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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to ________________
Commission file number 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
Securities registered pursuant to Section 12(b) of the Act:
(Name of each exchange on
(Title of each class) which registered)
Common Stock, $.001 par value American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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
requirement for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form l0-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the voting common stock held
by non-affiliates of the registrant, computed by using the
closing price of registrant's common stock on the American Stock
Exchange as of the close of business on February 29, 2000 was
$3,465,000.
The number of shares outstanding of each of the registrant's
classes of common stock as of February 29, 2000 was
Common Stock $.001 par value - 2,438,724
DOCUMENTS INCORPORATED BY REFERENCE: None
THE BEARD COMPANY
FORM 10-K
For the Fiscal Year Ended December 31, 1999
TABLE OF CONTENTS
PART I
Item 1. Business
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
PART II
Item 5. Market for the Company's Common Equity and Related
Stockholder Matters
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market
Risk
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
PART III
Item 10. Directors, Executive Officers and Significant Employees
of the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and
Management
Item 13. Certain Relationships and Related Transactions
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K
SIGNATURES
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 7.
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.
THE BEARD COMPANY
FORM 10-K
PART I
Item 1. Business.
(a) General development of business.
General. Prior to October, 1993, The Beard Company ("Beard"
or the "Company"), then known as Beard Oil Company ("Beard Oil"),
was primarily an oil and gas exploration company. During the
late 1960's we made the decision to diversify. In 1968 we
started a hazardous waste management company, USPCI, Inc.
("USPCI"), which we partially spun off to shareholders in January
1984. Following two public offerings and several acquisitions
USPCI became so successful that it subsequently listed on the New
York Stock Exchange in 1986 and was later acquired by Union
Pacific Corporation in 1987-1988 for $396 million ($111 million
to Beard Oil stockholders for their residual 28% interest, of
which $60 million was distributed to shareholders).
In 1989 Beard Oil founded Beard Investment Company (now The
Beard Company) which was formed for the purpose of building new
businesses outside of the oil and gas industry which Beard
management believed to have either high growth potential or
better-than-average profit potential. This is now our principal
business. We have started or acquired a number of new businesses
and invested in new business opportunities with the intent of
growing profitable businesses and converting our investments into
shareholder value, perhaps through sale, a spin-off or rights
offering to shareholders, or public offerings.
Our goal has been to nurture each investment to the point
where it could sustain its growth through internal cash flow
while cultivating its own outside funding sources to supplement
financing requirements as needed. Under this scenario we formed
in 1981 a joint venture for the extraction, production and sale
of crude iodine, which we managed until the decision was made to
discontinue such operations at year-end 1999. In 1987 we formed
a dry ice company which we nurtured and sold for a healthy profit
in 1997. In 1990 we bought a distressed real estate development
which we successfully operated for seven years before selling it
in 1997. In 1990 we also acquired an alternative fuels research
and development company which we sold in 1994 for a profit while
retaining certain technology which it patented for commercial
development. In 1997 we invested in an environmental remediation
company which we believed had considerable profit potential but
which has not produced any commercial results to date.
In 1998 we formed a subsidiary to enter the interstate travel
business and another to conduct operations in the People's
Republic of China where we are pursuing coal reclamation,
environmental opportunities and related marketing opportunities.
In October 1998 we formed a subsidiary in Mexico which commenced
operations in January 1999 working as a subcontractor testing
natural gas wells which Petroleos Mexicanos ("Pemex") is drilling
in northeastern Mexico. In July 1999 we formed
starpay(trademark).com, inc. ("starpay") which is an e-Commerce
startup company that has developed a proprietary payment system
to be used exclusively for Internet transactions and which will
provide state-of-the-art security for purchasing transactions.
In October 1999 we formed another Mexican subsidiary which
designed and furnished to Pemex in November five custom
fabricated sand separators for use in their operations.
Along the way we've had our share of unsuccessful investments,
including numerous oil secondary recovery projects, two
telecommunications projects, several investments in the drilling
contracting business, others in the environmental business, plus
our recent unsuccessful foray into the interstate travel
business.
As can be seen from the above, Beard should be viewed as a
company whose principal business is starting and/or acquiring
businesses, nurturing and growing them, weeding out the losers,
and riding with the winners until such time as the market is
willing to pay us more than the Company's management thinks they
are worth. Our focus is on building long-term value for our
shareholders.
In recognition of our philosophy and our business approach,
the Company believes that we should be viewed from the
perspective of our actual net earnings or losses rather than from
the normal perspective of earnings or losses from continuing
operations. In this context our earnings for the last five
years, net of losses, totaled $1,040,000, or an average of
$208,000 per year.
Loss of Significant Contract. The Company's current results
have been severely impacted as a result of the loss of a major
contract effective January 31, 1999. The Company's principal
business is coal fines reclamation, and the termination of the
Coal Segment's major contract on such date, which accounted for
53% of consolidated revenues and 84% of segment revenues in 1999
and for 93% of consolidated revenues and all of the segments
revenues in 1998 had a material detrimental effect upon the
Company's profitability during the last 11 months of 1999 (See
"Continuing Operations---Coal Reclamation Activities---The MCN
Projects---Dependence of the Segment on a Single Customer").
Treasury Stock Repurchase Program. On September 23, 1998, the
Company announced plans to repurchase up to 200,000 shares of its
currently outstanding common stock. The initial purchase of
shares was made on September 30, 1998. The Company repurchased
55,500 shares under the program in 1998 and 86,275 shares in 1999
at a total cost of $591,000. Repurchase of shares was suspended
in August of 1999.
Operating Segments. In 1999 the Company operated within the
following operating segments: (1) the coal reclamation ("Coal")
Segment, which is in the business of operating coal fines
reclamation and/or briquetting facilities in the U.S. and is
pursuing the development of advanced fine coal preparation
processes; (2) the carbon dioxide ("CO2") Segment, comprised of
the production of CO2 gas; (3) the natural gas well servicing
("WS") Segment, conducted by two companies operating in
northeastern Mexico, comprised of: (i) a 50%-owned company
(accounted for as an equity investment) involved in natural gas
well testing operations, and (ii) a 100%-owned company that has
designed a sand separator for use on gas wells; (4) the
environmental remediation ("ER") Segment, consisting of the
remediation of polycyclic aromatic hydrocarbon ("PAH")
contamination; (5) the China ("China") Segment, which is pursuing
(i) the sale of coal equipment, (ii) environmental opportunities,
(iii) the sale of technical services, and (iv) the operation of
coal fines reclamation facilities in China; and (6) the e-
Commerce ("e-Commerce") Segment, consisting of the development
and implementation of systems and technologies related to
Internet commerce.
Discontinued Operations---ITF Segment. In April 1999 the
Company adopted a plan to dispose of its voting and operational
control of Interstate Travel Facilities, Inc., whose activities
had previously been conducted as the "ITF" Segment. Those
operations were reflected as discontinued operations in 1998.
The majority of the assets of the ITF Segment were disposed of in
November 1999 in exchange for the release of certificates of
deposit totaling $327,000, the cancellation of $440,000 of debt
and accrued interest, and the assumption of debt totaling
$2,149,000 and accounts payable totaling $126,000.
At year-end 1999, the ITF Segment had $847,000 of assets
remaining, consisting of two convenience stores with related
property, plant, equipment and inventory, and liabilities
totaling $247,000 consisting primarily of trade payables and
accrued liabilities. The Company is aggressively pursuing the
sale of the remaining assets and anticipates disposing of same
and paying off the outstanding liabilities during the second
quarter of 2000. The Company took an additional charge of
$434,000 in the fourth quarter of 1999 related to discontinuing
the ITF Segment and does not expect further charges in connection
with such activities.
Discontinued Operations---BE/IM Segment. In December of 1999
the Management Committee of North American Brine Resources
("NABR") made the decision to terminate the business of the joint
venture and liquidate its assets. NABR's operations had
previously comprised the Company's Brine Extraction/Iodine
Manufacturing ("BE/IM") Segment. The decision reflected
primarily the outlook for future profitability of the partnership
given the decreasing production of the NABR plants and the
falling worldwide price of iodine.
NABR was formed in 1981 to engage in the extraction,
production and sale of crude iodine. The Beard Company serves as
the manager of NABR, a 40%-owned investment, which is not a
consolidated entity and had previously been accounted for as an
equity investment.
As a result of the Management Committee's decision, NABR's
activities have been reflected as discontinued operations for
calendar year 1999 and for all prior years.
At year-end 1999, the NABR had $1,326,000 of assets remaining,
consisting primarily of cash, two iodine extraction plants, brine
collection wells and iodine inventory, with liabilities totaling
$725,000 including the accrual of the estimated cost of shutting
down and/or disposing of the various facilities. NABR intends to
shut down the larger plant in April 2000 and dispose of the
equipment. It is negotiating to sell the smaller plant as a
going concern. NABR expects to dispose of all the assets and pay
off the outstanding liabilities prior to year-end 2000. The
Company recorded a charge of $540,000 in the fourth quarter of
1999 in connection with the discontinuance of the BE/IM Segment
and does not anticipate further charges in connection with such
activities.
Net Operating Loss Carryforwards. Beard has approximately
$52.6 million of unused net operating losses ("NOL's") available
for carryforward, which expire between 2004 and 2009. The loss
of the NOL's would have a negative impact on the Company's future
value. The Company's Certificate of Incorporation contains
provisions to prevent the triggering of an "ownership change" as
defined in Section 382 of the Code by restricting transfers of
shares without the Board of Directors' consent to any person if
that person was, or would thereby become, a holder of 5% or more
of the fair market value of Beard's outstanding capital stock.
Unless the context otherwise requires, references to Beard and
the Company herein include Beard and its consolidated
subsidiaries, including Beard Oil.
Recent Developments
- -------------------
New Coal Fines Operating Agreements. In November 1999 the
Company signed letters of intent with a major coal company which
are expected to result in the installation by the Company of two
coal wash plants targeted to be in operation in the third and
fourth quarter, respectively, of 2000. The definitive agreements
for these projects are currently in the process of being
finalized. Once these plants have been installed and are ramped
up to full production, it is anticipated that the Company's
financial results will improve significantly. However, there is
no assurance that the projects will be finalized.
Temporary Shutdown of Well Servicing Operations. Pemex is
changing its procedures for the handling of well servicing
contracts. In the past these contracts have usually been "rolled
over" so that there has been continuity of operations. Currently
these contracts are being allowed to expire, and several new
contracts will be let in April and May of 2000. The two
companies that comprise the WS Segment will be bidding on the new
contracts directly with Pemex, and are also in discussions to
subcontract their services to a large service company that will
be a bidder on a major new contract. Meanwhile, all of the WS
Segment's operations in Mexico were suspended as of January 29,
2000, and most of its personnel have been placed on furlough.
There is a shortage of well control equipment in Mexico, and
we expect that the WS Segment will receive new contracts and will
resume its activities in the second quarter of 2000. However,
there is no assurance of this. In the event the WS Segment is
not the successful bidder, the Company will need to evaluate the
viability of its Mexican operations.
New Activities in China. During the first quarter of 2000
Beard Sino-American Resources Co., Inc. ("BSAR") entered into
Memorandums of Understanding (the "MOU's") which may ultimately
result in the formation of cooperative joint ventures for the
installation of two composting facilities in China. The first
facility is to be located in Handan County in Hebei Province and
the second facility is to be located in Shijiazhuang, Hebei
Province. The MOU's are conditioned upon our partners obtaining
the necessary financing and all required governmental approvals.
Effect of Recent Developments on Liquidity. The termination
of the MCN Projects (see "Loss of Significant Contract" above and
"Continuing Operations---Coal Reclamation Activities") at January
31, 1999 had a material detrimental effect upon the Company's
profitability during the last 11 months of 1999. Primarily as a
result of the loss of its major revenue stream, coupled with the
funds required to support the activities of its various startup
activities, the Company's working capital decreased from
$4,994,000 at year-end 1998 to $572,000 at year-end 1999.
The Company has taken steps to mitigate future funding
requirements by its poorly performing subsidiaries. The Coal
Segment is expected to improve its profitability as soon as the
agreements for the new coal fines plants have been executed and
the plants have been installed (see "New Coal Fines Operating
Agreements" above). The discontinued ITF Segment, which consumed
$2,239,000 of cash in 1998 and $400,000 of cash in 1999, is
expected to generate cash in 2000 as its remaining assets are
sold. The discontinued BE/IM Segment is expected to contribute
$400,000 or more of cash to Beard in 2000 as its assets are
liquidated. The WS Segment, which consumed $1,251,000 of cash in
1999 as the Company funded its investment as well as a portion of
our partner's investment, is targeted to break even cash-wise in
2000. We have just concluded an arrangement with a related party
that has provided a $1 million working capital line until the new
coal agreements are signed and alternative financing currently
being pursued has been finalized and is in place.
CONTINUING OPERATIONS
Coal Reclamation Activities. The Company's coal reclamation
activities comprise the ("Coal") Segment, which is conducted by
Beard Technologies, Inc. ("BTI"). BTI is in the business of
operating coal fines reclamation and/or briquetting facilities in
the U.S. and is pursuing the development of advanced fine coal
preparation processes.
Carbon Dioxide Operations. The Company's carbon dioxide
activities comprise the ("CO2") Segment, consisting of the
production of CO2 gas which is conducted through Beard. The
Company owns non-operated working and overriding royalty
interests in two producing CO2 gas units in Colorado and New
Mexico.
Natural Gas Well Servicing Operations. The Company's natural
gas well servicing activities comprise the ("WS") Segment, which
is conducted by two companies operating in northeastern Mexico.
These operations are carried on by: (i) a 50%-owned company
(accounted for as an equity investment) involved in natural gas
well testing operations, and (ii) a 100%-owned company that has
designed a sand separator for use on gas wells and has had five
of them custom fabricated for use on a trial basis.
Environmental Remediation. The Company's environmental
remediation activities comprise the ("ER") Segment, which is
conducted by ISITOP, Inc., ("ISITOP"). ISITOP specializes in the
remediation of polycyclic aromatic hydrocarbon ("PAH")
contamination, and has been attempting to develop a commercial
market for the chemical process for which it is the sole U.S.
licensee.
Operations in China. The Company's activities in China
comprise the ("China") Segment, which is conducted by Beard Sino-
American Resources Co., Inc. ("BSAR"). BSAR is pursuing
environmental opportunities, coal reclamation and related
marketing opportunities in the People's Republic of China.
e-Commerce. The Company's e-Commerce activities comprise the
("e-Commerce") Segment, which is conducted by
starpay.com(trademark), inc. ("starpay"). starpay is pursuing
the development of a virtually secure payment system to be used
exclusively for Internet transactions.
(b) Financial information about industry segments.
Financial information about industry segments is contained in
the Statements of Operations and Note 16 of Notes to the
Company's Financial Statements. See Part II, Item 8---Financial
Statements and Supplementary Data.
(c) Narrative description of operating segments.
The Company currently has six operating segments: Coal, CO2,
WS, ER, China and e-Commerce. All of such activities, with the
exception of Beard's CO2 gas production activities, are conducted
through subsidiaries. Beard, through its corporate staff,
performs management, financial, consultative, administrative and
other services for its subsidiaries.
COAL RECLAMATION ACTIVITIES
General. In January of 1999 the Company's coal
reclamation activities consisted of its management of six coal
fines reclamation and briquetting facilities located in three
states in the U.S. Since the termination of its agreements to
operate these facilities the Company has primarily been seeking
other coal reclamation contracts while continuing to pursue the
development of advanced fine coal preparation processes.
In November of 1999 letters of intent were signed with a major
coal company which are expected to result in BTI's installing two
coal wash plants targeted to be in operation in the second and
third quarters, respectively, of 2000. The definitive agreements
for these projects are currently in the process of being
finalized. However, no assurance can be given that the projects
will be finalized.
History/Formation of Beard Technologies, Inc. In early 1990,
the Company acquired more than 80% of Energy International
Corporation ("EI"), a research and development firm specializing
in coal-related technologies. During the four years that Beard
owned EI, EI developed a new technology known as M/C Technology.
In May 1994 Beard sold EI to a subsidiary of The Williams
Companies, Inc., retaining certain assets and the patent rights
to the M/C Technology which Beard contributed to a wholly-owned
subsidiary, BTI. Thereafter, as discussed below, BTI has
attempted to pursue the commercial development of the M/C
Technology. See "Commercial Development Activities."
The M/C Technology. Underground coal mines have always
produced a certain amount of fine coal which is difficult to
clean and to market due to handling problems. Existing washing
processes used to deal with this problem are all wet processes,
and the end product must be dewatered to make it acceptable in
the market place, which is difficult and usually expensive. The
Mulled Coal process is an innovative and inexpensive solution to
fine coal handling problems. It is a process which involves the
addition of a low cost specifically formulated reagent to wet
fine coal in a simple mixing step to produce a material ("Mulled
Coal") that handles, stores and transports like dry coal. But,
unlike thermally dried fine coal, Mulled Coal is not dusty, will
not rewet, will not freeze, and causes no environmental or safety
hazards related to fugitive coal dust.
Patent Protection. The U.S. patent for the M/C Technology
was issued in 1993. Since then patents have been issued for
Australia, China, Europe (enforceable in Germany, Great Britain,
Italy and Spain), Poland and South Africa. Patent applications
are still pending in several other nations.
Department of Energy Contract; Attempts to Commercialize the
M/C Technology. From March 1994 to March 1996 the United States
Department of Energy funded most of the cost of a project to
demonstrate the feasibility of the M/C Technology. Results of
the project were highly encouraging, and BTI focused most of its
attention for the next two years on efforts to make coal
producers aware of the technology and its advantages. Although a
number of viable projects were developed, the parties involved
were for the most part focusing on Section 29 projects which
appeared to offer much greater profit potential.
Impact of Section 29. In late 1997 and early 1998 there was
significant activity focused upon the development of fine coal
waste impoundment recovery projects which qualified for Federal
tax credits under Section 29 of the Internal Revenue Code. Such
projects involve recovering the raw slurry with a dredge, using a
sophisticated washing plant to remove clay and other fine
impurities from the coal, and finally producing a high BTU fine
coal briquette which qualifies for the alternative fuels tax
credit. In order to qualify for the tax credit, which may amount
to as much as $20 to $25 per ton of coal briquettes sold, the
synthetic fuel must be produced (i) from a facility placed in
service before July 1, 1998; (ii) pursuant to a binding contract
entered into before January 1, 1997; and (iii) before January 1,
2008.
In certain cases where the Internal Revenue Service (the
"IRS") has granted a favorable tax ruling concerning a facility,
it has also ruled that a qualifying facility may be a mobile
facility that can be moved from one coal fines source to another
as fines are depleted at each successive site.
The MCN Projects. On June 30, 1998, the Company, through a
subsidiary, Beard Mining, L.L.C. ("BMLLC"), acquired coal fines
extraction and beneficiation equipment located at six coal slurry
impoundment sites (the "MCN Projects") for a purchase price of
$24,000,000. Three of the sites were located in West Virginia,
two in Kentucky, and one in Ohio. BMLLC financed the purchase
with a $24,000,000 note to MCNIC Pipeline & Processing Company
("MCNIC"), a subsidiary of MCN Energy Group Inc. ("MCN"), secured
solely by the equipment. BMLLC leased the equipment to BTI,
which operated and maintained the equipment and six briquetting
plants for six limited liability companies (the "LLC's"), each of
which is a subsidiary of MCNIC. The monthly lease payments
equalled the monthly payments due under the promissory note and
were reimbursed costs by the LLC's under BTI's operating
agreements with the LLC's.
Under the agreements, BTI provided services to the LLC's for
which it received a minimum profit of $100,000 per month,
effective April 1, 1998, so long as the contracts remained in
effect. During the time BTI was operating the six beneficiation
plants and the six briquetting plants for MCNIC it was, to the
best of the Company's knowledge, the largest operator of coal
recovery plants in the world. In November 1998, MCN announced
that it had taken a special charge of $133,782,000 pre-tax to
write-down the MCN Projects. The LLC's subsequently terminated
the operating agreements effective as of January 31, 1999. On
March 19, 1999, BTI assigned all of its membership interest in
BMLLC to MCNIC effective as of January 31, 1999. Since BMLLC
owned the beneficiation equipment located at the sites, the
agreement effectively assigned all of Beard's ownership interest
in the property, plant and equipment to MCNIC in exchange for a
full release of the $23,053,000 of remaining indebtedness related
to such items and all liabilities and obligations related
thereto.
BTI continued to absorb part of the operating costs and
continued to provide security and limited supervision at the six
sites through May 1999 while it was negotiating with MCNIC
concerning a proposal to form one or two limited liability
companies, to be owned by BTI and MCNIC, to pursue the
development of one or two of the six MCN Projects. These
negotiations were unsuccessful.
Current Focus on Coal Reclamation. Since the termination of
the MCNIC agreements BTI has continued to focus its efforts on
coal reclamation. During the past year BTI has called on
numerous coal producers and utilities, particularly those having
ponds which it believes have large reserves of recoverable coal
fines. Marketing efforts are no longer focused on the commercial
development of BTI's M/C Technology. We feel there are many
projects that have commercial potential with or without the use
of such technology.
However, BTI is continuing to pursue the development of
advanced fine coal preparation processes and will continue to
pursue the licensing of its M/C Technology in foreign countries.
Letters of Intent. In mid-1999 BTI began work on the
development of two new pond recovery/Section 29 briquetting plant
projects in the Illinois Coal Basin. In late 1999 BTI carried
out an extensive slurry pond core drilling program that proved up
reserves of sufficient quality, quantity and recovery rates to
justify the projects. In November 1999, BTI executed letters of
intent with a large coal company and a Section 29 operator
pursuant to which BTI will be the owner and operator of the
slurry pond dredging systems and the fine coal preparation plants
that will produce clean recovered coal from two ponds that will
provide the feed stock for two briquetting plants. BTI will
turnkey the coal recovered from the ponds and run through the
wash plants to the Section 29 operator. The first plant is
tentatively scheduled to come on stream in July of 2000. The
second plant is expected to start up about four months later.
The definitive agreements for these projects are currently in the
process of being finalized. However, finalization of definitive
agreements and commencement of plant operations in 2000 are not
assured.
Principal Products and Services. The principal products and
services supplied by the Company's Coal Segment are (i) the
capability to undertake large reclamation projects and the
cleanup of slurry pond recovery sites; (ii) the operation of coal
briquetting facilities owned by third parties; (iii) core
drilling of slurry ponds and evaluation of recoverable coal
reserves; (iv) consulting reclamation technology; (v) technical
services; and (vi) proprietary coal reclamation technology.
Dependence of the Segment on a Single Customer. The Coal
Segment accounted for the following percentages of the Company's
consolidated revenues from continuing operations for each of the
last three years.
Percent of
Consolidated
Revenues from
Fiscal Year Continuing
Ended Operations
----------- -------------
12/31/99 63.4%
12/31/98 92.9%
12/31/97 00.2%
It is important to note that revenues from the MCN Projects
accounted for 84% of the Coal Segment's revenues from continuing
operations in calendar year 1999 and for all of such revenues in
calendar year 1998. Termination of the MCNIC operating agreements
effective January 31, 1999 had a material detrimental effect upon
the Company's profitability during the last 11 months of 1999 and
during the first quarter of 2000. The Company's revenues and
profitability will continue to be negatively impacted until the
new coal contracts currently being negotiated have been finalized
and until the first of the two plants involved has ramped up to
full production.
Facilities. BTI leases an office and laboratory facilities
from the Applied Research Center at the University of Pittsburgh
("UPARC"). The UPARC facilities give BTI access to a wide range
of coal and mineral testing capabilities.
Market Demand and Competition. The coal reclamation
industry is highly competitive, and the Coal Segment must compete
against larger companies, as well as several small independent
concerns. Competition is largely on the basis of technological
expertise and customer service.
Seasonality. The coal reclamation business is somewhat
seasonal due to the tendency for field activity to be reduced in
cold and/or bad weather.
Employees. As of December 31, 1999, the Coal Segment
employed eight full time employees.
Financial Information. Financial information about the Coal
Segment is set forth in the Financial Statements. See Part II,
Item 8---Financial Statements and Supplementary Data.
CARBON DIOXIDE OPERATIONS
General. The Company's carbon dioxide (CO2) gas operations
are conducted by the parent company which owns working and
overriding royalty interests in two CO2 gas producing units.
Carbon Dioxide (CO2) Properties
- -------------------------------
McElmo Dome. The McElmo Dome field in western Colorado is a
240,000-acre unit from which CO2 gas is produced. Beard owns a
0.545610% working interest (0.471926% net revenue interest) and
an overriding royalty interest equivalent to a 0.092190% net
revenue interest in the Unit, giving it a total 0.564116% net
revenue interest.
Deliveries of CO2 gas are transported through a 502-mile
pipeline to the Permian Basin oilfields in West Texas where such
gas is utilized primarily for tertiary oil recovery. Shell CO2
Company Ltd. ("Shell Ltd.") is the operator. There are 41
producing wells, ranging from 7,634 feet to 8,026 feet in depth.
McElmo Dome and Bravo Dome (see below) are believed to be the two
largest producing CO2 fields in the world. The gas is
approximately 97% CO2.
In 1999 Beard sold 1,536,000 Mcf (thousand cubic feet)
attributable to its working and overriding royalty interests at
an average price of $.27 per Mcf. In 1998, Beard sold 2,187,000
Mcf attributable to its working and overriding royalty interests
at an average price of $.28 per Mcf. In 1997 Beard sold
1,617,000 Mcf attributable to its working and overriding royalty
interests at an average price of $.31 per Mcf. Beard was
overproduced by 243,000 Mcf on the sale of its share of McElmo
Dome gas at year-end 1999.
In July of 1996 Shell Ltd. advised the working interest owners
that current demand for McElmo Dome CO2 had increased from less
than 600 million cubic feet per day in 1995 to over 700 million
cubic feet per day, and was expected to increase to one billion
cubic feet per day beginning in mid-1997. In order to meet such
demand, Shell Ltd. commenced a $47 million development program in
July of 1996 which was completed in 1998. Beard expended a total
of $256,000 for its share of the development costs through 1998.
1998 CO2 revenues increased to $616,000 in 1998 from $503,000 in
1997 reflecting the successful development and the resultant
higher rate of production.
As a result of the development program, McElmo Dome production
had increased to 935 million cubic feet per day in March 1998.
Following the severe decline in oil prices in late 1998 and early
1999, CO2 demand for tertiary recovery decreased sharply, and CO2
production decreased to 657 million cubic feet per day in April
1999. With the subsequent sharp increase in oil prices in late
1999 and early 2000, CO2 demand for tertiary recovery is once
again increasing, and CO2 production had increased back to 810
million cubic feet per day in December 1999.
Bravo Dome. Beard also owns a 0.05863% working interest in
the 1,000,000-acre Bravo Dome CO2 gas unit in northeastern New
Mexico. At December 31, 1999, Beard was underproduced by 267,000
Mcf on the sale of its share of Bravo Dome gas. The Company sold
no CO2 gas from Bravo Dome in 1999, 1998 or 1997 despite being in
an underproduced status. The Company's solid CO2 segment, which
was sold in 1997, had previously provided the market for such
gas, and no efforts have been made to market the Company's share
of the gas since the sale.
Amoco Production Company operates a CO2 production plant in
the middle of the Bravo Dome field. The 265 producing wells are
approximately 2,500 feet deep. The gas is approximately 98% CO2.
Net CO2 Production. The following table sets forth Beard's
net CO2 production for each of the last three fiscal years:
Fiscal Net CO2
Year Production
Ended (Mcf)
-------- ---------
12/31/99 1,536,000
12/31/98 2,187,000
12/31/97 1,617,000
Average Sales Price and Production Cost. The following table
sets forth Beard's average sales price per unit of CO2 produced
and the average lifting cost, lease operating expenses and
production taxes, per unit of production for the last three
fiscal years:
Average Sales Average Lifting
Fiscal Year Price Per Mcf Cost Per Mcf
Ended of CO2 of CO2
----------- ------------- ---------------
12/31/99 $0.27 $0.06
12/31/98 $0.28 $0.05
12/31/97 $0.31 $0.06
Dependence of the Segment on a Single Customer. The CO2
Segment accounted for the following percentages of the Company's
consolidated revenues from continuing operations for each of the
last three years. The Company's CO2 revenues are received from
two operators in the CO2 Segment who market the CO2 gas to
numerous end users on behalf of the interest owners who elect to
participate in such sales.
Percent of
Consolidated
Revenues from
Fiscal Year Continuing
Ended Operations
- ----------- -------------
12/31/99 27.8%
12/31/98 6.7%
12/31/97 87.5%
Productive Wells and Acreage. Beard's principal CO2
properties are held through its ownership of working interests in
oil and gas leases which produce CO2 gas. As of December 31,
1999, Beard held a working interest in a total of 306 gross (0.25
net) CO2 wells located in the continental United States. The
table below is a summary of such developed properties by state:
Number of Wells
---------------
State Gross Net
----- ----- ---
Colorado................. 41 0.224
New Mexico ............. 265 0.029
--- -----
306 0.253
=== =====
Employees. As of December 31, 1999, the CO2 Segment had no
employees.
Financial Information. Financial information about the
Company's CO2 gas operations is contained in the Company's
Financial Statements. See Part II, Item 8---Financial Statements
and Supplementary Data.
NATURAL GAS WELL SERVICING OPERATIONS
TESTCO INC. de MEXICO, S.A. de C.V. In October 1998 the
Company formed ITS-Testco, L.L.C., an Oklahoma limited liability
company in which the Company has 50% ownership (the "LLC"). The
LLC owns 100% of a subsidiary, TESTCO INC. de MEXICO, S.A. de
C.V. ("Testco de Mexico"), which was also formed in October 1998
to conduct natural gas well testing operations in northeastern
Mexico. Testco de Mexico works as a subcontractor to contractors
working for Petroleos Mexicanos ("Pemex") testing natural gas
wells which Pemex is drilling just south of the southernmost
Texas border. The LLC owns most of the equipment which is being
utilized by and leased to Testco de Mexico.
Neither the LLC nor Testco de Mexico had any operations, other
than startup costs, in 1998. The LLC began leasing equipment to
Testco de Mexico in January 1999 when Testco de Mexico commenced
its actual well testing operations.
Incorporated Tank Systems de Mexico, S.A. de C.V. In August
1999 the Company formed ITS, Inc. ("ITS"), an Oklahoma
corporation which the Company owns 100%. ITS owns 100% of a
Mexican subsidiary, Incorporated Tank Systems de Mexico, S.A. de
C.V. ("ITS de Mexico") which was organized in September 1999.
ITS has designed a sand separator (patent applied for) to meet
the specific requirements of Pemex. ITS de Mexico has had five of
the separators custom fabricated which it was renting to Pemex
prior to the temporary shutdown. ITS de Mexico had installed the
separators at specific locations designated by Pemex and was
renting the separators to them on a trial basis. At the
conclusion of the trial period Pemex has advised that they will
consider entering into a long-term lease with an option to
purchase.
Principal Products and Services. The principal products and
services supplied by the Company's WS Segment are the services,
provided by the furnishing of (i) properly trained personnel,
(ii) specially designed equipment and (iii) technological
expertise, which it provides to customers who need such services
to test high pressure natural gas wells or to solve pipeline
maintenance problems.
Dependence of the Segment on a Single Customer. The WS
Segment accounted for the following percentages of the Company's
consolidated revenues from continuing operations for each of the
last three years. All of the Company's WS revenues were
received from Pemex in connection with the lease of sand
separators.
Percent of
Consolidated
Revenues from
Fiscal Year Continuing
Ended Operations
- ----------- --------------
12/31/99 5.5%
12/31/98 -0-%
12/31/97 -0-%
Because the Company owns only 50% of the LLC and thus only 50%
of Testco de Mexico it is not a consolidated entity and
accordingly (i) the Company's investment in such entities is
accounted for by the use of the equity method, and (ii) the
revenues of such entities were not included in the Company's
consolidated revenues. The Company recorded $229,000 and $35,000
of loss as its share of the LLC's operating losses in 1999 and
1998, respectively. All of Testco de Mexico's revenues (and thus
indirectly all of the LLC's revenues) were from work performed
for one subcontractor to Pemex.
It should be noted that all of the WS Segment's revenues are
directly attributable to work being performed by or for Pemex,
and that all of the equipment involved has been specifically
designed to meet the needs and requirements of Pemex.
Accordingly, future results of operations of the WS Segment are
totally dependent upon the Segment's continuing ability to attain
contracts and/or subcontracts from Pemex.
In this regard, it should be noted that Pemex recently changed
its procedures for the handling of well servicing contracts. In
the past these contracts were usually "rolled over" so that there
has been continuity of operations. Now these contracts are being
allowed to expire, and several new contracts will be let in April
and May of 2000. The two companies that comprise the WS Segment
will be bidding on the new contracts directly with Pemex, and are
also in discussions to subcontract their services to a large
service company that will be a bidder on a major new contract.
Meanwhile, all of the WS Segments operations in Mexico were
suspended as of January 29, 2000, and most of its personnel have
been placed on furlough.
There is a shortage of well control equipment in Mexico, and
we expect that the WS Segment will receive new contracts and will
resume its activities in the second quarter of 2000. However,
there is no assurance of this. In the event the WS Segment is
not the successful bidder, the Company will need to evaluate the
viability of its Mexican operations.
Facilities. Testco de Mexico is occupying a small office,
yard and warehouse which it leases in Reynosa, Tamaulipas,
Mexico. ITS de Mexico leases office space and personnel from
Testco de Mexico.
Market Demand and Competition. The well servicing industry
is highly competitive, and the WS Segment must compete against
significantly larger companies, as well as several small
independent concerns. Competition is largely on the basis of
technological expertise and customer service.
Employees. As of December 31, 1999, the WS Segment had 2 full
time employees.
Financial Information. Financial information about the
Company's well servicing operations is contained in the Company's
Financial Statements. See Part II, Item 8---Financial Statements
and Supplementary Data.
ENVIRONMENTAL REMEDIATION
General. The Company and its management have considerable
expertise in the environmental area stemming from previous
experience as the founder, as officers and directors, and as the
principal shareholder of USPCI, Inc. (NYSE) from 1968 until its
takeover by Union Pacific Corporation in 1987-88.
ISITOP, Inc. In January of 1997, Beard changed the name of a
wholly-owned, inactive subsidiary to ISITOP, Inc. ("ISITOP").
ISITOP has obtained an exclusive license for the United States
from a company which has developed a chemical (54GOTM 901) and
has tested a process which utilizes such chemical for the
remediation of PAH contamination. U.S. Patent #5,670,460 for
method and composition for 54GOTM Products was granted September
23, 1997. This patent covers all applications utilizing 54GOTM
Products, including ISITOP's applications.
ISITOP is 80%-owned by Beard and 20%-owned by three members of
ISITOP's management team, two of whom are also the principals of
the company from which the license was obtained. Pursuant to
employment agreements and other related agreements these three
parties also have options to acquire an additional 30% of ISITOP
following payout of all sums owed by ISITOP to Beard.
Attempts to Commercialize ISITOP's Technology. Following the
formation of ISITOP in early 1997 the company focused its
attention during the next two years on efforts to obtain
contracts to clean up old creosote sites.
Creosote sites appeared to be the ideal target for ISITOP'S
technology since the U.S. alone is believed to have over 700 wood
preserving plants which are estimated to use or produce more than
495,000 tons of creosote and creosote byproducts per year.
Creosote mixtures contain many compounds that are known to cause
several forms of cancer in animals and have been linked to
several types of cancer in humans. The specific chemical family
of cancer producing agents found in creosote are a group of
molecules that are made up of several connected ring structures
known as polycyclic aromatic hydrocarbons ("PAH's").
However, with the exception of a small field test near
Durango, Colorado in May of 1997 where ISITOP successfully
cleaned up 72 cubic yards of creosote contaminated soil, such
efforts have produced no commercial contracts.
In late 1998 and throughout much of 1999 ISITOP focused most
of its efforts on one major project where it proposed using a
bioslurry reactor system which it had developed to remediate oil
field hydrocarbon materials for a major oil company. This
project is now on hold while the oil company evaluates the cost
of off-site programs versus ISITOP's system. ISITOP also
developed a process for cleaning tanks at creosote treating
facilities and a similar procedure to clean rail cars used to
transport liquid creosote. Neither of these initiatives produced
commercial contracts.
At the beginning of 2000, ISITOP determined to broaden the
scope of its marketing efforts. The company has identified 27
opportunities which are currently in various stages of study or
investigation. In addition, ISITOP has entered into a teaming
agreement with a much larger company which gives them additional
scientific and engineering expertise, along with surface soil
washing equipment and in-situ expertise to implement some of
these projects.
Principal Products and Services. ISITOP's bioslurry reactor
system consists of three major steps. The first step is to treat
the contaminated material with a proprietary family of
surfactants, called 54GOTM 901, which separate the large ring
compounds and/or disperse significant amounts of the hydrocarbon
components. This separates the bond of molecules, allowing for
microbial penetration and rendering the mixture ready for
bioremediation. The next step of the ISITOP process is to wash
the mixture of contaminated material to further enhance the
molecular separation process. The final step is adding a
solution from an on-site catalyst generator that enhances in
place microbes, thus expediting the bioremediation process.
Despite the dearth of commercial projects to date, ISITOP
continues to believe that it has positioned itself and its
technologies to become a significant player in the remediation
market.
The ER Segment accounted for less than 3% of the Company's
consolidated revenues for each of the last three years.
Facilities. ISITOP is furnished office space in Farmington,
New Mexico as part of its arrangement with the company from which
it obtained its license. It also has an office in Ft. Collins,
Colorado.
Market Demand and Competition. The environmental remediation
industry is highly competitive, and in such activities ISITOP
must compete against major service companies, as well as a number
of small independent concerns. Competition is largely on the
basis of customer service. Beard's approach has been to seek out
niches of opportunity where it perceives that customers are not
being adequately served, and then to provide services using well-
trained personnel at reasonable rates. The regulatory
environment is rapidly changing, at times creating new markets
which the larger companies in the industry do not recognize or
have no desire to pursue, and thus creating opportunities for
smaller, aggressive entities such as Beard and ISITOP.
ISITOP had no revenues in 1999. It provided its services to
only one customer in 1998, but such revenues totaled only $8,000.
In 1997 it provided services to a different customer, and such
revenues totaled only $13,000. The loss of either customer would
not have a material adverse effect on the Company and its
subsidiaries as a whole.
Availability of Raw Materials. Materials used in the ER
Segment, as well as products purchased for resale, are available
from a number of competitive manufacturers.
Seasonality. The environmental remediation business is
seasonal, as there is a tendency for field operations to be
reduced in bad weather.
Employees. As of December 31, 1999, the ER Segment employed
two full time employees.
Financial Information. Financial information about the ER
Segment is set forth in the Company's Financial Statements. See
Part II, Item 8---Financial Statements and Supplementary Data.
OPERATIONS IN CHINA
Beard Sino-American Resources Co., Inc. In July of 1998 the
Company opened an office in Beijing, People's Republic of China.
In November of 1998 the Company formed Beard Sino-American
Resources Co., Inc. ("BSAR"), a wholly-owned subsidiary of Beard,
to serve as the joint venture partner for all of the Company's
activities in China. In early 1999 BSAR established a
representative office in Beijing.
Qitaihe Lushon Joint Venture. In July of 1998 the Company
entered into a Memorandum of Understanding to establish a joint
venture to utilize BTI's M/C Technology in two coal preparation
plants in China. The plants were to have been installed in
Heilongjiang Province in northeastern Manchuria. However, after
repeated delays, it now appears that installation of the plants
is unlikely due to changes in the political and business
environment in China. Changes in the coal industry where the
Coal Ministry has shut down more than 1,000 coal mines has caused
us to defer our plans indefinitely.
Centrifuge Distributorship. In February of 1999 the
Company became the exclusive distributor in China for Decanter
Machine, Inc. ("Decanter"). Decanter is the largest U.S.
manufacturer of centrifuges for the coal industry. Under the
agreement Beard acts as an independent contractor in promoting
the sale of Decanter products in China. BSAR held a seminar for
40 representatives from the coal industry in January of 2000 in
Beijing which was well received by the participants and appears
to have generated interest for future centrifuge sales. Based
upon the response at the seminar, BSAR has agreed to put a
technical service center in China once it has sold several
centrifuges.
Environmental Opportunities. One of the major changes
underway in China is a tremendous push to clean up the
environment, with particular focus on reducing air pollution.
One of their major problems involves the current landfilling of
municipal solid waste (MSW). China's present options to
landfilling are primarily incineration and gasification, both of
which result in significant negative impact to the environment.
BSAR presented to municipal and county governments in China the
option of receiving MSW, segregating and recovering appropriate
materials for recycling, and further treating the organic
fraction through composting.
BSAR has entered into a Memorandum of Understanding which is
expected to lead to the formation of a cooperative joint venture
with the Handan County Construction Environmental Protection
Bureau Heating Company ("Handan") and has aligned itself with a
major fertilizer producer which is considering providing our
share of the financing for the project. If the joint venture
proceeds as contemplated, the $9 million cost of the initial
plant (a 200 ton per day composting facility to be located at
Handan City) will be provided by the fertilizer producer and
Handan who will provide up to $5.3 million of equity and arrange
for the necessary financing. BSAR would have a carried interest
from inception in the plant and also receive an operating fee.
If the plant proceeds as planned and performs as anticipated, we
envision that it would be the precursor of many such plants
throughout China.
BSAR has also entered into a Memorandum of Understanding for a
second project which is expected to commence construction shortly
after the Handan City project is operational. Installation of
the second facility, which is to be located in Shijiazhuang,
Hebei Province, is also subject to our partners obtaining the
necessary financing and all required governmental approvals. BSAR
would also have a carried interest from inception in this plant
and receive an operating fee.
Principal Products and Services. The principal products and
services supplied by the Company's China Segment are (i) sales of
coal equipment; (ii) environmental technology; (iii) technical
services; and (iv) M/C Technology.
The China Segment has generated no revenues to date and
accordingly accounted for none of the Company's consolidated
revenues from continuing operations during the last three years.
Facilities. BSAR leases a small office located in Beijing
Landmark Tower A in Beijing, China.
Market Demand and Competition. Both the coal reclamation
industry and the environmental industry are highly competitive,
and the China Segment must compete against significantly larger
companies, as well as a number of small independent concerns, in
both businesses. Competition is largely on the basis of
technological expertise and customer service.
Employees. As of December 31, 1999, the China Segment
employed three full time employees.
Financial Information. Financial information about the
China Segment is set forth in the Financial Statements. See Part
II, Item 8---Financial Statements and Supplementary Data.
e-COMMERCE
Formation of starpay.com(trademark), inc. In February 1999
Marc Messner, Beard's VP-Corporate Development, presented to
Beard management his concept for an easy, inexpensive and
virtually secure payment system to be used exclusively for
Internet transactions. Shortly thereafter Beard entered into
Memorandums of Understanding (the "MOU's") with (i) a Web site
development company and (ii) a patent attorney who agreed to join
forces to develop the concept. The MOU's provided that the
patent applications would be owned by Beard, Messner (the
inventor), the Web site company and the patent attorney
(collectively, the "Patent Owners").
In June and July of 1999 three patent applications were filed
embodying the features of the invention. In July 1999
starpay.com(trademark), inc. ("starpay") was formed to pursue
the development of the payment system. A fourth patent
application was filed in November 1999 which supplemented the
earlier filings. In February 2000 the Patent Owners converted
their ownership in the patent applications to ownership in
starpay as follows: Beard (78.4%); Messner (7.6%); patent
attorney (7.0%); Web site company (7.0%).
In January and April of 2000, starpay filed two additional
patent applications which have considerably broadened the scope
and, starpay believes, the potential of its patent claims.
In November 1999 the Company announced that starpay was in the
process of seeking venture capital funding to complete the
development of its technology. In January 2000 the Company
announced that starpay had elected two new directors to its
Board, one of whom has agreed to assist starpay as a consultant
in its pursuit of strategic alliances. The Company also
announced that starpay had engaged a consultant to assist in
revising its Business Plan and in creating strategic alliances.
The starpay Technology. We believe that the starpay payment
system offers safer, easier and more flexible purchasing options
and account features than are presently available on the Internet
today. Unlike conventional credit, debit or prepaid cards, the
patent-pending starpay system cannot be used in person, nor can
it be used to order goods by telephone. The starpay system is an
Internet-only application that gives the user total control over
the use of their e-Commerce purchasing account and thus the
ultimate feeling of security. Cybertheft of a user's starpay
identification number, PIN number and other transaction
information during transmission from the user to the merchant is
virtually impossible due to the difficulty of overcoming
starpay's proprietary back-end security technology. Furthermore,
because of starpay's unique transaction methodology, if the
user's account information is stolen from a merchant's web site
there is still no liability exposure to the user, the merchant or
to starpay. The starpay system also addresses the merchant's
exposure to non-repudiation issues associated with Internet
purchasing. We believe starpay's security features and
associated secure transaction technology are significantly more
advanced and secure than any known technology in use today.
starpay Features. starpay will be available in four distinct
systems, all of which are patent pending and provide account
features unavailable through conventional e-Commerce purchasing
methods. These systems include: (i) a credit based purchasing
system, (ii) a debit based purchasing system, (iii) a pre-paid
based purchasing system, and (iv) a gift certificate and coupons
system. In addition, the starpay security technology will serve
as a springboard for an entire family of security products
including user authentication and security access products.
Review of starpay's Security Assessment. starpay engaged a
consulting firm to perform a security assessment of its security
technology and applied processes. The assessment compared and
contrasted starpay's security protocol with the two industry
primary "standard" protocols (SSL and SET) and provided a product
level comparison with leading credit, debit and prepaid payment
products. The "white paper"---titled "Protocol and Competitor
Analysis"---was completed on April 6, 2000.
Based upon its review of the document, starpay's management
believes that its patent-pending payment system is the most
secure payment system available for use on the Internet. The
starpay model significantly enhances the use of SSL by addressing
all the noted security risks associated with SSL-based
transactions and meets all the goals of a SET-based transaction
without the use of SET's slow and costly high level cryptographic
features. In summary, the starpay process provides significant
security components to both the vendor and consumer, with a focus
on ease of or transparent use to the vendor and the potential for
absolute transaction security for the consumer. The "white
paper" concludes that "the starpay process meets or exceeds the
majority of all transaction qualities of the various (competing)
Internet payment processes."
Current Status of starpay Development and Funding. At this
point starpay is still in the startup mode. The technology has
been designed, but funding is needed to complete the programming
and testing of all software, purchase and install the necessary
hardware, add necessary personnel, negotiate strategic alliances
and successfully launch the final product. starpay has engaged a
consultant that specializes in Internet and e-Commerce and
software development to assist in revising its Business Plan, and
to assist in securing the necessary funding and in arranging
strategic alliances. The revision to the Business Plan has just
been completed.
starpay believes that its patent-pending payment system is the
most secure payment system available for use on the Internet. If
starpay is successful in its fund raising and strategic alliance
efforts, the e-Commerce Segment is expected to become a major
contributor to the Company's future success. However, no
assurance can be given that starpay will successfully
commercialize its Internet payment system technology.
Facilities. starpay occupies a small portion of the office
space occupied by Beard at the Company's corporate headquarters
located in Oklahoma City, Oklahoma.
Market Demand and Competition. The e-Commerce industry is
rapidly changing and highly competitive, and the e-Commerce
Segment must compete against significantly larger companies, as
well as a number of small independent concerns. Competition is
largely on the basis of technological expertise, customer
service, capital available for product branding and the ability
to react quickly to a constantly changing environment.
Employees. As of December 31, 1999, the e-Commerce Segment
utilized three of the Company's full time employees on a part
time basis. One of such employees became a full time employee of
starpay effective January 1, 2000.
Financial Information. Financial information about the e-
Commerce Segment is set forth in the Financial Statements. See
Part II, Item 8---Financial Statements and Supplementary Data.
REGULATION
General. The Company is subject to extensive regulation by federal, state,
local, and foreign governmental authorities. The Company's operations
in the United States, Mexico, and China are subject to political
developments that the Company cannot accurately predict. Adverse
policital developments and changes in current laws and regulations
affecting the Company could dramatically impact the profitability of
the Company's current and intended operations. More stringent regulations
affecting the Company's coal reclamation activities or adverse changes in
federal tax laws concerning the availability of Section 29 tax credits
could adversely impact the profitability of the Company's future coal
reclamation operations and the availability of those projects.
Environmental and Worker Safety Matters. Federal, state, and local
laws concerning the protection of the environment, human health, worker
safety, natural resources, and wildlife affect virtually all the
operations of the Company, especially its coal reclamation and
environmental remediation activities. These laws affect the Company's
profitability and increase the Company's exposure to third party claims.
It is not possible to reliably estimate the amount or timing of the
Company's future expenditures relating to environmental matters because
of continually changing laws and regulations, and the nature of the
Company's businesses. The Company cannot accurately predict the scope
of environmental or worker safety legislation or regulations that will be
enacted. The Company's cost to comply with newly enacted legislation or
regulations affecting its business operations may require the Company to
make material expenditures to comply with these laws. Although management
believes that it has adequate reserves and insurance to address probable
environmental contingencies, it is possible that those reserves and that
coverage may be inadequate to satisfy future environmental liabilities.
As of this date, the Company is not aware of any environmental liability
or claim that could reasonably be expected to have a material adverse
effect upon its present financial condition.
OTHER CORPORATE ACTIVITIES
Other Assets. Beard also has a number of other assets and
investments which it is in the process of liquidating as
opportunities materialize. Such assets consist primarily of
drilling rigs and equipment, land and improvements, real estate
limited partnerships in which the Company is a limited partner
and other miscellaneous investments. As excess funds become
available from such liquidations they will be utilized for
working capital, reinvested in Beard's ongoing business
activities or redeployed into newly targeted opportunities.
Beard's recorded value for these other assets is less than or
equal to their estimated fair value.
Office and Other Leases. Beard leases office space in
Oklahoma City, Oklahoma, aggregating 5,817 square feet under a
lease expiring September 30, 2000, at a current annual rental of
$58,000. In addition, Beard's subsidiaries lease space at
several locations as required to serve their respective needs.
Employees. As of December 31, 1999, Beard employed 20 full
time and five part time employees in all of its operations,
including eight full time employees and five part time employees
on the corporate staff.
(d) Financial information about foreign and domestic operations
and export sales.
See Item 1(c) for a description of foreign and domestic
operations and export sales.
Item 2. Properties.
See Item 1(c) for a description of properties.
Item 3. Legal Proceedings.
Neither Beard nor any of its subsidiaries are engaged in any
litigation or governmental proceedings which Beard believes will
have a material adverse effect upon the results of operations or
financial condition of any of such companies. However, the
Company is a plaintiff in a lawsuit where the Company's share of
the claims, exclusive of interest and costs, exceeded 10% of
consolidated current assets at year-end 1999. See "McElmo Dome
Litigation" below.
McElmo Dome Litigation. On August 14, 1997, the Company
joined with other small working interest owners and royalty
owners in filing in U.S. District Court for the District of
Colorado a suit against Shell Oil Company ("Shell"), Shell
Western E & P, Inc. ("SWEPI"), Mobil Producing Texas and New
Mexico, Inc. ("Mobil") and Cortez Pipeline Company, a partnership
("Cortez").
Plaintiffs in the litigation are small share CO2 working
interest owners, CO2 royalty owners, CO2 overriding royalty
interest owners and taxing authorities all of whom have contract
or statutory interests in the value of the CO2 produced from the
McElmo Dome Field (the "Field"---see "Carbon Dioxide Operations
at pages 10-12). Plaintiffs' complaint alleges damages against
the defendants caused by defendants' wrongful determination of
the value of CO2 produced from the Field and the corresponding
wrongful underpayment to plaintiffs. The complaint further
alleges that Shell and Mobil are (1) the dominant producers of
CO2 from the Field; (2) partners owning defendant Cortez; (3)
users of CO2 produced from the Field in west Texas for the
production of crude oil; and that SWEPI is for all practical
purposes the alter ego of Shell and thus liable to the same
extent as Shell.
Plaintiffs further allege that defendants have a conflict of
interest because they are simultaneously producers and users of
CO2 from the Field, and that they have controlled and depressed
the price of CO2 from the Field by (i) reducing the delivered
price of CO2 while (ii) simultaneously inflating the cost of
transportation from the Field to West Texas. Plaintiffs have
alleged a total of 10 claims against the defendants, including
violations of the provisions of the antitrust laws, and that
during the period between 1984-1995 the plaintiffs have caused
damages to the defendants of not less than $590.8 million after
8% interest per annum but before trebling and damages as
permitted by law.
From 1997 through 1999 the Company incurred legal expenses
totaling $249,000 in connection with the suit. Because many of
the plaintiffs in the class have elected not to fund all or part
of their share of the costs involved (the "Nonparticipants"), the
Company has incurred more than its share of such costs for which
it is entitled to recover a bonus amount (exact amount to be
determined by the Judge) before the Nonparticipants will back in
for their share of any recovery. Plaintiffs' lawyers are
handling the case on a contingency basis and will receive 50% of
any settlement or judgment after deducting all out-of-pocket
expenses.
In addition, the Company has joined with several other
plaintiffs in securing a $300,000 loan for the benefit of the
plaintiff group to assist in meeting its current obligations.
The Company provided a $75,000 certificate of deposit as
collateral for one-fourth of the loan amount.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted during the fourth quarter of the
fiscal year covered by this report to a vote of security holders,
through the solicitation of proxies or otherwise.
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters.
(a) Market information.
The Company's common stock trades on the American Stock
Exchanger ("ASE") under the ticker symbol BOC. The following
table sets forth the high and low sales price for the Company's
common stock, as reflected in the ASE monthly detail reports, for
each full quarterly period within the two most recent fiscal
years.
1999 High Low
---- ---- ---
Fourth quarter $ 2-15/16 $ 1-3/4
Third quarter 4-1/4 2-1/2
Second quarter 3-7/8 3-1/8
First quarter 4-3/8 3-3/8
1998 High Low
---- ---- ---
Fourth quarter $ 5-1/4 $ 3-1/4
Third quarter 5-15/16 4-1/2
Second quarter 5-1/4 4-5/8
First quarter 5-3/8 4-5/8
(b) Holders.
As of February 29, 2000, the Company had 472 record holders of
common stock.
(c) Dividends.
To date, the Company has not paid any cash dividends. The
payment of cash dividends in the future will be subject to the
financial condition, capital requirements and earnings of the
Company. The Company intends to employ its earnings, if any,
primarily in its coal reclamation activities and does not expect
to pay cash dividends for the foreseeable future. The redemption
provisions of the Beard preferred stock limit the Company's
ability to pay cash dividends. (See "Business-General
development of business").
Item 6. Selected Financial Data.
The following financial data are an integral part of, and should
be read in conjunction with, the financial statements and notes
thereto. Information concerning significant trends in the
financial condition and results of operations is contained in
Management's Discussion and Analysis of Financial Condition and
Results of Operations on pages 23 through 32 of this report.
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
(in thousands, except per share data)
Statement of operations data:
Revenues from continuing
operations $ 1,503 $ 9,246 $ 575 $ 377 $ 419
Interest income 228 400 183 12 13
Interest expense (170) (964) (134) (62) (4)
Loss from continuing
operations (2,343) (277) (1,393) (938) (634)
Earnings (loss) from
discontinued operations (1,056) (3,580) 10,407 623 231
Net earnings (loss) (3,399) (3,857) 9,014 (315) (403)
Net earnings (loss)
attributable to
common shareholders (3,399) (3,857) 5,225 (315) (454)
Net earnings (loss) per share -
basic and diluted:
Loss from continuing
operations (0.96) (0.11) (0.50) (0.34) (0.24)
Net earnings (loss) (1.39) (1.52) 1.86 (0.11) (0.17)
Balance sheet data:
Working capital 572 4,994 9,924 1,745 1,989
Total assets 6,804 37,337 20,952 16,473 14,615
Long-term debt
(excluding current
maturities) 13 25,780 519 2,911 1,454
Redeemable preferred stock 889 889 889 1,200 1,200
Total common shareholders'
equity 4,666 8,387 12,433 8,656 8,788
________
In December 1999, the Management Committee of North American Brine
discontinue the business and dispose of its assets. Beard has a 40%
ownership interest in NABR, which is accounted for under the
equity method and represented Beard's entire brine extraction/iodine
manufacturing segment operations. Beard's share of NABR's
operating results have been reported as discontinued for all periods
presented. (See note 4 of notes to financial statements).
In August 1998 Beard adopted a plan to discontinue the Other E/S
Operations. In April 1999 Beard adopted a plan to discontinue its interstate
travel facilities ("ITF") segment. The results of operations and estimated
losses to discontinue the Other E/S Operations and the ITF segment,
including an estimated loss on disposition, were reported as discontinued
operations in 1998 and for all prior years. (See note 4 of notes to
financial statements).
Beard sold the business and substantially all of the assets of
Carbonic Reserves, an 85%-owned subsidiary, in 1997 with the
results of such operations, including the 1997 gain on sale, reported as
discontinued operations in 1997 and for all prior years.
(See note 4 of notes to financial statements).
In January 1997 Beard adopted a plan to dispose of the assets of
its real estate construction and development segment. The results of the
segment, including an estimated loss on disposition, were reported as
discontinued operations in 1996 and for all prior years. (See note 4 of
notes to financial statements).
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
The following discussion addresses the significant factors
affecting the results of operations, financial condition,
liquidity and capital resources of the Company. Such discussion
should be read in conjunction with the Company's financial
statements including the related notes and the Company's selected
financial information.
Overview
- --------
General. In 1999 the Company operated within the following
operating segments: (1) the Coal Reclamation ("Coal") Segment,
(2) the Carbon Dioxide ("CO2") Segment, (3) the China ("China")
Segment, (4) the Environmental Remediation ("ER") Segment, (5)
the Natural Gas Well Servicing ("WS") Segment, and (6) the e-
Commerce ("e-Commerce") Segment.
The Coal Segment is in the business of operating coal fines
reclamation and/or briquetting facilities in the U.S. and is
pursuing the development of advanced fine coal preparation
processes. The CO2 Segment consists of the production of CO2
gas. The China Segment is pursuing (i) the sale of coal
equipment, (ii) environmental opportunities, (iii) the sale of
technical services, and (iv) the operation of coal fines
reclamation facilities in China. The ER Segment consists of
services to remediate polycyclic aromatic hydrocarbon
contamination. The WS Segment is conducted by two companies
operating in northeastern Mexico and consists of (i) a 50%-owned
company (accounted for as an equity investment) involved in
natural gas well testing operations, and (ii) a wholly-owned
company that has designed a sand separator for use on natural gas
wells and has had five of them custom fabricated for use on a
trial basis. The e-Commerce Segment consists of a subsidiary
which is in the process of developing and executing an Internet
payment system.
The Company's continuing operations reflect losses of
$2,343,000, $277,000 and $1,393,000 in 1999, 1998 and 1997,
respectively. In October of 1997 the Company sold the business
and substantially all of the assets involved in the manufacture
and sale of dry ice (solid CO2), taking advantage of an extremely
favorable offer which it had received for the business. In
August of 1998 Beard's Board of Directors approved a plan to
restructure the Company's environmental/resource recovery
("E/RR") Segment. As a result, the coal reclamation activities
conducted by Beard Technologies, Inc. ("BTI") and Beard Sino-
American Resources Co., Inc. ("BSAR") are now included in the
Coal and China Segments of the Company, respectively. The
environmental remediation activities conducted by ISITOP, Inc.
now comprise the ER Segment. As part of the restructure, the
other environmental services operations (the "Other E/S
Operations") previously conducted by Whitetail Services, Inc.,
Horizontal Drilling Technologies, Inc. and Incorporated Tank
Systems were discontinued.
In April 1999 the Company's Board of Directors adopted a
formal plan to discontinue its ITF Segment and entered into
agreements with ITF and its minority shareholders to transfer
control of ITF to the minority shareholders. The discontinuation
of ITF was accounted for as of December 31, 1998. In September
1999 the Company entered into revised agreements with the
minority shareholders which resulted in the disposition of a
majority of the assets owned by the segment for (i) the release
of certificates of deposit in the amount of $327,000, (ii)
assumption of debt in the amount of $2,149,000 and accounts
payable of $126,000, and (iii) the cancellation of $440,000 of
debt and accrued interest to the minority shareholders. The sale
closed on November 18, 1999. Operating results for the ITF
Segment have been reported as discontinued in the accompanying
statements of operations (see Note 4 to the financial
statements). Included in the 1998 operating results was a
$1,603,000 estimated loss from the discontinuation of the ITF
Segment, including an estimated $347,000 for the operating losses
expected to be incurred by ITF prior to the final disposition of
its assets. ITF's operating losses for 1999 were $567,000.
$347,000 of such losses were charged against the loss accrual
recorded in 1998 with the remaining $220,000 reflected in loss
from discontinued operations in the 1999 statement of operations.
Beard also recorded an additional $214,000 loss from discontinued
operations in the fourth quarter of 1999: $180,000 of the loss
represents anticipated operating losses of ITF from December 31,
1999 through the anticipated disposal date of the remaining
assets and $34,000 of the loss represents additional reduction in
the estimated realizable values of the remaining assets as of
December 31, 1999.
In December 1999 the Management Committee of North American
Brine Resources ("NABR") made the decision to discontinue the
business which previously comprised the Company's BE/IM Segment.
Because the Company owns only 40% of NABR, it is not a
consolidated entity, and accordingly its operations had
previously been accounted for as an equity investment. Included
in the 1999 operating results of discontinued operations is a
$540,000 loss which represents Beard's share of the $1,350,000
loss NABR estimated it would incur from the discontinuation of
operations. $778,000 of NABR's loss represents the difference in
the estimated amounts to be received from disposing of its assets
and the assets' recorded values as of December 31, 1999.
$572,000 of the loss represents anticipated operating losses
through April 2000 (the date operations are expected to cease)
and costs of ceasing operations. Beard's share of NABR's
operating results were $82,000 and $296,000 of losses in 1999 and
1998, respectively, and $105,000 of income in 1997, which are
reported as discontinued operations. See Note 4 to the financial
statements.
The Company is now focusing its primary attention on the Coal
and China Segments, along with its new e-Commerce Segment, which
it believes have the greatest potential for growth and
profitability.
The Company has other operations, including various assets and
investments that it has been liquidating as opportunities have
materialized.
The results of operations for 1999 were severely impacted by
the termination of a major contract. Since April of 1998 the
Company had been operating six coal slurry impoundment sites for
a subsidiary of a large midwestern utility company under a cost-
plus arrangement which guaranteed the Company a minimum operating
profit of $100,000 per month. The arrangement was terminated on
January 31, 1999. Termination of the contracts was the primary
factor that resulted in the Coal Segment's reporting only
$953,000 of revenues and a $508,000 operating loss in 1999. Such
contracts accounted for all of the Segment's $8,585,000 of
revenues and $1,678,000 of operating profit in 1998. The CO2
Segment had a $170,000 reduction in its operating profit versus
1998 reflecting decreased CO2 production and demand. The China
Segment generated no revenues, but incurred $279,000 of selling,
general and administrative expenses related to its continuing
startup activities. The ER Segment reflected a $93,000 increase
in operating losses as a result of increased staffing and SG&A
expenses as it stepped up its marketing efforts. The WS Segment
had $82,000 in revenues and a loss of $213,000 as it started a
new subsidiary in the fourth quarter engaged in the rental of
sand separators to a customer in northeastern Mexico.
Additionally, this segment incurred a loss of $229,000 in 1999
compared to a loss of $35,000 in 1998, its initial year, from its
equity investee which provides natural gas well testing services
in northeastern Mexico. The e-Commerce Segment generated no
revenues but incurred $129,000 of SG&A expenses related to its
startup activities. The operating loss from corporate activities
at the parent company level decreased $78,000 from 1998
reflecting primarily the allocation of salaries and expenses to
the e-Commerce Segment.
The results of operations for 1998 reflected improved
operating margins from 1997 in the Coal Segment. The Segment had
a significant increase in revenues as a result of a contract to
operate six coal projects in the eastern United States, which was
partially offset by increased expenses due to increased staffing
and increased expenditures for chemicals and supplies to operate
the six facilities. The CO2 Segment showed a $198,000
improvement in operating margins in 1998 compared to 1997
reflecting increased CO2 production. The China Segment generated
no revenues, but incurred $277,000 of selling, general and
administrative expenses related to its startup activities. The
ER Segment reflected a $115,000 increase in operating losses in
1998 from 1997 as a result of increased staffing and SG&A
expenses as it stepped up its marketing efforts. Corporate
activities at the parent company level reflected (i) increased
staffing; (ii) higher health care and fringe benefit costs; and
(iii) higher legal costs associated with the McElmo Dome
litigation.
Liquidity and capital resources
- -------------------------------
Capital investments. The Company's capital investment
programs have required more cash than has been generated from
operations during the past three years. Cash flows provided by
(used in) operations during 1999, 1998, and 1997 were
$(1,709,000), $(854,000) and $312,000, respectively, while
capital additions from continuing operations were $1,392,000,
$24,175,000 and $154,000, respectively, as indicated in the table
below:
1999 1998 1997
---- ---- ----
Coal $ 1,135,000 $24,072,000 $ -
Carbon dioxide 10,000 41,000 147,000
Natural gas well
servicing 216,000 - -
Environmental
remediation - 6,000 3,000
e-Commerce - - -
Other 31,000 56,000 4,000
------------------------------------
Total $ 1,392,000 $24,175,000 $ 154,000
====================================
Capital additions in the discontinued solid CO2 segment were
$934,000 in 1997. Seller-provided financing and other debt
obligations provided $86,000 of the funds for such capital
investments.
Capital additions in the discontinued Other E/S Operations
were $143,000, and $515,000 for 1998 and 1997, respectively.
Seller-provided financing and other debt obligations provided
$20,000 of the funds for such capital investments.
Capital additions in the discontinued ITF segment were $59,000
and $3,891,000 in 1999 and 1998, respectively. Seller-provided
financing and other debt obligations provided $2,319,000 of the
funds for such capital investments in 1998.
The Company's 2000 capital expenditure budget has tentatively
been set at $5,736,000. Presently anticipated capital
expenditures include $5,531,000 for the Coal Segment and $205,000
for the WS Segment. Capital expenditures are targeted for two
reclamation facilities on which definitive agreements are being
finalized as of March 31, 2000. Such expenditures are expected
to be funded by equipment lease financing and other debt
obligations.
Liquidity. The sale of Carbonic Reserves in October of 1997
provided the Company with significant liquid resources. However,
at year-end 1999 such funds had been substantially utilized.
Future cash flows and availability of credit are subject to a
number of variables, including demand for the Company's coal
reclamation services and technology, continuing demand for CO2
gas and for the services provided by the Company's new WS
operations, private and governmental demand for environmental
remediation services and demand for the sale of coal equipment
and for the Company's environmental and technology services in
China.
During 1999 the Company reduced its working capital by
$4,422,000 from $4,994,000 at year-end 1998. $1,135,000 was used
by the Coal Segment to purchase the major portion of one of the
coal fines recovery plants for which agreements are now being
finalized. $508,000 was used to fund the operating loss of the
Coal Segment. $552,000 of the decrease resulted from additional
capital contributions of $301,000 and net advances of $251,000 to
the Company's well testing venture in Mexico. In addition, the
Company loaned a net amount of $486,000 to its partner which
operates the joint venture to fund a portion of its investment.
$213,000 was used to fund the startup of the new natural gas well
servicing operations. $326,000 was used to purchase treasury
stock in the first eight months of the year. $400,000 was used
to fund the discontinued operations of the ITF Segment.
$317,000, $279,000 and $129,000, respectively, were used to fund
the startup activities of the E/R, China and e-Commerce Segments.
Nonetheless, at December 31, 1999, the Company remained in a
positive working capital position with working capital of
$572,000, including $767,000 of cash and cash equivalents, and a
current ratio of 1.46 to 1.
Despite the fact that the Company has had losses from
continuing operations for the past five years, it has generated
total net earnings of $1,040,000 during such period. The last
two years have been particularly disappointing as the Company has
generated net losses totaling $7,256,000, including losses from
continuing operations totaling $2,620,000. Termination of the MCN
Projects was especially discouraging since it came at a time when
the Coal Segment had just established itself as the world's
largest operator of coal reclamation facilities. Our entry into
the interstate travel business was a major mistake, but those
problems are now behind us and the disposition of the remaining
assets is expected to generate cash for us going forward.
Results of the iodine business have also impacted earnings the
last two years---and again---those problems are now behind us and
the disposition of its assets is expected to generate cash for us
this year.
The Company's principal business is coal reclamation, and this
is where management's attention is primarily focused. Although
there is no absolute assurance that the letters of intent for two
major coal projects will be finalized into definitive agreements
we strongly believe this will occur. Meanwhile, we have taken
steps to bolster the Company's liquidity and working capital
until these or other contracts can be formalized. The Company
has replaced its $650,000 bank credit line with a $300,000 credit
line at a different bank. We have also executed a $1,000,000
line of credit with a related party to provide working capital
while the coal contracts are being finalized. We believe this
$1.3 million of financing will be sufficient to fund the
Company's operations until the new projects are underway. In
addition, the Company is attempting to dispose of the assets from
the discontinued ITF and BE/IM Segments and can sell certain
other assets to generate cash if necessary.
At the same time, we are pursuing two avenues of project
financing. The first traunch consists of: (i) $2 million of
equipment lease financing for the first coal project, backed by a
$1 million letter of credit, coupled with (ii) $1 million of
senior debt and (iii) warrants to purchase Beard common stock.
This traunch, which will enable us to proceed with purchasing the
balance of the equipment for the first project just as soon as
the final agreements are signed, may also include a takeout
provision. However, there is no assurance that the financing
will be secured. The second traunch will consist of $5 to $7
million of senior debt or senior participating preferred to
finance the second coal project and take out the first financing
if desired. We are having discussions with an investment banking
firm that has indicated they can have the second financing closed
within four months. However, there is no assurance this financing
will occur.
Selected liquidity highlights for the Company for the past
three years are summarized below:
1999 1998 1997
---- ---- ----
Cash and cash equivalents $767,000 $5,190,000 $13,955,000
Accounts and other receivables, net 480,000 1,386,000 2,654,000
Inventory 103,000 365,000 227,000
Trade accounts payable 262,000 677,000 533,000
Current maturities of long-term debt 17,000 119,000 136,000
Long-term debt (1) 13,000 25,780,000 519,000
Working capital 572,000 4,994,000 9,924,000
Current ratio 1.46 to 1 3.19 to 1 2.42 to 1
Net cash provided by (used in)
operations (1,709,000) (854,000) 312,000
__________
(1) On March 19, 1999, the Company terminated certain debt
agreements that resulted in the removal of $23,053,000 of debt
from the its balance sheet. On November 18, 1999, the Company
disposed of most of the assets of its ITF Segment, resulting in
the removal of $2,563,000 of debt from the Company's balance
sheet.
In 1999, the Company had negative cash flow of $4,423,000.
Operations of the Coal, E/R, W/S, China and e-Commerce Segments
resulted in cash outflows of $1,446,000. (See "Results of
operations---Other activities" below).
The Company's investing activities used cash of $2,134,000 in
1999. Acquisitions of property, plant and equipment primarily
related to the Company's Coal Segment accounted for $1,445,000 of
the cash outflow, while (i) investments in and (ii) loans to a
partner in the W/S Segment accounted for $1,038,000. Net
distributions from the Company's investment in Cibola provided
$308,000 in cash.
The Company's financing activities utilized cash flows of
$580,000 in 1999. The Company utilized $326,000 to repurchase
86,275 shares of its common stock, and $253,000 for payments on
lines of credit and term notes.
At year-end 1999 the Company had $575,000 of credit available
under the parent company's $650,000 bank line of credit.
However, the Company is allowing this credit line to expire on
April 30, 2000 and has replaced it with a $300,000 line of credit
at a new bank. At April 1, 2000, the Company had $225,000 of
credit available under the new credit line. At April 3, 2000 the
Company also had $1,000,000 of credit from a related party
available which bears interest at 10% until maturity at July 2,
2001. The Company believes that available cash and available
borrowings under its lines of credit will be adequate to meet the
Company's liquidity needs, including anticipated requirements for
working capital, until the $7,000,000 of financing currently
being pursued has been finalized and is in place.
Effect of Recent Developments on Liquidity. The Company had a
significant improvement in its debt ratios in 1999. The
termination of the MCNIC coal fines debt agreements effective as
of January 31, 1999, resulted in the removal of $23,053,000 of
debt and a corresponding amount of property, plant and equipment
from the Company's balance sheet. Such debt had been reflected
as a long-term obligation on the December 31, 1998 balance sheet.
The sale of a majority of the assets of the ITF Segment on
November 18, 1999 resulted in the removal of $2,563,000 of
additional debt from the Company's balance sheet. Primarily as a
result of these two events, the Company's debt-to-equity ratio,
which stood at 3.09 to l at year-end 1998, had been reduced to
0.01 to 1 at year-end 1999, with a total of only $30,000 of
consolidated debt outstanding. (See "Coal Reclamation Activities-
- --The MCN Projects" and "Discontinued Operations---ITF" in Part
I, Item 1).
On the negative side, it is important to note that revenues
from the MCN Projects accounted for 63.4% and 92.9% of the
Company's revenues from continuing operations in calendar years
1999 and 1998, respectively. The termination of the MCNIC
operating agreements had a material detrimental effect upon the
Company's profitability during the last 11 months of 1999, and
will continue to have a severe negative impact until the new
operating contracts currently being finalized have been executed
and the two projects involved have started to generate positive
cash flow. We currently anticipate that the first of the two
projects will start producing coal in August 2000 and start
generating positive cash flow in November 2000. The second
project is targeted to commence production in December 2000 and
achieve positive cash flow in March 2001.
It should be noted that, although letters of intent for the
two projects have been executed, the definitive agreements have
not yet been finalized nor executed. Once such agreements have
been executed, the Company must then be able to successfully
conclude the $7 million of financing that it is currently
pursuing to fund the additional equipment and working capital
required to bring the projects to a successful conclusion. The
Company believes that the contracts for the projects will be
finalized and executed, and that it will be successful in its
funding efforts. However, there is no assurance that such events
will occur.
The Coal Segment is working on several other projects, in
addition to the two projects for which contracts are now being
finalized, all of which have the potential for good prospective
return on investment. The Company's ability to finance such
projects will be limited by its success in arranging suitable
financing or equipment leasing facilities.
Effect of Reorganization on Liquidity. 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 5
to the financial statements).
Results of operations
- ---------------------
General. The period from 1997 to 1999 has been a time of
transition for the Company. Following the Restructure in 1993,
the Company shifted its attention to the management of its non-
oil and gas investments. During this period the Company divested
itself of its real estate construction and development activities
in January 1997, sold its dry ice manufacturing and distribution
business in October 1997, and restructured its E/RR Segment,
shifting the principal focus to coal reclamation and
discontinuing most of its environmental services activities. The
Company also made a brief and unsuccessful foray into the
interstate travel business in 1998, which it discontinued in
April 1999. The Management Committee directing the operations of
a 40%-owned joint venture engaged in the extraction, production
and sale of crude iodine decided to discontinue operations of the
joint venture in December 1999. As a result, the corporate staff
is now focusing most of its attention on the management of the
Coal, China and WS Segments, together with the Company's new e-
Commerce Segment, which we believe hold the greatest potential
for future growth and profits. The CO2 Segment's operating
results remain profitable; the degree of profitability primarily
reflecting changes in demand due to fluctuations in oil pricing.
The China and WS Segments are experiencing the normal problems
and delays encountered when starting new businesses in foreign
countries. In addition, the Company continues to liquidate
assets no longer in line with the Company's strategic objectives.
Operating profit (loss) for the last three years for the
Company's remaining principal operating segments which the
Company controls is set forth below:
1999 1998 1997
---- ---- ----
Operating profit (loss):
Coal reclamation $(508,000) $1,678,000 $(282,000)
Carbon dioxide 296,000 466,000 268,000
China (279,000) (277,000) -
Environmental remediation (317,000) (224,000) (109,000)
Natural gas well servicing (213,000) - -
e-Commerce (129,000) - -
----------------------------------
Subtotal (1,150,000) 1,643,000 (123,000)
Other - principally
corporate (1,324,000) (1,402,000) (1,188,000)
----------------------------------
Total $(2,474,000) $241,000 $(1,311,000)
==================================
Following is a discussion of results of operations for the
three-year period ended December 31, 1999.
Coal reclamation. As a result of the recent change of
direction, the Company has focused its primary attention on coal
reclamation. In January 1999, BTI completed a 10-month contract
as the operator of coal waste recovery projects (the "MCN
Projects") located at six sites in three states in the eastern
U.S. Now that such contracts have been terminated (see "Coal
Reclamation Activities---The MCN Projects" in Part I, Item 1),
BTI is again pursuing coal recovery projects where it will serve
as either owner or operator.
The MCN Projects generated 84% and 100% of the Coal Segment's
1999 and 1998 revenues, respectively. Operating revenues in this
segment were $953,000, $8,585,000 and $1,000 in 1999, 1998 and
1997, respectively, with the sharp increase in 1998 reflecting
the impact of the MCN Projects. In 1997 BTI had focused its
efforts on marketing its M/C Technology, and its only revenues
were derived from consulting services. Operating costs decreased
to $1,064,000 in 1999 from $5,110,000 in 1998, which was an
increase from $120,000 in 1997. SG&A expenses decreased to
$204,000 in 1999 from $985,000 in 1998, which was an increase
from $154,000 in 1997. The fluctuations in costs in 1999 and
1998 reflect the effect of the termination of the MCN Projects in
1999 and the buildup of such costs in 1998. The segment produced
an operating loss of $508,000 in 1999 versus an operating profit
of $1,678,000 in 1998 and an operating loss of $282,000 in 1997,
again reflecting the effect of the MCN Projects.
Carbon dioxide. 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 were $418,000, $616,000 and $503,000 in 1999, 1998 and
1997, respectively, while operating profits totaled $296,000,
$466,000 and $268,000, respectively, for the three years. CO2
net sales volumes were 1,536,000, 2,187,000 Mcf and 1,617,000 Mcf
in 1999, 1998 and 1997, respectively. The decrease in revenues
and operating profits in 1999 compared to 1998 reflect the
decreased demand for CO2 as a result of the severe deterioration
in oil prices in late 1998 and early 1999 and the resultant
decreased demand for CO2 used for tertiary oil recovery. The
increase in operating profits in 1998 compared to 1997 was
primarily the result of a 570,000 Mcf increase in sales volume
for 1998 compared to 1997 resulting from the successful
development program commenced in 1996 by the operator of the
McElmo Dome field.
China. In 1998 the Company activated Beard Sino-American
Resources Co., Inc. ("BSAR") to pursue coal reclamation
opportunities in China utilizing BTI's patented M/C Technology in
China. Due to changes in the political and business environment
in China, BSAR shifted its direction in 1999. Coal reclamation
activities have been put on hold and BSAR is now focusing on the
sale of coal equipment, environmental technology and other
technical services. BSAR had no revenues in 1999 or 1998, and
recorded $279,000 and $277,000 of SG&A expenses, respectively, in
1999 and 1998 while pursuing its various marketing efforts.
Environmental remediation. This subsidiary was added in 1997
and utilizes a chemical for which it is the sole U.S. licensee of
a process for the remediation of PAH contamination. This is
essentially still a startup operation, having generated no
revenues in 1999, and only $8,000 and $13,000 of revenues in 1998
and 1997, respectively. The segment produced an operating loss
of $317,000 in 1999, $224,000 in 1998 and $109,000 in 1997,
reflecting the sharp increase in SG&A expenses as the segment
stepped up its level of marketing activities each year.
Natural gas well servicing. In late 1998 the Company invested
in a 50%-owned subsidiary, ITS-Testco, L.L.C., which conducts
natural gas well testing operations in Mexico through a wholly-
owned subsidiary, Testco Inc. de Mexico, S.A. de C.V.; the
operations of these entities are not consolidated since the LLC
is managed by our 50% partner. The Company recorded $229,000 and
$35,000 in 1999 and 1998, respectively, as its share of the LLC's
losses. In late 1999, the Company formed a 100%-owned
subsidiary, ITS. Inc., which designed a proprietary sand
separator for use in Mexico through its wholly-owned subsidiary,
Incorporated Tank Systems de Mexico, S.A. de C.V. This
consolidated subsidiary generated $82,000 and $56,000 of revenues
and costs, respectively, in 1999. The WS Segment also incurred
$223,000 of SG&A expenses in 1999 resulting from the Company's
continued pursuit of natural gas well servicing opportunities in
Mexico.
e-Commerce. In early 1999, the Company began developing its
proprietary concept for an Internet payment system. The $129,000
operating loss reflected for 1999 relates solely to the SG&A
expenses incurred to date in the initial phases of developing the
technology.
Other corporate activities. Other corporate activities
include general and corporate operations, as well as assets
unrelated to the Company's operating segments or held for
investment. These activities generated operating losses of
$1,324,000 in 1999, $1,402,000 in 1998 and $1,188,000 in 1997.
The operating loss decreased $78,000 in 1999 compared to 1998 as
a portion of the SG&A expenses incurred were allocated to the e-
Commerce Segment for the development of the starpay Internet
payment system. Additionally, the year 1999 saw the Company
incur markedly lower benefit expenses while incurring slightly
higher legal expenses as the Company continued to pursue the CO2
litigation. A higher level of general and administrative
expenses impacted the bottom line in 1998 as the Company
continued its pursuit of additional business opportunities. In
1997, the parent company also incurred an impairment loss of
$171,000 relating to underutilized land remaining from the 1993
Restructure (see note 5 to the financial statements).
Selling, general and administrative expenses. Selling,
general and administrative expenses ("SG&A") decreased to $1.9
million in 1999 from $2.4 million in 1998 which had increased
from $1.3 million in 1997. Most of the sharp fluctuation was
attributable to the Coal Segment, which incurred SG&A expense of
$204,000, $985,000 and $154,000 in 1999, 1998 and 1997,
respectively. The large increase in 1998 was due to the
increased staffing and operations required to meet the demands of
the MCN Projects. SG&A expense incurred by the China Segment
during 1999 increased to $279,000 from $277,000 in 1998 and none
in 1997. SG&A expense incurred by the ER Segment during 1999
increased to $87,000 from $42,000 in 1998 and $23,000 in 1997.
The WS Segment incurred $223,000 of SG&A expenses as it continued
to pursue new opportunities in Mexico. e-Commerce and other
corporate SG&A decreased to $1,122,000 in 1999 from $1,096,000 in
1998 which had increased from $1,120,000 in 1997 as the Company's
reductions in benefits and other costs incurred were partially
offset by expenses to pursue investment opportunities that failed
to materialize.
Depreciation, depletion and amortization. The Company's
depreciation, depletion and amortization expenses decreased 59%
in 1999 from 1998, while such expenses increased 1,452% in 1998
over 1997's expense. The fluctuations in DD&A expense for 1999
and 1998 were primarily attributable to the significantly higher
depreciable basis of the assets in the Coal Segment during the
period that such assets were owned in connection with the MCN
Projects.
Interest income. Interest income increased from $183,000 in
1997 to $400,000 in 1998 and decreased to $228,000 in 1999. The
increase in 1998 compared to 1997 is a result of the increased
investment in commercial paper purchased with the cash from the
sale, in October 1997, of the assets of the discontinued solid
CO2 segment. The decrease in 1999 from the amount realized in
1998 reflects the decreased amount available to invest as cash
was used to fund other investments and operations.
Interest expense. Interest expense increased from $134,000 in
1997 to $964,000 in 1998 and decreased to $170,000 in 1999. The
sharp increase in 1998 reflects the higher level of debt incurred
by the Coal Segment to fund the acquisition of equipment for the
MCN Projects in such year. The sharp decrease in 1999 reflects
the Coal Segment being relieved of such indebtedness as of
January 31, 1999.
Equity in earnings of unconsolidated affiliates. The
Company's share of the operating loss of its 50%-owned natural
gas well testing investee was $229,000. The losses resulted from
startup and interest costs. Offsetting the Company's share of
the losses of ITS-Testco, L. L. C. was the Company's share of the
earnings of Cibola Corporation ("Cibola"). Although the Company
owns 80% of the common stock of Cibola Corporation, it does not
have operating or financial control of this gas marketing
subsidiary. Cibola, formed in April of 1996, contributed
$308,000, $274,000, and $185,000 of pre-tax net income to the
Company for fiscal years 1999, 1998 and 1997, respectively,
pursuant to a tax sharing agreement.
Gain on sale of assets. The gain on the sale of assets of
$56,000 in 1999, $8,000 in 1998 and $55,000 in 1997. Such gains
reflected proceeds from the sale of certain assets that are in
the process of being liquidated.
Impairment of investments and other assets. In 1999, 1998 and
1997 the Company recognized $110,000, $154,000, and $328,000 for
impairments to the carrying values of investments and other
assets relating to the recoverability of such investments or
assets.
Income taxes. The Company has approximately $58.2 million of
net operating loss carryforwards, investment tax credits, and
depletion carryforwards to reduce future income taxes. Based on
the Company's historical results of operations, it is not likely
that the Company will be able to realize the benefit of its net
operating loss carryforwards before they begin to expire in 2004,
or of its remaining investment tax credit carryforwards which
completely expire in 2000. At December 31, 1999 and 1998, the
Company has not reflected as a deferred tax asset any future
benefit it may realize as a result of its tax credits and loss
carryforwards. Future regular taxable income of the Company will
be effectively sheltered from tax as a result of the Company's
substantial tax credits and loss carryforwards. Continuing
operations reflect foreign and state income and federal
alternative minimum taxes of $48,000, $100,000 and $40,000 for
1999, 1998 and 1997, respectively. It is anticipated that the
Company will continue to incur minor alternative minimum tax in
the future, despite the Company's carryforwards and credits.
Discontinued operations. In December 1999 the Management
Committee of North American Brine Resources ("NABR") made the
decision to discontinue the business which previously comprised
the Company's BE/IM Segment. Because the Company owns only 40%
of NABR, it is not a consolidated entity, and accordingly its
operations had previously been accounted for as an equity
investment. Included in the 1999 operating results is a $540,000
loss which represents Beard's share of the $1,350,000 loss NABR
estimated it would incur from the discontinuation of operations.
$778,000 of NABR's loss represents the difference in the
estimated amounts to be received from disposing of its assets and
the assets' recorded values as of December 31, 1999. $572,000 of
the loss represents anticipated operating losses through April
2000 (the date operations are expected to cease) and costs of
ceasing operations. Beard's share of NABR's operating results
were $82,000 and $296,000 of losses in 1999 and 1998,
respectively, and $105,000 of income in 1997, which are reported
as discontinued. See Note 4 to the financial statements.
In April 1999 the Company's Board of Directors adopted a
formal plan to discontinue its ITF Segment and entered into
agreements with ITF and its minority shareholders to transfer
control of ITF to the minority shareholders. The discontinuation
of ITF was accounted for as of December 31, 1998. In September
1999 the Company entered into revised agreements with the
minority shareholders which resulted in the disposition of a
majority of the assets owned by the segment for (i) the release
of certificates of deposit in the amount of $327,000, (ii)
assumption of debt in the amount of $2,149,000 and accounts
payable of $126,000, and (iii) the cancellation of $440,000 of
debt and accrued interest to the minority shareholders. The sale
closed on November 18, 1999. Operating results for the ITF
Segment have been reported as discontinued in the accompanying
statements of operations (see Note 4 to the financial
statements). Included in the 1998 operating results was a
$1,603,000 estimated loss from the discontinuation of the ITF
Segment, including an estimated $347,000 for the operating losses
expected to be incurred by ITF prior to the final disposition of
its assets. ITF's operating losses for 1999 were $567,000.
$347,000 of such losses were charged against the loss accrual
recorded in 1998 with the remaining $220,000 reflected in loss
from discontinued operations in the 1999 statement of operations.
Beard also recorded an additional $214,000 loss in the fourth
quarter of 1999: $180,000 of the loss represents anticipated
operating losses of ITF from December 31, 1999 through the
anticipated disposal date of the remaining assets; $34,000 of the
loss represents a reduction in the estimated realizable values of
the remaining assets as of December 31, 1999.
In August of 1998 the Company's Board of Directors adopted a
plan to restructure the E/RR Segment and to discontinue the Other
E/S Operations. Losses from the discontinued Other E/S
Operations were $424,000 and $1,140,000 in 1998 and 1997,
respectively. Included in the accompanying statements of
operations for the year ended December 31, 1998, is a $684,000
estimated loss expected from the discontinuation of the Other E/S
Operations. $749,000 of the net loss represents the difference
in the estimated amounts to be received from disposing of the
Other E/S Operations assets and the assets' recorded values as of
June 30, 1998. $689,000 of this loss was recorded in June 1998
and $60,000 of the loss was recorded in December 1998 upon the
Company's review of the estimated realizable values of the
remaining assets. $300,000 of the loss represents anticipated
operating losses until disposal has been completed. Offsetting
the expected losses is a $365,000 gain from early extinguishment
of an obligation to the former owner of HDT. The gain represents
the amount of the discounted obligation as of June 30, 1998. At
December 31, 1999, the significant assets related to the Other
E/S Operations consist primarily of equipment with a recorded
value of $160,000. The significant liabilities related to the
Other E/S Operations consist of accrued expenses totaling
$20,000.
In October of 1997 the Company sold the business and
substantially all of the assets of Carbonic Reserves, an 85%-
owned subsidiary engaged in the manufacture of solid CO2 ("solid
CO2 segment") for cash of $19,375,000 and the assumption of
certain liabilities valued at $2,813,000. The gain on the sale
was $11,014,000 after deducting income taxes of $522,000. During
the third quarter of 1998, the Company determined that it
overestimated its state income tax liability thereby reducing the
gain recognized in October 1997 from the asset sale by $168,000.
As of December 31, 1999, the solid CO2 segment had no significant
assets. The significant liabilities of the solid CO2 segment
consisted of accrued employee severance compensation of $155,000.
Revenues and earnings applicable to the discontinued operations
of Carbonic Reserves were $11,071,000 and $428,000 in 1997,
respectively.
Forward looking statements. The previous discussions include
statements that are not purely historical and are "forward-
looking statements" within the meaning of Section 27A of the
Securities Act and Section 21E of the Exchange Act, including
statements regarding the Company's expectations, hopes, beliefs,
intentions and strategies regarding the future. The Company's
actual results could differ materially from its expectations
discussed herein, and particular attention is called to the
discussion under "Liquidity and Capital Resources --- Effect of
Recent Developments on Liquidity" contained in this Item 7.
Impact of Recently Issued Accounting Standards Not Yet Adopted
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 133,
"Accounting for Derivative Instruments and Hedging Activities."
SFAS No.133 establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities. It
requires an entity to recognize all derivatives as either assets
or liabilities in the statement of financial position and measure
those instruments at fair value. If certain conditions are met,
a derivative may be specifically designated as a hedge. The
accounting for changes in the fair value of a derivative (that
is, gains and losses) depends on the intended use of the
derivative and whether it qualifies as a hedge. A subsequent
pronouncement, SFAS 137, was issued in July, 1999, that delayed
the effective date of SFAS 133 until fiscal years beginning after
June 15, 2000. The Company plans to adopt the provisions of SFAS
133 in the first quarter of the year ending December 31, 2000,
and such adoption is not expected to have a material impact on
the Company's financial position or future results of operations.
Item 7A. Quantitative and Qualitative Disclosures About Market
Risk.
At December 31, 1999, the Company had notes receivable of
$836,000 and long-term debt of $30,000. The notes receivable and
long-term debt 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. At
December 31, 1999, 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 long-term debt by less
than $1,000.
The Company has no other market risk sensitive instruments.
Item 8. Financial Statements and Supplementary Data
The Beard Company and Subsidiaries
Index to Financial Statements
Forming a Part of Form 10-K Annual Report
to the Securities and Exchange Commission
Page Number
Independent Auditors' Report
Financial Statements:
Balance Sheets, December 31, 1999 and 1998
Statements of Operations, Years ended December 31, 1999, 1998
and 1997
Statements of Shareholders' Equity, Years ended December 31,
1999, 1998 and 1997
Statements of Cash Flows, Years ended December 31, 1999, 1998
and 1997
Notes to Financial Statements, December 31, 1999, 1998 and 1997
Independent Auditors' Report
The Board of Directors and Stockholders
The Beard Company:
We have audited the financial statements of The Beard Company
and subsidiaries as listed in the accompanying index. These
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of The Beard Company and subsidiaries at December 31, 1999 and
1998, and the results of their operations and their cash flows
for each of the years in the three-year period ended December 31,
1999, in conformity with generally accepted accounting
principles.
KPMG LLP
Oklahoma City, Oklahoma
April 7, 2000
THE BEARD COMPANY AND SUBSIDIARIES
Balance Sheets
December 31, December 31,
Assets 1999 1998
------ ------------ ------------
Current assets:
Cash and cash equivalents $ 767,000 $ 5,190,000
Investments (note 6) 280,000 -
Accounts receivable, less allowance
for doubtful receivables of $13,000
in 1999 and $69,000 in 1998 480,000 1,386,000
Inventory 103,000 365,000
Prepaid expenses and other assets 98,000 277,000
Current portion of notes receivable
(note 7) 80,000 57,000
----------- -----------
Total current assets 1,808,000 7,275,000
----------- -----------
Notes receivable (note 7) 756,000 300,000
Investments and other assets (note 6) 1,324,000 1,941,000
Property, plant and equipment, at
cost (note 8) 6,879,000 32,921,000
Less accumulated depreciation,
depletion and amortization 3,987,000 5,139,000
----------- -----------
Net property, plant and
equipment 2,892,000 27,782,000
----------- -----------
Intangible assets, at cost (note 9) 25,000 167,000
Less accumulated amortization 1,000 128,000
----------- -----------
Net intangible assets 24,000 39,000
----------- -----------
$ 6,804,000 $37,337,000
=========== ===========
Liabilities and Shareholders' Equity
------------------------------------
Current Liabilities:
Trade accounts payable $ 262,000 $ 677,000
Accrued expenses (note 4) 869,000 1,385,000
Income taxes payable (note 12) 88,000 100,000
Current maturities of long-term debt
(note 10) 17,000 119,000
----------- -----------
Total current liabilities 1,236,000 2,281,000
----------- -----------
Long-term debt less current maturities
(note 10) 13,000 25,780,000
Redeemable preferred stock of $100
stated value; 5,000,000 shares
authorized; 27,838 shares issued
and outstanding in 1999 and 1998
(note 5) 889,000 889,000
Common shareholders' equity:
Common stock of $.001 par value per
share; 10,000,000 shares authorized;
2,832,129 shares issued and outstanding
in 1999 and 1998 3,000 3,000
Capital in excess of par value 37,723,000 37,747,000
Accumulated deficit (31,218,000) (27,819,000)
Accumulated other comprehensive income 4,000 -
Treasury stock, 393,405 and 310,890
shares, at cost in 1999 and 1998,
respectively (1,846,000) (1,544,000)
----------- -----------
Total common shareholders'equity 4,666,000 8,387,000
----------- -----------
Commitments and contingencies (notes
5, 11, and 15)
$ 6,804,000 $37,337,000
=========== ===========
See accompanying notes to financial statements.
THE BEARD COMPANY AND SUBSIDIARIES
Statement of Operations
Year Ended December 31,
-----------------------
1999 1998 1997
---- ---- ----
Revenues:
Coal reclamation $ 953,000 $ 8,585,000 $ 1,000
Carbon dioxide 418,000 616,000 503,000
China - - -
Environmental remediation - 8,000 13,000
Natural gas well servicing 82,000 - -
e-Commerce - - -
Other 50,000 37,000 58,000
------------ ----------- ------------
1,503,000 9,246,000 575,000
------------ ----------- ------------
Expenses:
Coal reclamation 1,064,000 5,110,000 120,000
Carbon dioxide 89,000 119,000 103,000
China 279,000 277,000 -
Environmental remediation 184,000 185,000 96,000
Natural gas well servicing 56,000 - -
Selling, general and
administrative 1,915,000 2,400,000 1,297,000
Depreciation, depletion and
amortization 354,000 869,000 56,000
Impairment of long-lived assets
(notes 1 and 17) - - 171,000
Other 36,000 45,000 43,000
------------ ----------- ------------
3,977,000 9,005,000 1,886,000
------------ ----------- ------------
Operating profit (loss):
Coal reclamation (508,000) 1,678,000 (282,000)
Carbon dioxide 296,000 466,000 268,000
China (279,000) (277,000) -
Environmental remediation (317,000) (224,000) (109,000)
Natural gas well servicing (213,000) - -
e-Commerce (129,000) - -
Other, principally corporate (1,324,000) (1,402,000) (1,188,000)
------------ ----------- ------------
(2,474,000) 241,000 (1,311,000)
Other income (expense):
Interest income 228,000 400,000 183,000
Interest expense (170,000) (964,000) (134,000)
Equity in earnings of
unconsolidated affiliates 80,000 225,000 169,000
Gain on sale of assets 56,000 8,000 55,000
Impairment of investments and
other assets (notes 1 and 17) (110,000) (154,000) (328,000)
Other 95,000 67,000 13,000
------------ ----------- ------------
Loss from continuing operations
before income taxes (2,295,000) (177,000) (1,353,000)
Income taxes (note 12) (48,000) (100,000) (40,000)
------------ ----------- ------------
Loss from continuing operations (2,343,000) (277,000) (1,393,000)
Discontinued operations (note 4):
Losses from discontinued
operations (less applicable
income taxes of $33,000 in
1997) (82,000) (1,461,000) (607,000)
Loss from discontinuing brine
extraction/iodine manufacturing
activities (540,000) - -
Loss from discontinuing other
environmental services
activities - (684,000) -
Loss from discontinuing interstate
travel facilities activities (434,000) (1,603,000) -
Gain on sale of dry ice
manufacturing and distribution
business (less applicable income
taxes of $522,000 in 1997) - 168,000 11,014,000
------------ ----------- ------------
Earnings (loss) from discontinued
operations (1,056,000) (3,580,000) 10,407,000
------------ ----------- ------------
Net earnings (loss) $ (3,399,000) $(3,857,000) $ 9,014,000
============ =========== ============
Net earnings (loss) attributable
to common shareholders(note 5) $ (3,399,000) $(3,857,000) $ 5,225,000
============ =========== ============
Net earnings (loss) per average
common share outstanding:
Basic and diluted:
Loss from continuing operations $(0.96) $(0.11) $(0.50)
Earnings (loss) from
discontinued operations (0.43) (1.41) 2.36
------------ ----------- ------------
Net earnings (loss) $(1.39) $(1.52) $ 1.86
============ =========== ============
Weighted average common shares
outstanding - basic and diluted 2,452,000 2,542,000 2,808,000
============ =========== ============
See accompanying notes to financial statements.
THE BEARD COMPANY AND SUBSIDIARIES
Statements of Shareholders' Equity
Accumulated Total
Capital in Other Common
Common Excess of Accumulated Comprehensive Treasury Shareholders'
Stock Par Value Deficit Income Stock Equity
------ ---------- ----------- ------------- -------- -------------
Balance, December 31, 1996 $ 3,000 $41,629,000 $(32,976,000) $ - $ - $ 8,656,000
Net earnings - - 9,014,000 - - 9,014,000
Issuance of 33,055
shares of common stock - 71,000 - - - 71,000
Purchase of 303,890
shares of common stock
(note 1) - - - - (1,519,000) (1,519,000)
Accretion of preferred
stock (note 5) - (3,789,000) - - - (3,789,000)
------- ----------- ------------ ------- ----------- -----------
Balance, December 31, 1997 3,000 37,911,000 (23,962,000) - (1,519,000) 12,433,000
Net loss - - (3,857,000) - - (3,857,000)
Sale of 37,500 shares of
treasury stock - (112,000) - - 188,000 76,000
Issuance of 11,000 shares
of treasury stock for
stock option exercises - (52,000) - - 52,000 -
Purchase of 55,500 shares of
common stock (note 1) - - - - (265,000) (265,000)
------- ----------- ------------ ------- ----------- -----------
Balance, December 31, 1998 3,000 37,747,000 (27,819,000) - (1,544,000) 8,387,000
Net loss - - (3,399,000) - - (3,399,000)
Comprehensive income:
Foreign currency
translation adjustment - - - 4,000 - 4,000
----------
Comprehensive loss - - - - - (3,395,000)
----------
Issuance of 3,760 shares
of treasury stock
for stock option exercises - (24,000) - - 24,000 -
Purchase of 86,275 shares
of common stock (note 1) - - - - (326,000) (326,000)
------- ----------- ------------ ------- ----------- -----------
Balance, December 31, 1999 $ 3,000 $37,723,000 $(31,218,000) $ 4,000 $(1,846,000) $4,666,000
======= =========== ============ ======= =========== ===========
See accompanying notes to financial statements.
THE BEARD COMPANY AND SUBSIDIARIES
Statements of Cash Flows
Year Ended December 31,
-----------------------
1999 1998 1997
---- ---- ----
Operating activities:
Cash received from customers $ 8,953,000 $ 15,615,000 $ 17,189,000
Cash paid to suppliers and
employees (10,488,000) (15,472,000) (16,520,000)
Interest received 232,000 512,000 83,000
Interest paid (346,000) (1,151,000) (386,000)
Taxes paid (60,000) (358,000) (54,000)
------------ ------------ ------------
Net cash provided by (used in)
operating activities (1,709,000) (854,000) 312,000
------------ ------------ ------------
Investing activities:
Acquisition of property, plant
and equipment (1,445,000) (1,792,000) (1,517,000)
Proceeds from sale of business - 1,000,000 18,425,000
Proceeds from sale of assets 88,000 275,000 352,000
Purchase of minority interest - (900,000) -
Acquisition of travel facilities,
net of cash acquired of $49,000 - (886,000) -
Advances for notes receivable (960,000) - -
Payments on notes receivable 561,000 6,000 -
Investment in and advances to
fifty percent-owned subsidiary (552,000) (333,000) -
Net purchase of certificates of
deposit (25,000) (327,000) -
Other investments 199,000 76,000 106,000
------------ ------------ ------------
Net cash provided by (used in)
investing activities (2,134,000) (2,881,000) 17,366,000
------------ ------------ ------------
Financing activities:
Proceeds from line of credit and
term notes - 328,000 1,764,000
Payments on line of credit and
term notes (253,000) (1,165,000) (4,302,000)
Purchase of treasury stock (326,000) (265,000) (1,519,000)
Preferred stock repurchase - (4,005,000) (95,000)
Proceeds from issuance of
common stock - 76,000 71,000
Other (1,000) 1,000 (17,000)
------------ ------------ ------------
Net cash used in financing
activities (580,000) (5,030,000) (4,098,000)
------------ ------------ ------------
Net increase (decrease) in cash
and cash equivalents (4,423,000) (8,765,000) 13,580,000
Cash and cash equivalents at
beginning of year 5,190,000 13,955,000 375,000
------------ ------------ ------------
Cash and cash equivalents at
end of year $ 767,000 $ 5,190,000 $ 13,955,000
============ ============ ============
See accompanying notes to financial statements.
THE BEARD COMPANY AND SUBSIDIARIES
Statements of Cash Flows
Reconciliation of Net Earnings (Loss) to Net Cash Provided by (Used In)
Operating Activities:
Year Ended December 31,
-----------------------
1999 1998 1997
---- ---- ----
Net earnings (loss) $ (3,399,000) $(3,857,000) $ 9,014,000
Adjustments to reconcile net earnings
(loss) to net cash provided by (used
in) operating activities:
Depreciation, depletion and amortization 354,000 1,366,000 1,297,000
Gain on sale of assets (56,000) (16,000) (11,549,000)
Provision for uncollectible accounts and
notes 11,000 19,000 113,000
Impairment of investments and other assets 110,000 154,000 328,000
Impairment of long-lived assets - - 285,000
Net cash used by discontinued operations
offsetting accrued losses (347,000) (300,000) -
Loss from discontinued operations 974,000 2,119,000 -
Equity in net (income) loss of
unconsolidated affiliates 3,000 71,000 (274,000)
Minority interest in operations of
consolidated subsidiaries - (285,000) (49,000)
Interest and other costs recognized on
real estate project - - 357,000
Other (64,000) 33,000 (9,000)
(Increase) decrease in accounts
receivable, other receivables, prepaid
expenses and other current assets 1,138,000 79,000 (1,022,000)
(Increase) decrease in inventories 132,000 (8,000) 1,069,000
Increase (decrease) in trade accounts
payable, accrued expenses and other
liabilities (565,000) (229,000) 752,000
------------ ----------- -----------
Net cash provided by (used in) operating
activities $ (1,709,000) $ (854,000) $ 312,000
============ =========== ===========
Supplemental Schedule of Noncash Investing and Financing Activities:
Exchange of coal extraction and
beneficiation equipment for release
of debt obligation $ 23,053,000 $ - $ -
============ =========== ===========
Accounts payable, accrued expenses
and other debt obligations assumed
or cancelled by the purchaser of
the interestate travel facilities'
assets $ 2,715,000 $ - $ -
============ =========== ===========
Sale of property, plant and equipment
for notes receivable $ 80,000 $ 359,000 $ -
============ =========== ===========
Purchase of property, plant and
equipment and intangible assets
through issuance of debt obligations $ - $24,127,000 $ 86,000
============ =========== ===========
Purchase of travel facilities through
the sale of a subsidiary's common
stock $ - $ 181,000 $ -
============ =========== ===========
Purchase of travel facilities through
the issuance of a debt obligation
and assumption of debt obligations $ - $ 2,319,000 $ -
============ =========== ===========
Contribution of equipment for equity
investment $ - $ 20,000 $ -
============ =========== ===========
Accounts payable, accrued expenses and
other debt obligations assumed by the
purchaser from the sale of the dry
ice manufacturing and distribution
business $ - $ - $ 2,813,000
============ =========== ===========
Holdback receivable from the sale of
the dry ice manufacturing and
distribution business $ - $ - $ 1,000,000
============ =========== ===========
Stock purchase obligation resulting
from the sale of the dry ice
manufacturing and distribution
business $ - $ - $ 900,000
============ =========== ===========
See accompanying notes to financial statements.
THE BEARD COMPANY AND SUBSIDIARIES
Notes to Financial Statements
December 31, 1999, 1998 and 1997
(1) Summary of Significant Accounting Policies
- -----------------------------------------------
The Beard Company's ("Beard" or the "Company") accounting
policies reflect industry practices and conform to generally
accepted accounting principles. The more significant of such
policies are briefly described below.
Nature of Business
------------------
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, (4) the Environmental Remediation ("ER") Segment, (5)
the Natural Gas Well Servicing ("WS") Segment, and (6) the e-
Commerce ("e-Commerce") Segment.
The Coal Segment is in the business of operating coal fines
reclamation and/or briquetting facilities in the U.S. and is
pursuing the development of advanced fine coal preparation
processes. The China Segment is pursuing (i) the sale of coal
equipment, (ii) environmental opportunities, (iii) the sale of
technical services, and (iv) the operation of coal fines
reclamation facilities in China. The CO2 Segment consists of the
production of CO2 gas. The ER Segment consists of services to
remediate creosote and polycyclic aromatic hydrocarbon
contamination. The WS Segment is conducted by two companies
operating in northeastern Mexico and consists of (i) a 50%-owned
company (accounted for as an equity investment) involved in
natural gas well testing operations, and (ii) a wholly-owned
company that has designed a sand separator for use on natural gas
wells and has had five of them custom fabricated for use on a
trial basis. The e-Commerce Segment consists of a wholly-owned
subsidiary in the process of developing and executing an Internet
payment system.
Principles of Consolidation and Basis of Presentation
-----------------------------------------------------
The accompanying financial statements include the accounts of the
Company and its wholly and majority owned subsidiaries in which
the Company has a controlling financial interest. Subsidiaries
and investees in which the Company does not exercise control are
accounted for using the equity method. All significant
intercompany transactions have been eliminated in the
accompanying financial statements.
The Company operated in the Brine Extraction/Iodine Manufacturing
("BE/IM") Segment, consisting of the Company's 40%-ownership
investment in a joint venture, North American Brine Resources
("NABR"), for the extraction, production and sale of crude
iodine. As discussed in note 4, in December 1999, the Management
Committee of NABR adopted a formal plan to discontinue the
business.
The Company operated in the interstate travel facilities business
(the "ITF" Segment) following its acquisition of four travel
facilities in February 1998. As discussed in note 4, in April
1999, the Company's Board of Directors adopted a formal plan to
discontinue the ITF Segment. Also, as discussed in note 4, in
August 1998 the Company's Board of Directors adopted a formal
plan to discontinue its other environmental services operations
(the "Other E/S Operations"), conducted principally by Whitetail
Services, Inc. ("Whitetail"), Horizontal Drilling Technologies,
Inc. ("HDT") and Incorporated Tank Systems.
In prior years, the Company operated in the dry ice (solid
CO2) manufacturing and distribution business, included in the CO2
Segment which was discontinued through sale in October 1997.
Use of estimates
----------------
Management of the Company has made a number of estimates and
assumptions relating to the reporting of assets and liabilities
and the disclosure of contingent assets and liabilities to
prepare these financial statements in conformity with generally
accepted accounting principles. Actual results could differ from
those estimates.
Cash and Cash Equivalents
-------------------------
Cash equivalents approximated $525,000 and $3,954,000 at December
31, 1999 and 1998, respectively, and consist of investments in
short-term commercial paper and certificates of deposit whose
remaining terms at the date of purchase are less than 90 days.
For purposes of the statements of cash flows, the Company
considers all highly liquid debt instruments with original
maturities of three months or less at the date of purchase to be
cash equivalents.
Inventory
---------
As of December 31, 1999, inventory consisted primarily of
gasoline and grocery items located at the Company's two
remaining interstate travel facilities, at cost of $103,000. At
December 31, 1998, inventory consisted primarily of gasoline and
grocery items located at the Company's interstate travel
facilities, at cost of $156,000; and one speculative home, at
cost of $227,000, remaining from the real estate construction
and development business.
Costs associated with the acquisition, development and
construction of the real estate project were capitalized in
accordance with Statement of Financial Accounting Standards
("SFAS") No. 67, "Accounting for Costs and Initial Rental
Operations of Real Estate Projects." Accordingly, inventory at
December 31, 1998 included $24,000 of capitalized general and
administrative costs that related directly to the project. The
Company discontinued its real estate construction and
development segment in January 1997 and therefore has not
incurred any costs related to the real estate construction and
development project subsequent to that date.
Property, Plant and Equipment
-----------------------------
Property, plant and equipment are depreciated by use of the
straight-line method using estimated asset lives of 3 to 40
years. Depreciation, depletion and amortization of properties
producing CO2 are computed by the units-of-production method
using estimates of unrecovered proved developed CO2 reserves.
The Company charges maintenance and repairs directly to
expense as incurred while betterments and renewals are generally
capitalized. When property is retired or otherwise disposed of,
the cost and applicable accumulated depreciation, depletion and
amortization are removed from the respective accounts and the
resulting gain or loss is reflected in operations.
Intangible Assets
-----------------
Identifiable intangible assets, comprised primarily of patents
and licensing fees, are amortized on a straight-line basis over
their respective estimated useful lives, ranging from five to 17
years.
Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of
-----------------------------------------------------------------------
Long-lived assets and certain identifiable intangibles are
reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may
not be recoverable. Recoverability of assets to be held and used
is measured by a comparison of the carrying amount of an asset to
future net cash flows expected to be generated by the asset. If
such assets are considered to be impaired, the impairment to be
recognized is measured by the amount by which the carrying amount
of the assets exceeds the fair value of the assets. Assets to be
disposed of are reported at the lower of the carrying amount or
fair value less costs to sell.
The Company recorded an impairment loss of $171,000 in the fourth
quarter of 1997 related to underutilized land owned by the
Company. The impairment loss is a result of the difference
between the carrying value and the estimated fair value (based on
appraised value) of the assets. As a result of the 1993
Restructure (see note 5), the Company retained certain land which
was once utilized as oil and gas drilling and servicing supply
yards. The supply yards have been inactive since the Company's
1993 Restructure.
Fair Value of Financial Instruments
-----------------------------------
The carrying amounts of the Company's cash and cash equivalents,
accounts receivable, other current assets, trade accounts
payables, and accrued expenses approximate fair value because of
the short maturity of those instruments. At December 31, 1999
and 1998, the fair value of the long-term debt and notes
receivable were not significantly different than their carrying
value due to interest rates relating to the instruments
approximating market rates on those dates. Redeemable preferred
stock is carried at estimated fair value.
Income Taxes
------------
Income taxes are accounted for under the asset and liability
method. Deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and operating loss and
tax credit carryforwards. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
Treasury Stock
--------------
In September 1998, the Company announced a plan to repurchase
up to 200,000 shares of its outstanding common stock. In 1999,
the Company repurchased approximately 86,000 shares for $326,000
and in 1998 repurchased approximately 55,500 shares for $265,000.
Also, in November 1997, the Company repurchased approximately
304,000 shares of its common stock for approximately $1,519,000.
The Company holds repurchased stock as treasury stock.
Stock Option Plan
-----------------
The Company applies the intrinsic value method of accounting
prescribed by Accounting Principles Board ("APB") Opinion No. 25,
"Accounting for Stock Issued to Employees," and related
interpretations, in accounting for its stock options. As such,
compensation expense would be recorded on the date of grant only
if the current market price of the underlying stock exceeded the
exercise price. SFAS No. 123, "Accounting for Stock-Based
Compensation," established accounting and disclosure requirements
using a fair value-based method of accounting for stock-based
employee compensation plans. As allowed by SFAS No. 123, the
Company has elected to continue to apply the intrinsic value
method of accounting described above, and has adopted the
disclosure requirements of SFAS No. 123.
Mandatorily Redeemable Preferred Stock
--------------------------------------
The Company's preferred stock is accounted for at estimated fair
value. The excess of the estimated redeemable value over the fair
value at the date of issuance is accreted over the redemption
term. The carrying value of the preferred stock is increased
annually, if necessary, for the estimated accretion with a
corresponding reduction of capital in excess of par value. The
accretion of carrying value decreases net income or increases net
loss for purposes of calculating net income (loss) attributable
to common shareholders. No additional accretion was recorded in
1999 or 1998.
Earnings (Loss) Per Share
-------------------------
Basic earnings (loss) per share data is computed by dividing
earnings (loss) attributable to common shareholders by the
weighted average number of common shares outstanding for the
period. Diluted earnings per share reflect the potential
dilution that could occur if the Company's outstanding stock
options were exercised (calculated using the treasury stock
method) and if the Company's preferred stock were converted to
common stock.
Diluted loss per share from continuing operations 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 years presented. Net earnings for 1997 were reduced by
one-third of "consolidated net income" which accreted directly to
the mandatorily redeemable preferred shareholders. For purposes
of net earnings per share, such accretion reduced earnings from
discontinued operations which resulted from the gain on sale of
the business and substantially all of the assets of Carbonic
Reserves.
Comprehensive Income
--------------------
SFAS No. 130 establishes standards for reporting and display of
"comprehensive income" and its components in a set of financial
statements. It requires that all items that are required to be
recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is
displayed with the same prominence as other financial statements.
During 1999, the Company's only item of comprehensive income
related to foreign currency translation adjustments resulting
from its equity investment in ITS-Testco. The assets and
liabilities of Testco de Mexico, a wholly-owned subsidiary of ITS-
Testco, are stated in the local currency (the Mexican peso) and
are translated into U.S. dollars using the current exchange rate
in effect at the balance sheet date, while income and expenses
are translated at average rates for the respective periods.
Translation adjustments have no effect on net loss and are
included in accumulated other comprehensive loss. The Company
had no items of comprehensive income as defined by SFAS No. 130
not included in the accompanying statements of operations in 1998
and 1997.
Reclassifications
-----------------
Certain 1998 and 1997 balances have been reclassified to conform
to the 1999 presentation.
(2) Ability to Fund Operations
- -------------------------------
In January 1999, the Company's primary source of revenues and
cash flows was eliminated by the termination of the Operating
Agreements with MCNC (see note 3). As a result of the
termination of the plant operating agreements, the requirement to
fund operating losses, and the decision to pursue other
investment opportunities, including the repurchase of Company
common stock, the Company's working capital and cash and cash
equivalents decreased significantly at December 31, 1999 compared
to December 31, 1998. To mitigate potential liquidity problems,
the Company obtained stand-by financing of $1.3 million in April
2000, $1 million of which was from an affiliate of the Company's
chairman (see note 10). The Company also expects to generate
cash from the disposition of assets of discontinued operations.
The Company is focusing on replacing its Coal Segment's revenues
and is currently negotiating with two parties to which the
Company, through a subsidiary, will provide clean recovered coal
as feedstock for two briquetting plants for a fixed price per
ton. Installation and initial startup operations of the plants
are dependent on the Company's ability to obtain financing, which
the Company is currently pursuing. The Company expects that
available borrowings and cash to be generated from the sale of
assets, and ultimately from the operations of the new coal wash
plants will be sufficient to continue operations through 2000.
(3) Acquisitions
- -----------------
ITF Segment
-----------
On February 9, 1998, the Company, through a newly formed
subsidiary, Interstate Travel Facilities, Inc. ("ITF"), purchased
two travel facilities located along Interstate Highway I-40 in
eastern Oklahoma for a cash consideration of $490,000. Both
travel facilities included a service station, convenience store
and a restaurant ("C-store"). The fair value of identifiable
tangible and intangible net assets acquired approximated $628,000
on the acquisition date. The excess of the fair value of the
travel facilities' assets acquired over the purchase price was
reallocated among the long-lived assets acquired.
On February 27, 1998, ITF acquired two travel facilities and
an undeveloped parcel of land located along Interstate Highway I-
35 in central Oklahoma. The purchase price consisted of cash of
$322,000; a fifteen-year, unsecured, 5.93% $544,000 promissory
note, valued at $407,000 (discounted using a 10% interest rate);
the assumption by ITF of three mortgage notes payable
approximating $1,336,000 (see note 10), owed by the former owner
of the facilities; and 20% of the Company's ownership in ITF,
valued at $181,000. Approximately $1,051,000 of costs in excess
of fair value of the net assets acquired was recorded as goodwill
and was being amortized over 15 years.
On May 20, 1998, ITF acquired the assets of a truck wash located
along Interstate Highway I-44 in Tulsa, Oklahoma for $699,000.
The Company financed $576,000 of the asset acquisition with a
promissory note (see note 10). The fair value of the
identifiable tangible assets approximated $870,000 on the
acquisition date. The excess of the fair value of the assets
acquired over the purchase price was reallocated among the long-
lived assets acquired.
As discussed in note 4, on April 9, 1999, the Company's Board
of Directors approved a plan to discontinue its ITF Segment.
Coal Segment
------------
On June 30, 1998, the Company, through a newly formed subsidiary,
Beard Mining, L.L.C. ("BMLLC"), acquired coal fines extraction
and beneficiation equipment ("the Equipment") located at six coal
slurry impoundment sites for $24,000,000. BMLLC financed the
purchase with a $24,000,000 loan from MCNIC Pipeline & Processing
Company ("MCNIC") which was secured solely by the equipment (see
note 9). BMLLC leased the Equipment to Beard Technologies, Inc.
("BTI") a wholly-owned subsidiary of Beard, which operated and
maintained the Equipment and six briquetting plants for six
limited liability companies (the "LLC's"), each of which is a
subsidiary of MCNIC. The monthly lease payments equaled the
monthly payments due under the promissory note and were
reimbursed costs by the LLC's under BTI's operating agreements
with the LLC's.
Concurrent with BMLLC's acquisition of the Equipment, BTI entered
into operating agreements with the LLC's to provide services for
which it was being compensated in 1998 under a cost-plus
arrangement pursuant to which it received a minimum profit of
$100,000 per month (the "Operating Agreements"). The operating
agreements provided that, solely for determining BTI's
compensation thereunder, the agreements were deemed to have been
effective April 1, 1998.
On December 16, 1998, the LLC's terminated the Operating
Agreements effective January 31, 1999. BTI retained a reduced
work force at the plants for security reasons through April 30,
1999.
On March 19, 1999, BTI and MCNIC entered into an agreement,
effective January 31, 1999, whereby BTI assigned its 100%
interest in BMLLC to MCNIC in exchange for a release from MCNIC
of any obligations BTI had or would have had as an interest owner
in BMLLC (the "Exchange Agreement"). As a result of the Exchange
Agreement, the Company was relieved of its obligations under the
promissory note and the related loan documents in exchange for
its ownership in the Equipment. The remaining net book value of
the Equipment exchanged equaled the remaining principal balance
of the promissory note forgiven. Therefore, no gain or loss
resulted from the transaction.
The above acquisitions were accounted for by the purchase
method and accordingly, the results of operations of the travel
facilities and other acquired assets have been included in the
Company's financial statements from their respective acquisition
dates.
The Company considers the acquisition of the travel facilities
and the Equipment as asset acquisitions; therefore, no pro forma
financial information has been reported in the accompanying
financial statements.
(4) Discontinued Operations
- ----------------------------
BE/IM Segment
-------------
In December 1999, the Management Committee of NABR adopted a
formal plan to discontinue the business and dispose of its
assets. Beard has a 40% ownership in NABR, which is accounted
for under the equity method. As a result of NABR's planned
discontinuation, Beard's share of NABR's operating results have
been reported as discontinued for all periods presented in the
accompanying statements of operations. Beard's share of NABR's
operating results were $82,000 and $296,000 of losses in 1999 and
1998 respectively, and $105,000 of income in 1997. As of
December 31, 1999, Beard's investment in NABR was $225,000.
In addition, in December 1999, Beard recorded a $540,000 loss,
which represents its share of NABR's $1,350,000 estimated loss
expected from the discontinuation of operations. $778,000 of
NABR's loss represents the difference in the estimated amounts
expected to be received from the assets' disposition and the
assets' recorded values as of December 31, 1999. $572,000 of
NABR's loss represents anticipated operating losses through April
2000 (the date operations are expected to cease) and costs of
ceasing operations.
The Management Committee of NABR is actively pursuing
opportunities to sell its assets and expects the disposition to
be completed by December 31, 2000.
ITF Segment
-----------
On April 9, 1999, Beard's Board of Directors adopted a formal
plan to discontinue its ITF Segment. On April 13, 1999, Beard
entered into an agreement with ITF and its minority shareholders
(the "April 1999 Agreement") which would have resulted in (i) the
cancellation of a $544,000 note to the minority shareholders
(balance of $440,000 at March 31, 1999); (ii) Beard's giving up
operating and voting control of ITF to the minority shareholders;
(iii) a restructuring of ITF's indebtedness to Beard whereby ITF
agreed to obtain a release of and assign to Beard $327,000 of
certificates of deposit (the "C/D's") which was securing certain
ITF debt obligations, and to deliver two promissory notes to
Beard totaling $2,053,000. The April 1999 Agreement failed to
close and in September 1999 Beard, ITF and the minority
shareholders entered into new agreements (the "Revised
Agreements"), which were completed on November 18, 1999.
The Revised Agreements provided for the following: (i) ITF
formed a newly organized Company, known as ToeJoe, L.L.C.
("ToeJoe"), an Oklahoma limited liability company, of which it
was the sole initial member; (ii) ITF contributed its ownership
of four tracts of real property, together with all improvements,
equipment and inventory related thereto, into ToeJoe which
assumed the outstanding debt of $2,149,000 on the properties and
equipment and the accounts payable of $126,000; (iii) ITF was
relieved of all liabilities and obligations to the lending bank
and any outstanding notes and mortgages on the properties; (iv)
the minority shareholders exchanged all of their shares (6,250)
of ITF common stock with ITF for all of ITF's membership interest
in ToeJoe; (v) the C/D's were assigned to Beard; and (vi) the
$440,000 note to the minority shareholders was cancelled. As a
result of this transaction Beard has 100% ownership of ITF which
now owns two C-stores, including their equipment and inventory,
and has no outstanding indebtedness.
Revenues and losses from the discontinued ITF Segment were
$4,437,000 and $741,000, respectively in 1998.
Beard recorded a $1,603,000 estimated loss from discontinuing
the ITF Segment in 1998. $1,256,000 of the loss represented the
difference in the estimated fair value of the promissory notes
from the April 1999 Agreement and Beard's investment in and notes
and accounts receivable from ITF at December 31, 1998. Beard
recorded the loss as a reduction in goodwill resulting from the
purchase of the ITF facilities, with the remaining $205,000
recorded as a reduction in ITF's property, plant and equipment.
Beard recorded a provision of $347,000 in 1998 for the estimated
operating losses expected to be incurred by ITF from January 1,
1999 through disposition. ITF's revenues and actual operating
losses for 1999 were $6,487,000 and $567,000, respectively.
$347,000 of the losses were charged against the loss accrual
recorded in 1998 with the remaining $220,000 reflected in the
loss from discontinued operations in the 1999 statement of
operations. Beard also recorded an additional $214,000 loss in
the fourth quarter of 1999; $180,000 of the loss representing
anticipated operating losses of ITF from December 31, 1999
through the disposal date of the remaining assets; and $34,000 of
the loss representing a further reduction in the estimated
realizable value of the remaining C-stores as of December 31,
1999.
As of December 31, 1999, the significant assets related to the
ITF Segment consist of cash, inventory and the two remaining C-
stores with a total recorded value of $874,000. The significant
liabilities of the segment consist of trade accounts payable and
accrued expenses totaling $247,000. Beard is actively seeking
opportunities to sell the remaining C-stores and expects the C-
stores to be sold by September 2000.
Other E/S Operations
--------------------
In August 1998, the Company's Board of Directors adopted a
formal plan to restructure the E/RR Segment and to discontinue
the Other E/S Operations. Accordingly, the results of the Other
E/S Operations have been reported as discontinued for all periods
presented in the accompanying statements of operations. Revenues
applicable to the discontinued segment were $1,536,000 and
$5,233,000 for 1998 and 1997, respectively. Losses from the
discontinued operations were $424,000 and $1,140,000 in 1998 and
1997, respectively. Losses from discontinued operations
approximated $300,000 from the date operations were discontinued
to December 31, 1998, and reduced the accrued liability
established in the second quarter for such losses by a
corresponding amount. No such losses were realized in 1999.
As of December 31, 1999, the significant assets related to the
Other E/S Operations consist primarily of equipment with a
recorded value of $160,000. The significant liabilities related
to the Other E/S Operations consist of accrued expenses totaling
$20,000.
In 1998, the Company recorded a $684,000 loss expected from
the discontinuation of the Other E/S Operations. $749,000 of the
loss represented the difference in the estimated amounts to be
received from disposing of the Other E/S Operations' assets and
the assets' recorded values as of June 30, 1998. $689,000 of the
loss was recorded in June 1998 and $60,000 of the loss was
recorded in December 1998 upon the Company's review of the
estimated realizable values of the remaining assets. $300,000 of
the loss represented anticipated operating losses until disposal
of such assets have been completed. Offsetting the expected
losses was a $365,000 gain from early extinguishment of an
obligation to the former owner of HDT. The obligation was
originally incurred by the Company as a result of its acquisition
of 80% of HDT's outstanding common stock and was payable only
from 80% of the cash flows (prescribed under the obligation
agreement) of HDT and another company included in Other E/S
Operations. The gain represented the discounted obligation
balance as of June 30, 1998.
The Company has sold a significant portion of the Other E/S
Operations equipment for a total price of $710,000, since its
date of discontinuance. $439,000 of the equipment sales were for
various notes receivable with terms ranging from three to seven
years. The Company is actively seeking opportunities to sell the
remaining Other E/S Operations equipment.
Solid CO2 Segment
-----------------
In October 1997, the Company sold the business and
substantially all of the assets of Carbonic Reserves, an 85%-
owned subsidiary involved in the manufacturing and distribution
of solid CO2 ("solid CO2 segment") for cash of $19,375,000 and
the assumption of certain liabilities valued at $2,813,000 (the
"Asset Sale").
The gain on the Asset Sale was $11,014,000 (after applicable
income taxes of $522,000). Results of operations of the solid
CO2 segment have been reported as discontinued operations for the
year ended December 31, 1997 in the accompanying statements of
operations. Revenues and earnings applicable to the discontinued
solid CO2 segment were $11,071,000 and $428,000 in 1997,
respectively. During the third quarter of 1998, the Company
determined it overestimated its state income tax liability
thereby reducing the gain recognized in October 1997 from the
Asset Sale by $168,000. The Company reduced its estimated state
income tax liability and recognized an additional $168,000 gain
on the Asset Sale in the third quarter of 1998. The gain is
presented in discontinued operations in the accompanying 1998
statement of operations.
As of December 31, 1999, the solid CO2 segment had no
significant assets and its significant liabilities consisted of
accrued employee severance compensation of $155,000.
(5) 1993 Restructure; Redeemable Preferred Stock
- -------------------------------------------------
As a result of a restructure (the "Restructure") effected in
October of 1993 with four institutional lenders (the
"Institutions"): (a) substantially all of the oil and gas assets
of Beard's subsidiary, Beard Oil Company ("Beard Oil") were sold
to a company owned by the Institutions; (b) $101,498,000 of long-
term debt and other obligations were effectively eliminated; and
(c) the Institutions received 25% of Beard's then outstanding
common stock and $9,125,000 stated value (91,250 shares, or 100%)
of Beard's 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 in the Restructure agreements.
Accordingly, one-third of future "consolidated net income" will
accrete directly to the preferred stockholder and reduce earnings
per common share. Each share of Beard preferred stock which has
not previously been redeemed may be converted into 5.129425
shares of Beard common stock after December 31, 2002. Fractional
shares will not be issued, and cash will be paid in redemption
thereof.
In January 1997, three of the four Institutions sold their
common and preferred shares to five individuals. These
individuals (the "Sellers") thereafter sold such shares to the
Company (the "Repurchase"). Repurchase of the common (303,890
shares) was effected by the Company in November 1997 and
repurchase of the preferred (47,729 shares) was effected in
January 1998. $1,641,000 of the purchase price was used to
repurchase 16,411 preferred shares from Sellers at stated value
($100 per share). This portion of the purchase price was in lieu
of the Sellers' share of a redemption from one-third of 1997 net
income (as defined) (the "Redemption"). The 1997 Redemption
amount was agreed upon by all of the preferred shareholders at an
established value of $3,100,000. The Sellers' remaining 31,318
preferred shares were purchased for $1,000,000 or $31.93 per
share. The Company paid the Sellers $95,000 for the Repurchase
of the preferred shares in November 1997 and redeemed 14,589 of
the remaining preferred shares for $1,459,000 in March 1998.
The Company recorded the effect of the Repurchase and Redemption
in 1997. At December 31, 1999 and 1998, the redeemable preferred
stock was recorded at its estimated fair value of $889,000 or
$31.93 per share and had an aggregate redemption value of
$2,784,000. During 1997, the Company recorded $3,789,000 in
accretion of the preferred stock as a result of the increase in
value of the preferred stock as evidenced by the Repurchase and
Redemption.
(6) Investments and Other Assets
- ---------------------------------
Investments and other assets consisted of the following:
December 31,
------------
1999 1998
---- ----
Certificates of deposit $355,000 $330,000
Investment in and advances to ITS-
Testco, L.L.C. 645,000 318,000
Investment in North American Brine
Resources (see note 4) 225,000 847,000
Investment in Cibola Corporation 109,000 96,000
Investment in real estate limited
partnerships 201,000 200,000
Other assets 69,000 150,000
---------- ----------
1,604,000 1,941,000
Current investments (280,000) -
---------- ----------
$1,324,000 $1,941,000
========== ==========
Certificates of Deposit
-----------------------
Included in current assets at December 31, 1999, are $280,000
of certificates of deposit, which mature from May through October
of 2000. Included in investments and other assets at December
31, 1999 and 1998 are certificates of deposit of $75,000, and
$330,000, respectively. The certificate of deposit held at
December 31, 1999 has been pledged as collateral to secure a note
payable for the plaintiff group in a lawsuit in which the Company
is a participant.
Investment in and Advances to ITS-Testco, L.L.C.
------------------------------------------------
In October 1998, the Company contributed $353,000 for a 50%
ownership in ITS-Testco, L.L.C. ("ITS-Testco"). During 1999, the
Company contributed an additional $301,000 to ITS-Testco. ITS-
Testco, through its wholly-owned subsidiary, Testco Inc de
Mexico, S.A. de C.V., is involved in natural gas well testing
operations in northeastern Mexico. The Company does not control
ITS-Testco's operations and, therefore, accounts for its
investment using the equity method of accounting. The Company's
carrying value of its investment in ITS-Testco at December 31,
1999 and 1998 approximated $394,000 and $318,000, respectively,
which exceeds its 50% ownership in the underlying equity of ITS-
Testco by $15,000 and $6,000 as of December 31, 1999 and 1998,
respectively. The difference is a result of the Company's
capital contributions exceeding the other partner's capital
contributions. Such difference will be realized by the Company
through future distributions from ITS-Testco to the owners.
The Company also has a $251,000 receivable due from ITS-Testco
at December 31, 1999 related to advances to fund operations. The
receivable is due on demand and accrues interest at an annual
rate of 8.25% through December 31, 1999 and has been increased to
8.75% effective January 1, 2000. The company does not expect the
receivable to be repaid in 2000.
The summarized unaudited financial information of ITS-Testco
as of December 31, 1999 and 1998 and for the year ended December
31, 1999 and the two months ended December 31, 1998 is as
follows:
1999 1998
---- ----
Current assets $ 989,000 $ 61,000
Current liabilities (318,000) -
---------- ----------
Working capital $ 671,000 $ 61,000
Equipment, net 1,451,000 563,000
Advances from members (627,000) -
Long-term debt (738,000) -
---------- ----------
Members equity $ 757,000 $ 624,000
========== ==========
Revenue $2,378,000 $ -
========== ==========
Net loss (457,000) (70,000)
Foreign currency
translation adjustment 8,000 -
---------- ----------
Comprehensive loss $ (449,000) $ (70,000)
========== ==========
Investment in Cibola Corporation
--------------------------------
The Company owns 80% of the outstanding common stock of Cibola
Corporation ("Cibola"), a natural gas marketing company, but does
not consolidate the assets, liabilities, revenues or expenses of
Cibola because Cibola's assets are controlled by its minority
common stockholders and preferred stockholders. The Company's
equity in the earnings of Cibola were $308,000, $274,000, and
$185,000 in 1999, 1998 and 1997, respectively.
Investment in Real Estate Limited Partnerships
----------------------------------------------
The Company owns limited partnership interests in two real estate
limited partnerships. The limited partnerships significant
assets consist of undeveloped land near Houston, Texas. The
Company recorded $1,000 and $5,000 of income in 1999 and 1997,
respectively, and $4,000 of loss in 1998 resulting from its share
of the limited partnerships' operations for those years.
Other assets
------------
The Company recorded a provision totaling $152,000 in 1997 for
economic impairment of an unsecured note with a face value of
$362,000 held by the Company in a research and development
entity. The Company also recorded provisions of $110,000,
$154,000 and $176,000 in 1999, 1998 and 1997, respectively, for
economic impairment of other investments.
(7) Notes Receivable
- ---------------------
As of December 31, 1999 and 1998, the Company had various notes
receivable resulting from the sale of Other E/S Operations
equipment. The notes bear interest at rates ranging from 5.85%
to 8% (discounted using a 10% interest rate) at December 31, 1999
and 1998. The notes mature from May 2000 to February 2005, and
are secured by the sold equipment. At December 31, 1999 and
1998, $80,000 and $57,000, respectively, were due within one
year. At December 31, 1999, the Company had a $486,000 note
receivable due from Testco, Inc., the other fifty-percent owner
of ITS-Testco, L.L.C. The note accrues interest at 8.75%,
matures in June 2000 and is secured by a personal guaranty of the
owner of Testco, Inc. The Company expects to renegotiate the
note prior to maturity, extending the maturity of the note and
establishing a monthly payment schedule; therefore, the note is
presented as non-current.
(8) Property, Plant and Equipment
- ----------------------------------
Property, plant and equipment consisted of the following:
December 31,
------------
1999 1998
---- ----
Land $ 270,000 $ 776,000
Proved and unproved carbon dioxide properties 3,008,000 2,998,000
Buildings 82,000 1,096,000
Buildings and land improvements 264,000 1,029,000
Machinery and equipment 1,727,000 2,816,000
Other 404,000 206,000
Coal fines extraction and beneficiation
equipment 1,124,000 24,000,000
----------- -----------
$ 6,879,000 $32,921,000
=========== ===========
(9) Intangible Assets
- ----------------------
Intangible assets are summarized as follows:
December 31,
------------
1999 1998
---- ----
License fees $ - $ 50,000
Patent costs 25,000 57,000
Other - 60,000
---------- ----------
$ 25,000 $ 167,000
========== ==========
(10) Long-term Debt
- --------------------
Long-term debt is summarized as follows:
December 31,
1999 1998
---- ----
Coal (a) $ 30,000 $23,247,000
Interstate Travel Facilities Segment (b) - 2,652,000
---------- -----------
30,000 25,899,000
Less current maturities 17,000 119,000
---------- -----------
Long-term debt $ 13,000 $25,780,000
========== ===========
(a) At December 31, 1999 and 1998, the Company had $30,000
and $47,000 of various notes payable. The notes bear interest
at rates ranging from 14% to 18%, require monthly payments of
interest and principal and mature from April 2000 through
September 2001. The notes are secured by equipment with an
approximate book value of $39,000 at December 31, 1999.
At December 31, 1998, the Company had a $23.2 million
promissory note payable to MCNIC resulting from the June 1998
acquisition of the Equipment discussed in note 3. The annual
interest rate on the note was 8% and required monthly
principal and interest payments of $290,000 through July 1,
1999, at which time the remaining principal balance was due.
As discussed in note 3, BTI and MCNIC entered into an Exchange
Agreement on March 19, 1999, whereby the Company was relieved
of its obligation under the note and related loan documents in
exchange for its ownership in the Equipment securing the note.
The note was presented as long-term debt at December 31, 1998.
(b) At December 31, 1998, the Company had four notes payable to
a bank totaling $2,182,000. The notes required monthly
interest and principal payments totaling $22,000, and accrued
interest at the prime interest rate (8.5% at December 31,
1998). The Company also had $56,000 of various notes payable
outstanding at December 31, 1998, bearing interest at rates
ranging from 6% to 9%. As discussed in note 4, in November
30, 1999, the Company sold certain of its ITF assets, whereby
the purchaser assumed all of the related debt securing the
assets and the Company was relieved of all its obligations
under the agreements by the debt holders.
Also at December 31, 1998, the Company had a $544,000, 5.93%
promissory note payable, valued at $414,000 (discounted using
a 10% interest rate) to the former owner of certain interstate
travel facilities acquired by Beard in February 1998 (see note
3). As a result of Beard selling the majority of its ITF
assets in November 1999, the holder of the promissory note
(also a party to the purchase of the ITF assets) relieved
Beard of the obligation (see note 4).
The annual maturities of long-term debt subsequent to December
31, 1999 are $17,000 for 2000 and $13,000 for 2001.
At December 31, 1999, the Company had $575,000 of credit
available under a $650,000 bank line of credit. The line of
credit was extended until April 30, 2000, at which time it will
be allowed to expire and is being replaced with a $300,000 line
of credit at a new bank. In addition, at April 3, 2000, the
Company had a $1,000,000 revolving line of credit available from
a related party which bears interest at 10% until maturity at
July 2, 2001.
(11) Operating Leases
- ----------------------
Noncancelable operating leases relate principally to office
space, vehicles and operating equipment. Future minimum payments
under such leases as of December 31, 1999 are summarized as
follows:
2000 $110,000
2001 16,000
2002 6,000
--------
$132,000
========
Rent expense under operating leases aggregated $153,000,
$185,000, and $889,000 in 1999, 1998 and 1997, respectively.
(12) Income Taxes
- ------------------
Total income tax expense (benefit) was allocated as follows:
Year ended December 31,
1999 1998 1997
---- ---- ----
Continuing operations $ 48,000 $ 100,000 $ 40,000
Discontinued operations - (168,000) 555,000
-------- --------- --------
$ 48,000 $ (68,000) $595,000
======== ========= ========
Current income tax expense from continuing operations consisted of:
Year ended December 31,
-----------------------
1999 1998 1997
---- ---- ----
U. S. federal $ 34,000 $ 41,000 $ 40,000
Various states 2,000 59,000 -
Republic of Mexico 12,000 - -
-------- -------- --------
$ 48,000 $100,000 $ 40,000
======== ======== ========
Total income tax expense allocated to continuing operations
differed from the amounts computed by applying the
U. S. federal income tax rate to loss from continuing
operations before income taxes as a result of the following:
Year ended December 31,
-----------------------
1999 1998 1997
---- ---- ----
Computed U. S. federal
statutory benefit $(780,000) $(161,000) $(424,000)
Federal alternative
minimum taxes 34,000 41,000 40,000
Increase in the valuation
allowance for deferred tax
assets 780,000 161,000 424,000
State income taxes 2,000 59,000 -
Republic of Mexico taxes 12,000 - -
--------- --------- ---------
$ 48,000 $ 100,000 $ 40,000
========= ========= =========
The components of deferred tax assets and liabilities are as follows:
December 31,
------------
1999 1998
---- ----
Deferred tax assets - tax effect of:
Net operating loss carryforwards $19,988,000 $19,760,000
Statutory depletion and investment
tax credit carryforwards 2,129,000 2,280,000
Other, principally investments and
property, plant and equipment 651,000 239,000
----------- -----------
Total gross deferred tax assets 22,768,000 22,279,000
Less valuation allowance (22,768,000) (22,244,000)
Deferred tax liabilities - (35,000)
----------- -----------
Net deferred tax asset/liability $ - $ -
=========== ===========
In assessing the recoverability of deferred tax assets,
management considers whether it is more likely than not that some
portion or all of the tax assets will not be realized. The
ultimate realization of deferred tax assets is dependent upon the
generation of future taxable income during the periods in which
those temporary differences become deductible. Management
considers the scheduled reversal of deferred tax liabilities,
projected future taxable income, and tax planning strategies in
making this assessment.
At December 31, 1999, the Company had federal regular tax
operating loss carryforwards of approximately $52.6 million that
expire from 2004 to 2009, investment tax credit carryforwards of
approximately $102,000 that expire in 2000, and tax depletion
carryforwards of approximately $5.5 million. These carryforwards
may be limited if the Company undergoes a significant ownership
change.
(13) Stock Option Plans
- ------------------------
The Company reserved 175,000 shares of its common stock for
issuance to key management, professional employees and directors
under The Beard Company 1993 Stock Option Plan (the "1993 Plan")
adopted in August 1993. In April 1998 the Board of Directors
voted to increase the number of shares authorized under the 1993
Plan to 275,000, and the shareholders approved the increase in
June 1998. The 1993 Plan is administered by the Compensation and
Stock Option Committee (the "Committee") of the Board of
Directors. The option price is determined by the Committee but
cannot be less than the fair market value of the common stock of
the Company at the date of grant for incentive stock options and
75% of fair market value of the common stock for non-qualified
options. All options have ten-year terms and become exercisable
one year after the date of grant at the rate of 25% each year
until fully exercisable. Directors who are not key management
employees of the Company or subsidiaries of the Company are only
eligible to be granted non-qualified stock options. At December
31, 1999, there were 117,500 additional shares available for
grant under the Plan.
The per share weighted-average fair value of stock options
granted during 1997 was $2.67 on the date of grant using the
Black-Scholes option pricing model with the following
assumptions: no expected dividend yield; risk-free interest rate
of 6.5%; expected life of ten years; and expected volatility of
39%. No options were granted in 1998 or 1999.
The Company applies APB Opinion No. 25 in accounting for its
stock options and, accordingly, no compensation cost has been
recognized for its stock options in the financial statements.
Had the Company determined compensation cost based on the fair
value at the grant date for its stock options under SFAS No. 123,
the net loss would have increased $9,000 in 1999 and 1998 and net
income in 1997 would have decreased $8,000. Net earnings (loss)
per share would not have been affected for any years presented in
the accompanying financial statements.
Stock option activity during the periods indicated is as
follows:
Number of Weighted-Average
Shares Exercise Price
-------------------------------
Balance at December 31, 1996 148,000 $2.06
Granted 5,000 4.38
Exercised (28,000) 2.00
Forfeited - -
Expired - -
-------------------------------
Balance at December 31, 1997 125,000 $2.17
Granted - -
Exercised (55,000) 2.00
Forfeited - -
Expired - -
-------------------------------
Balance at December 31, 1998 70,000 $2.29
Granted - -
Exercised (8,000) 2.00
Forfeited - -
Expired - -
-------------------------------
Balance at December 31, 1999 62,000 $2.32
===============================
At December 31, 1999, the range of exercise prices and weighted-
average remaining contractual life of outstanding options was
$2.00 - $4.38 and five years, respectively.
At December 31, 1999 and 1998, the number of options exercisable
was 56,000 and 60,000, respectively, and the weighted-average
exercise price of those options was $2.22 and $2.12, respectively.
(14) Employee Benefit Plan
- ---------------------------
Employees of the Company participate in either of two defined
contribution plans with features under Section 401(k) of the
Internal Revenue Code. The purpose of the Plans is to provide
retirement, disability and death benefits for all full-time
employees of the Company who meet certain service requirements.
One of the plans allows voluntary "savings" contributions up to a
maximum of 15%, and the Company matches 100% of each employee's
contribution up to 5% of such employee's compensation. The
second plan covers those employees in the Coal Segment and allows
voluntary "savings" contributions up to a maximum of 15%. Under
this plan, the Company contributes $1.00 per hour of service
performed for hourly employees and up to 6% of compensation for
salaried employees regardless of the employees contribution. The
Company's contributions under both plans are limited to the
maximum amount that can be deducted for income tax purposes.
Benefits payable under the plans are limited to the amount of
plan assets allocable to the account of each plan participant.
The Company retains the right to modify, amend or terminate the
plans at any time. During 1999, 1998 and 1997, the Company made
matching contributions of $73,000, $54,000, and $150,000,
respectively, to the plans.
(15) 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 future results of operations.
At December 31, 1999, the Company is a guarantor of a 9.5%,
$600,000 promissory note to a bank. The note is an obligation of
ITS-Testco, the Company's 50%-owned equity investment engaged in
well testing operations in northeastern Mexico. The note becomes
due in June 2000 and is separately guaranteed in full by the
other 50% corporate owner of the joint venture and the owners of
that company, as individuals.
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.
(16) 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 five reportable
segments in 1999 and 1998: Coal Reclamation, China, Carbon
Dioxide, Environmental Remediation and Natural Gas Well
Servicing. The Company had three reportable segments in 1997:
Coal, Carbon Dioxide and Environmental Remediation. China and
Natural Gas Well Servicing operations began in 1998 and therefore
were not reportable segments in 1998.
The Coal Segment is in the business of operating coal fines
reclamation and/or briquetting facilities in the U.S. and is
pursuing the development of advanced fine coal preparation
processes. The China Segment is pursuing (i) the sale of coal
equipment, (ii) environmental opportunities, (ii) the sale of
technical services, and (iv) the operation of coal fines
reclamation facilities in China. The Carbon Dioxide Segment
consists of the production of CO2 gas. The Environmental
Remediation Segment consists of services to remediate creosote
and polycyclic aromatic hydrocarbon contamination. The Natural
Gas Well Servicing Segment is conducted by two companies
operating in northeastern Mexico and consists of (i) a 50%-owned
company (accounted for as an equity investment) involved in
natural gas well testing operations, and (ii) a wholly owned
company that has designed a sand separator for use on natural gas
wells and has had five custom fabricated for use on a trial
basis.
The accounting policies of the segments are the same as those
described in the summary of significant accounting policies in
note 1.
The following is certain financial information regarding the
Company's reportable segments (presented in thousands of
dollars). The information contained in "other" relates to the
Company's e-Commerce Segment and consists of start-up costs.
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.
Natural
Carbon Environmental Gas Well
Coal China Dioxide Remediation Servicing Other Totals
---- ----- ------- ------------ --------- ----- ------
1999
- ----
Revenues from
external customers $ 953 $ - $ 418 $ - $ 2,460 $ - $ 3,831
Interest income 24 - - - - - 24
Interest expense 160 - - - 91 - 251
Depreciation,
depletion and
amortization 194 - 33 46 257 - 530
Segment profit (loss) (614) (279) 360 (317) (642) (129) (1,621)
Segment assets 1,407 - 463 8 2,786 13 4,677
Expenditures for
segment assets 1,135 - 10 - 1,335 - 2,480
1998
- ----
Revenues from
external customers 8,585 - 616 8 - - 9,209
Interest income 2 - - - - - 2
Interest expense 949 - - - - - 949
Depreciation,
depletion and
amortization 815 - 31 4 - - 850
Segment profit (loss) 672 (277) 466 (238) (70) - 553
Segment assets 25,148 - 603 55 607 - 26,413
Expenditures for
segment assets 24,072 - 41 6 548 - 24,667
1997
- ----
Revenues from
external customers 1 - 503 13 - - 517
Interest income - - 13 - - - 13
Interest expense - - - 3 - - 3
Depreciation,
depletion and
amortization 8 - 25 3 - - 36
Segment profit (loss) (282) - 281 (113) - - (114)
Other significant
non cash items:
Impairment of
long-lived assets - - 107 - - - 107
Segment assets 34 - 481 50 - - 565
Expenditures for
segment assets - - 147 3 - - 150
Reconciliation of reportable segment revenues to consolidated
revenues is as follows (in thousands):
1999 1998 1997
---- ---- ----
Total revenues for
reportable segments $ 3,831 $ 9,209 $ 517
Revenues from Natural Gas
Well Servicing
operations accounted for
as an equity investment (2,378) - -
Revenues from corporate
activities not allocated
to segments 50 37 58
------- ------- -------
Total consolidated
revenues $ 1,503 $ 9,246 $ 575
======= ======= =======
Reconciliation of reportable segment interest expense to
consolidated interest expense is as follows (in thousands):
1999 1998 1997
---- ---- ----
Total interest expense for
reportable segments $ 251 $ 949 $ 3
Natural Gas Well Servicing
operations accounted for
as an equity investment (91) - -
Interest expense from
corporate activities not
allocated to segments 10 15 131
------- ------- -------
Total consolidated
interest expense $ 170 $ 964 $ 134
======= ======= =======
Reconciliation of reportable segment depreciation, depletion
and amortization to consolidated depreciation, depletion
and amortization is as follows (in thousands):
1999 1998 1997
---- ---- ----
Total depreciation,
depletion and amortization
for reportable segments $ 530 $ 850 $ 36
Depreciation and amortization of
Natural Gas Well Servicing
operations accounted for as
equity investment (222) - -
Corporate depreciation and
amortization not allocated to
segments 46 19 20
------- ------- -------
Total consolidated
depreciation, depletion
and amortization $ 354 $ 869 $ 56
======= ======= =======
Reconciliation of total reportable segment profit (loss) to
consolidated loss from continuing operations is
as follows (in thousands):
1999 1998 1997
---- ---- ----
Total profit (loss) for
reportable segments $(1,621) $ 553 $ (114)
Eliminate loss from Natural
Gas Well Servicing
operations accounted for
as an equity investment 433 70 -
Equity in loss from Natural
Gas Well Servicing
operations accounted for
as an equity investment (217) (35) -
Net corporate costs not
allocated to segments (902) (865) (1,279)
------- ------- -------
Total consolidated loss
from continuing
operations $(2,307) $ (277) $(1,393)
======= ======= =======
Reconciliation of reportable segment assets to consolidated
assets is as follows (in thousands):
1999 1998 1997
---- ---- ----
Total assets for reportable
segments $ 4,677 $26,413 $ 565
Assets of discontinued
operations 1,380 6,287 5,791
Assets from Natural Gas Well
Servicing operations accounted
for as an equity investment (2,440) (607) -
Investment in equity investee
(Natural Gas Well Servicing
operations) 394 318 -
Corporate assets not
allocated to segments 2,793 4,926 14,596
------- ------- -------
Total consolidated assets $ 6,804 $37,337 $20,952
======= ======= =======
Reconciliation of expenditures for segment assets to total
expenditures for assets is as follows (in thousands):
1999 1998 1997
---- ---- ----
Total expenditures for
assets for reportable segments $ 2,480 $24,667 $ 150
Capital expenditures of
discontinued operations - 4,034 1,449
Expenditures for Natural Gas
Well Servicing assets
accounted for as an equity
equity investment (1,119) (547) -
Corporate expenditures not
allocated to segments 31 55 4
------- ------- -------
Total expenditures for assets $ 1,392 $28,209 $ 1,603
======= ======= =======
Sixty-four percent of 1999's segment revenues were derived from
customers in Mexico. The remaining 1999, and all of 1998 and
1997 segment revenues were derived from customers in the United
States. Certain long-lived assets with recorded values
approximating $1,385,000 and $547,000 at December 31, 1999 and
1998, respectively, are located in Mexico. All remaining segment
assets are located in the United States.
During 1999, one customer accounted for 53% of the Company's
and 84% of the Coal Segment's revenues. The customer accounted
for 93% of the Company's and all of the Coal Segment's 1998
revenues. The Company's CO2 revenues are received from two
operators in the CO2 Segment who market the CO2 gas to numerous
end users on behalf of the interest owners who elect to
participate in such sales. During 1999, 1998 and 1997, sales by
these two operators accounted for 28%, 7%, and 87%, respectively,
of the Company's revenues and all of the Carbon Dioxide Segment's
revenues. All of the Natural Gas Well Servicing Segment's 1999
revenues were derived from one customer.
(17) Fourth Quarter Adjustments
- --------------------------------
The Company recorded adjustments in the fourth quarter of 1999
and 1998 resulting from the discontinuance of NABR (accounted for
under the equity method of accounting) and the interstate travel
facilities operations (see note 4). In the fourth quarter of
1997, the Company recorded economic impairment losses on long-
lived assets and unsecured notes and other investments totaling
$285,000 ($114,000 of which was related to the Company's Other
E/S Operations and is included in discontinued operations) and
$238,000, respectively.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
Not applicable
PART III
Item 10. Directors, Executive Officers and Significant
Employees of the Registrant.
The directors, executive officers and significant employees of
the Company are identified below. The table sets forth the age,
positions with the Company and the year in which each person
became a director, executive officer or significant employee.
All positions are held with the Company unless otherwise
indicated.
Director, Executive
Officer or Significant
Employee of Beard
Name Position or Beard Oil Since Age
- ---- -------- ------------------ ---
W. M. Beard Chairman of the Board,
Chief Executive Officer and
Director (a) June 1969 71
Herb Mee, Jr. President, Chief Financial
Officer and Director (a) November 1973 71
Allan R. Hallock Director December 1986 70
Harlon E. Martin, Jr. Director October 1997 52
Ford C. Price Director March 1988 62
Michael E. Carr Director February 1994 64
Philip R. Jamison President - Beard Technologies,
Inc. (b)(d) February 1997 61
Marc A. Messner President & CEO -
starpay.com, inc.(c)(d) September 1999 37
Jack A. Martine Controller and Chief
Accounting Officer October 1996 50
Rebecca G. Witcher Secretary-Treasurer (a) October 1993 40
_______________
(a) Trustee of certain assets of the Company's 401(k) Trust.
(b) Devotes all of his time to Beard Technologies, Inc.
(c) Devotes all of his time to starpay.com, inc.
(d) Indicated entities are subsidiaries of the Registrant.
The executive officers and other officers of the Company serve
at the pleasure of the Board of Directors.
W. M. Beard has served Beard as its Chairman of the Board and
Chief Executive Officer since December 1992. He previously
served as Beard's President and Chief Executive Officer from the
Company's incorporation in October 1974 until January 1985. He
has served Beard Oil as its Chairman of the Board and Chief
Executive Officer since its incorporation. He has also served as
a director of Beard and Beard Oil since their incorporation. Mr.
Beard has been actively involved since 1952 in all management
phases of Beard and Beard Oil from their inception, and as a
partner of their predecessor company.
Herb Mee, Jr. has served as Beard's President since October
1989 and as its Chief Financial Officer since June 1993. He has
also served as Chairman and CFO of starpay.com, inc. ("starpay")
since September 1999. He has served as Beard Oil's President
since its incorporation, and as its Chief Financial Officer since
June 1993. He has also served as a director of Beard and Beard
Oil since their incorporation. Mr. Mee served as President of
Woods Corporation, a New York Stock Exchange diversified holding
company, from 1968 to 1972 and as its Chief Executive Officer
from 1970 to 1972.
Allan R. Hallock was elected a director of Beard in July 1993.
He served as a director of Beard Oil from December 1986 until
October 1993. Mr. Hallock is currently an independent consulting
geologist. He served as Vice President and Exploration Manager
of Gemini Corporation from 1970 until December 1986.
Harlon E. Martin, Jr. was elected a director of Beard in
October 1997 to fill the vacancy created by the death of W. R.
Plugge. Mr. Martin has served as the principal of H. E. Martin &
Company, a Houston investment banking firm, since its founding in
1990. He was a co-founder of GTM Securities Corp. in 1985 and
served as a principal of such firm until 1989.
Ford C. Price was elected a director of Beard in July 1993. He
served as a director of Beard Oil from June 1987 until October
1993. From 1961 until 1986 Mr. Price served in various
capacities with The Economy Company, a privately-held schoolbook
publishing company, last serving as its Chairman of the Board and
Chief Executive Officer. Mr. Price is a private investor.
Michael E. Carr was elected in February 1994 by the preferred
stockholders to fill the directorship vacancy which they are
entitled to fill. Mr. Carr served as Senior Vice President of
Beard Oil from December 1986 until October 1993. He served as
President and Chief Executive Officer of Sensor Oil & Gas, Inc.
("Sensor") from October 1993 until August 1996. He presently
serves as President of Mica Energy Corp.
Philip R. Jamison has served as President of BTI since August
1994. Mr. Jamison has been associated with the coal industry
since 1960, working in various positions. From 1972 to 1977 he
served as Vice President Operations for International Carbon and
Minerals and as President and Chief Executive Officer of all its
coal producing subsidiaries. From 1979 to 1988 he served as
Chief Executive Officer of four small companies which were
engaged in the production and sales of coal. From 1993 to 1995
he served as a consultant to EI in connection with its
development of the Mulled Coal process, and supervised the
installation and operation of the process in connection with the
DOE contract.
Marc A. Messner has served as President and Chief Executive
Officer of starpay since April 1999. He is the inventor of
starpay's proprietary payment system technology. He has also
served as Vice President - Corporate Development of Beard since
August 1998. From 1993 to 1998 he served as President of
Horizontal Drilling Technologies, Inc. where he became recognized
as a world leader in short-turn horizontal well installations and
environmental drilling.
Jack A. Martine was elected as Controller, Chief Accounting
Officer and Tax Manager of Beard in October 1996. Mr. Martine
served as tax manager for Beard from June 1989 until October 1993
at which time he joined Sensor in a similar capacity. Mr.
Martine is a certified public accountant.
Rebecca G. Witcher has served as Corporate Secretary of the
Company and Beard Oil since October 1993, and has served as
Treasurer of such companies since July 1997.
The directors of the Company have been elected to serve until
the annual stockholders' meeting to be held in the year indicated
opposite their respective names or until their successors are
duly elected and qualified:
Director Term
-------- ----
W. M. Beard 2002
Allan R. Hallock 2000
Ford C. Price 2000
Harlon E. Martin, Jr. 2001
Herb Mee, Jr. 2001
Michael E. Carr (a)
__________
(a) Will serve until his successor has been duly elected and qualified.
There is no family relationship between any of the directors
or executive officers of the Company. All executive officers
hold office until the first meeting of the Board of Directors
following the next annual meeting of stockholders or until their
prior resignation or removal.
Compliance with Section 16(a) of the Securities Exchange Act of 1934.
--------------------------------------------------------------------
Section 16(a) of the Securities Exchange Act of 1934
requires the Company's directors and executive officers, and
persons who own more than ten percent (10%) of a registered class
of the Company's equity securities (collectively "reporting
persons"), to file with the Securities and Exchange Commission
and the American Stock Exchange initial reports of ownership and
reports of changes in ownership of common stock and other equity
securities of the Company. Reporting persons are required by the
SEC regulations to furnish the Company with copies of all Section
16(a) forms they file.
The William M. Beard and Lu Beard 1988 Charitable Unitrust, of
which Mr. Beard and his wife are Trustees, had one late Form 3
filing during the past fiscal year. The Form 3 that was filed
late was not for a transaction that had been missed, but was for
failure to report that the Unitrust had become a holder of 10% of
the common stock of the Company.
Except for the above, to the Company's knowledge, based solely
on information received from each reporting person which includes
written representations that no other reports were required
during the fiscal year ended December 31, 1999, all Section 16(a)
filing requirements applicable to its reporting persons were
complied with.
Item 11. Executive Compensation.
The table below sets forth the compensation paid or accrued
during each of the last three fiscal years by the Company and its
subsidiaries to the Company's Chief Executive Officer and each of
the Company's other most highly compensated executive officers
(hereafter referred to as the named executive officers), whose
aggregate salary and bonus exceeded $100,000, for any of the
fiscal years ended December 31, 1999, 1998 or 1997:
SUMMARY COMPENSATION TABLE
Long Term
Compensation
------------------------------
Annual Compensation Awards Payouts
------------------- ------ -------
Securities
Underlying All Other
Name and Options/ LTIP Compen-
Principal Salary(a) Bonus SAR's Payouts sation(c)
Position Year ($) ($) (#) ($) ($)
- --------- ---- --- --- --- --- ---
W. M. Beard 1999 122,375(d) 2,300(b) -0- 9,625(d) 6,234
Chairman &
CEO 1998 99,000(d) -0-(d) -0- 35,250 5,503(d)
1997 99,000(d) 18,750(d)(e) -0- 41,450(d)(e) 5,501(d)
Herb Mee, Jr.1999 132,000 1,300(b) -0- -0- 6,665
President
& CFO 1998 132,000 1,250(b) -0- -0- 7,288
1997 132,000 26,200(b)(e) -0- -0- 7,285
________
(a) Amounts shown include cash compensation earned and received
by executive officers as well as amounts earned but deferred
pursuant to the Company's 401(k) Plan at the election of those
officers. Amounts shown exclude cash compensation earned but
deferred pursuant to the Company's Deferred Stock Compensation
Plan.
(b) Bonus for length of service with Beard or Beard Oil.
(c) Consists of the Company's contribution to the Company's
401(k) Plan.
(d) In 1999 Mr. Beard deferred one-fourth ($9,625) of his salary
for 3-1/2 months; in 1998 Mr. Beard deferred one-fourth ($33,000)
of his salary and all ($2,250) of his length of service bonus for
the year; in 1997 Mr. Beard deferred one-fourth ($33,000) of his
salary and all ($2,200) of his length of service bonus for the
year pursuant to the Company's Deferred Stock Compensation Plan.
(e) In 1997 Messrs. Beard and Mee each received a special bonus
of $25,000, of which $12,500 was paid in 1997 and $12,500 in
1998. Mr. Beard deferred one-fourth of such bonus in both 1997
($3,125) and 1998 ($3,125).
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table provides information, with respect
to the named executive officers, concerning the exercise of
options during the Company's last fiscal year and unexercised
options held as of the end of the last fiscal year:
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
FY-End (#) FY-End ($)
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise (#) Realized ($) Unexercisable Unexercisable
- ---- --------------- ------------ ------------- -------------
W. M. Beard -0- $ -0- 12,500/-0- $-0-/-0-
Herb Mee, Jr. 8,055 $ 14,096 24,495/-0- $-0-/-0-
Compensation of Directors
- -------------------------
Mr. Carr received compensation of $9,280 for services rendered
during 1999 as a director of Beard. Messrs. Hallock, Martin and
Price received $14,069, $9,147 and $12,405, respectively, of
deferred fees under the Company's Deferred Stock Compensation
Plan (the "Plan"). Under the Plan, the electing officers and
directors can defer fees and compensation until termination of
service or termination of the Plan, at which time the accounts
will be settled by distribution of a number of shares of the
Company's common stock equal to the number of Units credited
under the Plan. A Unit is equal to the amount deferred divided
by the fair market value of a share of common stock on the date
of deferral. Currently, the non-management directors each
receive $500 per month for their services, and also receive the
following fees for directors' meetings which they attend: annual
and 1-1/2 day meetings -- $750; regular meeting -- $500;
telephone meeting -- $100 to $300 depending upon length of
meeting. The non-management directors also receive a small year-
end bonus depending upon their length of service as directors of
Beard and Beard Oil. Accordingly, Messrs. Hallock, Martin,
Price, and Carr received $550, $100, $550 and $250, respectively,
in 1999. All of the directors except Mr. Carr deferred such
bonuses pursuant to the Plan. Beard also provides health and
accident insurance benefits for its non-management directors who
are not otherwise covered and the value of these benefits is
included in the above compensation amounts. None of the
directors received additional compensation in 1999 for their
committee participation.
The two eligible non-management directors (Messrs. Hallock and
Price) were each granted 5,000 phantom stock units (the "Units")
under the Company's 1994 Phantom Stock Units Plan on November 1,
1994. Mr. Carr was awarded 5,000 Units when he became eligible
on February 22, 1995. All of these awards were based on an award
price of $2.00* per share and vest over a five year period at the
rate of 20% per year. Messrs. Hallock, Martin, Price and Carr
were each granted 5,000 Units on October 23, 1997 at an award
price of $5.00 per share, the market value of the stock on such
date. The 1997 awards vest over a four year period at the rate
of 25% per year. Each participant has the option of receiving
payment for his award: (i) as it vests; (ii) at the conclusion of
the award period; or (iii) 50% as it vests, with the other 50%
deferred to the conclusion of the award period. Payments are
based upon appreciation in the market value of the Company's
common stock during the appropriate time interval selected. Mr.
Carr received a cash payment of $1,123 in 2000 for 1,000 Units
which vested on February 22, 2000, $1,987 in 1999 for 1,000 Units
which vested on February 22, 1999, $3,046 in 1998 for 1,000 Units
which vested on February 22, 1998 and $3,808 in 1997 for 2,000
Units which vested on February 22, 1997. Messrs. Hallock and
Price received $8,630 each in 2000 for 5,000 Units which vested
on November 1, 1999.
_______
* The market value on November 1, 1994 was $1.875 per share; on
February 22, 1995 it was $1.75 per share.
Compensation Committee Interlocks and Insider Participation
- -----------------------------------------------------------
Michael E. Carr, who has been elected by the preferred
shareholders to serve as their representative on the Board of
Directors, was elected to serve as a member of the Compensation
Committee on April 26, 1994. Mr. Carr served as Senior Vice
President of Beard Oil from December 1986 until October 1993.
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
The table below sets forth the name and address of each
shareholder who is known to the Company to own beneficially more
than 5% of Beard's outstanding common stock or preferred stock,
the number of shares beneficially owned by each and the
percentage of outstanding common or preferred stock so owned as
of February 29, 2000. Unless otherwise noted, the person named
has sole voting and investment powers over the shares reflected
opposite his name.
Number of Number of Combined
Preferred Common Common and
Shares and Shares and Preferred
Nature of Percent Nature of Percent Voting Per-
Name and Address Ownership of Class Ownership of Class(8) centage(8)
---------------- --------- -------- ---------- ----------- ----------
John Hancock Financial
Services, Inc. ("Hancock") 27,838 100.00% 312,040(1)(2) 12.80%(2) 17.62%
57th Floor
200 Clarendon Street
Boston, Massachusetts
02117
Dimensional Fund
Advisors, Inc. None 0.00% 152,265(3) 6.24% 5.90%
1299 Ocean Avenue,
11th Floor
Santa Monica, CA 90401
The Beard Group 401(k)
Trust None 0.00% 240,042(4) 9.84% 9.30%
c/o Bank One, Oklahoma,
N.A., Trustee
100 N. Broadway Avenue
Oklahoma City, OK 73102
W. M. Beard None 0.00% 860,381(5) 35.10% 33.17%
Enterprise Plaza,
Suite 320
5600 North May Avenue
Oklahoma City, OK 73112
Lu Beard None 0.00% 307,186(6) 12.60% 11.90%
Enterprise Plaza,
Suite 320
5600 North May Avenue
Oklahoma City, OK 73112
Herb Mee, Jr. None 0.00% 390,802(7) 15.87% 15.00%
Enterprise Plaza,
Suite 320
5600 North May Avenue
Oklahoma City, OK 73112
________
(1) Shares are held by Hancock on behalf of itself and affiliated
entities.
(2) Excludes the Beard preferred shares which will collectively
become convertible into 5.53% of the outstanding common stock
(after conversion) on January 1, 2003 to the extent not
previously redeemed or converted.
(3) Dimensional Fund Advisors, Inc. ("Dimensional"), a registered
investment advisor, is deemed to have beneficial ownership of
152,265 shares, all of which shares are held in portfolios of
investment companies and commingled group trusts which
Dimensional serves as investment manager. Dimensional
disclaims beneficial ownership of all such shares.
(4) Represents shares owned by The Beard Group 401(k) Trust
(the "401(k) Trust") at December 31, 1999 (latest information
available). Shares held by the 401(k) Trust are owned by the
participating employees, each of whom has sole voting and
investment power over the shares held in his or her account.
Includes 104,875.63 and 120,036.09 shares held for the accounts
of Messrs. Beard and Mee, respectively.
(5) Includes 206,166 shares owned directly by Mr. Beard as to
which he has sole voting and investment power; 305,507 shares
(or 12.53%) owned by the William M. Beard and Lu Beard 1988
Charitable Unitrust (the "1988 Unitrust"), of which Mr. Beard
and his wife, Lu Beard, serve as co-trustees and share voting
and investment power; 49,286 shares held by the William M.
Beard Irrevocable Trust "A," 68,432 shares held by the William
M. Beard Irrevocable Trust "B," and 83,549 shares held by the
William M. Beard Irrevocable Trust "C" (collectively, the
"Beard Irrevocable Trusts") of which Messrs. Beard and Herb
Mee, Jr. are trustees and share voting and investment power;
6,738 shares each held by the John Mason Beard II Trust and by
the Joseph G. Beard Trust as to which Mr. Beard is the trustee
and has sole voting and investment power; 3,256 shares held by
the Rebecca Banner Beard Lilly Living Trust as to which Mr.
Beard is a co-trustee and shares voting and investment power
with his daughter; 104,875.63 shares held by The Beard Group
401(k) Trust (the "401(k) Trust") for the account of Mr. Beard
as to which he has sole voting and investment power; and
13,333 shares held by B & M Limited, a general partnership, of
which Mr. Beard is a general partner and shares voting and
investment power with Mr. Mee. Also includes 12,500 shares
subject to presently exercisable options. Excludes 1,679
shares owned by his wife as to which Mr. Beard disclaims
beneficial ownership.
(6) Represents 305,507 shares owned by the 1988 Unitrust, of
which Mr. Beard and Mrs. Beard serve as co-trustees and share
voting and investment power. Also includes 1,679 shares owned
directly by Mrs. Beard as to which she has sole voting and
investment power.
(7) Includes 25,005 shares owned directly by Mr. Mee as to
which he has sole voting and investment power; 6,666 shares held
by Mee Investments, Inc., as to which Mr. Mee has sole voting and
investment power; 13,333 shares held by B & M Limited as to which
Mr. Mee shares voting and investment power with Mr. Beard but as
to which Mr. Mee has no present economic interest; and 120,036.09
shares held by the 401(k) Trust for the account of Mr. Mee as to
which he has sole voting and investment power. Also includes
201,267 shares held by the Beard Irrevocable Trusts as to which
Mr. Mee is a co-trustee and shares voting and investment power
with Mr. Beard but as to which Mr. Mee has no pecuniary interest
and disclaims beneficial ownership. Also includes 24,495 shares
subject to presently exercisable options. Excludes 45 shares
owned by his wife, Marlene W. Mee, as to which Mr. Mee disclaims
beneficial ownership.
(8) All percentages reflected above exclude 393,405 common
shares held by the Company as treasury stock.
Security Ownership of Management
- --------------------------------
The following table sets forth certain information regarding
the number of shares of Beard common stock beneficially owned by
each director and nominee, the Chief Executive Officer ("CEO"),
each named executive officer and by all directors and executive
officers as a group and the percentage of outstanding common
stock so owned as of February 29, 2000.
Amount and
Nature of
Beneficial Percent
Name and Address Ownership of Class (6)
- ---------------- ---------- ------------
W. M. Beard 860,381(1) 35.10%
Herb Mee, Jr. 390,802(2) 15.87%
Michael E. Carr 28,643 1.17%
Ford C. Price 18,665(3) ---(5)
Allan R. Hallock 2,500 ---(5)
Harlon E. Martin, Jr. 1,000 ---(5)
All directors and
executive officers as
a group (8 in number) 1,101,396(4) 44.28%
_________
(1) See footnote (5) to table "Security Ownership of Certain
Beneficial Owners."
(2) See footnote (7) to table "Security Ownership of Certain
Beneficial Owners."
(3) Includes 10,399 shares owned directly by Mr. Price and 3,266
shares held by an IRA for the benefit of Mr. Price, as to all of
which he has sole voting and investment power, and 5,000 shares
held by the FCP Trust as to which he has shared voting and
investment power.
(4) Includes 573,033 shares as to which directors and executive
officers have sole voting and investment power and 528,363 shares
as to which they share voting and investment power with others.
(5) Reflects ownership of less than one (1) percent.
(6) See footnote (8) to table "Security Ownership of Certain
Beneficial Owners."
Item 13. Certain Relationships and Related Transactions.
None.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K.
(a) The following documents are filed as part of this report:
1. Financial Statements. Reference is made to the Index to
Financial Statements and Financial Statement
2. Financial Statement Schedules. Financial Statement
Schedules are omitted as inapplicable or not required,
or the required information is shown in the financial
statements or in the notes thereto.
3. Exhibits. The following exhibits are filed with this Form
10-K and are identified by the numbers indicated:
Exhibit
No. Description
- ------- -----------
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
by reference).
2(b) Agreement and Plan of Merger by and between The Beard
Company and The New Beard Company, dated as of 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 by
reference).
2(c) Certificate of Merger merging The Beard Company into The
New Beard Company as filed with theSecretary 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
by reference).
2(d) Asset Purchase Agreement by and among Registrant, Toby
B. Tindell, Cristie R. Tindell and Interstate Travel
Facilities, Inc. ("ITF"), dated as of February 27, 1998.
(This Exhibit has been previously filed as Exhibit 2 to
Registrant's Form 8-K, filed on March 16, 1998, and same
is incorporated 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 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 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 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 by reference).*
10(b) The Beard Company 1994 Phantom Stock Units Plan as
amended effective October 23, 1997 (The Amended Plan
supersedes the original Plan adopted on November 1,
1994).*
10(c) Amendment No. One to The Beard Company Deferred Stock
Compensation Plan dated November 1, 1995, as amended
July 21, 1999 (The Amended Plan supersedes the original
Plan adopted on June 3, 1996. This Exhibit has
previously been filed as Exhibit A, filed on May 11,
1999 to Registrant's Proxy Statement dated May 11, 1999,
and same is incorporated by reference).*
10(d) Form of Change in Control Compensation Agreement dated
as of January 24, 1997, by and between Carbonics and
three employees. (This Exhibit has been previously filed
as Exhibit 10(l) to Registrant's Form 10-Q for the
period ended March 31, 1997, filed on May 14, 1997, and
same is incorporated 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) Nonqualified Stock Option Agreement by and between Toby
Tindell and ITF, dated February 27, 1998. (This Exhibit
has been previously filed as Exhibit 10(n) 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).*
10(i) 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(j) 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
by reference).
10(k) 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 by reference).
10(l) 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
by reference).
10(m) 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
by reference).
10(n) Coal Fines Extraction and Beneficiation Agreement among
CRC NO. 1 LLC, CRC NO. 2 LLC, CRC NO. 3 LLC, CRC NO. 4
LLC, CRC NO. 5 LLC, CRC NO. 6 LLC, (the "Six LLC's") and
BTI, dated as of June 24, 1998. (This Exhibit has been
previously filed as Exhibit 10.1 to Registrant's Form 8-
K, filed on July 15, 1998, and same is incorporated
herein by reference).
10(o) Operation and Maintenance Agreement among the Six LLC's
and BTI, dated as of June 24, 1998. (This Exhibit has
been previously filed as Exhibit 10.2 to Registrant's
Form 8-K, filed on July 15, 1998, and same is
incorporated herein by reference).
10(p) Guaranty Agreement among Registrant and the Six LLC's,
dated as of June 24, 1998. (This Exhibit has been
previously filed as Exhibit 10.3 to Registrant's Form 8-
K, filed on July 15, 1998, and same is incorporated
herein by reference).
10(q) Guaranty Agreement between MCNIC Pipeline & Processing
Company ("MCNIC") and BTI, dated as of June 24, 1998.
(This Exhibit has been previously filed as Exhibit 10.4
to Registrant's Form 8-K, filed on July 15, 1998, and
same is incorporated herein by reference).
10(r) Loan Agreement between MCNIC and Beard Mining, L.L.C.
("BMLLC"), dated as of June 24, 1998. (This Exhibit has
been previously filed as Exhibit 10.5 to Registrant's
Form 8-K, filed on July 15, 1998, and same is
incorporated herein by reference).
10(s) Promissory Note from BMLLC to MCNIC, dated as of June
24, 1998. (This Exhibit has been previously filed as
Exhibit 10.6 to Registrant's Form 8-K, filed on July 15,
1998, and same is incorporated herein by reference).
10(t) Amendment to Coal Fines Extraction and Beneficiation
Agreement among the Six LLC's and BMLLC, dated October
30, 1998. (This Exhibit has been previously filed as
Exhibit 10(z) to Registrant's Form 10-Q for the period
ended September 30, 1998, filed on November 23, 1998,
and same is incorporated herein by reference).
10(u) Amendment to Operation and Maintenance Agreement among
the Six LLC's and BMLLC, dated October 30, 1998. (This
Exhibit has been previously filed as Exhibit 10(aa) to
Registrant's Form 10-Q for the period ended September
30, 1998, filed on November 23, 1998, and same is
incorporated herein by reference).
10(v) Notice by the Six LLC's of Termination of Operation and
Maintenance Agreement with BTI, dated December 16, 1998.
(This Exhibit has been previously filed as Exhibit 10(z)
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(w) Notice by the Six LLC's of Termination of Coal Fines
Extraction and Beneficiation Agreement with BTI, dated
December 16, 1998. (This Exhibit has been previously
filed as Exhibit 10(aa) 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(x) Agreement among MCNIC, the Six LLC's, BMLLC, Registrant
and BTI, dated March 19, 1999. (This Exhibit has been
previously filed as Exhibit 10(bb) 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(y) Letter Agreement by and among Registrant, ITF, Toby B.
Tindell and Cristie R. Tindell (the "Tindells"), dated
April 13, 1999. (This Exhibit has been previously filed
as Exhibit 10(cc) 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(z) 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(aa) Letter Agreement by and among Registrant, ITF, and the
Tindells, dated September 18, 1999. (This Exhibit has
been previously filed as Exhibit 10(cc) to Registrant's
Form 10-Q for the period ended September 30, 1999, filed
on November 22, 1999, and same is incorporated herein by
reference).
10(bb) Letter Agreement by and among Registrant, ITF, and the
Tindells, dated September 18, 1999. (This Exhibit has
been previously filed as Exhibit 10(dd) to Registrant's
Form 10-Q for the period ended September 30, 1999, filed
on November 22, 1999, and same is incorporated herein by
reference).
10(cc) Letter Loan Agreement by and between Registrant and The
William M. Beard and Lu Beard 1988 Charitable Unitrust
(the "Unitrust") dated April 3, 2000.
10(dd) Promissory Note from Registrant to the Trustees of
the Unitrust dated April 3, 2000.
21 Subsidiaries of the Registrant.
23 Consent of KPMG LLP
27 Financial Data Schedule
*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) No reports on Form 8-K were filed during the period
during the fourth quarter of the period covered by this report.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
THE BEARD COMPANY
(Registrant)
DATE: April 11, 2000 By HERB MEE, JR.
Herb Mee, Jr., President
Pursuant to the requirements of the Securities Exchange Act
of 1934, as amended, this report has been signed by the following
persons on behalf of the Registrant and in the capacities and on
the dates indicated below.
Signature Title Date
--------- ----- ----
By W.M. BEARD Chief Executive Officer April 11, 2000
W.M. Beard
By HERB MEE, JR. President and Chief April 11, 2000
Herb Mee, Jr. Financial Officer
By JACK A MARTINE Controller and April 14, 2000
Jack A. Martine Chief Accounting Officer
By W.M. BEARD Chairman of the Board April 11, 2000
W.M. Beard
By HERB MEE, JR. Director April 11, 2000
Herb Mee, Jr.
By ALLAN R. HALLOCK Director April 12, 2000
Allan R. Hallock
By HARLON E. MARTIN, JR. Director April 11, 2000
Harlon E. Martin, Jr.
By FORD C. PRICE Director April 11, 2000
Ford C. Price
By MICHAEL E. CARR Director April 11, 2000
Michael E. Carr
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)
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
September 16, 1997
2(c) Certificate of Merger merging The Incorporated herein by reference
Beard Company into The New Beard
Company as filed with the Secretary
of State of Oklahoma on November 26,
1997
2(d) Asset Purchase Agreement by and Incorporated herein by reference
among Airgas Carbonic Reserves,
Inc. ("Airgas"), and Registrant,
Carbonic Reserves ("Carbonics"),
and Clifford H. Collen, Jr.
("Collen")
2(e) Asset Purchase Agreement by and Incorporated herein by reference
among Registrant, Toby B. Tindell,
Cristie R. Tindell and Interstate
Travel Facilities, Inc. ("ITF"),
dated as of February 27, 1998
3(i) Certificate of Incorporation of Incorporated herein by reference
The New Beard Company as filed
with the Secretary of State of
Oklahoma on September 11, 1997
3(ii) Registrant's By-Laws as currently Incorporated herein by reference
in effect
4(a) Certificate of Designations, Incorporated herein by reference
Powers, Preferences and Relative,
Participating, Option and Other
Special Rights, and the Qualifi-
cations, Limitations or Restric-
tions Thereof of the Series A
Convertible Voting Preferred Stock
of the Registrant
4(b) Settlement Agreement, with Incorporated herein by reference
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
10(a) Amendment No. One to The Beard Incorporated herein by reference
Company 1993 Stock Option Plan
dated August 27, 1993, as amended
June 4, 1998
10(b) The Beard Company 1994 Phantom Filed herewith electronically
Stock Units Plan adopted November
1, 1994, as amended effective
October 23, 1997
10(c) Amendment No. One to The Beard Incorporated herein by reference
Company Deferred Stock Compensa-
tion Plan dated November 1, 1995,
as amended July 21, 1999
10(d) Form of Change in Control Com- Incorporated herein by reference
pensation Agreement dated as
of January 24, 1997, by and
between Carbonics and three
employees
10(e) Amended and Restated Nonquali- Incorporated herein by reference
fied Stock Option Agreement by
and between Richard D. Neely
and ISITOP, Inc. ("ISITOP"),
dated November 12, 1998
10(f) Amended and Restated Nonquali- Incorporated herein by reference
fied Stock Option Agreement by
and between Jerry S. Neely and
ISITOP, dated November 12, 1998
10(g) Nonqualified Stock Option Agree- Incorporated herein by reference
ment by and between Robert A.
McDonald and ISITOP, dated
November 12, 1998
10(h) Nonqualified Stock Option Agree- Incorporated herein by reference
ment by and between Toby Tindell
and ITF, dated February 27, 1998
10(i) Incentive Stock Option Agreement Incorporated herein by reference
by and between Philip R. Jamison
and ISITOP, Inc. ("ISITOP"),
dated November 12, 1998
10(j) Subscription Agreement by and Incorporated herein by reference
between Cibola Corporation
("Cibola") and Registrant, dated
April 10, 1996
10(k) Nonrecourse Secured Promissory Incorporated herein by reference
Note from Registrant to Cibola,
dated April 10, 1966
10(l) Security Agreement by and among Incorporated herein by reference
Registrant, Cibola and the Cibola
shareholders, dated April 10, 1996
10(m) Tax Sharing Agreement by and Incorporated herein by reference
among Registrant, Cibola and
the Cibola shareholders, dated
April 10, 1996
10(n) Coal Fines Extraction and Incorporated herein by reference
Beneficiation Agreement among CRC
NO. 1 LLC, CRC NO. 2 LLC, CRC
NO. 3 LLC, CRC NO. 4 LLC, CRC
NO. 5 LLC, CRC NO. 6 LLC
(the "Six LLC's") and BTI,
dated as of June 24, 1998
10(o) Operation and Maintenance Incorporated herein by reference
Agreement among the Six LLC's
and BTI, dated as of June 24,
1998
10(p) Guaranty Agreement among the Incorporated herein by reference
Six LLC's and BTI, dated as
of June 24, 1998
10(q) Guaranty Agreement among Incorporated herein by reference
MCNIC Pipeline & Processing
Company ("MCNIC") and BTI,
dated as of June 24, 1998
10(r) Loan Agreement between MCNIC Incorporated herein by reference
and Beard Mining. L.L.C.
("BMLLC"), dated as of June
24, 1998
10(s) Promissory Note from BMLLC to Incorporated herein by reference
MCNIC, dated as of June 24,
1998
10(t) Amendment to Coal Fines Incorporated herein by reference
Extraction and Beneficiation
Agreement among the Six LLC's
and BMLLC, dated October 30,
1998
10(u) Amendment to Operation and Incorporated herein by reference
Maintenance Agreement among the
Six LLC's and BMLLC, dated
October 30, 1998
10(v) Notice by the Six LLC's of Incorporated herein by reference
Termination of Operation and
Maintenance Agreement with BTI,
dated December 16, 1998
10(w) Notice by the Six LLC's of Incorporated herein by reference
Termination of Coal Fines
Extraction and Beneficiation
Agreement with BTI, dated
December 16, 1998
10(x) Agreement by and among MCNIC, Incorporated herein by reference
the Six LLC's, BMLLC,
Registrant and BTI, dated
March 19, 1999
10(y) Letter Agreement by and among Incorporated herein by reference
Registrant, ITF, Toby B.
Tindell and Cristie R. Tindell
(the "Tindells"), dated April 13, 1999
10(z) Guaranty Agreement between Registrant Incorporated herein by reference
and Oklahoma Bank and Trust Company,
dated as of June 7, 1999
10(aa) Letter Agreement by and among Incorporated herein by reference
Registrant, ITF, and the Tindells,
dated September 18, 1999
10(bb) Letter Agreement by and among Incorporated herein by reference
Registrant, ITF, and the Tindells,
dated September 18, 1999
10(cc) Letter Loan Agreement by and Filed herewith electronically
between Registrant and The William
M. Beard and Lu Beard 1988
Charitable Unitrust (the "Unitrust")
dated April 3, 2000
10(dd) Promissory Note from Registrant to Filed herewith electronically
the Trustees of the Unitrust dated
April 3, 2000
21 Subsidiaries of the Registrant Filed herewith electronically
23 Consent of KPMG LLP Filed herewith electronically
27 Financial Data Schedule Filed herewith electronically