Back to GetFilings.com
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, 2000
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 Number)
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:
(Title of each class) (Name of each exchange on
None which registered)
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.001333 par value
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 last sale price of
registrant's common stock on the OTC Bulletin Board as of the close of business
on February 28, 2001 was $522,000.
The number of shares outstanding of each of the registrant's classes of
common stock as of February 28, 2001 was
Common Stock $.001333 par value - 1,828,845
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the Registrant's Proxy Statement in connection with the 2001
Annual Meeting of Stockholders of The Beard Company are incorporated herein by
reference as to Part III, Items 10, 11, 12 and 13.
THE BEARD COMPANY
FORM 10-K
For the Fiscal Year Ended December 31, 2000
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
Item 4a Executive officers and Significant Employees of the
Company
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
THE BEARD COMPANY
FORM 10-K
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.
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. 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. 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 sold for a healthy
profit in 1997. In 1990 we bought a distressed real estate development which we
successfully operated 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 environmental opportunities, coal reclamation and related marketing
opportunities. In October 1998 we formed a subsidiary in Mexico which has worked
as a subcontractor testing natural gas wells which Petroleos Mexicanos ("Pemex")
is drilling in northeastern Mexico. In 1999 we formed starpay(TRADEMARK).com,
inc., an e-Commerce startup company that has developed a proprietary payment
system to be used exclusively for Internet transactions and to provide
state-of-the-art security for purchasing transactions. That same year we formed
another Mexican subsidiary which designed and furnished to Pemex 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.
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, which accounted for 53% of
consolidated revenues and 84% of segment revenues in 1999 and for 93% of
consolidated revenues and all of the segment's revenues in 1998 had a material
detrimental effect upon the Company's profitability during the last 11 months of
1999 and all of 2000 (See "Coal Reclamation Activities---The MCN
Projects---Dependence of the Segment on a Single Customer").
Operating Segments. In 2000 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 China ("China") Segment, which is
pursuing (i) environmental opportunities, (ii) the sale of technical services,
(iii) the sale of coal equipment, and (iv) the operation of coal fines
reclamation facilities in China; (5) the e-Commerce ("e-Commerce") Segment,
consisting of the development and implementation of systems and technologies
related to Internet commerce; and (6) the environmental remediation ("ER")
Segment, consisting of the remediation of polycyclic aromatic hydrocarbon
("PAH") contamination.
Discontinued Operations---ITF Segment. In 1999 the Company adopted a plan
to dispose of Interstate Travel Facilities, Inc., whose activities had
previously been conducted as the "ITF" Segment. Those operations were reflected
as discontinued operations in 1998 and the Company recorded a $1,603,000 loss
from discontinuing such operations that year. The majority of the assets of the
ITF Segment were disposed of in 1999 and the Company recorded an additional
charge of $434,000 related to discontinuing such operations. The Company
continued to operate the two remaining facilities during most of 2000 while it
was attempting to market them. The operation of both stores was suspended during
the fourth quarter of 2000 in order to minimize further losses. In 2000, the
Company recorded losses totaling $591,000, including an additional charge of
$420,000 related to discontinuing such operations, and does not expect further
charges in connection with such activities. At year-end 2000, the discontinued
ITF Segment had $561,000 of assets remaining, consisting of two convenience
stores with related property, plant, equipment and inventory, and liabilities
totaling $136,000 consisting primarily of trade payables, accrued liabilities
and long-term debt.
Discontinued Operations---BE/IM Segment. In 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. Beard owned 40% of NABR, which was not a consolidated entity
and had previously been accounted for as an equity investment.
The joint venture was dissolved effective September 15, 2000, and the
Japanese partners received their final distribution of cash in December, 2000,
with the Company taking over the remaining assets and liabilities. The segment's
larger plant produced its last iodine in April 2000. Shut down of this plant was
completed in September 2000, and the Company is now working to dispose of its
equipment. The Company intends to sell the smaller plant as a going concern. At
year-end 2000, the discontinued segment had $282,000 of assets remaining,
consisting primarily of cash, two iodine extraction plants, brine collection
wells and iodine inventory, with liabilities totaling $282,000. The Company
recorded a charge of $540,000 in 1999 and a gain of $179,000 in 2000 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 $53 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 Internal Revenue 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
Effect of Recent Developments on Liquidity. The termination of the MCN
Projects (see "Loss of Significant Contract" above and "Coal Reclamation
Activities") at January 31, 1999 had a material detrimental effect upon the
Company's profitability during the last 11 months of 1999 and all of 2000.
Primarily as a result of the loss of its major revenue stream, coupled with the
use of funds required to support the activities of its various startup
activities, the Company's working capital decreased from $981,000 at year-end
1999 to ($159,000) at year-end 2000.
The Company continues to take steps to mitigate future funding requirements
by its poorly performing subsidiaries. The Coal Segment is working on two new
pond reclamation projects, both of which are expected to mature into operating
projects for Beard Technologies in the coming 12 months (see "Coal Reclamation
Activities---Projects in Advanced Stages" below). The discontinued ITF Segment,
which consumed $2,239,000 of cash in 1998, $400,000 of cash in 1999 and $22,000
of cash in 2000, is expected to generate cash in 2001 as its remaining assets
are sold. The discontinued BE/IM Segment contributed $482,000 of cash to the
Company in 2000 and is expected to contribute $300,000 or more of cash to Beard
in 2001 as its remaining assets are liquidated. The WS Segment, which consumed
$1,251,000 of cash in 1999 and $795,000 of cash in 2000 as the Company funded
its investment as well as a portion of our partner's investment, is targeted to
contribute $375,000 or more of cash to Beard in 2001. In the meantime a related
party has provided $1.5 million of working capital until the contemplated new
coal projects are underway 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 provides slurry pond core drilling
services, fine coal laboratory analytical services and consulting services.
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 the sand
separators custom fabricated for use on a trial basis.
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.
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.
(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, China,
e-Commerce and ER. 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
History/Formation of Beard Technologies, Inc. In 1990, the Company acquired
more than 80% of Energy International Corporation, a research and development
firm specializing in coal-related technologies. In 1994 Beard sold Energy
International to The Williams Companies, Inc., retaining the patented mulled
coal technology that Energy International had developed in the interim. The
patent rights were contributed to a wholly-owned subsidiary, Beard Technologies,
Inc. The mulled coal technology is an innovative and inexpensive process that
converts wet fine coal into a mulled coal material 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.
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 mulled coal technology. Results of the project were highly encouraging, and
Beard Technologies 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
preferred to focus on Section 29 projects which appeared to offer much greater
profit potential. As a result, efforts to commercially develop the technology
have been placed on hold.
Impact of Section 29. In late 1997 and early 1998 significant activity was
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 October of 2000 the Internal Revenue Service announced that it would
conduct a public review of the Section 29 tax credit due to concerns that some
synfuel operators are violating the spirit of the synfuel credit by running
freshly mined coal through their plants instead of waste material.
The MCN Projects. On June 30, 1998, Beard Technologies finalized agreements
with MCNIC Pipeline & Processing Company ("MCNIC"), a subsidiary of MCN Energy
Group Inc. ("MCN"), to acquire beneficiation plants located at six coal slurry
impoundment sites in West Virginia, Kentucky, and Ohio. The purchase was
financed by a $24 million loan from MCNIC. Under the agreements, which became
effective April 1, 1998, Beard Technologies operated and maintained the six
beneficiation plants and six briquetting plants for MCNIC under a cost-plus
arrangement, receiving a minimum operating profit of $100,000 per month so long
as the contracts remained in effect. Since these were Section 29 projects, it
was originally contemplated that the contracts would last until the tax credits
expired on December 31, 2007. However, in November of 1998 MCN became concerned
that the plants might not qualify for the tax credit, and took a special charge
of $133,782,000 to completely write off the projects. Effective January 31,
1999, MCNIC terminated the operating agreements and assumed ownership of the
equipment, thereby relieving Beard Technologies of its debt obligation to MCNIC.
During the time Beard Technologies was operating the 12 plants it was, to
the best of the Company's knowledge, the largest operator of coal recovery
plants in the world. In its capacity as contract operator, BTI supervised the
last few months of construction, hired and trained 11 foremen and 71 equipment
operators, obtained all necessary permits, negotiated and executed a contract
with the Union, and brought each project into production of clean coal from the
ponds and alternative fuel from the briquetting plants by the required deadline.
Current Focus on Coal Reclamation. Since the termination of the MCNIC
agreements Beard Technologies has continued to focus its efforts on coal
reclamation. During the past two years Beard Technologies has called on numerous
coal producers and utilities, particularly those having ponds which it believes
have large reserves of recoverable coal fines.
Projects in Advanced Stages. Beard Technologies is continuing to pursue
other reclamation projects. It recently cored a slurry pond in West Virginia
owned by a Fortune 500 company which has now made the decision to install a
preparation plant to recover clean coal from the pond. Beard Technologies is
negotiating with third parties concerning the installation of the equipment
needed for the project. If such negotiations are successfully concluded, plant
construction is expected to commence in the third quarter of 2001.
Beard Technologies recently completed the drilling of 50 core holes at a
large pond for a sizeable public company. Analysis of samples from the cores are
favorable and we will be negotiating with the pond owner concerning the
installation and/or operation of a preparation plant at the pond site.
Although negotiations in connection with both of these projects are
underway, no formal agreements have been signed. Accordingly, finalization of
definitive agreements and commencement of plant operations in 2001 are not
assured.
Improved Drilling and Lab Capabilities. During the year 2000 Beard
Technologies made substantial investments to improve its slurry pond core
drilling equipment and its fine coal laboratory analytical services
capabilities. In addition to supporting its own pond recovery project
evaluations, by mid-year the company was able to offer state of the art drilling
and analytical services to commercial clients who were independently
investigating their own projects. During 2000 the company drilled 150 core holes
for eight different commercial clients, and 80% of the cores were analyzed at
Beard Technologies' laboratory. The drilling and analytical business continued
strong through January 2001, and there has been a substantial increase in
consulting revenues during the same period. Consulting revenues in 2001 are
expected to exceed $100,000, in addition to drilling and lab revenues.
Recent Developments: Sharp Increase in Natural Gas Prices; Effect on Coal
Pricing; Possible Impact of Change in National Energy Policy. The sharp increase
in natural gas prices beginning in late 1999 and continuing throughout 2000 has
had a major impact upon the electric power generating industry. In particular,
during the last two months of 2000 and continuing into January of 2001 natural
gas has been in extremely short supply and spot prices for natural gas have
increased to record levels. This has caused severe problems in southern
California with the cost of electricity in San Diego up 200%. The two major
electric utilities serving the area have both threatened bankruptcy because of
the gas supply problem and the sharp increase in gas prices resulting from the
previous deregulation of the industry. Similar imbalances have occurred to a
lesser degree over much of the country. As a result, during the last three
months the spot price for coal has moved up sharply, narrowing the price
differential between coal and natural gas on a btu basis.
On February 8, 2001, the new Secretary of Energy indicated that "enhancing
the future of coal-fired power is certain to be part of a comprehensive national
energy policy" under the Bush administration, and that the Department of Energy
is offering $95 million in matching grants to quickly increase efficiency and
decrease pollution at coal-fired power plants. The recent electricity shortages
in California, which have also threatened to impact other western states, have
drawn considerable attention to the problems that can be caused by reliance on
natural gas as the sole power supply to generate electricity.
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
----------- ----------------
12/31/00 27.5%
12/31/99 63.4%
12/31/98 92.9%
Revenues from the MCN Projects accounted for 35% of the Coal Segment's
revenues from continuing operations in 2000, for 84% of such revenues in 1999
and for all of such revenues in 1998. Termination of the MCNIC operating
agreements effective January 31, 1999 has had a material detrimental effect upon
the Company's profitability since that date. The Company's revenues and
profitability will continue to be negatively impacted until contracts for new
reclamation projects have been negotiated and finalized.
Facilities. Beard Technologies leases an office and laboratory facilities
from the Applied Research Center at the University of Pittsburgh ("UPARC"). The
UPARC facilities give the Coal Segment 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, 2000, the Coal Segment employed six 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 0.544690% working interest
(0.471157% net revenue interest) and an overriding royalty interest equivalent
to a 0.092190% net revenue interest in the Unit, giving it a total 0.563347% 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. In 2000, Kinder Morgan CO2 Company, L.P. replaced Shell
CO2 Company Ltd. as operator of the unit. There are 44 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 98% CO2.
In 2000 Beard sold 1,319,000 Mcf (thousand cubic feet) attributable to its
working and overriding royalty interests at an average price of $.36 per Mcf. In
1999 Beard sold 1,536,000 Mcf 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. Beard was overproduced by 76,000 Mcf on the sale of its share
of McElmo Dome gas at year-end 2000.
As the result of a development program undertaken by Shell in mid-1996,
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 McElmo Dome CO2
production decreased to 657 million cubic feet per day in April 1999. With the
sharp increase in oil prices in late 1999 and throughout 2000, CO2 demand for
tertiary recovery increased accordingly. CO2 production had increased back to
777 million cubic feet per day in the fourth quarter of 1999 and to 800 million
cubic feet per day in the fourth quarter of 2000.
Beard considers its ownership interest in the McElmo Dome Field to be one
of its most valuable assets. In November 2000 Hunt Oil Company sold its 0.0197%
working interest (0.0164% net revenue interest) and its overriding royalty
interest equivalent to a 0.0356% net revenue interest in the Unit for $225,000
at a public auction in Houston, Texas. On an equivalent basis, Beard's interest
in the Unit is estimated to have an approximate value of $2.2 million.
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, 2000, Beard was underproduced by 337,000 Mcf on the sale of its share of
Bravo Dome gas. The Company sold no CO2 gas from Bravo Dome in 2000, 1999 or
1998 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.
However, in view of the recent increase in CO2 prices, the Company has initiated
discussions to commence selling its CO2 and expects such sales to commence prior
to year-end 2001.
Amoco Production Company operates a CO2 production plant in the middle of
the Bravo Dome field. The 350 producing wells are approximately 2,500 feet deep.
The gas is approximately 99% 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)
------ ----------
12/31/00 1,319,000
12/31/99 1,536,000
12/31/98 2,187,000
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 Average
Fiscal Sales Lifting
Year Price Per Mcf Cost Per Mcf
Ended of CO2 of CO2
------ ----------- -------------
12/31/00 $0.36 $0.05
12/31/99 $0.27 $0.06
12/31/98 $0.28 $0.05
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 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
------------ --------------
12/31/00 60.2%
12/31/99 27.8%
12/31/98 6.7%
Productive Wells. 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, 2000, Beard held a working interest in a total of 394 gross
(0.44 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......... 44 0.239
New Mexico....... 350 0.205
---- ------
394 0.444
==== =====
Employees. As of December 31, 2000, 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 1998 the Company formed ITS-Testco,
L.L.C., an Oklahoma limited liability company in which the Company has 50%
ownership ("ITS-Testco"). ITS-Testco owns 100% of a subsidiary, TESTCO INC. de
MEXICO, S.A. de C.V. ("Testco de Mexico"), which was also formed in 1998 to
conduct natural gas well testing operations in northeastern Mexico. Testco de
Mexico has worked as a subcontractor to contractors working for Pemex testing
natural gas wells which Pemex is drilling just south of the southernmost Texas
border. ITS-Testco owns most of the equipment which is being utilized by and
leased to Testco de Mexico.
Neither the ITS-Testco nor Testco de Mexico had any operations, other than
startup costs, in 1998. ITS-Testco 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 1999 the Company
formed ITS, Inc. ("ITS"), an Oklahoma corporation which is wholly-owned by the
Company. ITS owns 100% of a Mexican subsidiary, Incorporated Tank Systems de
Mexico, S.A. de C.V. ("ITS de Mexico") which was also organized in 1999. ITS has
designed a sand separator (patent applied for) to meet the specific requirements
of Pemex. ITS de Mexico had five of the separators custom fabricated which it
was renting to Pemex prior to the 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.
Shutdown of Well Servicing Operations. In January of 2000 Pemex changed its
procedures for the handling of well servicing contracts. In the past these
contracts had usually been "rolled over" and there had been continuity of
operations. Under the new procedure these contracts were allowed to expire. The
two companies that comprise the WS Segment joined with a large service company
in bidding on new contracts let during the year by Pemex, but were not the
successful bidder. Meanwhile, all of the WS Segment's operations in Mexico were
suspended as of January 29, 2000, and most of its personnel were placed on
furlough with the balance on a severely reduced work schedule. At year-end,
following unsuccessful discussions with Pemex and with our partner service
company that had indicated some interest in pooling their well servicing
equipment with ours, we made the decision to move four of our eight well
servicing units back to south Texas where we expect to put them to work. A
decision will be made on the remaining equipment during the year.
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
----------- --------------
12/31/00 8.3%
12/31/99 5.5%
12/31/98 -0-%
Because the Company owns only 50% of ITS-Testco 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 $1,069,000, $229,000 and $35,000 of
losses as its share of ITS-Testco's operating losses in 2000, 1999 and 1998,
respectively. All of Testco de Mexico's revenues (and thus indirectly all of
ITS-Testco'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 in Mexico are totally dependent upon the Segment's continuing ability to
attain contracts and/or subcontracts from Pemex (see "Shutdown of Well Servicing
Operations" above).
There is a shortage of well control equipment in Mexico, and we are still
hopeful that the WS Segment will receive new contracts and will resume its
activities. However, there is no assurance of this. Meanwhile, we have moved
four of our eight well servicing units to south Texas where there is also a
shortage of such equipment and we expect to put the equipment to work there.
Facilities. Testco de Mexico is occupying a small office and yard 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.
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.
OPERATIONS IN CHINA
Beard Sino-American Resources Co., Inc. In 1998 the Company opened an
office in Beijing, People's Republic of China. Later that year 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 1999 BSAR established a Representative Office
in Beijing.
Environmental Opportunities. China is a large country with serious
environmental problems which include atmospheric pollution, ground water
pollution and land pollution. To solve these problems the government has made
the decision to bring in foreign equipment and technology. To assist China in
its efforts we decided to focus our initiatives on atmospheric pollution and
land pollution. The atmospheric pollution is generated by China's heavy
dependence on coal burning steam boiler electric power plants compounded by the
burning of coal for heat by many Chinese residences. Our focus here has been to
assist them with cleaning up the coal they are using to create the energy in the
coal burning plants. The government has decided to double the amount of wash
plants currently in operation and update the equipment in the existing ones. To
date, however, funds have not been made available to proceed with such efforts.
Our second area of focus is on land pollution. The amount of arable land in
China is limited considering its dense population. China is the largest user of
chemical fertilizers in the world. Unfortunately, the carryover of fertilizers
from one planting to the next and the considerable runoff into lakes and rivers
has polluted much of China's arable land and fresh water resources.
Qitaihe Lushon Joint Venture. In 1998 the Company entered into a Memorandum
of Understanding to establish a joint venture to utilize Beard Technologies'
mulled coal technology in two coal preparation plants in Heilongjiang Province
in northeastern Manchuria. Changes in the political and business environment in
China, particularly in the coal industry where the Coal Ministry has shut down
more than 1,000 coal mines in the last two years, have caused us to indefinitely
postpone the installation of these plants.
Centrifuge Distributorship. In 1999 the Company became the exclusive
distributor in China for Decanter Machine, Inc. ("Decanter"). Decanter is the
leading manufacturer of de-watering equipment (centrifuges) for the U. S. coal
industry. Beard acts as an independent contractor in promoting the sale of
Decanter products in China where there appears to be significant sales
potential. China is the largest producer and consumer of coal in the world, and
it relies heavily on coal for creating electricity. Currently it washes only 25%
of its production. In order for the country to meet its internal goals for
decreasing atmospheric pollution, it needs to start washing 100% of the coal it
produces. It needs to re-manufacture the centrifuges it already has, which were
furnished by a competing manufacturer but have proven to be the wrong machine
for the application. The existing centrifuges could never de-water to less than
30% moisture content, which is too much moisture to sell the coal. Decanter
believes that re-manufacuring those machines can improve their efficiency and
enable them to reduce the moisture content to the 15% to 18% range, which is
marketable. China also needs to buy additional equipment. We are currently
attempting to get the Decanter centrifuges approved by the various local
governments, which will then need to release the funds to re-manufacture and/or
purchase the needed equipment.
Although the need to upgrade old equipment and install new capacity is
great, the government has been slow in releasing funds and no commitments have
been received to date. Accordingly, marketing of the centrifuges has taken a
secondary position to the OCCF initiatives described below.
Organic-Chemical Compound Fertilizer Initiatives. China, which is the
world's fourth largest country in area, is also the world's most heavily
populated country, with a population of almost 1.4 billion. For many years the
Chinese have boosted the production of food crops by applying large quantities
of nitrogen, phosphate and potassium fertilizers to their dwindling amount of
arable land. This overuse of fertilizer has resulted in damaged, less productive
soil and high rates of erosion. Working with the top agronomists and
academicians in the Chinese agricultural community, BSAR has developed a concept
to solve the problem by manufacturing chemical fertilizers blended with compost
derived from organic wastes. The end result will be an organic-chemical compound
fertilizer ("OCCF") utilizing at least two types of organic waste materials:
sewage sludge and crop-residual agri-waste.
Cooperative Joint Ventures. Through BSAR, the Company has signed contracts
and formed Cooperative Joint Ventures ("CJV's") or similar arrangements with
various Chinese partners for the construction of four facilities and the
marketing and sales of OCCF. Negotiations are also underway for the construction
of three additional facilities. The life of each CJV will be 20 years after
which the facilities will revert to the Chinese partners. In each case the
Chinese partners have committed to provide the funding for the facilities and
the necessary financing and working capital. BSAR will have an interest from
inception in each CJV determined by BSAR's equity contribution for bringing the
technology to China, and will also receive an operating fee. Progress is
dependent upon the Chinese partners fulfilling their commitments.
Groundbreaking on the first four plants is tentatively scheduled as
follows:
Location Province Date
------------------------------------
Baoding Hebei March 2001*
Handan Hebei April 2001
Shenyang Luoyang May 2001
Qiqihaer Heilongjiang June 2001
- ----------------------
* Groundbreaking for this plant occurred in early March, and plant
construction is expected to commence in early April.
Construction of each facility is expected to be completed five months after
groundbreaking, at which point production is scheduled to start. Ramp up to full
production is scheduled to occur three months after production startup. Each
plant will be comprised of an AirLance Compost Systems facility, and a
granulating plant and other ancillary facilities. The plants will all be similar
in design and construction, and are targeted to cost approximately US$3.1
million each, including pre-operating expenses and working capital. Targeted
output of each plant is about 70,000 metric tons of OCCF per year at full
production.
The formulation of our product will be based on the target crops and
determined by the leading soil scientists at Beijing Agricultural University and
agronomists in each province. Our production will amount to less than about 5%
of total fertilizer demand in each of the provinces in which we are planning to
construct a facility. Sale prices for our product will be commensurate with and
the quality will be superior to other similar products presently available.
Furthermore, we will receive strong support for our product from these senior
scientists. Based on these and other factors, we are confident that our product
will be well received by the agricultural community.
Principal Products and Services. The principal products and services
supplied by the Company's China Segment are (i) environmental technology; (ii)
technical services; (iii) sales of coal equipment; and (iv) the mulled coal
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 environmental industry and the coal
reclamation 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, 2000, 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 with (i) a Web site development company and (ii) a patent attorney
who agreed to join forces to develop the concept. The Memorandums 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 mid-1999 three patent applications were filed embodying the features of
the invention, and 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 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%). starpay filed two additional patent applications in 2000 which have
considerably broadened the scope and, starpay believes, the potential of its
patent claims.
The starpay Technology. We have identified and investigated many
opportunities for our proprietary authentication technology which include
various e-commerce payment systems, security access applications and secure
document transmission. Although there are many applications for our technology,
we are focusing on the development of our Internet-only credit card because we
are confident that this product will get immediate response in today's
e-commerce marketplace.
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 more advanced and secure than any known
technology in use today.
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 in April of 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 an 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. On the development
track, we have identified a strategic banking partner to assist in developing,
implementing and beta testing our technology with the ultimate goal of
increasing their credit card portfolio because of starpay's unique Internet-only
credit card product. We are excited about the upstream and downstream marketing
potentials this relationship can bring to starpay which will cost effectively
strengthen our market penetration capability. starpay and the banking partner
are now working with one of their strategic partners to address functionality,
integration requirements and implementation issues. starpay believes that
finalizing agreements with these key strategic alliances will lead to
procurement of the additional funding needed to complete the programming and
testing of all software, the purchase and installation of the necessary
hardware, the addition of necessary personnel and the successful launching of
the final product.
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 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, 2000, the e-Commerce Segment had one full
time employee and utilized two of the Company's full time employees on a part
time basis.
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.
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 1997, Beard changed the name of an inactive subsidiary to
ISITOP, Inc. ("ISITOP"). ISITOP has obtained an exclusive license for the United
States from a company (the "Licensor") which has developed a chemical
(54GO(TRADEMARK) 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 54GO(TRADEMARK) products was granted in 1997. This patent covers
all applications utilizing 54GO(TRADEMARK) 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. Although the management team are no longer employees,
they continue as officers and directors of the company and have retained options
to acquire an additional 30% of ISITOP following payout of all sums owed by
ISITOP to Beard.
Attempts to Commercialize ISITOP's Technology. For the first two years
following the formation of ISITOP the company focused its attention on efforts
to obtain contracts to clean up old creosote sites. Such sites appeared to be
the ideal target for ISITOP'S technology since the United States 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 made up of polycyclic aromatic
hydrocarbons (PAH's) that are known to cause several forms of cancer. However,
with the exception of a field test in Colorado in 1997 where ISITOP successfully
cleaned up a small amount of creosote contaminated soil, such efforts have
produced no commercial contracts.
In 1998 and 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. 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. None of
these initiatives produced commercial contracts.
At the beginning of 2000, ISITOP broadened the scope of its marketing
efforts and entered into a teaming agreement with a much larger company to
enhance its capabilities. Again, these efforts failed to produce any commercial
contracts. Although two members of the management team continue to pursue
commercial contracts for the company, the Company is no longer providing
financial support.
Mexican Initiative. Another of the Licensor's products, 54GO(TRADEMARK)
101, has been used with good success in the zone fracture treatment of oil wells
in the San Juan Basin of New Mexico. Sample analyses of the heavy hydrocarbons
encountered in many of the wells in northern Mexico indicate that this product
could be used with similar success there. Licensor is currently pursuing the
sale of its product in Mexico. If it is successful in obtaining any contracts,
it is contemplated that ITS de Mexico would become the wholesale distributor for
any 54GO(TRADEMARK) products sold in Mexico. In addition to its 80% ownership of
ISITOP, the Company owns a 22% interest in 54GO Products, Ltd. Co., which is the
marketing arm for all of Licensor's products.
Principal Products and Services. The principal products and services
supplied by the Company's ER Segment are its licensed 54GO(TRADEMARK)
technology, its bioslurry reactor system, its process for cleaning tanks at
creosote treating facilities, its process for cleaning rail cars used to
transport liquid creosote, and the distribution of products used in the fracture
treatment of oil wells. None of these products or services have generated any
profits to date for the Company, nor can any assurance be given that ISITOP will
successfully commercialize any of them.
ISITOP had no revenues in 2000 or in 1999. It provided its services to only
one customer in 1998, but such revenues totaled only $8,000. The loss of such
customer would not have a material adverse effect on the Company and its
subsidiaries as a whole.
Facilities. ISITOP is furnished office space in Farmington, New Mexico as
part of its arrangement with the Licensor.
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 technological expertise and customer
service.
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, 2000, the ER Segment had no 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.
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 political 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
insurance to address probable environmental contingencies, it is possible 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 two convenience store locations with related property,
plant, equipment and a small amount of inventory, iodine extraction plants and
related equipment, brine collection wells, drilling rig components and related
equipment, land and improvements, wastewater storage tanks, a real estate
limited partnership 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,
2001, at a current annual rental of $80,000. In addition, Beard's subsidiaries
lease space at other locations as required to serve their respective needs.
Employees. As of December 31, 2000, Beard employed 23 full time and three
part time employees in all of its operations, including seven full time
employees and three 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 2000. See "McElmo Dome Litigation"
below.
McElmo Dome Litigation. On October 22, 1996, the Company joined with others
(the "CO2 Claims Coalition, LLC" or the "Plaintiff" or collectively, the
"Plaintiffs") 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 and CO2 overriding royalty interest owners all of whom have
contract 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'
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. Should Plaintiffs prevail on all of their claims, the
maximum total damages (after trebling) would be approximately $51.3 million plus
Plaintiffs' reasonable attorneys' fees.
On January 30, 2001, the U.S. Magistrate Judge in the case granted
Plaintiff's Motion to Compel Re: Crime-Fraud Exception and ordered Shell and
Mobil to produce to the Plaintiff all documents, from 1983 to the present, which
they had previously refused to deliver on or before February 12, 2001. The Judge
also granted Plaintiff's Motion to Compel Re: Cortez Pipeline Company's
Privilege Claims and ordered Cortez to provide to the Plaintiff 40 documents
previously requested on or before the same date. In his order the Judge stated:
"In conclusion, the Plaintiff has demonstrated to this Court that probable cause
exists to believe that a fraud has been committed by Defendants Shell and Mobil
and therefore the attorney-client privilege and work product privilege is
waived." Defendants' appeal of the Judge's order to the Tenth Circuit Court was
denied on March 19, 2001, and defendants were ordered to deliver the documents
to the Plaintiff. The trial will commence on July 2, 2001.
When the Court denied Plaintiffs' class motion in March of 2000, the CO2
Claims Coalition arranged for the filing of three additional cases, one on
behalf of each royalty owner, each overriding royalty owner and each small share
working interest owner. The aggregate Plaintiffs' interests in these cases is
greater than the aggregate Plaintiffs' interests in the present case with damage
claims proportionately the same. The CO2 Claims Coalition is entitled to 5% of
any recovery in these cases to compensate it for the expenditures made to date.
From 1996 through 2000 the Company incurred legal expenses totaling
$316,000 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 Company has incurred more than its share of such costs for which it may be
entitled to recover a bonus amount. Plaintiffs' lawyers are handling the case on
a contingency basis and will receive 33-1/3% of any settlement or judgment after
deducting all out-of-pocket expenses.
The Company has joined with several other Plaintiffs in securing a $300,000
loan for the benefit of the Plaintiffs' group to assist in meeting its current
obligations. The Company has provided a $75,000 certificate of deposit as
collateral for one-fourth of the loan amount in addition to the legal expenses
recited above.
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.
Item 4a. Executive Officers and Significant Employees of the Company.
The table below sets forth the age, positions with the Company and the year
in which each person first became an executive officer or significant employee
of the Company. All positions are held with the Company unless otherwise
indicated, and such persons are part of the corporate staff serving the Company
and all of its subsidiaries unless otherwise indicated.
Executive Officer
Or Significant
Employee of
Beard or Beard
Name Position Oil Since Age
- ---------------------------------------------------------------------
W. M. Beard Chairman of the Board and
Chief Executive Officer(AB) June 1969 72
Herb Mee, Jr. President & Chief November 1973 72
Financial Officer(AB)
Philip R. Jamison President-Beard February 1997 62
Technologies, Inc.(CD)
Riza E. Murteza President & CEO - Beard November 1998 71
Sino-American Resources
Co., Inc. (CD)
Marc A. Messner President & CEO - April 1999 39
starpay.com, inc.(CD)
Jack A. Martine Controller and Chief October 1996 51
Accounting Officer
Rebecca G. Witcher Secretary and Treasurer(B) July 1997 41
- ---------------
(A) Director of the Company.
(B) Trustee of certain assets of the Company's 401(k) Trust.
(C) Devotes all of his time to this subsidiary.
(D) Indicated entities are subsidiaries of the Registrant.
Information concerning the executive officers and certain significant
employees of the Company is set forth below:
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 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.
Philip R. Jamison has served as President of Beard Technologies, Inc. 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 CEO of all
its coal producing subsidiaries. From 1979 to 1988 he served as CEO of four
small companies which were engaged in the production and sale of coal. From 1993
to 1995 he served as a consultant to Energy International, Inc. ("EI") in its
development of the Mulled Coal technology and installed and operated the process
at an Alabama coal preparation plant in connection with EI's performance of a
contract for the Department of Energy.
Riza E. Murteza has served as President and Chief Executive Officer of
Beard Sino-American Resources Co., Inc. since November 1998. He was appointed
Senior Advisor to the United Nations Development Project for China, residing in
China for one year (1996-1997), assisting large Chinese enterprises move to a
market economy. Prior to that he served as General Manager and Project Manager
for two large projects in Indonesia and a large project in the Soviet Union for
periods totaling nine years, and as a consultant to a number of other companies
during the interim periods.
Marc A. Messner has served as President and Chief Executive Officer of
starpay since April 1999. He has also served as Vice President - Corporate
Development of Beard since August 1998. Mr. Messner is the inventor of starpay's
proprietary payment system technology. From 1993 to 1998 he served as President
of Horizontal Drilling Technologies, Inc., a company he founded in 1993.
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
Oil from June 1989 until October 1993 at which time he joined Sensor Oil & Gas,
Inc. 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.
All executive officers serve at the pleasure of the Board of Directors.
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters.
(a) Market information.
Since September 28, 2000, the Company's common stock has traded on the OTC
Bulletin Board ("OTCBB")(A) under the ticker symbol BRCO. From September 21
through September 27, 2000, such shares were quoted in the over-the-counter
market (Pink Sheets)(B) under the same symbol, although no shares traded during
such period. The following table sets forth the range of reported high and low
bid quotations for such shares in the respective markets from September 21, 2000
through year-end:
2000 High Low
---- ---- ---
Fourth quarter $ 9/16 $ 3/16
Third quarter 5/16 1/4
- -------------------
(A) The reported quotations were obtained from the OTCBB Web Site.(C)
(B) The reported quotations were obtained from Pink Sheets LLC.(C)
(C) In both cases, such over-the-counter market quotations reflect inter-dealer
prices, without retail mark-up, mark-down or commission and may not
necessarily represent actual transactions.
Prior to September 21, 2000, the Company's common stock traded on the
American Stock Exchange ("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.
2000 High Low
---- ---- ---
Third quarter $ 2 $ 5/8
Second quarter 2-3/8 1-5/8
First quarter 2-15/16 2
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
(b) Holders.
As of February 28, 2001, the Company had 441 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.
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 35 of this report.
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
(in thousands, except per share data)
Statement of operations data:
Revenues from
continuing operations $ 782 $ 1,503 $ 9,246 $ 575 $ 377
Interest income 136 228 400 183 12
Interest expense (60) (170) (964) (134) (62)
Loss from continuing operations (2,772) (2,343) (277) (1,393) (938)
Earnings (loss) from
discontinued operations (257) (1,056) (3,580) 10,407 623
Net earnings (loss) (3,029) (3,399) (3,857) 9,014 (315)
Net earnings (loss)
attributable to common
shareholders (3,029) (3,399) (3,857) 5,225 (315)
Net earnings (loss) per share -
basic and diluted:
Loss from continuing
operations (1.52) (1.28) (0.15) (0.66) (0.45)
Net earnings (loss) (1.66) (1.85) (2.02) 2.48 (0.15)
Balance sheet data:
Working capital (159) 981 5,378 10,352 1,888
Total assets 5,087 6,804 37,337 20,952 16,473
Long-term debt(excluding
current maturities) 1,428 13 25,780 519 2,911
Redeemable preferred stock 889 889 889 889 1,200
Total common shareholders' equity 1,883 4,666 8,387 12,433 8,656
- -----------
In December 1999, the Management Committee of North American Brine
Resources ("NABR") adopted a formal plan to discontinue the business and
dispose of its assets. Beard had a 40% ownership interest in NABR, which
was 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).
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 2000 the Company operated within the following operating
segments: (1) the Coal Reclamation ("Coal") Segment, (2) the Carbon Dioxide
("CO2") Segment, (3) the Natural Gas Well Servicing ("WS") Segment, (4) the
China ("China") Segment, (5) the e-Commerce ("e-Commerce") Segment, and (6) the
Environmental Remediation ("ER") Segment.
The Coal Segment is in the business of operating coal fines reclamation
and/or briquetting facilities in the U.S. and provides slurry pond core drilling
services, fine coal laboratory analytical services and consulting services. The
CO2 Segment consists of the production of CO2 gas. The 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 China Segment is pursuing (i)
environmental opportunities, (ii) the sale of coal equipment, (iii) the sale of
technical services, and (iv) the operation of coal fines reclamation facilities
in China. The e-Commerce Segment consists of a subsidiary which is pursuing the
development of a proprietary Internet-only payment system. The ER Segment
consists of services to remediate polycyclic aromatic hydrocarbon contamination.
The Company's continuing operations reflect losses of $2,772,000,
$2,343,000, and $277,000 in 2000, 1999, and 1998, respectively. In 1998 Beard's
Board of Directors approved a plan to restructure the Company's
environmental/resource recovery segment. As a result, the coal reclamation
activities conducted by Beard Technologies, Inc. and Beard Sino-American
Resources Co., Inc. 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
Company's "other environmental services operations" were discontinued.
In 1999 the Company adopted a plan to dispose of Interstate Travel
Facilities, Inc., whose activities had previously been conducted as the "ITF"
Segment. Those operations were reflected as discontinued operations in 1998 and
the Company recorded a $1,603,000 loss from discontinuing such operations that
year. The majority of the assets of the ITF Segment were disposed of in 1999 and
the Company recorded an additional charge of $434,000 that year related to
discontinuing such operations. The Company continued to operate the two
remaining facilities during most of 2000 while it was attempting to market them.
The operation of both stores was suspended during the fourth quarter of 2000 in
order to minimize further losses. In 2000, the Company recorded losses totaling
$591,000, including an additional charge of $420,000 related to discontinuing
such operations and does not expect further charges in connection with such
activities. At year-end 2000, the discontinued ITF Segment had $561,000 of
assets remaining, consisting primarily of two convenience stores with related
property, plant, equipment and inventory, and liabilities totaling $136,000
consisting primarily of trade payables, accrued liabilities and long-term debt.
See Note 4 to the financial statements.
In 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 segment. Beard owned 40% of NABR, which was not
a consolidated entity and had previously been accounted for as an equity
investment. Beard's share of NABR's operating results were $82,000 and $296,000
of losses in 1999 and 1998, respectively, which are reported as discontinued. In
addition, in December 1999, Beard recorded a $540,000 loss, which represented
its share of NABR's $1,350,000 estimated loss from the discontinuation of
operations. NABR's loss included $778,000 which represented the difference in
the estimated amounts to be received from the assets disposition and the asset's
recorded values as of December 31, 1999, and $572,000 of anticipated operating
losses through April 2000 (the date operations ceased) and the costs of ceasing
operations. The joint venture was dissolved effective September 15, 2000, and
the Japanese partners received their final distribution of cash in December,
2000, with the Company taking over the remaining assets and liabilities. The
segment's larger plant produced its last iodine in April 2000. Shut down of the
segment's larger plant was completed in September 2000 and the Company is now
working to dispose of its equipment. The Company intends to sell the smaller
plant as a going concern. In 2000, the Company recorded income of $179,000 which
represented the excess of the amounts received by the Company over the remaining
basis of the Company's investment in the joint venture. No further charges are
anticipated in connection with such activities. At year-end 2000, the
significant assets related to NABR's operations consisted primarily of equipment
and inventory with estimated net realizable values of $158,000 and $124,000,
respectively. The significant liabilities related to NABR's operations consisted
primarily of accounts and royalties payable totaling $282,000. See Note 4 to the
financial statements.
The Company is now focusing its primary attention on the Coal and China
Segments, along with its 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 2000 and 1999 were severely impacted by the
termination of a major contract, which had guaranteed the Company a minimum
operating profit of $100,000 per month, on January 31, 1999. Termination of the
contract were reflected in the sharp decline in the Coal Segment's revenues,
from $8,585,000 in 1998 to $953,000 in 1999 down to $215,000 in 2000. As a
result, the segment generated a $1,678,000 operating profit in 1998, versus
operating losses of $508,000 in 1999 and $625,000 in 2000.
2000 results of operations reflected improvement in the operating margins
of the CO2 Segment, which is presently the Company's largest segment in terms of
revenues. The segment had a $60,000 increase in its operating profit versus
1999, principally as the result of higher prices for CO2. The China Segment
generated no revenues, and incurred $400,000 of selling, general and
administrative expenses related to its continuing startup activities. This was
an increase of $121,000 over 1999, reflecting the expanded level of activity by
this segment. The WS Segment had $65,000 in revenues and a loss of $204,000
reflecting the shut down of the segment's activities at the end of January,
2000. Additionally, this segment incurred a loss of $1,069,000 in 2000 compared
to a loss of $229,000 in 1999, from its equity investee which provides natural
gas well testing services in northeastern Mexico. The e-Commerce Segment
generated no revenues but incurred $275,000 of SG&A expenses as it stepped up
its marketing activities. The ER Segment reflected a $175,000 decrease in
operating losses as a result of a reduction in staffing and SG&A expenses as it
cut back its marketing efforts. The operating loss from corporate activities at
the parent company level decreased $248,000 from 1999 reflecting decreased
salary, legal and other SG&A costs as the Company found ways to reduce costs.
The Company's total net loss decreased $370,000, reflecting the $799,000
decrease in losses from discontinued operations.
1999 results of operations reflected a $170,000 reduction in the operating
profit of the CO2 Segment 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 startup activities.
The WS Segment had $82,000 in revenues and a loss of $213,000 as it started a
new subsidiary engaged in the rental of sand separators. Additionally, this
segment incurred a loss of $229,000 in 1999 compared to a loss of $35,000 in
1998, from its equity investee. The e-Commerce Segment generated no revenues but
incurred $129,000 of SG&A expenses related to its 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.
Despite the fact that the Company's loss from continuing operations increased
$2,066,000, its total net loss decreased $458,000, reflecting the $2,524,000
decrease in losses from discontinued operations.
1998 results of operations showed a $198,000 improvement in operating
margins of the CO2 Segment versus 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 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 used in operations during 2000, 1999, and 1998 were
$(2,552,000), $(1,709,000), and $(854,000), respectively, while capital
additions from continuing operations were $461,000, $1,392,000, and $24,175,000,
respectively, as indicated in the table below:
2000 1999 1998
---- ---- ----
Coal $371,000 $1,135,000 $24,072,000
Carbon dioxide 4,000 10,000 41,000
Natural gas well servicing 38,000 216,000 -
e-Commerce 8,000 - -
Environmental remediation 1,000 - 6,000
Other 39,000 31,000 56,000
-------------------------------------------------
Total $461,000 $1,392,000 $24,175,000
==================================================
Capital additions in the discontinued "other environmental services
operations" were $143,000 in 1998. Capital additions in the discontinued ITF
segment were $13,000 and $59,000 in 2000 and 1999, respectively.
The Company's 2001 capital expenditure budget has tentatively been set at
$14,000, representing anticipated capital expenditures for the coal segment.
This does not include an estimated $1,853,000 to $2,504,000 of plant costs which
may be incurred by the segment for the Fortune 500 project subject to the
availability of financing.
Liquidity. The sale of the Company's dry ice manufacturing and distribution
business in 1997 provided the Company with significant liquid resources.
However, such funds had been substantially utilized by year-end 1999. The
Company's activities in 2000 were primarily funded by a bank line of credit, by
loans from a related party and by the sale of assets. 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 WS operations, demand
for the sale of the Company's environmental and technology services and for coal
equipment in China, demand for the Company's secure payment system for Internet
transactions and private and governmental demand for environmental remediation
services in the U.S.
During 2000 the Company reduced its working capital by $1,140,000 from
$981,000 at year-end 1999. $371,000 was used by the Coal Segment to purchase
equipment. $625,000 was used to fund the operating loss of the Coal Segment.
$666,000 was used to fund net advances to the Company's well testing venture in
Mexico. In addition, the Company loaned a net additional $129,000 to its partner
which operates the joint venture to fund a portion of its investment. $147,000
was used to fund the natural gas well servicing operations. $351,000 was used to
fund the operations of the discontinued ITF Segment. $400,000, $275,000 and
$142,000, respectively, were used to fund the startup activities of the China,
e-Commerce and E/R Segments. The bulk of these expenditures were funded by a
$1,428,000 increase in debt, $561,000 from the sale of assets, distributions of
$482,000 from the discontinued BE/IM Segment, and $114,000 from payments on
notes receivable.
As a result, at December 31, 2000, the Company was in a negative working
capital position with working capital of ($159,000), and a current ratio of 0.79
to 1.
Despite the fact that the Company has had losses from continuing operations
for the past five years, its total net loss during such period totaled only
$1,586,000. The last three years have been particularly disappointing, as the
Company generated net losses totaling $10,285,000, including losses from
continuing operations totaling $5,392,000. 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. Discontinuation of the interstate travel facilities business
accounted for $2,628,000 of the losses, but those problems are now behind us and
management expects to dispose of the remaining assets in 2001. Discontinuation
of the iodine business impacted earnings the last two years, but again, those
problems are behind us, and management expects to dispose of the remaining
assets in 2001.
The Company's principal business is coal reclamation, and this is where
management's attention is primarily focused. The Coal Segment is pursuing two
major coal projects at this time. If we are successful in concluding
negotiations with third parties concerning the installation of the equipment
needed, plant construction of the first project is expected to commence in the
third quarter of 2001. However, there is no assurance this will occur. The
second project is not nearly as far along and definitive negotiations on this
project are not expected to occur until late 2001.
Meanwhile, the outlook for the China Segment has brightened considerably.
After almost three years of development activity, it appears that its efforts
are finally starting to bear fruit. The segment has signed contracts and formed
Cooperative Joint Ventures ("CJV's") or similar arrangements with various
Chinese partners for the construction of four compost manufacturing facilities
in which the Company will own an interest and will also receive an operating
fee. Groundbreaking for the initial plant, located at Baoding in Hebei Province,
occurred in early March and plant construction is expected to commence in early
April. Assuming we are able to meet our anticipated timetable for the
construction of the four composting plants, the China Segment is expected to
achieve a breakeven or better cash flow during 2001 and the Company will no
longer need to infuse capital to subsidize the segment's ongoing operations.
This will improve liquidity to the extent of $400,000 or more over 2000.
In 2000 the Company replaced its $650,000 bank credit line with a $300,000
credit line at a different bank. We have also arranged for borrowings of up to
$1,500,000 from a related party to provide working capital while the coal
projects are being pursued and until the construction of the plants in China can
be successfully concluded. The Company is currently pursuing a $1,500,000 loan
on its CO2 reserves in order to provide additional working capital and improve
liquidity until the contemplated Coal and China projects achieve positive cash
flow. In addition, the Company will be disposing of the assets from the
discontinued ITF and BE/IM Segments and can sell certain other assets to
generate cash if necessary.
Selected liquidity highlights for the Company for the past three years are
summarized below:
2000 1999 1998
---- ---- ----
Cash and cash equivalents $ 31,000 $ 767,000 $ 5,190,000
Accounts and other receivables, net 337,000 480,000 1,386,000
Inventory 129,000 103,000 365,000
Trade accounts payable 167,000 262,000 677,000
Current maturities of long-term debt 30,000 17,000 119,000
Long-term debt 1,428,000 13,000 25,780,000
Working capital (159,000) 981,000 5,378,000
Current ratio 0.79 to 1 2.19 to 1 3.84 to 1
Net cash used in operations $(2,552,000) $(1,709,000) $ (854,000)
- --------------
In 1999 the Company terminated certain debt agreements that resulted in the
removal of $23,053,000 of debt from its balance sheet, and disposed of most
of the assets of its interstate travel facilities segment, resulting in the
removal of $2,563,000 of debt from its balance sheet.
In 2000, the Company had negative cash flow of $736,000. Operations of the
Coal, W/S, China, e-Commerce and E/R Segments resulted in cash outflows of
$1,646,000. (See "Results of operations---Other activities" below).
The Company's investing activities provided cash of $499,000 in 2000.
Proceeds from the sale of assets provided cash of $561,000, distributions from
the discontinued BE/IM Segment provided net cash of $482,000, and payments on
notes receivable provided cash of $360,000. Net distributions from the Company's
investment in Cibola provided cash of $310,000. Acquisitions of property, plant
and equipment primarily related to the Company's Coal Segment used cash of
$513,000 of the cash outflow, while (i) investments in and (ii) loans to a
partner in the W/S Segment utilized cash of $699,000.
The Company's financing activities provided cash flows of $1,317,000 in
2000. The Company received $1,386,000 from its borrowings and utilized $69,000
for payments on lines of credit and term notes.
At year-end 2000 the Company had fully utilized the parent company's
$300,000 bank line of credit which expires on January 15, 2002. At December 31,
2000 the Company had also fully utilized a $700,000 line of credit from a
related party which bears interest at 10% until maturity at February 28, 2002,
and had $464,000 of credit available from the same party which bears interest at
10% until maturity at April 1, 2002. The Company believes that cash and
available credit, together with proceeds from the sale of assets, will be
adequate to meet the Company's liquidity needs, including anticipated
requirements for working capital, until the $1,500,000 of financing currently
being pursued has been finalized and is in place.
Effect of Recent Developments on Liquidity. The Company's debt-to-equity
ratio, which stood at 0.01 to 1 at year-end 1999, increased to 0.77 to 1 at
year-end 2000. Consolidated debt, which totaled $30,000 at year-end 1999,
increased to $1,458,000 at year-end 2000. If the Company is successful in its
efforts to obtain the $1,500,000 CO2 production loan, it plans to pay off its
present indebtedness with the bank and the related party and negotiate new
credit lines with them. This should give the Company ample working capital to
operate until the contemplated coal projects and the composting projects in
China are generating positive cash flow.
The Company is negotiating with a party that has an available coal plant
that is ideally suited for the Fortune 500 company project. The party is
considering financing the purchase of the plant and may also assist in financing
the funds necessary to dismantle, move and reassemble the plant. The Company
believes that contracts for this project 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.
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 2000 has been a time of transition for the
Company. In 1997 the Company divested itself of its real estate construction and
development activities, sold its dry ice manufacturing and distribution
business, and restructured its E/RR Segment, shifting its 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 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 1999. As a result, the corporate
staff is now focusing most of its attention on the management of the Coal, China
and e-Commerce Segments, 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 Segment appears to be on the threshold of
a major breakout. The e-Commerce and WS Segments are experiencing the normal
problems and delays encountered when starting new businesses. 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:
2000 1999 1998
---- ---- ----
Operating profit (loss):
Coal reclamation $ (625,000) $ (508,000) $ 1,678,000
Carbon dioxide 356,000 296,000 466,000
Natural gas well servicing (204,000) (213,000) -
China (400,000) (279,000) (277,000)
e-Commerce (275,000) (129,000) -
Environmental remediation (142,000) (317,000) (224,000)
-----------------------------------------
Subtotal (1,290,000) (1,150,000) 1,643,000
Other - principally corporate (1,076,000) (1,324,000) (1,402,000)
-----------------------------------------
Total $(2,366,000) $ (2,474,000) $ 241,000
=========================================
Following is a discussion of results of operations for the three-year
period ended December 31, 2000.
Coal reclamation. As a result of the recent change of direction, the
Company has focused its primary attention on coal reclamation. In January 1999,
Beard Technologies 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), Beard
Technologies is again pursuing coal recovery projects where it will serve as
either owner or operator.
The MCN Projects generated 35% and 84% of the Coal Segment's 2000 and 1999
revenues, respectively. Operating revenues in this segment were $215,000,
$953,000, and $8,585,000 in 2000, 1999, and 1998, respectively, with the sharp
decreases in 2000 and 1999 reflecting the impact of terminating the MCN
Projects. Operating costs decreased to $663,000 in 2000 from $1,064,000 in 1999
and from $5,110,000 in 1998. SG&A expenses decreased to $158,000 in 2000 from
$204,000 in 1999 and from $985,000 in 1998. The decrease in costs in 2000 and
1999 reflect the effect of the termination of the MCN Projects. The segment
produced an operating loss of $625,000 in 2000 and $508,000 in 1999 versus an
operating profit of $1,678,000 in 1998, 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 $471,000, $418,000, and $616,000 in 2000, 1999,
and 1998, respectively, while operating profits totaled $356,000, $296,000, and
$466,000, respectively, for the three years. CO2 net sales volumes were
1,319,000 Mcf, 1,536,000 Mcf and 2,187,000 Mcf in 2000, 1999 and 1998,
respectively. The increase in revenues and operating profits in 2000 versus 1999
reflect the sharp increase in oil prices in late 1999 and throughout 2000, and
the resultant increased demand for CO2 used for tertiary oil recovery. 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.
Natural gas well servicing. In 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 $1,069,000, $229,000 and
$35,000 in 2000, 1999 and 1998, respectively, as its share of the LLC's losses.
In 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 $65,000 and $82,000 of revenues and $65,000 and $56,000 of
operating costs, respectively, in 2000 and 1999. The WS Segment also incurred
$160,000 and $223,000 of SG&A expenses in 2000 and 1999 resulting from the
Company's continued pursuit of natural gas well servicing opportunities in
Mexico.
China. In 1998 the Company activated Beard Sino-American Resources Co.,
Inc. ("BSAR") to pursue coal reclamation opportunities in China utilizing BTI's
patented mulled coal 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
environmental technology and other technical services and the sale of coal
equipment. BSAR had no revenues in 2000, 1999 or 1998, and recorded $400,000,
$279,000 and $277,000 of SG&A expenses, respectively, in such years while
pursuing its various marketing efforts.
e-Commerce. In early 1999, the Company began developing its proprietary
concept for an Internet payment system through starpay.com, inc. ("starpay").
starpay had no revenues in 2000 or 1999, and recorded $275,000 and $129,000 of
SG&A expenses, respectively, in such years while pursuing the development of its
technology.
Environmental remediation. In 1997 the Company changed the name of an
inactive subsidiary to ISITOP, Inc. ("ISITOP"). ISITOP 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 2000 or 1999, and only $8,000 of revenues in 1998. The segment
produced operating losses of $142,000, $317,000 and $224,000, respectively, in
2000, 1999 and 1998. The increased loss in 1999 reflected the sharp increase in
SG&A expenses as the segment stepped up its level of marketing activities that
year. The decreased loss in 2000 reflected the sharp reduction in SG&A expenses
as the Company phased out its financial support for the segment.
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
$1,076,000 in 2000, $1,324,000 in 1999 and $1,402,000 in 1998. The operating
loss decreased $248,000 in 2000 versus 1999 due to several factors, including
reduced salary and benefit costs, legal and professional expenses, and other
SG&A items as the Company continued to search for ways to reduce costs. 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.
Selling, general and administrative expenses. Selling, general and
administrative expenses ("SG&A") decreased to $1.7 million in 2000 from $1.9
million in 1999 and from $2.4 million in 1998. Most of the sharp fluctuation was
attributable to the Coal Segment, which incurred SG&A expense of $158,000,
$204,000 and $985,000 in 2000, 1999 and 1998, respectively. The large expense in
1998 was due to the high level of staffing and operations required to meet the
demands of the MCN Projects. The WS Segment incurred $160,000 of SG&A expenses
in 2000 versus $223,000 in 1999 as it continued to pursue opportunities in
Mexico. SG&A expense incurred by the China Segment during 2000 increased to
$400,000 from $279,000 in 1999 and $277,000 in 1998 as the segment expanded its
marketing efforts. SG&A expense incurred by the ER Segment during 2000 decreased
to $42,000 versus $87,000 in 1999 and $42,000 in 1998, reflecting the segment's
level of marketing activity. SG&A expense incurred by the e-Commerce Segment
increased to $272,000 in 2000 from $129,000 in 1999 reflecting the segment's
level of marketing activity. Other corporate SG&A decreased to $1,048,000 in
2000 from $1,333,000 in 1999 and $1,430,000 in 1998. The variances were
attributable primarily to reductions in the Company's benefits and to changes in
the level of costs incurred as the Company pursued investment opportunities that
failed to materialize.
Depreciation, depletion and amortization. The Company's depreciation,
depletion and amortization expenses decreased 69% in 2000 from 1999 and 59% in
1999 from 1998. The fluctuations in DD&A expense for 2000 and 1999 were
primarily attributable to the lower depreciable basis of assets in the Coal
Segment as the Company sold its ownership interest in the entity owning the
equipment for the MCN projects effective in January, 1999. 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 decreased to $136,000 in 2000 from
$228,000 in 1999 and from $400,000 in 1998. The Company had considerable cash at
the beginning of 1998 remaining from the sale of the assets of its discontinued
solid CO2 segment in 1997. The decreases in 2000 and 1999 from the amount
realized in 1998 reflect the decreased amount available to invest as cash was
used to fund other investments and operations.
Interest expense. Interest expense decreased from $964,000 in 1998 to
$170,000 in 1999 and to $60,000 in 2000. The high expense in 1998 reflects the
high 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.
Although the Company had less than $100,000 of debt for most of 1999, it
incurred considerable interest expense in January of that year when it had more
than $23 million of debt. The Company's indebtedness increased steadily
throughout 2000, but it still incurred less interest expense than it incurred in
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 $1,069,000
in 2000 and $229,000 in 1999. The losses resulted from startup, operating 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 1996, contributed $237,000, $308,000 and $274,000 of pre-tax
net income to the Company for fiscal years 2000, 1999 and 1998, respectively,
pursuant to a tax sharing agreement. Such income was down in 2000 due to capital
losses incurred on Cibola's investments.
Gain on sale of assets. Gains on the sale of assets totaled $334,000 in
2000, $56,000 in 1999 and $8,000 in 1998. Such gains reflected proceeds from the
sale of certain assets that are in the process of being liquidated. Most of the
increase in 2000 resulted from the sale of the Company's interest in a real
estate limited partnership which generated a gain of $194,000.
Impairment of investments and other assets. In 2000, 1999, and 1998 the
Company recognized $71,000, $110,000 and $154,000 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 $58.1 million of net operating
loss carryforwards 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. At December 31, 2000 and
1999, 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 $8,000, $48,000 and $100,000 for 2000, 1999 and 1998,
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 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 Segment. Beard
owned 40% of NABR, which was not a consolidated entity and had previously been
accounted for as an equity investment. The joint venture was dissolved effective
September 15, 2000. Shut down of the segment's larger plant was completed in
September 2000 and the Company is now working to dispose of its equipment. The
Company intends to sell the smaller plant as a going concern. Beard's share of
NABR's operating results were $82,000 and $296,000 of losses in 1999 and 1998,
respectively, which have been reported as discontinued in the Company's
statements of operations. In addition, the Company recorded a charge of $540,000
in 1999 and a gain of $179,000 in 2000 in connection with the discontinuance of
the segment's operations. No further charges are anticipated in connection with
such activities. See Note 4 to the financial statements.
In 1999 the Company adopted a plan to dispose of Interstate Travel
Facilities, Inc., whose activities had previously been conducted as the "ITF"
Segment. Those operations were reflected as discontinued operations in 1998 and
the Company recorded a $1,603,000 loss from discontinuing such operations that
year. The majority of the assets of the ITF Segment were disposed of in 1999 and
the Company recorded an additional charge of $434,000 that year related to
discontinuing such operations. The Company continued to operate the two
remaining facilities during most of 2000 while it was attempting to market them.
The operation of both stores was suspended during the fourth quarter of 2000 in
order to minimize further losses. In 2000, the discontinued ITF segment incurred
operating losses totaling $351,000. The discontinued ITF segment charged the
first $180,000 of these operating losses against a loss accrual established in
1999 and recognized $44,000 in September, 2000. The remaining $127,000 in
operating losses were recognized during the fourth quarter of 2000. The
discontinued ITF segment recorded an additional $420,000 loss in December, 2000;
$60,000 represented losses expected to be incurred by ITF from the date of
shutdown through the anticipated disposal date of the remaining assets; and
$360,000 of the loss represented an additional reduction in the estimated
realizable value of the remaining C-stores and related assets as of December 31,
2000. The total loss recorded in 2000 related to the discontinued ITF Segment
was $591,000. The Company does not anticipate any further charges in connection
with such activities. At year-end 2000, the discontinued ITF Segment had
$561,000 of assets remaining, consisting of two convenience stores with related
property, plant, equipment and inventory, and liabilities totaling $136,000
consisting primarily of trade payables, accrued liabilities and long-term debt.
See Note 4 to the financial statements.
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 represented anticipated operating losses
of ITF from December 31, 1999 through the anticipated disposal date of the
remaining assets; $34,000 of the loss represented a reduction in the estimated
realizable values of the remaining assets as of December 31, 1999.
In 1998 the Company's Board of Directors adopted a plan to restructure its
environmental/resource recovery segment and to discontinue the "other
environmental services operations". Losses from the discontinued other
environmental services operations were $424,000 in 1998 and were included in the
Company's 1998 statements of operations. The Company recorded an additional
charge of $684,000 that year related to discontinuing such operations. At
December 31, 2000, the significant assets related to the other environmental
services operations consist primarily of equipment with a recorded value of
$152,000. The significant liabilities related to the other environmental
services operations consist of accrued expenses totaling $7,000. See Note 4 to
the financial statements.
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 ("FASB") 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
recognition of all derivatives as either assets or liabilities in the balance
sheet and measurement of 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. In June 2000, the FASB issued SFAS No. 138, "Accounting for Certain
Derivative Instruments and Certain Hedging Activities", an amendment to SFAS No.
133. If the provisions of SFAS No. 133 and No. 138 were to be applied as of
December 31, 2000, it would not have a material impact on the Company's
financial position as of such date, or the results of operations for the year
then ended.
The Company plans to adopt the provisions of SFAS 133 in the first quarter
of the year ending December 31, 2001, 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, 2000, the Company had notes receivable of $869,000 and
total debt of $1,458,000. The notes receivable and $1,158,000 of the debt have
fixed interest rates and, to such extent, the Company's interest income and
expense and operating results would not be affected by an increase in market
interest rates. The Company's outstanding bank debt totaling $300,000 floats
with the prime rate, and a 10% increase in market interest rates would have
increased the Company's interest expense by approximately $1,000. At December
31, 2000, a 10% increase in market interest rates would have reduced the fair
value of the Company's notes receivable by $3,000 and reduced the fair value of
its debt by $14,000.
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
Independent Auditors' Report
Independent Auditors' Report
Financial Statements:
Balance Sheets, December 31, 2000 and 1999
Statements of Operations, Years ended December 31, 2000, 1999
and 1998
Statements of Shareholders' Equity, Years ended December 31,
2000, 1999 and 1998
Statements of Cash Flows, Years ended December 31, 2000, 1999
and 1998
Notes to Financial Statements, December 31, 2000, 1999 and 1998
Independent Auditors' Report
The Board of Directors and Stockholders
The Beard Company:
We have audited the accompanying consolidated balance sheets of The Beard
Company and subsidiaries as of December 31, 2000, and the related consolidated
statements of operations, shareholders' equity, and cash flows for the year then
ended. 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 audit. The financial statements of The Beard Company and
subsidiaries as of December 31, 1999 and for the years ended December 31, 1999
and 1998, were audited by other auditors, whose report dated April 7, 2000,
expressed an unqualified opinion on those statements.
We conducted our audit 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 audit provides 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, 2000, and the results of their operations and their
cash flows for the year ended December 31, 2000, in conformity with generally
accepted accounting principles.
Cole & Reed, P.C.
Oklahoma City, Oklahoma
March 19, 2001
Independent Auditors' Report
The Board of Directors and Stockholders
The Beard Company:
We have audited the balance sheet of The Beard Company and subsidiaries as
of December 31, 1999, and the related statements of operations, shareholders'
equity, and cash flows for the years ended December 31, 1999 and 1998. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe 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 the years ended December 31, 1999 and 1998, in
conformity with accounting principles generally accepted in the United States of
America.
KPMG LLP
Oklahoma City, Oklahoma
April 7, 2000
THE BEARD COMPANY AND SUBSIDIARIES
Balance Sheets
December 31, December 31,
Assets 2000 1999
------ ---- ----
Current assets:
Cash and cash equivalents $ 31,000 $ 767,000
Investments (note 6) - 280,000
Accounts receivable, less allowance for doubtful
receivables of $292,000 in 2000 and $13,000 in 1999 337,000 480,000
Inventory 129,000 103,000
Prepaid expenses and other assets 39,000 98,000
Current portion of notes receivable (note 7) 80,000 80,000
------------ ------------
Total current assets 616,000 1,808,000
------------ ------------
Notes receivable (note 7) 789,000 756,000
Investments and other assets (note 6) 467,000 1,324,000
Property, plant and equipment, at cost (note 8) 5,364,000 5,010,000
Less accumulated depreciation, depletion and amortization 2,198,000 2,118,000
------------ ------------
Net property, plant and equipment 3,166,000 2,892,000
------------ ------------
Intangible assets, at cost (note 9) 50,000 25,000
Less accumulated amortization 1,000 1,000
------------ ------------
Net intangible assets 49,000 24,000
------------ ------------
$ 5,087,000 $ 6,804,000
============ ============
Liabilities and Shareholders' Equity
Current liabilities:
Trade accounts payable $ 167,000 $ 262,000
Accrued expenses (note 4) 578,000 460,000
Income taxes payable (note 12) - 88,000
Current maturities of long-term debt (note 10) 30,000 17,000
------------ ------------
Total current liabilities 775,000 827,000
------------ ------------
Long-term debt less current maturities (note 10) 347,000 13,000
Long-term debt - related entity (note 10) 1,081,000 -
Other long-term liabilities 112,000 409,000
Redeemable preferred stock of $100 stated value;
5,000,000 shares authorized; 27,838 shares issued and
outstanding in 2000 and 1999 (note 5) 889,000 889,000
Common shareholders' equity:
Common stock of $.001333 par value per share; 7,500,000
shares authorized; 2,123,898 shares issued
and outstanding in 2000 and 1999 3,000 3,000
Capital in excess of par value 37,986,000 37,723,000
Accumulated deficit (34,247,000) (31,218,000)
Accumulated other comprehensive income (13,000) 4,000
Treasury stock, 295,053, at cost, in 2000 and 1999 (1,846,000) (1,846,000)
------------ ------------
Total common shareholders' equity 1,883,000 4,666,000
------------ ------------
Commitments and contingencies (notes 5, 11, and 15)
$ 5,087,000 $ 6,804,000
============ ============
See accompanying notes to financial statements.
THE BEARD COMPANY AND SUBSIDIARIES
Statements of Operations
Year Ended December 31,
-----------------------
2000 1999 1998
---- ---- ----
Revenues:
Coal reclamation $ 215,000 $ 953,000 $ 8,585,000
Carbon dioxide 471,000 418,000 616,000
Natural gas well servicing 65,000 82,000 -
China - - -
e-Commerce - - -
Environmental remediation - - 8,000
Other 31,000 50,000 37,000
----------- ----------- -----------
782,000 1,503,000 9,246,000
----------- ----------- -----------
Expenses:
Coal reclamation 663,000 1,064,000 5,110,000
Carbon dioxide 82,000 89,000 119,000
Natural gas well servicing 65,000 56,000 -
China 400,000 279,000 277,000
e-Commerce - - -
Environmental remediation 98,000 184,000 185,000
Selling, general and administrative 1,701,000 1,915,000 2,400,000
Depreciation, depletion and amortization 111,000 354,000 869,000
Other 28,000 36,000 45,000
----------- ----------- -----------
3,148,000 3,977,000 9,005,000
----------- ----------- -----------
Operating profit (loss):
Coal reclamation (625,000) (508,000) 1,678,000
Carbon dioxide 356,000 296,000 466,000
Natural gas well servicing (204,000) (213,000) -
China (400,000) (279,000) (277,000)
e-Commerce (275,000) (129,000) -
Environmental remediation (142,000) (317,000) (224,000)
Other, principally corporate (1,076,000) (1,324,000) (1,402,000)
----------- ----------- -----------
(2,366,000) (2,474,000) 241,000
Other income (expense):
Interest income 136,000 228,000 400,000
Interest expense (60,000) (170,000) (964,000)
Equity in net earnings (loss) of unconsolidated
affiliates (834,000) 80,000 225,000
Gain on sale of assets 334,000 56,000 8,000
Impairment of investments and other assets (notes
1 and 17) (71,000) (110,000) (154,000)
Minority interest in operations of consolidated
subsidiaries 16,000 - -
Other 81,000 95,000 67,000
----------- ----------- -----------
Loss from continuing operations before income taxes (2,764,000) (2,295,000) (177,000)
Income taxes (note 12) (8,000) (48,000) (100,000)
----------- ----------- -----------
Loss from continuing operations (2,772,000) (2,343,000) (277,000)
Discontinued operations (note 4):
Gain (loss) from discontinued operations 155,000 (82,000) (1,461,000)
Gain (loss) from discontinuing brine extraction/iodine
manufacturing activities 179,000 (540,000) -
Loss from discontinuing other environmental services
activities - - (684,000)
Loss from discontinuing interstate travel facilities
activities (591,000) (434,000) (1,603,000)
Gain on sale of dry ice manufacturing and distribution
business - - 168,000
----------- ----------- -----------
Loss from discontinued operations (257,000) (1,056,000) (3,580,000)
----------- ----------- -----------
Net loss $(3,029,000) $(3,399,000) $(3,857,000)
=========== =========== ===========
Net loss attributable to common shareholders (note 5) $(3,029,000) $(3,399,000) $(3,857,000)
=========== =========== ===========
Net loss per average common share outstanding:
Basic and diluted (notes 1 and 13):
Loss from continuing operations $ (1.52) $ (1.28) $ (0.15)
Loss from discontinued operations (0.14) (0.57) (1.87)
----------- ----------- -----------
Net loss $ (1.66) $ (1.85) $ (2.02)
=========== =========== ===========
Weighted average common shares outstanding - basic
and diluted 1,829,000 1,839,000 1,907,000
=========== =========== ===========
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, 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 28,125 shares of treasury stock - (112,000) - - 188,000 76,000
Issuance of 8,250 shares of treasury stock
for stock option exercises - (52,000) - - 52,000 -
Purchase of 41,625 shares of common
stock - - - - (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 2,820 shares of treasury stock
for stock option exercises - (24,000) - - 24,000 -
Purchase of 64,706 shares of common
stock - - - - (326,000) (326,000)
---------- ------------ ------------ --------- ------------ ------------
Balance, December 31, 1999 3,000 37,723,000 (31,218,000) 4,000 (1,846,000) 4,666,000
Net loss - - (3,029,000) - - (3,029,000)
Comprehensive income:
Foreign currency translation adjustment - - - (17,000) - (17,000)
-------------
Comprehensive loss - - - - - (3,046,000)
-------------
Reservation of shares pursuant to deferred
compensation plan (note 13) - 263,000 - - - 263,000
---------- ------------ ------------ --------- ------------ ------------
Balance, December 31, 2000 $ 3,000 $ 37,986,000 $(34,247,000) $ (13,000) $ (1,846,000) $ 1,883,000
========== ============ ============ ========= ============ ============
Adjusted to reflect the 3-for-4 reverse stock split effected in September 2000.
See accompanying notes to financial statements.
THE BEARD COMPANY AND SUBSIDIARIES
Statements of Cash Flows
Year Ended December 31,
-----------------------
2000 1999 1998
---- ---- ----
Operating activities:
Cash received from customers $ 2,538,000 $ 8,953,000 $ 15,615,000
Cash paid to suppliers and employees (5,158,000) (10,488,000) (15,472,000)
Interest received 88,000 232,000 512,000
Interest paid (12,000) (346,000) (1,151,000)
Taxes paid (8,000) (60,000) (358,000)
------------ ------------ ------------
Net cash used in operating activities (2,552,000) (1,709,000) (854,000)
------------ ------------ ------------
Investing activities:
Acquisition of property, plant and equipment (513,000) (1,445,000) (1,792,000)
Proceeds from sale of business - - 1,000,000
Proceeds from sale of assets 561,000 88,000 275,000
Purchase of minority interest - - (900,000)
Acquisition of travel facilities, net of cash
acquired of $49,000 - - (886,000)
Advances for notes receivable (325,000) (960,000) -
Payments on notes receivable 360,000 561,000 6,000
Investment in and advances to fifty percent-owned
subsidiary (619,000) (552,000) (333,000)
Net purchase of certificates of deposit - (25,000) (327,000)
Proceeds from redemptions of certificates of deposit 280,000 - -
Distribution from partnership 482,000 - -
Other investments 273,000 199,000 76,000
------------ ------------ ------------
Net cash provided by (used in) investing activities 499,000 (2,134,000) (2,881,000)
------------ ------------ ------------
Financing activities:
Proceeds from line of credit and term notes 1,386,000 - 328,000
Payments on line of credit and term notes (69,000) (253,000) (1,165,000)
Purchase of treasury stock - (326,000) (265,000)
Preferred stock repurchase - - (4,005,000)
Proceeds from issuance of common stock - - 76,000
Other - (1,000) 1,000
------------ ------------ ------------
Net cash provided by (used in) financing activities 1,317,000 (580,000) (5,030,000)
------------ ------------ ------------
Net decrease in cash and cash equivalents (736,000) (4,423,000) (8,765,000)
Cash and cash equivalents at beginning of year 767,000 5,190,000 13,955,000
------------ ------------ ------------
Cash and cash equivalents at end of year $ 31,000 $ 767,000 $ 5,190,000
============ ============ ============
See accompanying notes to financial statements.
THE BEARD COMPANY AND SUBSIDIARIES
Statements of Cash Flows
Reconciliation of Net Loss to Net Cash Used In Operating Activities:
Year Ended December 31,
-----------------------
2000 1999 1998
---- ---- ----
Net loss $ (3,029,000) $ (3,399,000) $ (3,857,000)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation, depletion and amortization 111,000 354,000 1,366,000
Gain on sale of assets (328,000) (56,000) (16,000)
Gain from discontinued operations (334,000) - -
Provision for uncollectible accounts and notes 99,000 11,000 19,000
Impairment of investments and other assets 491,000 110,000 154,000
Net cash used by discontinued operations offsetting
accrued losses (180,000) (347,000) (300,000)
Loss from discontinued operations - 974,000 2,119,000
Equity in net loss of unconsolidated affiliates 834,000 3,000 71,000
Minority interest in operations of consolidated
subsidiaries (16,000) - (285,000)
Other 6,000 (64,000) 33,000
Decrease in accounts receivable, other
receivables, prepaid expenses and other current assets 190,000 1,138,000 79,000
(Increase) decrease in inventories 73,000 132,000 (8,000)
Decrease in trade accounts payable,
accrued expenses and other liabilities (469,000) (565,000) (229,000)
------------ ------------ ------------
Net cash used in operating activities $ (2,552,000) $ (1,709,000) $ (854,000)
============ ============ ============
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 interstate 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
============ ============ ============
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
============ ============ ============
See accompanying notes to financial statements.
THE BEARD COMPANY AND SUBSIDIARIES
Notes to Financial Statements
December 31, 2000, 1999 and 1998
(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 Natural Gas Well Servicing ("WS") Segment, (4) the China
("China") Segment, (5) the e-Commerce ("e-Commerce") Segment, and (6) the
Environmental Remediation ("ER") Segment.
The Coal Segment is in the business of operating coal fines reclamation and/or
briquetting facilities in the U.S. and provides slurry pond core drilling
services, fine coal laboratory analytical services and consulting services. The
CO2 Segment consists of the production of CO2 gas. The 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 China Segment is pursuing (i)
environmental opportunities, (ii) the sale of technical services, (iii) the sale
of coal equipment, and (iv) the operation of coal fines reclamation facilities
in China. The e-Commerce Segment consists of a 78.4%-owned subsidiary in the
process of developing and implementing systems and technologies related to
Internet commerce. The ER Segment consists of services to remediate creosote and
polycyclic aromatic hydrocarbon contamination.
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.
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 at December 31, 1999 and consisted of
investments in short-term commercial paper and certificates of deposit whose
remaining terms at the date of purchase were less than 90 days. There were no
cash equivalents at December 31, 2000. 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, 2000, inventory consisted of iodine located at the
manufacturing facilities which was distributed to the Company upon the
dissolution of the joint venture in which the Company had an interest, at cost
of $124,000, and gasoline and grocery items located at the Company's two
remaining interstate travel facilities, at a fair market value of $5,000. 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.
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.
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, 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.
In 2000, 1999, and 1998 the Company recognized $71,000, $110,000 and $154,000
for impairments to the carrying values of investments and other assets relating
to the recoverability of such investments or assets.
Other Long-Term Liabilities
Other long-term liabilities consist of various items which are not payable
within the next calendar year.
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, 2000 and 1999, 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 Company provides a valuation allowance for deferred tax assets for
which it does not consider realization of such assets to be more likely than
not. 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 150,000
shares of its outstanding common stock. In 1999, the Company repurchased
approximately 64,700 shares for $326,000 and in 1998 repurchased approximately
41,600 shares for $265,000. In 1997, the Company repurchased approximately
228,000 shares of its common stock for approximately $1,519,000. The Company
holds repurchased stock as treasury stock. The number of shares purchased and
remaining as treasury shares as of December 31, 2000 have been restated to give
effect to the 3-for-4 reverse split in September, 2000.
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 2000, 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.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to concentrations of
credit risk consist primarily of accounts and notes receivable, and equity
investments in unconsolidated affiliates. Net advances for operations in Mexico
comprised approximately 52% of the balances in accounts receivable, notes
receivable, and investments and other assets at December 31, 2000. Notes and
leases receivable from three parties comprised approximately 15% of the December
31, 2000 balances of accounts receivable, notes receivable, and investments and
other assets. Generally, the Company does not require collateral to support
accounts and notes receivable.
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 2000
and 1999, the Company's only items 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.
Reclassifications
Certain 1999 and 1998 balances have been reclassified to conform to the 2000
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 MCNIC (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, the Company's working capital and cash and cash
equivalents decreased significantly at December 31, 2000 compared to December
31, 1999. To mitigate potential liquidity problems, the Company obtained
financing of $1.8 million in 2000, $1.5 million of which was from an affiliate
of the Company's chairman (see note 10). In addition, the Company expects to
generate cash from the disposition of assets of discontinued operations and from
the pay down of notes receivable. It is also currently pursuing a $1.5 million
loan backed by its CO2 reserves at McElmo Dome.
The Company is focusing on replacing its Coal Segment's revenues and is
currently working on two new pond reclamation projects, both of which are
expected to mature into operating projects for the segment in the next 12
months. The segment is currently negotiating with a Fortune 500 company which
has made the decision to install a clean coal preparation plant at a pond in
West Virginia. The segment is negotiating with third parties concerning the
installation of the equipment needed for the project. If such negotiations are
successfully concluded, plant construction is expected to commence in the third
quarter of 2001. The second project is longer range, with negotiations expected
to commence in the second half of 2001. The Company expects that cash to be
generated from the sale of assets and from the $1.5 million loan currently being
pursued will be sufficient to continue operations through 2001 and until the
operations of the new coal projects have come on stream.
(3) Acquisitions
ITF Segment
In 1998 the Company, through a newly formed subsidiary, Interstate Travel
Facilities, Inc. ("ITF"), acquired four travel facilities and a truck wash
bordering the Interstate Highway system in Oklahoma for a total cash
consideration of $935,000, notes totaling $1,120,000 (valued at $983,000),
assumption of debt totaling $1,336,000 and 20% of the Company's ownership in
ITF.
As discussed in note 4, in April 1999 the Company's Board of Directors approved
a plan to discontinue its ITF Segment.
Coal Segment
In June 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. 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 was 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.
In December 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.
In March 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 had a 40% ownership in
NABR, which was accounted for under the equity method. As a result of NABR's
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. The joint venture was dissolved
effective September 15, 2000 and the Japanese partners received their final
distribution of cash in December, 2000, with the Company taking over the
remaining assets and liabilities. The Company recorded $179,000 in income
representing the excess of the amounts received by the Company over the
remaining basis of the Company's investment in the joint venture.
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. NABR's loss included $778,000 which represented the difference in
the estimated amounts expected to be received from the assets' disposition and
the assets' recorded values as of December 31, 1999, and $572,000 of anticipated
operating losses through April 2000 (the date operations ceased) and costs of
ceasing operations.
As of December 31, 2000, the significant assets related to NABR's operations
consisted primarily of equipment and inventory with estimated net realizable
values of $158,000 and $124,000, respectively. The significant liabilities
related to NABR's operations consisted primarily of accounts and royalties
payable totaling $282,000. The Company is actively pursuing opportunities to
sell NABR's assets and expects the disposition to be completed by December 31,
2001.
ITF Segment
In April 1999, Beard's Board of Directors adopted a formal plan to discontinue
its ITF Segment. That same month Beard entered into an agreement with ITF and
its minority shareholders which would have resulted in the sale of ITF to the
minority shareholders. The agreement failed to close, and in September 1999
Beard, ITF and the minority shareholders entered into new agreements which were
closed in November 1999. As a result, ITF disposed of two of its travel
facilities and its truck wash. The purchaser assumed the outstanding debt of
$2,149,000 on the properties and equipment and accounts payable totaling
$126,000; the minority shareholders gave up their 20% interest in ITF; $327,000
of C/D's formerly securing the debt were assigned to the Company; and a $440,000
note ($544,000 face value) to the minority shareholders was cancelled. Beard now
has 100% ownership of ITF which owns two C-stores, including their equipment and
remaining inventory, and has no outstanding indebtedness with the exception of a
lease purchase arrangement totaling $41,000 on some equipment.
Revenues and operating 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, including a provision of $347,000 for 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. Losses of
$347,000 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 recorded an additional $214,000 loss in the
fourth quarter of 1999; including $180,000 of anticipated operating losses from
December 31, 1999 through the disposal date of the remaining assets; and $34,000
representing a further reduction in the estimated realizable value of the
remaining C-stores as of December 31, 1999. Revenues and operating losses from
the discontinued ITF Segment were $1,826,000 and $351,000, respectively in 2000.
The Company charged $180,000 of these operating losses against the loss accrual
established in 1999 and recognized $44,000 in September, 2000. The remaining
$127,000 in operating losses were recognized during the fourth quarter. Beard
recorded an additional $420,000 loss in December 2000; $60,000 represented
losses expected to be incurred by ITF from the date of shutdown through the
anticipated disposal date of the remaining assets; and $360,000 of the loss
represented an additional reduction in the estimated realizable value of the
remaining C-stores and related assets as of December 31, 2000. The total loss
recorded in 2000 related to the discontinued ITF Segment was $591,000.
As of December 31, 2000, the significant assets related to the ITF Segment
consisted of cash, inventory and the two remaining C-stores with a total
estimated net realizable value of $561,000. The significant liabilities of the
segment consist of trade accounts payable, accrued expenses and long-term debt
totaling $136,000. Beard is actively seeking opportunities to sell the remaining
C-stores and expects the C-stores to be sold by mid-year 2001.
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 and losses from the discontinued segment were
$1,536,000 and $424,000, respectively, for 1998. 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 2000 or 1999.
As of December 31, 2000, the significant assets related to the Other E/S
Operations consist primarily of equipment with a recorded value of $152,000. The
significant liabilities related to the Other E/S Operations consist of accrued
expenses totaling $7,000.
In 1998, the Company recorded a $684,000 loss expected from the discontinuation
of the Other E/S Operations. The loss included $749,000 which 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, and
$300,000 of the loss represented anticipated operating losses until disposal of
such assets had 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 $750,000 since its date of discontinuance. Equipment sales
totaling $439,000 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 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). In 1998 the Company determined it overestimated its state income tax
liability thereby reducing the gain recognized in 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 1998. The gain is
presented in discontinued operations in the accompanying 1998 statement of
operations. The Company recorded $155,000 in income in October 2000, as the
result of the lapse of an option for accrued employee severance compensation.
As of December 31, 2000, the solid CO2 segment had no significant assets or
liabilities.
(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" through such date 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 3.84706875 shares of Beard
common stock after December 31, 2002. Fractional shares will not be issued, and
cash will be paid in redemption thereof.
In 1997, three of the four Institutions sold their common and preferred shares
to five individuals (the "Sellers") who thereafter sold such shares to the
Company. Repurchase of the common shares was effected by the Company in 1997 and
repurchase of the preferred (47,729 shares) was effected in 1998. The Company
redeemed 16,411 of the preferred shares at stated value ($100 per share) in lieu
of the Sellers' share of the required redemption from one-third of 1997 net
income. The Sellers' remaining 31,318 preferred shares were purchased for
$1,000,000 or $31.93 per share.
At December 31, 2000 and 1999, 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.
(6) Investments and Other Assets
Investments and other assets consisted of the following:
December 31,
------------
2000 1999
---- ----
Certificates of deposit $ 75,000 $ 355,000
Investment in and advances to ITS-
Testco, L.L.C 241,000 645,000
Investment in North American Brine
Resources (see note 4) - 225,000
Investment in Cibola Corporation 38,000 109,000
Investment in real estate limited
partnerships 52,000 201,000
Other assets 61,000 69,000
----------- -----------
467,000 1,604,000
Current investments - (280,000)
----------- -----------
$ 467,000 $ 1,324,000
=========== ===========
Certificates of Deposit
Included in investments and other assets at December 31, 2000 and 1999 is a
certificate of deposit of $75,000. The certificate of deposit 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 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, 2000 and 1999 approximated ($675,000) and $394,000, respectively,
which exceeds its 50% ownership in the underlying equity (deficit) of ITS-Testco
by $29,000 and $15,000 as of December 31, 2000 and 1999, 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 had $917,000 and $251,000 of receivables due from ITS-Testco at
December 31, 2000 and 1999, respectively, related to advances to fund
operations. The receivables are due on demand and accrued 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 2001. Because the Company is committed to funding the operations of
ITS-Testco, the Company's equity (deficit) in its investment in ITS-Testco and
advances due from ITS-Testco are combined in the consolidated balance sheets.
The summarized unaudited financial information of ITS-Testco as of December 31,
2000 and 1999 and for the years ended December 31, 2000 and 1999 is as follows:
2000 1999
---- ----
Current assets $ 253,000 $ 989,000
Current liabilities (367,000) (318,000)
----------- -----------
Working capital (deficit) (114,000) 671,000
Equipment, net 1,197,000 1,451,000
Other assets 70,000 -
Advances from members (1,984,000) (627,000)
Long-term debt (576,000) (738,000)
----------- -----------
Members equity (deficit) $(1,407,000) $ 757,000
=========== ===========
Revenue $ 344,000 $ 2,378,000
=========== ===========
Net loss $(2,129,000) $ (457,000)
Foreign currency translation (34,000) 8,000
----------- -----------
Comprehensive loss $(2,163,000) $ (449,000)
=========== ===========
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 $237,000, $308,000, and $274,000
in 2000, 1999 and 1998, respectively.
Investment in Real Estate Limited Partnerships
The Company owns a limited partnership interest in a real estate limited
partnership, and had a limited partnership interest in another real estate
limited partnership which was sold in 2000. The limited partnerships'
significant assets consist of undeveloped land near Houston, Texas. The Company
recorded $2,000 and $4,000 of loss in 2000 and 1998, respectively, and $5,000 of
income in 1999 resulting from its share of the limited partnerships' operations
for those years. Additionally, in 2000, the Company realized income of $194,000
as the result of the sale of property owned by one of the two partnerships in
which the Company had an interest.
Other assets
The Company recorded provisions of $71,000, $110,000, and $154,000 in 2000,
1999, and 1998, respectively, for economic impairment of other investments.
(7) Notes Receivable
As of December 31, 2000 and 1999, the Company had various notes receivable
totaling $253,000 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, 2000 and 1999. The notes mature from July 2001 to
February 2005, and are secured by the sold equipment. At December 31, 2000 and
1999, $80,000 and $80,000, respectively, were due within one year. At December
31, 2000, the Company had a $586,000 note receivable due from Testco, Inc., the
other 50% owner of ITS-Testco, L.L.C. At December 31, 1999, the note receivable
balance was $457,000. The note accrues interest at one percent over the prime
rate, matures in June 2001 and is secured by a personal guaranty of the owner of
Testco, Inc. If the note has not been repaid at maturity, the Company will
extend the maturity and establish 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,
------------
2000 1999
---- ----
Land $ 245,000 $ 270,000
Proved and unproved carbon
properties 1,144,000 1,139,000
Buildings 82,000 82,000
Buildings and land improvements 301,000 264,000
Machinery and equipment 1,688,000 1,727,000
Other 411,000 404,000
Coal fines extraction and beneficiation
equipment 1,493,000 1,124,000
--------- ---------
$5,364,000 $5,010,000
========== ==========
(9) Intangible Assets
Intangible assets are summarized as follows:
December 31,
------------
2000 1999
---- ----
Patent costs $47,000 $25,000
Other 3,000 -
------- -------
$50,000 $25,000
======= =======
(10) Long-term Debt
Long-term debt is summarized as follows:
December 31,
------------
2000 1999
---- ----
Coal (a) $ 13,000 $ 30,000
e-Commerce (b) 22,000 -
Interstate Travel Facilities Segment (c) 42,000 -
Line of credit (d) 300,000 -
-------- --------
377,000 30,000
Less current maturities 30,000 17,000
-------- --------
Long-term debt $347,000 $ 13,000
======== ========
(a) At December 31, 2000 and 1999, the Company's Coal Segment had $13,000 and
$30,000 of various notes payable. The note payable remaining at December
31, 2000 bears interest at 14%, requires monthly payments of interest and
principal and matures in September 2001. The note is secured by equipment
with an approximate book value of $26,000 at December 31, 2000.
(b) At December 31, 2000, the Company's e-Commerce Segment had one note payable
with a balance due of $22,000. The note bears interest at 12%, requires
monthly payments of interest and principal and matures in July 2005. The
note is secured by an automobile with an approximate book value of $25,000
at December 31, 2000.
(c) At December 31, 2000, the Company's discontinued ITF Segment had a lease
purchase obligation with a balance due of $42,000. The obligation requires
monthly payments of principal and interest totaling approximately $1,000
and matures in March, 2004.
(d) At December 31, 2000, the Company had fully utilized a $300,000 line of
credit at a bank. The line bears interest at prime plus one-half percent,
requires monthly payments of interest and matures January 15, 2002. The
note is guaranteed by a related party.
At December 31, 2000, the Company has borrowed $1,036,000 from an affiliated
entity of the Chairman of the Company under terms of two unsecured notes
totaling $1,500,000 which bear interest at 10%. The principal of the first note
of $700,000 and accrued interest are due to be repaid February 28, 2002. The
amounts borrowed on the second note of $800,000 and any accrued interest are due
to be repaid on April 1, 2002.
The annual maturities of long-term debt subsequent to December 31, 2000 are
$30,000 for 2001, $1,353,000 for 2002, $18,000 for 2003, $8,000 for 2004, and
$3,000 for 2005.
(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, 2000 are summarized as follows:
2001 $101,000
2002 16,000
2003 10,000
--------
$127,000
========
Rent expense under operating leases aggregated $201,000, $197,000, and $185,000
in 2000, 1999 and 1998, respectively.
(12) Income Taxes
Total income tax expense (benefit) was allocated as follows:
Year ended December 31,
-----------------------
2000 1999 1998
---- ---- ----
Continuing operations $ 8,000 $ 48,000 $ 100,000
Discontinued operations - - (168,000)
--------- ---------- ---------
$ 8,000 $ 48,000 $ (68,000)
========= ========= =========
Current income tax expense from continuing operations consisted of:
Year ended December 31,
-----------------------
2000 1999 1998
---- ---- ----
U. S. federal $ 8,000 $ 34,000 $ 41,000
Various states - 2,000 59,000
Republic of Mexico - 12,000 -
-------- -------- --------
$ 8,000 $ 48,000 $100,000
======== ======== ========
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,
-----------------------
2000 1999 1998
---- ---- ----
Computed U.S. federal
statutory benefit $(886,000) $(780,000) $(161,000)
Federal alternative
minimum taxes 8,000 34,000 41,000
Increase in the valuation
allowance for deferred tax
assets 886,000 780,000 161,000
State income taxes - 2,000 59,000
Republic of Mexico taxes - 12,000 -
--------- --------- ---------
$ 8,000 $ 48,000 $ 100,000
========= ========= =========
The components of deferred tax assets and liabilities are as follows:
December 31,
------------
2000 1999
---- ----
Deferred tax assets - tax effect of:
Net operating loss carryforwards $ 20,180,000 $ 19,988,000
Statutory depletion and investment
tax credit carryforwards 2,081,000 2,129,000
Other, principally investments and
property, plant and equipment 8,000 651,000
------------ ------------
Total gross deferred tax assets 22,269,000 22,768,000
Less valuation allowance (22,269,000) (22,768,000)
Deferred tax liabilities - -
------------ ------------
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, 2000, the Company had federal regular tax operating loss
carryforwards of approximately $52.6 million that expire from 2004 to 2009 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 and Deferred Compensation 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.
As a result of the 3-for-4 reverse stock split effected in September 2000, the
number of shares authorized under the 1993 Plan was reduced to 206,250. 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, 2000, there
were 93,750 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, 1999 or 2000.
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 $8,000 in 2000, and $9,000 in 1999 and 1998. 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 Weighted-Average
of Shares Exercise Price
--------- --------------
Balance at December 31, 1997(A) 93,750 $ 2.89
Granted - -
Exercised(A) (41,250) 2.67
Forfeited - -
Expired - -
--------------------
Balance at December 31, 1998(A) 52,500 $ 3.05
Granted - -
Exercised(A) (6,000) 2.67
Forfeited - -
Expired - -
--------------------
Balance at December 31, 1999(A) 46,500 $ 3.09
Granted - -
Exercised - -
Forfeited - -
Expired(A) (5,625) 2.67
--------------------
Balance at December 31, 2000 40,875 $ 3.14
====================
- -----------------
(A) Adjusted to reflect the 3-for-4 reverse stock split effected in September
2000.
At December 31, 2000, the range of exercise prices and weighted-average
remaining contractual life of outstanding options was $2.67 - $5.83 and three
years, respectively.
At December 31, 2000 and 1999, the number of options exercisable was 40,000,
after giving effect to the 3-for-4 reverse split in September 2000, and 42,000,
respectively, and the weighted-average exercise price of those options was $3.10
and $2.95, respectively.
The Company has a deferred compensation plan for certain key executives and the
board of directors which provide for payments in the form of the Company's
common stock upon the death, disability, retirement or termination of the
participant. The number of shares of stock credited to each participant's
account is equal to the amount of compensation deferred divided by the fair
market value of the stock on the deferral date. As of December 31, 2000, there
were 105,000 shares reserved for distribution under the plan.
(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 2000, 1999 and 1998,
the Company made matching contributions of $40,000, $73,000, and $54,000,
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, 2000, the Company is a guarantor of an 11%, $535,000 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 2001 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 2000, 1999 and 1998: Coal Reclamation, Carbon
Dioxide, Natural Gas Well Servicing, China, and Environmental Remediation.
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 Carbon Dioxide Segment consists of the
production of CO2 gas. 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 China Segment is pursuing (i) environmental
opportunities, (ii) the sale of technical services, (iii) the sale of coal
equipment, and (iv) the operation of coal fines reclamation facilities in China.
The Environmental Remediation Segment consists of services to remediate creosote
and polycyclic aromatic hydrocarbon contamination.
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.
Carbon Gas Well Environmental
Coal Dioxide Servicing China Remediation Other Totals
---- ------- --------- ----- ----------- ----- ------
2000
Revenues from
external customers $ 215 $ 471 $ 409 $ - $ - $ - $ 1,095
Interest income - - - - - - -
Interest expense 3 - 180 - - 1 184
Depreciation,
depletion and
Amortization 19 33 286 - 2 3 343
Segment profit(loss) (625) 356 (2,297) (400) (197) (275) (3,438)
Segment assets 1,746 453 1,751 - 6 59 4,015
Expenditures for
segment assets 371 4 43 - 1 8 427
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 33 257 - 46 - 530
Segment profit(loss) (614) 360 (642) (279) (317) (129) (1,621)
Segment assets 1,407 463 2,786 - 8 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) 672 466 (70) (277) (238) - 553
Segment assets 25,148 603 607 - 55 - 26,413
Expenditures for
segment assets 24,072 41 548 - 6 - 24,667
Reconciliation of reportable segment revenues to consolidated revenues is as
follows (in thousands):
2000 1999 1998
---- ---- ----
Total revenues for reportable segments 1,095 3,831 9,209
Revenues from Natural Gas Well
Servicing operations accounted for
as an equity investment (344) (2,378) -
Revenues from corporate
activities not allocated to segments 31 50 37
------- ------- -------
Total consolidated revenues $ 782 $ 1,503 $ 9,246
======= ======= =======
Reconciliation of reportable segment interest expense to consolidated interest
expense is as follows (in thousands):
2000 1999 1998
---- ---- ----
Total interest expense for
reportable segments $ 184 $ 251 $ 949
Natural Gas Well Servicing
operations accounted for as an
equity investment (180) (91) -
Interest expense from
corporate activities not
allocated to segments 56 10 15
----- ----- -----
Total consolidated interest expense $ 60 $ 170 $ 964
===== ===== =====
Reconciliation of reportable segment depreciation, depletion and amortization to
consolidated depreciation, depletion and amortization is as follows (in
thousands):
2000 1999 1998
---- ---- ----
Total depreciation,
depletion and amortization
for reportable segments $ 343 $ 530 $ 850
Depreciation and amortization
of Natural Gas Well Servicing (261) (222) -
operations accounted for as an
equity investment
Corporate depreciation and
amortization not allocated to
segments 29 46 19
------ ------ ------
Total consolidated depreciation,
depletion and Amortization $ 111 $ 354 $ 869
====== ====== ======
Reconciliation of total reportable segment profit (loss) to consolidated loss
from continuing operations is as follows (in thousands):
2000 1999 1998
---- ---- ----
Total profit (loss) for
reportable segments $ (3,438) $ (1,621) $ 553
Eliminate loss from Natural
Gas Well Servicing operations
accounted for as an equity investment 2,129 433 70
Equity in loss from Natural
Gas Well Servicing operations
accounted for as an equity investment (1,069) (217) (35)
Net corporate costs not
allocated to segments (394) (938) (865)
-------- -------- --------
Total consolidated loss
from continuing Operations $ (2,772) $ (2,343) $ (277)
======== ======== =======
Reconciliation of reportable segment assets to consolidated assets is as follows
(in thousands):
2000 1999 1998
---- ---- ----
Total assets for reportable segments $ 4,015 $ 4,677 $ 26,413
Assets of discontinued operations 1,230 1,380 6,287
Assets from Natural Gas Well Servicing
operations accounted for as an equity
investment (1,520) (2,440) (607)
Investment in equity investee
(Natural Gas Well Servicing operations) (675) 394 318
Corporate assets not allocated to segments 2,037 2,793 4,926
-------- -------- --------
Total consolidated assets $ 5,087 $ 6,804 $ 37,337
======== ======== ========
Reconciliation of expenditures for segment assets to total expenditures for
assets is as follows (in thousands):
2000 1999 1998
---- ---- ----
Total expenditures for
assets for reportable Segments $ 427 $ 2,480 $ 24,667
Capital expenditures of
discontinued operations - - 4,034
Expenditures for Natural Gas
Well Servicing assets accounted
or as an equity investment (5) (1,119) (547)
Corporate expenditures not
allocated to segments 39 31 55
------- -------- --------
Total expenditures for assets $ 461 $ 1,392 $ 28,209
======= ======== ========
38% of 2000's and 64% of 1999's segment revenues were derived from customers in
Mexico. The remaining 1999, and all of 1998 segment revenues were derived from
customers in the United States. Certain long-lived assets with recorded values
approximating $1,797,000 and $1,385,000 at December 31, 2000 and 1999,
respectively, are located in Mexico. All remaining segment assets are located in
the United States.
During 2000, two customers accounted for 18% of the Company's and 65% of the
Coal Segment's revenues. 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 2000, 1999 and 1998, sales by these two
operators accounted for 60%, 28%, and 7%, respectively, of the Company's
revenues and all of the Carbon Dioxide Segment's revenues. All of the Natural
Gas Well Servicing Segment's 2000 and 1999 revenues were derived from one
customer.
(17) Fourth Quarter Adjustments
During the fourth quarter of 2000, the Company recorded economic impairment
losses on certain investments and an additional accrual for loss relating to the
Company's investment in the discontinued interstate travel business of $71,000
and $420,000, respectively. 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).
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
Not applicable
PART III
Item 10. Directors and Executive Officers of the Registrant.
The information regarding directors of the registrant will be contained in
the definitive proxy statement which will be filed pursuant to Regulation 14A
with the Commission not later than 120 days after the end of the fiscal year
covered by this Form 10-K, and the information to be contained therein is
incorporated herein by reference.
The information regarding executive officers of the registrant has been
furnished in a separate item captioned "Executive Officers and Significant
Employees of the Company" and included as Item 4a in Part I of this report at
pages 21 through 22.
Item 11. Executive Compensation.
The information regarding executive compensation will be contained in the
definitive proxy statement which will be filed pursuant to Regulation 14A with
the Commission not later than 120 days after the end of the fiscal year covered
by this Form 10-K, and the information to be contained therein is incorporated
herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The information regarding security ownership of certain beneficial owners
and management will be contained in the definitive proxy statement which will be
filed pursuant to Regulation 14A with the Commission not later than 120 days
after the end of the fiscal year covered by this Form 10-K, and the information
to be contained therein is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions.
The information regarding transactions with management and others will be
contained in the definitive proxy statement which will be filed pursuant to
Regulation 14A with the Commission not later than 120 days after the end of the
fiscal year covered by this Form 10-K, and the information to be contained
therein is incorporated herein by reference.
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:
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 ("Beard") and
The New Beard Company ("New Beard"), 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 Beard into New Beard as filed with the
Secretary of State of Oklahoma on 2(c) 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).
3(i) Restated Certificate of Incorporation of Beard (formerly New Beard) as
filed with the Secretary of State of Oklahoma on September 20, 2000. (This
Exhibit has been previously filed as Exhibit 3(i) to Registrant's Form 10-Q
for the period ended September 30, 2000, filed on November 20, 2000, 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)Form of Indemnification Agreement dated December 15, 1994, by and between
Registrant and eight directors.
10(c)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. This Exhibit has previously been filed as Exhibit 10(b)
to Registrant's Form 10-K for the period ended December 31, 1999, Filed on
April 14, 2000, and same is incorporated by reference).*
10(d)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(e)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(f)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(g)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(h)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(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(j)Subscription Agreement by and between Cibola Corporation ("Cibola") and
Registrant, dated April 10, 1996. (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(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)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(o)Letter Loan Agreement by and between Registrant and The William M. Beard
and Lu Beard 1988 Charitable Unitrust (the "Unitrust") dated April 3, 2000.
(This Exhibit has been previously filed as Exhibit 10(cc) to Registrant's
Form 10-K for the period ended December 31, 1999, filed on April 14, 2000,
and same is incorporated herein by reference).
10(p)Amended Letter Loan Agreement by and between Registrant and the Unitrust
dated September 1, 2000. (This Exhibit has been previously filed as Exhibit
10(o) to Registrant's Form 10-Q for the period ended September 30, 2000,
filed on November 20, 2000, and same is incorporated by reference).
10(q)Promissory Note from Registrant to the Trustees of the Unitrust dated
April 3, 2000. (This Exhibit has been previously filed as Exhibit 10(dd) to
Registrant's Form 10-K for the period ended December 31, 1999, filed on
April 14, 2000, and same is incorporated herein by reference).
10(r)Renewal Promissory Note from Registrant to the Trustees of the Unitrust
dated September 1, 2000. (This Exhibit has been previously filed as Exhibit
10(q) to Registrant's Form 10-Q for the period ended September 30, 2000,
filed on November 20, 2000, and same is incorporated by reference).
10(s)Promissory Note from Registrant to Bank of Oklahoma, N.A. ("BOK") dated
August 30, 2000. (This Exhibit has been previously filed as Exhibit 10(r)
to Registrant's Form 10-Q for the period ended September 30, 2000, filed on
November 20, 2000, and same is incorporated by reference).
10(t)Extension Promissory Note from Registrant to BOK dated September 30, 2000.
(This Exhibit has been previously filed as Exhibit 10(s) to Registrant's
Form 10-Q for the period ended September 30, 2000, filed on November 20,
2000, and same is incorporated by reference).
10(u)Guaranty Agreement between the Unitrust and BOK dated August 30, 2000.
(This Exhibit has been previously filed as Exhibit 10(t) to Registrant's
Form 10-Q for the period ended September 30, 2000, filed on November 20,
2000, and same is incorporated by reference).
10(v)Guaranty Agreement between W. M. Beard and BOK dated August 30, 2000.
(This Exhibit has been previously filed as Exhibit 10(u) to Registrant's
Form 10-Q for the period ended September 30, 2000, filed on November 20,
2000, and same is incorporated by reference).
10(w)Promissory Note from Registrant to the Trustees of the Unitrust dated
October 20, 2000.
21 Subsidiaries of the Registrant.
23 Consents:
23(a) Consent of Cole & Reed, P.C.
23(b) Consent of KPMG LLP
_____________
*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)
By HERB MEE, JR.
(President)
DATE: March 27, 2001
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
--------- ----- ----
W.M. BEARD Chief Executive Officer March 27, 2001
HERB MEE, JR. President and Chief March 27, 2001
Financial Officer
JACK A. MARTINE Controller and Chief March 27, 2001
Accounting Officer
W.M. BEARD Chairman of the Board March 27, 2001
HERB MEE, JR Director March 27, 2001
ALLAN R. HALLOCK Director March 21, 2001
HARLON E. MARTIN, JR. Director March 20, 2001
FORD C. PRICE Director March 18, 2001
MICHAEL E. CARR Director March 22, 2001
EXHIBIT INDEX
Exhibit
Number Description Method of Filing
- -------- ----------- ----------------
2(a) Agreement and Plan of Incorporated herein by reference
Reorganization by and among
Registrant, Beard Oil Company
("Beard Oil") and New Beard,
Inc., dated as of July 12,
1993.
2(b) Agreement and Plan of Merger Incorporated herein by reference
by and between The Beard
Company ("Beard") and The New
Beard Company ("New Beard"),
dated as of September 16,
1997.
2(c) Certificate of Merger merging Incorporated herein by reference
Beard into New Beard as filed
with the Secretary of State
of Oklahoma on November 26,
1997.
3(i) Restated Certificate of Filed herewith electronically
Incorporation of Beard
(formerly New Beard) as filed
with the Secretary of State
of Oklahoma on September 20,
2000.
3(ii) Registrant's By-Laws as Incorporated herein by reference
currently in effect.
4(a) Certificate of Designations, Incorporated herein by reference
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.
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 Incorporated herein by reference
Beard Company 1993 Stock
Option Plan dated August 27,
1993, as amended June 4,
1998.
10(b) Form of Indemnification Filed herewith electronically
Agreement dated December
15, 1995, by and between
Registrant and eight
directors
10(c) The Beard Company 1994 Incorporated herein by reference
Phantom Stock Units Plan as
amended effective October 23,
1997.
10(d) Amendment No. One to The Incorporated herein by reference
Beard Company Deferred Stock
Compensation Plan dated
November 1, 1995, as amended
July 21, 1999.
10(e) Form of Change in Control Incorporated herein by reference
Compensation Agreement dated
as of January 24, 1997, by
and between Carbonics and
three employees.
10(f) Amended and Restated Incorporated herein by reference
Nonqualified Stock Option
Agreement by and between
Richard D. Neely and ISITOP,
Inc. ("ISITOP"), dated
November 12, 1998.
10(g) Amended and Restated Incorporated herein by reference
Nonqualified Stock Option
Agreement by and between
Jerry S. Neely and ISITOP,
dated November 12, 1998.
10(h) Nonqualified Stock Option Incorporated herein by reference
Agreement by and between
Robert A. McDonald and
ISITOP, dated November 12,
1998.
10(i) Incentive Stock Option Incorporated herein by reference
Agreement by and between
Philip R. Jamison and Beard
Technologies, Inc. ("BTI"),
dated May 18, 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 Incorporated herein by reference
Promissory Note from
Registrant to Cibola, dated
April 10, 1996.
10(l) Security Agreement by and Incorporated herein by reference
among 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) Guaranty Agreement between Incorporated herein by reference
Registrant and Oklahoma Bank
and Trust Company, dated as
of June 7, 1999.
10(o) Letter Loan Agreement by and Incorporated herein by reference
between Registrant and The
William M. Beard and Lu Beard
1988 Charitable Unitrust (the
" Unitrust") dated April 3,
2000.
10(p) Amended Letter Loan Agreement Incorporated herein by reference
by and between Registrant and
The William M. Beard and Lu
Beard 1988 Charitable
Unitrust (the " Unitrust")
dated September 1, 2000.
10(q) Promissory Note from Incorporated herein by reference
Registrant to the Trustees of
the Unitrust dated April 3,
2000.
10(r) Renewal Promissory Note from Incorporated herein by reference
Registrant to the Trustees of
the Unitrust dated September
1, 2000.
10(s) Promissory Note from Incorporated herein by reference
Registrant to Bank of
Oklahoma, N.A. ("BOK") dated
August 30, 2000.
10(t) Extension Promissory Note Incorporated herein by reference
from Registrant to BOK dated
September 30, 2000.
10(u) Guaranty Agreement between Incorporated herein by reference
the Unitrust and BOK dated
August 30, 2000.
10(v) Guaranty Agreement between Incorporated herein by reference
W.M. Beard and BOK dated
August 30, 2000.
10(w) Promissory Note from Filed herewith electronically
Registrant to the
Trustees of the Unitrust
dated October 20, 2000.
21 Subsidiaries of the Filed herewith electronically
Registrant
23(a) Consent of Cole & Reed, P.C. Filed herewith electronically
23(b) Consent of KPMG LLP Filed herewith electronically