UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the period ended March 31, 2001
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number 1-12396
THE BEARD COMPANY
(Exact name of registrant as specified in its charter)
Oklahoma 73-0970298
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Enterprise Plaza, Suite 320
5600 North May Avenue
Oklahoma City, Oklahoma 73112
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (405) 842-2333
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the registrant's
classes of common stock as of April 30, 2001.
Common Stock $.001333 par value - 1,828,845
THE BEARD COMPANY
INDEX
PART I. FINANCIAL INFORMATION Page
Item 1. Financial Statements...............................................3
Balance Sheets - March 31, 2001 (Unaudited) and
December 31, 2000....................................................3
Statements of Operations - Three Months
ended March 31, 2001 and 2000 (Unaudited)............................4
Statements of Shareholders' Equity - Year ended December 31, 2000
and Three Months ended March 31, 2001 (Unaudited)....................5
Statements of Cash Flows - Three Months ended
March 31, 2001 and 2000 (Unaudited)..................................6
Notes to Financial Statements (Unaudited)...............................8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations....................13
Item 3. Quantitative and Qualitative Disclosures About Market Risk........19
PART II. OTHER INFORMATION
Item 2. Changes in Securities.............................................19
Item 5. Other information.................................................19
Item 6. Exhibits and Reports on Form 8-K..................................20
Signatures.................................................................23
THE BEARD COMPANY AND SUBSIDIARIES
Balance Sheets
March 31, December 31,
Assets 2001 2000
------ ---- ----
Current assets:
Cash and cash equivalents $ 76,000 $ 31,000
Accounts receivable, less allowance for doubtful
receivables of $292,000 in 2001 and 2000 334,000 337,000
Inventory 137,000 129,000
Prepaid expenses and other assets 48,000 39,000
Current portion of notes receivable 486,000 80,000
------------ ------------
Total current assets 1,081,000 616,000
------------ ------------
Notes receivable 331,000 789,000
Investments and other assets 285,000 467,000
Property, plant and equipment, at cost 5,380,000 5,364,000
Less accumulated depreciation, depletion and amortization 2,228,000 2,198,000
------------ ------------
Net property, plant and equipment 3,152,000 3,166,000
------------ ------------
Intangible assets, at cost 53,000 50,000
Less accumulated amortization 1,000 1,000
------------ ------------
Net intangible assets 52,000 49,000
------------ ------------
$ 4,901,000 $ 5,087,000
============ ============
Liabilities and Shareholders' Equity
------------------------------------
Current liabilities:
Trade accounts payable $ 177,000 $ 167,000
Accrued expenses 519,000 578,000
Current maturities of long-term debt 28,000 30,000
------------ ------------
Total current liabilities 724,000 775,000
------------ ------------
Long-term debt less current maturities 350,000 347,000
Long-term debt - related entity 1,503,000 1,081,000
Other long-term liabilities 112,000 112,000
Redeemable preferred stock of $100 stated value;
5,000,000 shares authorized;
27,838 shares issued
and outstanding in 2001 and 2000 (note 4) 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 2001 and 2000 3,000 3,000
Capital in excess of par value 38,009,000 37,986,000
Accumulated deficit (34,831,000) (34,247,000)
Accumulated other comprehensive income (12,000) (13,000)
Treasury stock, 295,053, at cost, in 2001 and 2000 (1,846,000) (1,846,000)
------------ ------------
Total common shareholders' equity 1,323,000 1,883,000
------------ ------------
Commitments and contingencies (note 7)
$ 4,901,000 $ 5,087,000
============ ============
See accompanying notes to financial statements.
THE BEARD COMPANY AND SUBSIDIARIES
Statements of Operations
(Unaudited)
For the Three Months Ended
--------------------------
March 31, March 31,
2001 2000
---- ----
Revenues:
Coal reclamation $ 52,000 $ 12,000
Carbon dioxide 126,000 99,000
Natural gas well servicing - 65,000
China - -
e-Commerce - -
Environmental remediation - -
Other 5,000 6,000
----------- -----------
183,000 182,000
----------- -----------
Expenses:
Coal reclamation 129,000 175,000
Carbon dioxide 24,000 21,000
Natural gas well servicing 2,000 43,000
China - 83,000
e-Commerce - -
Environmental remediation 14,000 40,000
Selling, general and administrative 341,000 455,000
Depreciation, depletion and amortization 29,000 26,000
Other 13,000 10,000
----------- -----------
552,000 853,000
----------- -----------
Operating profit (loss):
Coal reclamation (118,000) (215,000)
Carbon dioxide 94,000 70,000
Natural gas well servicing (32,000) (28,000)
China - (109,000)
e-Commerce (51,000) (75,000)
Environmental remediation (17,000) (66,000)
Other, primarily corporate (245,000) (248,000)
----------- -----------
(369,000) (671,000)
Other income (expense):
Interest income 41,000 27,000
Interest expense (39,000) (1,000)
Equity in operations of unconsolidated
affiliates (57,000) 96,000
Gain on sale of assets 17,000 -
Minority interest in operations of
consolidated subsidiary - 6,000
Other 1,000 6,000
----------- -----------
Loss from continuing operations before income taxes (406,000) (537,000)
Income taxes (note 6) 60,000 (6,000)
----------- -----------
Loss from continuing operations (346,000) (543,000)
Loss from discontinued operations (note 3) (238,000) (245,000)
----------- -----------
Net loss $ (584,000) $ (788,000)
=========== ===========
Net loss per average common share outstanding:
Basic and diluted:
Loss from continuing operations $ (0.19) $ (0.30)
Loss from discontinued operations (0.13) (0.13)
----------- -----------
Net loss $ (0.32) $ (0.43)
=========== ===========
Weighted average common shares outstanding -
basic and diluted 1,829,000 1,829,000
=========== ===========
See accompanying notes to financial statements.
THE BEARD COMPANY AND SUBSIDIARIES
Statements of Shareholders' Equity
Accumulated Total
Capital in Other Common
Common Excess of Accumulated Comprehensive Treasury Shareholders'
Stock Par Value Deficit Income Stock Equity
----- --------- ------- ------ ----- ------
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 - 263,000 - - - 263,000
------- ------------ ------------ --------- ------------ ------------
Balance, December 31, 2000 3,000 37,986,000 (34,247,000) (13,000) (1,846,000) 1,883,000
Net loss, three months ended March 31, 2001 - - (584,000) - - (584,000)
(unaudited)
Comprehensive income:
Foreign currency translation
adjustment (unaudited) - - - 1,000 - 1,000
------------
Comprehensive loss (unaudited) - - - - - (583,000)
------------
Reservation of shares pursuant to deferred
compensation plan (unaudited) - 23,000 - - - 23,000
------- ------------ ------------ --------- ------------ ------------
Balance, March 31, 2001 (unaudited) $ 3,000 $ 38,009,000 $(34,831,000) $ (12,000) $ (1,846,000) $ 1,323,000
======= ============ ============ ========= ============ ============
See accompanying notes to financial statements.
THE BEARD COMPANY AND SUBSIDIARIES
Statements of Cash Flows
(Unaudited)
For the Three Months Ended
--------------------------
March 31, 2001 March 31, 2000
-------------- --------------
Operating activities:
Cash received from customers $ 245,000 $ 873,000
Cash paid to suppliers and employees (574,000) (1,392,000)
Interest received 20,000 12,000
Interest paid (84,000) (1,000)
Taxes (paid) refunded 60,000 (20,000)
----------- -----------
Net cash used in operating activities (333,000) (528,000)
----------- -----------
Investing activities:
Acquisition of property, plant and equipment (8,000) (176,000)
Proceeds from sale of assets 17,000 -
Proceeds from redemptions of certificates of deposit - 280,000
Investment in and advances to fifty percent-owned (107,000) (125,000)
subsidiary
Advances for notes receivable (22,000) (128,000)
Payments on notes receivable 89,000 67,000
Other 13,000 96,000
----------- -----------
Net cash provided by (used in) investing activities (18,000) 14,000
----------- -----------
Financing activities:
Proceeds from term notes 401,000 50,000
Payments on line of credit and term notes (5,000) (4,000)
----------- -----------
Net cash provided by financing activities 396,000 46,000
----------- -----------
Net increase (decrease) in cash and cash equivalents 45,000 (468,000)
Cash and cash equivalents at beginning of period 31,000 767,000
----------- -----------
Cash and cash equivalents at end of period $ 76,000 $ 299,000
=========== ===========
Continued
THE BEARD COMPANY AND SUBSIDIARIES
Statements of Cash Flows
(Unaudited)
Reconciliation of Net loss to Net Cash Used in Operating Activities
For the Three Months Ended
--------------------------
March 31, 2001 March 31, 2000
-------------- --------------
Net loss $ (584,000) $ (788,000)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation, depletion and amortization 29,000 26,000
Gain on sale of assets (17,000) -
Equity in operations of unconsolidated affiliates 296,000 149,000
Net cash used by discontinued operations offsetting
accrued impairment loss (31,000) (112,000)
Minority interest in operations of consolidated
subsidiary - (6,000)
Noncash compensation expense - 6,000
(Increase) decrease in accounts receivable, prepaid
expenses and other current assets (5,000) 172,000
(Increase) decrease in inventories (8,000) 3,000
Increase (decrease) in accounts payable, accrued
expenses and other liabilities (13,000) 22,000
----------- -----------
Net cash used in operating activities $ (333,000) $ (528,000)
=========== ===========
Supplemental Schedule of Noncash Investing and Financing Activities:
Issuance of subsidiary common stock in exchange for
ownership in applied-for patents $ - $ 10,000
=========== ===========
See accompanying notes to financial statements.
THE BEARD COMPANY AND SUBSIDIARIES
Notes to Financial Statements
March 31, 2001 and 2000
(Unaudited)
(1) Summary of Significant Accounting Policies
Basis of Presentation
The accompanying financial statements and notes thereto have been prepared
pursuant to the rules and regulations of the Securities and Exchange
Commission. Accordingly, certain disclosures normally prepared in
accordance with generally accepted accounting principles have been omitted.
The accompanying financial statements and notes thereto should be read in
conjunction with the audited consolidated financial statements and notes
thereto included in The Beard Company's 2000 annual report on Form 10-K.
The accompanying financial statements include the accounts of The Beard
Company and its wholly and majority-owned subsidiaries in which The Beard
Company has a controlling financial interest ("Beard or the Company").
Subdidiaries and investees in which Beard does not exercise control are
accounted for using the equity method. All significant intercompany
transactions have been eliminated in the accompanying financial statements.
The financial information included herein is unaudited; however, such
information reflects solely normal recurring adjustments which are, in the
opinion of management, necessary for a fair presentation of the results for
the interim periods presented.
The results of operations for the three-month period ended March 31, 2001,
are not necessarily indicative of the results to be expected for the full
year.
The Company's current significant operations are within the following
segments: (1) the Coal Reclamation ("Coal") Segment, (2) the Carbon Dioxide
("CO2") Segment, (3) the Natural Gas Well Servicing ("WS") Segment, (4) the
China ("China") Segment, (5) 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 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
As discussed in note 3, in April 1999, the Company's Board of Directors
adopted a formal plan to discontinue its interstate travel facilities
business (the "ITF" Segment). As discussed in note 3, in December 1999 the
Management Committee of NABR adopted a plan to discontinue its brine
extraction/iodine manufacturing business which comprised the Company's
("BE/IM") Segment. Also as discussed in note 3, the fixed assets of the
50%-owned company (accounted for as an equity investment) involved in
natural gas well testing operations have been sold.
(2) Liquidity and Ability to Fund Operations
As a result of the requirement to fund operating losses and the decision to
pursue other investment opportunities, the Company's cash and cash
equivalents decreased at March 31, 2001 compared to March 31, 2000. To
mitigate potential liquidity problems, the Company obtained financing of
$1.8 million in 2000, and an additional $250,000 in the 2001 first quarter.
$1.75 million of such funding was from an affiliate of the Company's
chairman. In addition, the Company expects to generate cash from the
disposition of assets of discontinued operations and from the pay down of
notes receivable. The sale of the fixed assets of the Company's 50%-owned
investee in the well testing business on May 4, 2001, resulted in the
distribution of $821,000 of cash to the Company and the reclassification of
a portion of a note receivable from long-term to current. As a consequence,
working capital improved $516,000 during the current quarter. The Company
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) Discontinued Operations
BE/IM Segment
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 has a 40% ownership in NABR, which was
accounted for under the equity method. As a result of NABR's planned
discontinuation, Beard's share of NABR's operating results have been
reported as discontinued for all periods presented in the accompanying
statements of operations. 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.
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. NABR's actual loss
for the three months ended March 31, 2000 was $56,000 which was charged
against the loss accrual recorded in 1999.
As of March 31, 2001, the significant assets related to NABR's operations
consisted primarily of equipment and inventory with estimated net
realizable values of $155,000 and $137,000, respectively. The significant
liabilities related to NABR's operations consisted primarily of accounts
payable of $6,000. 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 of 1999, the Company's Board of Directors adopted a formal plan to
discontinue its interstate travel facilities ("ITF") Segment and recorded a
$1,603,000 estimated loss for the discontinuance in 1998. In November of
1999 ITF disposed of a majority of its assets and was relieved of its
outstanding debt of $2,149,000 and accounts payable of $126,000. ITF
retained two convenience stores ("C-stores"), including their equipment and
inventory, and Beard became 100% owner of ITF.
In the fourth quarter of 1999, Beard recorded an additional $214,000 loss
related to the discontinued ITF Segment. ITF's revenues and actual
operating losses were $538,000 and $112,000, respectively, for the three
months ended March 31, 2000. The actual losses for the three months ended
March 31, 2000 were charged against the loss accrual recorded in the fourth
quarter of 1999.
Beard recorded an additional $420,000 loss in December 2000; $60,000
represented losses expected to be incurred by the discontinued ITF Segment
from the date of shutdown through the anticipated disposal date of the
remaining assets; $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. ITF's revenues and actual operating losses
were $7,000 and $31,000, respectively, for the three months ended March 31,
2001. The actual losses for the three months ended March 31, 2001 were
charged against the loss accrual recorded in the fourth quarter of 2000.
As of March 31, 2001, the significant assets related to the ITF Segment
consisted primarily of the two remaining C-stores with a total recorded
value of $515,000. The significant liabilities of the segment consist of
trade accounts payable and accrued expenses totaling $91,000. Beard is
actively seeking opportunities to sell the remaining C-stores and expects
them to be sold by mid-year 2001.
ITS-Testco, LLC
On May 4, 2001, the fixed assets of the 50% owned company involved in
natural gas well testing operations for the Natural Gas Well Servicing
Segment were sold for $1,550,000, subject to a 90 day hold back of
$150,000. Beard's share of operating losses from the discontinued company
were $238,000, including a provision of $100,000 for estimated losses from
the discontinuation of operations, and $245,000 for the three months ended
March 31, 2001 and 2000, respectively.
As of March 31, 2001 significant assets of the 50% owned company in the WS
Segment consisted of eight well servicing packages and other related fixed
assets with a recorded value of $1,133,000, cash of $50,000, and accounts
and other receivables totaling $311,000. The significant liabilities of the
entity consisted of trade accounts payable, accrued expenses and notes
payable to unrelated parties of $41,000, $376,000 and $515,000,
respectively. It is anticipated that all liabilities of the subsidiary,
totaling approximately $932,000, will be paid off during the 90 day hold
back period and that the company will be dissolved in May of 2002.
(4) Redeemable Preferred Stock
The Company's preferred stock is mandatorily redeemable through December
31, 2002, from one-third of Beard's "consolidated net income" as defined.
Accordingly, one-third of future "consolidated net income" will accrete
directly to preferred stockholders and reduce earnings per common share.
The Company's 2001 operations through March 31 were not sufficient to begin
the sharing of the consolidated net income. To the extent that the
preferred stock is not redeemed by December 31, 2002, the shares of
preferred stock can be converted into shares of the Company's common stock.
(5) Loss Per Share
Basic loss per share data is computed by dividing loss attributable to
common shareholders by the weighted average number of common shares
outstanding for the period.
Diluted loss per share in the statements of operations exclude potential
common shares issuable upon conversion of redeemable preferred stock or
exercise of stock options as a result of losses from continuing operations
for all periods presented.
(6) Income Taxes
In accordance with the provisions of the Statement of Financial Accounting
Standard No. 109, "Accounting for Income Taxes" ("SFAS No. 109"), the
Company's net deferred tax asset is being carried at zero book value, which
reflects the uncertainties of the Company's utilization of the future net
deductible amounts. The Company recorded refunds of $41,000 and $19,000 for
federal and state income taxes, respectively, for the three months ended
March 31, 2001. The $6,000 provision for income taxes for the three months
ended March 31, 2000 relates to federal alternative minimum taxes.
At March 31, 2001, the Company estimates that it had the following income
tax carryforwards available for both income tax and financial reporting
purposes (in thousands):
Expiration
Date Amount
---- ------
Federal regular tax operating loss carryforwards 2004-2009 $ 52,700
Tax depletion carryforward Indefinite $ 5,500
(7) Commitments and Contingencies
In the normal course of business various actions and claims have been
brought or asserted against the Company. Management does not consider them
to be material to the Company's financial position, liquidity or results of
operations.
At March 31, 2001, the Company was a guarantor of an 11.0%, $515,000
promissory note to a bank. The note was an obligation of ITS-Testco, the
Company's 50%-owned equity investment engaged in well testing operations in
northeastern Mexico. The note was to be repaid in June 2001 and was
separately guaranteed in full by the other 50% corporate owner of the joint
venture and the owners of that company, as individuals. As a result of the
sale of the fixed assets involved in the natural gas well testing
operations discussed in note 3 above, this note was paid in full on May 4,
2001.
In connection with the sale of the fixed assets of the Mexican well testing
operations the Company and its 50% partner have each, as to 50%,
indemnified the purchaser from and against any claims, demands, actions,
damages, cause of action, cost, liability, penalties and expense (including
reasonable legal fees) that purchaser or its successors or assigns may
suffer arising from the Mexican subsidiary's failure to file any applicable
tax returns or pay any and all of its taxes which had accrued prior to the
sale date. As of March 31, 2001, the accrued tax liabilities were estimated
to be $323,000, with the Company liable for one-half of such amount.
The Company has an indemnity obligation to its institutional preferred
stockholder and one of its assignees for certain losses (i) arising out of
the ownership and/or operation of Beard Oil's former oil and gas assets,
including environmental liabilities; (ii) arising under any employee
benefit or severance plan; or (iii) relating to any misrepresentation or
inaccuracy in any representation made by the Company or Beard Oil in
connection with the Restructure (collectively, the "Obligations"). Neither
Beard nor Beard Oil is presently aware of any material liabilities existing
as a result of such Obligations.
(8) Business Segment Information
The Company manages its business by products and services and by geographic
location (by country). The Company evaluates its operating segments'
performance based on earnings or loss from operations before income taxes.
The Company had five reportable segments in the first quarter of 2001 and
2000: Coal, 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 a wholly-owned company that has designed a sand
separator for use on natural gas wells and has had five separators 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 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 Natural Gas Environmental
Coal Dioxide Well Servicing China Remediation Other Totals
---- ------- -------------- ----- ----------- ----- ------
Three months ended
- ------------------
March 31, 2001
- --------------
Revenues from
external customers $ 52 $ 126 $ 47 $ - $ - $ - $ 225
Segment profit (loss) (118) 94 (32) (88) (17) (51) (212)
Segment assets 1,622 443 176 - 6 60 2,307
Three months ended
- ------------------
March 31, 2000
- --------------
Revenues from
external customers $ 12 $ 99 $ 65 $ - $ - $ - $ 176
Segment profit (loss) (215) 70 (28) (109) (66) (75) (423)
Segment assets 1,395 462 565 - 9 23 2,454
Reconciliation of total reportable segment loss to consolidated loss from
continuing operations before income taxes is as follows for the three
months ended March 31, 2001 and 2000 in thousands):
2001 2000
---- ----
Total loss for reportable segments $ (212) $ (423)
Net corporate costs not allocated to segments (194) (114)
------- --------
Total consolidated loss from continuing
operations $ (406) $ (537)
======= ========
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
THIS REPORT INCLUDES "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF
SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. ALL STATEMENTS OTHER THAN
STATEMENTS OF HISTORICAL FACTS INCLUDED OR INCORPORATED BY REFERENCE IN THIS
REPORT, INCLUDING, WITHOUT LIMITATION, STATEMENTS REGARDING THE COMPANY'S FUTURE
FINANCIAL POSITION, BUSINESS STRATEGY, BUDGETS, PROJECTED COSTS AND PLANS AND
OBJECTIVES OF MANAGEMENT FOR FUTURE OPERATIONS, ARE FORWARD-LOOKING STATEMENTS.
IN ADDITION, FORWARD-LOOKING STATEMENTS GENERALLY CAN BE IDENTIFIED BY THE USE
OF FORWARD-LOOKING TERMINOLOGY SUCH AS "MAY," "WILL," "EXPECT," "INTEND,"
"PROJECT," "ESTIMATE," "ANTICIPATE," "BELIEVE," OR "CONTINUE" OR THE NEGATIVE
THEREOF OR VARIATIONS THEREON OR SIMILAR TERMINOLOGY. ALTHOUGH THE COMPANY
BELIEVES THAT THE EXPECTATIONS REFLECTED IN SUCH FORWARD-LOOKING STATEMENTS ARE
REASONABLE, IT CAN GIVE NO ASSURANCE THAT SUCH EXPECTATIONS WILL PROVE TO HAVE
BEEN CORRECT. IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY FROM THE COMPANY'S EXPECTATIONS ("CAUTIONARY STATEMENTS") ARE
DISCLOSED UNDER "ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS" AND ELSEWHERE IN THIS REPORT. ALL
SUBSEQUENT WRITTEN AND ORAL FORWARD-LOOKING STATEMENTS ATTRIBUTABLE TO THE
COMPANY, OR PERSONS ACTING ON ITS BEHALF, ARE EXPRESSLY QUALIFIED IN THEIR
ENTIRETY BY THE CAUTIONARY STATEMENTS. THE COMPANY ASSUMES NO DUTY TO UPDATE OR
REVISE ITS FORWARD-LOOKING STATEMENTS BASED ON CHANGES IN INTERNAL ESTIMATES OR
EXPECTATIONS OR OTHERWISE.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion focuses on material changes in the Company's
financial condition since December 31, 2000 and results of operations for the
quarter ended March 31, 2001, compared to the prior year first quarter. Such
discussion should be read in conjunction with the Company's financial statements
including the related footnotes.
In preparing the discussion and analysis, the Company has presumed readers
have read or have access to the discussion and analysis of the prior year's
results of operations, liquidity and capital resources as contained in the
Company's 2000 Form 10-K.
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 a wholly-owned company that has designed a sand separator for use on natural
gas wells and has had five separators 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.
In April 1999 the Company adopted a plan to discontinue its "ITF" Segment,
and those operations were reflected as discontinued operations in 1998. The
majority of the assets of the ITF Segment were disposed of in November 1999 and
the Company is pursuing the sale of the remaining assets. In December 1999 the
Company adopted a plan to discontinue its "BE/IM" Segment, and those operations
were reflected as discontinued operations in 1999. The Company is now in the
process of liquidating those assets.
Material changes in financial condition - March 31, 2001 as compared with
December 31, 2000.
The following table reflects changes in the Company's financial condition
during the periods indicated:
March 31, December 31, Increase
2001 2000 (Decrease)
---- ---- ----------
Cash and cash equivalents $ 76,000 $ 31,000 $ 45,000
Working capital $ 357,000 $ (159,000) $ 516,000
Current ratio 1.49 to 1 0.79 to 1
During the first quarter of 2001, the Company increased its working capital
by $516,000 from $(159,000) as of December 31, 2000. A related entity of the
Chairman of the Board advanced $391,000 to the Company. As a result of the sale
of the fixed assets held by the 50%-owned company in the WS Segment, $410,000 of
a long-term note receivable was reclassified to current assets as of March 31,
2001. Payment of this amount was received on May 4, 2001. See note 3 to the
financial statements. $99,000 of working capital was used to help fund the
operations of the Coal Segment. There were net advances of $107,000 to the
Company's joint venture involved in natural gas well testing in northeastern
Mexico. The Company received payments on notes receivable totaling $89,000
during the quarter ended March 31, 2001. $88,000, $17,000 and $51,000,
respectively, were used to fund the startup activities of the China, E/R and
e-Commerce Segments. The remainder of the working capital was utilized to fund
other operations.
The Company's principal business is coal reclamation, and this is where
management's 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 late
May. 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.
The Company's project financing plans for the Coal Segment are on hold
until the status of the two projects we're working on has been determined.
Meanwhile, the Company's $300,000 bank line of credit together with the $1.75
million line of credit provided by a related party are expected to be sufficient
to meet the Company's working capital requirements through 2001. 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
pursuing a $1.5 million loan backed by its CO2 reserves at McElmo Dome. On May
4, 2001, the fixed assets of the 50% owned company involved in natural gas well
testing operations in northeastern Mexico were sold for $1,550,000, subject to a
90 day holdback of $150,000. It is anticipated that all liabilities of the
subsidiary will be paid off during the 90 day period and that the Company will
receive approximately $500,000, net of liabilities, from this sale.
The Company's 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. The
Company anticipates that its current resources and available credit lines are
sufficient to enable it to fund its operations through 2001.
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
accompanying financial statements.
Material changes in results of operations - Quarter ended March 31, 2001 as
compared with the Quarter ended March 31, 2000.
The loss for the first quarter of 2001 was $584,000 compared to $788,000
for the 2000 first quarter. The operating loss in the Coal Segment decreased by
$97,000. The operating profit in the CO2 Segment increased $24,000. The
operating loss in the Natural Gas Well Servicing Segment increased by $4,000.
The e-Commerce Segment incurred operating losses of $51,000 for the first
quarter of 2001 compared to $75,000 in the first quarter of 2000. There was a
$49,000 reduction in the operating losses of the ER Segment for the first
quarter of 2001 compared to the first quarter of 2000. The operating loss in
Other activities for the first quarter of 2001 decreased $3,000 compared to the
same period in 2000. As a result, the operating loss for the current quarter
decreased $302,000 to $369,000 versus $671,000 in the corresponding quarter of
the prior year.
Operating results of the Company's primary operating Segments are reflected
below:
2001 2000
---- ----
Operating profit (loss):
Coal reclamation $ (118,000) $ (215,000)
Carbon dioxide 94,000 70,000
Natural gas well servicing (32,000) (28,000)
China - (109,000)
e-Commerce (51,000) (75,000)
Environmental remediation (17,000) (66,000)
---------- ----------
Subtotal (124,000) (423,000)
Other (245,000) (248,000)
---------- ----------
$ (369,000) $ (671,000)
========== ==========
The "Other" in the above table reflects primarily general and corporate
activities, as well as other activities of the Company.
Coal reclamation
The Company increased its revenues to $52,000 for the first quarter of 2001
compared to $12,000 for the same period in 2000 as the result of obtaining
several small consulting and coring jobs in the year 2001. Operating costs
decreased $46,000 to $129,000 for the first quarter of 2001 compared to $175,000
for the same period in 2000. The decrease was primarily attributable to
significantly lower labor costs related to the drilling work performed in 2001
versus 2000. SG&A costs decreased $11,000 for the three months ending March 31,
2001 compared to the same period in 2000. As a result, the operating loss for
the first quarter of 2001 decreased $97,000 to $118,000 for the first quarter of
2001 compared to the first three months of 2000.
Carbon dioxide
First quarter 2001 operations reflected an operating profit of $94,000
compared to $70,000 for the 2000 first quarter. The sole component of revenues
for this segment is the sale of CO2 gas from the working and overriding royalty
interests of the Company's two carbon dioxide producing units in Colorado and
New Mexico. Operating revenues in this segment increased $27,000 or 27% to
$126,000 for the first three months of 2001 compared to $99,000 for the same
period in 2000. CO2 gas is often used as an injectant in secondary and tertiary
recovery processes in the oil and gas industry. The decline in oil prices in
late 1998-early 1999 caused a sharp decline in the demand for CO2 gas. Demand
began increasing in late 1999 and throughout 2000 as oil prices improved,
causing an increase in the demand for CO2 gas for tertiary recovery. This was
reflected in the increased revenue for the paid volumes to the Company's
interest.
Natural gas well servicing
The operations of both of the companies comprising the WS Segment, which
conduct natural gas well servicing operations in northeastern Mexico, were
suspended in late January, 2000 after contracts with Petroleos Mexicanos
("Pemex") were allowed to expire by Pemex rather than being "rolled over" as has
been the practice in the past. The sand separator company incurred an operating
loss of $32,000 for the first quarter of 2001 compared to a loss of $28,000 for
the same period in 2000. The operating and SG&A costs were reduced but not
enough to offset the decline in revenues which decreased from $65,000 for the
first quarter of 2000 to none for the same period in 2001.
e-Commerce
The Company's startup company involved in the development of a secure
Internet purchasing system incurred an operating loss of $51,000 for the first
quarter of 2001 versus an operating loss of $75,000 in the prior year quarter.
The segment had no revenues in either the first quarter of 2001 or 2000 while
pursuing the development of its technology.
Environmental remediation
The subsidiary in this segment utilizes a chemical for which it is the sole
U.S. licensee of a process for the remediation of creosote and PAH
contamination. This remains a startup operation which generated no revenues in
either the first quarter of 2001 or 2000. The segment produced an operating loss
of $17,000 in 2001 versus $66,000 in 2000, reflecting a decrease in operating
expenses due to a reduced level of corporate staffing during the first quarter
of 2001 compared to the same period in 2000.
Other activities
Other operations, consisting primarily of general and corporate activities,
generated a $3,000 smaller operating loss for the first quarter of 2001 as
compared to the same period last year.
Selling, general and administrative expenses
The Company's selling, general and administrative expenses ("SG&A") in the
current quarter decreased to $341,000 from $455,000 in the 2000 first quarter.
The primary reasons for this were a $11,000 decrease in SG&A expenses incurred
by the Coal Segment as the segment was downsized while its personnel continued
to seek new opportunities for its technology during the first three months of
2001 compared to the same period in 2000. The WS Segment incurred $15,000 less
in SG&A expenses for the first quarter of 2001 compared to the same period in
2000 as the segment continued to seek work for its sand separators. The
e-Commerce Segment incurred $50,000 in SG&A for the first quarter of 2001
compared to $75,000 for the same period in 2000. The E/R Segment incurred
$23,000 less in SG&A for the first quarter of 2001 compared to the same period
in 2000 as the Company reduced its financial support for the segment.
Depreciation, depletion and amortization expenses
DD&A expense increased $3,000 from $26,000 in the first quarter of 2000 to
$29,000 in the same period of 2001. The slight increase was due to a small
increase in the amount of equipment owned by the Company at March 31, 2001
compared to the same date in the year 2000.
Other income and expenses
The other income and expenses for the first quarter of 2001 netted to a
loss of $37,000 compared to $134,000 of income for the same period in 2000.
Interest income was up $14,000 for the first quarter of 2001 compared to the
same period in 2000 as a result of increased amounts loaned to fund our
partner's operations in Mexico. Interest expense was $38,000 higher as a result
of the increase in debt, primarily to a related party. The Company realized a
gain on sale of assets for the three months ended March 31, 2001 of $17,000 with
no comparable amount for the prior year quarter.
The Company's equity in the operations of unconsolidated affiliates was a
loss of $57,000 for the first quarter of 2001 compared to income of $96,000 for
the same period in 2000. The Company's equity in the earnings of Cibola
decreased $66,000 from $97,000 for the first quarter of 2000 to $31,000 for the
same period in 2001 reflecting Cibola's decline in operating results. Through a
wholly-owned subsidiary, 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 sale of
organic-chemical compound fertilizer ("OCCF") utilizing two types of organic
waste materials: sewage sludge and crop-residual agri-waste. The personnel
employed by the subsidiary devote all their time and energies to the development
of the business related to the technology utilized by the CJV's. The Company's
share of the losses from these operations was $88,000 for the three months ended
March 31, 2001.
Income taxes
The Company recorded refunds of $41,000 and $19,000 for federal and state
income taxes, respectively, in the first quarter of 2001 compared to $6,000 in
federal alternative minimum tax expense in the first quarter of 2000. The
Company has not recorded any financial benefit attributable to its various tax
carryforwards due to uncertainty regarding their utilization and realization.
Discontinued operations
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 has a 40% ownership in NABR, which was accounted for under
the equity method. As a result of NABR's planned discontinuation, Beard's share
of NABR's operating results have been reported as discontinued for all periods
presented in the accompanying statements of operations. 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.
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. NABR's actual loss for the three months ended March 31, 2000
was $56,000 which was charged against the loss accrual recorded in 1999.
As of March 31, 2001, the significant assets related to NABR's operations
consisted primarily of equipment and inventory with estimated net realizable
values of $155,000 and $137,000 respectively. The significant liabilities
related to NABR's operations consisted primarily of accounts payable of $6,000.
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 of 1999, the Company's Board of Directors adopted a formal plan to
discontinue its interstate travel facilities ("ITF") Segment and recorded a
$1,603,000 estimated loss for the discontinuance in 1998. In November of 1999
ITF disposed of a majority of its assets and was relieved of its outstanding
debt of $2,149,000 and accounts payable of $126,000. ITF retained two
convenience stores ("C-stores"), including their equipment and inventory, and
Beard became 100% owner of ITF.
In the fourth quarter of 1999, Beard recorded an additional $214,000 loss
related to the discontinued ITF Segment. ITF's revenues and actual operating
losses were $538,000 and $112,000, respectively, for the three months ended
March 31, 2000. The actual losses for the three months ended March 31, 2000 were
charged against the loss accrual recorded in the fourth quarter of 1999.
Beard recorded an additional $420,000 loss in December 2000; $60,000
represented losses expected to be incurred by the discontinued ITF Segment from
the date of shutdown through the anticipated disposal date of the remaining
assets; $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. ITF's revenues and actual operating losses were $7,000 and
$31,000, respectively, for the three months ended March 31, 2001. The actual
losses for the three months ended March 31, 2001 were charged against the loss
accrual recorded in the fourth quarter of 2000.
As of March 31, 2001, the significant assets related to the ITF Segment
consisted primarily of the two remaining C-stores with a total recorded value of
$515,000. The significant liabilities of the segment consist of trade accounts
payable and accrued expenses totaling $91,000. Beard is actively seeking
opportunities to sell the remaining C-stores and expects them to be sold by
mid-year 2001.
ITS-TESTCO, L.L.C.
In 1998 the Company invested in a 50%-owned subsidiary, ITS-Testco, L.L.C.,
which conducted natural gas well testing operations in Mexico as a subcontractor
to PEMEX or as a subcontractor to contractors working for PEMEX through a
wholly-owned subsidiary, Testco de Mexico, S.A. de C.V. The operations of these
entities have not been consolidated since the LLC was managed by our 50%
partner. This entity generated its initial revenues in the first quarter of 1999
which were not sufficient to cover the overhead costs of the operations. The
operations of this entity were severely curtailed in the first quarter of 2000
as Pemex allowed the contracts for its subcontractors providing services to
expire rather than have them automatically renew. The Company recorded
$1,069,000 as its share of losses from the LLC for the year ended December 31,
2000.
On May 4, 2001 the fixed assets of the LLC and its subsidiary were sold for
$1,550,000, subject to a 90 day hold back of $150,000. It is anticipated that
all liabilities of the LLC and its subsidiary will be paid off during the 90 day
period and that it will be dissolved in May of 2002.
The Company recorded a loss of $238,000, including a provision of $100,000
for estimated losses from the discontinuation of operations, for the first three
months of 2001 compared to a loss of $245,000 for the same period in 2000
relating to the operations of these entities.
As of March 31, 2001 significant assets of the 50% owned company in the WS
Segment consisted of eight well servicing packages and other related fixed
assets with a recorded value of $1,133,000, cash of $50,000, and accounts and
other receivables totaling $311,000. The significant liabilities of the entity
consisted of trade accounts payable, accrued expenses and notes payable to
unrelated parties of $41,000, $376,000 and $515,000, respectively. It is
anticipated that all liabilities of the subsidiary, totaling approximately
$932,000, will be paid off during the 90 day hold back period and that the
company will be dissolved in May of 2002.
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
March 31, 2001, 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.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
At March 31, 2001, the Company had notes receivable of $817,000 and
long-term debt of $1,881,000. The notes receivable and $1,581,000 of the
long-term debt have fixed interest rates and therefore, the Company's interest
income and expense and operating results would not be affected by an increase in
market interest rates for these items. At March 31, 2001, a 10% increase in
market interest rates would have reduced the fair value of the Company's notes
receivable by $3,000 and reduced the fair value of its long-term debt by less
than $18,000. The remaining $300,000 of debt bears interest at a variable rate
which is one-half percent above Chase Manhattan prime rate. The Company's
interest expense would be increased by less than $1,000 as a result of a 10%
increase in interest rates on this variable rate debt.
The Company has no other market risk sensitive instruments.
PART II. OTHER INFORMATION.
Item 2. Changes in Securities.
The Company's preferred stock is mandatorily redeemable through December
31, 2002 from one-third of Beard's "consolidated net income" as defined in the
Stock Purchase Agreement. Accordingly, one-third of future "consolidated net
income" will accrete directly to preferred stockholders and reduce earnings per
common share. As a result of these redemption requirements, the payment of any
dividends to the common stockholders in the near future is very unlikely. See
Note 5 to the accompanying financial statements.
Item 5: Other Information
On May 4, 2001, the fixed assets of the 50%-owned company (accounted for as
an equity investment) involved in natural gas well testing operations in the WS
Segment were sold for a total of $1,550,000 subject to a 90 day hold back of
$150,000. ITS-Testco, LLC, the 50%-owned company, sold its fixed assets for
$664,328 to Inter-Tech Drilling Solutions, Inc subject to a 90 day hold back of
$64,328. Testco Inc de Mexico, S.A. de C.V., the wholly-owned subsidiary of
ITS-Testco, LLC, sold its fixed assets to PD Oilfield Services Mexicana, S. de
R.L. de C.V., a wholly-owned subsidiary of Inter-Tech Drilling Solutions, Inc.
for $885,672 subject to a 90 day hold back of $85,672. The assets sold included
separators, line heaters, choke manifolds, light plants, trailers, trucks,
office equipment, and furniture and fixtures.
There is no relationship between the buyers and any officer or director of the
Company.
The following proforma balance sheet is presented as if the sale of the assets
had been completed on March 31, 2001:
THE BEARD COMPANY AND SUBSIDIARIES
PROFORMA BALANCE SHEET
MARCH 31, 2001
ASSETS
Historical Adjustments Pro Forma
---------- ----------- ---------
Current assets
Cash and cash equivalents $ 76,000 $ 821,000 (a) $ 897,000
Accounts receivable, net 297,000 - 297,000
Inventory 137,000 - 137,000
Other current assets 85,000 - 85,000
Current portion of notes receivable 486,000 (410,000) (a) 76,000
------------ ------------ ------------
Total current assets 1,081,000 411,000 1,492,000
Notes receivable 331,000 - 331,000
Investments and other assets 285,000 (411,000) (a) (126,000)
Property, plant and equipment, net 3,152,000 - 3,152,000
Intangible assets, net 52,000 - 52,000
------------ ------------ ------------
Total assets $ 4,901,000 $ - $ 4,901,000
============ ============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Trade accounts payable $ 177,000 $ - $ 177,000
Accrued expenses 519,000 - 519,000
Current maturities of long-term debt 28,000 - 28,000
------------ ------------ ------------
Total current liabilities 724,000 - 724,000
Long-term debt less current maturities 350,000 - 350,000
Long-term debt - related party 1,503,000 - 1,503,000
Other long-term liabilities 112,000 - 112,000
Redeemable preferred stock 889,000 - 889,000
Shareholders' equity
Capital stock 3,000 - 3,000
Capital in excess of par value 38,009,000 - 38,009,000
Accumulated deficit (34,831,000) - (34,831,000)
Accumulated other comprehensive income (12,000) - (12,000)
Treasury stock (1,846,000) - (1,846,000)
------------ ------------ ------------
Total shareholders' equity 1,323,000 - 1,323,000
------------ ------------ ------------
Total liabilities and shareholders' equity $ 4,901,000 $ - $ 4,901,000
============ ============ ============
<FN>
(a) Distribution of cash from ITS-Testco, LLC for sale of fixed assets.
(b) Pro forma statements of operations have been omitted as the disposition of
assets would not impact the historical continuing operations.
</FN>
Item 6. Exhibits and Reports on Form 8-K.
(a) The following exhibits are filed with this Form 10-Q and are identified by
the numbers indicated:
2 Plan of acquisition, reorganization, arrangement, liquidation
or succession:
2(a) Agreement and Plan of Reorganization by and among Registrant,
Beard Oil Company ("Beard Oil") and New Beard, Inc., dated as
of July 12, 1993 (see Addendum A to Part I, which is
incorporated herein by reference; schedules to the Agreement
have been omitted). (This Exhibit has been previously filed
as Exhibit 3(b), filed on July 27, 1993 to Registrant's
Registration Statement on Form S-4, File No. 33-66598, and
same is incorporated herein by reference).
2(b) Agreement and Plan of Merger by and between The Beard Company
and The New Beard Company, dated as of September 16, 1997.
(This Exhibit has been previously filed as Exhibit B to
Registrant's Proxy Statement filed on September 12, 1997, and
same is incorporated herein by reference).
2(c) Certificate of Merger merging The Beard Company into The New
Beard Company as filed with the Secretary of State of
Oklahoma on November 26, 1997. (This Exhibit has been
previously filed as Exhibit 2.1 to Registrant's Form 8-K,
filed on December 8, 1997, and same is incorporated herein by
reference).
3(i) Certificate of Incorporation of The New Beard Company as
filed with the Secretary of State of Oklahoma on September
11, 1997. (This Exhibit has been previously filed as Exhibit
C to Registrant's Proxy Statement filed on September 12,
1997, and same is incorporated herein by reference).
3(ii) Registrant's By-Laws as currently in effect. (This Exhibit
has been previously filed as Exhibit 3(ii) to Registrant's
Form 10-K for the period ended December 31, 1997, filed on
March 31, 1998, and same is incorporated herein by
reference).
4 Instruments defining the rights of security holders:
4(a) Certificate of Designations, Powers, Preferences and
Relative, Participating, Option and Other Special Rights, and
the Qualifications, Limitations or Restrictions Thereof of
the Series A Convertible Voting Preferred Stock of the
Registrant. (This Exhibit has been previously filed as
Exhibit 3(c) to Amendment No. 2, filed on September 17, 1993
to Registrant's Registration Statement on Form S-4, File No.
33-66598, and same is incorporated herein by reference).
4(b) Settlement Agreement, with Certificate of Amendment attached
thereto, by and among Registrant, Beard Oil, New York Life
Insurance Company, New York Life Insurance and Annuity
Company, John Hancock Mutual Life Insurance Company, Memorial
Drive Trust and Sensor, dated as of April 13, 1995. (This
Exhibit has been previously filed as Exhibit 4(g) to
Registrant's Form 10-K for the period ended December 31, 1994
and same is incorporated herein by reference).
10 Material contracts:
10(a) Amendment No. One to The Beard Company 1993 Stock Option Plan
dated August 27, 1993, as amended June 4, 1998. (The Amended
Plan supersedes the original Plan adopted on August 27, 1993.
This Exhibit has previously been filed as Exhibit A, filed on
April 30, 1998 to Registrant's Proxy Statement dated April
30, 1998, and same is incorporated herein by reference).*
10(b) Form of Indemnification Agreement dated December 15, 1994, by
and between Registrant and eight directors. (This Exhibit
has been previously filed as Exhibit 10(b) to Registrant's
Form 10-K for the period ended December 31, 2000, filed on
April 2, 2001, and same is incorporated herein by reference).
10(c) The Beard Company 1994 Phantom Stock Units Plan as amended
effective October 23, 1997. (This Exhibit has been previously
filed as Exhibit 10(b) to Registrant's Form 10-K for the
period ended December 31, 1999, filed on April 14, 2000, and
same is incorporated herein by reference).*
10(d) Amendment No. 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 herein
by reference).*
10(e) Amended and Restated Nonqualified Stock Option Agreement by
and between Richard D. Neely and ISITOP, Inc. ("ISITOP"),
dated November 12, 1998. (This Exhibit has been previously
filed as Exhibit 10(g) to Registrant's Form 10-K for the
period ended December 31, 1998, filed on April 15, 1999, and
same is incorporated herein by reference).*
10(f) Amended and Restated Nonqualified Stock Option Agreement by
and between Jerry S. Neely and ISITOP, dated November 12,
1998. (This Exhibit has been previously filed as Exhibit
10(h) to Registrant's Form 10-K for the period ended December
31, 1998, filed on April 15, 1999, and same is incorporated
herein by reference).*
10(g) Nonqualified Stock Option Agreement by and between Robert A.
McDonald and ISITOP, dated November 12, 1998. (This Exhibit
has been previously filed as Exhibit 10(i) to Registrant's
Form 10-K for the period ended December 31, 1998, filed on
April 15, 1999, and same is incorporated herein by
reference).*
10(h) Incentive Stock Option Agreement by and between Philip R.
Jamison and Beard Technologies, Inc. ("BTI"), dated May 18,
1998. (This Exhibit has been previously filed as Exhibit
10(k) to Registrant's Form 10-K for the period ended December
31, 1998, filed on April 15, 1999, and same is incorporated
herein by reference).*
10(i) Subscription Agreement by and between Cibola Corporation
("Cibola") and Registrant, dated April 10, 1996. (This
Exhibit has been previously filed as Exhibit 10.1 to
Registrant's Form 10-Q for the period ended June 30, 1996,
filed on August 14, 1996, and same is incorporated herein by
reference).
10(j) Nonrecourse Secured Promissory Note from Registrant to
Cibola, dated April 10, 1966. (This Exhibit has been
previously filed as Exhibit 10.2 to Registrant's Form 10-Q
for the period ended June 30, 1996, filed on August 14, 1996,
and same is incorporated herein by reference).
10(k) Security Agreement by and among Registrant, Cibola and the
Cibola shareholders, dated April 10, 1996. (This Exhibit has
been previously filed as Exhibit 10.3 to Registrant's Form
10-Q for the period ended June 30, 1996, filed on August 14,
1996, and same is incorporated herein by reference).
10(l) Tax Sharing Agreement by and among Registrant, Cibola and the
Cibola shareholders, dated April 10, 1996. (This Exhibit has
been previously filed as Exhibit 10.4 to Registrant's Form
10-Q for the period ended June 30, 1996, filed on August 14,
1996, and same is incorporated herein by reference).
10(m) Guaranty Agreement between Registrant and Oklahoma Bank and
Trust Company, dated as of June 7, 1999. (This Exhibit has
been previously filed as Exhibit 10(bb) to Registrant's Form
10-Q for the period ended June 30, 1999, filed on August 20,
1999, and same is incorporated herein by reference).
10(n) Letter Loan Agreement by and between Registrant and The
William M. Beard and Lu Beard 1988 Charitable Unitrust (the "
Unitrust") dated April 3, 2000. (This Exhibit has been
previously filed as Exhibit 10(cc) to Registrant's Form 10-K
for the period ended December 31, 1999, filed on April 14,
2000, and same is incorporated herein by reference).
10(o) Amended Letter Loan Agreement by and between Registrant and
the Unitrust dated September 1, 2000. (This Exhibit has been
previously filed as Exhibit 10(o) to Registrant's Form 10-Q
for the period ended September 30, 2000, filed on November
20, 2000, and same is incorporated herein by reference).
10(p) Amended Letter Loan Agreement by and between Registrant and
the Unitrust dated March 31, 2001.
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 herein by reference).
10(s) Promissory Note from Registrant to the Trustees of the
Unitrust dated October 20, 2000. (This Exhibit has been
previously filed as Exhibit 10(w) to Registrant's Form 10-K
for the period ended December 31, 2000, filed on April 2,
2001, and same is incorporated herein by reference).
10(t) Renewal Promissory Note from Registrant to the Trustees of
the Unitrust dated March 31, 2001.
10(u) Promissory Note from Registrant to Bank of Oklahoma, N.A.
("BOK") dated August 30, 2000. (This Exhibit has been
previously filed as Exhibit 10(r) to Registrant's Form 10-Q
for the period ended September 30, 2000, filed on November
20, 2000, and same is incorporated herein by reference).
10(v) Extension Promissory Note from Registrant to BOK dated
September 30, 2000. (This Exhibit has been previously filed
as Exhibit 10(s) to Registrant's Form 10-Q for the period
ended September 30, 2000, filed on November 20, 2000, and
same is incorporated herein by reference).
10(w) Extension Promissory Note from Registrant to BOK dated March
15, 2001.
10(x) Guaranty Agreement between the Unitrust and BOK dated August
30, 2000. (This Exhibit has been previously filed as Exhibit
10(t) to Registrant's Form 10-Q for the period ended
September 30, 2000, filed on November 20, 2000, and same is
incorporated herein by reference).
10(y) Guaranty Agreement between W. M. Beard and BOK dated August
30, 2000. (This Exhibit has been previously filed as Exhibit
10(u) to Registrant's Form 10-Q for the period ended
September 30, 2000, filed on November 20, 2000, and same is
incorporated herein by reference).
10(z) Asset Purchase and Sale Agreement among Testco Inc. de
Mexico, S.A. de C.V. and ITS-Testco, LLC and PD Oilfield
Services Mexicana, S. de R.L. de C.V., dated May 4, 2001.
10(aa) Asset Purchase and Sale Agreement between ITS-Testco, LLC and
Inter-Tech Drilling Solutions, Inc., dated May 4, 2001.
_________________
* 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 covered by this report.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
(Registrant) THE BEARD COMPANY
/s/ Herb Mee, Jr.
(Date) May 18, 2001 ___________________________________
Herb Mee, Jr., President and
Chief Financial Officer
/s/ Jack A. Martine
(Date) May 18, 2001 ___________________________________
Jack A. Martine, Controller and
Chief Accounting Officer
INDEX TO EXHIBITS
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 by and Incorporated herein by reference
between The Beard Company and The
New Beard Company, dated as of
September 16, 1997.
2(c) Certificate of Merger merging The Incorporated herein by reference
Beard Company into The New Beard
Company as filed with the Secretary
of State of Oklahoma on November
26, 1997.
3(i) Certificate of Incorporation of The Incorporated herein by reference
New Beard Company as filed with the
Secretary of State of Oklahoma on
September 11, 1997.
3(ii) Registrant's By-Laws as currently Incorporated herein by reference
in effect.
4(a) Certificate of Designations, Incorporated herein by reference
Powers, Preferences and Relative,
Participating, Option and Other
Special Rights, and the
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 Beard Incorporated herein by reference
Company 1993 Stock Option Plan
dated August 27, 1993, as amended
June 4, 1998.
10(b) Form of Indemnification Agreement Incorporated herein by reference
dated December 15, 1994, by and
between Registrant and eight
directors.
10(c) The Beard Company 1994 Phantom Incorporated herein by reference
Stock Units Plan as amended
effective October 23, 1997.
10(d) Amendment No. One to The Beard Incorporated herein by reference
Company Deferred Stock Compensation
Plan dated November 1, 1995, as
amended July 21, 1999.
10(e) Amended and Restated Nonqualified Incorporated herein by reference
Stock Option Agreement by and
between Richard D. Neely and
ISITOP, Inc. ("ISITOP"), dated
November 12, 1998.
10(f) Amended and Restated Nonqualified Incorporated herein by reference
Stock Option Agreement by and
between Jerry S. Neely and ISITOP,
dated November 12, 1998.
10(g) Nonqualified Stock Option Agreement Incorporated herein by reference
by and between Robert A. McDonald
and ISITOP, dated November 12,
1998.
10(h) Incentive Stock Option Agreement by Incorporated herein by reference
and between Philip R. Jamison and
Beard Technologies, Inc. ("BTI"),
dated May 18, 1998.
10(i) Subscription Agreement by and Incorporated herein by reference
between Cibola Corporation
("Cibola") and Registrant, dated
April 10, 1996.
10(j) Nonrecourse Secured Promissory Note Incorporated herein by reference
from Registrant to Cibola, dated
April 10, 1966.
10(k) Security Agreement by and among Incorporated herein by reference
Registrant, Cibola and the Cibola
shareholders, dated April 10, 1996.
10(l) Tax Sharing Agreement by and among Incorporated herein by reference
Registrant, Cibola and the Cibola
shareholders, dated April 10, 1996.
10(m) Guaranty Agreement between Incorporated herein by reference
Registrant and Oklahoma Bank and
Trust Company, dated as of June 7,
1999.
10(n) 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(o) Amended Letter Loan Agreement by Incorporated herein by reference
and between Registrant and the
Unitrust dated September 1, 2000.
10(p) Amended Letter Loan Agreement by Filed herewith electronically
and between Registrant and the
Unitrust dated March 31, 2001.
10(q) Promissory Note from Registrant to Incorporated herein by reference
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 Registrant to Incorporated herein by reference
the Trustees of the Unitrust dated
October 20, 2000.
10(t) Renewal Promissory Note from Filed herewith electronically
Registrant to the Trustees of the
Unitrust dated March 31, 2001.
10(u) Promissory Note from Registrant to Incorporated herein by reference
Bank of Oklahoma, N.A. ("BOK")
dated August 30, 2000.
10(v) Extension Promissory Note from Incorporated herein by reference
Registrant to BOK dated September
30, 2000.
10(w) Extension Promissory Note from Filed herewith electronically
Registrant to BOK dated March 15,
2001.
10(x) Guaranty Agreement between the Incorporated herein by reference
Unitrust and BOK dated August 30,
2000.
10(y) Guaranty Agreement between W. M. Incorporated herein by reference
Beard and BOK dated August 30,
2000.
10(z) Asset Purchase and Sale Agreement Filed herewith electronically
among Testco Inc. de Mexico, S.A.
de C.V. and ITS-Testco, LLC and PD
Oilfield Services Mexicana, S. de
R.L. de C.V., dated May 4, 2001.
10(aa) Asset Purchase and Sale Agreement Filed herewith electronically
between ITS-Testco, LLC and
Inter-Tech Drilling Solutions, Inc.,
dated May 4, 2001.