May 24, 2005
Mr. Bret Johnson VIA FACSIMILE:
Staff Accountant (202) 942-9531
Division of Corporation Finance
Securities and Exchange Commission
Washington, D.C. 20549-0510
Re: Form 10-K for the fiscal year
ended December 31, 2004
File No. 1-12396
Dear Mr. Johnson:
The following is offered in response to your letter of April 28, 2005 regarding
the Form 10-K of The Beard Company:
SEC Comment No. 1
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Item 7 - Contractual Obligations
The table below has been revised to set forth our contractual cash obligations
as of December 31, 2004, including estimated interest payments on our long- and
short-term debt, and our other long-term liabilities:
Payments Due By Period
----------------------------------------------------------------------------------
2010 and
Contractual Obligations Total 2005 2006-2007 2008-2009 Beyond
- ------------------------------- -------------- ------------- -------------- -------------- ------------
Long-term debt obligations $4,381,000 $ 583,000 $3,543,000 $ - $255,000
Interest payable on debt
obligations 639,000 127,000 448,000 61,000 3,000
Bonus/production payment 568,000 - 568,000 - -
Short-term debt obligations 200,000 200,000 - - -
Capital lease obligations
- - - - -
Operating lease obligations
282,000 206,000 76,000 - -
Purchase obligations
- - - - -
Other long-term liabilities 103,000 - - - 103,000
-------------- ------------- -------------- -------------- ------------
Total $6,173,000 $1,116,000 $4,635,000 $61,000 $361,000
============== ============= ============== ============== ============
The interest payable on debt obligations is based on the known and contracted
interest rates existing on the balance sheet date, December 31, 2004. The
Company's $1,200,000 of 10% Participating Notes bear interest at an annual rate
equal to the Wall Street Journal Prime Rate plus 4% with a floor of 10%. This is
the rate at which the projected cash obligation for interest payments has been
calculated in the above table for that debt issue. A 10% increase in interest
rates would increase the total interest payable over the term of the debt by
$13,000. Also included is the bonus/production payment of $568,000 to be paid
upon the debt's maturity of November 30, 2006. During the first quarter of 2005,
the Company placed an additional $1,845,000 of its 12% Convertible Subordinated
Notes due to be repaid February 15, 2010. This additional debt increases
interest payments by $113,000 for 2005, $221,000 for each of the years 2006 thru
2009, and $111,000 for 2010. These additional amounts raise the expected total
of the contractual cash obligations by $2,955,000 from $6,173,000 to $9,128,000.
SEC Comment No. 2
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Report of Independent Registered Public Accounting Firm
The auditors did submit a properly signed report. The conformed signature was
inadvertently omitted from the EDGAR version of the 10K. It was included in the
draft submitted to be EDGARIZED but was simply omitted. We failed to catch the
omission upon proofing the EDGAR version.
SEC Comment No. 3
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Statement of Shareholders' Equity (Deficiency)
Attached is a revised Statement of Shareholders' Equity which includes two
columns which record the changes in the number of preferred and common shares
for the periods covered by the Form 10-K for the fiscal year ended December 31,
2004. This format was adopted for the Statement of Shareholders' Equity for the
Form 10-Q for the three month period ended March 31, 2005, and will be followed
for all subsequent filings.
SEC Comment No. 4
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Note 1--Summary of Significant Accounting Policies
Earnings (Loss) Per Share
We have included the following comment in Note (5) of the Notes to Financial
Statements contained in the Form 10-Q for the period ended March 31, 2005:
"Included in the weighted average number of common shares outstanding
are the shares issuable according to the terms of the DSC Plan. These
shares are considered common stock equivalents because the covered
individuals may resign their positions at will which would also terminate
their participation in the DSC Plan resulting in the issuance of the
shares."
SEC Comment No. 5
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Note 5 --- Investments and Other Assets
Investment in Cibola Corporation
This issue was previously addressed in a letter from the Company dated May 5,
2005. In our telephone conversation on May 6 you verbally advised us that the
Staff agreed that it was proper not to consolidate Cibola.
SEC Comment No. 6
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Note 5 --- Investments and Other Assets
Investment in Cibola Corporation
This issue was previously addressed in a letter from the Company dated May 10,
2005. At this writing, the Company is still awaiting a decision regarding the
necessity of including audited financial statements of Cibola.
SEC Comment No. 7
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Note 9 (c) --- Long-term Debt
The Company would expand the narrative in footnote 9 (c) to the December 31,
2004 audited financial statements to read as follows (the addition is
in all CAPS):
"The note holders (of the Company's 10% Participating Notes) will also
collectively receive at maturity a bonus/production payment equivalent to
approximately $1 per ton for the coal expected to be recovered during the term
of the notes from a coal project described in the offering document. The total
amount for the bonus/production payment is expected to equal $568,000. THIS
AMOUNT IS BEING AMORTIZED OVER THE LIFE OF THE DEBT ISSUE AND IS BEING CHARGED
TO INTEREST EXPENSE. THE LIABILITY IS REFLECTED ON THE BALANCE SHEET IN OTHER
LONG-TERM LIABILITIES AND TOTALED $147,000 AT DECEMBER 31, 2004. As a result of
the estimated bonus/production payment, these notes have an effective interest
rate of 29%."
SEC Comment No. 8
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Item 9A --- Controls and Procedures
The Company believes the following disclosure, as included in the Form 10-Q for
the three months ended March 31, 2005, complies with the Commission's request
for amplification and offers the portions of the existing statement in all CAPS
in reply:
"Our principal executive officer and principal financial officer have
participated in and supervised the evaluation of our disclosure controls and
procedures that are designed to ensure that information required to be disclosed
by the issuer in the reports it files is recorded, processed, summarized and
reported, within the time periods specified in the Securities and Exchange
Commission's rules and forms. Disclosure controls and procedures include
CONTROLS AND PROCEDURES DESIGNED TO ENSURE THAT THE INFORMATION REQUIRED TO BE
DISCLOSED IN THE REPORTS THAT IT FILES IS ACCUMULATED AND COMMUNICATED TO OUR
MANAGEMENT, INCLUDING OUR PRINCIPAL EXECUTIVE OFFICER OR OFFICERS AND PRINCIPAL
FINANCIAL OFFICER TO ALLOW TIMELY DECISIONS REGARDING REQUIRED DISCLOSURE. Based
on their evaluation of those controls and procedures as of a date within 90 days
of the date of this filing, OUR CEO AND CFO DETERMINED THAT THE CONTROLS AND
PROCEDURES ARE EFFECTIVE. The evaluation resulted in no significant changes in
those controls or in other factors that could significantly affect the controls,
and no corrective actions with regard to significant deficiencies and material
weaknesses."
SEC Comment No. 9
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Exhibit 31
The certifications have been revised and are included, in the form of the
attached exbibits, in the Form 10-Q filed for the three months ended March 31,
2005:
General
The Commission's letter directed that we respond within 10 business days, or
advise when we would provide a response. In my telephone conversation with you
on May 7 you were kind enough to grant us an additional 10 business days to
respond.
The SEC comment letter requests that the Company provide a supplemental response
letter that keys its responses to the SEC comments and provides any requested
supplemental information. This letter and the enclosed attachments constitute
that supplemental response letter.
The Company acknowledges that it is responsible for the adequacy and accuracy of
the disclosure in its filings. Further, the Company acknowledges that staff
comments or changes to disclosure in response to staff comments do not foreclose
the Commission from taking any action with respect to the filing. Finally, the
Company acknowledges that it may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the federal
securities laws of the United States.
The Company would also like to note that these suggested changes have been
incorporated into the Form 10-Q filed for the three month period ended March 31,
2005 and will be incorporated into all future filings of the Company.
We would be happy to answer any questions you may have regarding the responses
or the Form 10-K itself.
Please acknowledge receipt hereof by returning one copy of this letter with your
filing stamp endorsed thereon. A stamped, self-addressed envelope is enclosed
for your convenience.
Sincerely,
THE BEARD COMPANY
HERB MEE, JR.
Herb Mee, Jr.
President and Chief Financial Officer
HMJr/do
cc: Mr. Jerry A. Warren, Esq.
c/o McAfee & Taft
Tenth Floor
Two Leadership Square
Oklahoma City, OK 73102
Mr. Michael Gibson
c/o Cole & Reed, P.C.
531 Couch Drive, Suite 200
Oklahoma City, OK 73102-2251
Mr. W. M. Beard
Chairman of the Board
c/o The Beard Company
Mr. Jack A. Martine
Chief Accounting Officer
c/o The Beard Company
THE BEARD COMPANY
A Schedule Attached to and Made a Part of The Beard Company's
May 24, 2005 Response to the SEC Comment Letter of April 28, 2005
SEC Comment No. 3
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THE BEARD COMPANY AND SUBSIDIARIES
Statements of Shareholders' Equity (Deficiency)
Total
Accumulated Common
Capital in Other Shareholders'
Preferred Common Excess of Accumulated Comprehensive Treasury Equity
Shares Stock Shares Stock Par Value Deficit Income Stock (Deficiency)
---------------- ---------------- ----------- ----------- ------------- --------- --------------
Balance, December 31, 2001 - $ - 3,657,690 $3,000 $38,081,000 $(36,568,000) $(14,000) $(1,846,000) $ (344,000)
Net loss - - - - - (4,614,000) - - (4,614,000)
Comprehensive income:
Foreign currency
translation adjustment - - - - - - (1,000) - (1,000)
-----------
Comprehensive loss - - - - - - - - (4,615,000)
-----------
Issuance of stock warrants - - - - 11,000 - - - 11,000
Reservation of shares
pursuant to deferred
compensation plan
(note 12) - - - - 115,000 - - - 115,000
---------------- ------------------ ----------- ----------- ------------ ----------- -----------
Balance, December 31, 2002 - - 3,657,690 3,000 38,207,000 (41,182,000) (15,000) (1,846,000) (4,833,000)
Net loss - - - - - (1,611,000) - - (1,611,000)
Comprehensive income:
Foreign currency
translation adjustment - - - - - - - - -
-----------
Comprehensive loss - - - - - - - - (1,611,000)
-----------
Expiration of mandatory
redemption option for
preferred stock 27,838 889,000 - - - - - - 889,000
Issuance of stock warrants - - - - 24,000 - - - 24,000
Reservation of shares
pursuant to deferred
compensation plan
(note 12) - - - - 198,000 - - - 198,000
Issuance of shares
pursuant to termination
of deferred stock
compensation plan - - 1,000,000 - (488,000) (1,358,000) - 1,846,000 -
---------------- ------------------ ----------- ----------- ------------ ----------- -----------
Balance, December 31, 2003 27,838 889,000 4,657,690 3,000 37,941,000 (44,151,000) (15,000) - (5,333,000)
Net earnings - - - - - 937,000 - - 937,000
Comprehensive income:
Foreign currency
translation adjustment - - - - - - - - -
-----------
Comprehensive income - - - - - - - - 937,000
-----------
Issuance of stock warrants - - 181,875 - 50,000 - - - 50,000
Reservation of shares
pursuant to deferred
compensation plan
(note 12) - - - - 202,000 - - - 202,000
---------------- ------------------ ----------- ----------- ------------ ----------- -----------
Balance, December 31, 2004 27,838 $889,000 4,839,565 $3,000 $38,193,000 $(43,214,000) $(15,000) $ - $(4,144,000)
================ ================= =========== ============ ========== =========== ===========
See accompanying notes to financial statements.
The Beard Company
A Schedule Attached To and Made a Part of The Beard Company's
May 24, 2005 Response to the SEC Comment Letter of April 28, 2005
SEC Comment No. 9
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Exhibit 31
The certifications have been revised and are included, in the form of the
attached exhibits, in the Form 10-Q filed for the three months ended March 31,
2005.
Exhibit 31.1
CERTIFICATIONS
I, William M. Beard, Chairman of the Board and Chief Executive Officer of The
Beard Company, certify that:
1. I have reviewed this quarterly report on Form 10-Q of The Beard Company;
2. Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
b) [reserved];
c) evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures as of the end
of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth quarter in the
case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of registrant's board of
directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
likely to adversely affect the registrant's ability to record,
process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls over financial reporting.
Date: May 16, 2005 /s/ William M. Beard
Signature: William H. Beard
Title: Chairman of the Board and
Chief Executive Officer
Exhibit 31.2
CERTIFICATIONS
I, Herb Mee, Jr., President and Chief Financial Officer of The Beard Company,
certify that:
1. I have reviewed this quarterly report on Form 10-Q of The Beard Company;
2. Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
b) [reserved];
c) evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures as of the end
of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth quarter in the
case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of registrant's board of
directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
likely to adversely affect the registrant's ability to record,
process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls over financial reporting.
Date: May 16, 2006 /s/ Herb Mee, Jr.
Signature: Herb Mee, Jr.
Title: President and
Chief Financial Officer