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 June 30, 2002

                                       or

[ ]  Transition  Report  Pursuant  to Section  13 or 15(d) of the  Securities
     Exchange Act of 1934



                         Commission File Number 1-12396


                                THE BEARD COMPANY
             (Exact name of registrant as specified in its charter)




          Oklahoma                                            73-0970298
(State or other jurisdiction of                             (I.R.S. Employer
incorporation or organization)                             Identification No.)


                           Enterprise Plaza, Suite 320
                              5600 North May Avenue
                          Oklahoma City, Oklahoma         73112
               (Address of principal executive offices) (Zip Code)



Registrant's telephone number, including area code:  (405) 842-2333

     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

     Indicate  the  number of  shares  outstanding  of each of the  registrant's
classes of common stock as of July 31, 2002.


                   Common Stock $.001333 par value - 1,828,845

<PAGE>
                                THE BEARD COMPANY

                                      INDEX




PART I.  FINANCIAL INFORMATION                                              Page

Item 1.   Financial Statements................................................3

    Balance Sheets - June 30, 2002 (Unaudited) and
       December 31, 2001......................................................3

    Statements of Operations - Three Months and Six Months
       ended June 30, 2002 and 2001 (Unaudited)...............................4

    Statements of Shareholders' Equity (Deficiency) -
       Year ended December 31, 2001
       and Six Months ended June 30, 2002 (Unaudited).........................5

    Statements of Cash Flows - Six Months ended
       June 30, 2002 and 2001 (Unaudited).....................................6

    Notes to Financial Statements (Unaudited).................................8

Item 2.   Management's Discussion and Analysis of
          Financial Condition and Results of Operations......................16

Item 3.   Quantitative and Qualitative Disclosures About
          Market Risk........................................................25


PART II.  OTHER INFORMATION

Item 2.   Changes in Securities..............................................26

Item 4.   Submission of Matters to a Vote of Security Holders................26

Item 6.   Exhibits and Reports on Form 8-K...................................27

Signatures...................................................................28

<PAGE>
PART I.  FINANCIAL INFORMATION

Item 1.   Financial Statements

<TABLE>
                                       THE BEARD COMPANY AND SUBSIDIARIES
                                                 Balance Sheets
<CAPTION>
                                                                               June 30,          December 31,
                             Assets                                              2002                2001
                             ------                                              ----                ----
<S>                                                                        <C>                  <C>
Current assets:
       Cash and cash equivalents                                           $       73,000       $       55,000
       Accounts receivable, less allowance for doubtful
          receivables of $107,000 in 2002 and 2001                                221,000              175,000
       Inventory                                                                    7,000               76,000
       Prepaid expenses and other assets                                           46,000               56,000
       Current portion of notes receivable                                        171,000              180,000
                                                                           --------------       --------------
                   Total current assets                                           518,000              542,000
                                                                           --------------       --------------
Notes receivable                                                                   72,000              108,000

Investments and other assets                                                      849,000              652,000

Property, plant and equipment, at cost                                          4,839,000            4,894,000
       Less accumulated depreciation, depletion and amortization                2,165,000            2,184,000
                                                                           --------------       --------------
                   Net property, plant and equipment                            2,674,000            2,710,000
                                                                           --------------       --------------
Intangible and other assets, at cost                                              151,000               48,000
       Less accumulated amortization                                               15,000                2,000
                                                                           --------------       --------------
                   Net intangible assets                                          136,000               46,000
                                                                           --------------       --------------
                                                                           $    4,249,000       $    4,058,000
                                                                           ==============       ==============


                   Liabilities and Shareholders' Equity (Deficiency)
                   -------------------------------------------------

Current liabilities:
       Trade accounts payable                                              $      178,000       $      156,000
       Accrued expenses                                                           312,000              429,000
       Current maturities of long-term debt                                       133,000              307,000
                                                                           --------------       --------------
                   Total current liabilities                                      623,000              892,000
                                                                           --------------       --------------

Long-term debt less current maturities                                          1,052,000               19,000

Long-term debt - related entities                                               2,898,000            2,494,000

Other long-term liabilities                                                       108,000              108,000

Redeemable preferred stock of $100 stated value;
       5,000,0000 shares authorized; 27,838 shares issued
       and outstanding in 2002 and 2001 (note 4)                                  889,000              889,000

Common shareholders' equity (deficiency):
       Common stock of $.001333 par value per share; 7,500,000
          shares authorized; 2,123,898 shares issued
          and outstanding in 2002 and 2001                                          3,000                3,000
       Capital in excess of par value                                          38,126,000           38,081,000
       Accumulated deficit                                                    (37,589,000)         (36,568,000)
       Accumulated other comprehensive loss                                       (15,000)             (14,000)
       Treasury stock, 295,053 shares, at cost, in 2002 and 2001               (1,846,000)          (1,846,000)
                                                                           --------------       --------------
                   Total common shareholders' equity (deficiency)              (1,321,000)            (344,000)
                                                                           --------------       --------------
Commitments and contingencies (note 7)
                                                                           $    4,249,000       $    4,058,000
                                                                           ==============       ==============
</TABLE>

See accompanying notes to financial statements.
<PAGE>
<TABLE>
                                            THE BEARD COMPANY AND SUBSIDIARIES
                                                 Statements of Operations
                                                        (Unaudited)
<CAPTION>
                                                            For Three Months Ended               For Six Months Ended
                                                            ----------------------               --------------------
                                                           June 30,         June 30,           June 30,          June 30,
                                                             2002             2001               2002              2001
                                                             ----             ----               ----              ----
<S>                                                     <C>               <C>               <C>               <C>
Revenues:
     Coal reclamation                                   $   11,000        $   45,000        $    12,000       $    97,000
     Carbon dioxide                                        109,000           116,000            195,000           242,000
     China                                                       -                 -                  -                 -
     e-Commerce                                                  -                 -                  -                 -
     Other                                                   7,000             7,000             10,000            12,000
                                                        ----------        ----------        -----------       -----------
                                                           127,000           168,000            217,000           351,000
                                                        ----------        ----------        -----------       -----------
Expenses:
     Coal reclamation                                      114,000           131,000            233,000           260,000
     Carbon dioxide                                         19,000            21,000             50,000            45,000
     China                                                       -                 -                  -                 -
     e-Commerce                                                  -                 -                  -                 -
     Selling, general and administrative                   307,000           326,000            560,000           616,000
     Depreciation, depletion & amortization                 36,000            21,000             59,000            44,000
     Other                                                   4,000             4,000             19,000            17,000
                                                        ----------        ----------        -----------       -----------
                                                           480,000           503,000            921,000           982,000
                                                        ----------        ----------        -----------       -----------
Operating profit (loss):
     Coal reclamation                                     (139,000)         (124,000)          (286,000)         (242,000)
     Carbon dioxide                                         81,000            86,000            128,000           180,000
     China                                                       -                 -                  -                 -
     e-Commerce                                            (39,000)          (52,000)           (75,000)         (103,000)
     Other, primarily corporate                           (256,000)         (245,000)          (471,000)         (466,000)
                                                        ----------        ----------        -----------       -----------
                                                          (353,000)         (335,000)          (704,000)         (631,000)
Other income (expense):
     Interest income                                        32,000            35,000             59,000            76,000
     Interest expense                                      (95,000)          (48,000)          (162,000)          (87,000)
     Equity in operations of unconsolidated affiliates     (89,000)          (49,000)          (120,000)         (106,000)
     Gain on sale of assets                                  1,000            51,000             10,000            68,000
     Other                                                  (1,000)            4,000             (1,000)            4,000
                                                        ----------        ----------        -----------       -----------

Loss from continuing operations before income taxes       (505,000)         (342,000)          (918,000)         (676,000)
Income taxes (note 6)                                            -                 -                  -            60,000
                                                        ----------        ----------        -----------       -----------

Loss from continuing operations                           (505,000)         (342,000)          (918,000)         (616,000)

     Loss from discontinued operations                     (55,000)         (147,000)          (103,000)         (457,000)
                                                        ----------        ----------        -----------       -----------
Net loss                                                $ (560,000)       $ (489,000)       $(1,021,000)      $(1,073,000)
                                                        ==========        ==========        ===========       ===========
Net loss per average common share outstanding:
     Basic and diluted:
        Loss from continuing operations                 $    (0.28)       $    (0.19)       $     (0.50)      $     (0.34)
        Loss from discontinued operations                    (0.03)            (0.08)             (0.06)            (0.25)
                                                        ----------        ----------        -----------       -----------
        Net loss                                        $    (0.31)       $    (0.27)       $     (0.56)      $     (0.59)
                                                        ==========        ==========        ===========       ===========

Weighted average common shares outstanding -
     basic and diluted                                   1,829,000         1,829,000          1,829,000         1,829,000
                                                        ==========        ==========        ===========       ===========
</TABLE>

See accompanying notes to financial statements.
<PAGE>

<TABLE>
                                                 THE BEARD COMPANY AND SUBSIDIARIES
                                           Statements of Shareholders' Equity (Deficiency)
<CAPTION>
                                                                                                                        Total
                                                                                       Accumulated                      Common
                                                          Capital in                      Other                      Shareholders'
                                             Common       Excess of     Accumulated   Comprehensive    Treasury         Equity
                                              Stock       Par Value       Deficit        Income          Stock       (Deficiency)
                                             ---------  -------------  -------------- -------------  -------------- ---------------

<S>                                          <C>        <C>            <C>            <C>            <C>            <C>
Balance, December 31, 2000                   $  3,000   $ 37,986,000   $( 34,247,000) $(    13,000)  $(  1,846,000) $    1,883,000

     Net loss                                       -              -      (2,321,000)            -               -      (2,321,000)
     Comprehensive income:
       Foreign currency translation
       adjustment                                   -              -               -        (1,000)              -          (1,000)

                                                                                                                    ---------------
     Comprehensive loss                             -              -               -             -               -      (2,322,000)
                                                                                                                    ---------------

     Reservation of shares pursuant to
       deferred compensation plan                   -         95,000               -             -               -          95,000

                                             ---------  -------------  -------------- -------------  -------------- ---------------

Balance, December 31, 2001                      3,000     38,081,000     (36,568,000)      (14,000)     (1,846,000)       (344,000)

     Net loss, six months ended June 30,            -              -      (1,021,000)            -               -      (1,021,000)
       2002 (unaudited)
     Comprehensive income:
       Foreign currency translation
       adjustment (unaudited)                       -              -               -        (1,000)              -          (1,000)

                                                                                                                    ---------------
     Comprehensive loss (unaudited)                 -              -               -             -               -      (1,022,000)
                                                                                                                    ---------------

     Reservation of shares pursuant to
       deferred compensation plan (unaudited)       -         45,000               -             -               -          45,000

                                             ---------  -------------  -------------- -------------  -------------- ---------------
Balance, June 30, 2002 (unaudited)           $  3,000   $ 38,126,000   $( 37,589,000) $(    15,000)  $(  1,846,000) $(   1,321,000)
                                             =========  =============  ============== =============  ============== ===============
</TABLE>

See accompanying notes to financial statements.

<PAGE>
<TABLE>
                                     THE BEARD COMPANY AND SUBSIDIARIES
                                          Statements of Cash Flows
                                                 (Unaudited)
<CAPTION>
                                                                              For the Six Months Ended
                                                                              ------------------------
                                                                          June 30, 2002       June 30, 2001
                                                                          -------------       -------------
<S>                                                                       <C>                 <C>
Operating activities:
      Cash received from customers                                        $    293,000        $    293,000
      Cash paid to suppliers and employees                                  (1,097,000)         (1,299,000)
      Interest received                                                         57,000              69,000
      Interest paid                                                           (155,000)           (120,000)
      Taxes (paid) refunded                                                          -              62,000
                                                                          ------------        ------------
           Net cash used in operating activities                              (902,000)           (995,000)
                                                                          ------------        ------------

Investing activities:
      Acquisition of property, plant and equipment                             (12,000)            (20,000)
      Acquisition of intangibles                                                (1,000)                  -
      Proceeds from sale of assets                                              77,000              68,000
      Investment in and advances to fifty percent-owned
         subsidiary in Mexico                                                  (10,000)           (347,000)
      Investment in and advances to fifty percent-owned
         subsidiary in China                                                  (403,000)                  -
      Advances for notes receivable                                             (7,000)           (302,000)
      Payments on notes receivable                                              73,000             896,000
      Other                                                                     63,000              41,000
                                                                          ------------        ------------
           Net cash provided by (used in) investing activities                (220,000)            336,000
                                                                          ------------        ------------

Financing activities:
      Proceeds from term notes                                               1,682,000           1,043,000
      Payments on line of credit and term notes                               (454,000)           (331,000)
      Capitalized costs associated with issuance of subordinated debt          (88,000)                  -
                                                                          ------------        ------------
           Net cash provided by financing activities                         1,140,000             712,000
                                                                          ------------        ------------

Net increase in cash and cash equivalents                                       18,000              53,000

Cash and cash equivalents at beginning of period                                55,000              31,000
                                                                          ------------        ------------
Cash and cash equivalents at end of period                                $     73,000        $     84,000
                                                                          ============        ============
</TABLE>

Continued

<TABLE>
                                     THE BEARD COMPANY AND SUBSIDIARIES
                                          Statements of Cash Flows
                                                 (Unaudited)

Reconciliation of Net loss to Net Cash Used in Operating Activities
<CAPTION>
                                                                              For the Six Months Ended
                                                                              ------------------------
                                                                          June 30, 2002       June 30, 2001
                                                                          -------------       -------------
<S>                                                                       <C>                 <C>
Net loss                                                                  $ (1,021,000)      $ (1,073,000)
Adjustments to reconcile net loss to net cash
 used in operating activities:
      Depreciation, depletion and amortization                                  59,000             71,000
      Gain on sale of assets                                                   (58,000)           (68,000)
      Equity in operations of unconsolidated affiliates                        124,000            394,000
      Net cash used by discontinued operations offsetting
          accrued impairment loss                                               (6,000)           (37,000)
      Increase in accounts receivable, prepaid expenses and
         other current assets                                                  (27,000)          (194,000)
      Decrease in inventories                                                   69,000            105,000
      Decrease in accounts payable, accrued
         expenses and other liabilities                                        (42,000)          (193,000)
                                                                          ------------       ------------
      Net cash used in operating activities                               $   (902,000)      $   (995,000)
                                                                          ============       ============
</TABLE>

See accompanying notes to financial statements.

<PAGE>
                       THE BEARD COMPANY AND SUBSIDIARIES
                          Notes to Financial Statements

                             June 30, 2002 and 2001
                                   (Unaudited)

(1)  Summary of Significant Accounting Policies

     Basis of Presentation

     The accompanying  financial statements and notes thereto have been prepared
     pursuant  to the rules  and  regulations  of the  Securities  and  Exchange
     Commission.   Accordingly,   certain   disclosures   normally  prepared  in
     accordance  with  accounting  principles  generally  accepted in the United
     States have been omitted.  The accompanying  financial statements and notes
     thereto  should  be read  in  conjunction  with  the  audited  consolidated
     financial statements and notes thereto included in The Beard Company's 2001
     annual report on Form 10-K.

     The  accompanying  financial  statements  include the accounts of The Beard
     Company and its wholly and  majority-owned  subsidiaries in which The Beard
     Company has a  controlling  financial  interest  ("Beard or the  Company").
     Subsidiaries  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 and  six-month  periods ended June
     30, 2002, are not necessarily  indicative of the results to be expected for
     the full year.

     The  Company's  current  significant  operations  are within the  following
     segments: (1) the Coal Reclamation ("Coal") Segment, (2) the Carbon Dioxide
     ("CO2") Segment,  (3) the China ("China")  Segment,  and (4) the e-Commerce
     ("e-Commerce") Segment.

     The Coal  Segment is in the business of  operating  coal fines  reclamation
     facilities  in the U.S. and provides  slurry pond core  drilling  services,
     fine coal laboratory  analytical services and consulting services.  The CO2
     Segment  consists  of the  production  of CO2 gas.  The  China  Segment  is
     pursuing environmental  opportunities in China focusing on the installation
     and construction of facilities which utilize the patented  AirLance Compost
     Systems (trademark) composting technology.  The e-Commerce Segment consists
     of a 71%-owned  subsidiary which is pursuing the development of a virtually
     secure payment system to be used exclusively for Internet transactions. Its
     current  focus is to  develop  licensing  arrangements  and other fee based
     arrangements  with companies  implementing  technology in conflict with its
     intellectual property.

     As  discussed  in note 3: (1) In 1999,  the  Company's  Board of  Directors
     adopted a formal  plan to  discontinue  its  interstate  travel  facilities
     business (the "ITF" Segment); (2) in 1999 the Management Committee of North
     American Brine Resources  ("NABR")  adopted a plan to discontinue its brine
     extraction/iodine  manufacturing  business  which  comprised  the Company's
     ("BE/IM")  Segment;  (3) in May  2001 the  fixed  assets  of the  50%-owned
     company (accounted for as an equity investment) involved in the Natural Gas
     Well  Servicing  ("WS")  Segment were sold and in August 2001,  the Company
     ceased pursuing  opportunities in Mexico and the segment was  discontinued;
     and (4) in March 2001 the Company ceased providing financial support to its
     environmental  remediation  ("ER")  subsidiary,   its  exclusive  marketing
     license was subsequently cancelled, and the ER Segment was discontinued.

     Investments

     The Company  owns a 50%  interest in  ABT-Beard,  L.L.C.  ("ABT-Beard"),  a
     company  involved  in  pursuing   environmental   opportunities  in  China.
     ABT-Beard  had no revenues for either the first six months of 2002 or 2001.
     ABT-Beard  incurred  losses of $243,000 and $179,000 for the second quarter
     of 2002 and 2001,  respectively.  ABT-Beard incurred losses of $390,000 and
     $355,000 for the first six months of 2002 and 2001, respectively.

     Impact of Recently Issued Accounting Standards Not Yet Adopted

     In June 2001, the Financial  Accounting  Standards  Board  ("FASB")  issued
     Statement No. 142,  "Goodwill and Other Intangible  Assets".  Statement No.
     142 applies to intangible  assets acquired  individually or with a group of
     other assets at  acquisition  and subsequent to  acquisition.  According to
     Statement No. 142,  intangible  assets are to be recorded at fair value and
     goodwill will not be amortized, but assessed annually for impairment.

     In September 2001, the FASB issued Statement No. 143, "Accounting for Asset
     Retirement   Obligations".  Statement   No.  143  applies  to  the  initial
     measurement and subsequent  accounting for obligations  associated with the
     sale, abandonment, or other type of disposal of long-lived tangible assets.
     The statement  requires that asset retirement  obligations be recognized at
     fair value when the obligation is incurred.

     In October  2001,  the FASB issued  Statement No. 144, "Accounting  for the
     Impairment  or Disposal of  Long-Lived  Assets." The assets  covered by the
     statement  include  those to be held and used or to be disposed of, such as
     assets under capital leases of lessees,  assets subject to operating leases
     of lessors,  and prepaid assets.  This statement  provides guidance for the
     recognition  and  measurement  of an  impairment  loss for certain types of
     long-lived assets and expands the scope of discontinued operations.

     The Company has adopted FASB  Statements No. 142 and 144 effective  January
     1, 2002 for the fiscal year ended  December  31, 2002 and the impact is not
     material.  The  Company  will be  required  to  adopt  FASB  Statement  143
     effective  January 1, 2003 for the fiscal year ended December 31, 2003. The
     Company has not  evaluated  the effects of Statement  No. 143, but does not
     believe that adoption of this  accounting  standard will have a significant
     effect on the financial position or results of operations of the Company.

     Reclassifications

     Certain  2001  balances  have  been  reclassified  to  conform  to the 2002
     presentation.  As described in note 3, the Company  discontinued two of its
     segments.   As  a  result  the  2001   statement  of  operations  has  been
     reclassified to reflect the two segments' operations as discontinued.


(2)  Liquidity and Ability to Fund Operations

     The Company's cash and cash equivalents  increased $18,000 at June 30, 2002
     compared to December 31, 2001. To mitigate  potential  liquidity  problems,
     the Company  obtained  financing  of $1.8 million in 2000,  including  $1.5
     million from an affiliate of the Company's  chairman.  This credit line was
     increased  to  a  total  of  $2,250,000  in  September  of  2001,  and  was
     subsequently  increased  to  $2,625,000  in February  of 2002.  The line is
     secured  by a pledge of  approximately  89% of the  Company's  working  and
     overriding  royalty interests in the McElmo Dome Unit. As a result of these
     actions and the private  placement of $1,200,000 of 10% subordinated  notes
     discussed below, working capital improved $245,000 during the first half of
     2002.

     The  Company is focusing  on  replacing  its Coal  Segment's  revenues  and
     currently has three major projects in various stages of development, all of
     which, subject to arranging necessary financing, are ultimately expected to
     mature into operating  projects.  In each case core holes have been drilled
     and  sample  analyses  have been  completed  with  favorable  results.  The
     projects are in three different states and involve three different parties.
     Negotiations  are in  progress  with the pond owner of one of the  projects
     concerning the  installation of a preparation  plant to recover clean coal.
     The  installation  of this project  requires the  arrangement  of necessary
     financing.  Negotiations are in progress with a third party to form a joint
     venture or limited  liability  company (llc) that would provide the initial
     working  capital and guarantee the  necessary  equipment  financing on this
     project,  and give the llc the right of first  refusal  to  participate  in
     future recovery projects that require financing.  A second project involves
     the transfer of a large amount of non-recoverable  slurry to a new disposal
     area, and may ultimately result in the installation of a preparation plant.
     The initial phase of this project  would  require no  financing.  We have a
     high  level of  confidence  that we will be able to  start at least  one of
     these two  projects  this  year.  Although  the  exact  timing of the three
     projects is uncertain,  they are all considered to have a high  probability
     of activity.  However, no definitive contracts have as yet been signed, and
     there is no assurance that the required  financing will be obtained or that
     any or all of the projects will materialize.

     Development activity in the China Segment,  meanwhile,  has been plagued by
     delays.  Although we had reached agreements and/or formed Cooperative Joint
     Ventures  ("CJV's")  with  various  Chinese  partners  which called for the
     construction of three compost manufacturing facilities in which the Company
     would own an interest and receive an operating  fee, two of these  (Baoding
     and Qihe City) are now on indefinite hold pending resolution of some of the
     financing  terms.  It  appears  that the  third  CJV,  which  calls for the
     construction  of a plant  in the  City of  Handan  and  which  had  been on
     indefinite  hold,  is now  poised  to move  forward.  Terms of a  financing
     arrangement  have now been  verbally  agreed to with  third  parties in the
     U.S., and definitive  agreements are in the process of being  prepared.  In
     the event these  projects  materialize  they would  result in  contracts in
     which the segment would receive front-end fees, but might or might not have
     an equity  interest.  The segment is continuing to pursue a number of other
     projects,  several  of which are  believed  to have a high  probability  of
     occurrence.  It now appears that only Handan may  materialize in 2002, with
     the other projects falling into 2003 and beyond.

     Key to the Company's liquidity is the anticipated  settlement of a lawsuit,
     in which the Company is a Plaintiff, which has been in progress since 1996.
     A Settlement  Agreement  was signed by the parties in September of 2001. On
     May 6, 2002,  the federal  judge issued the Final  Judgment  approving  the
     Settlement  and ordered that a settlement  fund of $50.4 million in cash be
     established to settle the class action lawsuit. In companion rulings on the
     same date the Judge also approved the allocation of settlement  funds among
     the class members in the lawsuit. In late May, 2002,  objectors entitled to
     receive  approximately  $107,000 of the total settlement filed an appeal to
     the final approval of the settlement.  Distribution of the proceeds will be
     delayed  until all appeal  periods  have run. The Company  anticipates  its
     share of the proceeds  will be in excess of $3.5 million.  Distribution  of
     the contemplated proceeds will have a significant impact upon the Company's
     liquidity. Although there is the possibility that the appeals process could
     delay the  Settlement  into late 2003 or  possibly  early  2004 or that the
     objecting  parties could  ultimately cause the Settlement to be overturned,
     the Company believes it is unlikely that the Settlement will be overturned.

     To further  bolster  working  capital,  the Company was  successful  in the
     private placement of $1,200,000 of 10% subordinated notes due September 30,
     2003, to "bridge the gap" until the  settlement  funds are  distributed  or
     until the anticipated  Coal and China projects  achieve positive cash flow.
     In the event the notes have not been  redeemed by the maturity  date,  they
     will be  automatically  extended to March 31, 2005. An  investment  banking
     firm received warrants to purchase 45,000 shares of Company common stock as
     part of its sales  compensation in connection  with the offering.  The note
     holders  have the  contingent  right to receive  up to  240,000  additional
     warrants  depending  upon the length of time their notes are held.  Related
     parties purchased $320,000 of the offering.

     In addition,  the Company  expects to generate cash from the disposition of
     the remaining assets from the  discontinued  ITF, BE/IM and WS Segments and
     from the pay down of notes receivable, and can sell certain other assets to
     generate cash if necessary.

     The  Company  believes  that  the cash  generated  from  the  private  debt
     placement and the remaining  portion of its credit lines,  coupled with the
     cash  generated  from the sale of assets,  will be  adequate  to enable the
     Company to continue  operations  until (i) the  settlement  funds have been
     received or (ii) the  operations of the projects  under  development in the
     Coal and China  Segments  have come on stream and the Company is generating
     positive cash flow.


(3)  Discontinued Operations

     ITF Segment

     In  1999  the  Company's  Board  of  Directors  adopted  a  formal  plan to
     discontinue its interstate travel facilities ("ITF") Segment and recorded a
     $1,603,000 estimated loss for the discontinuance in 1998. ITF disposed of a
     majority  of  its  assets  in  1999,   retaining  two  convenience   stores
     ("C-stores"),  including  their  equipment and inventory,  and Beard became
     100% owner of ITF.

     Beard  recorded an additional  $420,000 loss in 2000;  $60,000  represented
     operating  losses expected to be incurred by the  discontinued  ITF Segment
     prior to the anticipated  disposal date of the remaining  assets;  $360,000
     represented an additional  reduction in the estimated  realizable  value of
     the  remaining  C-stores and related  assets as of December  31, 2000.  The
     discontinued  ITF Segment had no revenues  for the three  months ended June
     30, 2001 while recording  revenues of $7,000 for the six-month period ended
     June 30, 2001.  ITF's actual  operating  losses for the three and six-month
     periods  ended June 30, 2001 were $6,000 and  $37,000,  respectively.  Such
     losses were charged against the loss accrual recorded in the fourth quarter
     of 2000.

     In December 2001, Beard recorded an additional  $100,000  impairment in the
     carrying  value of the  facilities  and $14,000 for  anticipated  operating
     losses for the period from December 31, 2001 through the expected  disposal
     date of the remaining  assets.  ITF recorded no revenues for the first half
     of 2002 and  incurred  $2,000  and  $6,000  of  losses  for the  three  and
     six-months ending June 30, 2002 which were charged against the loss accrual
     recorded  in 2001.  Included in the losses was a $2,000 gain on the sale of
     equipment.

     As of June 30,  2002,  the  significant  assets  related to the ITF Segment
     consisted  primarily of the two remaining  C-stores and other assets with a
     total  recorded  value of  $406,000.  The  significant  liabilities  of the
     segment  consisted of trade accounts payable and accrued expenses  totaling
     $11,000.  Beard is actively  seeking  opportunities  to sell the  remaining
     C-stores and expects them to be sold by December 31, 2002.

     BE/IM Segment

     In 1999 the Management Committee of North American Brine Resources ("NABR")
     adopted a formal  plan to  discontinue  the  business  and  dispose  of its
     assets.  Beard had a 40%  ownership in NABR,  which was accounted for under
     the equity method.  As a result,  Beard's share of NABR's operating results
     has  been  reported  as  discontinued  for  all  periods  presented  in the
     accompanying  statements of operations.  The joint venture was dissolved in
     September 2000 and the Japanese partners received their final  distribution
     of cash in December 2000, with the Company taking over the remaining assets
     and liabilities.

     In 1999 Beard  recorded a $540,000  loss,  which  represented  its share of
     NABR's $1,350,000  estimated loss from the  discontinuation  of operations.
     NABR's loss included $572,000 of anticipated operating losses through April
     2000 (the date  operations  ceased  for the larger of its two  plants)  and
     costs of ceasing  operations.  Revenues  for the  smaller of the two plants
     were $43,000 and $120,000 for the three and  six-month  periods  ended June
     30, 2002,  respectively.  The net losses for the three and six-months ended
     June  30,  2002  were  $30,000  and  $67,000,  respectively,  and  were not
     anticipated  in the loss  accruals  recorded in 1999.  The Company  charged
     $5,000 and $7,000 for the three and six-month  periods ended June 30, 2002,
     respectively,  against the accrual for anticipated  expenses related to the
     shutdown  of the  larger  of its two  plants.  Revenues  for the  three and
     six-month periods ending June 30, 2001 were $116,000.  The actual operating
     results  for the three and  six-month  periods  ending  June 30,  2001 were
     losses of $12,000 and $43,000, respectively, which were charged against the
     loss accrual recorded in 1999. In addition,  the Company recorded losses of
     $1,000 and $26,000 for the three and six-month periods ended June 30, 2001,
     respectively,  for  the  operations  of  the  smaller  of  the  two  plants
     distributed  to Beard from NABR.  These losses were not  anticipated in the
     loss accrual of 1999.

     As of June 30, 2002, the  significant  assets related to NABR's  operations
     consisted   primarily  of  equipment  and  inventory   with  estimated  net
     realizable  values of $68,000 and  $7,000,  respectively.  The  significant
     liabilities  related to NABR's operations  consisted  primarily of accounts
     payable  of  $4,000  and  accrued  expenses  related  to  the  shutdown  of
     operations  totaling  $146,000.  The  smaller  of the two  plants  was sold
     effective July 31, 2002, which will eliminate future operating losses after
     such date. The Company is actively  pursuing  opportunities  to sell NABR's
     remaining  assets and expects the  disposition  to be completed by December
     31, 2002.

     WS Segment

     In May 2001 the fixed assets of the 50%-owned company  (accounted for as an
     equity investment)  involved in natural gas well testing operations for the
     Natural Gas Well Servicing ("WS") Segment were sold for $1,550,000, subject
     to a holdback of $150,000.  The Company received $21,000 and $65,000 of the
     holdback in June and November,  respectively,  of 2001. In May,  2002,  the
     Company received $35,000,  net of attorney's fees of $29,000,  representing
     the  remainder  of the  holdback.  As a result  of the sale all debt of the
     50%-owned  company was retired and the Company was  relieved of  contingent
     liabilities totaling $512,000. In August 2001 the Company made the decision
     to  cease  pursuing   opportunities  in  Mexico  and  the  WS  Segment  was
     discontinued.  In  December  2001 all of the sand  separators  owned by the
     100%-owned company in the WS Segment were sold for $100,000. The Company is
     now pursuing the sale of all remaining equipment owned by the segment.

     The segment  recorded no revenues for the first half of 2002 and $3,000 for
     the  first  half of  2001.  Beard's  share  of  operating  losses  from the
     discontinued  segment was $25,000 and $36,000 for the three and  six-months
     ended June 30, 2002,  respectively.  The loss for the first quarter of 2002
     included  gains on sales of equipment  totaling  $36,000.  Beard's share of
     operating losses from the  discontinued  segment was $145,000 and $414,000,
     respectively, for the three and six-month periods ending June 30, 2001. For
     the  first  half of  2001,  Beard's  share  of  operating  losses  from the
     50%-owned  company was  $312,000,  including a $175,000  provision  for the
     discontinuation of operations. The remaining $102,000 of losses incurred in
     the six months ended June 30, 2001 were  associated  with the operations of
     the wholly-owned company and were not anticipated in the loss accrual.

     As of June 30, 2002, the significant  assets of the WS Segment consisted of
     fixed  assets  with a  recorded  value of  $141,000  and cash and  accounts
     receivable totaling of $18,000.  The significant  liabilities of the entity
     consisted of trade accounts payable and accrued expenses  totaling $58,000.
     It is anticipated that all liabilities of the segment will be paid prior to
     December 31, 2002.

     ER Segment

     In March of 2001 the  Company  determined  that it would no longer  provide
     financial support to ISITOP, Inc., an 80%-owned subsidiary  specializing in
     the remediation of polycyclic aromatic  hydrocarbon ("PAH")  contamination.
     The   operations   of  ISITOP  had   previously   comprised  the  Company's
     environmental  remediation  ("ER")  Segment.  On May 31,  2001,  ISITOP was
     notified  by the  Licensor  that the  segment's  exclusive  U.S.  marketing
     license for the chemical used for such PAH  remediation had been cancelled.
     ISITOP generated no revenues in 2002 or in 2001.  ISITOP's operating losses
     for the six months  ended June 30, 2002  totaled less than $1,000 which was
     all  incurred  in the second  quarter  of the year.  The  operating  losses
     totaled  less than $1,000 and $17,000 for the three and  six-month  periods
     ending June 30, 2001,  respectively.  ISITOP had no  significant  assets or
     liabilities at June 30, 2002.


(4)  Redeemable Preferred Stock

     The Company's  preferred stock is mandatorily  redeemable  through December
     31, 2002, from one-third of Beard's  "consolidated  net income" as defined.
     Accordingly,  one-third  of future  "consolidated  net income" will accrete
     directly to preferred  stockholders  and reduce  earnings per common share.
     The Company's 2002 operations  through June 30 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 six months ended June
     30,  2001.  There  was no  provision  for  income  taxes  for the three and
     six-month periods ended June 30, 2002.

     At June 30, 2002, the Company  estimates  that it had the following  income
     tax  carryforwards  available for both income tax and  financial  reporting
     purposes (in thousands):

                                                         Expiration
                                                            Date         Amount
                                                         ----------     --------

     Federal regular tax operating loss carryforwards    2004-2009      $ 52,300
     Tax depletion carryforward                          Indefinite     $  5,500


(7)  Commitments and Contingencies

     In the normal  course of  business  various  actions  and claims  have been
     brought or asserted against the Company.  Management does not consider them
     to be material to the Company's financial position, liquidity or results of
     operations.

     In connection with the sale of the fixed assets of the Mexican well testing
     operations  the  Company  and  its  50%  partner  have  each,  as  to  50%,
     indemnified  the purchaser from and against any claims,  demands,  actions,
     damages, cause of action, cost, liability, penalties and expense (including
     reasonable  legal fees) that  purchaser  or its  successors  or assigns may
     suffer arising from the Mexican subsidiary's failure to file any applicable
     tax returns or pay any and all of its taxes which had accrued  prior to the
     sale date. As of June 30, 2002, the accrued tax liabilities  were estimated
     to be $3,000, with the Company liable for one-half of such amount.

     The Company has an  indemnity  obligation  to its  institutional  preferred
     stockholder  and one of its assignees for certain losses (i) arising out of
     the  ownership  and/or  operation of Beard Oil's former oil and gas assets,
     including  environmental  liabilities;  (ii)  arising  under  any  employee
     benefit or severance  plan; or (iii) relating to any  misrepresentation  or
     inaccuracy  in any  representation  made by the  Company  or  Beard  Oil in
     connection with the Restructure (collectively, the "Obligations").  Neither
     Beard nor Beard Oil is presently aware of any material liabilities existing
     as a result of such Obligations.


(8)  Business Segment Information

     The Company manages its business by products and services and by geographic
     location  (by  country).  The Company  evaluates  its  operating  segments'
     performance  based on earnings or loss from operations before income taxes.
     The  Company  had four  reportable  segments  in the first half of 2002 and
     2001: Coal, Carbon Dioxide, China and e-Commerce.

     The Coal  Segment is in the business of  operating  coal fines  reclamation
     facilities  in the U.S. and provides  slurry pond core  drilling  services,
     fine coal laboratory  analytical services and consulting services.  The CO2
     Segment  consists  of the  production  of CO2 gas.  The  China  Segment  is
     pursuing environmental opportunities in China, focusing on the installation
     and construction of facilities which utilize the patented  AirLance Compost
     Systems (trademark) composting technology.  The e-Commerce Segment consists
     of a  71%-owned  subsidiary  which is (i)  pursuing  the  development  of a
     payment system to be used  exclusively for Internet  transactions  and (ii)
     focusing  on   developing   licensing   agreements   and  other  fee  based
     arrangements  with companies  implementing  technology in conflict with the
     Company's intellectual property.

     The  following is certain  financial  information  regarding  the Company's
     reportable  segments  (presented in thousands of dollars).

     General  corporate  assets and  expenses  are not  allocated  to any of the
     Company's operating segments; therefore, they are included as a reconciling
     item to  consolidated  total  assets  and loss from  continuing  operations
     before  income  taxes  reported  in the  Company's  accompanying  financial
     statements.
<TABLE>
<CAPTION>
                                            Carbon
                                  Coal     Dioxide     China   e-Commerce    Totals
                                  ----     -------     -----   ----------    ------
     <S>                         <C>       <C>         <C>       <C>        <C>
     Three months ended
     ------------------
      June 30, 2002
      -------------
       Revenues from
         external  customers     $   11    $  109      $   -     $   -      $  120
       Segment profit (loss)       (139)       81       (243)      (40)       (341)

     Three months ended
     ------------------
      June 30, 2001
      -------------
       Revenues from
         external  customers     $   45    $  116      $   -     $   -       $  161
       Segment profit (loss)       (125)       87       (179)      (53)        (270)

     Six months ended
     ----------------
      June 30, 2002
      -------------
       Revenues from
         external  customers     $   12    $  195      $   -     $   -      $  207
       Segment profit (loss)       (277)      128       (390)      (76)       (615)
       Segment assets             1,582       467        429        62       2,540

     Six months ended
     ----------------
      June 30, 2001
      -------------
       Revenues from
         external  customers     $   97    $  242      $   -     $   -      $  339
       Segment profit (loss)       (243)      180       (355)     (104)       (522)
       Segment assets             1,642       436        156        61       2,295

</TABLE>

     Reconciliation  of total reportable  segment loss to consolidated loss from
     continuing  operations  before income taxes is as follows for the three and
     six months ended June 30, 2002 and 2001 (in thousands):

<TABLE>
<CAPTION>
                                                         For the Three Months Ended    For the Six Months Ended
                                                         --------------------------    ------------------------
                                                           June 30,       June 30       June 30,       June 30,
                                                             2002          2001           2002           2001
                                                             ----          ----           ----           ----
      <S>                                                  <C>            <C>           <C>            <C>
      Total loss for reportable segments                   $ (341)        $ (270)        $ (615)       $ (522)
      Eliminate loss from China operations accounted
          for as an equity investment                         243            179            390           355
      Equity in loss from China operations accounted
          for as an equity investment                        (122)           (89)          (195)         (177)
      Net corporate costs not allocated to segments          (285)          (162)          (498)         (332)
                                                             ----           ----           ----          ----
           Total consolidated loss for continuing
              operations                                   $ (505)        $ (342)        $ (918)       $ (676)
                                                           ======         ======         ======        ======
</TABLE>
<PAGE>
                       THE BEARD COMPANY AND SUBSIDIARIES

                 DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

     THIS REPORT  INCLUDES  "FORWARD-LOOKING  STATEMENTS"  WITHIN THE MEANING OF
SECTION 27A OF THE  SECURITIES  ACT OF 1933, AS AMENDED,  AND SECTION 21E OF THE
SECURITIES  EXCHANGE  ACT  OF  1934,  AS  AMENDED.  ALL  STATEMENTS  OTHER  THAN
STATEMENTS OF HISTORICAL  FACTS  INCLUDED OR  INCORPORATED  BY REFERENCE IN THIS
REPORT, INCLUDING, WITHOUT LIMITATION, STATEMENTS REGARDING THE COMPANY'S FUTURE
FINANCIAL POSITION,  BUSINESS STRATEGY,  BUDGETS,  PROJECTED COSTS AND PLANS AND
OBJECTIVES OF MANAGEMENT FOR FUTURE OPERATIONS, ARE FORWARD-LOOKING  STATEMENTS.
IN ADDITION,  FORWARD-LOOKING  STATEMENTS GENERALLY CAN BE IDENTIFIED BY THE USE
OF  FORWARD-LOOKING  TERMINOLOGY  SUCH AS  "MAY,"  "WILL,"  "EXPECT,"  "INTEND,"
"PROJECT,"  "ESTIMATE,"  "ANTICIPATE,"  "BELIEVE," OR "CONTINUE" OR THE NEGATIVE
THEREOF OR  VARIATIONS  THEREON OR SIMILAR  TERMINOLOGY.  ALTHOUGH  THE  COMPANY
BELIEVES THAT THE EXPECTATIONS REFLECTED IN SUCH FORWARD-LOOKING  STATEMENTS ARE
REASONABLE,  IT CAN GIVE NO ASSURANCE THAT SUCH  EXPECTATIONS WILL PROVE TO HAVE
BEEN  CORRECT.  IMPORTANT  FACTORS  THAT COULD  CAUSE  ACTUAL  RESULTS TO DIFFER
MATERIALLY  FROM  THE  COMPANY'S  EXPECTATIONS   ("CAUTIONARY  STATEMENTS")  ARE
DISCLOSED  UNDER "ITEM 2.  MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF  FINANCIAL
CONDITION  AND  RESULTS  OF  OPERATIONS"  AND  ELSEWHERE  IN  THIS  REPORT.  ALL
SUBSEQUENT  WRITTEN  AND ORAL  FORWARD-LOOKING  STATEMENTS  ATTRIBUTABLE  TO THE
COMPANY,  OR PERSONS  ACTING ON ITS BEHALF,  ARE  EXPRESSLY  QUALIFIED  IN THEIR
ENTIRETY BY THE CAUTIONARY STATEMENTS.  THE COMPANY ASSUMES NO DUTY TO UPDATE OR
REVISE ITS FORWARD-LOOKING  STATEMENTS BASED ON CHANGES IN INTERNAL ESTIMATES OR
EXPECTATIONS OR OTHERWISE.

Item 2. Management's  Discussion and Analysis of Financial Condition and Results
        of Operations

     The  following  discussion  focuses on  material  changes in the  Company's
financial  condition  since  December 31, 2001 and results of operations for the
quarter ended June 30, 2002,  compared to the prior year second  quarter and the
six months  ended June 30,  2002  compared  to the prior year six  months.  Such
discussion should be read in conjunction with the Company's financial statements
including the related footnotes.

     In preparing the discussion and analysis,  the Company has presumed readers
have read or have access to the  discussion  and  analysis  of the prior  year's
results of  operations,  liquidity  and capital  resources  as  contained in the
Company's 2001 Form 10-K.

     The Coal  Segment is in the business of  operating  coal fines  reclamation
facilities  in the U.S. and provides  slurry pond core drilling  services,  fine
coal laboratory  analytical  services and consulting  services.  The CO2 Segment
consists  of  the   production  of  CO2  gas.  The  China  Segment  is  pursuing
environmental   opportunities   in  China  focusing  on  the   installation  and
construction  of  facilities   which  utilize  the  patented   AirLance  Compost
Systems(TM)  composting  technology.   The  e-Commerce  Segment  consists  of  a
71%-owned  subsidiary  which is pursuing the  development of a virtually  secure
payment system to be used  exclusively  for Internet  transactions.  Its current
focus is to develop licensing arrangements and other fee based arrangements with
companies implementing technology in conflict with its intellectual property.

     In 1999 the Company  adopted a plan to  discontinue  its ITF  Segment,  and
those operations were reflected as discontinued operations in 1998. The majority
of the assets of the ITF  Segment  were  disposed  of in 1999 and the Company is
pursuing the sale of the remaining assets. In 1999 the Company adopted a plan to
discontinue its BE/IM Segment, and those operations have since been reflected as
discontinued.  The Company is now in the process of liquidating those assets. In
March 2001 the Company ceased providing  financial  support to ISITOP,  Inc. and
shortly thereafter its exclusive marketing license was terminated.  Accordingly,
the  operations of the ER Segment have been  reflected as  discontinued.  In May
2001 the  fixed  assets of the  50%-owned  company  (accounted  for as an equity
investment)  involved  in the WS Segment  were sold.  In August 2001 the Company
ceased  pursuing  opportunities  in Mexico related to the sand separator  assets
previously operated in Mexico in the WS Segment,  and the Company has since been
pursuing the sale of the segment's remaining assets. As a result, the operations
of the WS Segment have now been reflected as discontinued.


MATERIAL  CHANGES  IN  FINANCIAL  CONDITION  - JUNE 30,  2002 AS  COMPARED  WITH
DECEMBER 31, 2001.

     The following table reflects changes in the Company's  financial  condition
during the periods indicated:
                                    June 30,    December 31,     Increase
                                     2002           2001        (Decrease)
                                     ----           ----        ----------

     Cash and cash equivalents    $  73,000      $  55,000      $ 18,000

     Working capital              $(105,000)     $(350,000)     $245,000

     Current ratio                0.83 to 1      0.61 to 1

     During the first six months of 2002,  the  Company  increased  its  working
capital by $245,000 from  $(350,000)  as of December 31, 2001.  The placement of
the 10% Subordinated Debt infused over $900,000 in working capital in the second
quarter of 2002. Net advances from related entities of the Chairman of the Board
totaled  $280,000.  Proceeds from the sales of assets totaled $77,000 during the
first half of 2002. The Company received  payments on notes receivable  totaling
$73,000 during the six months ended June 30, 2002.  $286,000 of working  capital
were  used to help  fund the  operations  of the Coal  Segment.  There  were net
advances of $403,000 to the Company's  joint venture  involved in the pursuit of
environmental  opportunities  in  China.  $75,000  was used to fund the  startup
activities of the e-Commerce Segment.  The Company made net payments of $175,000
on its line of credit with a bank.  The  remainder  of the  working  capital was
utilized to fund other operations.

     The Company's  principal  business is coal  reclamation,  and this is where
management's   operating  attention  is  primarily  focused.  The  Coal  Segment
currently  has three major  projects in various  stages of  development,  all of
which,  subject to arranging  necessary  financing,  are ultimately  expected to
mature into  operating  projects.  In each case core holes have been drilled and
sample analyses have been completed with favorable results.  The projects are in
three different states and involve three different parties.  Negotiations are in
progress with the pond owner of one of the projects  concerning the installation
of a preparation  plant to recover clean coal. The  installation of this project
requires the arrangement of necessary  financing.  Negotiations  are in progress
with a third party to form a joint  venture or limited  liability  company (llc)
that would  provide the initial  working  capital and  guarantee  the  necessary
equipment financing on this project, and give the llc the right of first refusal
to  participate in future  recovery  projects that require  financing.  A second
project involves the transfer of a large amount of  non-recoverable  slurry to a
new  disposal  area,  and  may  ultimately  result  in  the  installation  of  a
preparation plant. The initial phase of this project would require no financing.
We have a high level of confidence that we will be able to start at least one of
these two projects this year. Although the exact timing of the three projects is
uncertain,  they are all  considered  to have a high  probability  of  activity.
However,  no  definitive  contracts  have as yet been  signed,  and  there is no
assurance that the required financing will be obtained or that any or all of the
projects will materialize.

     Development activity in the China Segment,  meanwhile,  has been plagued by
delays.  Although we had reached  agreements  and/or  formed  Cooperative  Joint
Ventures   ("CJV's")  with  various  Chinese   partners  which  called  for  the
construction  of three  compost  manufacturing  facilities  in which the Company
would own an interest  and receive an operating  fee, two of these  (Baoding and
Qihe  City)  are  now on  indefinite  hold  pending  resolution  of  some of the
financing terms. It appears that the third CJV, which calls for the construction
of a plant in the City of Handan and which had been on  indefinite  hold, is now
poised to move forward.  Terms of a financing arrangement have now been verbally
agreed to with third parties in the U.S., and  definitive  agreements are in the
process of being prepared.  In the event these projects  materialize  they would
result in contracts in which the segment would receive front-end fees, but might
or might not have an equity  interest.  The  segment is  continuing  to pursue a
number  of  other  projects,  several  of  which  are  believed  to  have a high
probability  of occurrence.  It now appears that only Handan may  materialize in
2002, with the other projects falling into 2003 and beyond.

     Key to the Company's liquidity is the anticipated  settlement of a lawsuit,
in which the Company is a  Plaintiff,  which has been in progress  since 1996. A
Settlement  Agreement  was signed by the parties in September of 2001. On May 6,
2002, the federal judge issued the Final  Judgment  approving the Settlement and
ordered that a settlement fund of $50.4 million in cash be established to settle
the class action lawsuit.  In companion  rulings on the same date the Judge also
approved  the  allocation  of  settlement  funds among the class  members in the
lawsuit.  Distribution  of the proceeds will be delayed until all appeal periods
have run. The Company anticipates its share of the proceeds will be in excess of
$3.5 million.  Distribution of the contemplated proceeds will have a significant
impact upon the Company's  liquidity.  In late May, 2002,  objectors entitled to
receive  approximately  $107,000 of the total  settlement filed an appeal to the
final approval of the  settlement.  Although there is the  possibility  that the
appeals process could delay the Settlement into late 2003 or possibly early 2004
or  that  objecting   parties  could  ultimately  cause  the  Settlement  to  be
overturned,  the Company  believes it is unlikely  that the  Settlement  will be
overturned.

     In addition,  the Company  expects to generate cash from the disposition of
the remaining assets from the  discontinued  ITF, BE/IM and WS Segments and from
the pay down of notes receivable,  and can sell certain other assets to generate
cash if necessary.

     The  Company  believes  that  the cash  generated  from  the  private  debt
placement,  coupled with remaining  credit lines and the cash generated from the
sale of assets,  will be adequate  to enable the Company to continue  operations
until (i) the settlement  funds have been received or (ii) the operations of the
projects  under  development  in the Coal and China Segments have come on stream
and the Company is generating positive cash flow.

     Through the period ending  December 31, 2002, the Company's  liquidity will
be  reduced to the extent it is  required  to redeem any of the Beard  preferred
stock  pursuant  to  the  mandatory  redemption  provisions.  See  Note 4 to the
accompanying financial statements.


MATERIAL  CHANGES IN  RESULTS OF  OPERATIONS  - QUARTER  ENDED JUNE 30,  2002 AS
COMPARED WITH THE QUARTER ENDED JUNE 30, 2001.

     The net loss  for the  second  quarter  of 2002 was  $560,000  compared  to
$489,000 for the 2001 second quarter. Continuing operations posted a net loss of
$505,000 compared to a loss from continuing  operations of $342,000 for the same
period in 2001. In addition, the Company had losses from discontinued operations
of $55,000 for the second quarter of 2002 compared to a loss of $147,000 for the
comparable quarter of 2001.

     The operating loss in the Coal Segment increased by $15,000.  The operating
profit in the CO2 Segment  decreased  $5,000.  The e-Commerce  Segment  incurred
operating  losses of $39,000 for the second  quarter of 2002 compared to $52,000
in the second quarter of 2001.  The operating  loss in Other  activities for the
second quarter of 2002 increased $11,000 compared to the same period in 2001. As
a result,  the  operating  loss for the  current  quarter  increased  $18,000 to
$353,000 versus $335,000 in the corresponding quarter of the prior year.

     Operating results of the Company's primary operating Segments are reflected
below:

                                               2002           2001
                                               ----           ----
     Operating profit (loss):
        Coal reclamation                   $(139,000)     $(124,000)
        Carbon dioxide                        81,000         86,000
        China                                      -              -
        e-Commerce                           (39,000)       (52,000)
                                             -------        -------
                 Subtotal                    (97,000)       (90,000)
        Other                               (256,000)      (245,000)
                                            --------       --------
                                           $(353,000)     $(335,000)
                                           =========      =========

     The "Other" in the above table  reflects  primarily  general and  corporate
activities, as well as other activities of the Company.

Coal reclamation

     The segment's  revenues decreased $34,000 to $11,000 for the second quarter
of 2002  compared  to  $45,000  for the  same  period  in  2001 as a  result  of
performing  fewer small  consulting and coring jobs in the year 2002.  Operating
costs  decreased  $17,000 to $114,000 for the second quarter of 2002 compared to
$131,000 for the same period in 2001. The decrease was primarily attributable to
significantly  lower labor costs related to the drilling work  performed in 2002
versus 2001 as a result of a  reduction  in staffing  and the  reduction  in the
number of jobs.  SG&A costs  decreased  $3,000  for the  second  quarter of 2002
compared to the same period in 2001.  As a result,  the  operating  loss for the
second quarter of 2002 increased $15,000 to $139,000 compared to $124,000 in the
second quarter of 2001.

Carbon dioxide

     Second  quarter 2002  operations  reflected an operating  profit of $81,000
compared to $86,000 for the 2001 second quarter.  The sole component of revenues
for this segment is the sale of CO2 gas from the working and overriding  royalty
interests of the Company's two carbon  dioxide  producing  units in Colorado and
New Mexico.  Operating revenues in this segment decreased $7,000 to $109,000 for
the second quarter of 2002 compared to $116,000 for the same period in 2001. The
decrease in revenue for the current  quarter was primarily due to lower pricing,
with the Company  receiving an average of $0.30 per mcf sold in the 2002 quarter
versus $0.41 per mcf in the year earlier quarter.  Paid volumes were actually up
82,000 mcf in the current  quarter versus a year ago due to  underproduction  in
the prior year quarter.

China

     Effective  January  1,  2001,  the  operations  of this  segment  are being
conducted through an affiliate. The results of operations for the second quarter
of 2002 and 2001 were  losses of $122,000  and  $89,000,  respectively,  and are
included in equity in operations of unconsolidated  affiliates  discussed below.
The segment had no revenues in either the second quarter of 2002 or 2001.

e-Commerce

     The  Company's  startup  company  involved in the  development  of a secure
Internet  purchasing system incurred an operating loss of $39,000 for the second
quarter of 2002 versus an operating  loss of $52,000 in the prior year  quarter.
The segment has cut back its pursuit of strategic alliances pending the issuance
of pending  patent  claims.  The  segment  had no  revenues in either the second
quarter of 2002 or 2001 while pursuing the development of its technology.

Other corporate activities

     Other corporate  activities  include general and corporate  operations,  as
well as  assets  unrelated  to the  Company's  operating  segments  or held  for
investment.  These  activities  generated  operating  losses of $256,000 for the
second quarter of 2002 as compared to $245,000 for the same period of 2001. This
increase in operating losses was due primarily to increased amortization expense
associated with the capitalized cost of issuing the 10% subordinated debt.

Selling, general and administrative expenses

     The Company's selling,  general and administrative expenses ("SG&A") in the
current quarter  decreased to $307,000 from $326,000 in the 2001 second quarter.
The primary reason for this was a $12,000 decrease in SG&A expenses  incurred by
the  e-Commerce  Segment  as it  shifted  focus  from  the  development  of  its
technology to concentrate  on developing  licensing  arrangements  and other fee
based  arrangements  with  companies  implementing  technology  in conflict with
starpay's intellectual  property.  Other operations incurred $4,000 less in SG&A
as the Company continued its efforts to reduce costs.

Depreciation, depletion and amortization expenses

     DD&A expense  increased  $15,000 from $21,000 in the second quarter of 2001
to  $36,000  in the same  period of 2002.  The  increase  was due  primarily  to
increased  amortization expense associated with the capitalized costs of issuing
the 10% subordinated debt.

Other income and expenses

     The other income and  expenses  for the second  quarter of 2002 netted to a
loss of  $152,000  compared  to a loss of  $7,000  for the same  period in 2001.
Interest  income was down $3,000 for the second  quarter of 2003 compared to the
same period in 2001.  Interest  expense  was  $47,000  higher as a result of the
increase  in  debt,  primarily  to  related  parties  and  the  issuance  of the
subordinated  debt. The Company  realized a gain on sale of assets for the three
months  ended June 30,  2002 of $1,000  versus  $51,000 in the prior year second
quarter.

     The Company's equity in the operations of  unconsolidated  affiliates was a
loss of $89,000 for the second quarter of 2002 compared to a loss of $49,000 for
the same  period  in 2001.  The  Company's  equity  in the  earnings  of  Cibola
decreased  $7,000 from $40,000 for the second quarter of 2001 to $33,000 for the
same period in 2002 reflecting Cibola's decline in operating results.  Through a
wholly-owned   subsidiary,   the  Company  is  pursuing   contracts  and  formed
Cooperative  Joint  Ventures  ("CJV's")  or similar  arrangements  with  various
Chinese  partners for the  construction of 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  were  $122,000  and $89,000 for the
three months ended June 30, 2002 and 2001, respectively.

Income taxes

     The Company  made no provision  for income  taxes in the second  quarter of
2002 or 2001. The Company has not recorded any financial benefit attributable to
its various tax carryforwards due to uncertainty regarding their utilization and
realization.

Discontinued operations

     ITF Segment

     In  1999  the  Company's  Board  of  Directors  adopted  a  formal  plan to
discontinue  its interstate  travel  facilities  ("ITF")  Segment and recorded a
$1,603,000  estimated  loss for the  discontinuance  in 1998.  ITF disposed of a
majority of its assets in 1999,  retaining two convenience stores  ("C-stores"),
including their equipment and inventory, and Beard became 100% owner of ITF.

     Beard  recorded an additional  $420,000 loss in 2000;  $60,000  represented
operating  losses expected to be incurred by the  discontinued ITF Segment prior
to the anticipated  disposal date of the remaining assets;  $360,000 represented
an  additional  reduction in the  estimated  realizable  value of the  remaining
C-stores  and related  assets as of December  31,  2000.  The  discontinued  ITF
Segment had no revenues for the three  months ended June 30, 2001.  ITF's actual
operating  loss for the three  months June 30, 2001 was $6,000 which was charged
against the loss accrual recorded in the fourth quarter of 2000.

     In December 2001, Beard recorded an additional  $100,000  impairment in the
carrying value of the facilities and $14,000 for  anticipated  operating  losses
for the period from December 31, 2001 through the expected  disposal date of the
remaining  assets.  ITF recorded no revenues for the second  quarter of 2002 and
incurred  $2,000 in losses for the three  months  ended June 30, 2002 which were
charged against the loss accrual  recorded in 2001.  Included in this loss was a
$2,000 gain on the sale of equipment.

     As of June 30,  2002,  the  significant  assets  related to the ITF Segment
consisted primarily of the two remaining C-stores with a total recorded value of
$406,000. The significant liabilities of the segment consisted of trade accounts
payable  and  accrued  expenses  totaling  $11,000.  Beard is  actively  seeking
opportunities  to sell the  remaining  C-stores  and expects  them to be sold by
December 31, 2002.

     BE/IM Segment

     In 1999 the Management Committee of North American Brine Resources ("NABR")
adopted a formal plan to  discontinue  the  business  and dispose of its assets.
Beard had a 40%  ownership  in NABR,  which was  accounted  for under the equity
method. As a result, Beard's share of NABR's operating results has been reported
as  discontinued  for all periods  presented in the  accompanying  statements of
operations.  The joint venture was dissolved in September  2000 and the Japanese
partners  received their final  distribution  of cash in December 2000, with the
Company taking over the remaining assets and liabilities.

     In 1999 Beard  recorded a $540,000  loss,  which  represented  its share of
NABR's $1,350,000 estimated loss from the discontinuation of operations.  NABR's
loss included  $572,000 of anticipated  operating losses through April 2000 (the
date  operations  ceased for the larger of its two  plants) and costs of ceasing
operations.  NABR's  revenues for the smaller of the two plants were $43,000 and
$116,000 for the three months ended June 30, 2002 and 2001, respectively. NABR's
operating  losses for the three months ended June 30, 2002 were $30,000 and were
not  anticipated in the loss accruals  recorded in 1999. NABR charged $5,000 for
the three  months  ended June 30,  2002,  against the  accrual  for  anticipated
expenses related to the shutdown of the larger of its two plants.  NABR's actual
operating  losses for the three months ended June 30, 2001,  were $12,000  which
were  charged  against the loss  accrual  recorded in 1999.  In  addition,  NABR
recorded a loss of $1,000 for the three  month  period  ending June 30, 2001 for
the operation of the smaller of the two plants  distributed  to Beard from NABR.
This loss was not anticipated in the loss accrual of 1999.

     As of June 30, 2002, the  significant  assets related to NABR's  operations
consisted  primarily of equipment and inventory  with  estimated net  realizable
values of $68,000 and $7,000 respectively.  The significant  liabilities related
to NABR's  operations  consisted  primarily  of  accounts  payable of $4,000 and
accrued expenses related to the shutdown of operations  totaling  $146,000.  The
Company is actively pursuing opportunities to sell NABR's assets and expects the
disposition to be completed by December 31, 2002.

     WS Segment

     In May 2001 the fixed assets of the 50%-owned company  (accounted for as an
equity  investment)  involved in natural  gas well  testing  operations  for the
Natural Gas Well Servicing ("WS") Segment were sold for $1,550,000, subject to a
holdback of $150,000.  The Company  received $21,000 and $65,000 of the holdback
in June and November,  respectively,  of 2001. In May 2002 the Company  received
$35,000,  net of attorney's fees of $29,000,  representing  the remainder of the
holdback.  As a result of the sale all debt of the 50%-owned company was retired
and the Company was relieved of contingent  liabilities  totaling  $512,000.  In
August 2001 the Company made the  decision to cease  pursuing  opportunities  in
Mexico and the WS Segment was  discontinued.  In  December  2001 all of the sand
separators  owned by the  100%-owned  company  in the WS  Segment  were sold for
$100,000.  The Company is now pursuing the sale of all remaining equipment owned
by the segment.

     The segment  recorded no revenues for the second quarter of 2002 and $3,000
of revenues for the first  quarter of 2001.  Beard's  share of operating  losses
from the  discontinued  segment  were  $25,000 and $145,000 for the three months
ended  June 30,  2002 and 2001  respectively.  For the  second  quarter of 2001,
Beard's  share of operating  losses from the  50%-owned  company  were  $75,000,
comprised  of a  provision  for  estimated  losses from the  discontinuation  of
operations.  The remaining  $72,000 of losses incurred in the three months ended
June 30, 2001 were  associated with the operations of the  wholly-owned  company
and were not anticipated in the loss accrual.

     As of June 30, 2002, the significant  assets of the WS Segment consisted of
fixed assets with a recorded value of $141,000 and cash and accounts  receivable
totaling of $18,000.  The  significant  liabilities of the segment  consisted of
trade accounts payable and accrued expenses totaling $58,000.  It is anticipated
that all liabilities of the segment will be paid prior to December 31, 2002.

     ER Segment

     In March of 2001 the  Company  determined  that it would no longer  provide
financial support to ISITOP,  Inc., an 80%-owned subsidiary whose operations had
previously comprised the Company's environmental  remediation ("ER") Segment. In
May 2001 ISITOP was notified that the segment's exclusive U.S. marketing license
for the chemical used for PAH remediation  had been  cancelled,  and the segment
was  discontinued.  ISITOP  generated  no revenues in 2002 or in 2001.  ISITOP's
operating losses for the three months ended June 30, 2002 and 2001, totaled less
than $1,000 for either quarter.  ISITOP had no significant assets or liabilities
at June 30, 2002.


MATERIAL  CHANGES IN RESULTS OF  OPERATIONS  - SIX MONTHS ENDED JUNE 30, 2002 AS
COMPARED WITH THE SIX MONTHS ENDED JUNE 30, 2001.

     The net loss  for the six  months  ended  June  30,  2002  was  $1,021,000,
compared to a net loss of $1,073,000 for the first six months of the prior year.
Continuing  operations  posted a net loss of $918,000  compared to a net loss of
$616,000  after tax credits of $60,000 for the same period in 2001. In addition,
the Company had losses from discontinued operations of $103,000 and $457,000 for
the first half of 2002 and 2001, respectively.

     Operating results of the Company's primary operating segments are reflected
below:

                                              2002               2001
                                              ----               ----
     Operating profit (loss):
       Coal reclamation                   $(286,000)         $(242,000)
       Carbon dioxide                       128,000            180,000
       China                                      -                  -
       e-Commerce                           (75,000)          (103,000)
                                            -------           --------
                 Subtotal                  (233,000)          (165,000)
       Other                               (471,000)          (466,000)
                                           --------           --------
                 Total                    $(704,000)         $(631,000)
                                          =========          =========

     The "Other" in the above table  reflects  primarily  general and  corporate
activities, as well as other activities and investments of the Company.

Coal reclamation

     The Company's coal reclamation  revenues decreased to $12,000 for the first
six months of 2002 compared to $97,000 for the same period in 2001 as the result
of obtaining fewer small consulting and coring jobs in the year 2002.  Operating
costs decreased $27,000 to $233,000 for the first six months of 2002 compared to
$260,000  for the same period in 2001.  SG&A costs also  decreased,  dropping to
$55,000 for the first six months of 2002 compared to $69,000 for the same period
in 2001.  As a result,  the  operating  loss for the  first  six  months of 2002
increased  $44,000  to  $286,000  for the first six months of 2002  compared  to
$242,000 in the first six months of 2001.

Carbon dioxide

     Operations for the first six months of 2002 resulted in an operating profit
of $128,000 compared to a $180,000 operating profit for the 2001 first half. The
sole  component  of  revenues  for this  segment is the sale of CO2 gas from the
working and  overriding  royalty  interests of the Company's two carbon  dioxide
producing units in Colorado and New Mexico.  Operating  revenues in this segment
decreased  $47,000 or 19% to $195,000 for the first six months of 2002  compared
to $242,000  for the same period in 2001.  The Company  recorded  $5,000 more in
operating  costs  associated  with  the  properties  in the  first  half of 2002
compared  to the same  period in 2001.  Production  volumes  for the McElmo Dome
field  increased for the first six months of 2002 compared to the same period in
2001.  The  decrease in revenue for the current six months was  entirely  due to
lower  pricing,  with the Company  receiving an average of $0.26 per mcf sold in
the first six months of 2002 versus  $0.42 per mcf in the year  earlier  period.
Paid  volumes  were  actually up 174,000 mcf in the current six months  versus a
year ago due to underproduction in the prior year.

China

     Effective  January  1,  2001,  the  operations  of this  segment  are being
conducted  through an  affiliate.  The results of  operations  for the first six
months of 2002 and 2001 were losses of $195,000 and $177,000,  respectively, and
are included in equity in  operations  of  unconsolidated  affiliates  discussed
below. The segment had no revenues in either the first half of 2002 or 2001.

e-Commerce

     The  Company's  startup  company  involved in the  development  of a secure
Internet  purchasing  system incurred an operating loss of $75,000 for the first
half of 2002 versus an operating loss of $103,000 in the prior year period.  The
segment has cut back its pursuit of strategic  alliances pending the issuance of
pending patent  claims.  The segment had no revenues in either the first half of
2002 or 2001 while pursuing the development of its technology.

Other corporate activities

     Other corporate  activities  include general and corporate  operations,  as
well as  assets  unrelated  to the  Company's  operating  segments  or held  for
investment.  These  activities  generated  operating  losses of $471,000 for the
first  half of 2002  as  compared  to  $466,000  in the  same  period  of  2001.
Reductions  of  $6,000  in  benefit   administration  costs  and  reductions  in
professional  fees of $24,000  were more than  offset by  increases  in DD&A and
other types of SG&A costs, including higher insurance costs.

Selling, general and administrative expenses

     The Company's selling,  general and administrative expenses ("SG&A") in the
first half of 2002  decreased to $560,000 from $616,000 for the 2001 six months.
The Coal  Segment had a decrease in SG&A  expenses of $14,000 due  primarily  to
reductions in staff and associated  expenses.  The e-Commerce  Segment  incurred
$28,000  less in SG&A costs as the segment  scaled back its pursuit of strategic
alliances.  Other operations incurred approximately $11,000 less in SG&A for the
six months of 2002 compared to the same period in 2001  primarily as a result of
the  decreased  legal costs and by the  reduction  in other  expenses  discussed
above.

Depreciation, depletion and amortization expenses

     DD&A expense  increased  $15,000 from $44,000 for the six months ended June
30, 2001 to $59,000 for the same period in 2002.  The increase was due primarily
to increased  amortization  expense  associated  with the  capitalized  costs of
issuing the 10% subordinated debt.

Other income and expense

     The other  income and expenses for the first six months of 2002 netted to a
loss of  $214,000  compared  to a loss of $45,000  for the same  period in 2001.
Interest income was down $17,000 for the first half of 2002 compared to the same
period in 2001.  Interest  expense was up $75,000 as a result of the increase in
debt,  primarily  to related  parties and as a result of the issuance of the 10%
subordinated  debt.  The Company  realized gains on sale of assets for the first
six months of 2001 totaling $68,000 versus $10,000 in the current year period.

     The Company's equity in the operations of  unconsolidated  affiliates was a
loss of $120,000 for the first six months of 2002 compared to a loss of $106,000
for the same  period in 2001.  The  Company's  equity in the  earnings of Cibola
increased  $3,000  from  $71,000 for the first six months of 2001 to $74,000 for
the same  period in 2002.  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 $195,000 for the first half of 2002 compared to $177,000 for the
first six months of 2001.

Income taxes

     The  Company  recorded  no  provision  for taxes in the first  half of 2002
compared to refunds of $41,000 and $19,000 for federal and state  income  taxes,
respectively,  in the first  half of 2001.  The  Company  has not  recorded  any
financial  benefit   attributable  to  its  various  tax  carryforwards  due  to
uncertainty regarding their utilization and realization.

Discontinued operations

     ITF Segment

     Complete details  concerning the  discontinuance  of the interstate  travel
facilities  ("ITF")  Segment are  contained in  "Material  changes in results of
operations - Quarter ended June 30, 2002 as compared with the Quarter ended June
30, 2001" under the "Discontinued Operations - ITF Segment" heading.

     ITF's  revenues  and  actual   operating   losses  were  none  and  $6,000,
respectively,  for the six months ended June 30, 2002. The actual losses for the
six months ended June 30, 2002 were charged against the loss accrual recorded in
the fourth quarter of 2001.

     ITF's  revenues  and actual  operating  losses  were  $7,000  and  $37,000,
respectively,  for the six months ended June 30, 2001. The actual losses for the
six months ended June 30, 2001 were charged against the loss accrual recorded in
the fourth quarter of 2000.

     BE/IM Segment

     Complete  details  concerning the  discontinuance  of NABR are contained in
"Material  changes in results of  operations  - Quarter  ended June 30,  2002 as
compared  with  the  Quarter  ended  June  30,  2001"  under  the  "Discontinued
Operations - BE/IM Segment" heading.

     The  revenues  and actual loss for the six months  ended June 30, 2002 were
$120,000 and $67,000,  respectively.  These losses were not  anticipated  in the
loss accrual  recorded in 1999. The Company charged $7,000 in losses against the
accrual for  anticipated  expenses  related to the shutdown of the larger of its
two plants.  NABR's  actual  operating  losses for the six months ended June 30,
2001, were $43,000 which were charged against the loss accrual recorded in 1999.
In addition,  Beard recorded a loss of $26,000 for the six months ended June 30,
2001 for net operating  expenses of the smaller of the two plants distributed to
the Company in 2000. This loss was not anticipated in the loss accrual of 1999.

     WS Segment

     Complete details concerning the discontinuance of the Company's natural gas
well testing  operations in Mexico are contained in "Material changes in results
of  operations - Quarter  ended June 30, 2002 as compared with the Quarter ended
June 30, 2001" under the "Discontinued Operations - WS Segment" heading.

     The  Segment  recorded  no  revenues  for the first six  months of 2002 and
$3,000 of revenues for the first half of 2001.  Beard recorded  operating losses
of $36,000 and $414,000 for the six-month  periods ended June 30, 2002 and 2001,
respectively.

     ER Segment

     Complete   details   concerning   the   discontinuance   of  the  Company's
environmental  remediation  ("ER") Segment are contained in "Material changes in
results of operations - Quarter ended June 30, 2002 as compared with the Quarter
ended June 30, 2001" under the "Discontinued Operations - ER Segment." heading.

     ISITOP had no revenues for either of the  six-month  periods ended June 30,
2002 or 2001, respectively. The segment's operating losses were less than $1,000
and  $17,000  for  the   six-month   periods  ended  June  30,  2002  and  2001,
respectively.


Item 3. Quantitative and Qualitative Disclosures About Market Risk.

     At June 30,  2002,  the  Company  had  notes  receivable  of  $243,000  and
long-term  debt of  $4,083,000.  The  notes  receivable  and  $3,958,000  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 June 30,  2002,  a 10% increase in
market  interest rates would have reduced the fair value of the Company's  notes
receivable  by $3,000 and reduced the fair value of its  long-term  debt by less
than $53,000.  The remaining  $125,000 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 4 to the accompanying financial statements.

Item 4. Submission of Matters to a Vote of Security Holders.

     Commencing on May 17, 2002,  proxies were  solicited on behalf of the Board
of  Directors  of  the  Company  in  connection   with  the  Annual  Meeting  of
Stockholders.

     (a) The annual meeting was held on June 20, 2002.

     (b) The  business of the meeting  included  the  election of W. M. Beard to
serve as director for a three-year  term or until his successor has been elected
and qualified.

     In addition, the following persons continue to serve as directors for terms
expiring on the dates indicated or until their successors have been elected and
qualified:

            Allan R. Hallock         (2003)          Ford C. Price     (2003)
            Harlon E. Martin, Jr.    (2004)          Herb Mee, Jr.     (2004)

     To date the  preferred  stockholder  has not  elected  to fill the  vacancy
created by the resignation of Michael E. Carr who resigned effective February 1,
2002.

     The table below sets forth the voting for election of directors:

                            Votes     Votes     Votes                  Broker
       Name of Nominee       For     Against   Withheld  Abstentions  Non-Votes
       ---------------       ---     -------   --------  -----------  ---------

       W. M. Beard       1,785,899      -0-       2,029        -0-     154,054

     (c) At the meeting the  stockholders  also voted to approve the appointment
of Cole & Reed, P.C. as independent certified public accountants for fiscal year
2002. The table below sets forth the voting for such proposal:

            Votes              Votes                              Broker
             For              Against         Abstentions       Non-Votes
             ---              -------         -----------       ---------

          1,786,324            1,343              261            154,054


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)     Extension  Promissory Note from  Registrant to Bank of Oklahoma,  N.A.
          ("BOK") dated April 15, 2002.

10(b)     Extension Promissory Note from Registrant to BOK dated May 15, 2002.

10(c)     Form of 10% Subordinated Note due September 30, 2003.

10(d)     Form of Warrant.


                       THE BEARD COMPANY AND SUBSIDIARIES

     The  Company  will  furnish to any  shareholder  a copy of any of the above
exhibits  upon the payment of $.25 per page.  Any request  should be sent to The
Beard  Company,  Enterprise  Plaza,  Suite 320, 5600 North May Avenue,  Oklahoma
City, Oklahoma 73112.

     (b) A report  on Form 8-K was filed by the  Company  on June 3,  2002.  The
matter reported was the completion of the sale of $1,200,000 of 10% subordinated
notes to accredited investors in a private placement. An investment banking firm
received 45,000  warrants as part of its sales  compensation.  In addition,  the
purchasers  of the notes  have the  contingent  right to  receive  up to 240,000
warrants depending upon the length of time their notes are held.


<PAGE>
                                   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


     (Date)   August 14, 2002           HERB MEE, JR.
                                        Herb Mee, Jr., President and
                                          Chief Financial Officer

     (Date)   August 14, 2002           JACK A. MARTINE
                                        Jack A. Martine, Controller and
                                          Chief Accounting Officer
<PAGE>
                               INDEX TO EXHIBITS

2(a)   Agreement  and Plan of  Reorganization   incorporated herein by reference
       by and  among  Registrant,  Beard  Oil
       Company  ("Beard  Oil") and New Beard,
       Inc.,  dated as of July 12,  1993 (see
       Addendum   A  to  Part  I).

2(b)   Agreement  and Plan of  Merger  by and   incorporated herein by reference
       between The Beard  Company and The New
       Beard  Company,  dated as of September
       16, 1997.

2(c)   Certificate   of  Merger  merging  The   incorporated herein by reference
       Beard   Company  into  The  New  Beard
       Company as filed with the Secretary of
       State  of  Oklahoma  on  November  26,
       1997.

3(i)   Certificate  of  Incorporation  of The   incorporated herein by reference
       New Beard  Company  as filed  with the
       Secretary  of  State  of  Oklahoma  on
       September 11, 1997.

3(ii)  Registrant's  By-Laws as  currently in   incorporated herein by reference
       effect.

4(a)   Certificate of  Designations,  Powers,   incorporated herein by reference
       Preferences        and       Relative,
       Participating,    Option   and   Other
       Special      Rights,      and      the
       Qualifications,     Limitations     or
       Restrictions  Thereof  of the Series A
       Convertible  Voting Preferred Stock of
       the Registrant.

4(b)   Settlement Agreement, with Certificate   incorporated herein by reference
       of Amendment attached thereto,  by and
       among Registrant,  Beard Oil, New York
       Life Insurance Company,  New York Life
       Insurance  and Annuity  Company,  John
       Hancock Mutual Life Insurance Company,
       Memorial Drive Trust and Sensor, dated
       as of April 13, 1995.

10(a)  Extension    Promissory    Note   from   filed herewith electronically
       Registrant  to Bank of Oklahoma,  N.A.
       ("BOK") dated April 15, 2002.

10(b)  Extension    Promissory    Note   from   filed herewith electronically
       Registrant to BOK dated May 15, 2002.

10(c)  Form   of  10%  Subordinated  Note due   filed herewith electronically
       September 30, 2003.

10(d)  Form of Warrant.                         filed herewith electronically