SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

                          [X] ANNUAL REPORT PURSUANT TO
                           SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                   For the fiscal year ended December 31, 2004
                                       or
          [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
        For the transition period from ______________ to ________________

                         Commission file number 001-12396

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

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

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

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

           Securities registered pursuant to Section 12(b) of the Act:

                                                 (Name of each exchange on
(Title of each class)                               which registered)
        None                                              None

           Securities registered pursuant to Section 12(g) of the Act:
                        Common Stock, $.0006665 par value

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

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form l0-K or any amendment to this
Form 10-K. [ ]

Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined in Rule 12b-2 of the Act). Yes [ ] No [X]

The aggregate market value of the voting common stock held by  non-affiliates of
the  registrant,  computed by using the last sale price of  registrant's  common
stock on the OTC  Bulletin  Board as of the close of business on June 30,  2004,
was  $1,773,000.  The number of shares  outstanding of the  registrant's  common
stock as of March 28, 2005 was Common Stock $.0006665 par value - 5,245,940

                      DOCUMENTS INCORPORATED BY REFERENCE:

Portions of the  Registrant's  Proxy  Statement  for its 2005 Annual  Meeting of
Stockholders  are incorporated by reference as to Part III, Items 10, 11, 12, 13
and 14.
<PAGE>
                                THE BEARD COMPANY
                                    FORM 10-K

                   For the Fiscal Year Ended December 31, 2004

                                TABLE OF CONTENTS

PART I

Item 1.   Business...........................................................3
Item 2.   Properties........................................................18
Item 3.   Legal Proceedings.................................................18
Item 4.   Submission of Matters to a Vote of Security Holders...............20
Item 4a.  Executive Officers and Significant Employees of the Registrant....21

PART II
Item 5.   Market for Registrant's Common Equity, Related
          Stockholder Matters and Issuer Purchases of Equity Securities.....23
Item 6.   Selected Financial Data...........................................25
Item 7.   Management's Discussion and Analysis of Financial
          Condition and Results of Operation................................26
Item 7A.  Quantitative and Qualitative Disclosures About Market
          Risk..............................................................37
Item 8.   Financial Statements and Supplementary Data.......................39
Item 9.   Changes in and Disagreements with Accountants on
          Accounting and Financial Disclosure...............................64
Item 9A.  Controls and Procedures...........................................64
Item 9B   Other Information.................................................64

PART III
Item 10.  Directors and Executive Officers of the Registrant................64
Item 11.  Executive Compensation............................................64
Item 12.  Security Ownership of Certain Beneficial Owners and Management....64

Item 13.  Certain Relationships and Related Transactions....................65
Item 14.  Principal Accountant Fees and Services............................65

PART IV
Item 15.  Exhibits, Financial Statement Schedules...........................65

SIGNATURES..................................................................70
<PAGE>
                                THE BEARD COMPANY

                                    FORM 10-K

                 DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

     THIS REPORT  INCLUDES  "FORWARD-LOOKING  STATEMENTS"  WITHIN THE MEANING OF
SECTION 27A OF THE  SECURITIES  ACT OF 1933, AS AMENDED,  AND SECTION 21E OF THE
SECURITIES  EXCHANGE  ACT  OF  1934,  AS  AMENDED.  ALL  STATEMENTS  OTHER  THAN
STATEMENTS OF HISTORICAL  FACTS  INCLUDED OR  INCORPORATED  BY REFERENCE IN THIS
REPORT, INCLUDING, WITHOUT LIMITATION, STATEMENTS REGARDING THE COMPANY'S FUTURE
FINANCIAL POSITION,  BUSINESS STRATEGY,  BUDGETS,  PROJECTED COSTS AND PLANS AND
OBJECTIVES OF MANAGEMENT FOR FUTURE OPERATIONS, ARE FORWARD-LOOKING  STATEMENTS.
IN ADDITION,  FORWARD-LOOKING  STATEMENTS GENERALLY CAN BE IDENTIFIED BY THE USE
OF  FORWARD-LOOKING  TERMINOLOGY  SUCH AS  "MAY,"  "WILL,"  "EXPECT,"  "INTEND,"
"PROJECT,"  "ESTIMATE,"  "ANTICIPATE,"  "BELIEVE," OR "CONTINUE" OR THE NEGATIVE
THEREOF OR  VARIATIONS  THEREON OR SIMILAR  TERMINOLOGY.  ALTHOUGH  THE  COMPANY
BELIEVES THAT THE EXPECTATIONS REFLECTED IN SUCH FORWARD-LOOKING  STATEMENTS ARE
REASONABLE,  IT CAN GIVE NO ASSURANCE THAT SUCH  EXPECTATIONS WILL PROVE TO HAVE
BEEN  CORRECT.  IMPORTANT  FACTORS  THAT COULD  CAUSE  ACTUAL  RESULTS TO DIFFER
MATERIALLY  FROM  THE  COMPANY'S  EXPECTATIONS   ("CAUTIONARY  STATEMENTS")  ARE
DISCLOSED  UNDER  "ITEM 1.  BUSINESS  (c)  NARRATIVE  DESCRIPTION  OF  OPERATING
SEGMENTS - RISK  FACTORS,"  "ITEM 7.  MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS" AND ELSEWHERE IN THIS REPORT. ALL
SUBSEQUENT  WRITTEN  AND ORAL  FORWARD-LOOKING  STATEMENTS  ATTRIBUTABLE  TO THE
COMPANY,  OR PERSONS  ACTING ON ITS BEHALF,  ARE  EXPRESSLY  QUALIFIED  IN THEIR
ENTIRETY BY THE CAUTIONARY STATEMENTS.  THE COMPANY ASSUMES NO DUTY TO UPDATE OR
REVISE ITS FORWARD-LOOKING  STATEMENTS BASED ON CHANGES IN INTERNAL ESTIMATES OR
EXPECTATIONS OR OTHERWISE.

                                     PART I

Item 1.  Business.
         --------

     (a)  General development of business.
     ---  --------------------------------

     General.  Prior  to  October,  1993,  The  Beard  Company  ("Beard"  or the
"Company"),  then known as Beard Oil Company  ("BOC"),  was primarily an oil and
gas  exploration  company.  During  the  late  1960's  we made the  decision  to
diversify.  In 1968 we started a hazardous waste management company, USPCI, Inc.
("USPCI"),  which  was  partially  spun off to  shareholders  in  January  1984.
Following  two  public  offerings  and  several  acquisitions  USPCI  became  so
successful that it  subsequently  listed on the New York Stock Exchange in 1986.
It was acquired by Union Pacific Corporation in 1987-1988 for $396 million ($111
million  to BOC  stockholders  for their  residual  28%  interest,  of which $60
million was distributed to shareholders).

     In 1989 BOC founded Beard  Investment  Company (now The Beard  Company) for
the purpose of building new businesses which Beard  management  believed to have
either high growth potential or better-than-average  profit potential.  Our goal
has been to nurture  each  investment  to the point  where it could  sustain its
growth  through  internal cash flow while  cultivating  its own outside  funding
sources to supplement financing requirements.

     In pursuit of this  endeavor we have been  involved in numerous  businesses
during the last 25 years,  many of them  unsuccessful.  We have now  reduced our
operating activities down to four segments:

     o    The coal  reclamation  ("Coal")  Segment,  which is in the business of
          operating coal fines reclamation facilities in the U.S.;

     o    The carbon dioxide ("CO2") Segment,  which has profitably produced CO2
          gas since the early 1980's;

     o    The  China  ("China")   Segment,   which  is  pursuing   environmental
          opportunities  in China,  focusing on the financing,  construction and
          operation of organic chemical compound fertilizer plants; and

     o    The e-Commerce  ("e-Commerce")  Segment,  whose current strategy is to
          develop business opportunities to leverage starpay's(TM)  intellectual
          property   portfolio   of  Internet   payment   methods  and  security
          technologies.

     Net Operating Loss  Carryforwards.  We have approximately  $46.8 million of
unused net operating losses ("NOL's")  available for carryforward,  which expire
between 2006 and 2022.  Approximately $44.8 million of such NOL's expire between
2006 and 2008. The loss of the NOL's would have a negative  impact on our future
value. If we were to experience an "ownership  change" as defined in Section 382
of the Internal Revenue Code, we would be severely limited in our ability to use
our NOL's in the future. Our Certificate of Incorporation contains provisions to
prevent  the  triggering  of such a change by  restricting  transfers  of shares
without  the Board of  Directors'  consent to any person if that  person was, or
would  thereby  become,  a holder of 5% or more of the fair market  value of our
outstanding capital stock.

     Effect  of  Recent  Operations  on  Liquidity.   Sustaining  the  operating
activities of our  unprofitable  Coal, China and e-Commerce  segments,  plus our
overhead,  has  resulted in a serious  outflow of cash  during the past  several
years.  We have managed this cash  shortfall  through a series of financings and
the sale of various assets,  principally  those left over from our  discontinued
operations.  We obtained bank loans  totaling  $125,000 in February and March of
2004  which  were  needed to  "bridge  the gap"  until we  received  the  second
installment of the McElmo Dome litigation (the "Settlement".  See "Item 3. Legal
Proceedings--McElmo  Dome  Litigation" for complete  details).  These loans were
supplemented by private placements of (i) notes and warrants totaling $1,200,000
completed in June of 2004 and (ii) $2,100,000 of convertible  notes completed in
October of 2004 and  January of 2005.  These  borrowings  were needed to provide
working capital until we obtain the funds necessary to proceed with the Pinnacle
Project  (defined  below).  Any  remaining  proceeds will be used to finance the
project (See "Coal Reclamation Activities---Projects Under Development").

     Upon receipt of the second  installment of the Settlement,  we paid off all
of our then outstanding  $1,529,000 of subordinated notes, plus accrued interest
totaling  $63,000,  and paid off an  additional  $564,000  of notes to a related
party, plus accrued interest totaling $464,000.

     We have  several  projects  in various  stages of  development  in the Coal
Segment which, subject to arranging necessary financing, we ultimately expect to
mature into operating  projects.  We have finalized a definitive  agreement with
Pinnacle Mining Company,  LLC, a coal mining and energy  resources  company,  to
construct  and  operate a pond  fines  recovery  project in West  Virginia  (the
"Pinnacle Project") on which we are currently pursuing  financing.  In addition,
we have arranged for the financing of our initial fertilizer manufacturing plant
in China.  Now that the  Settlement has been received it is essential that these
projects move forward quickly. If that does not occur, we must pursue additional
outside   financing,   which  would  likely  involve  further  dilution  to  our
shareholders.

     Unless the context otherwise requires,  references to us herein include our
consolidated subsidiaries, including BOC.

Recent Developments
-------------------

     Oil and Gas Business.  On January 19, 2005, we announced  that we were back
in the oil and gas business.  We reported that in recent years our  wholly-owned
subsidiary,  BOC,  has filed on a number of federal and state oil and gas leases
in the Rocky  Mountain area. One of the leases which BOC acquired was a 640-acre
tract  covering  all of Section  36,  Township 3 North,  Range 48 West,  in Yuma
County, Colorado.

     In January of 2004 BOC entered  into a Seismic  Option - Farmout  Agreement
with  Vista  Resources  ("Vista")  of  Pittsburgh,  Pennsylvania.  Vista has now
drilled six wells in the  Niobrara  Formation  on the farmout  lands.  Under the
farmout  arrangement BOC was carried for a 22.5% working  interest in the #43-36
well and will pay its 22.5% share of the cost of the additional wells. The first
two wells were  completed in January of 2005. The Yuma-5 State #43-36 located in
the  NE SE of  Section  36 had an  indicated  wellhead  open  flow  of 516  mcfd
(thousand  cubic feet per day) and the Yuma-5 State #44-36  located in the SE SE
of Section 36 had an indicated  wellhead open flow of 678 mcfd.  Pipe was set on
four  additional  wells  in  February  and  March  of 2005  which  are  awaiting
completion and test results.

     Preliminary indications are that the wells are expected to have reserves of
approximately  350 to 400 mmcf (million cubic feet) each, with BOC's 22.5% share
of the six wells costing a total of approximately $200,000. Following completion
of the four new wells,  we anticipate  that they will be placed on production in
the second quarter of 2005, with expected initial  production of 150-200 MCF per
day from each well. We believe the wells will be a source of  meaningful  income
to BOC for a number of years.

     Placement  of  Convertible  Subordinated  Notes.  On January 25,  2005,  we
reported that we had  completed  the sale of  $2,100,000 of our 12%  Convertible
Subordinated  Notes due  February  15, 2010 (the  "Notes") to a group of private
investors.  $255,000  of the Notes were  exchanged  for notes we had  previously
issued.  The Notes are convertible  into shares of the Company's common stock at
$1.00 per share.  The sale of the Notes, net of the exchange and legal and other
costs  associated with the offering,  provided  approximately  $1,700,000 of net
proceeds to us in 2005. A portion of the net proceeds will be used to provide us
with the necessary  working  capital to bridge the gap until we obtain the funds
necessary  to proceed  with the  Pinnacle  Project,  which we expect to commence
during the second  quarter of 2005.  The  remainder of the net proceeds  will be
used to finance the project, if necessary.

     Financing of Initial Fertilizer  Manufacturing  Plant in China. On February
14, 2005, we announced that a private investor has agreed to finance the cost of
our initial fertilizer  manufacturing facility in the People's Republic of China
(the "PRC").  Beard Environmental  Engineering,  L.L.C. ("BEE") and the investor
have formed a limited  liability  company  (the "LLC") that will own the Chinese
operating company that will control and manage the day-to-day  operations of the
facility. The investor and BEE have each made a $50,000 cash contribution to and
have a 50%  ownership  and equity in the LLC.  The  investor  has agreed to loan
funds to the LLC between  February 14 and July 1, 2005,  that we believe will be
sufficient  to fund the capital costs and  pre-operating  costs of the facility.
The lender can look only to  available  funds of the LLC for  repayment,  and we
will not be liable for repayment of the loan.

     The initial  plant will be located in close  proximity  to Beijing and will
produce a new,  environmentally  friendly,  Organic Chemical Compound Fertilizer
("OCCF").  The new fertilizer  will use up to 62% less chemicals and yet provide
superior performance as compared to chemical  fertilizers  presently used in the
PRC. The plant is  initially  targeted to produce  about 32,000  metric tons per
year of OCCF with estimated  revenues of more than  US$5,000,000  annually.  The
facility will be sized to permit doubling of production  capacity to meet market
demand.  We  anticipate  that  production  will  commence  in time  for the fall
planting.

                              CONTINUING OPERATIONS

     Coal Reclamation  Activities.  Our coal reclamation  activities,  which are
conducted by Beard Technologies, Inc. ("BTI"), comprise the Coal Segment. BTI 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.

     Carbon Dioxide  Operations.  Our carbon dioxide activities comprise the CO2
Segment,  consisting  of the  production  of CO2 gas which is conducted  through
Beard.  We own  non-operated  working and  overriding  royalty  interests in two
producing CO2 gas units in Colorado and New Mexico.

     Operations in China. Our activities in China,  which are conducted by Beard
Environmental  Engineering,  LLC ("BEE") through its consolidated  subsidiaries,
comprise the China Segment. BEE and its subsidiaries are pursuing  environmental
opportunities  in the PRC,  focusing on the  installation  and  construction  of
plants that manufacture OCCF.

     e-Commerce.   Our   e-Commerce   activities,   which   are   conducted   by
starpay.com(TM),   l.l.c.   ("starpay")  and  its  parent,   Advanced   Internet
Technologies, L.L.C. ("AIT"), comprise the e-Commerce Segment. starpay's current
focus is on developing  licensing  agreements  and other fee based  arrangements
with  companies  implementing  technology  in  conflict  with  its  intellectual
property.

     (b)  Financial information about industry segments.
     ---  ----------------------------------------------

     Financial   information   about  industry  segments  is  contained  in  the
Statements  of  Operations  and  Note 15 of  Notes  to the  Company's  Financial
Statements. See Part II, Item 8---Financial Statements and Supplementary Data.

     (c)  Narrative description of operating segments.
     ---  --------------------------------------------

     We  currently  have  four  operating   segments:   Coal,  CO2,  China,  and
e-Commerce. All of such activities, with the exception of our CO2 gas production
activities, are conducted through subsidiaries. We, through our corporate staff,
perform management, financial,  consultative,  administrative and other services
for our subsidiaries.

                           COAL RECLAMATION ACTIVITIES

     Background of Beard Technologies,  Inc. In early 1990 we acquired more than
80% of Energy International  Corporation ("EI"), a research and development firm
specializing in coal-related technologies. We sold EI in 1994, retaining certain
assets which were contributed to a wholly-owned subsidiary, BTI.

     Impact of Section 29. In the late 1990's  significant  activity in the coal
industry  was  focused  upon the  development  of fine  coal  waste  impoundment
recovery  projects which qualified for Federal tax credits of $20 to $25 per ton
under  Section 29 of the Internal  Revenue Code. In order to qualify for the tax
credit,  the projects had to produce a synthetic fuel (i) from a facility placed
in service before July 1, 1998; (ii) pursuant to a binding contract entered into
before January 1, 1997; and (iii) before January 1, 2008.

     The MCN  Projects.  Beginning  in  April  of 1998,  BTI  operated  six pond
recovery/Section  29 briquetting  projects for a subsidiary of MCN Energy Group,
Inc.  ("MCN").  At the time  this made BTI,  to the best of our  knowledge,  the
largest operator of coal recovery plants in the world.  Unfortunately MCN became
concerned  that the  plants  might not  qualify  for the tax  credit  and took a
special  charge of  $133,782,000  at year-end 1998 to  completely  write off the
projects. In January of 1999 MCN terminated the contracts, which later qualified
for the tax credits.  This was a major setback to BTI and had a severe  negative
impact on its subsequent income and cash flow.

     DTE  Dickerson  Services  Agreement.  In July of 2004 BTI  entered  into an
agreement to provide dredging  services and equipment for DTE Dickerson,  LLC, a
subsidiary of DTE Energy Company.  At the time the agreement was entered into it
was expected to have a material effect upon the Coal Segment's financial results
during the initial two year agreement term. However,  BTI was unable to meet the
performance  design  objectives  specified in the agreement which contained some
unusually restrictive requirements.  BTI spent approximately $184,000 gearing up
for the project,  which  generated  only $133,000 of revenues.  Due to the early
termination  of the  project  on  November  30,  2004,  BTI  incurred  a loss of
approximately $158,000 on the project.

     Sharp  Increase in Natural Gas Prices;  Effect on Coal  Demand.  The recent
sharp  increase in natural gas prices has had a major  impact upon the  electric
power  generating  industry.  It  now  appears  that  natural  gas  will  be  in
increasingly  short supply in future years. As a result,  the price of coal when
compared to the price of gas on a Btu basis has become increasingly  attractive.
It now appears that coal,  which  accounts  for over 50% of the  nation's  power
generating  capacity,  will remain the principal  fuel source for electric power
production for a number of years.

     The rising price of natural gas has driven the spot price of coal to record
levels that have not been seen in the coal industry since the oil crisis of 1974
and 1975.  Many energy  economists  believe  that natural gas prices will remain
high for many years to come.  The strong coal market,  plus added  pressure from
regulatory  agencies  to  more  quickly  reclaim  or  re-mine  abandoned  slurry
impoundments,  has sparked renewed interest among pond owners and coal operators
to quickly move  forward with pond  recovery  projects.  Many of these  recovery
projects  have been sitting on the back burner for a number of years  because of
marginal coal prices and stagnant demand.

     We believe this is an ideal set of  circumstances  for BTI, which in recent
years has been totally  focused on pond recovery.  Since the  termination of the
MCN  agreements  BTI has  called  on  numerous  coal  producers  and  utilities,
particularly  those  having  ponds  which it  believes  have large  reserves  of
recoverable  coal fines.  We have a great deal of expertise  in the  complicated
business of coal pond recovery.  We believe that we are the industry  leader and
that most coal  operators  contact us first when they are interested in having a
pond recovered.

     Projects Under Development. This convergence of high coal prices with added
regulatory agency pressure has resulted in BTI having more potential projects on
the  drawing  board than at any other time in its  existence.  In  September  we
announced  the signing of an  agreement  to perform the  Pinnacle  Project.  The
contract has an initial term of six years and is  extendible  for an  additional
four years if sufficient coal reserves remain at the end of the initial term. We
expect to commence the Pinnacle  Project during the second quarter of 2005 if we
can successfully arrange the financing therefor.

     Currently,  we are actively pursuing seven other projects, all but three of
which are located in the Central  Appalachian  Coal Basin. We also have a number
of other projects in the pipeline for follow up once these projects have come to
a  resolution.  We have had more coal  producers  and  utilities  calling  us to
discuss  projects in the last year than we have had during the previous 13 years
of BTI's existence.

     Status of Financing.  We are pursuing the  financing  necessary to fund the
Pinnacle Project through three separate avenues:

     Note  Offering.  We  arranged  for  an  investment  banking  firm  to  sell
$1,800,000  of our  9%  convertible  subordinated  notes  (the  "9%  Notes")  to
accredited investors in a private placement which was commenced on September 15,
2004 on a best efforts basis. We raised a total of $255,000 under this offering,
which we terminated  when we determined  that we needed to offer more  favorable
terms in order to raise the needed  funds.  On December 29, 2004, we commenced a
private placement of $2,100,000 of 12% convertible  subordinated notes (the "12%
Notes")  which  had a higher  coupon,  a lower  conversion  price,  and gave the
purchasers a security  position in certain  equipment  owned by BTI in the event
that we do not obtain sufficient  financing to perform the Pinnacle Project.  We
also allowed the  purchasers  of our 9% Notes to exchange such notes for the 12%
Notes  if they  agreed  to  forego  any  interest  accrued  prior to the date of
exchange. All of the 9% Notes were subsequently exchanged,  and the offering was
fully subscribed and closed on January 25, 2005.

     The net proceeds of more than $1,700,000 from the offering of the 12% Notes
substantially  improved our liquidity  and working  capital  position.  However,
because  the 12% Notes are  currently  convertible  at $1.00 per share  into our
common stock,  their conversion will create a substantial  amount of dilution on
our future earnings per share.

     USDA-Guaranteed  Financing.  We have  also  been  pursuing  USDA-guaranteed
financing of up to  $5,000,000  for the Pinnacle  Project.  We have been advised
that such financing may also be available for up to four additional projects. In
order to qualify for the USDA guaranty of our financing,  we must have a minimum
equity  amount of 20% of the loan  proceeds.  We intend to use the net  proceeds
from the 12% Note  offering  (to the extent not used for working  capital),  the
proceeds from any additional  debt or equity  placements and BTI's  equipment to
provide the equity necessary to qualify for the USDA guaranty.

     Additional  Debt  and  Equity  Placements.  We  have  retained  a New  York
City-based  firm  (the  "Financing  Agent")  which  specializes  in the  private
placement  of debt and  equity  securities  for energy  companies,  to raise the
financing  necessary  for us to perform  three to four pond  recovery  projects,
including the Pinnacle  Project.  They are seeking  financing from both debt and
equity lenders,  based on the premise that USDA-guaranteed  financing may or may
not be available.

     At this point, we cannot determine which, if any, of the financing  avenues
described above will be successfully  achieved.  Additionally,  we cannot assure
you that the new  subsidiary  debt or project equity being offered will be sold,
that the  USDA-guaranteed  financing will become  available,  that the Financing
Agent will arrange the desired financing, or that any of the eight pond recovery
projects will proceed.

     To date no  financing  commitments  have  been  received,  and  there is no
assurance that our financing efforts will be successful.

     Improved  Drilling  and Lab  Capabilities.  In 2000  BTI  made  substantial
investments to improve its slurry pond core drilling equipment and its fine coal
laboratory analytical services  capabilities.  In addition to supporting its own
pond  recovery  project  evaluations,  BTI is now able to offer state of the art
drilling and  analytical  services to commercial  clients who are  independently
investigating their own projects.

     Principal  Products  and  Services.  The  principal  products  and services
supplied  by our  Coal  Segment  are  (i)  the  capability  to  undertake  large
reclamation  projects and the cleanup of slurry pond recovery  sites;  (ii) core
drilling of slurry ponds and  evaluation of  recoverable  coal  reserves;  (iii)
consulting reclamation technology;  (iv) technical services; and (v) proprietary
coal reclamation technology.

     Sources  and  Availability  of  Raw  Materials.  There  are  numerous  coal
impoundments  scattered  throughout  the eastern third of the U.S. which contain
sizeable reserves of coal fines which we believe can be recovered on an economic
basis while at the same time solving an environmental  problem.  With the recent
dramatic  increase  in coal  prices,  slurry pond  owners are  recognizing  that
recovery can be done on a profitable basis,  making it a win-win proposition for
both the pond owner and the company undertaking the project.

     Dependence of the Segment on a Single Customer.  The Coal Segment accounted
for the following  percentages  of our  consolidated  revenues  from  continuing
operations for each of the last three years.

                                      Percent of
                                     Consolidated
                                     Revenues from
        Fiscal Year                   Continuing
           Ended                      Operations
           -----                      ----------
          12/31/04                       19.4%
          12/31/03                        9.9%
          12/31/02                        2.6%

     The  segment  is not  dependent  on a single  customer.  Loss of all of the
segment's  present  customers  would not have a material  adverse  effect on the
segment nor on us. Although revenues from the DTE Servicing  Agreement accounted
for  70.4% of  segment  revenues  and  13.7%  of  consolidated  revenues,  early
termination  of this contract is not expected to have a material  adverse effect
on the  segment  or the  Company  as it  appears  the  contract  would have been
marginally profitable at best if it had run to its conclusion.

     Our revenues and  profitability  will  continue to be  negatively  impacted
until contracts for new reclamation  projects currently in development have been
negotiated and finalized.

     Facilities. BTI leases an office and laboratory facilities from the Applied
Research Center at the University of Pittsburgh  ("UPARC").  BTI's facilities at
UPARC give the Coal Segment  access to a wide range of coal and mineral  testing
capabilities.

     Market Demand and Competition.  To our best knowledge, our only competition
of equivalent or greater size and scope of operations is DTE Energy  Company,  a
full service  energy and energy  technology  company based in Detroit,  Michigan
("DTE"). Although DTE has significantly greater financial capability, we believe
that BTI has better facilities and a wider range of technical  expertise.  There
are also several  small  independent  concerns in the business.  Competition  is
largely on the basis of technological expertise and customer service.

     Seasonality.  The coal reclamation business is somewhat seasonal due to the
tendency for field activity to be reduced in cold and/or bad weather.

     Environmental  Matters.  Compliance  with  Federal,  state and  local  laws
regarding  discharge of materials into the environment or otherwise  relating to
protection of the  environment  are of primary  concern to the segment,  and the
cost of addressing such concerns are factored into the cost of each project. The
cost of  compliance  varies by project and cannot be estimated  until all of the
contract provisions have been finalized.  See "  Regulation---Environmental  and
Worker Safety Matters."

     Financial Information.  Financial information about the Coal Segment is set
forth in the Financial  Statements.  See Part II, Item 8---Financial  Statements
and Supplementary Data.

                            CARBON DIOXIDE OPERATIONS

     General.  Our carbon  dioxide  (CO2) gas  operations  are  conducted by the
parent  company which owns working and overriding  royalty  interests in two CO2
gas producing units.

Carbon Dioxide (CO2) Properties
-------------------------------

     McElmo Dome.  The McElmo Dome field in western  Colorado is a  240,000-acre
unit from  which CO2 gas is  produced.  We own a  0.53814206%  working  interest
(0.4708743% net revenue interest) and an overriding royalty interest  equivalent
to a 0.0920289% net revenue  interest in the Unit,  giving us a total 0.5629032%
net revenue interest.

     Deliveries of CO2 gas are  transported  through a 502-mile  pipeline to the
Permian Basin  oilfields in West Texas where such gas is utilized  primarily for
tertiary oil recovery. Kinder Morgan CO2 Company, L.P. serves as operator of the
unit.  There are 46  producing  wells,  ranging from 7,634 feet to 8,026 feet in
depth.  McElmo Dome is believed  to be the  largest  producing  CO2 field in the
world. The gas is approximately 98% CO2.

     In 2004, we sold 1,787,000 Mcf (thousand  cubic feet)  attributable  to our
working and overriding royalty interests at an average price of $.42 per Mcf. In
2003 we sold 1,529,000 Mcf  attributable  to our working and overriding  royalty
interests  at an average  price of $.33 per Mcf. In 2002 we sold  1,514,000  Mcf
attributable to our working and overriding royalty interests at an average price
of $.29 per Mcf. We were underproduced by 48,000 Mcf on the sale of our share of
McElmo Dome gas at year-end 2004.

     As the result of the recent increase in oil prices, CO2 demand for tertiary
recovery and McElmo Dome production has increased  accordingly.  CO2 production,
which averaged 732 million cubic feet per day in 2002,  increased to 784 million
cubic feet per day in 2003, and increased  further to 887 million cubic feet per
day in 2004.  We have been advised by the operator that the field is now capable
of producing 1.2 billion cubic feet per day.

     We consider  our  ownership  interest in the McElmo Dome Field to be one of
our most  valuable  assets.  As a result of the  settlement  of the McElmo  Dome
litigation,  the recent  improvement in oil prices and the increased  demand and
improved  pricing for CO2, we now believe  that our  interest in the field has a
fair market value in excess of $4.8  million  versus a book value of $338,000 at
year-end 2004.

     Anticipated  Improvement  in  Pricing  as  a  Result  of  the  McElmo  Dome
Settlement.  In addition to  establishing a cash  settlement  fund to settle the
litigation the McElmo Dome Settlement Agreement also provided for the monitoring
of pipeline  tariffs,  minimum prices and funding for a CO2 Claims  Committee to
enforce these provisions.  We anticipate additional  improvement in pricing from
the above.  Moreover, we will investigate marketing our share of the CO2 through
other parties at a higher price.

     Bravo Dome. We also own a 0.05863% working  interest in the  1,000,000-acre
Bravo Dome CO2 gas unit in northeastern New Mexico. Bravo Dome is believed to be
the second  largest  producing CO2 field in the world.  At December 31, 2004, we
had produced  606,000 Mcf of CO2 gas which is  presently in storage.  We sold no
CO2 gas from Bravo Dome in 2004, 2003 and 2002. Our solid CO2 segment, which was
sold in 1997, had previously provided the market for such gas. We are continuing
our  efforts  to market  our share of the gas at a  reasonable  price,  but such
efforts have to date been unsuccessful.

     Occidental  Petroleum  Corporation  operates the Bravo Dome field.  The 350
producing wells are approximately  2,500 feet deep. The gas is approximately 99%
CO2.

     Net CO2 Production. The following table sets forth our net CO2 production
from McElmo Dome for each of the last three fiscal years:

                                     Net CO2
         Fiscal Year               Production
            Ended                     (Mcf)
            -----                     -----
           12/31/04                1,787,000
           12/31/03                1,529,000
           12/31/02                1,514,000

     Average Sales Price and Production Cost. The following table sets forth our
average sales price per unit of CO2 produced and the average lifting cost (lease
operating  expenses and  production  taxes) per unit of production  for the last
three fiscal years:

                             Average Sales Average Lifting
        Fiscal Year                   Price Per Mcf             Cost Per Mcf
           Ended                         of CO2                    of CO2
           -----                         ------                    ------
         12/31/04                         $0.42                    $0.06
         12/31/03                         $0.33                    $0.06
         12/31/02                         $0.29                    $0.07

     Dependence of the Segment on a Single Customer.  The CO2 Segment  accounted
for the following  percentages  of our  consolidated  revenues  from  continuing
operations for each of the last three years.  Our CO2 revenues are received from
two  operators  who  market the CO2 gas to  numerous  end users on behalf of the
interest owners who elect to participate in such sales.  In 2004,  approximately
95% of our  revenues  from the sale of CO2 gas was derived  from Kinder  Morgan,
L.P. and approximately 5% was derived from Exxon Mobil.

                               Percent of
                              Consolidated
                              Revenues from
      Fiscal Year              Continuing
         Ended                 Operations
         -----                 ----------
       12/31/04                   77.6%
       12/31/03                   85.7%
       12/31/02                   94.9%

     Under the existing  operating  agreements,  so long as any CO2 gas is being
produced and sold from the field,  we have the right to sell our undivided share
of the production to either Kinder Morgan or Exxon Mobil and also have the right
to sell such production to other users. During 2004 Kinder Morgan was offering a
slightly higher price than Exxon Mobil, so more of the segment's  production was
sold to Kinder Morgan. We believe that the loss of either Kinder Morgan or Exxon
Mobil as a customer  would have a material  adverse effect on the segment and on
us.

     Productive  Wells.  Our  principal  CO2  properties  are held  through  our
ownership of working  interests in oil and gas leases which  produce CO2 gas. As
of December 31, 2004,  we held a working  interest in a total of 396 gross (0.45
net) CO2 wells located in the  continental  United States.  The table below is a
summary of such developed properties by state:

                                                     Number of Wells
                                                     ---------------
                     State                      Gross               Net
                     -----                      -----               ---
          Colorado .....................        46                0.248
          New Mexico ...................       350                0.205
                                               ---                -----
               Total....................       396                0.453
                                               ===                =====

     Financial  Information.  Financial information about our CO2 gas operations
is  contained  in our  Financial  Statements.  See Part II,  Item  8---Financial
Statements and Supplementary Data.

                               OPERATIONS IN CHINA

     Background Information.  In 1998 we opened an office in the PRC. In 1999 we
established a Representative  Office in Beijing.  In 2001 Beijing Beard Bio-Tech
Engineering  Co.,  Ltd.  ("BTEC"),  a Chinese  corporation,  was  organized as a
wholly-owned  subsidiary to serve as the  operating  entity for all of the China
Segment's activities in the PRC. In 2002 we formed BEE, a wholly-owned  Oklahoma
limited liability company, to serve as the parent company of BTEC and all of the
segment's  subsidiaries in China. In February of 2005 BEE and a private investor
formed  BEE/7HBF,  LLC which is owned 50% each by BEE and the private  investor.
This new entity will form a wholly  foreign-owned  enterprise  ("WFOE") in China
that will  control and manage the  segment's  initial  fertilizer  manufacturing
plant in the PRC.

     Environmental  Opportunities.   China  is  a  large  country  with  serious
environmental  problems  which  include  atmospheric  pollution,   ground  water
pollution and land  pollution.  To solve these  problems the government has made
the decision to permit the use of foreign  equipment and technology.  The amount
of arable land in China is limited  considering its dense  population.  China is
the  largest  user of  chemical  fertilizers  in the world.  Unfortunately,  the
carryover  of  fertilizers  from one  planting to the next and the  considerable
runoff into lakes and rivers has polluted much of China's  arable land and fresh
water resources.

     Organic-Chemical  Compound  Fertilizer  Initiatives.  China,  which  is the
world's  fourth  largest  country  in area,  is also the  world's  most  heavily
populated  country,  with a population of almost 1.3 billion.  China categorizes
about 800 million of their  population as  "farmers."  The average sized farm is
less than two acres.  In order to earn a  subsistence  living,  China's  farmers
must, if possible,  multi-crop  the same plot of soil,  frequently  using hybrid
crop  varieties  with  greater  yields  that  stress  the soil much more so than
non-hybrid crops. To ensure production, fertilizers are used with each planting,
which  increases  soil stress.  This abusive  farming  practice  has, over time,
resulted in damaged,  less productive soil. Working with the top agronomists and
academicians in the Chinese agricultural  community, we have developed a concept
to mitigate this problem by manufacturing  organic chemical compound fertilizers
("OCCF"). The end result will be a line of environmentally  friendly fertilizers
utilizing  organics  derived from waste materials that, due to their  abundance,
are a serious environmental nuisance in China.

     Formulation of Product. The formulation of our product will be based on the
target crops and  determined by leading soil  scientists  at China  Agricultural
University in Beijing and  agronomists  in each province.  Our  production  will
amount to less than about 5% of total fertilizer demand in each of the provinces
in which we are  planning to  construct a  facility.  We believe  that the sales
price for our product  will be  commensurate  with and that the quality  will be
superior to other similar  products  presently  available.  We expect to receive
strong  support  for our  product  from  these  senior  scientists  and from the
provincial authorities.  Based on these and other factors, we are confident that
our product will be well received by the agricultural community.

     REUSE  License  Agreement.  In February of 2003 BEE entered  into a License
Agreement with Real Earth United States Enterprises,  Inc. ("REUSE") whereby BEE
obtained the exclusive right and license to use the REUSE proprietary composting
technology in the PRC. BEE also has the exclusive right to license or sublicense
the  technology in the PRC. The exclusive  right is for a term of five years and
will be  automatically  extended for additional  five year periods if BEE or its
affiliates have entered into written agreements for either (i) the sublicense of
five plants or (ii) the sale to  Cooperative  Joint  Ventures  ("CJV's") of five
plants during the respective periods involved.

     BEE will pay a license  fee prior to the start up date of each plant  which
utilizes the REUSE technology.  For biosolid plants, such fee will be determined
by the design biocell  capacity of each plant. The fee for a biosolid plant will
range from  $125,000  to  $250,000  depending  upon the size of the  plant.  The
license fee for an MSW plant will be higher due to the  complexity  of the plant
and equipment involved. If either type of plant is later expanded,  BEE will pay
a supplemental  license fee equal to 10% of the  construction  cost of the plant
enhancement.  BEE will also pay a  quarterly  royalty  payment to REUSE for each
metric ton of compost sold.

     BEE has  placed  the  marketing  of the REUSE  technology  on hold  pending
completion  of the  new  "mini-plant"  described  below,  which  will be used to
showcase our OCCF technology.

     Financing of Initial Fertilizer Manufacturing Plant. In February of 2005 we
announced  that a  private  investor  has  agreed to  finance  the cost of BEE's
initial fertilizer  manufacturing facility in the PRC. The initial plant will be
located in close  proximity to Beijing and will  produce a new,  environmentally
friendly,  OCCF. The plant is initially  targeted to produce about 32,000 metric
tons  per  year of OCCF  with  estimated  revenues  of  more  than  US$5,000,000
annually.  The facility is sized to permit  doubling of  production  capacity to
meet market demand.  It is anticipated that production will commence in time for
the fall planting. (See "General development of business---Recent  Developments"
for additional details).

     Principal  Products  and  Services.  The  principal  products  and services
supplied by our China Segment are the  installation,  construction and operation
of facilities which utilize proprietary technology licensed from others.

     The China Segment generated no revenues in 2004, 2003 and 2002.

     Facilities.  BEE leases a small office located in Beijing  Landmark  Tower,
Building No. 1, in Beijing,  China. It intends to move its office to the site of
the new manufacturing facility during the second quarter of 2005.

     Market  Demand  and  Competition.  The  environmental  industry  is  highly
competitive,  and the China Segment must compete  against  significantly  larger
companies,  as well as a number of small  independent  concerns.  Competition is
largely on the basis of  technological  expertise,  product quality and customer
service.

     Financial Information. Financial information about the China Segment is set
forth in the Financial  Statements.  See Part II, Item 8---Financial  Statements
and Supplementary Data.

                                   e-COMMERCE

     Formation of starpay.com(TM),  inc. (now starpay.com, l.l.c.). In 1999 four
patent  applications  were filed  embodying the features of a new secure payment
system for Internet transactions and we formed starpay.com,  inc. ("starpay") to
pursue  the  development  of the  payment  system.  In 2000,  starpay  filed two
additional patent  applications which  considerably  broadened the scope and the
potential of its patent claims. In 2001 starpay became starpay.com, l.l.c.

     In May of 2003 we formed Advanced Internet  Technologies,  L.L.C.  ("AIT").
The members of starpay.com, l.l.c. contributed their entire membership interests
in starpay to AIT for equivalent  membership  interests in AIT. starpay became a
wholly-owned   subsidiary  of  AIT  with  Marc  Messner,   Beard's  VP-Corporate
Development  and the  inventor  of  starpay's  technology,  serving  as its Sole
Manager.  Current  ownership in AIT is as follows:  Beard (71%);  Messner (15%);
patent attorney (7%); Web site company (7%).

     The starpay Technology. Our secure payment methods and technologies address
payer and transaction  authentication in many forms. These include,  but are not
limited to, performing a payer query for authentication and transaction  consent
verification,  as well  as,  chaining  split  transactions  into  an  integrated
verifiable  unique  transaction  authenticating  the  user  and the  transaction
attributes in the process.

     Other features of starpay's technology include a patent-pending system that
incorporates the innovative use of the ubiquitous  compact disc or smart card as
a  security  and  transaction-enabling   device.  The  enabling  device,  user's
identifier and/or PIN must all be present to enable a payment transaction on the
Internet. This technology is an additional layer of security that may or may not
be applied to starpay's proprietary process flow models.

     License Agreement. In November of 2001 VIMachine,  Inc. ("VIMachine"),  the
owner of U.S. Patent 5,903,878,  "Method and Apparatus for Electronic  Commerce"
(the "VIMachine Patent") granted to starpay the exclusive marketing rights, with
respect to certain  clients (the  "Clients")  which  starpay has  identified  to
VIMachine, for security software and related products and applications.  starpay
believes the VIMachine  Patent will provide  numerous  opportunities to generate
related  licensing  agreements  in the  electronic  authentication  and  payment
transaction fields.

     In March 2002 starpay's  marketing  rights with respect to its Clients were
broadened  to include the right to litigate  on behalf of  VIMachine  all patent
claims in relation to the VIMachine  Patent and related foreign  applications or
patents. Any settlement and/or judgment resulting from starpay's  prosecution of
the VIMachine  Patent  claims will be shared 50/50 or 25/75 between  starpay and
VIMachine   (depending   upon  who  the  infringing   party  may  be)  following
reimbursement  to starpay  (from the  settlement  and/or  judgment  monies)  for
litigation related expenses incurred, including defense of any counterclaims.

     Visa  Litigation.  In May of 2003 starpay along with VIMachine filed a suit
in the U. S. District Court for the Northern District of Texas,  Dallas Division
against Visa  International  Service  Association and Visa USA, Inc., both d/b/a
Visa (Case No.  CIV:3-03-CV0976-L).  In July of 2003 the Plaintiffs  filed, with
the express written consent of the Defendants, an Amended Complaint. The ongoing
suit seeks damages and injunctive  relief (i) related to Visa's  infringement of
the  VIMachine  Patent;  and (ii) under  California's  common law and  statutory
doctrines of unfair trade practices,  misappropriation and/or theft of starpay's
intellectual property and/or trade secrets. In addition,  Plaintiffs are seeking
attorney fees and court costs related to the foregoing  claims.  If  willfulness
can be shown, Plaintiffs will seek treble damages.

     On January 4, 2005,  following a Markman  hearing  held in late  October of
2004,  the  Magistrate  Judge  filed a Report and  Recommendation  of the United
States Magistrate Judge addressing his findings and recommendations with respect
to the claim constructions to be applied to the VIMachine Patent. The Magistrate
Judge found that 24 of the 28 claims asserted by the Plaintiffs were valid. Both
parties have pursued  modifications of the Magistrate's  recommendations  in the
form of an appeal to the  District  Court and are  awaiting  the  Court's  final
ruling on claim construction issues.

     See "Item 3. Legal Proceedings---Visa Litigation" for additional details.

     Issuance of Initial Patent;  Exclusive License Agreement. On April 9, 2002,
the U.S.  Patent and Trademark  Office  issued U.S.  Patent No.  6,370,514  (the
"Voucher  Patent")  to starpay  on its patent  application  titled  "Method  for
Marketing  and  Redeeming  Vouchers  for use in Online  Purchases."  All  claims
submitted in this application were allowed.

     On March 28,  2003,  starpay  finalized  a Patent  License  Agreement  with
Universal  Certificate  Group LLC ("UCG"),  a private  company based in New York
City. UCG has developed a universal  online gift certificate that is accepted as
payment at hundreds of online stores through its  subsidiary,  GiveAnything.com,
LLC. The Agreement,  which remains in effect for the term of the patent,  grants
to UCG the exclusive,  worldwide license to use, improve,  enhance or sublicense
the Voucher Patent. Under the Agreement,  starpay receives a license fee payable
annually for three years plus a royalty payable  semi-annually during the patent
term.  starpay also shares in any license fees or royalties  paid to UCG for any
sublicenses.  UCG has the exclusive right to institute any suit for infringement
under the Agreement.  starpay has the right to jointly  participate in any suit,
in which case any  damages  obtained  will be shared  according  to the fees and
expenses  borne by each party.  UCG has the option to terminate the Agreement at
any time without liability.

     starpay's Strategy and Current Opportunities.  starpay's plan is to develop
licensing   agreements   and  other  fee  based   arrangements   with  companies
implementing  technology in conflict  with our  intellectual  property.  We have
identified and investigated  many  opportunities  for our intellectual  property
portfolio  which include various  e-commerce  payment  systems,  security access
applications  and  secure  document   transmission.   Although  there  are  many
applications   for  our   technology,   our  focus  is  on  Internet   security,
authentication and electronic payments.  starpay is continuously assessing these
situations  looking toward the  possibility of generating  additional  licensing
opportunities.

     starpay  believes that its  intellectual  property  portfolio  provides the
technology  and  methods  for  enabling  the  most  secure  payment  system  and
authentication  protocols  available  for use on the  Internet.  If  starpay  is
successful in its strategic  licensing and  litigation  efforts,  the e-Commerce
Segment  is  expected  to  become a major  contributor  to our  future  success.
However, no assurance can be given that starpay will successfully  capitalize on
its Internet security methods and technologies.

     Facilities.  starpay  occupies a small portion of the office space occupied
by us at our corporate headquarters located in Oklahoma City, Oklahoma.

     Market Demand and Competition.  The e-commerce industry is rapidly changing
and  highly  competitive,  and  the  e-Commerce  Segment  must  compete  against
significantly  larger  companies,  as  well as a  number  of  small  independent
concerns.  Competition  is  largely  on the  basis of  technological  expertise,
customer  service,  capital  available  for product  branding and the ability to
react quickly to a constantly changing environment.

     Dependence  of the Segment on a Single  Customer.  The  e-Commerce  Segment
accounted for the following  percentages of the Company's  consolidated revenues
from continuing operations for each of the last three years.

                                      Percent of
                                     Consolidated
                                     Revenues from
        Fiscal Year                   Continuing
           Ended                      Operations
           -----                      ----------
          12/31/04                        3.0%
          12/31/03                        4.2%
          12/31/02                        0%

     The segment  presently  has only one  customer,  a licensee.  However,  the
licensee has already generated one sublicense and is pursuing others. We believe
that  the loss of the  segment's  present  customer  would  not have a  material
adverse  effect on the segment  since the segment would then be in a position to
pursue licenses  directly with other parties.  The loss of the present  customer
would not have a material adverse effect on us.

     Financial  Information.  Financial information about the e-Commerce Segment
is set  forth in the  Financial  Statements.  See Part  II,  Item  8---Financial
Statements and Supplementary Data.

                                   REGULATION

     General. We are subject to extensive  regulation by federal,  state, local,
and foreign  governmental  authorities.  Our operations in the United States and
China are subject to political  developments that we cannot accurately  predict.
Adverse  political  developments  and  changes in current  laws and  regulations
affecting  us could  dramatically  impact the  profitability  of our current and
intended operations.  More stringent  regulations affecting our coal reclamation
activities  could  adversely  impact  the   profitability  of  our  future  coal
reclamation operations and the availability of those projects.

     Environmental  and Worker Safety Matters.  Federal,  state,  and local laws
concerning  the  protection of the  environment,  human health,  worker  safety,
natural  resources,  and  wildlife  affect  virtually  all  of  our  operations,
especially our coal reclamation and environmental remediation activities.  These
laws affect our profitability and increase the Company's exposure to third party
claims.

     It is not possible to reliably  estimate the amount or timing of our future
expenditures  relating to environmental  matters because of continually changing
laws and  regulations,  and the nature of our businesses.  We cannot  accurately
predict the scope of environmental  or worker safety  legislation or regulations
that will be  enacted.  Our cost to comply  with newly  enacted  legislation  or
regulations  affecting our business  operations  may require us to make material
expenditures to comply with these laws.  Since we are not currently  involved in
any  projects,  it does not include  environmental  exposures  in its  insurance
coverage. Should we become involved with projects having environmental exposure,
we  believe  we will have no  difficulty  in  obtaining  environmental  coverage
adequate to satisfy its probable environmental liabilities.  As of this date, we
are not aware of any  environmental  liability or claim that could reasonably be
expected to have a material adverse effect upon our present financial condition.

                                  RISK FACTORS

Net Losses, Limited Liquidity and Capital Resources

     Although we were profitable in 2004 as a result of the Settlement,  we have
suffered net operating losses during each of the last seven years. Our net worth
became  negative  as of December  31,  2001,  and the  deficiency  increased  to
($5,333,000)  at  year-end  2003.  Receipt  of  the  second  installment  of the
Settlement  reduced the deficiency to  ($4,144,000)  at year-end 2004;  however,
such  deficiency  will  continue  to  increase  until  we are  able  to  achieve
profitability  in our Coal and China  Segments.  This deficiency will impede our
ability to borrow funds and may impact our ability to achieve  profitability  in
the future.

     Our business will continue to require substantial expenditures. There is no
certainty that we will be able to achieve or sustain  profitability  or positive
cash flows from operating activities in the future.

History of Delays in Finalizing New Coal Projects

     We have experienced delays in the past in finalizing its new coal projects.
We may  experience  additional  delays in the future.  Although we have signed a
definitive agreement on the Pinnacle Project, we have not yet been successful in
arranging  the  financing for the project.  No  definitive  contracts  have been
signed in connection with the other projects  currently under development in the
Coal Segment,  nor has any financing  been arranged to date for these  projects.
Continued delays in finalizing our new coal projects may have a material adverse
effect on us.

History of Delays in Finalizing Projects in China

     We have experienced delays in the past in finalizing  projects in China and
may  experience  additional  delays in the  future.  We have just  arranged  the
financing for our initial project. It is critical that this project be completed
on  budget  and in a timely  manner.  Continued  delays  in  finalizing  our new
projects in China may have a material adverse effect on us.

starpay Intellectual Property Rights; Copying by Competitors

     We have  identified  at least three  competitors  that offer  services that
potentially  conflict with starpay's  intellectual  property  rights.  If we are
unable to protect our intellectual property rights from infringement, we may not
be able to realize the anticipated profit potential from the e-Commerce Segment.

Failure to Achieve a Settlement or Win a Judgment in the Lawsuit Against Visa

     In  connection  with the  lawsuit  against  Visa,  we have  agreed  to bear
one-half of the out-of-pocket  expenses  (excluding legal fees) borne by the law
firm  handling  the case.  At this point it is difficult to estimate the maximum
exposure  for such  expenses,  or the length of time before the matter  might be
resolved.  However, if our operating results do not improve going forward and we
are  unable  to pay our  share of the  expenses,  then we  would  be faced  with
reducing our potential recovery from any settlement or judgment.

Political and economic uncertainty in China could worsen at any time and our
operations could be delayed or discontinued.

     Our business is subject to political and economic risks, including:

     o    Loss of revenue,  property  and  equipment  as a result of  unforeseen
          events like expropriation, nationalization, war and insurrection;

     o    Risks of increases in import,  export and  transportation  regulations
          and tariffs, taxes and governmental royalties;

     o    Renegotiation of contracts with governmental entities;

     o    Changes in laws and policies  governing  operations  of  foreign-based
          companies in China;

     o    Exchange  controls,  currency  fluctuations  and  other  uncertainties
          arising  out of  foreign  government  sovereignty  over  international
          operations;

     o    Laws and  policies  of the  United  States  affecting  foreign  trade,
          taxation and investment; and

     o    The  possibility  of being  subject to the exclusive  jurisdiction  of
          foreign  courts in  connection  with legal  disputes  and the possible
          inability to subject foreign persons to the  jurisdiction of courts in
          the United States.

                           OTHER CORPORATE ACTIVITIES

     Other  Assets.  During the last six years we have  disposed  of most of the
assets  related to our  discontinued  operations.  However,  we still have a few
remaining  assets and investments  which we are in the process of liquidating as
opportunities  materialize.  At year-end 2004 such assets consisted primarily of
the  residue  of  an  iodine  extraction  plant  and  related  equipment,  brine
collection  wells,  drilling  rig  components  and related  equipment,  land and
improvements,  wastewater  storage  tanks,  oil and gas leases and a real estate
limited  partnership in which we are a limited  partner.  All of such assets are
reflected  on our books for less than their  anticipated  realizable  value.  As
excess funds become available from such  liquidations  they will be utilized for
working  capital,  reinvested in our ongoing  business  activities or redeployed
into newly targeted opportunities.

     Office and Other Leases. We lease office space in Oklahoma City,  Oklahoma,
aggregating  5,817 square feet under a lease  expiring  September 30, 2005, at a
current annual rental of $75,000.  In addition,  our subsidiaries lease space at
other locations as required to serve their respective needs.

     Employees. As of December 31, 2004, we employed 21 full time and seven part
time employees in all of our operations,  including five full time employees and
two part time employees on the corporate staff.

     (d)  Financial information about foreign and domestic operations and export
          sales.
          ---------------------------------------------------------------------

     See Item 1(c) for a  description  of foreign and  domestic  operations  and
export sales.

Item 2. Properties.
        -----------

     See Item 1(c) for a description of properties.

Item 3. Legal Proceedings.
        ------------------

     Neither we nor any of our  subsidiaries  are engaged in any  litigation  or
governmental  proceedings  which we believe will have a material  adverse effect
upon the results of operations or financial  condition of any of such companies.
However,  we were a  plaintiff  in a  lawsuit  where  our  share of the  claims,
exclusive of interest and costs,  exceeded 10% of consolidated current assets at
year-end  2004.  This suit has now been  settled.  See "McElmo Dome  Litigation"
below.

     McElmo Dome Litigation.  In October of 1996 we joined with other Plaintiffs
in filing in U.S.  District  Court for the  District of Colorado a suit  against
Shell Oil Company,  Shell  Western E & P, Inc.,  Mobil  Producing  Texas and New
Mexico,  Inc. and Cortez  Pipeline  Company,  a partnership  (collectively,  the
"Defendants").  Plaintiffs'  complaint  alleged  damages  caused by  Defendants'
wrongful  determination  of the value of CO2 produced from the McElmo Dome Field
(the  "Field"---see   "Carbon  Dioxide  Operations"  at  pages  10-12)  and  the
corresponding wrongful underpayment to Plaintiffs.

     A Settlement Agreement was signed in September of 2001. Following a lengthy
appeal by certain objecting class members the Settlement became final in July of
2003 and we  received  our  $1,151,000  share of the  first  installment  of the
Settlement.  We received the second installment of $2,826,000 on March 26, 2004.
Distribution  of the  proceeds  significantly  improved  our  balance  sheet and
enabled us to pay off  $2,620,000 of our then  outstanding  debt and  associated
accrued interest.

     We expensed all of our share,  totaling $450,000 from 1996 through year-end
2003,  of the costs of the  litigation.  Accordingly,  the  Settlement  proceeds
flowing to us resulted in net income,  except for alternative minimum tax in the
amount of  $118,000  in 2004.  Our share of the  Settlement  was not  subject to
Federal or Colorado  income tax due to our NOL's.  (See Note 11 to the Company's
Financial Statements).

     Coalition  Managers  Litigation.  In April of 2002 a suit was  filed in the
U.S.  District  Court of  Colorado  (Harry  Ptasynski  v. John M.  Cogswell,  et
al---Case No. 02-WM-0830 (OES) against the attorneys and managers (including our
Chairman)  of the  CO2  Claims  Coalition,  LLC  (the  "Coalition"---one  of the
Plaintiffs in the preceding  lawsuit which has now been  settled).  We are not a
defendant in the suit,  which was  initially  brought by  Ptasynski  and another
party which later dismissed itself from the action.  In this action Ptasynski is
seeking to recover a share of the proceeds of the Coalition's settlement against
the Defendants in the McElmo Dome lawsuit  despite the fact that he opted out of
the lawsuit in order to pursue his own claims in a separate  lawsuit against the
Defendants in Texas.  Although his case was initially successful in Texas it was
later overturned on appeal.

     The Coalition held back $1 million of the Settlement proceeds to defend the
costs of the Ptasynski suit until such time as its outcome has been  determined.
Presently  approximately $700,000 remains in the defense fund. Once the case has
been  resolved,  any  remaining  funds net of costs will be  distributed  to the
Coalition members, including us. In March of 2004 the Court dismissed the claims
against the  attorneys  and several of the claims  against the managers but gave
the  Plaintiff  the  opportunity  to make  additional  arguments as to why other
claims should not be dismissed.  In April of 2004 Plaintiff  asked the Court not
to dismiss the  remaining  claims and moved to file a Second  Amended  Complaint
against the managers and, for the first time,  against the Coalition.  In May of
2004 the Defendants  asked the Court to deny  Plaintiff's new Complaint and have
been  waiting for the Court's  Order since  then.  We consider  the  Plaintiff's
claims to be without merit. We will receive  approximately  20% of the remaining
funds, if any, once the suit has been resolved.

     Visa  Litigation.  In May of 2003 our  71%-owned  subsidiary,  starpay.com,
l.l.c., along with VIMachine,  Inc. filed a suit in the U. S. District Court for
the Northern  District of Texas,  Dallas  Division  against  Visa  International
Service   Association   and  Visa  USA,   Inc.,   both   d/b/a  Visa  (Case  No.
CIV:3-03-CV0976-L).  VIMachine is the holder of U.S.  Patent No.  5,903,878 (the
"VIMachine  Patent")  that covers,  among other  things,  an improved  method of
authenticating the cardholder  involved in an Internet payment  transaction.  On
July 25, 2003, the Plaintiffs filed an Amended Complaint. The suit seeks damages
and  injunctive  relief (i)  related  to Visa's  infringement  of the  VIMachine
Patent;  (ii)  related to Visa's  breach of certain  confidentiality  agreements
express or implied; (iii) for alleged fraud on the Patent Office based on Visa's
pending patent application; and (iv) under California's common law and statutory
doctrines of unfair trade practices,  misappropriation and/or theft of starpay's
intellectual property and/or trade secrets. In addition,  Plaintiffs are seeking
attorney fees and costs related to the foregoing  claims.  If willfulness can be
shown, Plaintiffs will seek treble damages.

     In August of 2003 the  Defendants  filed a motion to  dismiss  the  second,
third and fourth claims.  Despite  objections to such motion by the  Plaintiffs,
the Judge on February 11, 2004, granted Defendants' motion to dismiss the second
and third  causes of  action,  and  denied  the  motion  insofar as it sought to
dismiss  the  fourth  cause of action.  Accordingly,  Plaintiffs'  fourth  claim
(misappropriation  and/or theft of  intellectual  property and/or trade secrets)
will continue to move forward.

     On February 23, 2004,  Defendants  filed an Answer to  Plaintiffs'  Amended
Complaint.  In such filing Visa denied each  allegation  relevant to claim four.
Visa asked that the  VIMachine  Patent be declared  invalid,  and, even if it is
found valid, Visa asked that they be found not to infringe the VIMachine Patent.
Visa asked for other related relief based on these two allegations.

     In  April  and  May  2004,   Plaintiffs  filed  their  Patent  Infringement
Contentions and a supplement  thereto  detailing Visa's alleged  infringement of
the  majority  of  the  patent  claims   depicted  in  the   VIMachine   Patent.
Subsequently,  in May 2004, Defendants filed Preliminary  Invalidity Contentions
requesting the VIMachine Patent be found invalid.

     From May through  October 2004, the  Plaintiffs  and  Defendants  submitted
numerous filings related to  interpretation  of the terms and phrases set out in
the 878'  patent  claims.  A hearing  regarding  patent  claim  construction  (a
"Markman hearing") was held on October 21 and 29, 2004, allowing both parties to
present oral arguments before the Court regarding the claim construction issues.
On January 4, 2005, Magistrate Judge Sanderson filed a Report and Recommendation
of  the  United   States   Magistrate   Judge   addressing   his   findings  and
recommendations  with  respect to the claim  constructions  to be applied to the
VIMachine Patent. Judge Sanderson found that 24 of the 28 claims asserted by the
Plaintiffs  were  valid.   Both  parties  have  pursued   modifications  of  the
Magistrate's  recommendations in the form of an appeal to District Judge Lindsey
and are awaiting the Court's final ruling on claim construction issues.

     During the first  quarter of 2000  starpay's  trade secrets were relayed to
Visa verbally in  face-to-face  conferences  and telephone  calls, as well as in
correspondence by post and electronic mail. After receiving starpay's technology
and ideas, Visa filed a series of provisional patent  applications  beginning in
April of 2000 using starpay's  trade secrets.  At the same time, Visa wrongfully
incorporated starpay's trade secrets in to its Visa Payer Authentication Service
("VPAS").  VPAS infringes the VIMachine Patent.  From early 2000 until recently,
starpay tried on several  occasions to enter into meaningful  negotiations  with
Visa to resolve  their  intellectual  property  concerns.  Visa has  continually
denied their  infringement of the VIMachine Patent and starpay's  assertion that
Visa has appropriated starpay's trade secrets.

     In November of 2000 Visa  publicly  announced  that it was testing VPAS. In
September of 2001 Visa stated that,  once rolled out globally,  it expected VPAS
to reduce  Internet  payment  disputes by at least 50%. In an October 26,  2004,
news release,  Visa depicted  Verified by Visa as "the leading security standard
for  authentication  of  Internet  transactions."  Also,  in this  release  Visa
announced  that  Verified by Visa had  "recorded an increase of close to 200% in
the number of  transactions  for the  quarter  ending in  September  2004." Visa
further  announced  that "total  Verified by Visa card volume for the first nine
months of 2004 was $5.4 billion."

     Both sides  anticipate  filing  dispositive  motions in the late  summer or
fall. Trial is slated to begin in February 2006.

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

     No matters  were  submitted  during the fourth  quarter of the fiscal  year
covered by this report to a vote of security  holders,  through the solicitation
of proxies or otherwise.

Item 4a.  Executive Officers and Significant Employees of the Company.
          ------------------------------------------------------------

     The table below sets forth the age, positions with us and the year in which
each person first became our  executive  officer or  significant  employee.  All
positions are held with us unless otherwise indicated, and such persons are part
of the corporate staff serving us and all of our  subsidiaries  unless otherwise
indicated.

<TABLE>
<CAPTION>
                                                                                              Executive Officer
                                                                                                Or Significant
                                                                                                 Employee of
                                                                                                Beard or Beard
        Name                                 Principal Positions<F6>                              Oil Since           Age
        ----                                 --------------------                                 ---------           ---
<S>                <C>                                                                          <C>                   <C>
W. M. Beard                                  Chairman of the Board and
                                           Chief Executive Officer<F1><F2>                        June 1969           76
Herb Mee, Jr.                       President & Chief Financial Officer<F1><F2>                 November 1973         76
Philip R. Jamison                    Chairman - Beard Technologies, Inc.<F3>                    February 1997         66
C. David Henry                      President - Beard Technologies, Inc.<F3>                      July 2004           51
Riza E. Murteza          President & CEO - Beard Environmental Engineering, L.L.C. and
                   Chairman - Beijing Beard Sino-American Bio-Tech Engineering Co., Ltd.<F4>    November 1998         75
Marc A. Messner       President - Advanced Internet Technologies, L.L.C., Sole Manager -
                                            starpay.com, l.l.c.<F5>
                            and Vice President Corporate Development of the Company               April 1999          43
Jack A. Martine                     Controller and Chief Accounting Officer                      October 1996         55
Rebecca G. Voth                            Secretary and Treasurer<F2>                            July 1997           45
_____________________
<FN>
<F1>
     Director of the Company.
<F2>
     Trustee of certain assets of the Company's 401(k) Trust.
<F3>
     Devotes all of his time to this subsidiary.
<F4>
     Devotes all of his time to these subsidiaries.
<F5>
     Devotes most of his time to these subsidiaries.
<F6>
     Indicated entities are subsidiaries of the Registrant.
</FN>
</TABLE>

     Information  concerning  our  executive  officers  and certain  significant
employees is set forth below:

     W. M. Beard has  served as our  Chairman  of the Board and Chief  Executive
Officer since  December  1992.  He previously  served as our President and Chief
Executive  Officer from our incorporation in October 1974 until January 1985. He
has served BOC as its Chairman of the Board and Chief  Executive  Officer  since
its  incorporation.  He has also served as our director and as a director of BOC
since their  incorporation.  Mr. Beard has been actively  involved since 1952 in
all management  phases of us and BOC from their  inception,  and as a partner of
their predecessor company.

     Herb Mee,  Jr. has served as our  President  since  October 1989 and as our
Chief Financial  Officer since June 1993. He has served as BOC's President since
its  incorporation  and as its Chief  Financial  Officer since June 1993. He has
also served as our director and as a director of BOC since their  incorporation.
Mr. Mee served as  President  of Woods  Corporation,  a New York Stock  Exchange
diversified  holding  company,  from  1968 to 1972  and as its  Chief  Executive
Officer from 1970 to 1972.

     Philip R.  Jamison  has  served as  Chairman  of BTI since  July  2004.  He
previously  served as BTI's  President  from  August  1994 until July 2004.  Mr.
Jamison  has been  associated  with the coal  industry  since  1960,  working in
various positions.  From 1972 to 1977 he served as Vice President Operations for
International  Carbon  and  Minerals  and as  President  and CEO of all its coal
producing  subsidiaries.  From  1979  to  1988 he  served  as CEO of four  small
companies which were engaged in the production and sale of coal.

     C.  David  Henry  has  served  as  President  of BTI since  July  2004.  He
previously  served  from  2000  until  July  2004 as  BTI's  Vice  President  of
Operations  where he  focused on the  development  of coal  recovery  operations
through  the  utilization  of  advanced  coal  processing  technologies  and the
production  of high-grade  fine coal  products.  His area of expertise  includes
recovery and  reclamation of coal slurry  impoundments,  testing and analysis of
coal slurry samples, slurry pond reclamation design and coal preparation.

     Riza E. Murteza has served as President and Chief Executive  Officer of BEE
since December 2002 and of its predecessor since November 1998. He has served as
Chairman of BTEC since  December  2001. He was appointed  Senior  Advisor to the
United  Nations  Development  Project for China,  residing in China for one year
(1996-1997) while assisting large Chinese enterprises' move to a market economy.
Prior to that he served as General  Manager  and  Project  Manager for two large
projects  in  Indonesia  and a large  project  in the Soviet  Union for  periods
totaling nine years.

     Marc A.  Messner  has  served as  President  of AIT and as sole  manager of
starpay.  com, l.l.c. since May 2003. He served as President and Chief Executive
Officer of starpay  (and its  predecessor)  from April 1999 to May 2003,  and as
Sole Manager of starpay since May 2003. He has also served as our Vice President
- Corporate  Development  since  August  1998.  Mr.  Messner is the  inventor of
starpay's proprietary payment system technology.  From 1993 to 1998 he served as
President of  Horizontal  Drilling  Technologies,  Inc., a company he founded in
1993 which we acquired in 1996.

     Jack A. Martine has served as our Controller,  Chief Accounting Officer and
Tax Manager since 1996. Mr. Martine had previously served as tax manager for BOC
from June 1989 until October 1993. Mr. Martine is a certified public accountant.

     Rebecca  G. Voth has  served  as  Corporate  Secretary  of us and BOC since
October 1993, and has served as Treasurer of such companies since July 1997.

     All executive officers serve at the pleasure of the Board of Directors.

     There is no family relationship between any of our executive officers.  All
executive officers hold office until the first meeting of the Board of Directors
following  the  next  annual  meeting  of  stockholders  or  until  their  prior
resignation or removal.

                                     PART II

Item 5.  Market  for the  Registrant's  Common  Equity and  Related  Stockholder
         Matters.
         -----------------------------------------------------------------------

Market Price of and Dividends on the Registrant's Common Equity and Related
Stockholder Matters.
---------------------------------------------------------------------------

     (a)  Market information.
     ---  -------------------

     Our common  stock  trades on the OTC  Bulletin  Board  ("OTCBB")  under the
ticker symbol BRCO.  The  following  table sets forth the range of reported high
and low bid  quotations  A for such shares on the OTCBB for each full  quarterly
period within the two most recent fiscal years:

<TABLE>
<CAPTION>
         2004<F1><F2>              High              Low
         ------------              ----              ---
<S>                               <C>               <C>
      Fourth quarter              $0.83             $0.52
      Third quarter                1.25              0.35
      Second quarter               1.00              0.115
      First quarter                0.275             0.10

         2003<F1><F2>              High              Low
         ------------              ----              ---
      Fourth quarter              $0.35             $0.125
      Third quarter                0.35              0.14
      Second quarter               0.80              0.12
      First quarter                0.375             0.12
____________________
<FN>
<F1>
     The  reported  quotations  were  obtained  from the OTCBB  Web  Site.  Such
     quotations reflect inter-dealer prices,  without retail mark-up,  mark-down
     or commission and may not necessarily  represent actual  transactions.  The
     quotations  reflect  the high  best bid and low best bid for each  quarter.
     There are several  market  makers who have been quoting a best bid of $0.01
     per share for some  time,  and such bids are not  considered  to  reflect a
     realistic bid for the shares.
<F2>
     All of the 2003 quotations and the 2004 quotations prior to August 6, 2004,
     have been  adjusted  to reflect the  2-for-1  stock split  effected on that
     date.
</FN>
</TABLE>

     (b)  Holders.
     ---  --------

     As of March 25, 2005, the Company had 431 record holders of common stock.

     (c)  Dividends.
     ---  ----------

     To date, we have not paid any cash dividends. The payment of cash dividends
in the future will depend upon our financial condition, capital requirements and
earnings.  We intend to  employ  our  earnings,  if any,  primarily  in our coal
reclamation  activities  and do  not  expect  to  pay  cash  dividends  for  the
foreseeable  future. The Certificate of Designations of our Preferred Stock does
not preclude the payment of cash dividends.  The  Certificate  provides that, in
the event we pay a dividend or other  distribution  of any kind,  holders of the
Preferred  Stock will be entitled to receive the same  dividend or  distribution
based upon the shares into which their  Preferred  Stock would be convertible on
the record date for such dividend or distribution.

     (d)  Securities authorized for issuance under equity compensation plans.
     ---  -------------------------------------------------------------------

<TABLE>
<CAPTION>
        Plan category                Number of securities to              Weighted-average        Number of securities remaining
                                     be issued upon exercise              exercise price of        available for future issuance
                                 of outstanding options, warrants       outstanding options,         under equity compensation
                                            and rights                   warrants and rights        plans (excluding securities
                                                                                                     reflected in column (a))
                                               (a)                               (b)                            (c)
                               -------------------------------------    ----------------------    --------------------------------
<S>                            <C>                    <C>                      <C>                             <C>
  Equity compensation plans    1993 SO Plan       -    26,250<F1>              $2.08<F1>                       None
 approved by security holders  2003-2 DSC Plan    -   712,717<F3>              $0.36<F2>                       87,283

  Equity compensation plans
   not approved by security
           holders                         None                                 None                           None
                               -------------------------------------    ----------------------    --------------------------------
            Total              All Plans          -   738,967                  $0.42                           87,283
                               =====================================    ======================    ================================
_____________________
<FN>
<F1>
     The 1993 Stock Option Plan, as amended and as adjusted for subsequent stock splits, authorized the issuance of 412,500 shares
     of common stock.  Stockholders  approved the initial plan and all subsequent  amendments.  The Plan  terminated on August 26,
     2003.
<F2>
     The 2003-2 Deferred Stock  Compensation  Plan, as amended,  which authorizes 800,000 shares to be issued, was approved by the
     stockholders at the 2004 Annual Stockholders' Meeting.
<F3>
     As of March 15, 2005, a total of 739,991 Stock Units had been credited to the  Participants'  Stock Unit Accounts  based upon
     the Participants' deferral of $292,600 of Fees or Compensation.
<F4>
     The numbers shown in the above table are as of December 31, 2004.
</FN>
</TABLE>

Item 6. Selected Financial Data.
        ------------------------

The  following  financial  data are an  integral  part of, and should be read in
conjunction  with,  the  financial  statements  and notes  thereto.  Information
concerning  significant  trends  in  the  financial  condition  and  results  of
operations  is contained in  Management's  Discussion  and Analysis of Financial
Condition and Results of Operations on pages 26 through 37 of this report.

<TABLE>
<CAPTION>
                                                    2004             2003             2002             2001             2000
                                                    ----             ----             ----             ----             ----
                                                                     (in thousands, except per share data)
<S>                                               <C>              <C>             <C>              <C>               <C>
Statement of operations data:
   Revenues from continuing operations            $   972          $   593         $   469          $   602           $   717

   Interest income                                      3                1             119              177               136

   Interest expense                                  (575)            (519)           (400)            (207)              (60)

   Earnings (loss) from continuing
      operations                                      937           (1,490)         (4,391)          (1,453)           (1,392)

   Loss from discontinued operations                    -             (121)           (223)            (868) <F1>      (1,637)

   Net earnings (loss)                                937           (1,611)         (4,614)          (2,321)           (3,029)

   Net earnings (loss) attributable to
      common shareholders                             937           (1,611)         (4,614)          (2,321)           (3,029)

   Net earnings (loss) per share <F2>:
    Basic:
         Earnings (loss) from continuing
              operations                             0.18            (0.33)          (1.05)           (0.37)            (0.37)
         Loss from discontinued operations           0.00            (0.02)          (0.05)           (0.21)            (0.43)
         Net earnings (loss)                         0.18            (0.35)          (1.10)           (0.58)            (0.80)
    Diluted:
         Earnings (loss) from continuing
              operations                             0.14            (0.33)          (1.05)           (0.37)            (0.37)
         Loss from discontinued operations           0.00            (0.02)          (0.05)           (0.21)            (0.43)
         Net earnings (loss)                         0.14            (0.35)          (1.10)           (0.58)            (0.80)

Balance Sheet Data:
   Working capital                                   (944)            (854)           (303)             281              (159)

   Total assets                                     1,273              941           1,264            4,058             5,087

   Long-term debt (excluding
       current maturities)                          3,807            4,883           4,241            2,513             1,428

   Convertible preferred stock                        889              889               -                -                 -

   Redeemable preferred stock                           -                -             889              889               889

    Total common shareholders'
   equity (deficiency)                             (4,144)          (5,333)         (4,833)            (344)            1,883
___________________
<FN>
<F1>
     In March 2001, we determined that we would no longer provide  financial  support to ISITOP,  Inc., an 80%-owned  subsidiary
     specializing in the remediation of polycyclic aromatic hydrocarbon contamination.  In May 2001, we sold the fixed assets of
     the 50%-owned  subsidiary  involved in natural gas well testing  operations.  In August 2001, we made the decision to cease
     pursuing opportunities in Mexico and the WS Segment was discontinued. (See note 3 of notes to financial statements).
<F2>
     All per share numbers have been adjusted to reflect the 2-for-1 stock split effected by us as of August 6, 2004.
</FN>
</TABLE>

Item 7. Management's  Discussion and Analysis of Financial Condition and Results
        of Operations.
        ------------------------------------------------------------------------

     The following  discussion  addresses the significant  factors affecting our
results of operations,  financial  condition,  liquidity and capital  resources.
Such  discussion  should be read in  conjunction  with our financial  statements
including the related notes and our selected financial information.

Overview
--------

     General. In 2004 we operated within the following  operating segments:  (1)
the Coal Reclamation  Segment,  (2) the Carbon Dioxide ("CO2") Segment,  (3) the
China Segment, and (4) the 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, construction
and  operation  of plants  that  manufacture  environmentally  friendly  organic
chemical compound  fertilizer  ("OCCF").  The e-Commerce Segment is engaged in a
strategy to develop licensing  agreements and other fee based  arrangements with
companies implementing technology in conflict with our intellectual property.

     In 2004,  our  continuing  operations  reflected  earnings  of  $937,000 as
compared with losses of $1,490,000,  $4,391,000,  $1,453,000,  and $1,392,000 in
2003, 2002, 2001, and 2000, respectively.

     Beginning in 1999 we started discontinuing the operations of those segments
that were not meeting their targeted profit  objectives and which did not appear
to have significant growth potential.  This ultimately led to the discontinuance
of  four  of  our  unprofitable  segments.  Such  discontinued  operations  have
reflected losses of $-0-, $121,000,  $223,000,  $868,000 and $1,637,000 in 2004,
2003, 2002, 2001 and 2000, respectively. See "Discontinued Operations" below.

     Now that the McElmo Dome  litigation has been settled,  we are focusing our
primary attention on the Coal, China and e-Commerce  Segments,  which we believe
have significant potential for growth and profitability.

     We have  other  assets and  investments  that we have been  liquidating  as
opportunities have materialized.

     The results of operations for 2004, 2003 and 2002 were severely impacted by
the  termination  of a major  contract in January of 1999.  Termination  of this
contract (see "Coal Reclamation  Activities---The MCN Projects") has resulted in
a severe  decline in the  segment's  revenues---from  $8,585,000 in 1998 down to
$189,000 in 2004---with a correspondingly dramatic impact on profitability.  The
segment, which had an operating profit of $1,678,000 in 1998, recorded operating
losses of $508,000 in 1999,  $625,000 in 2000,  $544,000 in 2001,  $2,105,000 in
2002,  $516,000 in 2003 and $682,000 in 2004.  $1,516,000 and $6,000 of the 2002
and 2003 losses,  respectively,  resulted from impairments of long-lived  assets
within the segment.

     Operating  profit of the CO2 Segment in 2004  increased  $222,000,  or 61%,
from the  prior  year,  as a result  of both  increased  production  and  higher
pricing. The operating losses of the China Segment decreased to $549,000 in 2004
from $724,000 for the prior year as the segment  incurred  fewer  administrative
costs associated with the termination of a relationship with a former technology
partner in China.  The operating  loss of the  e-Commerce  Segment  increased to
$124,000  from  $100,000  the previous  year as a result of  increased  expenses
associated  with its lawsuit  against VISA.  The operating  loss from  corporate
activities at the parent company level decreased $231,000,  or 20%, primarily as
a  result  of  lower  professional  fees  and a  reduction  in  amortization  of
capitalized   costs  associated  with  our  debt  offerings.   We  reversed  our
fortunes---going  from a loss of  $1,611,000  in 2003 to earnings of $937,000 in
2004, primarily reflecting (i) the receipt of $2,943,000 as the second and third
installments  of the McElmo Dome  settlement  versus  $1,151,000 the prior year,
(ii) a $379,000  increase in total revenues,  and (iii) a reduction in operating
costs of $59,000.

     Operating profit of the CO2 Segment in 2003 increased $72,000, or 25%, from
the prior year, as a result of both increased  production and higher pricing. As
a result of the  dissolution of the  relationship  with its previous  technology
partner in China, losses of the China Segment increased to $724,000 in 2003 from
$46,000 the prior year when  results of the first 11 months  were  reported as a
$357,000 loss in earnings of unconsolidated  affiliates.  The e-Commerce Segment
reported its first  revenues in 2003, and reduced its operating loss to $100,000
from  $202,000  the  previous  year  when  results  were  burdened  by a $45,000
impairment of intangible assets. The operating loss from corporate activities at
the parent company level increased  $183,000,  or 19%,  primarily as a result of
higher insurance costs and professional fees, and costs associated with the debt
offerings.  Our total  net loss  decreased  $3,003,000,  or 65%,  to  $1,611,000
primarily  reflecting (i) the receipt of $1,162,000 as the first  installment of
the McElmo Dome  settlement  and (ii) the fact that  $2,433,000 of the 2002 loss
resulted from impairment of long-lived assets, investments and other assets.

     Operating  profit of the CO2  Segment in 2002  decreased  $22,000  from the
prior year, primarily as a result of higher production costs. As a result of the
deterioration  in relations  between us and our previous  partner in  conducting
operations in China, we reported the results of operations for the last month of
2002 as an operating  segment and, for the first 11 months of 2002,  through the
affiliate which is included in equity in earnings of unconsolidated  affiliates.
The segment incurred an operating loss of $63,000 for the last month of 2002 and
reported a loss in  earnings  of  unconsolidated  affiliates  of  $357,000.  The
e-Commerce  Segment also had no revenues in 2002, but incurred $15,000 less SG&A
expenses  than in the  prior  year as it  continued  its  pursuit  of  strategic
alliances. The segment's operating loss increased $30,000 to $202,000 in 2002 as
a result  of a  $45,000  impairment  of  intangible  assets.  Our total net loss
increased  $2,293,000  to  $4,614,000  primarily  as a result of the  $2,392,000
increase in impairments during 2002.

     The  recurring net losses and overall  declines in financial  condition and
liquidity  raise  substantial  doubts  about our  ability to continue as a going
concern, as expressed in the independent auditors' opinion on page 39.

Liquidity and capital resources
-------------------------------

     Capital  investments.   The  Company's  capital  investment  programs  have
required more cash than has been generated from operations during the past three
years.  Cash flows provided by (used in) operations  during 2004,  2003 and 2002
were  $447,000,  $(732,000)  and  $(1,789,000),   respectively,   while  capital
additions  from  continuing  operations  were  $217,000,  $55,000  and  $77,000,
respectively, as indicated in the table below:

                                 2004             2003               2002
                                 ----             ----               ----
Coal                         $ 183,000         $  7,000            $  7,000
Carbon dioxide                  33,000           33,000              62,000
e-Commerce                       1,000                -                   -
Other                                -           15,000               8,000
                       ---------------- ---------------- -------------------
              Total          $ 217,000         $ 55,000            $ 77,000
                       ================ ================ ===================

     Our 2005 capital  expenditure  budget has tentatively been set at $951,000.
This does not include the cost of any recovery plants that may be constructed by
the Coal  Segment  since the  timing  and  dollar  amount of such  projects  are
uncertain and the projects are subject to the availability of financing.

     Liquidity.  The Coal  Segment  produced a healthy  profit in 1998,  but has
since operated unprofitably. Activity commenced in China in late 1998 and in the
e-Commerce  Segment  in early  1999,  but both are  still  essentially  start-up
operations.  Sustaining  the  operating  activities  of the  three  unprofitable
segments,  plus our overhead,  has resulted in a serious  outflow of cash during
the past three years.  We have  managed to survive  this cash  shortfall to date
through a series of financings and the sale of various assets, principally those
left over from our discontinued  operations.  Three private  placements of notes
and warrants  totaling  $1,829,000 were completed in May of 2002 and in February
and July of 2003. Three additional private placements were completed in June and
December of 2004 and January of 2005 for gross proceeds of $3,300,000,  of which
$1,455,000  was  received in 2004.  In  addition,  we borrowed  $200,000  from a
related party in November 2003,  $103,000 from an  unconsolidated  subsidiary in
December 2003 and $125,000 from a bank in February and March of 2004. Such funds
were  needed to "bridge  the gap"  until the  distribution  of the  McElmo  Dome
settlement  had been  completed.  We borrowed an  additional  $200,000  from the
unconsolidated  subsidiary in November of 2004 to provide needed working capital
until the $2,100,000 private placement was completed in January of 2005.

     Several  projects are in various  stages of development in the Coal Segment
which,  subject to arranging  necessary  financing,  are ultimately  expected to
mature into operating projects. A definitive agreement has been finalized on the
Pinnacle Project on which we are currently pursuing financing.  In addition,  we
have arranged for the financing of our initial fertilizer manufacturing plant in
China. (See "Recent Developments---Financing of Initial Fertilizer Manufacturing
Plant in  China"  for  additional  details).  Now that the  Settlement  has been
received it is essential that these projects move forward quickly.  If that does
not occur,  we must pursue  additional  outside  financing,  which would  likely
involve further dilution to our stockholders.

     Our activities in 2003 and 2002 were primarily  funded by the proceeds from
three private placements of notes and warrants, by loans from related parties or
an affiliate and by the sale of assets.  Our  activities in 2004 were  primarily
funded from the proceeds of three  additional  private  placements.  Future cash
flows and availability of credit are subject to a number of variables, including
demand for our coal reclamation  services and technology,  continuing demand for
CO2 gas, demand for the installation of fertilizer  manufacturing  facilities in
China  and  the  e-Commerce   Segment's  success  (i)  in  developing  licensing
agreements  and  other  fee  based  arrangements  with  companies   implementing
technology in conflict with its intellectual property or (ii) resulting from its
ongoing Visa litigation.

     During 2004 we reduced our working capital by $90,000 to $(944,000) in 2004
from  $(854,000)  at year-end  2003.  The Coal Segment used $183,000 to purchase
equipment and $682,000 to fund  operating  losses.  The China  Segment  required
$549,000 to fund net advances for  operations.  The four  discontinued  segments
absorbed $-0-,  $121,000 and $223,000,  respectively,  in 2004, 2003 and 2002 to
fund their operations while we sought buyers for the remaining  assets.  Another
$124,000 was used to fund the startup activities of the e-Commerce  Segment.  We
repaid  $2,466,000 in debt. Other corporate  activities  utilized  approximately
$1,445,000 of working capital. The bulk of these expenditures were funded by the
second and third installments of the McElmo Dome Settlement totaling $2,943,000,
an additional  $1,820,000 in debt,  $754,000 from the sale of carbon dioxide,  a
$122,000  distribution  from an  investment  in a real  estate  partnership  and
$63,000 from the sale of assets.

     As a result,  at December 31, 2004, we were in a negative  working  capital
position with working capital of $(944,000), and a current ratio of 0.31 to 1.

     We incurred losses from continuing  operations  totaling  $4,944,000 during
the past three  years.  Losses from  discontinued  operations  totaled  $344,000
during such period.  $4,391,000  of the losses from  continuing  operations  and
$223,000  of the losses  from  discontinued  operations  occurred  in 2002.  The
problems from the discontinued segments are now behind us and management expects
to dispose of the few assets remaining from such operations in 2005.

     Our principal business is coal reclamation,  and this is where management's
operating attention is primarily focused. The Coal Segment has a signed contract
on the Pinnacle  Project on which we are currently  pursuing  financing,  and is
actively  pursuing seven other  projects.  We have a number of other projects in
the pipeline once these projects have come to a resolution.

     We completed a private  placement of  $2,100,000  of  convertible  notes in
January of 2005. A portion of the net proceeds  from this  offering will be used
to finance the Pinnacle Project, if necessary.

     The timing of the  projects  we are  actively  pursuing is  uncertain  but,
subject to obtaining the necessary financing, they are considered to have a high
probability  of  activity.  With  the  exception  of the  Pinnacle  Project,  no
definitive contracts have as yet been signed, and there is no assurance that the
required   financing  will  be  obtained  or  that  any  of  the  projects  will
materialize.  However, we are diligently pursuing both debt and equity financing
through  several  different  sources,  and believe that we will be successful in
arranging  financing for at least one or two projects  during the second quarter
of 2005.

     We achieved a major  breakthrough in February of 2005 with the announcement
that a private  investor  had agreed to finance the cost of the China  Segment's
initial fertilizer  manufacturing  facility in China. The investor has agreed to
loan funds to an LLC, owned 50% by BEE and 50% by the investor,  that we believe
will be  sufficient  to fund the capital  costs and  pre-operating  costs of the
facility.  The plant is initially targeted to produce estimated revenues of more
than US$5 million  annually.  Additionally,  the LLC will  absorb,  beginning in
February of 2005,  approximately 60% of the overhead burden that the Company has
been carrying for the China Segment.

     Receipt  of  the  second  and  third  installments  from  the  McElmo  Dome
litigation  has improved  our balance  sheet and income  statement.  We received
$1,162,000 of the  settlement in July of 2003,  and  $2,826,000  and $117,000 in
March and May of 2004, respectively.  Upon receipt of the second installment, we
were able to eliminate $2,620,000 of our total indebtedness. (See "Item 3. Legal
Proceedings---McElmo Dome Litigation").

     In March of 2001 we arranged for a $1,750,000 long-term line of credit from
an  affiliate  of the  Chairman.  The credit line was  increased in stages up to
$3,000,000 in October of 2002 to provide additional  working capital.  This line
was supplemented by a $150,000  short-term line of credit from the same party in
November  of 2002,  and  subsequently  increased  in  stages up to  $375,000  in
November of 2003. In March of 2004,  following receipt of the second installment
of the  Settlement,  the  short-term  line of  credit  was  terminated,  and the
long-term  line of  credit  was  paid  down to  $2,800,000  and  ceased  to be a
revolving credit. This loan has since been extended and paid down to $2,785,000.
These  loans from a related  party were  supplemented  by (i) the three  private
placements completed in 2002 and 2003 which raised proceeds of $1,829,000,  (ii)
loans totaling $303,000 from a related party and an unconsolidated subsidiary in
late 2003, (iii) the three additional private  placements  completed in 2004 and
January of 2005 which raised  proceeds of  $3,300,000,  and (iv) the  additional
borrowings of $200,000 in November of 2004 from the  unconsolidated  subsidiary.
Such funds were needed to provide additional working capital,  improve liquidity
and to "bridge the gap" until the distribution of the McElmo Dome settlement had
been completed. In addition, we have been disposing of the remaining assets from
our  discontinued  segments as  opportunities  have become  available and we are
continuing to pursue the sale of the few remaining assets.

     Our selected  liquidity  highlights for the past three years are summarized
below:

<TABLE>
<CAPTION>
                                                                2004           2003             2002
                                                                ----           ----             ----
<S>                                                         <C>             <C>              <C>
Cash and cash equivalents                                   $  127,000      $  216,000       $  79,000
Accounts and other receivables, net                            167,000          89,000         133,000
Asset sales                                                     63,000         234,000         334,000
Assets of discontinued operations held for resale               40,000          55,000         324,000
Liabilities of discontinued operations held for resale          95,000          92,000         125,000
Trade accounts payable                                         177,000         133,000         138,000
Current maturities of long-term and short-term debt            774,000         698,000         419,000
Long-term debt                                               3,807,000       4,883,000       4,241,000
Working capital                                               (944,000)       (854,000)       (303,000)
Current ratio                                                0.31 to 1       0.32 to 1       0.65 to 1
Net cash provided by (used in) operations                      447,000        (732,000)     (1,789,000)
</TABLE>

     In 2004,  we had  negative  cash flow of $89,000.  Operations  of the Coal,
China, and e-Commerce Segments and the discontinued  operations resulted in cash
outflows  of   $1,330,000.   (See  "Results  of   operations---Other   corporate
activities" below).

     Our investing  activities  provided cash of $107,000 in 2004. Proceeds from
the  sale of  assets  provided  cash of  $63,000.  Net  distributions  from  our
investment  in Cibola and a real estate  partnership  provided cash of $333,000.
Acquisitions  of  property,  plant and  equipment  and  intangible  assets  used
$255,000 of the cash outflow.

     Our financing  activities  used cash flows of $643,000 in 2004. We received
$1,865,000  from our  borrowings  and from the exercise of warrants and utilized
$2,466,000 for payments on lines of credit and term notes.

     At December 31, 2004 we had no available lines of credit. However, at March
24, 2005 we had cash and cash equivalents of $914,000,  primarily as a result of
the $2,100,000 debt offering closed in January of 2005.

     Effect of Recent Developments on Liquidity. Our debt-to-equity ratio, which
stood at 2.20(A) to 1 at year-end 2001, had deteriorated to 11.07(A) at year-end
2002,  but  improved  to 9.59(A) to 1 at year-end  2003,  and to 1.64(A) to 1 at
year-end 2004.  Consolidated  debt,  which totaled  $2,820,000 at year-end 2001,
$4,660,000  at year-end  2002,  and  $5,581,000 at year-end  2003,  decreased to
$4,581,000 at year-end  2004.  Although our balance sheet  improved in 2004 as a
result of the receipt of the  settlement and the subsequent pay down of debt, it
is essential that some of the projects  under  development in the Coal and China
Segments  achieve  positive cash flow quickly.  If this does not occur,  we must
pursue additional outside financing, which would likely involve further dilution
to our shareholders.
____________________

(A)  Computed by using the market value of our common equity in the  denominator
     of the equation. Using the negative equity for the respective periods would
     result in ending up with meaningless numbers.


     Material Trends and Uncertainties. 2004 was our first profitable year since
1997.  We recorded net earnings of $937,000 in 2004  compared with net losses of
$1,611,000  in 2003 and  $4,614,000  in 2002.  2004 results  benefited  from the
$2,943,000 received from the McElmo Dome settlement. We have generated operating
losses  for six  consecutive  years.  The  recent  trend has been  positive.  We
recorded an operating  loss of  $1,700,000  in 2004 versus  operating  losses of
$2,138,000 and $3,057,000 in 2003 and 2002, respectively.  Despite the amount of
debt that we have incurred in recent years,  we believe that we have the ability
to  finance  our Coal and  China  projects  on a  project  financing  basis,  as
demonstrated by the financing of our initial  fertilizer plant in China.  At the
corporate level,  future borrowings will likely be dependent upon our ability to
generate  positive cash flows from  operations.  It is unlikely that  additional
borrowings  will be made  available  to us from a related  party  until the Coal
and/or China Segments have  demonstrated  the ability to generate  positive cash
flow. We have retained a firm which specializes in the private placement of debt
and equity  securities for energy companies to pursue project  financing for our
Coal projects, and we are also pursuing  USDA-guaranteed loans for such projects
through various sources, but there is no assurance we will be successful in such
efforts.  As discussed  above, it is critical that we achieve positive cash flow
on at least one, and preferably two, Coal or China projects in short order.

     Our 2004,  2003 and 2002  financial  results were  burdened by  impairments
totaling  $-0-,  $82,000  and  $2,433,000,   and  by  losses  from  discontinued
operations totaling $-0-, $121,000 and $223,000,  respectively. At year-end 2004
our total assets,  net of current  assets of $416,000,  had been written down to
only $857,000.  $338,000 of this amount  consisted of our McElmo Dome properties
which generated  revenues of $754,000 and operating profits of $585,000 in 2004.
We believe it is highly unlikely that there will be any significant  impairments
going  forward.  Nor do we  anticipate  having any  additional  losses  from the
operations of the discontinued  segments going forward.  On the other hand, 2003
and 2004  financial  results  benefited  from the McElmo Dome  settlement in the
gross amount of $1,162,000  and  $2,943,000,  respectively.  The Settlement is a
non-recurring item, so we will not have this benefit in the future except to the
extent that McElmo Dome operating  results may benefit from improved  pricing or
reduced pipeline charges as a result of the Settlement.

     One  uncertainty  we are facing is the  amount of  litigation  expense  the
e-Commerce Segment will incur in 2005 and 2006 related to the litigation against
Visa.  It is  difficult  to  estimate  how much the  segment's  one-half  of the
out-of-pocket  expenses  (excluding  legal fees) associated with such litigation
may total.  However,  we believe  that the improved  results from the  segment's
licensing activities, coupled with the anticipated improved results from the CO2
Segment, will take care of such expenses.

Results of operations
---------------------

     General.  We  discontinued  four  of  our  segments,   all  of  which  were
unprofitable,  during the period  from 1998 to 2001.  Management  has since been
focusing its attention on making the remaining  operations  profitable.  We have
now  succeeded  in arranging  financing  for our initial  fertilizer  project in
China.  Subject to  obtaining  the  necessary  financing,  we believe we are now
getting  close to bringing  one or more of the  projects in the Coal  Segment to
reality.  If not, as mentioned above, we will need to pursue additional  outside
financing, which would likely involve further dilution to our shareholders.

     Operating profit (loss) for the last three years for our remaining segments
is set forth below:

<TABLE>
<CAPTION>
                                                   2004                2003              2002
                                                   ----                ----              ----
<S>                                            <C>                <C>                <C>
Operating profit (loss):
    Coal                                       $  (682,000)       $  (516,000)       $(2,105,000)
    Carbon dioxide                                 585,000            363,000            291,000
    China                                         (549,000)          (724,000)           (63,000)
    e-Commerce                                    (124,000)          (100,000)          (202,000)
                                          ------------------ ------------------ ------------------
                           Subtotal               (770,000)          (977,000)        (2,079,000)
   Other - principally corporate                  (930,000)        (1,161,000)          (978,000)
                                          ------------------ ------------------ ------------------
                        Total                  $(1,700,000)       $(2,138,000)       $(3,057,000)
                                          ================== ================== ==================
</TABLE>

     Following  is a  discussion  of results of  operations  for the  three-year
period ended December 31, 2004.

     Coal  reclamation.  As a result of the recent change of direction,  we have
focused much of our attention on coal  reclamation.  The following table depicts
segment operating results for the last three years:

                                    2004              2003            2002
                                    ----              ----            ----
Revenues                        $  189,000        $   59,000     $     12,000
Operating costs                   (719,000)         (441,000)        (458,000)
SG&A                              (135,000)         (129,000)        (123,000)
Other expenses                     (17,000)           (5,000)      (1,536,000)
                            ---------------- ----------------- ----------------
Operating profit (loss)         $ (682,000)       $ (516,000)    $ (2,105,000)
                            ================ ================= ================

     The  2004  operating  loss  reflects  the  negative  impact  of  the  early
termination of the DTE Dickerson  agreement.  The 2003 and 2002 operating losses
included  $6,000 and  $1,516,000,  respectively,  of  impairments  of long-lived
assets. Except for the aforementioned  contract, no new projects were undertaken
during the three  year  period.  However,  the  industry  climate  has  improved
dramatically  in recent  months  due to the  increase  in coal and  natural  gas
prices, and the outlook for the segment has correspondingly improved, with eight
projects  currently  under  development,  including three new projects since the
beginning of 2005.

     Carbon dioxide. The sole component of revenues for this segment is the sale
of CO2 gas from the working and overriding  royalty  interests of our two carbon
dioxide producing units in Colorado and New Mexico.  The following table depicts
operating results for the last three years:

                               2004              2003            2002
                               ----              ----            ----
Revenues                     $ 754,000         $ 508,000        $ 445,000
Operating expenses            (128,000)         (106,000)        (117,000)
DD&A                           (41,000)          (39,000)         (37,000)
                       ---------------- ----------------- ----------------
Operating profit             $ 585,000         $ 363,000        $ 291,000
                       ================ ================= ================

     The following table shows the trend in production volume,  sales prices and
lifting cost for the three years:

                                     2004              2003            2002
                                     ----              ----            ----
Net production (Mcf)              1,787,000        1,529,000         1,514,000
Average sales price per Mcf           $0.42            $0.33             $0.29
Average lifting cost per Mcf          $0.06            $0.06             $0.07

     As evidenced by the above,  revenues,  production  and sales prices are all
trending up, while lifting  costs per Mcf are trending  down. As a result of the
additional  development drilling in the field in 2003-2004,  the increase in oil
prices which has  increased the demand for CO2, and the  anticipated  continuing
improvement  in CO2 pricing as a result of the McElmo Dome  settlement,  we look
for continuing improvement in the outlook for the CO2 Segment in 2005.

     China.  In  2002,  2003  and most of 2004 the  China  Segment  focused  its
attention on the  financing and  construction  of  fertilizer  plants  utilizing
composting   technology   licensed  from  third  parties.   These  efforts  were
unsuccessful;  accordingly, in the fall of 2004 the segment shifted its focus to
the concept of a much  smaller  mini-plant  which would not utilize the licensed
technology.  During the first 11 months of 2002,  the operations of this segment
were conducted through an unconsolidated  affiliate. The segment had no revenues
in 2004,  2003 or 2002,  and  recorded  $548,000,  $724,000  and $58,000 of SG&A
expenses,  respectively,  in 2004,  2003 and 2002  while  pursuing  its  various
marketing  efforts.  The  segment  recorded  operating  losses of  $549,000  and
$724,000  attributable  to its  operations in China for the years 2004 and 2003,
respectively.  In 2002, we recorded an operating loss of $63,000 attributable to
our  operations in China,  along with losses of $357,000 in equity in operations
of unconsolidated affiliates for the first 11 months of 2002.

     e-Commerce.  In early 1999, we began developing our proprietary concept for
an  Internet  payment  system  through  starpay.  starpay  recorded  its initial
revenues  of  $25,000  in 2003 and  $29,000  in 2004  versus  none in 2002,  and
recorded $147,000,  $119,000,  and $151,000 of SG&A expenses,  respectively,  in
2004,  2003 and 2002.  Operating  results for 2004 were burdened with additional
expenses  associated  with the segment's  ongoing  litigation  against VISA. The
segment's 2004 and 2003 results benefited from the improvement in revenues, cost
cutting efforts and no impairment  provisions.  The segment  recorded $45,000 of
impairment of intangibles in 2002,  which  increased its operating loss for such
year to $202,000.

     Other corporate activities.  Other corporate activities include general and
corporate  operations,  as well as assets unrelated to our operating segments or
held for investment.  These activities generated operating losses of $930,000 in
2004,  $1,161,000 in 2003, and $978,000 in 2002. The increased operating loss in
2003  compared  to 2002  was  due to a  $76,000  impairment  of  leases,  higher
professional fees associated with the search for project financing and increased
amortization of capitalized  costs  associated with our  subordinated  debt. The
$231,000  decrease  in  the  operating  loss  for  2004  compared  to  2003  was
attributable to a $58,000 reduction in professional fees and other SG&A costs, a
$91,000 drop in amortization  costs associated with our  subordinated  debt, and
the fact that there was no impairment of leases in 2004.

     Selling,  general  and  administrative   expenses.   Selling,  general  and
administrative  expenses ("SG&A") decreased to $870,000 in 2004 from $923,000 in
2003 after  increasing  from $884,000 in 2002. The $53,000  decrease in 2004 was
primarily  attributable to lower  professional fees associated with the issuance
of our  debt.  The  $39,000  increase  in  2003  compared  to 2002  was  largely
attributable  to an increase  in  professional  fees  incurred in the search for
project financing.

     Depreciation,  depletion  and  amortization.  Depreciation,  depletion  and
amortization  expenses decreased to $92,000 in 2004 after increasing to $169,000
in 2003 from  $144,000  in 2002.  The  decrease  in 2004 was the result of lower
amortization  costs associated with the issuance of our  subordinated  debt. The
lower  amortization  expense was the result of such costs being amortized over a
longer term than in the prior year.  The  increase in 2003 was due  primarily to
the  increase  in  intangible  assets  associated  with the  issuance of the 10%
subordinated debt.

     Impairment of long-lived assets. In 2003 and 2002 we recognized $82,000 and
$1,561,000, respectively, of impairment of long-lived assets as required by FASB
No.  144.  Assets in the Coal  Segment  were  impaired  $6,000 in 2003 while the
remainder of the 2003  impairments  related to assets unrelated to the operating
segments.  Impairments  related  to assets in the Coal and  e-Commerce  Segments
totaled  $1,516,000 and $45,000,  respectively in 2002. No such impairments were
required in 2004.

     Interest income. Interest income increased to $3,000 in 2004 from $1,000 in
2003 after  decreasing  from  $119,000 in 2002.  At the end of 2002, we made the
decision to stop charging interest on a loan by us to our affiliate operating in
China shortly after we had initiated litigation to dissolve the affiliate.  This
decision  was the  primary  reason  for the  drop in  interest  income  for 2003
compared to 2002.

     Interest  expense.  Interest  expense  increased  to  $575,000 in 2004 from
$519,000 in 2003 and $400,000 in 2002  reflecting the increased level of debt in
each year as we borrowed to meet our working  capital and operating needs and to
fund the China ventures.

     Equity in earnings of unconsolidated  affiliates. Our equity in earnings of
unconsolidated  affiliates  reflected earnings of $376,000 and $236,000 for 2004
and 2003,  respectively,  compared to losses of $238,000 for 2002. Our equity in
the operating  losses of our affiliate in China reflected a loss of $357,000 for
2002, the second year of conducting the operations in China in this format,  and
$-0- for both 2003 and 2004, respectively.  The losses for 2002 represent 50% of
the  losses  recorded  by the  affiliate  in China.  The  litigation  seeking to
dissolve the affiliate,  in which we had been involved with our former  partner,
was settled in 2003 and the entity was dissolved in December of that year.

     Offsetting  our share of the losses of the affiliate in China was our share
of the  earnings of Cibola  Corporation  ("Cibola").  Although we own 80% of the
common stock of Cibola,  we do not have  operating or financial  control of this
gas  marketing  subsidiary.   Cibola,  formed  in  1996,  contributed  $290,000,
$238,000, and $123,000 of our pre-tax net income for fiscal years 2004, 2003 and
2002, respectively, pursuant to a tax sharing agreement. Such income was down in
2002 due to capital losses  incurred on Cibola's  investments.  In addition,  in
2004,  we recorded  $86,000 in earnings from our  investment  in JMG-15,  a real
estate partnership in Texas that sold a parcel of land during the year, compared
to  losses of  $2,000  and  $4,000  for 2003 and  2002,  respectively,  from the
partnership.

     Gain on sale of  assets.  Gains on the sale of assets  totaled  $14,000  in
2004,  $1,000 in 2003, and $27,000 in 2002. Such gains  reflected  proceeds from
the sale of certain assets sold in such years.

     Impairment of investments and other assets. In 2002, we recognized $872,000
of impairments to the carrying values of investments and other assets related to
the  recoverability  of such investments or assets.  The 2002 impairment was due
primarily to the $759,000 impairment of our net investment in our then 50%-owned
subsidiary in China. There were no such impairments in 2003 and 2004.

     Income taxes.  We have  approximately  $50.1 million of net operating  loss
carryforwards and depletion  carryforwards to reduce future income taxes.  Based
on our historical  results of operations,  it is not likely that we will be able
to fully realize the benefit of our net operating loss carryforwards which begin
expiring in 2006.  At December  31, 2004 and 2003,  we have not  reflected  as a
deferred  tax asset any  future  benefit  we may  realize as a result of our tax
credits and loss  carryforwards.  Our future regular taxable income for the next
four years will be effectively  sheltered from federal income tax as a result of
our  substantial  tax  credits  and loss  carryforwards.  Continuing  operations
reflect foreign and state income and federal alternative minimum taxes (refunds)
of $118,000,  $-0-, and ($31,000) for 2004, 2003 and 2002,  respectively.  It is
anticipated that we will continue to incur minor alternative  minimum tax in the
future, despite our carryforwards and credits.

     Discontinued operations.  As mentioned in the Overview above, our financial
results from the  discontinuance  of four of our segments  have been burdened by
losses of $-0-, $121,000, and $223,000,  $868,000 and $1,637,000,  respectively,
during the last five years.  As of December  31,  2004,  assets of  discontinued
operations  held for resale  totaled  $40,000 and  liabilities  of  discontinued
operations held for resale totaled $95,000. We believe that all of the assets of
the discontinued  segments have been written down to their realizable value. See
Note 4 to the financial statements.

     Forward looking  statements.  The previous  discussions  include statements
that are not purely historical and are  "forward-looking  statements" within the
meaning of Section 27A of the  Securities  Act and  Section 21E of the  Exchange
Act, including statements regarding our expectations, hopes, beliefs, intentions
and strategies  regarding the future. Our actual results could differ materially
from its expectations  discussed herein,  and particular  attention is called to
the  discussion  under  "Liquidity  and  Capital  Resources---Effect  of  Recent
Developments on Liquidity" and "Material Trends and Uncertainties"  contained in
this Item 7.

Impact of Recently Adopted Accounting Standards
-----------------------------------------------

     In November 2004, the FASB issued SFAS 151, "Inventory Costs - an amendment
of ARB No. 43,  Chapter 4." This  Statement  amends the  guidance in  Accounting
Research Bulletin ("ARB") No. 43, Chapter 4, "Inventory Pricing," to clarify the
accounting  for abnormal  amounts of idle facility  expense,  freight,  handling
costs,  and  wasted  material  (spoilage).  Paragraph  5 of ARB 43,  Chapter  4,
previously stated that "...under some circumstances, items such as idle facility
expense,  excessive  spoilage,  double freight,  and rehandling  costs may be so
abnormal as to require  treatment as current period  charges..."  This Statement
requires that those items be recognized as current-period  charges regardless of
whether they meet the criterion of "so  abnormal." In addition,  this  Statement
requires  that  allocation  of  fixed  production  overheads  to  the  costs  of
conversion be based on the normal  capacity of the production  facilities.  This
Statement  is  effective  for  inventory  costs  incurred  during  fiscal  years
beginning after June 15, 2005.

     In December  2004,  the FASB issued SFAS 152,  "Accounting  for Real Estate
Time-Sharing Transactions - an amendment of FASB Statements No. 66 and 67." This
Statement  amends FASB Statement No. 66,  "Accounting for Sales of Real Estate,"
to reference the  financial  accounting  and reporting  guidance for real estate
time-sharing  transactions  that is provided in American  Institute of Certified
Public Accountants  ("AICPA") Statement of Position (SOP) 04-2,  "Accounting for
Real  Estate  Time-Sharing   Transactions."  This  Statement  also  amends  FASB
Statement No. 67,  "Accounting  for Costs and Initial Rental  Operations of Real
Estate  Projects," to state that the guidance for (a) incidental  operations and
(b) costs  incurred to sell real estate  projects  does not apply to real estate
time-sharing  transactions.  The  accounting  for those  operations and costs is
subject to the guidance in SOP 04-2.  This  Statement is effective for financial
statements for fiscal years beginning after June 15, 2005.

     In  December  2004,  the FASB issued SFAS 153,  "Exchanges  of  Nonmonetary
Assets - an  amendment  of APB  Opinion  No.  29." The  guidance  in  Accounting
Principles   Board  ("APB")   Opinion  No.  29,  "Accounting   for   Nonmonetary
Transactions," is based on the principle that  exchanges of  nonmonetary  assets
should be measured based on the fair market value of the assets  exchanged.  The
guidance in that Opinion, however, included certain exception to that principle.
This  Statement  amends  Opinion 29 to eliminate the  exception for  nonmonetary
exchanges of similar  productive assets and replaces it with a general exception
for exchanges of nonmonetary assets that do not have commercial substance if the
future cash flows of the entity are expected to change significantly as a result
of the  exchange.  This  Statement is  effective  for  nonmonetary  transactions
occurring in fiscal periods beginning after June 15, 2005.

     In addition, in December 2004, the FASB issued a revision of FASB Statement
No.  123,  "Accounting  for Stock  Based  Compensation,"  entitled  "Share-Based
Payment." This statement  supercedes APB Opinion No. 25,  "Accounting  for Stock
Issued to Employees," and its related  implementation  guidance.  This Statement
establishes  standards for the  accounting for  transactions  in which an entity
exchanges  its  equity  instruments  for goods or  services.  It also  addresses
transactions  in which an entity  incurs  liabilities  in exchange  for goods or
services that are based on the fair value of the entity's equity  instruments or
that may be settled by the issuance of those equity instruments.  This Statement
focuses  primarily on accounting  for  transactions  in which an entity  obtains
employee services in share-based payment  transactions.  This Statement does not
change the accounting guidance for share-based payment transactions with parties
other than  employees  provided in Statement 123 as  originally  issued and EITF
Issue No. 96-18,  "Accounting  for Equity  Instruments  That Are Issued to Other
Than  Employees  for  Acquiring,  or  in  Conjunction  with  Selling,  Goods  or
Services."  This  Statement  does not address the  accounting for employee share
ownership  plans,  which  are  subject  to AICPA  Statement  of  Position  93-6,
"Employers'  Accounting for Employee Stock Ownership Plans." This Statement will
be effective as of the beginning of the first interim or annual reporting period
that begins after December 15, 2005.

     We have not  evaluated the effects of Statement No. 151, 152 or 153, or the
revision  of  Statement  123,  but we do not  believe  that  adoption  of  these
accounting standards will have a significant effect on the financial position or
results of operations of the Company.

Critical Accounting Policies
----------------------------

     The  preparation  of  financial   statements  and  related  disclosures  in
conformity with accounting principles generally accepted in the United States of
America  requires  management to make estimates and assumptions  that affect the
reported amounts of assets and liabilities and disclosures of contingent  assets
and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses  during the  reporting  period.  Actual  results  could
differ  from  those  estimates.  For  example,   unexpected  changes  in  market
conditions or a downturn in the economy could  adversely  affect actual results.
Estimates are used in  accounting  for,  among other  things,  the allowance for
doubtful   accounts,   valuation  of   long-lived   assets,   legal   liability,
depreciation,  taxes, and contingencies.  Estimates and assumptions are reviewed
periodically  and the effects of revisions  are  reflected  in the  consolidated
financial statements in the period they are determined to be necessary.

     Management  believes the  following  critical  accounting  policies,  among
others,  affect  its  more  significant  judgments  and  estimates  used  in the
preparation of its consolidated financial statements.

Receivables and Credit Policies
-------------------------------
     Accounts  receivable  include  amounts  due  from  the  sale  of  CO2  from
properties  in which we own an  interest,  a tax refund  due,  accrued  interest
receivable  and  uncollateralized  customer  obligations  due under normal trade
terms requiring  payment within 30 days from the invoice date.  Notes receivable
are stated at  principal  amount plus  accrued  interest  and are  normally  not
collateralized.  Payments of accounts  receivable  are allocated to the specific
invoices identified on the customers  remittance advice or, if unspecified,  are
applied to the  earliest  unpaid  invoices.  Payments  of notes  receivable  are
allocated  first to  accrued  but  unpaid  interest  with the  remainder  to the
outstanding principal balance. Trade accounts and notes receivable are stated at
the amount management expects to collect from outstanding balances. The carrying
amounts of  accounts  receivable  are  reduced  by a  valuation  allowance  that
reflects  management's  best estimate of the amounts that will not be collected.
Management  individually  reviews all notes  receivable and accounts  receivable
balances  that exceed 90 days from  invoice date and based on an  assessment  of
current  creditworthiness,  estimates  the portion,  if any, of the balance that
will not be collected.  Management provides for probable  uncollectible accounts
through a charge to earnings and a credit to a valuation  allowance based on its
assessment of the current status of individual accounts. Balances that are still
outstanding after management has used reasonable  collection efforts are written
off through a charge to the  valuation  account  and a credit to trade  accounts
receivable.  Changes to the  valuation  allowance  have not been material to the
financial statements.

Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of
-----------------------------------------------------------------------
     Long-lived  assets and certain  identifiable  intangibles  are reviewed for
impairment  whenever  events  or  changes  in  circumstances  indicate  that the
carrying amount of an asset may not be recoverable.  Recoverability of assets to
be held and used is measured by a comparison of the carrying  amount of an asset
to future net cash flows  expected to be generated by the asset.  If such assets
are  considered to be impaired,  the  impairment to be recognized is measured by
the amount by which the carrying  amount of the assets exceeds the fair value of
the assets.  Assets to be disposed of are  reported at the lower of the carrying
amount or fair value less costs to sell.


Revenue Recognition
-------------------
     We recognize revenue when it is realized or receivable and earned.  Revenue
from the CO2 Segment is  recognized  in the period of  production.  Revenue from
Coal Segment  projects is recognized  in the period the projects are  performed.
License fees from the  e-Commerce  segment are  recognized  over the term of the
agreement.

Off-Balance Sheet Arrangements
------------------------------

     We do not have any material off-balance sheet arrangements.

Contractual Obligations
-----------------------

     The table below sets forth our contractual  cash obligations as of December
31, 2004:

<TABLE>
                                                    Payments Due By Period
                        -----------------------------------------------------------------------------------
<CAPTION>
Contractual                                                                                     2010 and
Obligations                 Total             2005           2006-2007         2008-2009         Beyond
--------------------    --------------    -------------    ---------------    -------------    ------------
<S>                      <C>               <C>                 <C>               <C>           <C>
Long-term debt
obligations              $4,581,000        $  774,000          $3,552,000        $ -           $255,000
Capital lease
obligations              $        -        $        -          $        -        $ -           $      -
Operating lease
obligations              $  282,000        $  206,000          $   76,000        $ -           $      -
Purchase
obligations              $        -        $        -          $        -        $ -           $      -
Other long-term
liabilities              $        -        $        -          $        -        $ -           $      -
                        --------------    -------------    ---------------    -------------    ------------

       Total             $4,863,000        $  980,000          $3,628,000        $ -           $255,000
                        ==============    =============    ===============    =============    ============
</TABLE>

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
         -----------------------------------------------------------

     At  December  31,  2004,  we had no  notes  receivable  and  total  debt of
$4,581,000,  including accrued interest to related parties of $138,000.  Debt in
the amount of  $3,381,000  has fixed  interest  rates;  therefore,  our interest
expense  and  operating  results  would not be affected by an increase in market
interest rates for this amount.  Our $1,200,000 of 10% Participating  Notes bear
interest at an annual rate equal to the Wall Street  Journal  Prime Rate plus 4%
with a floor of 10%. The Notes required  payment of interest only until November
30, 2004. We will then  amortize the notes with equal  payments of principal and
interest over the remaining  eight  quarters.  A 10% increase in market interest
rates  above  the 10%  floor  would  have  increased  our  interest  expense  by
approximately $3,000. At December 31, 2004, a 10% increase in market rates above
the 10%  floor  would  have  reduced  the fair  value of our  long-term  debt by
$52,000.

     We have no other market risk sensitive instruments.

Item 8. Financial Statements and Supplementary Data
        -------------------------------------------

                       The Beard Company and Subsidiaries
                          Index to Financial Statements
                    Forming a Part of Form 10-K Annual Report
                    to the Securities and Exchange Commission

                                                                    Page Number
                                                                    -----------

Report of Independent Registered Public Accounting Firm ....................39

Financial Statements:

   Balance Sheets, December 31, 2004 and 2003...............................40

   Statements of Operations, Years ended December 31, 2004, 2003 and 2002...41

   Statements of Shareholders' Equity (Deficiency), Years ended
     December 31, 2004, 2003 and 2002.......................................42

   Statements of Cash Flows, Years ended December 31, 2004, 2003 and 2002...43

   Notes to Financial Statements, December 31, 2004, 2003 and 2002..........45
<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Board of Directors and Stockholders of
The Beard Company
Oklahoma City, Oklahoma


We have  audited  the  accompanying  consolidating  balance  sheets of The Beard
Company and  subsidiaries  a as of December  31, 2004 and 2003,  and the related
consolidated  statements of operations,  shareholders'  equity  (deficiency) and
cash flows for each of the years in the  three-year  period  ended  December 31,
2004.  These  financial  statements  are  the  responsibility  of the  Company's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements based on our audits

We conducted our audits in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements  are free of material  misstatement.  The Company is not  required to
have,  nor were we engaged to perform,  an audit of its  internal  control  over
financial reporting.  Our audits included consideration of internal control over
financial  reporting  as  a  basis  for  designing  audit  procedures  that  are
appropriate  in the  circumstances,  but not for the  purpose of  expressing  an
opinion on the  effectiveness  of the Company's  internal control over financial
reporting.  Accordingly,  we express  no such  opinion.  An audit also  includes
examining,  on a test basis,  evidence supporting the amounts and disclosures in
the  financial   statements,   assessing  the  accounting  principles  used  and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all  material  respects,  the  financial  position  of  The  Beard  Company  and
subsidiaries  as of  December  31,  2004  and  2003,  and the  results  of their
operations and their cash flows for each of the years in the  three-year  period
ended  December 31, 2004, in conformity  with  accounting  principles  generally
accepted in the United States of America.

The accompanying  consolidated  financial statements have been prepared assuming
that The Beard Company and  subsidiaries  will continue as a going  concern.  As
discussed  in  Note  2 to  the  financial  statements,  The  Beard  Company  and
subsidiaries'  recurring  losses and negative cash flows from  operations  raise
substantial doubt about its ability to continue as a going concern. Management's
plans  as to  these  matters  are also  described  in Note 2.  The  consolidated
financial  statements  do not include any  adjustments  that may result from the
outcome of this uncertainty.


Oklahoma City, Oklahoma
March 28, 2005


<PAGE>
<TABLE>
                                     THE BEARD COMPANY AND SUBSIDIARIES
                                               Balance Sheets
<CAPTION>
                                                                        December 31,       December 31,
                                      Assets                               2004               2003
                                      ------                         -----------------  ------------------
<S>                                                                    <C>                 <C>
Current assets:
     Cash and cash equivalents                                         $      127,000      $      216,000
     Accounts receivable, less allowance for doubtful
        receivables of $97,000 in 2004 and 2003                               167,000              89,000
     Prepaid expenses and other assets                                         82,000              34,000
     Assets of discontinued operations held for resale                         40,000              55,000
                                                                     -----------------  ------------------
              Total current assets                                            416,000             394,000
                                                                     -----------------  ------------------

Note receivable, less allowance for doubtful receivable of
     $30,000 in 2004 and 2003 (note 6)                                              -                   -

Investments and other assets (note 5)                                         121,000              81,000

Property, plant and equipment, at cost (note 7)                             2,090,000           1,843,000
     Less accumulated depreciation, depletion and amortization              1,457,000           1,392,000
                                                                     -----------------  ------------------
              Net property, plant and equipment                               633,000             451,000
                                                                     -----------------  ------------------
Intangible assets, at cost (note 8)                                           292,000             183,000
     Less accumulated amortization                                            189,000             168,000
                                                                     -----------------  ------------------
              Net intangible assets                                           103,000              15,000
                                                                     -----------------  ------------------
                                                                       $    1,273,000      $      941,000
                                                                     =================  ==================

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

Current liabilities:
     Trade accounts payable                                            $      177,000      $      133,000
     Accrued expenses (note 3)                                                314,000             325,000
     Short-term debt                                                                -              32,000
     Short-term debt - related entities                                       200,000             661,000
     Current maturities of long-term debt (note 9)                            241,000               5,000
     Current maturities of long-term debt - related entities (note 9)         333,000                   -
     Liabilities of discontinued operations held for resale                    95,000              92,000
                                                                     -----------------  ------------------
              Total current liabilities                                     1,360,000           1,248,000
                                                                     -----------------  ------------------
Long-term debt less current maturities (note 9)                               367,000           1,215,000

Long-term debt - related entities (note 9)                                  3,440,000           3,668,000

Other long-term liabilities                                                   250,000             143,000

Common shareholders' equity (deficiency):
     Convertible preferred stock of $100 stated value;
        5,000,000 shares authorized; 27,838 shares issued
        and outstanding                                                       889,000             889,000
     Common stock of $.0006665 and $.001333 par value per share;
         15,000,000 and 7,500,000 authorized; 4,839,565 and 2,328,845
         shares issued and outstanding in 2004 and 2003, respectively           3,000               3,000
     Capital in excess of par value                                        38,193,000          37,941,000
     Accumulated deficit                                                  (43,214,000)        (44,151,000)
     Accumulated other comprehensive loss                                     (15,000)            (15,000)
                                                                     -----------------  ------------------
              Total common shareholders' equity (deficiency)               (4,144,000)         (5,333,000)
                                                                     -----------------  ------------------
Commitments and contingencies (notes 4, 10, and 14)
                                                                       $    1,273,000      $      941,000
                                                                     =================  ==================
</TABLE>

See accompanying notes to financial statements.

<TABLE>
                                           THE BEARD COMPANY AND SUBSIDIARIES
                                                Statements of Operations
<CAPTION>
                                                                                 Year Ended December 31,
                                                                   ----------------------------------------------------
                                                                        2004              2003               2002
                                                                   ----------------  ----------------   ---------------
<S>                                                                   <C>               <C>                <C>
Revenues:
     Coal reclamation                                                 $    189,000      $     59,000       $    12,000
     Carbon dioxide                                                        754,000           508,000           445,000
     China                                                                       -                 -                 -
     e-Commerce                                                             29,000            25,000                 -
     Other                                                                       -             1,000            12,000
                                                                   ----------------  ----------------   ---------------
                                                                           972,000           593,000           469,000
                                                                   ----------------  ----------------   ---------------
Expenses:
     Coal reclamation                                                      854,000           570,000           581,000
     Carbon dioxide                                                        128,000           106,000           117,000
     China                                                                 548,000           724,000            46,000
     e-Commerce                                                            147,000           119,000           151,000
     Selling, general and administrative                                   870,000           923,000           884,000
     Depreciation, depletion and amortization                               92,000           169,000           144,000
     Impairment of long-lived assets (notes 1, 7, 8 and 16)                      -            82,000         1,561,000
     Other                                                                  33,000            38,000            42,000
                                                                   ----------------  ----------------   ---------------
                                                                         2,672,000         2,731,000         3,526,000
                                                                   ----------------  ----------------   ---------------
Operating profit (loss):
     Coal reclamation                                                     (682,000)         (516,000)       (2,105,000)
     Carbon dioxide                                                        585,000           363,000           291,000
     China                                                                (549,000)         (724,000)          (63,000)
     e-Commerce                                                           (124,000)         (100,000)         (202,000)
     Other, principally corporate                                         (930,000)       (1,161,000)         (978,000)
                                                                   ----------------  ----------------   ---------------
                                                                        (1,700,000)       (2,138,000)       (3,057,000)
Other income (expense):
     Interest income                                                         3,000             1,000           119,000
     Interest expense                                                     (575,000)         (519,000)         (400,000)
     Equity in net earnings (loss) of unconsolidated affiliates            376,000           236,000          (238,000)
     Gain on settlement                                                  2,943,000         1,151,000                 -
     Gain on sale of assets                                                 14,000             1,000            27,000
     Impairment of investments and other assets (notes 1, 7, 8 and 16)           -                 -          (872,000)
     Other                                                                  (6,000)         (222,000)           (1,000)
                                                                   ----------------  ----------------   ---------------
Earnings (loss) from continuing operations before income taxes           1,055,000        (1,490,000)       (4,422,000)

Income tax (expense) benefit  (note 11)                                   (118,000)                -            31,000
                                                                   ----------------  ----------------   ---------------
Earnings (loss) from continuing operations                                 937,000        (1,490,000)       (4,391,000)

Discontinued operations (note 3):
     Earnings (loss) from discontinued brine extraction/iodine manufacturing
         activities                                                         21,000                 -           (88,000)
     Loss from discontinued interstate travel facilities activities              -            (9,000)          (85,000)
     Loss from discontinued natural gas well servicing activities          (21,000)         (112,000)          (50,000)
                                                                   ----------------  ----------------   ---------------
     Loss from discontinued operations                                           -          (121,000)         (223,000)
                                                                   ----------------  ----------------   ---------------
Net earnings (loss)                                                   $    937,000      $ (1,611,000)      $(4,614,000)
                                                                   ================  ================   ===============
Net earnings (loss) attributable to common shareholders (note 4)      $    937,000      $ (1,611,000)      $(4,614,000)
                                                                   ================  ================   ===============
Net earnings (loss) per average common share outstanding:
  Basic (notes 1 and 12):
     Earnings (loss) from continuing operations                       $       0.18      $      (0.33)      $     (1.05)
     Loss from discontinued operations                                           -             (0.02)            (0.05)
                                                                   ----------------  ----------------   ---------------
     Net earnings (loss)                                              $       0.18      $      (0.35)      $     (1.10)
                                                                   ================  ================   ===============
Net earnings (loss) per average common share outstanding:
  Diluted (notes 1 and 12):
     Earnings (loss) from continuing operations                       $       0.14      $      (0.33)      $     (1.05)
     Loss from discontinued operations                                           -             (0.02)            (0.05)
                                                                   ----------------  ----------------   ---------------
     Net earnings (loss)                                              $       0.14      $      (0.35)      $     (1.10)
                                                                   ================  ================   ===============
Weighted average common shares outstanding:
     Basic                                                               5,215,000         4,542,000         4,193,000
                                                                   ================  ================   ===============
     Diluted                                                             6,478,000         4,542,000         4,193,000
                                                                   ================  ================   ===============
</TABLE>

See accompanying notes to financial statements.

<TABLE>
                                                THE BEARD COMPANY AND SUBSIDIARIES
                                          Statements of Shareholders' Equity (Deficiency)
<CAPTION>
                                                                                                                          Total
                                                                                           Accumulated                   Common
                                                             Capital in                      Other                     Shareholders'
                                         Preferred  Common   Excess of      Accumulated   Comprehensive    Treasury        Equity
                                           Stock    Stock    Par Value        Deficit        Income          Stock      (Deficiency)
                                         --------- --------- -----------    -----------    ---------    ------------   -------------
<S>                                      <C>       <C>       <C>           <C>             <C>          <C>             <C>
Balance, December 31, 2001               $      -  $  3,000  $38,081,000   $(36,568,000)   $(14,000)    $(1,846,000)    $(  344,000)

       Net loss                                 -         -            -     (4,614,000)          -               -      (4,614,000)
       Comprehensive income:
         Foreign currency translation
         adjustment                             -         -            -              -      (1,000)              -          (1,000)

                                                                                                                        ------------
    Comprehensive loss                          -         -            -              -           -               -      (4,615,000)
                                                                                                                        ------------
    Issuance of stock warrants                  -         -       11,000              -           -               -          11,000

    Reservation of shares pursuant to deferred
         compensation plan (note 12)            -         -      115,000              -           -               -         115,000

                                         --------  --------  -----------   ------------    ---------    -----------     ------------
Balance, December 31, 2002                      -     3,000   38,207,000    (41,182,000)    (15,000)     (1,846,000)     (4,833,000)

       Net loss                                 -         -            -     (1,611,000)          -               -      (1,611,000)
       Comprehensive income:
         Foreign currency translation
         adjustment                             -         -            -              -           -               -               -

                                                                                                                        ------------
    Comprehensive loss                          -         -            -              -           -               -      (1,611,000)
                                                                                                                        ------------
    Expiration of mandatory redemption
       option for preferred stock         889,000         -            -              -           -               -         889,000

    Issuance of stock warrants                  -         -       24,000              -           -               -          24,000

    Reservation of shares pursuant to deferred
         compensation plan (note 12)            -         -      198,000              -           -               -         198,000

    Issuance of shares pursuant to termination
         of deferred stock compensation plan    -         -     (488,000)    (1,358,000)          -       1,846,000               -

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

Balance, December 31, 2003                889,000     3,000   37,941,000    (44,151,000)    (15,000)              -      (5,333,000)

       Net earnings                             -         -            -        937,000           -               -         937,000
       Comprehensive income:
         Foreign currency translation
         adjustment                             -         -            -              -           -               -               -

                                                                                                                        ------------
    Comprehensive income                        -         -            -              -           -               -         937,000
                                                                                                                        ------------
    Issuance of stock warrants                  -         -       50,000              -           -               -          50,000

    Reservation of shares pursuant to deferred
         compensation plan (note 12)           -          -      202,000              -           -               -         202,000
                                         --------  --------  -----------   ------------    ---------    -----------     ------------

Balance, December 31, 2004               $889,000  $  3,000  $38,193,000   $(43,214,000)   $(15,000)    $         -     $(4,144,000)
                                         ========  ========  ===========   ============    =========    ===========     ============
</TABLE>

See accompanying notes to financial statements.

<TABLE>
                                         THE BEARD COMPANY AND SUBSIDIARIES
                                              Statements of Cash Flows
<CAPTION>
                                                                             Year Ended December 31,
                                                                ---------------------------------------------------
                                                                     2004              2003              2002
                                                                ----------------  ----------------  ---------------
<S>                                                             <C>               <C>               <C>
Operating activities:
     Cash received from customers                               $       894,000   $       593,000   $      499,000
     Gain on settlement                                               2,943,000         1,162,000                -
     Cash paid to suppliers and employees                            (2,670,000)       (2,247,000)      (1,595,000)
     Interest received                                                    3,000             1,000           21,000
     Interest paid                                                     (711,000)         (160,000)        (430,000)
     Operating cash flows of discontinued operations                    (12,000)          (81,000)        (284,000)
                                                                ----------------  ----------------  ---------------
          Net cash provided by (used in) operating activities           447,000          (732,000)      (1,789,000)
                                                                ----------------  ----------------  ---------------

Investing activities:
     Acquisition of property, plant and equipment                      (221,000)          (59,000)         (68,000)
     Acquisition of intangibles                                         (34,000)           (3,000)          (2,000)
     Proceeds from sale of assets                                        14,000             1,000           49,000
     Proceeds from sale of assets of discontinued operations             49,000           233,000          285,000
     Payments on notes receivable                                             -                 -          188,000
     Investment in and advances to fifty percent-owned
       and wholly-owned subsidiary in Mexico                                  -                 -          (21,000)
     Investment in and advances to fifty percent-owned
       subsidiary in China                                                    -                 -         (585,000)
     Other investments                                                  299,000           200,000          199,000
                                                                ----------------  ----------------  ---------------
          Net cash provided by investing activities                     107,000           372,000           45,000
                                                                ----------------  ----------------  ---------------

Financing activities:
     Proceeds from line of credit and term notes                        755,000           879,000        1,166,000
     Proceeds from related party debt                                 1,065,000           814,000        1,178,000
     Payments on line of credit and term notes                       (1,397,000)         (828,000)        (373,000)
     Payments on related party debt                                  (1,069,000)         (302,000)        (101,000)
     Proceeds from exercise of warrants                                  45,000                 -                -
     Capitalized costs associated with issuance of
       subordinated debt                                                (42,000)          (66,000)        (102,000)
                                                                ----------------  ----------------  ---------------
          Net cash provided by (used in) financing activities          (643,000)          497,000        1,768,000
                                                                ----------------  ----------------  ---------------

Net increase (decrease) in cash and cash equivalents                    (89,000)          137,000           24,000

Cash and cash equivalents at beginning of year                          216,000            79,000           55,000
                                                                ----------------  ----------------  ---------------

Cash and cash equivalents at end of year                        $       127,000   $       216,000   $       79,000
                                                                ================  ================  ===============
</TABLE>

See accompanying notes to financial statements.


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

Reconciliation of Net Earnings (Loss) to Net Cash Provided by (Used In) Operating Activities:
<CAPTION>
                                                                             Year Ended December 31,
                                                                ---------------------------------------------------
                                                                     2004              2003              2002
                                                                ----------------  ----------------  ---------------
<S>                                                             <C>               <C>               <C>
Net earnings (loss)                                             $       937,000   $    (1,611,000)  $   (4,614,000)
Adjustments to reconcile net earnings (loss) to net cash
  provided by (used in) operating activities:
     Depreciation, depletion and amortization                            92,000           169,000          144,000
     Depreciation, depletion and amortization
       discontinued operations                                                -                 -            2,000
     Gain on sale of assets                                             (14,000)           (1,000)         (27,000)
     Gain on sale of assets of discontinued operations                  (33,000)          (51,000)         (86,000)
     Provision for uncollectible accounts and notes                           -            17,000           25,000
     Impairment of investments and other assets                               -            82,000        2,433,000
     Impairment of investments and other assets of
       discontinued operations                                                -            85,000           80,000
     Equity in net (earnings) loss of unconsolidated
       affiliates                                                      (376,000)         (236,000)         238,000
     Equity in net loss of unconsolidated affiliates of
       discontinued operations                                                -                 -           15,000
     Non cash compensation expense and stock warrants                   206,000           222,000          126,000
     Other                                                                5,000                 -          (10,000)
     Net change in assets and liabilities of discontinued
       operations                                                             -           (17,000)        (155,000)
     (Increase) decrease in accounts receivable, other
       receivables, prepaid expenses and other current assets          (126,000)           58,000         (102,000)
     Decrease in inventories                                                  -                 -           93,000
     Increase (decrease) in trade accounts payable,
        accrued expenses and other liabilities                         (244,000)          551,000           49,000
                                                                ----------------  ----------------  ---------------
     Net cash provided by (used in) operating activities        $       447,000   $      (732,000)  $   (1,789,000)
                                                                ================  ================  ===============
</TABLE>

See accompanying notes to financial statements.

<PAGE>
                       THE BEARD COMPANY AND SUBSIDIARIES

                          Notes to Financial Statements

                        December 31, 2004, 2003, and 2002

(1)  Summary of Significant Accounting Policies
---  ------------------------------------------
The Beard  Company's  ("Beard" or the  "Company")  accounting  policies  reflect
industry  practices and conform to accounting  principles  generally accepted in
the United States of America.  The more significant of such policies are briefly
described below.

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

The  Coal  Segment  is in the  business  of  operating  coal  fines  reclamation
facilities  in the  United  States of  America  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
financing,  construction and operation of organic chemical  compound  fertilizer
plants. The e-Commerce Segment consists of a 71%-owned  subsidiary whose current
strategy  is  to  develop  business   opportunities  to  leverage  starpay's(TM)
intellectual  property  portfolio  of  Internet  payment  methods  and  security
technologies.

Principles of Consolidation and Basis of Presentation
-----------------------------------------------------
The accompanying  financial  statements  include the accounts of the Company and
its  wholly  and  majority  owned  subsidiaries  in  which  the  Company  has  a
controlling financial interest.  Subsidiaries and investees in which the Company
does not  exercise  control  are  accounted  for using the  equity  method.  All
significant  intercompany  transactions have been eliminated in the accompanying
financial statements.

Use of estimates
----------------
Management  of the  Company  has  made a number  of  estimates  and  assumptions
relating  to the  reporting  of assets and  liabilities  and the  disclosure  of
contingent  assets and  liabilities  to prepare  these  financial  statements in
conformity with accounting principles generally accepted in the United States of
America. Actual results could differ from those estimates.

Cash and Cash Equivalents
-------------------------
There were no cash equivalents at December 31, 2004 or 2003. For purposes of the
statements  of  cash  flows,  the  Company  considers  all  highly  liquid  debt
instruments  with  original  maturities  of three  months or less at the date of
purchase to be cash equivalents.

Receivables and Credit Policies
-------------------------------
Accounts  receivable include amounts due from the sale of CO2 from properties in
which  the  Company  owns  an  interest,  a tax  refund  due,  accrued  interest
receivable  and  uncollateralized  customer  obligations  due under normal trade
terms requiring  payment within 30 days from the invoice date.  Notes receivable
are stated at  principal  amount plus  accrued  interest  and are  normally  not
collateralized.  Payments of accounts  receivable  are allocated to the specific
invoices identified on the customers  remittance advice or, if unspecified,  are
applied to the  earliest  unpaid  invoices.  Payments  of notes  receivable  are
allocated  first to  accrued  but  unpaid  interest  with the  remainder  to the
outstanding principal balance. Trade accounts and notes receivable are stated at
the amount management expects to collect from outstanding balances. The carrying
amounts of  accounts  receivable  are  reduced  by a  valuation  allowance  that
reflects  management's  best estimate of the amounts that will not be collected.
Management  individually  reviews all notes  receivable and accounts  receivable
balances  that exceed 90 days from  invoice date and based on an  assessment  of
current  creditworthiness,  estimates  the portion,  if any, of the balance that
will not be collected.  Management provides for probable  uncollectible accounts
through a charge to earnings and a credit to a valuation  allowance based on its
assessment of the current status of individual accounts. Balances that are still
outstanding after management has used reasonable  collection efforts are written
off through a charge to the  valuation  account  and a credit to trade  accounts
receivable.  Changes to the  valuation  allowance  have not been material to the
financial statements.

Property, Plant and Equipment
-----------------------------
Property,   plant  and  equipment  are  stated  at  cost,   net  of  accumulated
depreciation,  and are  depreciated  by use of the  straight-line  method  using
estimated asset lives ranging from three to 40 years.

The Company  charges  maintenance  and  repairs  directly to expense as incurred
while  betterments  and renewals are  generally  capitalized.  When  property is
retired  or  otherwise   disposed  of,  the  cost  and  applicable   accumulated
depreciation,  depletion  and  amortization  are  removed  from  the  respective
accounts and the resulting gain or loss is reflected in operations.

Intangible Assets
-----------------
Identifiable   intangible   assets  are  stated  at  cost,  net  of  accumulated
amortization,  and are amortized on a straight-line  basis over their respective
estimated useful lives, ranging from five to 17 years.

Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of
-----------------------------------------------------------------------
Long-lived  assets  and  certain  identifiable   intangibles  are  reviewed  for
impairment  whenever  events  or  changes  in  circumstances  indicate  that the
carrying amount of an asset may not be recoverable.  Recoverability of assets to
be held and used is measured by a comparison of the carrying  amount of an asset
to future net cash flows  expected to be generated by the asset.  If such assets
are  considered to be impaired,  the  impairment to be recognized is measured by
the amount by which the carrying  amount of the assets exceeds the fair value of
the assets.  Assets to be disposed of are  reported at the lower of the carrying
amount or fair value less costs to sell.

In 2003, the Company recorded  impairments of long-lived assets of $6,000 in the
Coal  Segment and $76,000 in Other  operations.  In 2002,  the Company  recorded
impairments  of long-lived  assets of $1,516,000 in the Coal Segment and $45,000
in the e-Commerce Segment. There were no such impairments in 2004.

In addition,  in 2002 the Company  recognized  $872,000 for  impairments  to the
carrying values of investments  and other assets relating to the  recoverability
of such investments or assets. There were no such impairments in 2003 or 2004.

Other Long-Term Liabilities
---------------------------
Other  long-term  liabilities  consist of various  items  which are not  payable
within the next calendar year.

Fair Value of Financial Instruments
-----------------------------------
The  carrying  amounts  of the  Company's  cash and cash  equivalents,  accounts
receivable,  other current assets, trade accounts payables, and accrued expenses
approximate  fair value because of the short maturity of those  instruments.  At
December  31,  2004 and 2003,  the fair values of the  long-term  debt and notes
receivable  were not  significantly  different than their carrying values due to
interest rates relating to the instruments  approximating  market rates on those
dates.

Revenue Recognition
-------------------
The Company  recognizes  revenue when it is realized or  receivable  and earned.
Revenue from the CO2 Segment is recognized in the period of production.  Revenue
from Coal  Segment  projects  is  recognized  in the  period  the  projects  are
performed. License fees from the e-Commerce segment are recognized over the term
of the agreement.

Income Taxes
------------
Income taxes are accounted for under the asset and  liability  method.  Deferred
tax assets  and  liabilities  are  recognized  for the  future tax  consequences
attributable to differences  between the financial statement carrying amounts of
existing  assets and  liabilities  and their  respective tax bases and operating
loss and tax credit  carryforwards.  Deferred  tax assets  and  liabilities  are
measured  using  enacted tax rates  expected  to apply to taxable  income in the
years in which those  temporary  differences  are  expected to be  recovered  or
settled.  The Company provides a valuation allowance for deferred tax assets for
which it does not  consider  realization  of such  assets to be more likely than
not. The effect on deferred tax assets and  liabilities of a change in tax rates
is recognized in income in the period that includes the enactment date.

Stock Option Plan
-----------------
The Company  applies the  intrinsic  value method of  accounting  prescribed  by
Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued
to Employees," and related interpretations, in accounting for its stock options.
As such, compensation expense would be recorded on the date of grant only if the
current market price of the underlying  stock exceeded the exercise price.  SFAS
No. 123, "Accounting for Stock-Based  Compensation,"  established accounting and
disclosure  requirements  using a fair  value-based  method  of  accounting  for
stock-based employee compensation plans. As allowed by SFAS No. 123, the Company
has  elected to  continue  to apply the  intrinsic  value  method of  accounting
described above, and has adopted the disclosure requirements of SFAS No. 123.

Had the  Company  determined  compensation  cost  based on the fair value at the
grant date for its stock options under SFAS No. 123, neither net earnings (loss)
nor net  earnings  (loss)  per  share  would  have been  affected  for any years
presented in the accompanying financial statements.

Convertible Preferred Stock
---------------------------
The Company's  convertible  preferred  stock is accounted for at estimated  fair
value. Prior to January 1, 2003, the preferred stock had been redeemable and was
carried at its  estimated  fair value.  The excess of the  estimated  redeemable
value  over  the  fair  value  at the date of  issuance  was  accreted  over the
redemption  term.  Effective  January 1, 2003, the preferred  stock ceased to be
mandatorily  redeemable and thereafter became convertible at the holder's option
into common stock. Accordingly, it is no longer subject to accretion.

Earnings (Loss) Per Share
-------------------------
Basic  earnings  (loss) per share data is computed by dividing  earnings  (loss)
attributable  to common  shareholders  by the weighted  average number of common
shares  outstanding  for the  period.  Diluted  earnings  per share  reflect the
potential  dilution that could occur if the Company's  outstanding stock options
(calculated  using the treasury stock method) and warrants were exercised and if
the Company's preferred stock, convertible notes and deferred stock compensation
units were converted to common stock.

Diluted  earnings (loss) per share from continuing  operations in the statements
of  operations  exclude  potential  common shares  issuable  upon  conversion of
preferred  stock,   convertible   notes,   termination  of  the  deferred  stock
compensation  plan,  or  exercise of stock  options and  warrants as a result of
losses from continuing operations in 2002 and 2003.

The  table  below  contains  the  components  of the  common  share  and  common
equivalent  share amounts  (adjusted to reflect the 2-for-1 stock split effected
on August 6, 2004) used in the  calculation of earnings  (loss) per share in the
Company's statements of operations:

<TABLE>
<CAPTION>
                                                          For the Year Ended
                                        ------------------------------------------------------
                                          December 31,       December 31,        December 31,
                                              2004              2003               2002
                                        ------------------------------------------------------
<S>                                            <C>               <C>                <C>
Basic EPS:
  Weighted average common
   shares outstanding                          4,708,580         4,375,224          3,658,086
  Weighted average shares in deferred
   stock compensation plan treated
   as common stock equivalents                   506,026           167,254            534,948
                                        ------------------------------------------------------
                                               5,214,606         4,542,478          4,193,034
                                        ======================================================
Diluted EPS:
  Weighted average common
   shares outstanding                          4,708,580         4,375,224          3,658,086
  Weighted average shares in deferred
   stock compensation plan treated as
   common stock equivalents                      506,026           167,254            534,948
  Convertible Preferred Shares
   considered to be common
   stock equivalents                             287,558                 -                  -
  Warrants issued in connection
   with debt offerings treated
   as common stock equivalents                   975,750                 -                  -
                                        ------------------------------------------------------
                                               6,477,914         4,542,478          4,193,034
                                        ======================================================
</TABLE>

Concentrations of Credit Risk
-----------------------------
Financial  instruments that potentially subject the Company to concentrations of
credit  risk  consist  primarily  of  accounts  and notes  receivable.  Accounts
receivable from one party comprised  approximately  80% of the December 31, 2004
balances  of  accounts  receivable.  Generally,  the  Company  does not  require
collateral to support accounts and notes receivable.

The Company  maintains its cash in bank deposit  accounts which,  at times,  may
exceed federally  insured limits.  The Company has not experienced any losses in
such accounts.  The Company believes it is not exposed to any significant credit
risk on cash and cash equivalents.

Comprehensive Income
--------------------
SFAS No. 130 establishes  standards for reporting and display of  "comprehensive
income" and its  components in a set of financial  statements.  It requires that
all items that are  required to be  recognized  under  accounting  standards  as
components of comprehensive  income be reported in a financial statement that is
displayed with the same prominence as other financial  statements.  During 2002,
the Company's only significant items of comprehensive  income related to foreign
currency  translation  adjustments  resulting  from  its  equity  investment  in
ITS-Testco.  The assets and  liabilities  of Testco de  Mexico,  a  wholly-owned
subsidiary of  ITS-Testco,  are stated in the local  currency (the Mexican peso)
and are translated into U.S.  dollars using the current  exchange rate in effect
at the balance sheet date,  while income and expenses are  translated at average
rates for the respective periods.  Translation adjustments have no effect on net
loss and are included in accumulated other comprehensive loss.

Reclassifications
-----------------
Certain 2003 and 2002  balances  have been  reclassified  to conform to the 2004
presentation.

(2) Ability to Fund Operations and Continue as a Going Concern
--------------------------------------------------------------

Overview
--------
The  accompanying  financial  statements  have  been  prepared  based  upon  the
Company's belief that it will continue as a going concern. Despite the fact that
the Company's  revenues from  continuing  operations had declined in each of the
three preceding years, they increased in 2003 and 2004. The Company has incurred
operating losses and negative cash flows from operations during each of the last
five  years;  however,  the  Company  is of the belief  that it will  commence a
project in both its Coal and China Segments in 2005. Moreover,  the long-awaited
Settlement  in the  McElmo  Dome  litigation  has now been  received.  The first
installment,  totaling  $1,162,000 and including an $11,000  payment on accounts
receivable,  was received on July 31,  2003,  the second  installment,  totaling
$2,826,000  was received on March 26, 2004,  and a third  installment,  totaling
$117,000 was received on May 12, 2004. Receipt of the Settlement enabled 2004 to
become a  profitable  year  while  at the  same  time  enhancing  the  Company's
liquidity.  Meanwhile,  the Coal Segment is currently  pursuing eight  different
projects, which are in various stages of negotiation.  (See "Additional Details"
below).  The Company has arranged for the financing  for its initial  fertilizer
plant in China.  (See  "Recent  Developments--Financing  of  Initial  Fertilizer
Manufacturing  Plant in China").  In addition,  the Company  finalized its first
licensing  arrangement in its e-Commerce Segment in March of 2003.  Although the
e-Commerce licensing arrangement did not make the segment profitable in 2004 and
will  probably  not  make it  profitable  in  2005,  the  Company  believes  the
arrangement  has the  potential  to make  the  segment  profitable  in 2006  and
subsequent years.

During the three years ended  December  31,  2004,  the Company took a number of
steps to reduce its negative  cash flow.  The  Company's  Chairman and President
deferred a portion of their base salary  into two  Deferred  Stock  Compensation
Plans (the "DSC Plans")  which  terminated  in 2003,  and the  Company's  2003-2
Deferred Stock  Compensation  Plan (the "2003-2 Plan") which became effective on
September 30, 2003, and is ongoing. The Company's outside directors deferred all
of their  directors'  fees into such Plans.  The Chairman of Beard  Technologies
deferred a portion of his salary  during such period.  The Company has suspended
its 100%  matching  contribution  (up to a cap of 5% of gross  salary) under its
401(k) Plan.  Five private debt  placements  raised gross proceeds of $3,374,000
during  such  period,  and an  additional  $1,755,000  in  January  of 2005.  In
addition,  in  November  of 2003 the Company  borrowed  $200,000  from a related
party.  In December of 2003 and November of 2004 the Company  borrowed  $103,000
and $200,000,  respectively,  from an unconsolidated subsidiary.  These measures
enabled the Company to continue  operating  until the  Settlement was finalized.
The negative  result has been a substantial  amount of dilution to the Company's
common  equity.  During such period  1,157,625  warrants  (as  adjusted  for the
2-for-1 stock split  effected in August of 2004) were issued in connection  with
such  private  debt  placements,  and 819,000  Stock  Units were  accrued in the
participants' accounts as a result of deferrals of salary into the DSC Plans and
the 2003-2 Plan.  During such period 345,000  convertible notes were also issued
which were convertible into 345,000 shares of common stock.  Additional dilution
also  occurred due to an  adjustment to the  Preferred  Stock  conversion  ratio
resulting  from the  issuance of the  warrants,  the  convertible  notes and the
salary  deferrals.  Termination of the two DSC Plans resulted in the issuance of
1,000,000  common  shares  in 2003 (as  adjusted  for the  2-for-1  stock  split
effected in August of 2004).

Additional Details
------------------
To mitigate potential liquidity problems,  the Company's lines of credit from an
affiliate of the Company's  chairman were increased from $2,250,000 in September
of 2001 to $3,375,000 in November of 2003. The lines of credit were converted to
a term loan and paid  down to  $2,785,000  in March of 2004.  As a result of the
private debt placements completed in 2003, the Company obtained a net additional
$545,000 of working  capital.  Nevertheless,  the funding of operations  and the
repayment of a portion of the Company's debt resulted in a $551,000 reduction in
the Company's  working capital  position during 2003. As a result of the private
debt placements completed in 2004, the Company obtained a net additional working
capital  of  approximately  $1,820,000.   However,  cash  and  cash  equivalents
decreased from $216,000 at December 31, 2003 to $127,000 at December 31, 2004.


The  Company's  principal  business  is coal  reclamation,  and  this  is  where
management's  operating  attention is primarily focused.  The Coal Segment has a
signed  contract to construct and operate a pond fines recovery  project in West
Virginia  (the  "Pinnacle  Project")  which it expects to commence in the second
quarter of 2005 if it can  successfully  arrange  the  financing  therefor.  The
segment is  actively  pursuing  seven other  projects  and has a number of other
projects in the pipeline for follow up once these eight  projects have come to a
resolution.   The  Company  completed  a  private  placement  of  $2,100,000  of
convertible  notes in January of 2005.  To the extent not  required  for working
capital,  a  portion  of the net  proceeds  from this  offering  will be used to
finance the Pinnacle Project, if necessary.

The timing of the  projects the Company is actively  pursuing is uncertain  but,
subject to obtaining the necessary financing, they are considered to have a high
probability  of  activity.  With  the  exception  of the  Pinnacle  Project,  no
definitive contracts have as yet been signed, and there is no assurance that the
required   financing  will  be  obtained  or  that  any  of  the  projects  will
materialize.  However,  the Company is diligently  pursuing both debt and equity
financing  through  several  different  sources,  and  believes  that it will be
successful in arranging  financing  for at least one or two projects  during the
second quarter of 2005.

In February of 2005 the Company announced that it has arranged the financing for
its initial fertilizer manufacturing plant in China (See "General development of
business---Recent Developments."

In addition,  the Company expects to generate cash of approximately $30,000 from
the  sale of real  estate  and at least  $50,000  from  the  disposition  of the
remaining  assets from two of its  discontinued  segments,  and can sell certain
other assets to generate cash if necessary.

The Company believes that if the current financing efforts are successful,  they
will provide  sufficient  working  capital to sustain the  Company's  activities
until 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
from  operations.  If such  efforts  are not  successful  or are only  partially
successful,  then the Company will need to pursue additional  outside financing,
which would likely involve further dilution to our shareholders.

(3)  Discontinued Operations
---  -----------------------

ITF Segment
-----------
In 1999 the Company  adopted a formal plan to  discontinue  its ITF  (Interstate
Travel Facilities)  Segment and recorded a loss of $2,419,000 from discontinuing
the  segment in 1998.  The  segment  disposed  of all of its  assets  except two
convenience  stores in 1999 and  recorded an  additional  loss of $214,000  that
year. In 2000,  ITF recorded  revenues of $1,826,000 and a net loss of $591,000,
including a $360,000 additional  impairment loss. In 2001, ITF recorded revenues
of  $7,000  and a  net  loss  of  $121,000,  including  an  additional  $100,000
impairment in the carrying value of the remaining  facilities.  The Company sold
one of the convenience stores with related property, plant and equipment in 2002
and recorded  losses  totaling  $85,000,  including a $1,000 gain on the sale of
assets and an additional  charge of $77,000 to impair the carrying  value of the
remaining  facility  in such  year.  In 2003,  the  Company  sold the  remaining
convenience store and related property,  plant and equipment and recorded losses
totaling  $9,000 for the  segment in such year,  including  a $5,000 gain on the
sale of assets.  In 2004,  the segment  recorded no earnings  and income of less
than $1,000.  As of December 31,  2004,  the segment had no remaining  assets or
liabilities.

BE/IM Segment
-------------
In 1999,  the Management  Committee of a joint venture  40%-owned by the Company
adopted a formal plan to discontinue the business and dispose of its assets. The
venture was dissolved in 2000 and the Company took over certain remaining assets
and liabilities.  The assets included two iodine plants, the larger of which was
shut down in 2000.  The smaller plant  continued to operate.  As a result of the
discontinuance,  the Company  reflected  $540,000  of losses  from  discontinued
operations in 1999 and $179,000 in income from discontinued  operations in 2000.
The  Company  recorded  $88,000  and  $111,000  for the  years  2002  and  2001,
respectively,  in net operating  expenses from the smaller of the two plants. In
2003, the Company  recorded no net losses related to this segment.  In 2004, the
Company recorded $21,000 of earnings related to this segment, resulting from the
sale of  equipment  in excess of the  impaired  value on the books.  The Company
expects no further material charges to earnings related to the remaining assets.

As of  December  31,  2004,  the  significant  assets  related to the  segment's
operations  consisted  primarily of equipment  with no estimated net  realizable
value. The significant liabilities related to the segment's operations consisted
primarily of accrued expenses totaling $54,000. The Company is actively pursuing
opportunities to sell the segment's remaining assets and expects the disposition
to be completed by December 31, 2005.

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 $1,521,000.  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 net loss from the  discontinued  operations  of the segment was  $619,000 in
2001, including a $107,000 loss on the sale of equipment.  In 2002, the net loss
of the segment was $50,000,  including  gains totaling  $88,000 from the sale of
equipment. The net loss for 2003 was $112,000, including an impairment provision
of $85,000. The net loss of the segment for 2004 was $21,000. As of December 31,
2004 the  significant  assets  of the WS  Segment  were  fixed  assets  totaling
$39,000.  The Company is actively  pursuing the sale of the remaining assets and
expects to have them sold or otherwise  disposed of by December  31,  2005.  The
significant  liabilities of the segment  consisted of trade accounts payable and
other accrued  expenses  totaling  $60,000.  It is  anticipated  that all of the
liabilities of the segment will be paid prior to December 31, 2005.

(4)  1993 Restructure; Convertible Preferred Stock
---  ---------------------------------------------

As the result of a restructure (the  "Restructure")  effected in 1993, a company
owned by four  lenders (the  Institutions")  received  substantially  all of the
Company's  oil and gas assets,  25% of the  Company's  then  outstanding  common
stock,  and $9,125,000  stated value (91,250  shares,  or 100%) of its preferred
stock.  As a result,  $101,498,000  of the  Company's  long-term  debt and other
obligations were eliminated.

The Company's  preferred stock was mandatorily  redeemable  through December 31,
2002 from one-third of Beard's  consolidated net income. At January 1, 2003, the
stock was no longer  redeemable,  and each share of Beard preferred stock became
convertible into 4.26237135  (118,655) shares (pre-split) of Beard common stock.
The  conversion  ratio is adjusted  periodically  (i) for stock splits,  (ii) as
additional  warrants or  convertible  notes are issued,  and (iii) as additional
shares of stock are  credited  to the  accounts  of the  Company's  Chairman  or
President in the Company's Deferred Stock Compensation  Plans, in each case at a
value of less than $1.29165 per share. Fractional shares will not be issued, and
cash will be paid in  redemption  thereof.  At December  31, 2004 (after  giving
effect to a 2-for-1 stock split  effected in August of 2004) each share of Beard
preferred  stock was  convertible  into  10.32971466  (287,558)  shares of Beard
common stock.  The preferred  stockholder  is entitled to one vote for each full
share of common  stock  into which its  preferred  shares  are  convertible.  In
addition,  preferred  shares that have not been  converted  have  preference  in
liquidation to the extent of their $100 per share stated value.

From  1995  through  1998 the  Company  redeemed  or  repurchased  63,412 of the
preferred  shares  from  the  Institutions  or  from  individuals  to  whom  the
Institutions had sold such shares. The last 31,318 of such shares were purchased
for $31.93 per share in 1998.

At December 31, 2004 and 2003, the  convertible  preferred stock was recorded at
its  estimated  fair value of $889,000 or $31.93 per share versus its  aggregate
stated value of $2,784,000.

(5)  Investments and Other Assets
---  ----------------------------

Investments and other assets consisted of the following:

                                                            December 31,
                                                            ------------
                                                        2004          2003
                                                        ----          ----
   Investment in Cibola Corporation                  $   92,000    $   13,000
   Investment in real estate limited partnerships        13,000        50,000
   Other assets                                          16,000        18,000
                                                     ----------    ----------
                                                     $  121,000    $   81,000
                                                     ==========    ==========

Investment in Cibola Corporation
--------------------------------
The  Company  owns 80% of the  outstanding  common  stock of Cibola  Corporation
("Cibola"),  a natural  gas  marketing  company,  but does not  consolidate  the
assets, liabilities,  revenues or expenses of Cibola because Cibola's assets are
controlled by its minority common stockholders and preferred  stockholders.  The
Company's equity in the earnings of Cibola was $290,000, $238,000, and $123,000,
in 2004, 2003 and 2002, respectively.

Investment in Real Estate Limited Partnerships
----------------------------------------------
The  Company  owns a  limited  partnership  interest  in a real  estate  limited
partnership  whose  only  asset  consists  of a tract of  undeveloped  land near
Houston,  Texas,  most of which was sold in 2004. The Company recorded income of
$86,000  and losses of $2,000 and $4,000 in 2004,  2003 and 2002,  respectively,
resulting  from its  share of the  limited  partnership's  operations  for those
years.  The Company  received a distribution of $122,000 from this investment in
2004 as its share of  proceeds  from the sale of the portion of land sold by the
partnership.

Other assets
------------
The Company recorded a provision of $872,000 in 2002 for economic  impairment of
other investments, including those discussed above. There were no impairments of
these assets in 2003 or 2004.

(6)  Notes Receivable
---  ----------------
At  December  31,  2003,  the  Company had a note  receivable  totaling  $30,000
resulting   from  the  sale  of  equipment.   The  note  was  determined  to  be
uncollectible  in December of 2003 and the note was fully impaired.  The $30,000
was charged against an impairment reserve.

(7)  Property, Plant and Equipment
---  -----------------------------
Property, plant and equipment consisted of the following:

                                                            December 31,
                                                            ------------
                                                         2004         2003
                                                         ----         ----
    Land                                            $     9,000   $     9,000
    Oil and gas leases                                  124,000       134,000
    Proved carbon dioxide properties                  1,291,000     1,256,000
    Buildings and land improvements                      28,000        65,000
    Machinery and equipment                             460,000       202,000
    Other                                               178,000       177,000
                                                    -----------   -----------
                                                    $ 2,090,000   $ 1,843,000
                                                    ===========   ===========

The initial  evaluation of long-lived  assets on a fair value basis, as required
by the  implementation of SFAS No. 144,  indicated that an impairment existed in
the Coal Segment.  Accordingly,  impairment losses of $1,516,000 and $6,000 were
recognized  in 2002 and  2003,  respectively,  to fully  impair  the coal  fines
extraction and  beneficiation  equipment and certain other long-lived  assets of
the Coal Segment. The fair value of the segment was estimated using the expected
present  value of future cash flows.  The Company also recorded an impairment of
$76,000 in 2003 relating to its oil and gas leases in other operations. The fair
values of these assets were estimated using the expected present value of future
cash flows.

The Company incurred $71,000,  $58,000,  and $89,000 of depreciation expense for
2004, 2003, and 2002, respectively.

(8)  Intangible Assets
---  -----------------
Intangible assets are summarized as follows:

                                                       December 31,
                                                       ------------
                                                   2004            2003
                                                   ----            ----
      Debt issuance costs                      $   260,000     $   169,000
      Patent costs                                   1,000           1,000
      Other                                         31,000          13,000
                                               -----------     -----------
                                               $   292,000     $   183,000
                                               ===========     ===========

Accumulated amortization is summarized as follows:

                                                        December 31,
                                                        ------------
                                                    2004           2003
                                                    ----           ----
      Debt issuance costs                      $   181,000     $   159,000
      Patent costs                                   1,000           1,000
      Other                                          7,000           8,000
                                               -----------     -----------
                                               $   189,000     $   168,000
                                               ===========     ===========

During  2004,  the  Company  capitalized  $65,000 of costs  associated  with the
issuance of the 10% Participating  Subordinated and 12% Convertible Subordinated
notes. The costs of the 10% notes are being amortized over 31 months and will be
fully  amortized  in  November  of 2006;  the  costs of the 12%  notes are being
amortized  over five years and will be fully  amortized by the first  quarter of
2010, all as a result of such notes having been paid off.

The initial  evaluation of long-lived  assets on a fair value basis, as required
by the  implementation of SFAS No. 144,  indicated that an impairment existed in
the  e-Commerce  Segment.  Accordingly,  patent  and  patent  application  costs
totaling  $45,000 were written off in 2002. The fair value of the affected asset
group was estimated using the expected present value of future cash flows.

The Company incurred $21,000,  $111,000, and $55,000 of amortization expense for
2004, 2003 and 2002, respectively.  If no capital assets are added, amortization
expense is expected to be as follows.

           2005         $ 21,000
           2006           20,000
           2007            7,000
           2008            7,000
           2009            6,000
           2010            1,000
                       ----------
                        $ 62,000
                       ==========

(9)  Long-term Debt
---  --------------
Long-term debt is summarized as follows:

                                                         December 31,
                                                         ------------
                                                    2004              2003
                                                    ----              ----
   Coal                                        $                   $      1,000
                                                          -
   e-Commerce (a)                                     3,000               9,000
   Other                                                  -               2,000
   10% Subordinated Notes (b)(f)                          -           1,240,000
   10% Participating Notes (c)(f)                 1,200,000                   -
   12% Convertible Subordinated Notes (d)           255,000                   -
   Loans including accrued interest -
     affiliated entities (e)                      3,123,000           4,329,000
                                               ------------        ------------
                                                  4,581,000           5,581,000
   Less current maturities                          774,000             698,000
                                               ------------        ------------
       Long-term debt                          $  3,807,000        $  4,883,000
                                               ============        ============
____________________

(a)  At December 31, 2004, the Company's e-Commerce Segment had one note payable
     with a balance  due of $3,000.  The note bears  interest  at 12%,  requires
     monthly  payments of interest and principal  and matures in July 2005.  The
     note is secured by an automobile  with an approximate  book value of $3,000
     at December 31, 2004.

(b)  In  2002,  the  Company  completed  the  private  placement  of  $1,200,000
     ($1,157,000  net of discount) of 10%  subordinated  notes due September 30,
     2003 (the "2002 Notes").  The notes were mandatorily  redeemable  within 10
     days of the receipt of the McElmo Dome settlement.  Since the notes had not
     been redeemed by their maturity date, they were  automatically  extended to
     March 31, 2005.  An investment  banking firm received  warrants to purchase
     90,000 shares of Company common stock as part of its sales  compensation in
     connection with the offering.  The note holders received 458,000  warrants.
     Related parties purchased $320,000 of the offering, and received 122,500 of
     such  warrants.  All of the warrants  have a 5-year term and have  exercise
     prices ranging from  $0.353949 to $0.3570475  per share.  As a condition of
     the private placement, a Deed of Trust, Assignment of Production,  Security
     Agreement and Financing  Statement has been recorded  against the Company's
     working and overriding  royalty interests in the McElmo Dome field pursuant
     to which the  related  entity  which has made a $3  million  line of credit
     available to the Company has been granted a security interest.  Because the
     Company had not  redeemed the 2002 Notes by  September  30, 2003,  the note
     holders  were  granted a security  interest  pari  passu  with the  related
     entity.  The assets serving as collateral for these debt  instruments had a
     recorded value on the Company's  books of $338,000 as of December 31, 2004.
     The 2002 Notes,  along with $45,000 of accrued interest,  were paid in full
     on March 26,  2004,  and the  holders  of the 2002  Notes no longer  have a
     security interest in the McElmo Dome collateral.

     In February of 2003 the Company completed the private placement of $600,000
     of  subordinated  notes (the  "2003A  Notes") to  accredited  investors.  A
     $550,000  note was sold by an investment  banking firm which  received a 5%
     commission  thereon.  The  purchaser  received  a 5% loan fee on this note,
     which  bears a 5%  coupon.  A  $50,000  note  was  sold by the  Company  to
     affiliates  of the  Company  and bears a 10%  coupon.  The 2003A Notes were
     accompanied  by  warrants  to  purchase a total of 130,000  shares of Beard
     common stock at $0.242365 per share. A new Deed of Trust was recorded which
     established the priorities as to repayment among the 2002 note holders, the
     2003 note holders and the related party. The 2003A Notes were due to mature
     on April 1, 2004;  such maturity  would have extended to January 1, 2005 if
     they had not been  redeemed  by such  date.  The 2003A  Notes,  along  with
     $16,000 of accrued  interest,  were paid in full on March 26, 2004, and the
     note  holders  no  longer  have a  security  interest  in the  McElmo  Dome
     collateral.

     In July of 2003 the Company  completed the private  placement of $29,000 of
     subordinated  notes  (the  "2003B  Notes")  to  accredited  investors.  The
     $300,000  offering  was  terminated  early when it became clear the Company
     would  receive the first  installment  of the  Settlement  by August 1. The
     2003B  Notes  bore  interest  at 10% per  annum  from the date of  original
     issuance,   payable  at   maturity.   The  notes  were   subject  to  a  4%
     non-refundable loan fee, payable upon issuance to the investors.  $4,000 of
     the notes  were sold by an  investment  banking  firm  which  received a 5%
     commission thereon. The 2003B Notes, along with $2,000 of accrued interest,
     were paid in full on March 26, 2004.

(c)  In June of 2004,  the Company  completed  the sale of $1,200,000 of its 10%
     Participating  Notes raising a net of  $1,163,000 of working  capital after
     reductions for expenses. The notes were accompanied by warrants to purchase
     a total of 480,000 shares of Beard Company stock at exercise prices ranging
     from $0.135 to $0.23 per share.  The notes bear  interest at an annual rate
     equal to the Wall  Street  Journal  Prime Rate plus 4%, with a floor of 10%
     and will mature on November 30, 2006.  The Company paid interest only until
     November  30,  2004.  The Company  will then  amortize the notes with equal
     payments of principal  and interest over the ensuing  eight  quarters.  The
     note holders will also collectively  receive at maturity a bonus/production
     payment  equivalent to approximately $1 per ton for the coal expected to be
     recovered during the term of the notes from a coal project described in the
     offering  document.  The total amount for the  bonus/production  payment is
     expected to equal $568,000.  As a result of the estimated  bonus/production
     payment,  these  notes  have an  effective  interest  rate of 29%.  Related
     entities  purchased a total of $700,000 of these notes. The Company prepaid
     $280,000 of the notes,  along with accrued interest  totaling  $14,000,  on
     February 10, 2005.

(d)  In September of 2004, the Company  arranged for an investment  firm to sell
     $1,800,000  of 9%  convertible  subordinated  notes  (the "9%  Notes") in a
     private  placement.  As of December  15,  2004,  a total of $255,000 of the
     offering had been subscribed and closed, including $150,000 by directors of
     the Company, and the offering was terminated. On December 29, a new private
     placement of the Company's  12%  Convertible  Subordinated  Notes (the "12%
     Notes") was commenced.  In December of 2004 the 9% Notes were exchanged for
     a like amount of 12% Notes and the holders forgave all accrued  interest on
     the 9% Notes,  totaling $5,000.  An additional  $1,845,000 of the 12% Notes
     were subscribed and closed in January bringing the total offering amount to
     $2,100,000.  The Company  will pay  interest  only on a  semi-annual  basis
     beginning  August 15, 2005 until the February 15, 2010  maturity  date,  at
     which  time the  Company  will make a balloon  payment  of the  outstanding
     principal balance plus accrued and unpaid interest. The Company has granted
     a security interest in Beard Technologies'  equipment to the holders of the
     12% Notes. The security  interest will be released in the event the Company
     raises sufficient funds to proceed with a certain coal reclamation project.
     The notes are convertible  into shares of the Company's stock at an initial
     conversion  price of $1.00 per share.  The Company may force  conversion of
     the notes after  February 15, 2007 if the weighted  average  sales price of
     the  Company's  common  stock has been  more than two times the  conversion
     price for more than sixty (60) consecutive trading days.

(e)  At  December  31,  2004,  the  Company  had  borrowed  $2,785,000  from  an
     affiliated entity of the Chairman of the Company under terms of a note that
     bears interest at 10%. The note is due to be repaid on April 1, 2006.

     On December 31, 2004, the Company borrowed  $200,000 from an unconsolidated
     subsidiary. The note bears interest at 15% and is due to be repaid no later
     than July 31, 2005. The note is unsecured.

(f)  The number and exercise  prices of the warrants  shown in footnotes (b) and
     (c) have been  adjusted to reflect the 2-for-1  stock split  effected as of
     August 6, 2004.

At December 31, 2004,  the annual  maturities of long-term debt were $774,000 in
2005, $3,552,000 in 2006 and $255,000 in 2010. Following receipt of the proceeds
of the 12% Convertible debt, $280,000 of the 10% Participating Notes, along with
$14,000 of accrued interest, was repaid on February 10, 2005.

The Company  incurred  $455,000,  $370,000  and  $294,000  of  interest  expense
relating to debt to related parties in 2004, 2003, and 2002,  respectively.  The
Company paid $189,000,  $48,000,  and $363,000 of those amounts for 2004,  2003,
and 2002, respectively.

The weighted average interest rates for the Company's short-term borrowings were
15% and 10.65% as of December 31, 2004 and 2003, respectively.

(10)  Operating Leases
----  ----------------
Noncancelable operating leases relate principally to office space, vehicles and
operating equipment. Gross future minimum payments under such leases as of
December 31, 2004 are summarized as follows:

           2005                 $ 206,000
           2006                    71,000
           2007                     5,000
                             -------------
                                $ 282,000
                             =============

Rent expense under operating leases aggregated $281,000, $313,000, and $315,000
in 2004, 2003, and 2002, respectively.

(11)  Income Taxes
----  ------------
Total income tax expense (benefit) was allocated as follows:

                                          Year ended December 31,
                                          -----------------------
                                    2004             2003          2002
                                    ----             ----          ----
   Continuing operations         $   118,000     $        -     $  (31,000)
   Discontinued operations                 -              -              -
                                 -----------     ----------     ----------
                                 $   118,000     $        -     $  (31,000)
                                 ===========     ==========     ==========

Current income tax expense (benefit) from continuing operations consisted of:

                                           Year ended December 31,
                                           -----------------------
                                     2004            2003           2002
                                     ----            ----           ----
   U. S. federal                 $   118,000     $        -     $  (31,000)
   Various states                          -              -              -
                                 -----------     ----------     ----------
                                 $   118,000     $        -     $  (31,000)
                                 ===========     ==========     ==========

Total income tax expense (benefit)  allocated to continuing  operations differed
from the amounts  computed by applying the U. S. federal income tax rate to loss
from continuing operations before income taxes as a result of the following:

<TABLE>
<CAPTION>
                                                               Year ended December 31,
                                                               -----------------------
                                                          2004           2003           2002
                                                          ----           ----           ----
<S>                                                   <C>            <C>           <C>
   Computed U. S. federal statutory expense
   (benefit)                                          $   401,000    $ (566,000)   $(1,680,000)
   Federal alternative minimum tax (benefit)              118,000             -        (31,000)
   Increase (decrease) in the valuation allowance
   for deferred tax assets                               (401,000)      566,000      1,680,000
   State income tax (benefit)                                   -             -              -
                                                      -----------    ----------    -----------
                                                      $   118,000    $        -    $   (31,000)
                                                      ===========    ==========    ===========
</TABLE>

The components of deferred tax assets and liabilities are as follows:

<TABLE>
<CAPTION>
                                                                      December 31,
                                                                      ------------
                                                                2004               2003
                                                                ----               ----
<S>                                                         <C>               <C>
   Deferred tax assets - tax effect of:
      Net operating loss carryforwards                      $  17,782,000     $   20,811,000
      Statutory depletion and investment tax credit
        carryforwards                                           1,275,000          1,275,000
      Other, principally investments and property, plant
        and equipment                                             116,000             70,000
                                                            -------------     --------------
         Total gross deferred tax assets                       19,173,000         22,156,000
              Less valuation allowance                        (19,126,000)       (22,116,000)
   Deferred tax liabilities                                       (47,000)           (40,000)
                                                            -------------     --------------
         Net deferred tax asset/liability                   $           -     $            -
                                                            =============     ==============
</TABLE>

In assessing the  recoverability  of deferred tax assets,  management  considers
whether it is more  likely  than not that some  portion or all of the tax assets
will not be  realized.  The  ultimate  realization  of  deferred  tax  assets is
dependent  upon the  generation of future  taxable  income during the periods in
which those temporary  differences become deductible.  Management  considers the
scheduled reversal of deferred tax liabilities, projected future taxable income,
and tax planning strategies in making this assessment.

At  December  31,  2004,  the Company had  federal  regular tax  operating  loss
carryforwards of approximately $46.8 million and tax depletion  carryforwards of
approximately  $3.35 million.  Approximately $44.8 of such NOLs will expire from
2006 to 2008..  These  carryforwards  may be limited if the Company  undergoes a
significant ownership change.

(12)  Stock Option and Deferred Compensation Plans
----  --------------------------------------------
The Company  reserved  175,000  shares of its common  stock for  issuance to key
management,  professional  employees and directors  under The Beard Company 1993
Stock  Option Plan (the "1993 Plan")  adopted in August 1993.  In April 1998 the
Board of Directors voted to increase the number of shares  authorized  under the
1993 Plan to 275,000,  and the shareholders  approved the increase in June 1998.
As a result of the 3-for-4  reverse stock split  effected in September  2000 and
the 2-for-1 stock split effected in August 2004, the number of shares authorized
under the 1993 Plan was increased to 412,500. The 1993 Plan terminated on August
26, 2003. At December 31, 2004, there were 26,250 options  outstanding under the
Plan.

The per share  weighted-average  fair value of stock options granted during 1997
was $2.67 on the date of grant using the Black-Scholes option pricing model with
the following  assumptions:  no expected dividend yield; risk-free interest rate
of 6.5%;  expected life of ten years; and expected volatility of 39%. No options
were granted in 2002, 2003 or 2004.

Stock option activity during the periods indicated is as follows:

                                       Number of   Weighted-Average
                                         Shares    Exercise Price
                                     ------------- ---------------

Balance at December 31, 2001               81,742    $1.58
     Granted                                    -        -
     Exercised                                  -        -
     Forfeited                                  -        -
     Expired                                    -        -
                                     ------------- ------------
Balance at December 31, 2002               81,742    $1.58
     Granted                                    -        -
     Exercised                                  -        -
     Forfeited                                  -        -
     Expired                                    -        -
                                     ------------- ------------
Balance at December 31, 2003               81,742    $1.58
     Granted                                   -         -
     Exercised                                 -         -
     Forfeited                                 -         -
     Expired                               55,492        -
                                     ------------- ------------
Balance at December 31, 2004               26,250    $2.08
                                     ============= ============

At  December  31,  2004,  the  range of  exercise  prices  and  weighted-average
remaining  contractual  life of  outstanding  options  was $1.75 - $2.92 and 2.0
years, respectively.

The Company has adopted a series of deferred  compensation plans for certain key
executives and the board of directors  which provide for payments in the form of
the  Company's  common  stock  upon (i) the  death,  disability,  retirement  or
termination  of the  participant or (ii)  termination  of the plans.  Under such
plans, the number of shares of stock credited to each  participant's  account is
equal to the amount of compensation deferred divided by the fair market value of
the stock on the deferral  date.  700,000  shares of stock were  authorized  for
issuance  under the initial plan,  adopted in 1996,  and such shares were issued
effective January 31, 2003 upon termination of the plan. 300,000 shares of stock
were authorized for issuance under the second plan,  adopted in January of 2003,
and such shares were issued  effective  September 30, 2003 upon  termination  of
this plan.  800,000  shares of stock are authorized for issuance under the third
plan,  adopted  in  September  of 2003 and  amended  in  February  of 2004.  The
weighted-average  fair values of stock units issued under the plans were $0.371,
$0.385 and $0.545 for 2004, 2003 and 2002, respectively.

As of December 31, 2002,  there were 670,000  shares  reserved for  distribution
under the initial plan, which were  subsequently  issued  effective  January 31,
2003.  As  of  December  31,  2004,  there  were  713,000  shares  reserved  for
distribution under the third plan, none of which have to date been issued.

(13)  Employee Benefit Plan
----  ---------------------
Employees of the Company participate in either of two defined contribution plans
with features under Section 401(k) of the Internal  Revenue Code. The purpose of
the  Plans is to  provide  retirement,  disability  and death  benefits  for all
full-time employees of the Company who meet certain service requirements. One of
the plans allows voluntary  "savings"  contributions up to a maximum of 50%, and
the  Company  matches  100% of  each  employee's  contribution  up to 5% of such
employee's  compensation.  The second plan covers  those  employees  in the Coal
Segment and allows  voluntary  "savings"  contributions  up to a maximum of 40%.
Under this plan, the Company contributes $1.00 per hour of service performed for
hourly employees and up to 6% of compensation for salaried employees  regardless
of the employees' contribution. The Company's contributions under both plans are
limited to the  maximum  amount that can be  deducted  for income tax  purposes.
Benefits  payable  under the  plans are  limited  to the  amount of plan  assets
allocable to the account of each plan participant. The Company retains the right
to modify,  amend or  terminate  the plans at any time.  During 2002 the Company
made matching contributions of $32,000 to the plans. Effective July 16, 2002 the
Company  notified all  participants  in the two plans that it was suspending the
100% match until further notice.  Accordingly, no contributions were made to the
plans in 2003 or 2004.

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

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" - see note 4).

The  Company  has  no  liability  under  the  indemnity  obligation  unless  the
accumulated  damage or loss incurred by the Buyer or its assignees in connection
with such Claims exceeds $250,000 in the aggregate. The maximum amount of future
payments  that could be required  under the  indemnity  has no  limitation.  The
principal  exposure under the obligation  would have been for any  environmental
problems which  existed,  at the time of the sale, on the oil and gas properties
sold. If any Claims were to be made at this point they would  presumably need to
be made first  against any and all of the  subsequent  owners of the  properties
involved;  if any liability was then determined to exist it would  presumably be
assigned  first to such  subsequent  owners.  In the event the Company should be
required to pay an amount under this obligation, it does not believe any of such
amount could be recovered from third parties.  However,  during the more than 11
years subsequent to the date of the Restructure  there have been no Claims,  and
the Company has no reason to believe that there will be any. For these  reasons,
no reserve has ever been established for the liability, because none is believed
to exist.

(15)  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 2004, 2003 and 2002: 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 financing,  construction
and operation of organic chemical  compound  fertilizer  plants.  The e-Commerce
Segment consists of a 71%-owned  subsidiary whose current strategy is to develop
business   opportunities  to  leverage  a  subsidiary's   intellectual  property
portfolio of Internet payment methods and security technologies.

The accounting  policies of the segments are the same as those  described in the
summary of significant accounting policies in note 1.

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

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>
                                        Coal      Dioxide      China    e-Commerce       Totals
                                        ----      -------      -----    ----------       ------
<S>                                      <C>       <C>         <C>          <C>         <C>
                2004
                ----
     Revenues from external
       customers                         $   189   $  754      $   -        $   29      $  972
     Interest income                           -        -          -             -           -
     Interest expense                          -        -          -             1           1
     Depreciation, depletion and
        amortization                          17       40          1             6          64
     Segment profit (loss)                  (682)     585       (549)         (124)       (770)
     Segment assets                          259      485         31             4         779
     Expenditures for segment                216       35          1             1         253
       assets

                2003
                ----
     Revenues from external
       customers                         $    59   $  508      $   -        $   25      $  592
     Interest income                           -        -          -             -           -
     Interest expense                          1        -          -             2           3
     Depreciation, depletion and
        amortization                           -       38          1             6          45
     Segment profit (loss)                  (516)     363       (724)         (100)       (977)
     Segment assets                           37      459         52            11         559
     Expenditures for segment                  7       33          -             2          42
       assets

                2002
                ----
     Revenues from external
       customers                         $    12   $  445      $   -        $    -      $  457
     Interest income                           -        -          -             -           -
     Interest expense                          1        -         98             2         101
     Depreciation, depletion and
        amortization                          21       35          3             6          65
     Segment profit (loss)                (2,105)     291       (714)         (202)     (2,730)
     Segment assets                           33      458        439            15         945
     Expenditures for segment                  7       62          -             2          71
       assets
</TABLE>

<TABLE>
Reconciliation of reportable segment revenues to consolidated revenues is as follows (in thousands):

<CAPTION>
                                                                     2004                 2003                 2002
                                                            -------------------- -------------------- --------------------
<S>                                                         <C>                  <C>                  <C>
        Total revenues for reportable segments                         $   972              $   592              $   457
        Revenues from corporate activities not
           allocated  to segments                                            -                    1                   12
                                                            -------------------- -------------------- --------------------
           Total consolidated revenues                                 $   972              $   593              $   469
                                                            ==================== ==================== ====================

Reconciliation of reportable segment interest expense to consolidated interest expense is as follows (in thousands):

                                                                     2004                 2003                 2002
                                                            -------------------- -------------------- --------------------

        Total interest expense for
            reportable segments                                        $     1              $     3              $   101
        Interest expense from China operations
            accounted for as an equity investment                            -                    -                  (98)
        Interest expense from corporate activities not
           allocated to segments                                           571                  516                  397
                                                            -------------------- -------------------- --------------------
           Total consolidated interest expense                         $   572              $   519              $   400
                                                            ==================== ==================== ====================

Reconciliation of reportable segment depreciation, depletion and amortization to consolidated depreciation, depletion and
amortization is as follows (in thousands):

                                                                     2004                 2003                 2002
                                                            -------------------- -------------------- --------------------

        Total depreciation, depletion and
            amortization  for reportable segments                      $    64              $    45              $    65
        Corporate depreciation and amortization
           not allocated to segments                                        28                  124                   79
                                                            -------------------- -------------------- --------------------
             Total consolidated depreciation,
                 depletion and amortization                            $    92              $   169              $   144
                                                            ==================== ==================== ====================


Reconciliation of total reportable segment profit (loss) to consolidated loss from continuing operations is as follows
(in thousands):

                                                                     2004                 2003                 2002
                                                            -------------------- -------------------- --------------------

        Total loss for reportable segments                             $  (770)             $(  977)             $(2,730)
        Eliminate loss from China operations
           accounted for as an equity investment                             -                    -                  714
        Equity in loss from China operations accounted
            for as an equity investment                                      -                    -                 (357)
        Net corporate income (costs) not allocated
           to segments                                                   1,812                 (513)              (2,049)
                                                            -------------------- -------------------- --------------------
             Total consolidated earnings (loss) from
           continuing operations                                       $ 1,042              $(1,490)             $(4,422)
                                                            ==================== ==================== ====================
</TABLE>


Reconciliation of reportable segment assets to consolidated assets is as follows
(in thousands):

                                                             2004       2003
                                                          ----------- ---------
        Total assets for reportable segments              $     779   $   559
        Assets of discontinued operations                        40        55
        Corporate assets not allocated to segments              454       327
                                                          ----------- ---------
           Total consolidated assets                      $   1,273   $   941
                                                          =========== =========

Reconciliation of expenditures for segment assets to total expenditures for
assets is as follows (in thousands):

                                                               2004       2003
                                                         ----------- -----------

        Total expenditures for assets for reportable
            Segments                                     $      253  $       42
        Corporate expenditures not allocated to segments          -          20
                                                         ----------- -----------
           Total expenditures for assets                 $      253  $       62
                                                         =========== ===========

All of 2002,  2003 and 2004 segment  revenues were derived from customers in the
United  States of  America.  Certain  long-lived  assets  with  recorded  values
approximating  $5,000 at December 31, 2004 were located in China.  All remaining
segment assets are located in the United States of America.

For the year 2004, one customer  accounted for 71% of the Coal Segment's and 14%
of the Company's  revenues.  During 2003, two customers accounted for 90% of the
Coal  Segment's  and 9% of the  Company's  revenues.  During 2002,  one customer
accounted for 93% of the Coal Segment's and 2% of the Company's revenues. All of
the e-Commerce  Segment's 2003 and 2004 revenues were derived from one customer.
The  Company's  CO2 revenues are received  from two operators in the CO2 Segment
who market the CO2 gas to numerous  end users on behalf of the  interest  owners
who elect to participate in such sales.  During 2004,  2003, and 2002,  sales by
these two  operators  accounted  for 78%,  86%,  and 95%,  respectively,  of the
Company's segment revenues and all of the Carbon Dioxide Segment's revenues.

(16) Quarterly Financial Data (unaudited)
-----------------------------------------

<TABLE>
<CAPTION>
                                                              Three Months Ended
                                  ------------------- ------------------- ------------------- -----------------
                                      March 31,            June 30,         September 30,       December 31,
                                         2004                2004                2004               2004
                                  ------------------- ------------------- ------------------- -----------------
                                                       (in thousands except per share data)
<S>                                          <C>                 <C>                 <C>                <C>
     Revenues                                $   188             $   185             $   249            $  350
     Operating loss                             (373)               (419)               (409)             (499)
     Earnings (loss) from
       continuing operations                   2,300                (307)               (509)             (547)
     Earnings (loss) from
       discontinued operations                     3                   4                  (3)               (4)
     Net earnings (loss)                       2,303                (303)               (512)             (551)
     Basic earnings (loss) per share            0.46               (0.06)              (0.10)            (0.10)
     Diluted earnings (loss) per share          0.40               (0.06)              (0.09)            (0.10)
</TABLE>

<TABLE>
<CAPTION>
                                                              Three Months Ended
                                  ------------------- ------------------- ------------------- -----------------
                                      March 31,            June 30,         September 30,       December 31,
                                         2003                2003                2003               2003
                                  ------------------- ------------------- ------------------- -----------------
                                                    (in thousands except per share data)
<S>                                          <C>                 <C>                 <C>                <C>
     Revenues                                $   194             $   117             $   137            $  145
     Operating loss                             (433)               (541)               (583)             (581)
     Earnings (loss) from
       continuing operations                    (518)               (622)                274              (624)
     Earnings (loss) from
       discontinued operations                    20                 (15)                (18)             (108)
     Net earnings (loss)                        (498)               (637)                256              (732)
     Basic earnings loss per share             (0.12)              (0.14)               0.06             (0.15)
     Diluted  earnings  loss per share         (0.12)              (0.14)               0.06             (0.15)
</TABLE>

The quarterly  information  presented  above has been restated to conform to the
final year-end 2004 presentation.

During the fourth  quarter of 2003,  the Company  recorded  economic  impairment
losses on certain  long-lived assets in the Coal Segment and Other operations of
$6,000  and  $76,000,  respectively.  The  Company  recorded  no  such  economic
impairments in the fourth quarter of 2004.

(17)  Subsequent events
----  -----------------
Oil and Gas Business.  In January of 2005 the Company announced that it was back
in the oil and gas business.  The Company's wholly-owned  subsidiary,  Beard Oil
Company  ("BOC")  has filed on a number of federal and state oil and gas leases,
including a lease on a 640-acre  tract  subsequently  acquired  in Yuma  County,
Colorado.  In  January  of 2004 BOC  farmed  out this  tract to Vista  Resources
("Vista"). Vista has now drilled six wells in the Niobrara Formation on the farm
out  lands,  two of which  were  completed  and  tested in  January  2005.  Four
additional  wells were  drilled in February and March of 2005 which are awaiting
completion  and test results.  (See "General  development  of  business---Recent
Developments---Oil and Gas Business" for complete details).

Placement  of  Convertible  Subordinated  Notes.  In January of 2005 the Company
completed the sale of $2,100,000 of its 12% Convertible  Subordinated  Notes due
February 15, 2010 (the "Notes") to a group of private investors. $255,000 of the
Notes  were  exchanged  for  previously  issued  notes.  The  Notes,  which  are
convertible  at $1.00 per  share  into the  Company's  common  stock,  generated
approximately  $1,700,000  of net proceeds to the Company in 2005.  The proceeds
will be used for working  capital and for a coal  project,  if  necessary.  (See
"General   development   of   business---Recent    Developments---Placement   of
Convertible Subordinated Notes" for complete details).

Financing of Initial  Fertilizer  Manufacturing  Plant in China.  In February of
2005  the  Company  arranged  for  the  financing  of  its  initial   fertilizer
manufacturing plant in China by a private investor.  The Company's  wholly-owned
subsidiary,  Beard  Environmental  Engineering,  L.L.C.,  and the investor  have
formed a limited liability  company,  owned 50% by each party, that will control
and manage the facility.  The investor  will loan funds between  February 14 and
July 1,  2005  sufficient  to fund the  costs  of the  facility.  (See  "General
development of business---Recent  Developments---Financing of Initial Fertilizer
Manufacturing Plant in China" for complete details).

Item 9.  Changes  in  and  Disagreements  with  Accountants  on  Accounting  and
         Financial Disclosure.
         -----------------------------------------------------------------------

     No matters require disclosure here.

Item 9A. Controls and Procedures.
         -----------------------

     We, under the  supervision  and with the  participation  of our management,
including  our  Chief  Executive  Officer  and  Chief  Financial  Officer,  have
evaluated  the  effectiveness  of the design  and  operation  of our  disclosure
controls and procedures.  Based on that evaluation,  the Chief Executive Officer
and Chief  Financial  Officer have concluded  that our  disclosure  controls and
procedures  were  effective as of December  31, 2004 to ensure that  information
required to be  disclosed  by us in reports  that it files or submits  under the
1934 Act is recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission rules and forms.

     There were no changes in our  internal  control  over  financial  reporting
during our fiscal fourth quarter ended December 31, 2004,  that have  materially
affected,  or are reasonably likely to materially  affect,  our internal control
over financial reporting.

Item 9B. Other Information.

     There was no  information  required to be disclosed in a report on Form 8-K
during the fourth quarter ended December 31, 2004, that was not reported.

                                    PART III

Item 10. Directors and Executive Officers of the Registrant.
         ---------------------------------------------------

     The information regarding our directors will be contained in the definitive
proxy  statement  which  will be  filed  pursuant  to  Regulation  14A  with the
Commission  not later than 120 days after the end of the fiscal year  covered by
this Form 10-K,  and the  information  to be contained  therein is  incorporated
herein by reference.

     The  information  regarding our executive  officers has been furnished in a
separate item captioned  "Executive  Officers and  Significant  Employees of the
Company"  and  included  as Item 4a in Part I of this report at pages 21 through
22.

Item 11. Executive Compensation.
         -----------------------

     The information  regarding executive  compensation will be contained in the
definitive  proxy  statement which will be filed pursuant to Regulation 14A with
the  Commission not later than 120 days after the end of the fiscal year covered
by this Form 10-K, and the  information to be contained  therein is incorporated
herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management.
         --------------------------------------------------------------

     The information  regarding  security ownership of certain beneficial owners
and  management  and  related  stockholder  matters  will  be  contained  in the
definitive  proxy  statement which will be filed pursuant to Regulation 14A with
the  Commission not later than 120 days after the end of the fiscal year covered
by this Form 10-K, and the  information to be contained  therein is incorporated
herein by reference.

Item 13. Certain Relationships and Related Transactions.
         -----------------------------------------------

     The information  regarding  transactions with management and others will be
contained in the  definitive  proxy  statement  which will be filed  pursuant to
Regulation  14A with the Commission not later than 120 days after the end of the
fiscal  year  covered by this Form 10-K,  and the  information  to be  contained
therein is incorporated herein by reference.

Item 14. Principal Accountant Fees and Services.
         ---------------------------------------

     The information  regarding  principal  accountant fees and services will be
contained in the  definitive  proxy  statement  which will be filed  pursuant to
Regulation  14A with the Commission not later than 120 days after the end of the
fiscal  year  covered by this Form 10-K,  and the  information  to be  contained
therein is incorporated herein by reference.

                                     PART IV

Item 15. Exhibits, Financial Statement Schedules.
         ----------------------------------------

     (a)  The following documents are filed as part of this report:

          1.   Financial Statements. Reference is made to the Index to Financial
               Statements and Financial Statement.

          2.   Financial Statement Schedules.  Financial Statement Schedules are
               omitted  as  inapplicable  or  not  required,   or  the  required
               information is shown in the financial  statements or in the notes
               thereto.

          3.   Exhibits.  The  following  exhibits are filed with this Form 10-K
               and are identified by the numbers indicated:

       3.1    Restated  Certificate of Incorporation of Registrant as filed with
              the  Secretary of State of Oklahoma on September  20, 2000.  (This
              Exhibit has been previously  filed as Exhibit 3(i) to Registrant's
              Form  10-Q for the  period  ended  September  30,  2000,  filed on
              November 20, 2000, and same is incorporated herein by reference).

       3.2    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:

       4.1    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).

       4.2    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 Oil & Gas,  Inc.,  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:

       10.1*  Amendment  No. One to The Beard  Company  1993 Stock  Option  Plan
              dated August 27, 1993, as amended June 4, 1998.  (The Amended Plan
              supersedes  the original  Plan  adopted on August 27,  1993.  This
              Exhibit has previously been filed as Exhibit A, filed on April 30,
              1998 to  Registrant's  Proxy  Statement  dated April 30, 1998, and
              same is incorporated herein by reference).

       10.2   Form of Indemnification  Agreement dated December 15, 1994, by and
              between  Registrant  and eight  directors.  (This Exhibit has been
              previously  filed as Exhibit 10(b) to  Registrant's  Form 10-K for
              the period ended  December 31, 2000,  filed on April 2, 2001,  and
              same is incorporated herein by reference).

       10.3*  Amendment  No.  One to The Beard  Company  2003-2  Deferred  Stock
              Compensation  Plan,  adopted by the Board of  Directors  effective
              February 13, 2004. (This Amendment,  which supersedes the original
              Plan adopted on September 30, 2003, has been  previously  filed as
              Exhibit  10.5 to  Registrant's  Form  10-K  for the  period  ended
              December  31,  2003,   filed  on  March  30,  2004,  and  same  is
              incorporated herein by reference).

       10.4*  Incentive Stock Option  Agreement by and between Philip R. Jamison
              and Beard  Technologies,  Inc.,  dated May 18, 1998. (This Exhibit
              has been previously  filed as Exhibit 10(k) to  Registrant's  Form
              10-K for the period ended  December  31, 1998,  filed on April 15,
              1999, and same is incorporated herein by reference).

       10.5   Subscription   Agreement   by  and  between   Cibola   Corporation
              ("Cibola") and Registrant, dated April 10, 1996. (This Exhibit has
              been previously  filed as Exhibit 10.1 to  Registrant's  Form 10-Q
              for the period ended June 30, 1996,  filed on August 14, 1996, and
              same is incorporated herein by reference).

       10.6   Nonrecourse  Secured  Promissory  Note from  Registrant to Cibola,
              dated April 10, 1996.  (This Exhibit has been previously  filed as
              Exhibit 10.2 to  Registrant's  Form 10-Q for the period ended June
              30,  1996,  filed on August  14,  1996,  and same is  incorporated
              herein by reference).

       10.7   Security Agreement by and among Registrant,  Cibola and the Cibola
              shareholders,  dated  April  10,  1996.  (This  Exhibit  has  been
              previously filed as Exhibit 10.3 to Registrant's Form 10-Q for the
              period ended June 30, 1996,  filed on August 14, 1996, and same is
              incorporated herein by reference).

       10.8   Tax  Sharing  Agreement  by and among  Registrant,  Cibola and the
              Cibola shareholders,  dated April 10, 1996. (This Exhibit has been
              previously filed as Exhibit 10.4 to Registrant's Form 10-Q for the
              period ended June 30, 1996,  filed on August 14, 1996, and same is
              incorporated herein by reference).

       10.9   Supplemental  Letter Loan Agreement by and between  Registrant and
              The William M. Beard and Lu Beard 1988  Charitable  Unitrust  (the
              "Unitrust")   dated  November  13,  2003.  (This  Exhibit,   which
              superseded all prior Letter Loan  Agreements  between the parties,
              has been previously  filed as Exhibit 10.12 to  Registrant's  Form
              10-K for the period ended  December  31, 2003,  filed on March 30,
              2004, and same is incorporated herein by reference).

       10.10  Restated  and  Amended   Letter  Loan  Agreement  by  and  between
              Registrant and the Unitrust  dated March 26, 2004.  (This Exhibit,
              which  superseded  all prior  Letter Loan  Agreements  between the
              parties,   has  been   previously   filed  as  Exhibit   10.13  to
              Registrant's  Form 10-K for the period  ended  December  31, 2003,
              filed on  March  30,  2004,  and same is  incorporated  herein  by
              reference).

       10.11  Amendment  to Restated  and Amended  Letter Loan  Agreement by and
              between Registrant and the Unitrust dated June 25, 2004.

       10.12  Supplemental  Promissory  Note from  Registrant to the Trustees of
              the  Unitrust  dated  November  13,  2003.  (This  Exhibit,  which
              superseded  all prior  Supplemental  Promissory  Notes between the
              parties,   has  been   previously   filed  as  Exhibit   10.15  to
              Registrant's  Form 10-K for the period  ended  December  31, 2003,
              filed on  March  30,  2004,  and same is  incorporated  herein  by
              reference).

       10.13  Renewal  and  Extension  Promissory  Note from  Registrant  to the
              Trustees of the  Unitrust  dated March 26,  2004.  (This  Exhibit,
              which  superseded  all prior Notes  between the parties,  has been
              previously  filed as Exhibit 10.16 to  Registrant's  Form 10-K for
              the period ended  December 31, 2003,  filed on March 30, 2004, and
              same is incorporated herein by reference).

       10.14  Replacement Renewal and Extension  Promissory Note from Registrant
              to the Trustees of the Unitrust  dated March 26, 2004.  (This Note
              superseded all prior Notes between the parties).

       10.15  Form of 10%  Subordinated  Note  due  September  30,  2003.  (This
              Exhibit has been previously filed as Exhibit 10(c) to Registrant's
              Form  10-Q  for the  period  ended  June  30,  2002,  and  same is
              incorporated herein by reference).

       10.16  Form of 2002 Warrant.  (This Exhibit has been previously  filed as
              Exhibit 10(d) to Registrant's  Form 10-Q for the period ended June
              30, 2002, and same is incorporated herein by reference).

       10.17  Promissory Note from  Registrant to B & M Limited,  a Partnership,
              dated February 7, 2003. (This Exhibit has been previously filed as
              Exhibit 10(a) to Registrant's Form 10-Q for the period ended March
              31, 2003,  filed on May 15, 2003, and same is incorporated  herein
              by reference).

       10.18  Promissory  Note  from  Registrant  to  Boatright  Family,  L.L.C.
              ("Boatright"),  dated  February 21, 2003.  (This  Exhibit has been
              previously  filed as Exhibit 10(b) to  Registrant's  Form 10-Q for
              the period ended March 31, 2003,  filed on May 15, 2003,  and same
              is incorporated herein by reference).

       10.19  Form of 2003 Warrant.  (This Exhibit has been previously  filed as
              Exhibit 10(c) to Registrant's Form 10-Q for the period ended March
              31, 2003,  filed on May 15, 2003, and same is incorporated  herein
              by reference).

       10.20  Form  of  Deed  of  Trust,  Assignment  of  Production,   Security
              Agreement and Financing  Statement  dated as of February 21, 2003.
              (This  Exhibit  has  been  previously  filed as  Exhibit  10(d) to
              Registrant's  Form 10-Q for the period ended March 31, 2003, filed
              on May 15, 2003, and same is incorporated herein by reference).

       10.21  Subordination and Nominee Agreement dated February 21, 2003. (This
              Exhibit has been previously filed as Exhibit 10.26 to Registrant's
              Form 10-K for the period ended  December 31, 2003,  filed on March
              30, 2004, and same is incorporated herein by reference).

       10.22  Form of 10%  Participating  Note  due  November  30,  2006.  (This
              Exhibit has been previously  filed as Exhibit 10.1 to Registrant's
              Form 10-Q for the period ended June 30, 2004,  filed on August 16,
              2004, and same is incorporated herein by reference).

       10.23  Form of 2004 Warrant.  (This Exhibit has been previously  filed as
              Exhibit 10.2 to  Registrant's  Form 10-Q for the period ended June
              30,  2004,  filed on August  16,  2004,  and same is  incorporated
              herein by reference).

       10.24  Form of 2004 Production Payment. (This Exhibit has been previously
              filed as  Exhibit  10.3 to  Registrant's  Form 10-Q for the period
              ended  June  30,  2004,  filed on  August  16,  2004,  and same is
              incorporated herein by reference).

       10.25  Deed of Trust, Assignment of Production,   Security  Agreement and
              Financing  Statement  by and  between  Registrant  and McElmo Dome
              Nominee, LLC, dated as of May 21, 2004.

       10.26  Form of Convertible Subordinated Promissory Note.

       10.27  Subordination  and Nominee  Agreement  dated May 21, 2004,  by and
              between the Unitrust and Boatright Family, L.L.C.

       10.28  Amended and Restated  Promissory  Note from Registrant to The John
              M. Beard Trust dated  November  19, 2003.  (This  Exhibit has been
              previously  filed as Exhibit 10.27 to  Registrant's  Form 10-K for
              the period ended  December 31, 2003,  filed on March 30, 2004, and
              same is incorporated herein by reference).

       10.29  Advancing  Term   Promissory   Note  from   Registrant  to  Cibola
              Corporation  dated  December  31,  2003.  (This  Exhibit  has been
              previously  filed as Exhibit 10.28 to  Registrant's  Form 10-K for
              the period ended  December 31, 2003,  filed on March 30, 2004, and
              same is incorporated herein by reference).

       10.30  Promissory  Note from  Registrant  to Bank of Nichols  Hills dated
              February 27, 2004.

       10.31  Advancing  Term   Promissory   Note  from   Registrant  to  Cibola
              Corporation dated December 1, 2004.

       10.32  Dredging  Services  Agreement by and between DTE Dickerson LLC and
              Beard  Technologies,  Inc., dated July 14, 2004. (This Exhibit has
              been previously  filed as Exhibit 10.4 to  Registrant's  Form 10-Q
              for the period ended  September  30, 2004,  filed on Nov 16, 2004,
              and same is incorporated herein by reference).

       14     Code of Ethics (This Exhibit has been previously  filed as Exhibit
              14 to  Registrant's  Form 10-K for the period  ended  December 31,
              2002,  filed on April 8, 2003, and same is incorporated  herein by
              reference).

       21     Subsidiaries of the Registrant

       23     Consents of Experts and Counsel:

       23.1   Consent of Cole & Reed, P.C.

       31     Rule 13a-14(a)/15d-14(a) Certifications:

       31.1   Chief Executive Officer  Certification  required by Rule 13a-14(a)
              or Rule 15d-14(a).

       31.2   Chief Financial Officer  Certification  required by Rule 13a-14(a)
              or Rule 15d-14(a).

       32     Section 1350 Certifications:

       32.1   Chief Executive Officer  Certification  required by Rule 13a-14(b)
              or Rule  15d-14(b)  and Section  1350 of Chapter 63 of Title 18 of
              the United States Code.

       32.2   Chief Financial Officer  Certification  required by Rule 13a-14(b)
              or Rule  15d-14(b)  and Section  1350 of Chapter 63 of Title 18 of
              the United States Code.
____________________

* Compensatory plans or arrangements.

     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.

<PAGE>
                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.


                                              THE BEARD COMPANY
                                                (Registrant)

                                               /s/Herb Mee, Jr.
DATE:  March 29, 2005                        By Herb Mee, Jr., President


Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
this report has been signed by the following persons on behalf of the Registrant
and in the capacities and on the dates indicated below.

<TABLE>
<CAPTION>
Signature                                       Title                    Date
---------                                       -----                    ----
<S>                                      <C>                         <C>
      /s/W. M. Beard
By  _________________________________    Chief Executive Officer     March 29, 2005
         W.M. Beard

          /s/Herb Mee, Jr.
By  _________________________________    President and Chief         March 29, 2005
         Herb Mee, Jr.                   Financial Officer

       /s/Jack A. Martine
By  _________________________________    Controller and              March 29, 2005
       Jack A. Martine                   Chief Accounting Officer

        /s/W. M. Beard
By  _________________________________    Chairman of the Board       March 29, 2005
          W.M. Beard

         /s/Herb Mee, Jr.
By  _________________________________    Director                    March 29, 2005
          Herb Mee, Jr.

        /s/Allan R. Hallock
By  _________________________________    Director                    March 29, 2005
       Allan R. Hallock

    /s/Harlon E. Martin, Jr.
By___________________________________    Director                    March 29, 2005
       Harlon E. Martin, Jr.

        /s/Ford C. Price
By  _________________________________    Director                    March 29, 2005
        Ford C. Price
</TABLE>
<PAGE>
                               INDEX TO EXHIBITS

Exhibit
 No.           Description                          Method of Filing
 ---           -----------                          ----------------

3.1    Restated  Certificate of  Incorporation  Incorporated herein by reference
       of   Registrant   as  filed   with  the
       Secretary   of  State  of  Oklahoma  on
       September  20, 2000.

3.2    Registrant's  By-Laws as  currently  in  Incorporated herein by reference
       effect.

4.1    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.

4.2    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 Oil &
       Gas, Inc., dated as of April 13, 1995.

10.1   Amendment  No. One to The Beard Company  Incorporated herein by reference
       1993 Stock Option Plan dated August 27,
       1993,  as amended  June 4,  1998.

10.2   Form of Indemnification Agreement dated  Incorporated herein by reference
       December  15,  1994,   by  and  between
       Registrant and eight  directors.

10.3   Amendment  No. One to The Beard Company  Incorporated herein by reference
       2003-2   Deferred  Stock   Compensation
       Plan, adopted by the Board of Directors
       effective   February  13,  2004.

10.4   Incentive Stock Option Agreement by and  Incorporated herein by reference
       between  Philip  R.  Jamison  and Beard
       Technologies, Inc., dated May 18, 1998.

10.5   Subscription  Agreement  by and between  Incorporated herein by reference
       Cibola   Corporation   ("Cibola")   and
       Registrant, dated April 10, 1996.

10.6   Nonrecourse   Secured  Promissory  Note  Incorporated herein by reference
       from Registrant to Cibola,  dated April
       10,  1996.

10.7   Security   Agreement   by   and   among  Incorporated herein by reference
       Registrant,   Cibola   and  the  Cibola
       shareholders, dated April 10, 1996.

10.8   Tax  Sharing  Agreement  by  and  among  Incorporated herein by reference
       Registrant,   Cibola   and  the  Cibola
       shareholders, dated April 10, 1996.

10.9   Supplemental  Letter Loan  Agreement by  Incorporated herein by reference
       and between  Registrant and The William
       M. Beard and Lu Beard  1988  Charitable
       Unitrust   (the    "Unitrust")    dated
       November 13, 2003.

10.10  Restated   and   Amended   Letter  Loan  Incorporated herein by reference
       Agreement by and between Registrant and
       the Unitrust dated March 26, 2004.

10.11  Amendment   to  Restated   and  Amended  Filed herewith electronically
       Letter  Loan  Agreement  by and between
       Registrant  and the Unitrust dated June
       25, 2004.

10.12  Supplemental   Promissory   Note   from  Incorporated herein by reference
       Registrant   to  the  Trustees  of  the
       Unitrust dated November 13, 2003.

10.13  Renewal and Extension  Promissory  Note  Incorporated herein by reference
       from  Registrant to the Trustees of the
       Unitrust dated March 26, 2004.

10.14  Replacement   Renewal   and   Extension  Filed herewith electronically
       Promissory  Note from Registrant to the
       Trustees  of the  Unitrust  dated March
       26, 2004.

10.15  Form  of  10%  Subordinated   Note  due  Incorporated herein by reference
       September 30, 2003.

10.16  Form of 2002 Warrant.                    Incorporated herein by reference

10.17  Promissory  Note from Registrant to B &  Incorporated herein by reference
       M   Limited,   a   Partnership,   dated
       February 7, 2003.

10.18  Promissory   Note  from  Registrant  to  Incorporated herein by reference
       Boatright Family, L.L.C. ("Boatright"),
       dated February 21, 2003.

10.19  Form of 2003 Warrant.                    Incorporated herein by reference

10.20  Form of Deed of  Trust,  Assignment  of  Incorporated herein by reference
       Production,   Security   Agreement  and
       Financing   Statement   dated   as   of
       February 21, 2003.

10.21  Subordination   and  Nominee  Agreement  Incorporated herein by reference
       dated February 21, 2003.

10.22  Form  of  10%  Participating  Note  due  Incorporated herein by reference
       November 30, 2006.

10.23  Form of 2004 Warrant.                    Incorporated herein by reference

10.24  Form of 2004 Production Payment.         Incorporated herein by reference

10.25  Deed of Trust, Assignment of Production, Filed herewith electronically
       Security   Agreement   and    Financing
       Statement  by  and  between  Registrant
       Registrant  and  McElmo  Dome  Nominee,
       LLC, dated as of May 21, 2004.

10.26  Form   of   Convertible   Subordinated   Filed herewith electronically
       Promissory Note.

10.27  Subordination   and  Nominee  Agreement  Filed herewith electronically
       dated May 21, 2004,  by and between the
       Unitrust and Boatright Family, L.L.C.

10.28  Amended and  Restated  Promissory  Note  Incorporated herein by reference
       from  Registrant  to The John M.  Beard
       Trust dated November 19, 2003.

10.29  Advancing  Term  Promissory  Note  from  Incorporated herein by reference
       Registrant to Cibola  Corporation dated
       December 31, 2003.

10.30  Promissory Note from Registrant to Bank  Filed herewith electronically
       of Nichols  Hills  dated  February  27,
       2004.

10.31  Advancing  Term  Promissory  Note  from  Filed herewith electronically
       Registrant to Cibola  Corporation dated
       December 1, 2004.

10.32  Dredging  Services   Agreement  by  and  Incorporated herein by reference
       between  DTE  Dickerson  LLC and  Beard
       Technologies,   Inc.,  dated  July  14,
       2004.

14     Code of Ethics                           Incorporated herein by reference

21     Subsidiaries of the Registrant           Filed herewith electronically

23.1   Consent of Cole & Reed, P.C.             Filed herewith electronically

31.1   Chief Executive  Officer  Certification  Filed herewith electronically
       required  by  Rule  13a-14(a)  or  Rule
       15d-14(a).

31.2   Chief Financial  Officer  Certification  Filed herewith electronically
       required  by  Rule  13a-14(a)  or  Rule
       15d-14(a).

32.1   Chief Executive  Officer  Certification  Filed herewith electronically
       required  by  Rule  13a-14(b)  or  Rule
       15d-14(b)  and Section  1350 of Chapter
       63 of  Title  18 of the  United  States
       Code.

32.2   Chief Financial  Officer  Certification  Filed herewith electronically
       required  by  Rule  13a-14(b)  or  Rule
       15d-14(b)  and Section  1350 of Chapter
       63 of  Title  18 of the  United  States
       Code.