UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

            [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                   For the fiscal year ended December 31, 2002
                                       OR
          [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
        For the transition period from ______________ to ________________

                         Commission file number 1-12396

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

                        Oklahoma                          73-0970298
            (State or other jurisdiction of            (I.R.S. Employer
             incorporation or organization            Identification 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, $.001333 par value

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

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

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

The aggregate market value of the voting common stock held by  non-affiliates of
the  registrant,  computed by using the last sale price of  registrant's  common
stock on the OTC Bulletin Board as of the close of business on February 28, 2003
was $512,000.

The number of shares  outstanding of each of the registrant's  classes of common
stock as of February 28, 2003 was Common Stock $.001333 par value - 1,828,845

                    DOCUMENTS INCORPORATED BY REFERENCE: None


<PAGE>
                                THE BEARD COMPANY
                                    FORM 10-K

                   For the Fiscal Year Ended December 31, 2002

                                TABLE OF CONTENTS

PART I

Item 1.  Business..........................................................  3

Item 2.  Properties........................................................ 19

Item 3.  Legal Proceedings................................................. 19

Item 4.  Submission of Matters to a Vote of Security Holders............... 20


PART II

Item 5.  Market for the Company's Common Equity and
           Related Stockholder Matters..................................... 21

Item 6.  Selected Financial Data........................................... 22

Item 7.  Management's Discussion and Analysis of Financial Condition
           and Results of Operations....................................... 23

Item 7A. Quantitative and Qualitative Disclosures About Market Risk........ 33

Item 8.  Financial Statements and Supplementary Data....................... 34

Item 9.  Changes in and Disagreements with Accountants on
           Accounting and Financial Disclosure............................. 61


PART III

Item 10. Directors and Executive Officers of the Registrant................ 61

Item 11. Executive Compensation............................................ 63

Item 12. Security Ownership of Certain Beneficial Owners
           and Management and Related Stockholder Matters.................. 68

Item 13. Certain Relationships and Related Transactions.................... 71

Item 14. Controls and Procedures........................................... 71


PART IV

Item 15. Exhibits, Financial Statement Schedules,
           and Reports on Form 8-K........................................ 72

SIGNATURES................................................................ 78

CERTIFICATIONS............................................................ 79


<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 ("Beard Oil"), was primarily an oil
and gas  exploration  company.  During the late  1960's we made the  decision to
diversify.  In 1968 we started a hazardous waste management company, USPCI, Inc.
("USPCI"),  which  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 Beard Oil stockholders for their residual 28% interest,  of which $60
million was distributed to shareholders).

     In 1989 Beard Oil founded Beard Investment  Company (now The Beard Company)
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.

     Under this scenario we formed in 1981 a joint  venture for the  extraction,
production and sale of crude iodine, which we managed until such operations were
discontinued at year-end 1999. In 1987 we formed a dry ice company which we sold
for an $11  million  gain in 1997.  In 1990 we bought a  distressed  real estate
development which we successfully operated before selling it in 1997.

     In 1998 we  formed a  subsidiary  to  conduct  operations  in the  People's
Republic  of China where we are  pursuing  environmental  and related  marketing
opportunities.  In 1999 we  formed  starpay(TM).com,  inc.  (now  starpay.  com,
l.l.c.),  an e-Commerce startup company that has developed a proprietary payment
system  to  be  used  exclusively  for  Internet  transactions  and  to  provide
state-of-the-art security for purchasing transactions.

     Along the way we've had our share of  unsuccessful  investments,  including
numerous oil  secondary  recovery  projects,  two  telecommunications  projects,
several investments in the drilling and well servicing  business,  others in the
environmental  business,  plus an unsuccessful  foray into the interstate travel
business.

     Operating  Segments.  In 2002 the  Company  operated  within the  following
operating segments:  (1) the coal reclamation ("Coal") Segment,  which 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;  (2) the carbon dioxide ("CO2") Segment,  comprised of the
production  of CO2 gas;  (3) the  China  ("China")  Segment,  which is  pursuing
environmental   opportunities  in  China,   focusing  on  the  installation  and
construction  of  facilities  which  will  utilize  the  proprietary  composting
technology of Real Earth United States Enterprises, Inc.; and (4) the e-Commerce
("e-Commerce")   Segment,   whose  current  strategy  is  to  develop  licensing
agreements  and  other  fee  based  arrangements  with  companies   implementing
technology in conflict with our intellectual property.

     Fourth  Quarter  2002  Impairment  Provisions.  The Company was required to
adopt Financial  Accounting Standards Board ("FASB") Statement No. 142, Goodwill
and Other Intangible Assets and Statement No. 144, Accounting for the Impairment
or Disposal of Long-Lived Assets,  effective January 1, 2002 for the fiscal year
ended  December 31, 2002.  As a result,  we wrote off  $1,561,000  of long-lived
assets  in  2002.  (See  "Management's  Discussion  and  Analysis  of  Financial
Condition  and Results of  Operations---Impact  of Recently  Adopted  Accounting
Standards").

     In  addition,  we were  required to write off $872,000 of  investments  and
other assets.  $759,000 of this impairment  resulted from the current litigation
involving ABT Beard. (See "Item 3. Legal  Proceedings---ABT  Beard Litigation").
The Company  impaired an  additional  $7,000 of startup  costs  associated  with
another  investment  opportunity  in China.  The  Company  impaired  the $75,000
certificate of deposit  serving as collateral on a note payable of the Coalition
involved in the McElmo  Dome  litigation.  Finally,  the  Company  impaired  the
carrying value of a note receivable relating to a prior year sale of assets down
to the estimated  market value of those assets should the debtor  default on the
obligation and the Company be forced to repossess such assets for resale.

     Discontinued  Operations.  Starting in 1998 the Company began discontinuing
various segments whose operations had proven to be unsuccessful, as set forth on
the next page:

<TABLE>
<CAPTION>
                                                                                        Loss             Assets         Liabilities
                             Entity(ies) Involved and                 Year            Recorded         Remaining         Remaining
     Segment                  Percentage of Ownership             Discontinued         in 2002        At 12/31/02       At 12/31/02
-----------------    -----------------------------------------    ------------        --------        -----------       -----------
<S>                  <C>                                          <C>                 <C>             <C>               <C>
   ITF Segment       Interstate Travel Facilities, Inc. (100%)         1998            $85,000          $147,000          $ 2,000
  BE/IM Segment        North American Brine Resources (40%)            1999            $88,000          $ 33,000          $65,000


   ER Segment                   ISITOP, Inc. (80%)                     2000            $  -             $   -             $  -
   WS Segment            Incorporated Tank Systems (100%)              2001            $22,000          $144,000          $ 1,000
                             ITS-TESTCO, L.L.C. (50%)                  2001            $  -             $   -             $  -
                     Testco Inc. de Mexico, S.A. de C.V. (50%)         2001            $18,000          $   -             $  -
                                 ITS, Inc. (100%)                      2001            $  -             $   -             $  -
                             Incorporated Tank Systems                 2001            $10,000          $ 17,000          $58,000
                          de Mexico, S.A. de C.V. (100%)
</TABLE>

     Net Operating Loss Carryforwards.  Beard has approximately $54.6 million of
unused net operating losses ("NOL's")  available for carryforward,  which expire
between 2004 and 2009. The loss of the NOL's would have a negative impact on the
Company's  future value.  The Company's  Certificate of  Incorporation  contains
provisions  to prevent the  triggering  of an  "ownership  change" as defined in
Section 382 of the  Internal  Revenue  Code by  restricting  transfers of shares
without  the Board of  Directors'  consent to any person if that  person was, or
would thereby become, a holder of 5% or more of the fair market value of Beard's
outstanding capital stock.

     Effect  of Recent  Operations  on  Liquidity.  The  termination  of the MCN
Projects (see "Coal Reclamation  Activities") in January 1999 has had a material
detrimental effect upon the Company's  profitability since that date.  Primarily
as a result of the loss of its major  revenue  stream,  coupled  with the use of
funds required to support the activities of its various startup activities,  the
Company's working capital decreased from $981,000 at year-end 1999 to ($284,000)
at year-end 2002.

     The Company continues to take steps to mitigate future funding requirements
by its poorly performing subsidiaries. Several projects are in various stages of
development  which,  subject to arranging  necessary  financing,  are ultimately
expected  to  mature  into  operating  projects.  In  the  Coal  Segment,  Beard
Technologies  has entered  into a  memorandum  of  understanding  and expects to
finalize a definitive  agreement on a project in the second quarter of 2003 (see
"Coal   Reclamation   Activities---Project   in  Advanced  Stage"  below).   The
discontinued  ITF Segment,  which  consumed  $482,000 of cash from 1999 to 2001,
generated  cash of $96,000 in 2002 and is  expected  to  generate  approximately
$140,000  of cash in 2003 as its  remaining  assets are sold.  The  discontinued
BE/IM  Segment is  expected to  contribute  $110,000 or more of cash to Beard in
2003 as its remaining  assets are  liquidated.  The WS Segment,  which  consumed
$2,046,000  of cash from 1999 to 2000,  generated  $104,000 of cash from 2001 to
2002 and is  expected to  contribute  $150,000 or more of cash to the Company in
2003 as its remaining assets are liquidated.  Meanwhile,  two private placements
of notes and  warrants  totaling  $1,800,000  were  completed in May of 2002 and
February  of 2003.  Such funds are  expected  to "bridge  the gap" until (i) the
anticipated   McElmo  Dome  settlement  has  been  distributed,   and  (ii)  the
contemplated  new coal  project  and  projects  under  development  in China are
underway. (See "Recent Developments" below).

Recent Developments

     McElmo Dome  Litigation.  On December 24, 2002,  the Tenth Circuit Court of
Appeals  issued an Opinion  affirming  the May 6, 2002  decision of the Colorado
District Court which approved the Settlement, the allocation thereof, attorneys'
fees and other matters.

     On March 24, 2003, the Objectors  filed a Petition for a Writ of Certiorari
with the U.S.  Supreme Court.  On April 1 Plaintiffs'  counsel advised the Court
that  they to not  intend  to file a  response  to the  Petition  unless  one is
requested by the Court.  We are advised that the vast  majority of petitions are
ruled upon within  three to 12 weeks,  and that most  petitions  are disposed of
within 2-1/2 weeks.

     If the U.S.  Supreme Court denies the Petition,  the Settlement is expected
to be final between early May and late June of 2003, meaning the distribution of
Settlement funds can begin at that time according to the terms of the Settlement
Agreement.  Although it is possible the U.S.  Supreme Court could decide to hear
the case and could overturn the Settlement, our counsel believe such possibility
is remote.  The U.S. Supreme Court takes very few cases and our counsel think it
is unlikely the Court would have any interest in this case.  (See "Item 3. Legal
Proceedings---McElmo Dome Litigation").

     Private Placement of Notes and Warrants.  On February 21, 2003, the Company
completed the sale of $600,000 of subordinated 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 Notes were  accompanied  by  Warrants  to
purchase a total of 60,000 shares of Beard common stock at $0.50 per share.  The
Company  has agreed to redeem the Notes  within 10 days of receipt of the second
installment  of the McElmo  Dome  settlement.  The Notes will mature on April 1,
2004;  however,  if  they  have  not  been  redeemed  by  such  date  they  will
automatically be extended to January 1, 2005.

     ABT Beard  Litigation.  In early September a controversy  arose between the
Company  and  ABT  concerning  their  legal  rights  and  relationship.  Lengthy
negotiations  and  discussions  were  unsuccessful  in  arriving  at a  mutually
agreeable  solution.  Accordingly,  in November of 2002,  the Company filed suit
against ABT in the United  States  District  Court for the  Western  District of
Oklahoma, styled The Beard Company and ABT Beard, L.L.C. (the "LLC") v. American
Bio-Tech,  Inc.  ("ABT"),  Case No.  CIV-02-1392,  seeking  the  Court  to:  (i)
judicially dissolve the LLC; (ii) order that the affairs of the LLC be wound up;
and (iii) award the Company its costs,  expenses and attorneys' fees. In January
of 2003, ABT filed its answer and asserted counterclaims against the Company and
third-party  claims against Beard  Sino-American  Resources  Co., Inc.,  Beijing
Beard Biotech Engineering Co., Inc., Cambridge/ABT Beard Handan Venture, L.L.C.,
William  M.  Beard,  Riza E.  Murteza  and Mark E.  Voth.  (See  "Item 3.  Legal
Proceedings---ABT Beard Litigation" for additional details).

     REUSE  License  Agreement.   On  February  14,  2003,  Beard  Environmental
Engineering,  L.L.C.  ("BEE")  entered into a License  Agreement with Real Earth
United States  Enterprises,  Inc.  ("REUSE")  pursuant to which BEE obtained the
exclusive  right and license to use the  proprietary  composting  technology  of
REUSE in the People's  Republic of China ("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 either  sublicensed  five plants or sold
plants during the  respective  periods  involved.  BEE will pay a license fee to
REUSE  prior to the start up date of each  plant  and will  also make  quarterly
royalty  payments  for each  metric ton of compost  sold.  (See  "OPERATIONS  IN
CHINA---REUSE License Agreement").

     Unless the context otherwise requires,  references to Beard and the Company
herein include Beard and its consolidated subsidiaries, including Beard Oil.

                              CONTINUING OPERATIONS

     Coal  Reclamation  Activities.  The Company's coal  reclamation  activities
comprise the ("Coal") Segment,  which is conducted by Beard  Technologies,  Inc.
("BTI").  BTI is in the business of operating coal fines reclamation  facilities
in the  U.S.  and  provides  slurry  pond  core  drilling  services,  fine  coal
laboratory analytical services and consulting services.

     Carbon Dioxide Operations. The Company's carbon dioxide activities comprise
the ("CO2") Segment,  consisting of the production of CO2 gas which is conducted
through Beard.  The Company owns  non-operated  working and  overriding  royalty
interests in two producing CO2 gas units in Colorado and New Mexico.

     Operations  in  China.  The  Company's  activities  in China  comprise  the
("China") Segment, which is conducted by Beard Sino-American Resources Co., Inc.
("BSAR").  BSAR is pursuing environmental  opportunities in the PRC, focusing on
the  installation  and  construction of facilities which utilize the proprietary
composting technology of REUSE.

     e-Commerce. The Company's e-Commerce activities comprise the ("e-Commerce")
Segment, which is conducted by starpay.com(TM),  l.l.c. ("starpay").  starpay is
pursuing  the  development  of a  virtually  secure  payment  system  to be used
exclusively for Internet transactions. Its current focus is to develop 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.

     The Company  currently has four operating  segments:  Coal, CO2, China, and
e-Commerce.  All of such  activities,  with the  exception  of  Beard's  CO2 gas
production  activities,  are conducted through subsidiaries.  Beard, through its
corporate staff, performs management,  financial,  consultative,  administrative
and other services for its subsidiaries.

                           COAL RECLAMATION ACTIVITIES

     Background of Beard  Technologies,  Inc. In early 1990 the Company acquired
more  than 80% of  Energy  International  Corporation  ("EI"),  a  research  and
development firm specializing in coal-related technologies.  The Company sold EI
in 1994,  retaining  certain  assets which were  contributed  to a  wholly-owned
subsidiary, Beard Technologies, Inc. ("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 under Section 29 of
the Internal Revenue Code. Such projects involve  recovering the raw slurry with
a dredge,  using a  sophisticated  washing  plant to remove  clay and other fine
impurities  from the coal, and finally  producing a high BTU fine coal briquette
which  qualifies for the alternative  fuels tax credit.  In order to qualify for
the  tax  credit,  which  may  amount  to as  much as $20 to $25 per ton of coal
briquettes  sold, the synthetic fuel must be produced (i) from a facility placed
in service before July 1, 1998; (ii) pursuant to a binding contract entered into
before January 1, 1997; and (iii) before January 1, 2008.

     The MCN Projects.  In June of 1998 Beard Technologies  finalized agreements
with a subsidiary  of MCN Energy Group Inc.  ("MCN"),  to acquire  beneficiation
plants located at six coal slurry impoundment sites in West Virginia,  Kentucky,
and Ohio.  Under the agreements,  which became effective in April of 1998, Beard
Technologies  operated  and  maintained  the six  beneficiation  plants  and six
briquetting  plants for MCN under a cost-plus  arrangement,  receiving a minimum
operating  profit of  $100,000  per month so long as the  contracts  remained in
effect. Since these were Section 29 projects, BTI anticipated that the contracts
would last until the tax  credits  expired on December  31,  2007.  However,  in
November of 1998 MCN became  concerned that the plants might not qualify for the
tax credit and took a special charge of $133,782,000 to completely write off the
projects. In January of 1999 MCN terminated the operating agreements.

     During the time Beard  Technologies  was operating the 12 plants it was, to
the best of the  Company's  knowledge,  the largest  operator  of coal  recovery
plants in the world.  In its capacity as contract  operator,  BTI supervised the
last few months of  construction,  hired and trained 11 foremen and 71 equipment
operators,  obtained  all  necessary  permits,  negotiated  and executed a union
contract,  and  brought  each  project  into  production  of clean coal from the
impoundments  and alternative  fuel from the briquetting  plants by the required
deadline.

     Current  Focus  on  Coal  Reclamation.  Since  the  termination  of the MCN
agreements  Beard  Technologies  has  continued  to focus  its  efforts  on coal
reclamation.  During such time BTI has called on  numerous  coal  producers  and
utilities, particularly those having ponds which it believes have large reserves
of recoverable coal fines.

     Project  in  Advanced  Stage.  Beard  Technologies  currently  has  several
projects in various stages of development which,  subject to arranging necessary
financing,  are ultimately expected to mature into operating  projects.  BTI has
entered into a memorandum of  understanding on one of these projects and expects
to reach a  definitive  agreement  on the project  during the second  quarter of
2003. Negotiations are in progress with a third party to form a joint venture or
limited  liability  company that would provide the initial  working  capital and
guarantee the necessary equipment  financing for the project.  The timing of the
project is uncertain but,  subject to obtaining the necessary  financing,  it is
considered  to have a high  probability  of  activity.  However,  no  definitive
contracts  have as yet been signed,  and there is no assurance that the required
financing will be obtained or that the project will materialize.

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

     Recent Developments:  Sharp Increase in Oil and Natural Gas Prices;  Effect
on Coal  Demand.  As a result of the  current war in Iraq there has been a sharp
increase in both oil and natural  gas prices  which 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.  This has caused many  electric
utilities  to  re-think  their  strategy  of moving to natural gas as their sole
source of supply, and a number of them have now reverted or moved to dual source
capability.  As a result, the price of coal when compared to the price of gas on
a btu basis has become increasingly  attractive.  Although there is no certainty
of occurrence,  the coal industry looks for coal to supply a greater  portion of
electricity demand growth over the next few years.

     Principal  Products  and  Services.  The  principal  products  and services
supplied by the Company's Coal Segment are (i) the capability to undertake large
reclamation  projects and the cleanup of slurry pond recovery  sites;  (ii) core
drilling of slurry ponds and  evaluation of  recoverable  coal  reserves;  (iii)
consulting reclamation technology; (iv) technical services; (v) proprietary coal
reclamation technology;  and, if desired, (vi) the operation of coal briquetting
facilities owned by third parties.

     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 the Company  believes can be recovered on
an economic basis while at the same time solving an environmental  problem.  The
key is getting  the  owners of the  slurry  ponds to  recognize  that,  with the
technology  BTI  now has  available,  recovery  can now be done on a  profitable
basis.

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

<TABLE>
<CAPTION>
                                      Percent of
                                     Consolidated
                                     Revenues from
        Fiscal Year                   Continuing
           Ended                      Operations
        -----------                  -------------
<S>                                  <C>

         12/31/02                         2.6%
         12/31/01                        22.8%
         12/31/00                        27.5%
</TABLE>

     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 the Company.

     Termination  of the MCN  operating  agreements  in 1999 has had a  material
detrimental  effect  upon the  Company's  profitability  since  that  date.  The
Company's  revenues and  profitability  will continue to be negatively  impacted
until contracts for new reclamation  projects currently in development have been
negotiated and finalized.

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

     Market  Demand and  Competition.  The coal  reclamation  industry is highly
competitive, and the Coal Segment must compete against larger companies, as well
as several small  independent  concerns.  Competition is largely on the basis of
technological expertise and customer service.

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

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

Carbon Dioxide (CO2) Properties

     McElmo Dome.  The McElmo Dome field in western  Colorado is a  240,000-acre
unit from which CO2 gas is produced.  Beard owns a 0.53814206%  working interest
(0.4708743% net revenue interest) and an overriding royalty interest  equivalent
to a 0.0920289% net revenue  interest in the Unit,  giving it 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.  In 2000, Kinder Morgan CO2 Company,  L.P. replaced Shell
CO2 Company Ltd. as operator of the unit. There are 46 producing wells,  ranging
from 7,634 feet to 8,026 feet in depth.  McElmo  Dome and Bravo Dome (see below)
are believed to be the two largest producing CO2 fields in the world. The gas is
approximately 98% CO2.

     In 2002 Beard sold 1,514,000 Mcf attributable to its working and overriding
royalty  interests  at an  average  price of $.29 per Mcf.  In 2001,  Beard sold
1,327,000 Mcf (thousand  cubic feet)  attributable to its working and overriding
royalty  interests  at an  average  price of $.33 per Mcf.  In 2000  Beard  sold
1,319,000 Mcf attributable to its working and overriding royalty interests at an
average price of $.36 per Mcf. Beard was underproduced by 20,000 Mcf on the sale
of its share of McElmo Dome gas at year-end 2002.

     As the result of a  development  program  undertaken  by Shell in mid-1996,
McElmo Dome  production had increased to 935 million cubic feet per day in March
1998.  Following  the severe  decline in oil prices in late 1998 and early 1999,
CO2  demand  for  tertiary  recovery  decreased  sharply,  and  McElmo  Dome CO2
production  decreased to 657 million cubic feet per day in April 1999.  With the
sharp  increase in oil prices in late 1999 and  throughout  2000, CO2 demand for
tertiary recovery  increased  accordingly.  CO2 production had increased back to
745 million  cubic feet per day in 2000 and 2001,  and  dropped  slightly to 732
million  cubic  feet per day in 2002.  As a result of  additional  developmental
drilling in the field in 2002,  we have been  advised by the  operator  that the
field is now capable of producing 1.2 billion cubic feet per day.

     Beard  considers its ownership  interest in the McElmo Dome Field to be one
of its most valuable assets.  In November 2000 Hunt Oil Company sold its 0.0197%
working  interest  (0.0164% net revenue  interest)  and its  overriding  royalty
interest  equivalent to a 0.0356% net revenue  interest in the Unit for $225,000
at a public auction in Houston,  Texas. On an equivalent basis, Beard's interest
in the Unit is estimated to have had an approximate value of $2.1 million at the
time of the auction.  However,  the value of CO2 properties has decreased due to
pricing  since the  auction.

     Bravo  Dome.   Beard  also  owns  a  0.05863%   working   interest  in  the
1,000,000-acre  Bravo Dome CO2 gas unit in northeastern New Mexico.  At December
31,  2002,  Beard was  underproduced  by 472,000 Mcf on the sale of its share of
Bravo Dome gas.  The Company sold no CO2 gas from Bravo Dome in 2002,  2001,  or
2000 despite being in an underproduced  status. The Company's solid CO2 segment,
which was sold in 1997, had previously  provided the market for such gas, and no
efforts have been made to market the Company's share of the gas since the sale.

     Amoco  Production  Company operates a CO2 production plant in the middle of
the Bravo Dome field. The 350 producing wells are approximately 2,500 feet deep.
The gas is approximately 99% CO2.

     Net  CO2  Production.  The  following  table  sets  forth  Beard's  net CO2
production for each of the last three fiscal years:

<TABLE>
<CAPTION>
                                      Net CO2
        Fiscal Year                  Production
           Ended                       (Mcf)
        -----------                  ----------
<S>                                  <C>
         12/31/02                    1,514,000
         12/31/01                    1,327,000
         12/31/00                    1,319,000
</TABLE>

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

<TABLE>
<CAPTION>
                              Average Sales                Average Lifting
     Fiscal Year              Price Per Mcf                 Cost Per Mcf
        Ended                    of CO2                       of CO2
     -----------              -------------                ---------------
<S>                           <C>                          <C>
       12/31/02                  $0.29                         $0.07
       12/31/01                  $0.33                         $0.06
       12/31/00                  $0.36                         $0.05
</TABLE>

     Dependence of the Segment on a Single Customer.  The CO2 Segment  accounted
for the  following  percentages  of the  Company's  consolidated  revenues  from
continuing  operations  for each of the last  three  years.  The  Company's  CO2
revenues are received  from two operators who market the CO2 gas to numerous end
users on behalf of the interest  owners who elect to  participate in such sales.
In 2002 approximately 52% of the Company's CO2 gas was sold to Kinder Morgan CO2
Company, L.P. and approximately 47% to Exxon Mobil.

     Under the existing  operating  agreements,  so long as any CO2 gas is being
produced  and  sold  from  the  field,  the  Company  has the  right to sell its
undivided  share of the  production  to either  Kinder Morgan or Exxon Mobil and
also has the right to sell  such  production  in the spot  market.  During  2002
Kinder Morgan was offering a slightly  higher price than Exxon Mobil, so more of
the segment's  production was sold to Kinder  Morgan.  Although there might be a
slight  loss of revenue if either  Kinder  Morgan or Exxon  Mobil were lost as a
customer,  the  Company  does not  believe  that such loss would have a material
adverse effect on the segment or on the Company.

<TABLE>
<CAPTION>
                                      Percent of
                                     Consolidated
                                    Revenues from
        Fiscal Year                   Continuing
          Ended                       Operations
        -----------                 --------------
<S>                                 <C>

        12/31/02                        94.9%
        12/31/01                        73.4%
        12/31/00                        65.7%
</TABLE>

     Productive  Wells.  Beard's  principal CO2  properties are held through its
ownership of working  interests in oil and gas leases which  produce CO2 gas. As
of  December  31,  2002,  Beard 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:

<TABLE>
<CAPTION>
                                                Number of Wells
                                            ------------------------
                   State                     Gross             Net
              --------------                -------          -------
<S>                                         <C>              <C>
               Colorado                        46             0.248
               New Mexico                     350             0.205
                                            -------          -------
                        Total                 396             0.453
                                            =======          =======
</TABLE>

     Employees. As of December 31, 2002, the CO2 Segment had no employees.

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

                               OPERATIONS IN CHINA

     Background  Information.  In 1998 the Company  opened an office in Beijing,
People's Republic of China (the "PRC"). Later that year the Company formed Beard
Sino-American  Resources  Co.,  Inc.  ("BSAR"),  an Oklahoma  corporation  and a
wholly-owned  subsidiary of Beard.  In 1999 BSAR  established  a  Representative
Office  in  Beijing.  In  December  2001  BSAR  formed  Beijing  Beard  Bio-Tech
Engineering  Co.,  Ltd.  ("BTEC"),  a  Chinese  corporation,  as a  wholly-owned
subsidiary of BSAR to engage in business activities 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  bring in  foreign  equipment  and  technology.  Initially  we
concentrated our marketing efforts on atmospheric  pollution caused primarily by
the burning of coal; however such efforts were unsuccessful. We are now focusing
all of our  efforts on land  pollution.  The  amount of arable  land in China is
limited considering its dense population.  China is the largest user of chemical
fertilizers in the world.  Unfortunately,  the carryover of fertilizers from one
planting  to the next and the  considerable  runoff  into  lakes and  rivers has
polluted much of China's arable land and fresh water resources.

     Organic-Chemical  Compound  Fertilizer  Initiatives.  China,  which  is the
world's  fourth  largest  country  in area,  is also the  world's  most  heavily
populated country,  with a population of almost 1.4 billion.  For many years the
Chinese have boosted the production of food crops by applying  large  quantities
of nitrogen,  phosphate and potassium  fertilizers to their dwindling  amount of
arable land. This overuse of fertilizer has resulted in damaged, less productive
soil  and  high  rates  of  erosion.   Working  with  the  top  agronomists  and
academicians in the Chinese agricultural community, BSAR has developed a concept
to solve the problem by manufacturing  chemical fertilizers blended with compost
derived from organic wastes. The end result will be an organic-chemical compound
fertilizer  ("OCCF")  utilizing at least two types of organic  waste  materials:
sewage sludge and crop-residual agri-waste.

     Background/Formation  of  ABT-Beard.  The Company  developed the concept of
converting  municipal waste into compost/organic  fertilizer.  In furtherance of
that  concept  Beard  contacted  American  Bio Tech,  Inc.  ("ABT"),  which owns
proprietary  composting  technology.  In  December  of 2000 the  Company and ABT
formed a joint venture to market,  design and construct plants utilizing the ABT
composting technology in the PRC. In February of 2001 the Company and ABT formed
ABT Beard,  LLC ("ABT Beard") to replace the joint  venture.  In May of 2001 the
Company and ABT entered into (i) an operating agreement governing the management
and operation of ABT Beard and (ii) a license agreement which gave ABT Beard the
exclusive right to exploit the ABT technology in the PRC.

     Cooperative Joint Ventures.  Through BSAR, the Company has signed contracts
and formed  Cooperative  Joint Ventures  ("CJV's") or similar  arrangements with
various  Chinese  partners  for the  construction  of three  facilities  and the
marketing and sales of fertilizer. Two of these plants, to be located at Baoding
City  and  the  City  of  Handan  in  Hebei  Province,  were  to  have  produced
organic-chemical compound fertilizer ("OCCF"); the third plant was to be located
in Qihe City in Shandong Province to produce an organic  fertilizer from compost
(no added chemical  fertilizer  enhancement).  At Baoding City and Qihe City the
Chinese  partners  committed to provide the funding for the  facilities  and the
necessary financing and working capital. Through BSAR, ABT Beard was to have had
an  interest  from  inception  in these two CJV's  determined  by BSAR's  equity
contribution  for  bringing  the  technology  to China,  and was also receive an
operating fee. Progress was dependent upon the Chinese partners fulfilling their
commitments,  which to date has not occurred.  Financing  terms for the plant in
the City of Handan were being  negotiated when the  controversy  arose with ABT.
All of the plants were to have used the patented  composting  technology of ABT.
All of the projects  which were under  development by ABT Beard have been placed
on indefinite hold until the outcome of the litigation currently in progress has
been determined. (See "Termination of Business Relationship with ABT" below).

     Formulation of Product. The formulation of our product will be based on the
target  crops  and  determined  by  the  leading  soil   scientists  at  Beijing
Agricultural  University and  agronomists in each province.  Our production will
amount to less than about 5% of total fertilizer demand in each of the provinces
in which we are  planning to  construct a  facility.  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.  Based on these and
other  factors,  we are confident  that our product will be well received by the
agricultural community.

     Termination  of  Business  Relationship  with  ABT.  In early  September  a
controversy  arose between the Company and ABT concerning their legal rights and
relationships.   Lengthy  negotiations  and  discussions  were  unsuccessful  in
arriving at a mutually agreeable solution.  In November of 2002 Beard filed suit
against  ABT in the U.S.  District  Court for the  Western  District of Oklahoma
asking that the Court (i)  judicially  dissolve  ABT Beard,  (ii) order that the
affairs  of ABT  Beard be wound up,  and (iii)  award  the  Company  its  costs,
expenses and  attorneys'  fees. In January of 2003 ABT filed a  counterclaim  to
which the  Company has  subsequently  responded.  The outcome of the  litigation
cannot presently be determined.  Although the Company hopes to recover the other
party's  50% of the total  loans and accrued  interest  receivable  of more than
$1,379,000  which the Company has made to ABT Beard,  we have fully impaired the
receivable  due to the present  uncertainties  of recovery,  and  accordingly an
impairment  provision  in the amount of $759,000 was  established  in the fourth
quarter of 2002.  Accordingly,  all of the projects which were under development
in China are on  indefinite  hold until the outcome of the  litigation  has been
determined.  (See "Item 3. Legal  Proceedings---ABT Beard Litigation" and Note 2
to the financial statements).

     Ongoing Development Efforts in China. Meanwhile,  the Company is continuing
to pursue new development  opportunities  in China. To that end, on December 12,
2002, the Company formed Beard  Environmental  Engineering,  L.L.C.  ("BEE"),  a
wholly-owned  Oklahoma limited liability company,  to serve as the joint venture
partner for all of the Company's activities in China. BTEC became a wholly-owned
subsidiary of BEE on that date.

     REUSE License  Agreement.  On February 14, 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 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.  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.

     Principal  Products  and  Services.  The  principal  products  and services
supplied by the Company's China Segment are the installation and construction of
facilities which utilize the proprietary technology of REUSE.

     The China Segment generated its initial revenues,  totaling $72,000, before
taxes of  approximately  $10,000,  in December  2001.  However,  since it was an
unconsolidated  entity in 2000 and 2001,  it accounted for none of the Company's
consolidated  revenues from continuing  operations  during such years. The China
Segment generated no revenues in 2002.

     Facilities.  BSAR leases a small office located in Beijing Landmark Tower A
in Beijing, China.

     Market Demand and Competition. Both the environmental industry and the coal
reclamation industry are highly competitive,  and the China Segment must compete
against significantly larger companies, as well as a number of small independent
concerns,   in  both  businesses.   Competition  is  largely  on  the  basis  of
technological expertise and customer service.

     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 February
1999  Marc  Messner,  Beard's  VP-Corporate  Development,   presented  to  Beard
management  his concept for an easy,  inexpensive  and virtually  secure payment
system to be used  exclusively  for Internet  transactions.  Shortly  thereafter
Beard entered into Memorandums of Understanding  with (i) a Web site development
company  and (ii) a patent  attorney  who agreed to join  forces to develop  the
concept. The Memorandums provided that the patent applications would be owned by
Beard,  Messner (the  inventor),  the Web site  company and the patent  attorney
(collectively, the "Patent Owners").

     In mid-1999 three patent  applications were filed embodying the features of
the invention,  and  starpay.com(TM),  inc. ("starpay") was formed to pursue the
development  of the payment  system.  A fourth patent  application  was filed in
November 1999 which supplemented the earlier filings.  In 2000 the Patent Owners
converted their ownership in the patent  applications to ownership in starpay as
follows: Beard (78.4%); Messner (7.6%); patent attorney (7.0%); Web site company
(7.0%).  starpay filed two  additional  patent  applications  in 2000 which have
considerably  broadened the scope and,  starpay  believes,  the potential of its
patent claims.  At year-end 2001,  starpay.com,  l.l.c.  was formed and starpay.
com, inc. was merged into it. In January of 2002 the Company,  in recognition of
his efforts,  increased Mr. Messner's interest in starpay to 15.0%, reducing the
Company's interest to 71.0%.

     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 ("CD") or smart
card as a security  and  transaction-enabling  device  ("AVCard").  The  starpay
AVCard, user's identifier and/or PIN must all be present to enable a transaction
on the World Wide Web. This  technology is an additional  layer of security that
may or may not be applied to starpay's proprietary process flow models.

     Review of starpay's Security Assessment.  starpay engaged a consulting firm
to  perform  a  security  assessment  of its  security  technology  and  applied
processes.  The assessment  compared and contrasted  starpay's security protocol
with the two industry primary "standard"  protocols (SSL and SET) and provided a
product  level  comparison  with  leading  credit,  debit  and  prepaid  payment
products.  The "white paper"---titled  "Protocol and Competitor  Analysis"---was
completed in April of 2000.

     Based upon its review of the document,  starpay's  management believes that
its secure payment protocol is the most secure payment process available for use
on the  Internet.  The starpay  model  significantly  enhances the use of SSL by
addressing all the noted security risks  associated with SSL-based  transactions
and meets all the goals of an  SET-based  transaction  without  the use of SET's
slow and costly high level cryptographic  features.  The "white paper" concludes
that "the  starpay  process  meets or exceeds the  majority  of all  transaction
qualities of the various (competing) Internet payment processes."

     Issuance of Initial Patent;  Negotiations for 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.  starpay has negotiated an
exclusive license agreement with a private company.  It is anticipated that this
agreement will be finalized in April of 2003.

     License Agreement. On November 19, 2001, the owner (the "Patent Holder") of
U.S.  Patent  5,903,878,  "Method and Apparatus for  Electronic  Commerce"  (the
"Patent")  granted to starpay the exclusive  marketing  rights,  with respect to
certain  clients (the  "Clients")  which  starpay has  identified  to the Patent
Holder,  for security  software and related products and  applications.  starpay
believes  that  this  alliance  strongly  enhances  its  intellectual   property
portfolio of electronic  payment  technologies.  The Patent  addresses 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. starpay believes the claims in this Patent are unique
and will provide numerous opportunities to generate related licensing agreements
in the electronic authentication and payment transaction fields.

     On March 20, 2002,  starpay's  marketing rights with respect to its Clients
were  broadened to include the right to litigate on behalf of the Patent  Holder
all patent claims in relation to the Patent and related foreign  applications or
patents. Any settlement and/or judgment resulting from starpay's  prosecution of
Patent  claims  will be shared  50/50 or 25/75  between  starpay  and the Patent
Holder (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.

     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.

     We have identified two major credit card industry entities who have payment
systems  utilizing  technology  very  similar  to the  authentication  protocols
embodied  in this  Patent  and/or  our  pending  patent  claims.  We  have  also
identified  two key entities in enabling  mobile  e-commerce  that are currently
implementing  payment systems using an  authentication  protocol very similar to
the patent to which we have marketing rights. starpay is currently assessing all
of these  situations  looking  toward the  possibility  of generating  licensing
opportunities with each.

     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  alliance and licensing  efforts,  the  e-Commerce
Segment  is  expected  to become a major  contributor  to the  Company's  future
success.  However,  no assurance  can be given that  starpay  will  successfully
capitalize on its Internet security methods and technologies.

     Facilities.  starpay  occupies a small portion of the office space occupied
by Beard at the  Company's  corporate  headquarters  located in  Oklahoma  City,
Oklahoma.

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

     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. The Company is subject to extensive regulation by federal,  state,
local, and foreign  governmental  authorities.  The Company's  operations in the
United States and China are subject to political  developments  that the Company
cannot accurately predict. Adverse political developments and changes in current
laws and  regulations  affecting  the  Company  could  dramatically  impact  the
profitability of the Company's current and intended  operations.  More stringent
regulations  affecting  the  Company's  coal  reclamation  activities or adverse
changes  in  federal  tax laws  concerning  the  availability  of Section 29 tax
credits could adversely  impact the  profitability  of the Company's future coal
reclamation operations and the availability of those projects.

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

     It is not  possible  to  reliably  estimate  the  amount  or  timing of the
Company's  future  expenditures  relating to  environmental  matters  because of
continually  changing  laws and  regulations,  and the  nature of the  Company's
businesses.  The Company cannot accurately predict the scope of environmental or
worker safety  legislation  or regulations  that will be enacted.  The Company's
cost to comply with newly  enacted  legislation  or  regulations  affecting  its
business  operations  may require the Company to make material  expenditures  to
comply  with these  laws.  Although  management  believes  that it has  adequate
insurance to address probable environmental  contingencies,  it is possible that
coverage may be inadequate to satisfy future  environmental  liabilities.  As of
this date, the Company is not aware of any environmental liability or claim that
could  reasonably be expected to have a material adverse effect upon its present
financial condition.

                                  RISK FACTORS

Net Losses, Limited Liquidity and Capital Resources

     The Company  has  suffered  net losses  during each of the last five years.
Because of losses  incurred in the fourth  quarter of 2001,  the  Company's  net
worth became  negative as of December 31, 2001, and the deficiency  increased to
($4,833,000) at year-end 2002. Receipt of the anticipated McElmo Dome settlement
will materially  reduce the deficiency.  However,  the Company will still have a
negative net worth,  the amount of which will depend upon the additional  losses
sustained  before the  settlement  is  received.  The  Company's  business  will
continue to require  substantial  expenditures.  There is no certainty  that the
Company will be able to achieve or sustain  profitability or positive cash flows
from operating activities in the future.

Impact of Recent Writeoffs

     The Company's  balance  sheet was severely  impacted in 2002 as a result of
being  required to impair  long-lived  assets in the amount of $1,561,000 and to
impair  investments  and other assets in the amount of $872,000.  The  resulting
impairment of  $2,433,000  increased the common  shareholders'  deficiency  from
($2,400,000) to  ($4,833,000),  more than doubling the deficiency.  As a result,
even  assuming the Company  receives  the  anticipated  Settlement  of more than
$3,900,000,  it will still have a  deficiency.  Such  deficiency  may reduce the
Company's   ability  to  borrow   funds  and  impact  its   ability  to  achieve
profitability in the future.

Failure to Receive or Delay in Receiving the Settlement

     In the event the  McElmo  Dome  Settlement  should be  overturned  it would
severely   diminish  the   Company's   liquidity  and  its  efforts  to  achieve
profitability.  (See "Item 7. Management's  Discussion and Analysis of Financial
Condition     and    Results    of     Operations---Liquidity     and    capital
resources---Liquidity").  An appeal has been filed with the U.S.  Supreme  Court
which will delay the  Settlement,  and there is the  possibility  that the Court
could    overturn   the    Settlement.    (See   "Item   1.    Business---Recent
Developments---McElmo  Dome Litigation" and "Item 3. Legal Proceedings--- McElmo
Dome Litigation").

History of Delays in Finalizing New Coal Projects

     The Company has  experienced  delays in the past in finalizing its new coal
projects.  The  Company  may  experience  additional  delays in the  future.  No
definitive  contracts  have been  signed  yet in  connection  with the  projects
currently under development in the Coal Segment. Additionally, financing has yet
to be arranged for these projects.  Continued delays in finalizing the Company's
new coal projects may have a material adverse effect on the Company.

History of Delays in Finalizing Projects in China

     The Company has  experienced  delays in the past in finalizing  projects in
China. The Company may experience additional delays in the future. No definitive
contracts have been signed yet in connection  with the projects  currently under
development in the China Segment. Additionally, financing has yet to be arranged
for these projects. Continued delays in finalizing the Company's new projects in
China may have a material adverse effect on the Company.

starpay Intellectual Property Rights; Copying by Competitors

     The Company has identified at least three  competitors  that offer services
that potentially  conflict with starpay's  intellectual  property rights. If the
Company is unable to protect its intellectual property rights from infringement,
the Company may not be able to realize the anticipated profit potential from the
e-Commerce Segment.

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.

     o    The ABT Beard litigation  currently in progress could hinder the China
          Segment's  ability to finance future  projects until the litigation is
          resolved; an unfavorable conclusion to the litigation could impact the
          segment's ability to move forward with any projects.

                           OTHER CORPORATE ACTIVITIES

     Other Assets. Beard also has a number of other assets and investments which
it is in the process of liquidating as  opportunities  materialize.  Such assets
consist primarily of a convenience store location with related property,  plant,
and  equipment,  an  iodine  extraction  plant  and  related  equipment,   brine
collection  wells,  drilling  rig  components  and related  equipment,  land and
improvements,  wastewater  storage tanks,  a real estate limited  partnership in
which the Company is a limited partner and other miscellaneous  investments.  As
excess funds become available from such  liquidations  they will be utilized for
working capital, reinvested in Beard's ongoing business activities or redeployed
into newly targeted opportunities. Beard's recorded value for these other assets
is less than or equal to their estimated fair value.

     Office and Other  Leases.  Beard  leases  office  space in  Oklahoma  City,
Oklahoma,  aggregating  5,817 square feet under a lease  expiring  September 30,
2003, at a current annual rental of $83,000. In addition,  Beard's  subsidiaries
lease space at other locations as required to serve their respective needs.

     Employees.  As of December  31, 2002,  Beard  employed 20 full time and six
part time employees in all of its operations, including five full time employees
and three part time employees on the corporate staff.

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

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

Item 2. Properties.

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

Item 3. Legal Proceedings.

     Neither Beard nor any of its  subsidiaries are engaged in any litigation or
governmental  proceedings  which  Beard  believes  will have a material  adverse
effect upon the results of  operations  or  financial  condition  of any of such
companies.  However, the Company is a plaintiff in a lawsuit where the Company's
share  of  the  claims,  exclusive  of  interest  and  costs,  exceeded  10%  of
consolidated  current  assets at year-end  2002.  See "McElmo  Dome  Litigation"
below. It is also plaintiff in another lawsuit which seeks judicial  dissolution
of a subsidiary.  The  defendant has filed an answer and asserted  counterclaims
against the Company, several subsidiaries and three of the officers thereof. The
Company and the other  defendants  have filed an answer  denying  liability  and
intends to vigorously defend such claims. See "ABT Beard Litigation" below.

     McElmo Dome Litigation. On October 22, 1996, the Company joined with others
(the  "CO2  Claims  Coalition,  LLC" or the  "Plaintiff"  or  collectively,  the
"Plaintiffs")  in filing in U.S.  District  Court for the District of Colorado a
suit against Shell Oil Company ("Shell"),  Shell Western E & P, Inc.  ("SWEPI"),
Mobil  Producing  Texas and New  Mexico,  Inc.  ("Mobil")  and  Cortez  Pipeline
Company, a partnership ("Cortez").

     Plaintiffs in the litigation are small share CO2 working  interest  owners,
CO2 royalty owners and CO2 overriding  royalty  interest owners all of whom have
contract  interests in the value of the CO2 produced  from the McElmo Dome Field
(the  "Field"---see  "Carbon  Dioxide  Operations"  at pages 9-12).  Plaintiffs'
complaint alleges damages against the defendants caused by defendants'  wrongful
determination of the value of CO2 produced from the Field and the  corresponding
wrongful  underpayment to Plaintiffs.  The complaint  further alleges that Shell
and Mobil are (1) the  dominant  producers  of CO2 from the Field;  (2) partners
owning defendant Cortez;  (3) users of CO2 produced from the Field in west Texas
for the  production of crude oil; and that SWEPI is for all  practical  purposes
the alter ego of Shell and thus liable to the same extent as Shell.

     A Settlement Agreement (the "Agreement") was signed among the attorneys for
the Plaintiffs  and the Defendants on September 24, 2001. On May 6, 2002,  Judge
Weinshienk of the Colorado District Court issued a final judgment  approving the
Settlement  and ordered  that a  settlement  fund of $50.4  million in cash (the
"Settlement")  be established to settle the  litigation.  Shortly  thereafter 11
objecting  class  members (the  "Objectors")  who  collectively  are entitled to
receive  approximately  $106,500  net of  expenses  under the  Settlement  filed
appeals to the final approval of the Settlement. On December 24, 2002, the Tenth
Circuit Court of Appeals issued an Opinion affirming the May 6, 2002 decision of
the Colorado  District  Court which  approved  the  Settlement,  the  allocation
thereof, attorneys' fees and other matters.

     On March 24, 2003, the Objectors filed a Petition for Certiorari asking the
U.S.  Supreme  Court  for  review.  (See  "Recent   Developments---McElmo   Dome
Litigation").  The U.S. Supreme Court takes very few cases and our counsel think
it is unlikely  that the Court would have any interest in this case. If the U.S.
Supreme  Court  denies the  petition,  the  Settlement  is  expected to be final
between early May and late June of 2003,  meaning the distribution of Settlement
funds can begin at that time according to the terms of the Settlement Agreement.

     Distribution of the proceeds will be delayed until the petition to the U.S.
Supreme  Court has been decided.  The Company  believes the  Settlement  will be
concluded in the time frame  indicated  above with  anticipated  proceeds to the
Company  in excess  of $3.9  million  including  interest.  Distribution  of the
contemplated  proceeds  will  have  a  significant  impact  upon  the  Company's
liquidity. The appeal to the Supreme Court could ultimately cause the Settlement
to be overturned. We believe such an outcome is unlikely.

     The Company has  expensed  all of its share,  totaling  $450,000  from 1996
through  year-end  2002,  of the  costs  of  the  litigation.  Accordingly,  any
Settlement  proceeds  flowing to Beard  will  result in net  income,  except for
alternative minimum taxes which are not expected to exceed 2% in total.  Beard's
share of any  Settlement  will not be subject to Federal or Colorado  income tax
due to the Company's NOL's. (See Note 11 to the Company's Financial Statements).

     ABT Beard  Litigation.  In early September a controversy  arose between the
Company  and  ABT  concerning  their  legal  rights  and  relationship.  Lengthy
negotiations  and  discussions  were  unsuccessful  in  arriving  at a  mutually
agreeable  solution.  Accordingly,  in November of 2002,  the Company filed suit
against ABT in the United  States  District  Court for the  Western  District of
Oklahoma, styled The Beard Company and ABT Beard, L.L.C. (the "LLC") v. American
Bio-Tech,  Inc.  ("ABT"),  Case No.  CIV-02-1392,  seeking  the  Court  to:  (i)
judicially dissolve the LLC; (ii) order that the affairs of the LLC be wound up;
and (iii) award the Company its costs,  expenses and attorneys' fees. In January
of 2003, ABT filed its answer and asserted counterclaims against the Company and
third-party  claims against Beard  Sino-American  Resources  Co., Inc.,  Beijing
Beard Biotech Engineering Co., Inc., Cambridge/ABT Beard Handan Venture, L.L.C.,
William M. Beard,  Riza E. Murteza and Mark E. Voth for: (i) fraud;  (ii) breach
of fiduciary duty; (iii) breach of loyalty; (iv) an accounting and imposition of
a constructive trust; (v) breach of the ABT Operating Agreement;  (vi) violation
of  the  Oklahoma  Uniform  Trade  Secrets  Acts;  (vii)  federal  service  mark
infringement;  (viii)  common  law unfair  competition;  (ix)  violation  of the
Oklahoma Deceptive Trade Practices Act; (x) unjust enrichment;  (xi) conversion;
(xii)  common  law  conspiracy;  and  (xiii)  dissolution  of ABT.  ABT seeks an
unspecified amount of direct,  incidental,  consequential,  punitive, and treble
damages, plus attorneys' fees and costs and injunctive relief.

     Discovery  has not yet  commenced in the  lawsuit,  and the outcome of this
litigation cannot be determined.  On its claim against ABT, the Company hopes to
recover  loans  of more  than  $700,000  that  were  made to ABT,  plus  accrued
interest.  Because of the uncertainty of the outcome, an impairment provision in
the amount of $759,000 was  established  in the fourth  quarter of 2002 to write
off the loan, the accrued interest,  and the Company's  investment in all of the
LLC's projects. On the counterclaims and third party claims asserted by ABT, the
Company and third-party  defendants  have filed an answer denying  liability and
intend to  vigorously  defend the claims.  All of the  projects  that were under
development by the LLC have been placed on indefinite  hold until the outcome of
the litigation has been determined.

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.

                                     PART II

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

(a)  Market information.

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

<TABLE>
<CAPTION>
               2002                    High              Low
          --------------             --------          -------
<S>                                  <C>               <C>
          Fourth quarter               $1.04            $0.01
          Third quarter                 1.75             0.10
          Second quarter                2.55             0.40
          First quarter                 0.99             0.40

              2001                     High              Low
          --------------             --------          -------

          Fourth quarter               $1.03            $0.03
          Third quarter                 1.50             0.05
          Second quarter                1.15             0.12
          First quarter                 0.75             0.125

---------------
<FN>
(A)  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.
</FN>
</TABLE>

(b)  Holders.

     As of February  28,  2003,  the  Company  had 432 record  holders of common
stock.

(c)  Dividends.

     To date, the Company has not paid any cash  dividends.  The payment of cash
dividends  in the future  will be subject to the  financial  condition,  capital
requirements  and  earnings of the  Company.  The Company  intends to employ its
earnings,  if any,  primarily in its coal  reclamation  activities  and does not
expect to pay cash  dividends for the  foreseeable  future.  The  Certificate of
Designations  of the Beard Preferred Stock does not preclude the payment of cash
dividends.  The  Certificate  provides  that,  in the event the  Company  pays 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.

Item 6.  Selected Financial Data.

     The following financial data are an integral part of, and should be read in
conjunction  with,  the  financial  statements  and notes  thereto.  Information
concerning  significant  trends  in  the  financial  condition  and  results  of
operations  is contained in  Management's  Discussion  and Analysis of Financial
Condition and Results of Operations on pages 23 through 33 of this report.

<TABLE>
<CAPTION>
                                                  2002            2001             2000           1999              1998
                                                  ----            ----             ----           ----              ----
                                                                  (in thousands, except per share data)
<S>                                           <C>             <C>              <C>           <C>              <C>
Statement of operations data:
   Revenues from
      continuing operations                   $    469        $    602         $    717      $    1,421       $    9,238

   Interest income                                 119             177              136             228              400

   Interest expense                               (400)           (207)             (60)           (170)            (964)

   Loss from continuing operations              (4,391)         (1,453)          (1,392)         (1,571)             (89)

    Loss from discontinued operations             (223)           (868)(a)       (1,637)         (1,828)(b)       (3,768)(c)

   Net loss                                     (4,614)         (2,321)          (3,029)         (3,399)          (3,857)

   Net loss attributable to
      common shareholders                       (4,614)         (2,321)          (3,029)         (3,399)          (3,857)

   Net loss per share - basic and diluted:
         Loss from continuing operations         (2.40)          (0.79)           (0.76)          (0.86)           (0.05)
         Loss from discontinued operations       (0.12)          (0.48)           (0.90)          (0.99)           (1.97)
         Net loss                                (2.52)          (1.27)           (1.66)          (1.85)           (2.02)

Balance Sheet Data:
   Working capital                                (284)             281            (159)             981            5,378

   Total assets                                  1,264            4,058           5,087            6,804           37,337

   Long-term debt (excluding
       current maturities)                       4,241            2,513           1,428               13           25,780

   Redeemable preferred stock                      889              889             889              889              889

    Total common shareholders' equity
       (deficiency)                             (4,833)            (344)          1,883            4,666            8,387
---------------
<FN>
(a)  In March 2001, the Company determined that it would no longer provide financial support to ISITOP, Inc., an 80%-owned
     subsidiary specializing in the remediation of polycyclic aromatic hydrocarbon  contamination.  In May 2001, the fixed
     assets of the 50%-owned  subsidiary  involved in natural gas well testing  operations  were sold. In August 2001, the
     Company made the decision to cease pursuing opportunities in Mexico and the WS Segment was discontinued.  (See note 3
     of notes to financial  statements).

(b)  In December 1999,  the Management  Committee of North  American  Brine  Resources  ("NABR")  adopted a formal plan to
     discontinue the business and dispose of its assets.  Beard had a 40% ownership  interest in NABR, which was accounted
     for under the equity method and represented Beard's entire brine extraction/iodine  manufacturing segment operations.
     Beard's share of NABR's operating results have been reported as discontinued for all periods  presented.  (See note 3
     of notes to financial statements).

(c)  In August 1998, Beard adopted a plan to discontinue the Other E/S Operations.  In April 1999, Beard adopted a plan to
     discontinue its interstate  travel  facilities  ("ITF")  segment.  The results of operations and estimated  losses to
     discontinue the Other E/S Operations and the ITF segment,  including an estimated loss on disposition,  were reported
     as discontinued operations in 1998. (See note 3 of notes to financial statements).
</FN>
</TABLE>

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

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

Overview

     General.  In 2002 the  Company  operated  within  the  following  operating
segments:  (1) the Coal  Reclamation  ("Coal")  Segment,  (2) the Carbon Dioxide
("CO2")  Segment,  (3) the  China  ("China")  Segment,  and  (4) the  e-Commerce
("e-Commerce") Segment.

     The Coal  Segment is in the business of  operating  coal fines  reclamation
facilities  in the U.S. and provides  slurry pond core drilling  services,  fine
coal laboratory  analytical  services and consulting  services.  The CO2 Segment
consists  of  the   production  of  CO2  gas.  The  China  Segment  is  pursuing
environmental   opportunities  in  China,   focusing  on  the  installation  and
construction of facilities which utilize the proprietary  composting  technology
of Real Earth United States Enterprises,  Inc. 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  its  intellectual
property.

     The Company's  continuing  operations have reflected  losses of $4,391,000,
$1,453,000,  $1,392,000,  $1,571,000 and $89,000 in 2002,  2001,  2000, 1999 and
1998, respectively.

     Beginning in 1999 the Company started discontinuing the operations of those
segments that were not meeting their targeted profit objectives. This ultimately
led to the discontinuance of the Company's ITF, BE/IM, WS and ER Segments.  Such
discontinued operations have reflected losses of $223,000, $868,000, $1,637,000,
$1,828,000 and $3,768,000, in 2002, 2001, 2000, 1999 and 1998, respectively. See
"Discontinued Operations" below.

     The  Company is now  focusing  its  primary  attention  on the McElmo  Dome
litigation,  together with the Coal,  China and  e-Commerce  Segments,  which it
believes have significant potential for growth and profitability.

     The Company has other operations,  including various assets and investments
that it has been liquidating as opportunities have materialized.

     The results of operations for 2002, 2001 and 2000 were severely impacted by
the termination of a major contract,  which had guaranteed the Company a minimum
operating profit of $100,000 per month, on January 31, 1999. Termination of this
contract (see "Coal Reclamation  Activities---The  MCN Projects") was especially
discouraging  since it came at a time when the Coal Segment had just established
itself as the world's  largest  operator  of coal  reclamation  facilities.  The
result was a sharp decline in the Coal Segment's  revenues---from  $8,585,000 in
1998  down to  $12,000  in  2002---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  and  $2,105,000  in  2002.  $1,516,000  of the  2002  loss  resulted  from
impairment of long-lived assets within the segment.

     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 the Company  and its  previous  partner in
conducting  operations in China,  the Company 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.
The  operating  loss from  corporate  activities  at the  parent  company  level
increased  $9,000.  The  Company's  total  net  loss  increased   $2,298,000  to
$4,614,000  primarily  as a result of the  $2,374,000  increase  in  impairments
during 2002.

     Operating  profit of the CO2  Segment in 2001  decreased  $43,000  from the
prior  year,  primarily  as a result of a slight  decrease in prices for CO2 and
higher operating costs. Beginning in 2001 the results of operations of the China
Segment,  which  had no  revenues  in  such  year,  were  conducted  through  an
unconsolidated  affiliate. The segment incurred an operating loss of $300,000 in
2001 which is included in equity in earnings of unconsolidated  affiliates.  The
e-Commerce Segment also had no revenues in 2001, but incurred $103,000 less SG&A
expenses  than in the  prior  year  as it cut  back  its  pursuit  of  strategic
alliances  pending the issuance of patents.  The operating  loss from  corporate
activities  at the  parent  company  level  decreased  $107,000  as the  Company
continued  to cut costs.  The  Company's  total net loss  decreased  $708,000 to
$2,321,000,  reflecting  the  $769,000  decrease  in  losses  from  discontinued
operations.

     2000 results of operations  reflected  improvement in the operating margins
of the CO2 Segment.  The segment had a $60,000  increase in its operating profit
versus  1999,  principally  as the result of higher  prices  for CO2.  The China
Segment  generated no revenues,  and incurred  $400,000 of selling,  general and
administrative  expenses related to its continuing startup activities.  This was
an increase of $121,000 over 1999,  reflecting the expanded level of activity by
this segment. The e-Commerce Segment generated no revenues but incurred $275,000
of SG&A expenses as it stepped up its marketing  activities.  The operating loss
from corporate  activities at the parent company level  decreased  $248,000 from
1999  reflecting  decreased  salary,  legal and other SG&A costs as the  Company
found ways to reduce costs.  The Company's  total net loss  decreased  $370,000,
reflecting the $179,000  decrease in losses from  continuing  operations and the
$191,000 decrease in losses from discontinued operations.

     The  recurring net losses and overall  declines in financial  condition and
liquidity raise substantial  doubts about the Company's ability to continue as a
going concern, as expressed in the independent auditors' opinion on page 35.

Liquidity and capital resources

     Capital  investments.   The  Company's  capital  investment  programs  have
required more cash than has been generated from operations during the past three
years.   Cash  flows  used  in  operations  during  2002,  2001  and  2000  were
$(1,789,000),   $(1,243,000),  and  $(2,552,000),  respectively,  while  capital
additions  from  continuing  operations  were  $77,000,  $71,000,  and $422,000,
respectively, as indicated in the table below:

                          2002              2001               2000
                          ----              ----               ----
Coal                        $  7,000           $ 17,000         $ 371,000
Carbon dioxide                62,000             17,000             4,000
e-Commerce                         -                 -              8,000
Other                          8,000             37,000            39,000
                     ---------------- ------------------ -----------------
              Total         $ 77,000           $ 71,000         $ 422,000
                     ================ ================== =================

     Capital additions in the discontinued WS Segment were $9,000 and $38,000 in
2002 and 2000,  respectively.  Capital additions in the discontinued ITF Segment
were $13,000 in 2000.

     The Company's 2003 capital  expenditure  budget has tentatively been set at
zero. This does not include an estimated  $6,120,000 of plant costs which may be
incurred  by the Coal  Segment  for the  project  expected to start in such year
subject to the  availability  of  financing.  It also  excludes  the cost of any
composting plants in China. It is anticipated that any composting plants will be
separately  financed  by each  Cooperative  Joint  Venture  ("CJV")  with  Beard
Environmental  Engineering,  L.L.C. selling the plants on a turnkey basis to the
respective CJV's and having a residual interest in each CJV after payout.

     Liquidity.  The Company's activities in 2000 and 2001 were primarily funded
by a bank line of credit, by loans from related parties,  by repayments on notes
receivable  related to our  operations in Mexico and by the sale of assets.  The
Company's activities in 2002 were primarily funded by loans from related parties
and by the proceeds from a private placement of notes and warrants.  Future cash
flows and availability of credit are subject to a number of variables, including
demand for the Company's coal  reclamation  services and technology,  continuing
demand for CO2 gas, demand for the construction of facilities in China using the
proprietary  technology  of Real Earth United States  Enterprises,  Inc. and the
e-Commerce  Segment's success in developing  licensing  agreements and other fee
based arrangements with companies  implementing  technology in conflict with its
intellectual property.

     During 2002 the  Company  reduced  its  working  capital by  $565,000  from
$281,000 at year-end  2001.  The Coal Segment used $8,000 to purchase  equipment
and $569,000 to fund operating  losses.  The China Segment required  $585,000 to
fund net advances for operations.  The  discontinued  BE/IM, ITF and WS Segments
absorbed $88,000, $85,000 and $50,000,  respectively,  in 2002, 2001 and 2000 to
fund their operations while the Company sought buyers for the remaining  assets.
Another  $157,000  was used to fund the  startup  activities  of the  e-Commerce
Segment.  Other corporate activities utilized  approximately $900,000 of working
capital.  The bulk of these expenditures were funded by a $1,556,000 increase in
debt,  $342,000  from  the  sale of  assets,  $188,000  from  payments  on notes
receivable, and $334,000 from the sale of carbon dioxide.

     As a result,  at December 31, 2002,  the Company was in a negative  working
capital position with working capital of $(284,000), and a current ratio of 0.67
to 1.

     The Company incurred losses from continuing  operations totaling $8,896,000
during  the  past  five  years.  The  Company   generated  net  losses  totaling
$17,220,000  during such period.  The discontinued  interstate travel facilities
and  natural  gas  well  servicing   businesses  accounted  for  $3,650,000  and
$2,397,000,  respectively,  of the losses,  but those problems are now behind us
and  management  expects  to  dispose  of their  remaining  assets in 2003.  The
discontinued  iodine business impacted earnings in the amount of $642,000 during
the last five years,  including  $199,000 the last two years,  but again,  those
problems  are  behind  us, and  management  expects to dispose of its  remaining
assets in 2003.

     The Company's  principal  business is coal  reclamation,  and this is where
management's   operating  attention  is  primarily  focused.  The  Coal  Segment
currently has several projects in various stages of development  which,  subject
to  arranging  necessary  financing,  are  ultimately  expected  to mature  into
operating  projects.  The segment has entered into a memorandum of understanding
on one of these  projects  and  expects,  despite  repeated  delays,  to reach a
definitive  agreement  on  the  project  during  the  second  quarter  of  2003.
Negotiations  are in  progress  with a third  party to form a joint  venture  or
limited  liability  company that would provide the initial  working  capital and
guarantee the necessary equipment  financing for the project.  The timing of the
project is uncertain but,  subject to obtaining the necessary  financing,  it is
considered  to have a high  probability  of  activity.  However,  no  definitive
contracts  have as yet been signed,  and there is no assurance that the required
financing will be obtained or that the project will materialize.

     After more than four years of  development  activity by the China  Segment,
and just when it appeared that its efforts were finally  starting to bear fruit,
we had a  "falling  out" with our  technology  partner  and have  filed  suit to
terminate   our   business   relationship.   (See   "Item   1.   OPERATIONS   IN
CHINA---Termination  of  Business  Relationship  with  ABT" and  "Item 3.  Legal
Proceedings---ABT  Beard  Litigation").  Accordingly,  all of the projects which
were under development in China are on indefinite hold. The segment has obtained
an exclusive  license  agreement  for another  technology in China (see "Item 1.
Recent  Developments---REUSE   License  Agreement")  and  is  now  pursuing  new
projects. Negotiations are in progress on the first of these, and there is ample
room and an adequate market for a number of such projects in the same area.

     Key to the Company's liquidity is the anticipated  settlement of a lawsuit,
in which the Company is a  Plaintiff,  which has been in progress  since 1996. A
Settlement Agreement was signed by the parties in September of 2001. On December
24,  2002 the Tenth  Circuit  Court of  Appeals  affirmed  the  decision  of the
Colorado District Court which approved the Settlement. On March 24, 2003 parties
who objected to the Settlement  filed a petition with the U.S. Supreme Court. If
the Supreme  Court denies the  petition,  the  Settlement  is expected to become
final between early May and late June of this year with anticipated  proceeds to
the Company in excess of $3.9  million.  Although it is possible the Court could
overturn the Settlement,  our counsel believes such possibility is remote.  (See
"Item 1.  Recent  Developments---McElmo  Dome  Litigation"  and  "Item 3.  Legal
Proceedings---McElmo Dome Litigation").

     In 2000 the Company supplemented its $300,000 credit line with a commercial
bank by arranging  for  borrowings  of up to  $1,500,000  from  affiliates  of a
related party. The long-term line of credit from the related party was increased
to $2,600,000 in January of 2002 and to $3,000,000 in October of 2002 to provide
additional working capital,  and was supplemented by a $150,000  short-term line
of  credit  from the same  party in  November  of  2002.  The  Company  recently
completed the private  placement of $600,000 of subordinated  notes due April 1,
2004, with warrants, to provide additional working capital and improve liquidity
and to "bridge  the gap" until the  Settlement  funds are  distributed  or until
contemplated  Coal and China projects  achieve positive cash flow. (See "Item 1.
Recent  Developments---Private  Placement of Notes and Warrants").  In addition,
the Company will be disposing of the remaining assets from the discontinued ITF,
BE/IM and WS Segments  and can sell  certain  other  assets to generate  cash if
necessary.

     Selected liquidity  highlights for the Company for the past three years are
summarized below:

<TABLE>
<CAPTION>
                                                            2002                2001                2000
                                                            ----                ----                ----
<S>                                                     <C>                  <C>                <C>
Cash and cash equivalents                                $  79,000            $  55,000          $  31,000
Accounts and other receivables, net                        133,000              157,000            320,000
Assets of discontinued operations held for resale          343,000              764,000          1,480,000
Trade accounts payable                                     138,000              120,000            118,000
Liabilities of discontinued operations held for resale     125,000              321,000            500,000
Current maturities of long-term and short-term debt        419,000              307,000             17,000
Long-term debt                                           4,241,000            2,513,000          1,400,000
Working capital                                           (284,000)             281,000          1,116,000
Current ratio                                            0.67 to 1            1.32 to 1          2.39 to 1
Net cash used in operations                             (1,789,000)          (1,243,000)        (2,552,000)
</TABLE>

     In 2002,  the Company had positive cash flow of $24,000.  Operations of the
Coal,  China,  and  e-Commerce  Segments and the  discontinued  W/S, ITF and E/R
Segments   resulted  in  cash   outflows  of   $1,473,000.   (See   "Results  of
operations---Other corporate activities" below).

     The  Company's  investing  activities  provided  cash of  $45,000  in 2002.
Proceeds from the sale of assets provided cash of $334,000 and payments on notes
receivable  provided  cash of $188,000.  Net  distributions  from the  Company's
investment in Cibola provided cash of $160,000.  Acquisitions of property, plant
and equipment and intangible assets used $70,000 of the cash outflow,  while (i)
investments  in and  (ii)  loans  to a  partner  in the  China  Segment  and the
discontinued W/S Segment utilized cash of $606,000.

     The  Company's  financing  activities  provided cash flows of $1,768,000 in
2002. The Company received  $2,344,000 from its borrowings and utilized $474,000
for payments on lines of credit and term notes.

     At  year-end  2002 the  Company  had fully  utilized  the parent  company's
$300,000 bank line of credit which matures on May 15, 2003. At December 31, 2002
the Company had also utilized all of a $3,000,000  line of credit from a related
party which bears  interest  at 10% until  maturity at January 3, 2005,  and had
utilized  $110,000 of a short-term  $250,000  line of credit from the same party
which bears interest at 10% until maturity at October 31, 2003.  This short-term
line of credit  was paid down to zero and the bank line of credit  was paid down
to $500 from the net  proceeds of the  $600,000  private  placement of notes and
warrants  completed  by the Company on February  21, 2003 (see "Item  1---Recent
Developments---Private  Placement of Notes and Warrants").  The Company believes
that cash and available credit,  together with proceeds from the sale of assets,
will be adequate to meet the Company's  liquidity needs,  including  anticipated
requirements  for working  capital,  until the McElmo Dome  settlement  has been
received.

     Effect of Recent  Developments on Liquidity.  The Company's  debt-to-equity
ratio, which stood at 0.77 to 1 at year-end 2000, had deteriorated to 2.20(A) to
1 at year-end 2001 and to 11.07(A) at year-end 2002.  Consolidated  debt,  which
totaled  $1,458,000 at year-end  2000,  increased to $2,820,000 at year-end 2001
and to $4,660,000 at year-end 2002.  The recently  completed sale of $600,000 of
subordinated  notes  enabled the Company to pay down its bank debt and a portion
of its present  indebtedness  with a related party. This should give the Company
ample working  capital to operate until the Settlement  funds are distributed or
until  contemplated  Coal and China  projects  achieve  positive  cash flow.  In
addition,  the  Company  will be  disposing  of the  remaining  assets  from the
discontinued  ITF,  BE/IM and WS Segments and can sell  certain  other assets to
generate cash if necessary.

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

Results of operation

     General. The period from 1997 to 2002 has been a time of transition for the
Company. In 1997 the Company divested itself of its real estate construction and
development  activities,   sold  its  dry  ice  manufacturing  and  distribution
business,  and  restructured  its E/RR Segment,  shifting its principal focus to
coal  reclamation  and  discontinuing   most  of  its   environmental   services
activities.  The Company made a brief and unsuccessful foray into the interstate
travel  business  in 1998,  which it  discontinued  in 1999.  That same year the
decision was made to  discontinue  the  operations of a 40%-owned  joint venture
engaged in the extraction,  production and sale of crude iodine.  In 2001 the ER
and WS Segments  were  discontinued.  As a result,  the  corporate  staff is now
focusing  most  of its  attention  on the  management  of the  Coal,  China  and
e-Commerce  Segments,  which we believe hold the greatest  potential  for future
growth and profits.

     The CO2  Segment's  operating  results  remain  profitable;  the  degree of
profitability  primarily reflecting changes in demand due to fluctuations in oil
pricing. The China Segment experienced a setback in late 2002 as the result of a
controversy with our technology partner. (See "Item 1. Recent Developments---ABT
Beard Litigation" and "Item 3. Legal  Proceedings--- ABT Beard Litigation").  We
have  subsequently  entered into an exclusive  licensing  arrangement  for a new
technology  which is expected to improve the  economics  of this  segment in the
future  assuming the segment is successful in its efforts to develop and finance
new projects. (See "Item 1. Recent Developments---REUSE License Agreement"). The
e-Commerce  Segment is experiencing  the normal problems and delays  encountered
when starting new businesses.  In addition,  the Company  continues to liquidate
assets which no longer fit the Company's strategic objectives.  Operating profit
(loss) for the last three  years for the  Company's  remaining  segments  is set
forth below:

<TABLE>
<CAPTION>
                                          2002              2001              2000
                                          ----              ----              ----
<S>                                    <C>            <C>            <C>
Operating profit (loss):
     Coal                              $ (2,105,000)  $   (544,000)  $   (625,000)
    Carbon dioxide                          291,000        313,000        356,000
    China                                   (63,000)             -       (400,000)
    e-Commerce                             (202,000)      (172,000)      (275,000)
                                       -------------- -------------- --------------
                           Subtotal      (2,079,000)      (403,000)      (944,000)
   Other - principally corporate           (978,000)      (969,000)    (1,076,000)
                                       -------------- -------------- --------------
                        Total          $ (3,057,000)  $ (1,372,000)  $ (2,020,000)
                                       ============== ============== ==============
</TABLE>

     Following  is a  discussion  of results of  operations  for the  three-year
period ended December 31, 2002.

     Coal  reclamation.  As a result  of the  recent  change of  direction,  the
Company has focused its primary attention on coal reclamation.  In January 1999,
Beard  Technologies  completed a 10-month contract as the operator of coal waste
recovery  projects (the "MCN Projects")  located at six sites in three states in
the  eastern  U.S.  Now that such  contracts  have been  terminated  (see  "Coal
Reclamation   Activities---The   MCN   Projects"  in  Part  I,  Item  1),  Beard
Technologies  is again  pursuing coal recovery  projects  where it will serve as
either owner or operator.

     The MCN Projects  generated  none, none and 35% of the Coal Segment's 2002,
2001 and 2000 revenues,  respectively.  Operating  revenues in this segment were
$12,000,  $137,000 and $215,000 in 2002, 2001 and 2000, respectively.  Operating
costs  decreased to $458,000 in 2002 from $524,000 in 2001 from $663,000 in 2000
and from $1,064,000 in 1999. SG&A expenses decreased $19,000 to $123,000 in 2002
from $142,000 in 2001 and from  $158,000 in 2000.  The decrease in costs in 2002
and 2001 reflects the effect of the termination of the MCN Projects. The segment
produced an operating loss of $2,105,000 in 2002,  $544,000 in 2001 and $625,000
in 2000. The 2002 operating loss included $1,516,000 of impairment of long-lived
assets.

     Carbon dioxide. The sole component of revenues for this segment is the sale
of CO2 gas from the working and  overriding  royalty  interests of the Company's
two  carbon  dioxide  producing  units in  Colorado  and New  Mexico.  Operating
revenues in this segment were $445,000,  $442,000 and $471,000 in 2002, 2001 and
2000,  respectively,  while  operating  profits totaled  $291,000,  $313,000 and
$356,000,  respectively,  for the  three  years.  CO2  net  sales  volumes  were
1,514,000  Mcf,  1,327,000  Mcf and  1,319,000  Mcf,  in 2002,  2001  and  2000,
respectively.  The increase in sales volumes were nearly offset by a decrease in
price resulting in virtually the same revenue amounts for 2002 compared to 2001.
Operating  expenses increased $21,000 to $117,000 in 2002 compared to $96,000 in
2001. As a result,  operating profits decreased $22,000 to $291,000 in 2002. The
decrease  in  revenues  and  operating  profits in 2001 versus 2000 was due to a
slight  increase in net sales volume which was more than offset by a decrease in
prices received for CO2.

     China.  In 1998 the Company  activated Beard  Sino-American  Resources Co.,
Inc. ("BSAR") to pursue coal reclamation  opportunities in China. Due to changes
in the political and business  environment in China,  BSAR shifted its direction
in 1999. Coal reclamation  activities were suspended and BSAR focused all of its
attention on the installation  and construction of facilities  utilizing the ABT
composting  technology.  During  2001 and the  first  11  months  of  2002,  the
operations of this segment were conducted through an  unconsolidated  affiliate.
BSAR had no revenues in 2002, 2001 or 2000, and recorded $58,000 and $400,000 of
SG&A  expenses,  respectively,  in 2002  and 2000  while  pursuing  its  various
marketing   efforts.   The  Company   recorded  an  operating  loss  of  $63,000
attributable to its operations in China, along with losses of $357,000 in equity
in operations of unconsolidated  affiliates for the first 11 months of 2002. For
the year 2001,  the  segment  incurred a loss of  $289,000  which is included in
equity in operations of unconsolidated affiliates discussed below.

     e-Commerce.  In early 1999, the Company began  developing  its  proprietary
concept  for  an  Internet  payment  system  through   starpay.com,   inc.,  now
starpay.com, l.l.c. ("starpay").  starpay had no revenues in 2002, 2001 or 2000,
and recorded $151,000, $167,000 and $272,000 of SG&A expenses,  respectively, in
such years.  The segment  recorded $45,000 of impairment of intangibles in 2002,
increasing its operating loss for such year to $202,000. In 2001 starpay shifted
its focus from the  development  of its  technology to concentrate on developing
licensing   agreements   and  other  fee  based   arrangements   with  companies
implementing technology in conflict with its intellectual property.

     Other corporate activities.  Other corporate activities include general and
corporate  operations,  as well as assets  unrelated to the Company's  operating
segments or held for investment.  These activities generated operating losses of
$978,000 in 2002,  $969,000 in 2001 and  $1,076,000 in 2000.  The operating loss
increased  $9,000 in 2002  compared to 2001 due to slight  increases  in certain
SG&A expenses.  The operating  loss decreased  $107,000 in 2001 compared to 2000
primarily as a result of lower fees for legal, accounting and other professional
services.

     Selling,  general  and  administrative   expenses.   Selling,  general  and
administrative expenses ("SG&A") decreased to $1,204,000 in 2002 from $1,232,000
in 2001 and from  $1,480,000 in 2000. The reduction was partly  attributable  to
the Coal  Segment,  which  incurred  SG&A  expense of  $123,000,  $142,000,  and
$158,000 in 2002,  2001,  and 2000,  respectively.  The decreases  reflect lower
staffing costs required to meet the demands of the projects  undertaken in place
of the MCN  Projects.  SG&A expense  incurred by the China  Segment  during 2000
increased  to  $400,000  from  $279,000  in 1999  as the  segment  expanded  its
marketing  efforts.  For the year 2001 and the  first 11  months of 2002,  those
activities  were being  conducted  through an  unconsolidated  affiliate and are
reflected elsewhere. The China Segment incurred $58,000 in SG&A expenses for the
month of December, 2002, as the Company changed the vehicle in which it conducts
business  in  China  from  an   unconsolidated   entity  back  to   wholly-owned
subsidiaries.  SG&A expense incurred by the e-Commerce Segment decreased in 2002
to $151,000  from  $167,000 in 2001 and from  $272,000  in 2000  reflecting  the
segment's  level of  marketing  activity.  Other  corporate  SG&A  decreased  to
$870,000 in 2002 from $924,000 in 2001 and from  $1,048,000 in 2000. The $54,000
decrease  for the year  2002  compared  to 2001 was  attributable  primarily  to
reductions in professional fees associated with the McElmo Dome litigation.  The
year 2001  decreased  $124,000  compared to 2000  primarily  due to decreases in
professional  fees,  in  Company  benefits  and to changes in the level of costs
incurred  as  the  Company  pursued  investment  opportunities  that  failed  to
materialize.

     Depreciation,  depletion  and  amortization.  Depreciation,  depletion  and
amortization expenses increased $54,000 to $144,000 in 2002 compared to 2001 and
$6,000 to  $90,000  in 2001  compared  to 2000 due  primarily  to  increases  in
intangible  assets associated with the issuance of the 10% subordinated debt and
in property, plant and equipment in the Coal Segment.

     Impairment of long-lived assets. In 2002 the Company recognized  $1,561,000
of  impairment  of  long-lived  assets as required by FASB No. 144.  Impairments
related to assets in the Coal and  e-Commerce  Segments  totaled  $1,516,000 and
$45,000, respectively. No such impairments were required in either 2001 or 2000.

     Interest income. Interest income decreased $58,000 to $119,000 in 2002 from
$177,000 in 2001.  The decrease is primarily  the result of the decision made at
year-end  2001 to cease  charging  interest  on a loan to the  50%-owned  entity
involved in  operations  in Mexico when it became  apparent  the entity could no
longer  repay the note.  Interest  income  increased  $41,000 to  $177,000  from
$136,000 in 2000.  The  increase  for 2001  reflects  the income on loans to its
partners in Mexico and China.

     Interest expense.  Interest expense increased  $193,000 in 2002 to $400,000
from $207,000 in 2001.  Interest expense increased  $147,000 in 2001 to $207,000
from $60,000 in 2000. The higher expense in 2002 and 2001 reflects the increased
level of debt in each year as the Company  borrowed to meet operating  needs and
to fund the China ventures.

     Equity in earnings of  unconsolidated  affiliates.  The Company's equity in
earnings of  unconsolidated  affiliates  reflected  a loss of $238,000  for 2002
compared to a loss of $167,000  for 2001 and  earnings of $235,000 in 2000.  The
Company's  equity in the operating  losses of its affiliate in China reflected a
loss of $312,000 for 2001,  the first year of conducting the operations in China
in this  format,  and a loss of  $357,000  for the  first  11  months  of  2002.
Effective at the close of November,  2002,  and as a result of the  disagreement
with our partner over  operations  in China,  the Company  began  recording  the
results of operations as an operating segment. Offsetting the Company's share of
the losses of the affliate in China was the  Company's  share of the earnings of
Cibola Corporation ("Cibola"). Although the Company owns 80% of the common stock
of Cibola, it does not have operating or financial control of this gas marketing
subsidiary.  Cibola, formed in 1996, contributed $123,000, $142,000 and $237,000
of pre-tax  net income to the  Company  for fiscal  years  2002,  2001 and 2000,
respectively,  pursuant to a tax sharing agreement. Such income was down in 2001
and 2002 due to capital losses incurred on Cibola's investments.

     Gain on sale of  assets.  Gains on the sale of assets  totaled  $27,000  in
2002,  $81,000 in 2001 and $298,000 in 2000. Such gains reflected  proceeds from
the sale of certain assets that are in the process of being liquidated.  Most of
the increase in 2000 resulted from the sale of the Company's  interest in a real
estate limited partnership which generated a gain of $194,000.

     Impairment  of  investments  and other assets.  In 2002,  2001 and 2000 the
Company recognized $872,000, $41,000 and $71,000,  respectively, for impairments
to  the  carrying  values  of  investments  and  other  assets  relating  to the
recoverability of such investments or assets.  The large increase in 2002 is due
primarily to the $759,000  impairment  of its net  investment  in its  50%-owned
subsidiary in China.

     Income taxes. The Company has approximately  $60.1 million of net operating
loss  carryforwards  and depletion  carryforwards to reduce future income taxes.
Based on the Company's  historical results of operations,  it is not likely that
the  Company  will be able to  realize  the  benefit of its net  operating  loss
carryforwards  before  they begin to expire in 2004.  At  December  31, 2002 and
2001,  the Company has not reflected as a deferred tax asset any future  benefit
it may  realize as a result of its tax credits  and loss  carryforwards.  Future
regular taxable income of the Company will be effectively  sheltered from tax as
a result  of the  Company's  substantial  tax  credits  and loss  carryforwards.
Continuing  operations reflect foreign and state income and federal  alternative
minimum taxes  (refunds) of ($31,000),  ($73,000) and $8,000 for 2002,  2001 and
2000,  respectively.  It is anticipated  that the Company will continue to incur
minor alternative minimum tax in the future, despite the Company's carryforwards
and credits.

     Discontinued  operations.  In 1999 the Company adopted a plan to dispose of
Interstate  Travel  Facilities,  Inc.,  whose  activities  had  previously  been
conducted as the "ITF" Segment.  Such  operations  were  initially  reflected as
discontinued  in 1998  and  the  Company  recorded  losses  for the ITF  Segment
totaling  $2,419,000  that year.  The  majority of the assets of the ITF Segment
were  disposed  of in 1999 and the  Company  recorded  an  additional  charge of
$434,000 that year. The Company recorded additional losses of $591,000, $121,000
and $85,000 in 2000, 2001 and 2002,  respectively,  related to such discontinued
operations.  The Company sold one of the two remaining  convenience  stores with
related  property,  plant and equipment on November 12, 2002 for $169,000  after
commissions and other settlement charges. At year-end 2002, the discontinued ITF
Segment had $147,000 of assets remaining,  consisting primarily of a convenience
store with related  property,  plant,  and equipment,  and liabilities  totaling
$2,000 consisting primarily of trade payables.  The remaining  convenience store
along  with  related  assets  is under  contract  for sale for  $146,000,  after
commissions and other selling expenses, and is due to be closed prior to May 31,
2003. See Note 4 to the financial statements.

     In 1999 the Management Committee of North American Brine Resources ("NABR")
made the decision to terminate  the business of the joint  venture and liquidate
its assets.  NABR's  operations  had  previously  comprised the Company's  brine
extraction/iodine  manufacturing segment. Beard owned 40% of NABR, which was not
a  consolidated  entity  and had  previously  been  accounted  for as an  equity
investment.  Beard's share of NABR's losses totaled  $622,000 in 1999. The joint
venture was dissolved in September of 2000, and the Japanese  partners  received
their final distribution of cash in December, 2000, with the Company taking over
the remaining assets and  liabilities.  The segment's larger plant was shut down
in September 2000 and the Company is now working to dispose of its equipment. In
2000, the Company  recorded  income of $179,000 which  represented the excess of
the amounts  received by the Company over the  remaining  basis of the Company's
investment  in the  joint  venture.  In 2001,  the  Company  recorded  losses of
$111,000  related to the operations of the smaller  plant.  In 2002, the Company
recorded  losses of $88,000 related to the operations of the smaller plant which
was sold  effective  July 31, 2002.  The sale will  eliminate  future  operating
losses after such date. At year-end  2002,  the  significant  assets  related to
NABR's operations  consisted  primarily of plant and equipment with an estimated
net realizable value of $33,000.  The significant  liabilities related to NABR's
operations  consisted  primarily of accrued  expenses of $65,000  related to the
shutdown of the remaining plant. See Note 4 to the financial statements.

     In May 2001 the fixed assets of the 50%-owned company  (accounted for as an
equity  investment)  involved  in natural  gas well  testing  operations  in the
Natural Gas Well Servicing ("WS") Segment were sold for $1,550,000, subject to a
holdback of $150,000.  The Company  received  $86,000 of the holdback later that
year and received an additional  $35,000 in 2002.  The remainder of the holdback
was offset by legal  expenses  incurred by the purchaser in order to clear title
to a portion of the equipment. 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. Beard's share of operating losses from
the discontinued  segment in 2001 totaled  $619,000.  Beard's share of operating
losses from the 50%-owned company  (accounted for as an equity  investment) were
$393,000.  The  remaining  $226,000 of losses in 2001 were  associated  with the
operations of the sand separator company.  These losses included a $107,000 loss
incurred  on the  sale of the five  sand  separators  owned by the  wholly-owned
subsidiary  of  the  Company.   Beard's  share  of  operating  losses  from  the
discontinued  segment were $50,000 in 2002, including $18,000 from the 50%-owned
company  and  $32,000  from  sand  separator  company.  At  year-end  2002,  the
significant assets related to the discontinued  segment's  operations  consisted
primarily of equipment with an estimated net realizable  value of $144,000.  The
significant  liabilities related to the segment's operations consisted primarily
of trade payables of $21,000 and accrued expenses of $38,000.  See Note 4 to the
financial statements.

     In March of 2001 the  Company  determined  that it would no longer  provide
financial support to ISITOP, Inc., an 80%-owned  subsidiary  specializing in the
remediation  of  polycyclic  aromatic  hydrocarbon  ("PAH")  contamination.  The
operations  of ISITOP  had  previously  comprised  the  Company's  environmental
remediation ("ER") Segment. On May 31, 2001, ISITOP was notified by the Licensor
that the segment's  exclusive U.S.  marketing  license for the chemical used for
such PAH remediation had been cancelled.  ISITOP  generated no revenues in 2002,
2001 or 2000.  ISITOP's  operating losses totaled zero, $17,000 and $142,000 for
2002, 2001 2000,  respectively.  ISITOP had no significant assets or liabilities
at December 31, 2002.

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

Impact of Recently Adopted Accounting Standards

     FASB Statement No. 144. In October 2001, the FASB issued Statement No. 144,
Accounting  for the  Impairment  or Disposal of  Long-Lived  Assets.  The assets
covered by the statement include those to be held and used or to be disposed of,
such as assets  under  capital  leases of lessees,  assets  subject to operating
leases of lessors,  and prepaid assets. This statement provides guidance for the
recognition  and  measurement  of  an  impairment  loss  for  certain  types  of
long-lived assets and expands the scope of discontinued operations.  The Company
was required to adopt FASB  Statement No. 144 effective  January 1, 2002 for the
fiscal year ended December 31, 2002.

     The Company has compared the carrying value of the long-lived assets in its
Coal Segment to the fair value of such assets.  Because the Coal Segment has not
been  successful  in obtaining  contracts  for the use of such  assets,  we have
impaired  the value of such  assets to their  expected  present  value  based on
probability-weighted  cash flows.  Since the Company has been unable  during the
past  year to  demonstrate  the  near-term  probability  of  obtaining  any such
contracts  we have,  accordingly,  written  off all of the  property,  plant and
equipment of the segment,  resulting in a total impairment  charge in the amount
of $1,516,000.

     FASB  Statement No. 142. In June 2001,  the FASB issued  Statement No. 142,
Goodwill and Other Intangible  Assets.  This statement  requires that intangible
assets are to be recorded at fair value, and that goodwill not be amortized, but
assessed  annually  for  impairment.  The  Company  was  required  to adopt FASB
Statement No. 142 effective  January 1, 2002 for the fiscal year ended  December
31, 2002.

     The Company has reviewed the carrying value of the intangible assets in its
e-Commerce  Segment.  $41,000  of such  value was  related to the cost of patent
applications on which to date no patents have been issued.  $4,000 of such value
was  related  to the cost of  obtaining  the  segment's  Voucher  Patent.  As of
year-end  2002 no revenues had been  generated  related to such  patent,  and no
licensing or other  arrangements  had been  finalized in  connection  therewith.
Accordingly,  we have  written off all such  intangible  assets,  resulting in a
total impairment charge in the amount of $45,000.

Impact of Recently Issued Accounting Standards Not Yet Adopted

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

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

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

     At December 31, 2002, the Company had notes receivable of $30,000 and total
debt of $4,660,000.  The notes  receivable and $4,360,000 of the debt have fixed
interest rates and, to such extent,  the Company's  interest  income and expense
and operating  results  would not be affected by an increase in market  interest
rates. The Company's  outstanding bank debt totaling $300,000 at year-end floats
with the prime  rate,  and a 10%  increase in market  interest  rates would have
increased the Company's  interest expense by approximately  $2,000.  At December
31, 2002, a 10%  increase in market  interest  rates would have reduced the fair
value of the Company's notes  receivable by $1,000 and reduced the fair value of
its debt by $54,000.

     The Company has no other market risk sensitive instruments.

Item 8. Financial Statements and Supplementary Data

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

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

Independent Auditors' Report.........................................35

Financial Statements:

  Balance Sheets, December 31, 2002 and 2001.........................36

  Statements of Operations,
    Years ended December 31, 2002, 2001 and 2000.....................37

  Statements of Shareholders' Equity (Deficiency),
    Years ended December 31, 2002, 2001 and 2000.....................38

  Statements of Cash Flows,
    Years ended December 31, 2002, 2001 and 2000.....................39

  Notes to Financial Statements,
    December 31, 2002, 2001 and 2000.................................41

<PAGE>

                          Independent Auditors' Report



The Board of Directors and Stockholders
The Beard Company:


We have  audited  the  accompanying  consolidated  balance  sheets  of The Beard
Company  and  subsidiaries  as of December  31,  2002 and 2001,  and the related
consolidated  statements of operations,  shareholders' equity (deficiency),  and
cash flows for each of the three years in the period  ended  December  31, 2002.
These financial  statements are the responsibility of the Company's  management.
Our responsibility is to express an opinion on these financial  statements based
on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable  assurance about whether the financial  statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting  the amounts and  disclosures in the financial  statements.  An audit
also includes assessing the accounting principles used and significant estimates
made by  management,  as well as  evaluating  the  overall  financial  statement
presentation.  We believe  that our audits  provide a  reasonable  basis for our
opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all  material  respects,  the  financial  position  of  The  Beard  Company  and
subsidiaries at December 31, 2002 and 2001, and the results of their  operations
and their cash flows for each of the three  years in the period  ended  December
31, 2002, in conformity with  accounting  principles  generally  accepted in the
United States.

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 2 to the
financial  statements,  the Company's  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.



                                            Cole & Reed, P.C.


Oklahoma City, Oklahoma
April 8, 2003

<PAGE>
<TABLE>
                                  THE BEARD COMPANY AND SUBSIDIARIES
                                            Balance Sheets
<CAPTION>
                                                                   December 31,       December 31,
          Assets                                                       2002               2001
                                                                 ----------------    ---------------
<S>                                                              <C>                 <C>
Current assets:
       Cash and cash equivalents                                 $        79,000     $        55,000
       Accounts receivable, less allowance for doubtful
          receivables of $80,000 in 2002 and $79,000 in 2001             133,000             157,000
       Prepaid expenses and other assets                                  20,000              17,000
       Current portion of notes receivable (note 6)                            -             180,000
       Assets of discontinued operations held for resale                 343,000             764,000
                                                                 ----------------    ----------------
                  Total current assets                                   575,000           1,173,000
                                                                 ----------------    ----------------

Notes receivable (note 6)                                                 30,000             108,000

Investments and other assets (note 5)                                     67,000             641,000

Property, plant and equipment, at cost (note 7)                        1,794,000           3,579,000
       Less accumulated depreciation, depletion and amortization       1,259,000           1,489,000
                                                                 ----------------    ----------------
                  Net property, plant and equipment                      535,000           2,090,000
                                                                 ----------------    ----------------

Intangible assets, at cost (note 8)                                      114,000              48,000
       Less accumulated amortization                                      57,000               2,000
                                                                 ----------------    ----------------
                  Net intangible assets                                   57,000              46,000
                                                                 ----------------    ----------------

                                                                 $     1,264,000     $     4,058,000
                                                                 ================    ================


          Liabilities and Shareholders' Equity (Deficiency)

Current liabilities:
       Trade accounts payable                                    $       138,000     $       120,000
       Accrued expenses (note 3)                                         177,000             144,000
       Short-term debt                                                   411,000             300,000
       Current maturities of long-term debt (note 9)                       8,000               7,000
       Liabililities of discontinued operations held for resale          125,000             321,000
                                                                 ----------------    ----------------
                  Total current liabilities                              859,000             892,000
                                                                 ----------------    ----------------

Long-term debt less current maturities (note 9)                          853,000              19,000

Long-term debt - related entities (note 9)                             3,388,000           2,494,000

Other long-term liabilities                                              108,000             108,000

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

Common shareholders' equity (deficiency):
       Common stock of $.001333 par value per share; 7,500,000
          shares authorized; 2,123,898 shares issued
          and outstanding in 2002 and 2001                                 3,000               3,000
       Capital in excess of par value                                 38,207,000          38,081,000
       Accumulated deficit                                           (41,182,000)        (36,568,000)
       Accumulated other comprehensive loss                              (15,000)            (14,000)
       Treasury stock, 295,053 shares, at cost, in 2002 and 2001      (1,846,000)         (1,846,000)
                                                                 ----------------    ----------------
                  Total common shareholders' equity (deficiency)      (4,833,000)           (344,000)
                                                                 ----------------    ----------------

Commitments and contingencies (notes 4, 10, and 14)
                                                                 $     1,264,000     $     4,058,000
                                                                 ================    ================
</TABLE>

See accompanying notes to financial statements.

<TABLE>
                                           THE BEARD COMPANY AND SUBSIDIARIES
                                                Statements of Operations
<CAPTION>
                                                                        -----------------------------------------------
                                                                             2002            2001            2000
                                                                        --------------   -------------   --------------
<S>                                                                     <C>              <C>             <C>
Revenues:
      Coal reclamation                                                  $      12,000    $    137,000    $     215,000
      Carbon dioxide                                                          445,000         442,000          471,000
      China                                                                         -               -                -
      e-Commerce                                                                    -               -                -
      Other                                                                    12,000          23,000           31,000
                                                                        --------------   -------------   --------------
                                                                              469,000         602,000          717,000
                                                                        --------------   -------------   --------------
Expenses:
      Coal reclamation                                                        458,000         524,000          663,000
      Carbon dioxide                                                          117,000          96,000           82,000
      China                                                                         -               -          400,000
      e-Commerce                                                                    -               -                -
      Selling, general and administrative                                   1,204,000       1,232,000        1,480,000
      Depreciation, depletion and amortization                                144,000          90,000           84,000
      Impairment of long-lived assets (notes 1, 7, 8 and 16)                1,561,000               -                -
      Other                                                                    42,000          32,000           28,000
                                                                        --------------   -------------   --------------
                                                                            3,526,000       1,974,000        2,737,000
                                                                        --------------   -------------   --------------
Operating profit (loss):
      Coal reclamation                                                     (2,105,000)       (544,000)        (625,000)
      Carbon dioxide                                                          291,000         313,000          356,000
      China                                                                   (63,000)              -         (400,000)
      e-Commerce                                                             (202,000)       (172,000)        (275,000)
      Other, principally corporate                                           (978,000)       (969,000)      (1,076,000)
                                                                        --------------   -------------   --------------
                                                                           (3,057,000)     (1,372,000)      (2,020,000)
Other income (expense):
      Interest income                                                         119,000         177,000          136,000
      Interest expense                                                       (400,000)       (207,000)         (60,000)
      Equity in net earnings (loss) of unconsolidated affiliates             (238,000)       (167,000)         235,000
      Gain on sale of assets                                                   27,000          81,000          298,000
      Impairment of investments and other assets (notes 1, 7, 8 and 16)      (872,000)        (41,000)         (71,000)
      Minority interest in operations of consolidated subsidiaries                  -               -           16,000
      Other                                                                    (1,000)          3,000           82,000
                                                                        --------------   -------------   --------------
Loss from continuing operations before income taxes                        (4,422,000)     (1,526,000)      (1,384,000)

Income tax (expense) benefit  (note 11)                                        31,000          73,000           (8,000)
                                                                        --------------   -------------   --------------
Loss from continuing operations                                            (4,391,000)     (1,453,000)      (1,392,000)

Discontinued operations (note 3):
      Gain from discontinued operations                                             -               -          155,000
      Gain (loss) from discontinuing brine extraction/iodine
        manufacturing activities                                              (88,000)       (111,000)         179,000
      Loss from discontinuing other environmental remediation activities            -         (17,000)        (142,000)
      Loss from discontinuing interstate travel facilities activities         (85,000)       (121,000)        (591,000)
      Loss from discontinued Natural Gas Well Servicing activities            (50,000)       (619,000)      (1,238,000)
                                                                        --------------   -------------   --------------
      Loss from discontinued operations                                      (223,000)       (868,000)      (1,637,000)
                                                                        --------------   -------------   --------------
Net loss                                                                $  (4,614,000)   $ (2,321,000)   $  (3,029,000)
                                                                        ==============   =============   ==============
Net loss attributable to common shareholders (note 4)                   $  (4,614,000)   $ (2,321,000)   $  (3,029,000)
                                                                        ==============   =============   ==============
Net loss per average common share outstanding:
   Basic and diluted (notes 1 and 12):
      Loss from continuing operations                                   $       (2.40)   $      (0.79)   $       (0.76)
      Loss from discontinued operations                                         (0.12)          (0.48)           (0.90)
                                                                        --------------   -------------   --------------
      Net loss                                                          $       (2.52)   $      (1.27)   $       (1.66)
                                                                        ==============   =============   ==============
Weighted average common shares outstanding - basic and diluted              1,829,000       1,829,000        1,829,000
                                                                        ==============   =============   ==============
</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'
                                                  Common      Excess of      Accumulated   Comprehensive   Treasury      Equity
                                                   Stock      Par Value        Deficit        Income        Stock     (Deficiency)
                                                 ---------  --------------  --------------  -----------  ----------- ---------------
<S>                                              <C>        <C>              <C>            <C>          <C>           <C>
Balance, December 31, 1999                       $  3,000   $   37,723,000   $(31,218,000)  $    4,000   $ (1,846,000) $ 4,666,000

        Net loss                                        -                -     (3,029,000)           -              -   (3,029,000)
        Comprehensive income:
          Foreign currency translation
          adjustment                                    -                -              -      (17,000)             -      (17,000)

                                                                                                                        ------------
     Comprehensive loss                                 -                -              -            -              -   (3,046,000)
                                                                                                                        ------------

       Reservation of shares pursuant to deferred
          compensation plan (note 12)                   -          263,000              -            -              -      263,000

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

Balance, December 31, 2000                          3,000       37,986,000    (34,247,000)     (13,000)    (1,846,000)   1,883,000

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

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

       Reservation of shares pursuant to deferred
          compensation plan (note 12)                   -           95,000              -            -              -       95,000

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

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

        Net loss                                        -                -     (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)
                                                 =========  ===============  ==============  =========== ============= ============

</TABLE>

See accompanying notes to financial statements.

<TABLE>
                                              THE BEARD COMPANY AND SUBSIDIARIES
                                                   Statements of Cash Flows
<CAPTION>
                                                                                       Year Ended December 31,
                                                                          ------------------------------------------------
                                                                              2002              2001              2000
                                                                          ------------      -------------     ------------
<S>                                                                       <C>               <C>               <C>
Operating activities:
      Cash received from customers                                        $   499,000        $   768,000      $   734,000
      Cash paid to suppliers and employees                                 (1,595,000)        (1,766,000)      (2,673,000)
      Interest received                                                        21,000            142,000           88,000
      Interest paid                                                          (430,000)          (106,000)         (12,000)
      Taxes paid                                                                    -             73,000           (8,000)
      Operating cash flows of discontinued operations                        (284,000)          (354,000)        (681,000)
                                                                          ------------       ------------     ------------
           Net cash used in operating activities                           (1,789,000)        (1,243,000)      (2,552,000)
                                                                          ------------       ------------     ------------

Investing activities:
      Acquisition of property, plant and equipment                            (68,000)           (83,000)        (488,000)
      Acquisition of intangibles                                               (2,000)           (12,000)         (25,000)
      Proceeds from sale of assets                                             49,000             82,000          516,000
      Proceeds from sale of assets of discontinued operations                 285,000            182,000           45,000
      Advances for notes receivable                                                 -           (378,000)        (325,000)
      Payments on notes receivable                                            188,000            876,000          360,000
      Investment in and advances to fifty percent-owned
         and wholly-owned subsidiary in Mexico                                (21,000)           (80,000)        (615,000)
      Investment in and advances to fifty percent-owned
         subsidiary in China                                                 (585,000)          (751,000)               -
      Proceeds from redemptions of certificates of deposit                          -                  -          280,000
      Distribution from partnership                                                 -                  -          482,000
      Other investments                                                       199,000            133,000          269,000
                                                                          ------------       ------------     ------------
           Net cash provided by (used in) investing activities                 45,000            (31,000)         499,000
                                                                          ------------       ------------     ------------

Financing activities:
      Proceeds from line of credit and term notes                           1,166,000            480,000        1,386,000
      Proceeds from related party debt                                      1,178,000          1,327,000                -
      Payments on line of credit and term notes                              (373,000)          (489,000)         (69,000)
      Payments on related party debt                                         (101,000)           (20,000)               -
      Capitalized costs associated with issuance of
         subordinated debt                                                   (102,000)                 -                -
                                                                          ------------       ------------     ------------
           Net cash provided by financing activities                        1,768,000          1,298,000        1,317,000
                                                                          ------------       ------------     ------------

Net increase (decrease) in cash and cash equivalents                           24,000             24,000         (736,000)

Cash and cash equivalents at beginning of year                                 55,000             31,000          767,000
                                                                          ------------       ------------     ------------

Cash and cash equivalents at end of year                                  $    79,000        $    55,000      $    31,000
                                                                          ============       ============     ============
</TABLE>

See accompanying notes to financial statements.

<TABLE>
                                             THE BEARD COMPANY AND SUBSIDIARIES
                                                  Statements of Cash Flows
Reconciliation of Net Loss to Net Cash Used In Operating Activities:
<CAPTION>
                                                                                       Year Ended December 31,
                                                                          ------------------------------------------------
                                                                              2002              2001              2000
                                                                          ------------      -------------     ------------
<S>                                                                       <C>               <C>               <C>
Net loss                                                                  $  (4,614,000)    $  (2,321,000)    $  (3,029,000)
Adjustments to reconcile net loss to net cash
  used in operating activities:
      Depreciation, depletion and amortization                                  144,000            90,000            84,000
      Depreciation, depletion and amortization
         discontinued operations                                                  2,000            46,000            27,000
      (Gain) loss on sale of assets                                             (27,000)          (81,000)         (298,000)
      (Gain) loss on sale of assets of discontinued operations                  (86,000)           90,000           (30,000)
      Gain from discontinued operations                                               -                 -          (334,000)
      Provision for uncollectible accounts and notes                             25,000            45,000            99,000
      Impairment of investments and other assets                              2,433,000            41,000            71,000
      Impairment of investments and other assets of
         discontinued operations                                                 80,000           145,000           420,000
      Equity in net (earnings) loss of unconsolidated
         affiliates                                                             238,000           167,000          (235,000)
      Equity in net loss of unconsolidated affiliates of
         discontinued operations                                                 15,000           313,000         1,069,000
      Minority interest in operations of consolidated subsidiaries                    -                 -           (16,000)
      Non cash compensation expense                                             126,000                 -                 -
      Other                                                                     (10,000)                -             5,000
      (Increase) decrease in accounts receivable, other
        receivables, prepaid expenses and other current assets                 (102,000)          159,000           239,000
      Decrease in inventories                                                    93,000                 -                 -
      Net cash used by discontinued operations offsetting
         accrued losses                                                        (155,000)          (58,000)         (180,000)
      Increase (decrease) in trade accounts payable,
         accrued expenses and other liabilities                                  49,000           121,000          (444,000)
                                                                          --------------    --------------    --------------
      Net cash used in operating activities                               $  (1,789,000)    $  (1,243,000)    $  (2,552,000)
                                                                          ==============    ==============    ==============
Supplemental Schedule of Noncash Investing and Financing Activities:

Accounts payable, accrued expenses and other debt
      obligations assumed or cancelled by the purchaser of
      the interstate travel facilities' assets                            $           -     $      38,000     $           -
                                                                          ==============   ===============    ==============
</TABLE>

See accompanying notes to financial statements.

<PAGE>
                       THE BEARD COMPANY AND SUBSIDIARIES

                          Notes to Financial Statements

                        December 31, 2002, 2001, and 2000

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

Principles of Consolidation and Basis of Presentation

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

The Company  operated in the interstate  travel  facilities  business (the "ITF"
Segment)  following its acquisition of four travel  facilities in February 1998.
As discussed in note 3, in April 1999, the Company's Board of Directors  adopted
a formal plan to discontinue the ITF Segment.

The Company  operated  in the Brine  Extraction/Iodine  Manufacturing  ("BE/IM")
Segment,  consisting  of  the  Company's  40%-ownership  investment  in a  joint
venture, North American Brine Resources ("NABR"), for the extraction, production
and  sale of  crude  iodine.  As  discussed  in note 3, in  December  1999,  the
Management Committee of NABR adopted a formal plan to discontinue the business.

The Company  operated in the Natural Gas Well Servicing  ("WS") Segment  through
(i) a 50%-owned  company  (accounted  for as an equity  investment)  involved in
natural gas well testing  operations  and (ii) a  wholly-owned  company that had
designed a sand separator for use on natural gas wells.  As discussed in note 3,
in May 2001,  the fixed assets of the 50%-owned  company were sold and in August
2001, the Company ceased  pursuing  opportunities  in Mexico and the segment was
discontinued.  The  majority  of the  assets of the  100%-owned  company  in the
segment were sold in December 2001.

The Company operated in the environmental  remediation  business through ISITOP,
Inc., an 80%-owned  subsidiary  specializing  in the  remediation  of polycyclic
aromatic  hydrocarbon  ("PAH")  contamination.  As discussed in note 3, in March
2001, the Company  determined that it would no longer provide  financial support
to ISITOP, Inc. and the business was discontinued.

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.
Actual results could differ from those estimates.

Cash and Cash Equivalents

There were no cash equivalents at December 31, 2002 or 2001. 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 of 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

In October 2001, the Financial  Accounting  Standards Board issued  Statement of
Financial  Accounting  Standards ("SFAS") NO. 144, Accounting for the Impairment
or Disposal of  Long-Lived  Assets.  This  statement  provides  guidance for the
recognition  and  impairment  loss for certain  types of  long-lived  assets and
expands the scope of discontinued operations.  The Company adopted the Statement
effective January 1, 2002.

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 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 2001 or 2000.

In addition,  in 2002, 2001, and 2000 the Company recognized $872,000,  $41,000,
and $71,000 for  impairments  to the carrying  values of  investments  and other
assets relating to the recoverability of such investments or assets.

Other Long-Term Liabilities

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

Fair Value of Financial Instruments

The  carrying  amounts  of the  Company's  cash and cash  equivalents,  accounts
receivable,  other current assets, trade accounts payables, and accrued expenses
approximate  fair value because of the short maturity of those  instruments.  At
December  31,  2002 and 2001,  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. Redeemable preferred stock is carried at estimated fair value.

Revenue Recognition

The Company recognizes revenue when it is realized or receivable and earned. The
Company  considers  revenue  realized  or  receivable  and earned  when there is
documentation  of an  arrangement,  the  product  has been  shipped or  services
provided to a customer, and the amount of revenue is fixed and determinable.

Income Taxes

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

Treasury Stock

In September  1998,  the Company  announced a plan to  repurchase  up to 150,000
shares  of its  outstanding  common  stock.  In 1999,  the  Company  repurchased
approximately  64,700 shares for $326,000 and in 1998 repurchased  approximately
41,600  shares for  $265,000.  In 1997,  the Company  repurchased  approximately
228,000  shares of its common stock for  approximately  $1,519,000.  The Company
holds  repurchased  stock as treasury stock.  The number of shares purchased and
remaining as treasury  shares as of December 31, 2002 have been restated to give
effect to the 3-for-4 reverse split in September, 2000.

Stock Option Plan

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

Mandatorily Redeemable Preferred Stock

The  Company's  preferred  stock is accounted for at estimated  fair value.  The
excess of the  estimated  redeemable  value  over the fair  value at the date of
issuance  is  accreted  over the  redemption  term.  The  carrying  value of the
preferred stock is increased annually, if necessary, for the estimated accretion
with a corresponding  reduction of capital in excess of par value. The accretion
of carrying  value  decreases  net income or increases  net loss for purposes of
calculating net income (loss) attributable to common shareholders. No additional
accretion was recorded in 2002,  2001, or 2000.  Effective  January 1, 2003, the
preferred  stock  ceased to be  mandatorily  redeemable  and  thereafter  became
convertible at the holder's option into common stock.

Earnings (Loss) Per Share

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

Diluted  loss  per  share  from  continuing  operations  in  the  statements  of
operations   exclude   potential  common  shares  issuable  upon  conversion  of
redeemable preferred stock or exercise of stock options and warrants as a result
of losses from continuing operations for all years presented.

Concentrations of Credit Risk

Financial  instruments that potentially subject the Company to concentrations of
credit risk consist primarily of accounts and notes receivable. Notes and leases
receivable  from four parties  comprised  approximately  82% of the December 31,
2002 balances of accounts and notes receivable.  Generally, the Company does not
require collateral to support accounts and notes receivable.

Comprehensive Income

SFAS No. 130 establishes  standards for reporting and display of  "comprehensive
income" and its  components in a set of financial  statements.  It requires that
all items that are  required to be  recognized  under  accounting  standards  as
components of comprehensive  income be reported in a financial statement that is
displayed with the same  prominence as other financial  statements.  During 2002
and 2001, 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 2001 and 2000  balances  have been  reclassified  to conform to the 2002
presentation.  As  described  in note 3,  the  Company  discontinued  two of its
segments  in 2001.  As a  result,  the 2000  statement  of  operations  has been
reclassified to reflect the two segments' operations as discontinued.

(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 have declined in each of the
last four years and the Company has incurred  operating losses and negative cash
flows from operations  during each of the last five years, the Company is of the
belief  (i) that it will  commence a project  in both its Coal  Segment  and its
China  Segment  during  2003 and (ii) that the  long-awaited  Settlement  in the
McElmo Dome litigation will be received in the May-July time frame of this year.
In addition,  the Company expects to finalize its first licensing arrangement in
its  e-Commerce  Segment  in April of 2003.  Receipt  of the  Settlement  in the
expected  time frame would ensure that 2003 will be a  profitable  year while at
the same time  materially  enhancing the Company's  liquidity and bolstering its
balance sheet ratios.  Meanwhile,  the Company expects to finalize  negotiations
currently in progress on a major coal project,  including the financing thereof,
which would  ensure that its Coal Segment  will become  profitable  beginning in
late 2003 or early 2004. (See Additional  Details below).  Negotiations are also
underway  for a new  composting  project  in China and the  financing  therefor.
Although  the  e-Commerce  licensing  arrangement  would  not make  the  segment
profitable this year, the Company  believes the arrangement has the potential to
make the segment profitable in 2004 or 2005.

During the 12 months  ended  December 31, 2002 and through  March 31, 2003,  the
Company  has taken a number of steps to  reduce  its  negative  cash  flow.  The
Company's  Chairman and  President  have deferred a portion of their base salary
into the  Company's  Deferred  Stock  Compensation  Plan (the "DSC  Plan").  The
Company's outside directors have deferred all of their directors' fees into such
Plan. The President of Beard  Technologies  has deferred a portion of his salary
until the Settlement  has occurred.  The Company has suspended its 100% matching
contribution  (up to a cap of 5% of gross salary) under its 401(k) Plan.  All of
these  measures have helped and will continue to help until the  Settlement  has
occurred.  The negative result has been a substantial  amount of dilution to the
Company's  common  equity.  During such period  225,000  warrants were issued in
connection  with the two private debt  placements,  and 169,000 Stock Units were
accrued in the  participants'  accounts as a result of  deferrals of salary into
the DSC Plan. A minor amount of dilution has also  occurred due to an adjustment
to the  Preferred  Stock  conversion  ratio  resulting  from the issuance of the
warrants and the salary deferrals.

Meanwhile,  despite the recent poor financial  results and the  deterioration of
its financial  condition,  the Company has  demonstrated the ability to maintain
its viability as a going  concern.  During the 12 months ended December 31, 2002
and through March 31, 2003, the Company has  successfully  completed two private
debt placements  totaling $1,800,000 while at the same time increasing its lines
of credit  from a total of  $2,925,000  to a total of  $3,450,000.  During  such
period it has remained in  compliance on all of its debt  obligations.  On March
31, 2003, the Company made the required  semi-annual $61,000 interest payment on
its 10%  subordinated  notes due  September  30,  2003,  and still had  $125,000
available on its existing line of credit from the Unitrust  which,  coupled with
anticipated  proceeds  from the sale of assets,  it believes will be adequate to
carry it until the  anticipated  Settlement of more than $3,900,000 is received.
Receipt of the  Settlement  in the  indicated  time frame would  ensure that the
Company  will remain  viable as a going  concern at least  through  December 31,
2003.

Distribution  of the  Settlement  proceeds will be delayed until the petition to
the U. S. Supreme Court has been decided. Although there is the possibility that
the  appeal  process  would  delay  the  Settlement  into  late 2003 or that the
objecting  parties could ultimately  cause the Settlement to be overturned,  the
Company believes it is unlikely that the Settlement will be overturned.  A delay
in  receiving  the funds until late 2003 would  require  that the  Company  seek
additional financing,  and there is no assurance this would be accomplished.  In
such event the Company  might need to take severe  measures,  including  further
reduction  of overhead  expenses,  in order to ensure the  Company's  ability to
continue as a going concern.

Additional Details

Despite continuing operating losses during the past twelve months, the Company's
cash and cash equivalents  increased  slightly from $55,000 at December 31, 2001
to $79,000 at December 31, 2002. To mitigate potential liquidity  problems,  the
Company obtained financing of $1,800,000 in 2000,  including  $1,500,000 from an
affiliate of the Company's  chairman.  Lines from related parties were increased
to a total of $2,350,000 in September of 2001, to $2,500,000 in January of 2002,
to $2,625,000  in February of 2002,  to  $3,000,000  in October of 2002,  and to
$3,150,000  in  November  of  2002.  Despite  these  inflows,   working  capital
deteriorated $565,000 during 2002.

The  Company's  principal  business  is coal  reclamation,  and  this  is  where
management's   operating  attention  is  primarily  focused.  The  Coal  Segment
currently has several projects in various stages of development  which,  subject
to  arranging  necessary  financing,  are  ultimately  expected  to mature  into
operating  projects.  The segment has entered into a memorandum of understanding
on one of these  projects  and expects to reach a  definitive  agreement  on the
project during the second quarter of 2003.  Negotiations  are in progress with a
third  party to form a joint  venture or limited  liability  company  that would
provide the  initial  working  capital and  guarantee  the  necessary  equipment
financing for the project.  The timing of the project is uncertain but,  subject
to  obtaining  the  necessary  financing,  it  is  considered  to  have  a  high
probability  of activity.  However,  no  definitive  contracts  have as yet been
signed,  and there is no assurance that the required  financing will be obtained
or that the project will materialize.

After more than four years of  development  activity by the China  Segment,  and
just when it appeared  that its efforts were finally  starting to bear fruit,  a
controversy  arose  between the Company and its  technology  partner  concerning
their legal rights and relationships.  Lengthy negotiations and discussions were
unsuccessful in arriving at a mutually agreeable  solution.  In November of 2002
the Company  filed suit to  terminate  the  relationship.  Our  partner  filed a
counterclaim to which the Company has subsequently responded. The outcome of the
litigation cannot presently be determined. Although the Company hopes to recover
the  technology  partner's  50% portion of the total loans and accrued  interest
receivable of more than $1,379,000 which it has made to the partnership,  due to
the present  uncertainties of recovery, an impairment provision in the amount of
$759,000  was  established  in the  fourth  quarter  of 2002.  See Note 5 below.
Accordingly,  all of the projects  which were under  development in China are on
indefinite hold until the outcome of the litigation has been determined.

The segment has obtained an exclusive license  agreement for another  technology
in China and is now pursuing new projects.  Negotiations  are in progress on the
first of these,  and there is ample room and an adequate  market for a number of
such projects in the same area.

Key to the Company's  liquidity is the anticipated  settlement of a lawsuit,  in
which the  Company is a  Plaintiff,  which has been in progress  since  1996.  A
Settlement  Agreement was signed among the attorneys for the  Plaintiffs and the
Defendants  in September  of 2001.  On May 6, 2002,  the federal  judge issued a
final judgment  approving the  Settlement and ordered that a settlement  fund of
$50.4  million in cash be  established  to settle the  litigation.  In late May,
2002, 11 parties (the  "Objectors")  who objected to the Settlement and who were
entitled to receive  approximately  $107,000  thereof filed appeals to the final
approval of the  settlement.  On December 24, 2002,  the Tenth  Circuit Court of
Appeals issued an opinion affirming the May 6, 2002 decision.  On March 24, 2003
the Objectors filed a Petition for a Writ of Certiorari  asking the U.S. Supreme
Court for review. On April 1 Plaintiff's  counsel advised the Court that they do
not intend to file a response to the  Petition  unless one is  requested  by the
Court.  Counsel has also advised that the vast  majority of petitions  are ruled
upon within three to 12 weeks,  and that most  petitions  are disposed of within
2-1/2 weeks.  If the U.S.  Supreme Court denies the Petition,  the Settlement is
expected  to be final  between  early  May and late  June of 2003,  meaning  the
distribution  of Settlement  funds can begin at that time according to the terms
of the Settlement Agreement.  Distribution of the proceeds will be delayed until
the petition to the U.S.  Supreme Court has been decided.  The Company  believes
the  Settlement  will  be  concluded   within  the  time  frame  indicated  with
anticipated  proceeds to the Company in excess of $3.9 million.  Distribution of
the  contemplated  proceeds  will have a  significant  impact upon the Company's
liquidity.  Although  there is the  possibility  that the appeals  process could
delay  the  Settlement  into  late  2003 or that  the  objecting  parties  could
ultimately  cause the  Settlement to be overturned,  the Company  believes it is
unlikely that the Settlement will be overturned.

To further  bolster working  capital,  the Company on May 31, 2002 completed the
private placement of $1,200,000 of 10% subordinated notes due September 30, 2003
(the  "2002  Notes"),  to  "bridge  the gap"  until  the  settlement  funds  are
distributed or until the anticipated  Coal and China projects  achieve  positive
cash flow.  The  Company  has agreed to redeem the 2002 Notes  within 10 days of
receipt of the McElmo Dome settlement. In the event the 2002 Notes have not been
redeemed by the maturity date, they will be automatically  extended to March 31,
2005. An investment  banking firm received warrants to purchase 45,000 shares of
Company common stock as part of its sales  compensation  in connection  with the
offering.  The note holders have the  contingent  right to receive up to 240,000
additional  warrants  depending upon the length of time their notes are held. As
of March 1, 2003,  a total of 120,000 of such  warrants  had been  issued to the
note  holders.  Related  parties  purchased  $320,000 of the  offering,  and had
received a total of 32,000  warrants as of such date. All of the warrants issued
in connection  with the 2002 Notes have a 5-year term and have an exercise price
of $1.00 per share during the first three years and $1.25 per share thereafter.

On February 21, 2003, the Company completed the sale of $600,000 of subordinated
notes (the "2003 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
2003 Notes were  accompanied by warrants to purchase a total of 60,000 shares of
Beard common stock at $0.50 per share. The Company has agreed to redeem the 2003
Notes  within 10 days of receipt of the second  installment  of the McElmo  Dome
settlement.  The 2003 Notes will mature on April 1, 2004;  however, if they have
not been redeemed by such date they will automatically be extended to January 1,
2005.

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

The Company  believes that the cash  generated  from the private debt  placement
just completed,  coupled with the cash expected to be generated from the sale of
assets  and  the  anticipated  distribution  of the  settlement  funds  will  be
sufficient to enable the Company to continue  operations  through 2003 and 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.

(3)  Discontinued Operations

ITF Segment

In April 1999,  Beard's Board of Directors  adopted a formal plan to discontinue
its ITF Segment and recorded losses totaling  $2,419,000 from  discontinuing the
segment in 1998.  The  segment  disposed of all of its assets in 1999 except two
convenience stores,  including their remaining equipment and inventory,  and was
relieved of all outstanding  indebtedness  related to the assets.  An additional
$214,000 was  reflected as loss from  discontinued  operations by the segment in
1999, including a loss accrual of $180,000 to cover anticipated operating losses
from  December 31, 1999 through the  anticipated  disposal date of the remaining
assets.  Revenues and operating  losses from the  discontinued  ITF Segment were
$1,826,000 and $351,000,  respectively in 2000. The Company charged  $180,000 of
these  operating  losses  against  the  loss  accrual  established  in 1999  and
recognized  $44,000 in  September,  2000.  The  remaining  $127,000 in operating
losses were recognized  during the fourth quarter.  Beard recorded an additional
$420,000  loss in  December  2000;  $60,000  represented  losses  expected to be
incurred by the  discontinued  ITF Segment from the date of shutdown through the
anticipated  disposal  date of the  remaining  assets;  and $360,000 of the loss
represented  an additional  reduction in the estimated  realizable  value of the
remaining  C-stores and related  assets as of December 31, 2000.  The total loss
recorded in 2000  related to the  discontinued  ITF Segment  was  $591,000.  ITF
recorded $7,000 of revenues in 2001 and its actual operating losses attributable
to the shutdown and  maintenance  of the  facilities  were $67,000.  ITF charged
$60,000 of the losses to the loss accrual recorded in 2000. The remaining $7,000
is reflected in the statement of operations.  At December 31, 2001, ITF recorded
an additional  $100,000  impairment in the carrying  value of the facilities and
$14,000 for anticipated  operating  losses for the period from December 31, 2001
through the expected  disposal  date of those  remaining  assets.  In 2002,  the
Company 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  facilities.  The  Company  sold one of the  convenience  stores  with
related  property,  plant and equipment on November 12, 2002, for $169,000 after
commissions and other settlement charges.

As of December  31,  2002,  the  significant  assets  related to the ITF Segment
consisted  of  fixed  assets  with a total  estimated  net  realizable  value of
$143,000 and prepaid  expenses and other assets with a recorded value of $4,000.
The significant  liabilities of the segment consist of trade accounts payable of
$2,000.  The remaining  C-store along with related  assets is under contract for
sale for $146,000,  after selling expenses, and is due to be closed prior to May
31, 2003.

BE/IM Segment

In December  1999,  the  Management  Committee  of NABR adopted a formal plan to
discontinue the business and dispose of its assets. Beard had a 40% ownership in
NABR,  which was  accounted for under the equity  method.  As a result of NABR's
discontinuation, Beard's share of NABR's operating results have been reported as
discontinued  for  all  periods  presented  in the  accompanying  statements  of
operations.  Beard's share of NABR's operating results were $82,000 of losses in
1999.  The joint  venture was  dissolved  effective  September  15, 2000 and the
Japanese partners received their final  distribution of cash in December,  2000,
with the Company taking over the remaining assets and  liabilities.  The Company
recorded  $179,000 in income  representing the excess of the amounts received by
the Company over the remaining  basis of the  Company's  investment in the joint
venture.

In addition,  in December 1999, Beard recorded a $540,000 loss, which represents
its share of NABR's $1,350,000  estimated loss expected from the discontinuation
of operations. NABR's loss included $778,000 which represented the difference in
the estimated  amounts expected to be received from the assets'  disposition and
the assets' recorded values as of December 31, 1999, and $572,000 of anticipated
operating  losses through April 2000 (the date operations  ceased for the larger
of the two plants) and costs of ceasing operations. The Company recorded $88,000
and  $111,000,  for the years  2002 and  2001,  respectively,  in net  operating
expenses for the smaller of the two plants  distributed  to the Company in 2000.
The  smaller of the two  plants was sold  effective  July 31,  2002,  which will
eliminate  future  operating  losses  after such date.  The  Company  expects no
further  material  charges to earnings related to the remaining assets until the
time of their disposition or sale.

As of December 31, 2002, the  significant  assets  related to NABR's  operations
consisted  primarily of  equipment  with an estimated  net  realizable  value of
$33,000.  The significant  liabilities  related to NABR's  operations  consisted
primarily of accrued expenses totaling $65,000. The Company is actively pursuing
opportunities  to sell NABR's assets and expects the disposition to be completed
by December 31, 2003.

Solid CO2 Segment

In 1997 the Company  sold the business  and  substantially  all of the assets of
Carbonic  Reserves,  an 85%-owned  subsidiary  involved in the manufacturing and
distribution of solid CO2 ("solid CO2 segment").  The Company recorded  $155,000
in income in October  2000 as the  result of the lapse of an option for  accrued
employee severance compensation.

As of December  31,  2002,  the solid CO2 segment had no  significant  assets or
liabilities.

WS Segment

In May 2001 the  fixed  assets of the  50%-owned  company  (accounted  for as an
equity  investment)  involved in natural  gas well  testing  operations  for the
Natural Gas Well Servicing ("WS") Segment were sold for $1,550,000, subject to a
holdback of $150,000.  $21,000 and $65,000 of the holdback were received in June
and  November,  respectively,  of 2001.  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.

Operating losses from the discontinued segment were $50,000 and $619,000 for the
years ending  December 31, 2002 and 2001,  respectively.  This included  Beard's
share of operating losses from the 50%-owned company (accounted for as an equity
investment)  of $15,000 and $393,000 for the years ending  December 31, 2002 and
2001,  respectively.  The loss for 2001 also included a provision of $72,000 for
estimated losses from the  discontinuation of operations.  The remaining $35,000
and  $226,000  of  losses  for the year  ending  December  31,  2002  and  2001,
respectively,  were associated with the operations of the wholly-owned companies
and were not  anticipated  in the loss  accrual.  The 2002 loss  included  gains
totaling  $88,000 from the sale of equipment  in this  segment.  The 2001 losses
included a $107,000 loss incurred on the sale of the five sand separators  owned
by the  subsidiary of the Company.  Beard's  share of operating  losses from the
discontinued segment was $1,238,000 for 2000.

As of December 31, 2002 the  significant  assets of the WS Segment were accounts
receivable  totaling  $17,000  and fixed  assets of  $144,000.  The  Company  is
actively pursuing the sale of the remaining assets and expects to have them sold
or other wise disposed of by December 31, 2003. The  significant  liabilities of
the segment  consisted  of trade  accounts  payable and other  accrued  expenses
totaling  $59,000.  It is anticipated that all of the liabilities of the segment
will be paid in prior to December 31, 2003.

ER Segment

In  March of 2001  the  Company  determined  that it  would  no  longer  provide
financial support to ISITOP, Inc., an 80%-owned  subsidiary  specializing in the
remediation  of  polycyclic  aromatic  hydrocarbon  ("PAH")  contamination.  The
operations  of ISITOP  had  previously  comprised  the  Company's  environmental
remediation ("ER") Segment. On May 31, 2001, ISITOP was notified by the Licensor
that the segment's  exclusive U.S.  marketing  license for the chemical used for
such PAH remediation had been cancelled.  ISITOP  generated no revenues in 2002,
2001 or in 2000.  ISITOP's  operating losses totaled less than $1,000,  $17,000,
and $142,000 for 2002,  2001 and 2000,  respectively.  ISITOP had no significant
assets or liabilities at December 31, 2002.

(4)  1993 Restructure; Redeemable Preferred Stock

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

The Company's  preferred stock was mandatorily  redeemable  through December 31,
2002 from  one-third  of  Beard's  consolidated  net  income as  defined  in the
Restructure  agreements.  Each share of Beard preferred stock became convertible
into 4.054017704 shares of Beard common stock on January 1, 2003. The conversion
ratio  will be  adjusted  slightly  as  additional  warrants  are  issued  or as
additional  shares  of stock  are  credited  to the  accounts  of the  Company's
Chairman  or  President  in the  Company's  Deferred  Stock  Compensation  Plan.
Fractional  shares  will  not be  issued,  and cash  will be paid in  redemption
thereof.

In 1997, three of the four  Institutions  sold their common and preferred shares
to five  individuals  (the  "Sellers")  who  thereafter  sold such shares to the
Company. Repurchase of the common shares was effected by the Company in 1997 and
repurchase of the preferred  (47,729  shares) was effected in 1998.  The Company
redeemed  16,411 of the preferred  shares at stated value ($100 per share).  The
Sellers'  remaining  31,318  preferred  shares were  purchased for $1,000,000 or
$31.93 per share.

At December 31, 2002 and 2001,  the redeemable  preferred  stock was recorded at
its  estimated  fair value of $889,000 or $31.93 per share and had an  aggregate
redemption value of $2,784,000.

(5)  Investments and Other Assets

Investments and other assets consisted of the following:

<TABLE>
<CAPTION>
                                                                 December 31,
                                                                 ------------
                                                           2002               2001
                                                           ----               ----
<S>                                                     <C>               <C>
      Certificates of deposit                           $         -       $     75,000
      Investment in and advances to ABT-Beard, L.L.C.             -            440,000
      Investment in Cibola Corporation                       11,000             48,000
      Investment in real estate limited partnerships         52,000             54,000
      Other assets                                            4,000             24,000
                                                        -----------       ------------
                                                             67,000            641,000
      Current investments                                         -                  -
                                                        -----------       ------------
                                                        $    67,000       $    641,000
                                                        ===========       ============
</TABLE>

Certificates of Deposit

Included in  investments  and other assets at December 31, 2001 is a certificate
of deposit of $75,000. The certificate of deposit has been pledged as collateral
to secure a note  payable  for the  plaintiff  group in a  lawsuit  in which the
Company is a  participant.  The  certificate of deposit was expensed in the year
2002 as it will not be returned.

Investment in ABT-Beard, L.L.C.

In 2001, the Company contributed $50,000 for a 50% interest in ABT-Beard, L.L.C.
("ABT-Beard"). ABT-Beard was pursuing the formation of joint venture entities in
China which would oversee the  construction  and operation of waste  reclamation
facilities.  The Company did not control ABT-Beard's  operations and, therefore,
accounted  for its  operations  using the equity  method of  accounting  through
November 30, 2002, when the Company decided to terminate the joint venture.  The
Company's  carrying  value of its  investment  in ABT-Beard at December 31, 2002
approximated  ($620,000).  The  Company  also  had  $1,379,000  of  receivables,
including  accrued interest of $99,000,  due from ABT-Beard at December 31, 2002
related to advances to fund operations. Inasmuch as the Company was committed to
funding the operations of ABT-Beard,  the Company's deficit in its investment in
ABT-Beard  and advances  due from  ABT-Beard  are  combined in the  consolidated
balance sheets. The Company recognized an impairment of $759,000 at December 31,
2002 to reduce the net investment  (including the  receivables)  in ABT-Beard to
zero.

The summarized  unaudited financial  information of ABT-Beard,  L.L.C. as of and
for the eleven  months ended  November 30, 2002 and for the year ended  December
31, 2001 is as follows:

<TABLE>
<CAPTION>
                                              November 30,      December 31,
                                                  2002              2001
                                             ----------------  ----------------
<S>                                          <C>               <C>
   Current assets                            $       50,000    $       11,000
   Current liabilities                              (26,000)                -
                                             ----------------  ----------------
   Working capital                                   24,000            11,000

   Equipment, net                                     4,000             6,000
   Other assets                                     385,000           385,000
   Long-term debt (including interest)           (1,427,000)         (702,000)
                                             ----------------  ----------------
   Members' equity (deficit)                 $   (1,014,000)   $     (300,000)
                                             ================  ================

   Revenue                                   $            -    $       72,000
                                             ================  ================

   Net income (loss)                         $     (714,000)   $     (625,000)
   Foreign currency translation adjustment                -                 -
                                             ----------------  ----------------
   Comprehensive income (loss)               $     (714,000)   $     (625,000)
                                             ================  ================
</TABLE>

Investment in Cibola Corporation

The  Company  owns 80% of the  outstanding  common  stock of Cibola  Corporation
("Cibola"),  a natural  gas  marketing  company,  but does not  consolidate  the
assets, liabilities,  revenues or expenses of Cibola because Cibola's assets are
controlled by its minority common stockholders and preferred  stockholders.  The
Company's equity in the earnings of Cibola were $123,000, $142,000, and $237,000
in 2002, 2001 and 2000, respectively.

Investment in Real Estate Limited Partnerships

The  Company  owns a  limited  partnership  interest  in a real  estate  limited
partnership,  and had a limited  partnership  interest  in another  real  estate
limited partnership which was sold in 2000. The remaining limited  partnership's
significant assets consist of undeveloped land near Houston,  Texas. The Company
recorded $4,000 and $2,000 of income in 2002 and 2000, respectively,  and $3,000
of income in 2001  resulting  from its  share of the two  limited  partnerships'
operations for those years.  Additionally,  in 2000, the Company realized income
of  $194,000  as the  result  of the  sale of  property  owned by one of the two
partnerships in which the Company had an interest.

Other assets

The Company recorded provisions of $872,000, $41,000, and $71,000, in 2002, 2001
and 2000, respectively, for economic impairment of other investments,  including
those discussed above.

(6)  Notes Receivable

As of December  31, 2002 and 2001,  the  Company  had various  notes  receivable
totaling  $30,000  and  $179,000,  respectively,  resulting  from  the  sale  of
equipment. The notes bear interest at rates ranging from 5.85% to 8% (discounted
using a 10% interest  rate) at December 31, 2002 and 2001. The note remaining at
December 31, 2002 matures in October, 2004 and is secured by the sold equipment.
At  December  31,  2001,  the Company had a $109,000  note  receivable  due from
Testco, Inc., the other 50% owner of ITS-Testco,  L.L.C. The note, which accrued
interest at an annual rate one percent above the Wall Street  Journal prime rate
until November 26, 2001, when it was increased to 10% per year, was paid in full
in December, 2002.

(7)  Property, Plant and Equipment

Property, plant and equipment consisted of the following:

<TABLE>
<CAPTION>
                                                                     December 31,
                                                                     ------------
                                                              2002                  2001
                                                              ----                  ----
<S>                                                    <C>                   <C>
      Land                                             $        143,000      $        141,000
      Proved and unproved carbon dioxide properties           1,222,000             1,161,000
      Buildings and land improvements                            65,000                65,000
      Machinery and equipment                                   202,000               540,000
      Other                                                     162,000               162,000
      Coal fines extraction and beneficiation equipment               -             1,510,000
                                                       ----------------      ----------------
                                                       $      1,794,000      $      3,579,000
                                                       ================      ================
</TABLE>

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,  an impairment loss of $1,516,000 was recognized
in 2002 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 incurred  $89,000,  $90,000 and $84,000 of depreciation  expense for
2002, 2001 and 2000, respectively.

(8)  Intangible Assets

Intangible assets are summarized as follows:
                                                  December 31,
                                                  ------------
                                           2002                  2001
                                           ----                  ----

      Patent costs                  $              -      $         45,000
      Debt issuance costs                    102,000                     -
      Other                                   12,000                 3,000
                                    ----------------       ----------------
                                    $        114,000      $         48,000
                                    ================      ================


Accumulated amortization is summarized as follows:

                                                  December 31,
                                                  ------------
                                           2002                  2001
                                           ----                  ----

      Patent costs                  $              -      $         45,000
      Debt issuance costs                     47,000                     -
      Other                                   10,000                 3,000
                                    ----------------      ----------------
                                    $         57,000      $         48,000
                                    ================      ================

The Company  capitalized  $102,000 of costs  associated with the issuance of the
10%  Subordinated  Debt. These costs are being amortized over 18 months and will
be fully amortized by December 31, 2003.

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  $55,000 of  amortization  expense for 2002 and less than
$1,000 amortization  expense for each of the years 2001 and 2000,  respectively.
Amortization  expense is expected  to be $55,000 for 2003,  and less than $1,000
for each subsequent year.

(9)  Long-term Debt

Long-term debt is summarized as follows:

<TABLE>
<CAPTION>
                                                               December 31,
                                                               ------------
                                                        2002                  2001
                                                        ----                  ----
<S>                                                <C>                   <C>
   Coal (a)                                        $        5,000        $        8,000
   e-Commerce (b)                                          14,000                18,000
   Line of credit (c)                                     300,000               300,000
   10% Subordinated debt (d)                              842,000                     -
   Lines of credit including accrued interest -
     affiliated entities (e)                            3,499,000             2,494,000
                                                   --------------        --------------
                                                        4,660,000             2,820,000
   Less current maturities                                419,000               307,000
                                                   --------------        --------------
       Long-term debt                              $    4,241,000        $    2,513,000
                                                   ==============        ==============
---------------
<FN>
(a)  At December  31,  2002,  the  Company's  Coal  Segment had one note  payable with a
     balance of $5,000.  The note bears interest at 18%,  requires  monthly  payments of
     interest and principal and matures in March, 2004. The note is secured by equipment
     with an approximate book value of $6,000 at December 31, 2002.

(b)  At December 31, 2002, the Company's  e-Commerce Segment had one note payable with a
     balance due of $14,000.  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 $14,000 at December 31, 2002.

(c)  At December 31, 2002, the Company had fully utilized a $300,000 line of credit at a
     bank.  The line bears interest at prime plus one-half  percent,  (4.75% at December
     31, 2002) requires  monthly payments of interest and matures May 15, 2003. The note
     is guaranteed by a related party.

(d)  At December  31,  2002,  the Company had  various  subordinated  10% notes  payable
     totaling $1,157,000,  net of discount of $43,000,  pursuant to a private placement.
     The  discount,  when  combined with the stated  interest  rate,  will result in the
     holders  receiving an effective  interest rate of approximately  15%. The notes are
     mandatorily redeemable within 10 days of the receipt of the McElmo Dome settlement.
     In the event the notes have not been redeemed by the maturity date of September 30,
     2003, they will be automatically  extended to March 31, 2005. An investment banking
     firm received warrants to purchase 45,000 shares of Company common stock as part of
     its sales  compensation in connection with the offering.  The note holders have the
     contingent right to receive up to 240,000  additional  warrants  depending upon the
     length of time their notes are held.  As of December 31, 2002, a total of 60,000 of
     such  warrants  had been  issued to the note  holders.  Related  parties  purchased
     $320,000 of the  offering,  and had received a total of 16,000  warrants as of such
     date.  The exercise price of the warrants is $1.00 per warrant share until November
     30, 2005 and thereafter  $1.25 per warrant share;  however,  if the maturity of the
     notes is extended  for 18 months,  the exercise  price after the original  maturity
     shall be $0.75 per warrant 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.  The
     note holders will be granted a security interest pari passu with the related entity
     if certain  events of default  should occur.  The assets  serving as collateral for
     these debt  instruments have a recorded value on the Company's books of $414,000 as
     of December 31, 2002.

(e)  At December 31, 2002, the Company had borrowed $3,110,000 from an affiliated entity
     of the Chairman of the Company  under terms of two notes that bear interest at 10%.
     The amounts borrowed under the first note totaling  $3,000,000 are due to be repaid
     on the  earlier of  January 3, 2005 or within 10 days of the  receipt of the McElmo
     Dome  settlement.  The  principal  amount of the other note,  totaling  $110,000 at
     December 31, 2002, plus accrued  interest was repaid February 24, 2003,  along with
     accrued interest of $74,000 on the first note.
</FN>
</TABLE>

The annual  maturities  of long-term  debt  subsequent  to December 31, 2002 are
$419,000 for 2003, $3,081,000 for 2004, and $1,160,000 for 2005.

The Company incurred $294,000, $182,000 and $45,000 of interest expense relating
to debt to related  parties in 2002,  2001 and 2000,  respectively.  The Company
paid  $363,000,  $76,000  and none of those  amounts  for  2002,  2001 and 2000,
respectively.

The weighted average interest rate for the Company's  short-term  borrowings was
6.16% as of December 31, 2002.

(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, 2002 are summarized as follows:

           2003              $ 170,000
           2004                 21,000
           2005                 12,000
                             ----------
                             $ 203,000
                             ==========

Rent expense under operating leases aggregated $311,000,  $275,000, and $201,000
in 2002,  2001 and 2000,  respectively.  The Company has charged  $64,000 of the
amount incurred in 2002 to ABT-Beard, L.L.C.

(11)  Income Taxes

Total income tax expense (benefit) was allocated as follows:

<TABLE>
<CAPTION>
                                        Year ended December 31,
                                        -----------------------
                                  2002            2001           2000
                                  ----            ----           ----
<S>                           <C>             <C>             <C>
   Continuing operations      $  (31,000)     $  (73,000)     $    8,000
   Discontinued operations             -          (2,000)              -
                              ----------      ----------      ----------
                              $  (31,000)     $  (75,000)     $    8,000
                              ==========      ==========      ==========
</TABLE>

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

<TABLE>
<CAPTION>
                                       Year ended December 31,
                                       -----------------------
                                 2002            2001           2000
                                 ----            ----           ----
<S>                          <C>             <C>             <C>

   U. S. federal             $  (31,000)     $  (54,000)     $    8,000
   Various states                     -         (19,000)              -
                             ----------      ----------      ----------
                             $  (31,000)     $  (73,000)     $    8,000
                             ==========      ==========      ==========
</TABLE>

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,
                                                                         -----------------------
                                                        2002                    2001                 2000
                                                        ----                    ----                 ----
<S>                                                <C>                     <C>                  <C>
   Computed U. S. federal statutory benefit        $  (1,680,000)          $   (580,000)        $   (526,000)
   Federal alternative minimum tax (benefit)             (31,000)               (54,000)               8,000
   Increase in the valuation allowance
        for deferred tax assets                        1,680,000                580,000              526,000

   State income tax (benefit)                                  -                (19,000)                   -
                                                   -------------           ------------         ------------
                                                   $     (31,000)          $    (73,000)        $      8,000
                                                   =============           ============         ============
</TABLE>

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

<TABLE>
<CAPTION>
                                                                                               December 31,
                                                                                               ------------
                                                                                       2002                   2001
                                                                                       ----                   ----
<S>                                                                                <C>                   <C>
   Deferred tax assets - tax effect of:
      Net operating loss carryforwards                                             $  20,725,000         $   20,047,000
      Statutory depletion and investment tax credit carryforwards                      2,081,000              2,081,000
      Other, principally investments and property, plant and equipment                    57,000                112,000
                                                                                   -------------         --------------
         Total gross deferred tax assets                                              22,863,000             22,240,000
              Less valuation allowance                                               (22,823,000)           (22,200,000)
   Deferred tax liabilities                                                              (40,000)               (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,  2002,  the Company had  federal  regular tax  operating  loss
carryforwards of  approximately  $54.6 million that expire from 2004 to 2009 and
tax depletion  carryforwards of approximately $5.5 million.  These carryforwards
may be limited if the Company undergoes a significant ownership change.

(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, the
number of shares authorized under the 1993 Plan was reduced to 206,250. The 1993
Plan is  administered  by the  Compensation  and  Stock  Option  Committee  (the
"Committee")  of the Board of  Directors.  The option price is determined by the
Committee  but cannot be less than the fair market  value of the common stock of
the  Company at the date of grant for  incentive  stock  options and 75% of fair
market value of the common  stock for  non-qualified  options.  All options have
ten-year  terms and become  exercisable  one year after the date of grant at the
rate  of 25%  each  year  until  fully  exercisable.  Directors  who are not key
management  employees  of the  Company or  subsidiaries  of the Company are only
eligible to be granted  non-qualified stock options. At December 31, 2002, there
were 93,750 additional shares available for grant under the Plan.

The per share  weighted-average  fair value of stock options granted during 1997
was $2.67 on the date of grant using the Black-Scholes option pricing model with
the following  assumptions:  no expected dividend yield; risk-free interest rate
of 6.5%;  expected life of ten years; and expected volatility of 39%. No options
were granted in 2000, 2001 or 2002.

The Company  applies APB Opinion No. 25 in accounting for its stock options and,
accordingly,  no compensation  cost has been recognized for its stock options in
the financial statements.  Had the Company determined compensation cost based on
the fair value at the grant date for its stock  options  under SFAS No. 123, the
net loss would have increased  $1,000 in 2001 and $8,000 in 2000. There would be
no effect on the 2002 net loss.  Net  earnings  (loss) per share  would not have
been affected for any years presented in the accompanying financial statements.

Stock option activity during the periods indicated is as follows:

<TABLE>
<CAPTION>
                                         Number of          Weighted-Average
                                          Shares             Exercise Price
                                     ----------------       ----------------
<S>                                  <C>                    <C>
Balance at December 31, 1999(A)               46,496                   $3.09
     Granted                                       -                       -
     Exercised                                     -                       -
     Forfeited                                (5,625)                   2.67
     Expired                                       -                       -
                                     ----------------       ----------------
Balance at December 31, 2000                  40,871                   $3.16
     Granted                                       -                       -
     Exercised                                     -                       -
     Forfeited                                     -                       -
     Expired                                       -                       -
                                     ----------------       ----------------
Balance at December 31, 2001                  40,871                   $3.16
     Granted                                       -                       -
     Exercised                                     -                       -
     Forfeited                                     -                       -
     Expired                                       -                       -
                                     ----------------       ----------------
Balance at December 31, 2002                  40,871                   $3.16
                                     ================       ================
<FN>
(A)  Adjusted to reflect the 3-for-4  reverse stock split  effected in September
     2000.
</FN>
</TABLE>

At  December  31,  2002,  the  range of  exercise  prices  and  weighted-average
remaining  contractual  life of  outstanding  options  was $2.67 - $5.83 and 2.5
years, respectively.

At both  December  31, 2002 and 2001,  41,000  options were  exercisable,  after
giving  effect  to  the  3-for-4  reverse  split  in  September  2000,  and  the
weighted-average exercise price of those options was $3.16.

The Company has a deferred  compensation plan for certain key executives and the
board of  directors  which  provide for  payments  in the form of the  Company's
common  stock upon the  death,  disability,  retirement  or  termination  of the
participant.  The  number  of  shares of stock  credited  to each  participant's
account  is equal to the  amount of  compensation  deferred  divided by the fair
market value of the stock on the deferral  date. As of December 31, 2002,  there
were 335,000 shares reserved for distribution under the plan.

(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 15%, and
the  Company  matches  100% of  each  employee's  contribution  up to 5% of such
employee's  compensation.  The second plan covers  those  employees  in the Coal
Segment and allows  voluntary  "savings"  contributions  up to a maximum of 15%.
Under this plan, the Company contributes $1.00 per hour of service performed for
hourly employees and up to 6% of compensation for salaried employees  regardless
of the employees' contribution. The Company's contributions under both plans are
limited to the  maximum  amount that can be  deducted  for income tax  purposes.
Benefits  payable  under the  plans are  limited  to the  amount of plan  assets
allocable to the account of each plan participant. The Company retains the right
to modify, amend or terminate the plans at any time. During 2002, 2001 and 2000,
the Company  made  matching  contributions  of $32,000,  $54,000,  and  $63,000,
respectively,  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.

(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").  Neither Beard nor Beard Oil is
presently  aware  of any  material  liabilities  existing  as a  result  of such
Obligations.

In November of 2002, the Company filed suit in the Western  District of Oklahoma
to terminate ABT-Beard and the Company's business relationship with American Bio
Tech, Inc. ("ABT"), the other party in ABT-Beard.  Additionally,  the Company is
seeking recovery of costs, expenses and attorney's fees. In January of 2003, ABT
filed its answer and asserted  counterclaims against the Company and third-party
claims against Beard Sino-American  Resources,  Co., Inc., Beijing Beard Biotech
Engineering Co., Inc.,  Cambridge/ABT Beard Handan Venture,  L.L.C.,  William M.
Beard,  Riza E. Murteza,  and Mark E. Voth. The Company and the other defendants
have filed an answer  denying  liability  and intend to  vigorously  defend such
claims.  Management feels that the claims of ABT are without merit and expect no
material liabilities as a result of ABT's suit against the Company and the other
defendants.

(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 2002, 2001 and 2000: Coal,  Carbon Dioxide,  China,
and e-Commerce.

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

The 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>
                                                   Carbon
                                        Coal      Dioxide     China     e-Commerce     Totals
                                        ----      -------     -----     ----------     ------
<S>                                     <C>       <C>         <C>          <C>         <C>
                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)                (2,098)      291       (714)         (204)      (2,725)
     Segment assets                           33       458        439            15          945
     Expenditures for segment                  7        62          -             2           71
       assets

                2001
                ----
     Revenues from external
       customers                        $    137  $    442    $    72      $      -    $     651
     Interest income                           -         -          -             -            -
     Interest expense                          2         -         34             2           38
     Depreciation, depletion and
        amortization                          20        33          1             6           60
     Segment profit (loss)                  (531)      313       (625)         (175)      (1,018)
     Segment assets                        1,609       460        403            64        2,536
     Expenditures for segment                 17        17          -            14           48
       assets

                2000
                ----
     Revenues from external
       customers                        $    215  $    471    $     -      $      -    $     686
     Interest income                           -         -          -             -            -
     Interest expense                          3         -          -             1            4
     Depreciation, depletion and
        amortization                          19        33          -             3           55
     Segment profit (loss)                  (625)      356       (400)         (275)        (944)
     Segment assets                        1,746       453          -            59        2,258
     Expenditures for segment                371         4          -             8          383
       assets
</TABLE>


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

<TABLE>
<CAPTION>
                                                                 2002          2001          2000
                                                            ------------- ------------- -------------
<S>                                                         <C>           <C>           <C>
        Total revenues for reportable segments              $       457   $      651    $       686
        Revenues from China operations accounted for as
           an equity investment                                       -          (72)             -
        Revenues from corporate activities not allocated
           to segments                                               12            23            31
                                                            ------------- ------------- -------------
           Total consolidated revenues                      $       469   $       602   $       717
                                                            ============= ============= =============
</TABLE>

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

<TABLE>
<CAPTION>
                                                                 2002          2001          2000
                                                            ------------- ------------- -------------
<S>                                                         <C>           <C>           <C>
        Total interest expense for reportable segments      $      101    $       38    $         4
        Interest expense from China operations
            accounted for as an equity investment                  (98)          (34)             -
        Interest expense from corporate activities not
           allocated to segments                                   397           203             56
                                                            ------------- ------------- -------------
           Total consolidated interest expense              $      400    $      207    $        60
                                                            ============= ============= =============
</TABLE>

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

<TABLE>
<CAPTION>
                                                                 2002          2001          2000
                                                            ------------- ------------- -------------
<S>                                                         <C>           <C>           <C>
        Total depreciation, depletion and amortization
            for reportable segments                         $        65   $        60   $        55
        Corporate depreciation and amortization
           not allocated to segments                                 79            30            29
                                                            ------------- ------------- -------------
             Total consolidated depreciation, depletion and
                 amortization                               $       144   $        90   $        84
                                                            ============= ============= =============
</TABLE>

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

<TABLE>
<CAPTION>
                                                                 2002          2001          2000
                                                            ------------- ------------- -------------
<S>                                                         <C>           <C>           <C>
        Total loss for reportable segments                  $    (2,725)  $    (1,018)  $      (994)
        Eliminate loss from China operations
           accounted for as an equity investment                    714           625             -
        Equity in loss from China operations accounted for
           as an equity investment                                 (357)         (312)            -
        Net corporate costs not allocated to segments            (2,054)         (821)         (390)
                                                            ------------- ------------- -------------
             Total consolidated loss from continuing
                 operations                                 $    (4,422)  $    (1,526)  $    (1,384)
                                                            ============= ============= =============
</TABLE>


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

<TABLE>
<CAPTION>
                                                                 2002            2001
                                                            --------------- ---------------
<S>                                                         <C>             <C>
        Total assets for reportable segments                $        945    $      2,536
        Assets from China operations accounted for as an
           equity investment                                        (439)           (403)
        Investment in equity investee - China operations               -             440
        Assets of discontinued operations                            343             764
        Corporate assets not allocated to segments                   415             721
                                                            --------------- ---------------
           Total consolidated assets                        $      1,264    $      4,058
                                                            =============== ===============
</TABLE>

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

<TABLE>
<CAPTION>
                                                                 2002            2001
                                                            --------------- --------------
<S>                                                         <C>             <C>
        Total expenditures for assets for reportable
            Segments                                        $         71    $          48
        Capital expenditures of discontinued operations                9                3
        Corporate expenditures not allocated to segments              21               24
                                                            --------------- --------------
           Total expenditures for assets                    $        101    $          75
                                                            =============== ==============
</TABLE>

11% of segment  revenues  for 2001 were  derived  from a customer in China.  The
remaining  2002 and all of 2000 segment  revenues were derived from customers in
the United States.  Certain long-lived assets with recorded values approximating
$305,000  at December  31, 2001 were  located in China.  All  remaining  segment
assets are located in the United States.

During 2002, one customer  accounted for 93% of the Coal Segment's and 2% of the
Company's  revenues.  During 2001,  two customers  accounted for 47% of the Coal
Segment's  and  10%  of the  Company's  revenues.  During  2000,  two  customers
accounted for 65% of the Coal Segment's and 20% of the Company's  revenues.  The
Company's  CO2 revenues are received  from two  operators in the CO2 Segment who
market the CO2 gas to numerous  end users on behalf of the  interest  owners who
elect to participate in such sales.  During 2002, 2001, and 2000, sales by these
two operators  accounted for 97%, 68%, and 69%,  respectively,  of the Company's
segment revenues and all of the Carbon Dioxide  Segment's  revenues.  All of the
China Segment's 2001 revenues were derived from one customer.

(16)  Quarterly Financial Data (unaudited)

<TABLE>
<CAPTION>
                                                                Three Months Ended
                                  ------------------- ------------------- ------------------- -----------------
                                      March 31,            June 30,         September 30,       December 31,
                                         2002                2002                2002               2002
                                  ------------------- ------------------- ------------------- -----------------
                                                      (in thousands except per share data)
<S>                               <C>                 <C>                 <C>                 <C>
     Revenues                     $              90   $             127   $             131   $           121
     Operating loss                            (351)               (353)               (327)           (2,026)
     Loss from continuing
          operations                           (413)               (505)               (450)           (3,023)
     Loss from discontinued
          operations                            (48)                (55)                (78)              (42)
     Net loss                                  (461)               (560)               (528)           (3,065)
     Basic loss per share                     (0.25)              (0.31)              (0.29)            (1.67)
     Diluted loss per share                   (0.25)              (0.31)              (0.29)            (1.67)

                                                                Three Months Ended
                                  ------------------- ------------------- ------------------- -----------------
                                      March 31,            June 30,         September 30,       December 31,
                                         2001                2001                2001               2001
                                  ------------------- ------------------- ------------------- -----------------
                                                      (in thousands except per share data)
     Revenues                     $             183   $             168   $             129   $           122
     Operating loss                            (296)               (335)               (349)             (392)
     Loss from continuing
          operations                           (274)               (339)               (393)             (447)
     Loss from discontinued
          operations                           (310)               (150)                (56)             (352)
     Net loss                                  (584)               (489)               (449)             (799)
     Basic loss per share                     (0.32)              (0.27)              (0.24)            (0.44)
     Diluted loss per share                   (0.32)              (0.27)              (0.24)            (0.44)
</TABLE>

The quarterly  information  presented  above has been restated to conform to the
final year-end 2002 presentation.

During the fourth  quarter of 2002,  The Company  recorded  economic  impairment
losses on certain  long-lived assets in the Coal Segment and e-Commerce  Segment
of $1,516,000 and $45,000,  respectively.  In addition, in the fourth quarter of
2002, the Company recorded economic  impairments of the Company's  investment in
its operations in China totaling $759,000,  a certificate of deposit relating to
the McElmo Dome  litigation of $75,000,  another  start-up  entity  operating in
China totaling $7,000,  and a note receivable for certain assets sold in a prior
year totaling  $31,000.  During the fourth quarter of 2001, the Company recorded
economic  impairment losses on certain investments and an additional accrual for
loss relating to the Company's investment in the discontinued  interstate travel
business of $113,000 and $114,000, respectively.

(17)  Subsequent events

Private Placement of Notes and Warrants

On February 21, 2003, the Company completed the sale of $600,000 of subordinated
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 Notes were
accompanied  by Warrants to  purchase a total of 60,000  shares of Beard  common
stock at $0.50 per share.  The Company has agreed to redeem the Notes  within 10
days of receipt of the second  installment  of the McElmo Dome  settlement.  The
Notes will mature on April 1, 2004;  however,  if they have not been redeemed by
such date they will automatically be extended to January 1, 2005. As a condition
of the  private  placement,  a new  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.
Under this Deed of Trust and a companion Subordination and Nominee Agreement the
priorities  as to the  repayment  of  indebtedness  to the note  holders and the
Company's affiliates has been established without the necessity for a triggering
event.

McElmo Dome Litigation

On December  24,  2002,  the Tenth  Circuit  Court of Appeals  issued an Opinion
affirming the May 6, 2002 decision of the Colorado District Court which approved
the Settlement,  the allocation  thereof,  attorneys' fees and other matters. On
March 24,  2003,  parties  objecting  to the  Settlement  filed a  Petition  for
Certiorari  asking the U.S. Supreme Court for review.  If the U.S. Supreme Court
denies the  Petition,  the  Settlement is expected to be final between early May
and late June of 2003, meaning the distribution of Settlement funds can begin at
that time according to the terms of the Settlement  Agreement.  Distribution  of
the proceeds  will be delayed  until the  petition to the U.S Supreme  Court has
been decided.  The Company  believes the Settlement will be concluded within the
time frame indicated with anticipated  proceeds to the Company in excess of $3.9
million.  Although there is the possibility that the appeals process could delay
the  Settlement  into late 2003 or that the objecting  parties could  ultimately
cause the Settlement to be overturned,  the Company  believes it is unlikely the
Settlement   will  be  overturned.   (See  Note  2  above  and  "Item  3.  Legal
Proceedings---McElmo Dome Litigation").

ABT Beard Litigation

In November of 2002,  the Company  filed suit against  American  Bio-Tech,  Inc.
("ABT") seeking judicial  termination of the partnership between the Company and
ABT. In January of 2003, ABT filed its answer and asserted counterclaims against
the Company and third-party claims against various Company affiliates seeking an
unspecified  amount of damages plus attorneys'  fees and costs.  The Company and
the third-party  defendants  have filed an answer denying  liability and stating
their intention to vigorously defend the claims.

<PAGE>
Item 9.  Changes  in  and  Disagreements  with  Accountants  on  Accounting  and
         Financial Disclosure.

     Not applicable

                                    PART III

Item 10.  Directors,   Executive  Officers  and  Significant  Employees  of  the
          Registrant.

     The directors,  executive officers and significant employees of the Company
are identified  below. The table sets forth the age,  positions with the Company
and the year in which  each  person  became a  director,  executive  officer  or
significant  employee.  All positions are held with the Company unless otherwise
indicated.

<TABLE>
<CAPTION>
                                                                                Director, Executive Officer
                                                                                     or Significant
                                                                                    Employee of Beard
             Name                                  Position                         or Beard Oil Since     Age
             ----                                  --------                         ------------------     ---
<S>                                 <C>                                             <C>                    <C>
W. M. Beard                         Chairman of the Board, Chief Executive
                                              Officer and Director(A)               June 1969              74
Herb Mee, Jr.                         President, Chief Financial Officer            November 1973          74
                                                and Director(A)
Allan R. Hallock                                   Director                         December 1986          73
Harlon E. Martin, Jr.                              Director                         October 1997           55
Ford C. Price                                      Director                         March 1988             65
Philip R. Jamison                   President - Beard Technologies, Inc.(B)(C)      February 1997          64
Riza E. Murteza                      President & CEO - Beard Sino-American          November 1998          73
                                              Resources Co., Inc.(B)(C)
Marc A. Messner                      President & CEO- starpay.com, l.l.c.(C)        August 1998            41
                                  and Vice President-Corporate Development of
                                                   the Company
Jack A. Martine                     Controller and Chief Accounting Officer         October 1996           53
Rebecca G. Witcher                           Secretary-Treasurer(A)                 October 1993           43

----------------
<FN>
(A) Trustee of certain assets of the Company's 401(k) Trust.

(B) Devotes all of his time to this subsidiary.

(C) Indicated entity is a subsidiary of the Registrant.
</FN>
</TABLE>

     The  executive  officers  and other  officers of the  Company  serve at the
pleasure of the Board of Directors.

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

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

    Allan R. Hallock was elected a director of Beard in July 1993. He served as
a director of Beard Oil from December 1986 until October 1993. Mr. Hallock is
currently an independent consulting geologist. He served as Vice President and
Exploration Manager of Gemini Corporation from 1970 until December 1986.

     Harlon E.  Martin,  Jr. was elected a director of Beard in October  1997 to
fill the directorship  vacancy created by the death of W. R. Plugge.  Mr. Martin
has served as the  principal  of H. E.  Martin & Company,  a Houston  investment
banking firm,  since its founding in 1990. He was a co-founder of GTM Securities
Corp.  in 1985 and served as a principal of such firm until 1989. H. E. Martin &
Company is not a parent, subsidiary, or other affiliate of Beard.

     Ford C. Price was elected a director of Beard in July 1993.  He served as a
director of Beard Oil from June 1987 until  October  1993.  From 1961 until 1986
Mr.  Price  served  in  various   capacities   with  The  Economy   Company,   a
privately-held  schoolbook  publishing company,  last serving as its Chairman of
the Board and Chief Executive Officer. Mr. Price is a private investor.

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

     Riza E.  Murteza has served as  President  and Chief  Executive  Officer of
Beard  Sino-American  Resources  Co., Inc. since November 1998. He was appointed
Senior Advisor to the United Nations Development Project for China,  residing in
China for one year  (1996-1997),  assisting large Chinese  enterprises move to a
market  economy.  Prior to that he served as General Manager and Project Manager
for two large  projects in Indonesia and a large project in the Soviet Union for
periods totaling nine years.

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

     Jack A. Martine was elected as Controller, Chief Accounting Officer and Tax
Manager of Beard in October 1996.  Mr.  Martine  served as tax manager for Beard
from June 1989 until October 1993 at which time he joined Sensor Oil & Gas, Inc.
in a similar capacity. Mr. Martine is a certified public accountant.

     Rebecca G.  Witcher has served as  Corporate  Secretary  of the Company and
Beard Oil since  October  1993,  and has served as Treasurer  of such  companies
since July 1997.

     The  directors  of the Company  have been elected to serve until the annual
stockholders' meeting to be held in the year indicated opposite their respective
names or until their successors are duly elected and qualified:

                Director(A)                       Term
                -----------                       ----
     Allan R. Hallock                             2003
     Ford C. Price                                2003
     Harlon E. Martin, Jr.                        2004
     Herb Mee, Jr.                                2004
     W. M. Beard                                  2005
---------------

(A)  Michael E. Carr, who was elected by the preferred  stockholders in February
     1994 to fill the  directorship  vacancy  which they were  entitled to fill,
     resigned effective  February 1, 2002. To date the sole remaining  preferred
     stockholder has not elected to fill such vacancy.

     There is no family  relationship  between any of the directors or executive
officers of the  Company.  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.

     Compliance  with  Section  16(a) of the  Securities  Exchange  Act of 1934.
Section  16(a) of the  Securities  Exchange Act of 1934  requires the  Company's
directors  and  executive  officers,  and  persons who own more than ten percent
(10%) of a registered  class of the Company's  equity  securities  (collectively
"reporting  persons"),  to file  with the  Securities  and  Exchange  Commission
initial reports of ownership and reports of changes in ownership of common stock
and other equity  securities of the Company.  Reporting  persons are required by
the SEC  regulations  to furnish  the Company  with copies of all Section  16(a)
forms they file.

     All of the  Company's  directors  had late  filings  during the fiscal year
covered by this report. The directors  erroneously believed that the granting of
Stock Units under the  Company's  Deferred  Stock  Compensation  Plan were to be
reported  annually on Form 5 rather than as they occurred  during the year,  and
they  reported such grants for the entire year on such basis.  Accordingly,  Mr.
Beard had 24 late  filings,  Mr. Mee had one late filing,  and Messrs.  Hallock,
Martin and Price each had 16 late filings.

     To the Company's knowledge,  based solely on information received from each
reporting  person which includes  written  representations  that,  other than as
described  above,  no other reports were  required  during the fiscal year ended
December  31, 2002,  all Section  16(a) filing  requirements  applicable  to its
reporting persons were complied with.

Item 11.  Executive Compensation.

     The table below sets forth the compensation  paid or accrued during each of
the last three fiscal years by the Company and its subsidiaries to the Company's
Chief Executive Officer and each of the Company's other most highly  compensated
executive  officers  (hereafter  referred to as the named  executive  officers),
whose aggregate salary and bonus exceeded $100,000,  for any of the fiscal years
ended December 31, 2002, 2001 or 2000:

<TABLE>
                                         SUMMARY COMPENSATION TABLE
<CAPTION>

                                                                                Long Term
                                                                              Compensation
                                                             --------------------------------------------
                   Annual Compensation                          Awards           Payouts
----------------------------------------------------------      ------           -------
                                                              Securities
                                                              Underlying                        All Other
      Name and                                                 Options/           LTIP           Compen-
      Principal               Salary (A)      Bonus (B)         SAR's            Payouts       sation (C)
      Position         Year       ($)            ($)             (#)               ($)             ($)
      --------         ----       ---            ---             ---               ---             ---
<S>                    <C>    <C>              <C>               <C>           <C>             <C>
W. M. Beard            2002    44,275(D)       -0-(D)            -0-            90,175(D)       1,788(D)(F)
Chairman & CEO         2001    66,000(D)       -0-(D)            -0-            68,400(D)       3,300(D)
                       2000   118,250(D)       -0-(D)            -0-            16,100(D)       5,913(D)
Herb Mee, Jr.          2002   132,000          -0-(E)            -0-            1,450(E)        3,505(F)
President & CFO        2001   132,000          -0-(E)            -0-            1,400(E)        6,670(E)
                       2000   132,000          -0-(E)            -0-            1,350(E)        6,600(E)
---------------
<FN>
(A)  Amounts  shown include cash  compensation  earned and received by executive
     officers as well as amounts  earned but deferred  pursuant to the Company's
     401(k) Plan at the election of those  officers.  Amounts shown exclude cash
     compensation  earned but deferred pursuant to the Company's  Deferred Stock
     Compensation  Plan  (the  "DSC  Plan").  The  Company  has  350,000  shares
     available  for  issuance  under the DSC Plan;  335,000  were  reserved  for
     distribution under the DSC Plan at December 31, 2002.

(B)  Bonus for length of service with Beard or Beard Oil.

(C)  Consists of the Company's contribution to the Company's 401(k) Plan.

(D)  In 2002 Mr.  Beard  deferred 50%  ($35,750) of his salary  during the first
     6-1/2 months of the year, 85% ($51,975) of his salary during the last 5-1/2
     months of the year and all ($2,450) of his length of service  bonus for the
     year; in 2001 Mr. Beard deferred  one-half  ($66,000) of his salary and all
     ($2,400)  of his  length of  service  bonus  for the  year;  and in 2000 he
     deferred one-half ($13,750) of his salary for 2-1/2 months and all ($2,350)
     of his length of service bonus for the year pursuant to the DSC Plan.

(E)  In 2002 Mr. Mee deferred  all  ($1,450) of his length of service  bonus for
     the year;  in 2001 Mr. Mee  deferred  all ($1,400) of his length of service
     bonus for the year;  and in 2000 he deferred  all ($1,350) of his length of
     service bonus for the year pursuant to the DSC Plan.

(F)  Beginning  July  16,  2002,   the  Company   suspended  its  100%  matching
     contribution  (up to a cap of 5% of gross  salary)  under its 401(k)  Plan.
     Although  there is no firm  commitment  to do so, the Company has indicated
     its intention to reinstate the match when future conditions permit.
</FN>
</TABLE>

                        OPTION GRANTS IN LAST FISCAL YEAR

     The Company did not grant any options during the last fiscal year.


                 AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
                        AND FISCAL YEAR-END OPTION VALUES

     The  following  table  provides  information,  with  respect  to the  named
executive officers, concerning the exercise of options during the Company's last
fiscal year and unexercised options held as of the end of the last fiscal year:

<TABLE>
<CAPTION>
                                                                       Number of Securities        Value of Unexercised
                                                                      Underlying Unexercised      In-the-Money Options at
                                                                      Options at FY-End (#)              FY-End ($)
                                                                      ---------------------              ----------
                          Shares Acquired            Value                 Exercisable/                 Exercisable/
         Name             on Exercise (#)        Realized ($)             Unexercisable                Unexercisable
         ----             ---------------        ------------             -------------                -------------
<S>                       <C>                    <C>                      <C>                          <C>
W. M. Beard                     -0-                  $ -0-                  9,375/-0-                     $-0-/-0-
Herb Mee, Jr.                   -0-                  $ -0-                  18,371/-0-                    $-0-/-0-
</TABLE>

Compensation of Directors

     Messrs.  Hallock,  Martin and Price  received  $8,000 each of deferred fees
under  the  Company's   Deferred  Stock   Compensation   Plan  (the  "Plan")  as
compensation  for  services  rendered  in 2002.  Under  the Plan,  the  electing
officers and  directors can defer fees and  compensation  until  termination  of
service or  termination  of the Plan, at which time the accounts will be settled
by distribution of a number of shares of the Company's common stock equal to the
number of Units credited under the Plan. A Unit is equal to the amount  deferred
divided  by the fair  market  value of a share  of  common  stock on the date of
deferral.  Currently,  the non-management  directors each receive $500 per month
for their services,  and also receive the following fees for directors' meetings
which they  attend:  annual and 1-1/2 day meetings -- $750;  regular  meeting --
$500;  telephone  meeting  -- $100 to $300  depending  upon  length of  meeting.
Messrs.  Hallock,  Martin and Price received $700, $250 and $700,  respectively,
for such attendance in 2002. The  non-management  directors also receive a small
year-end bonus  depending upon their length of service as directors of Beard and
Beard Oil. All of the  directors  deferred  such  bonuses  pursuant to the Plan.
Beard  also  provides  life,  health and  accident  insurance  benefits  for its
non-management  directors who are not  otherwise  covered and the value of these
benefits is included in the above compensation amounts.  Messrs.  Hallock, Price
and Martin received $4,478,  $453 and $202,  respectively,  of such compensation
during the year. None of the directors received additional  compensation in 2002
for their committee participation.


             COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

     The Compensation Committee (the "Committee") of the Board of Directors (the
"Board")  establishes  the general  compensation  policies of the  Company.  The
Committee meets once each year to establish specific compensation levels for the
chairman/chief  executive  officer  ("CEO")  and the  president/chief  financial
officer ("CFO") and to review the executive  officers'  compensation  generally.
(The compensation for executive  officers other than the CEO and CFO is actually
determined by the CEO and CFO).

     The  Committee's  goal in setting  executive  compensation  is to motivate,
reward  and  retain  management  talent  who  support  the  Company's  goals  of
increasing  shareholder  value.  This goal is to provide  competitive  levels of
compensation  that  relate  to the  Company's  long-term  performance  goals and
objectives,  reward outstanding  corporate  performance and recognize individual
initiative and achievement.  The Committee endeavors to achieve these objectives
through a combination of base salary, cash bonuses and stock options.

     The  Committee  believes  that the total  compensation  of its CEO, CFO and
other executive  officers  should be tied to the Company's  success in achieving
long-term growth in earnings, cash flow and stock price per share. The Committee
also believes that the total cash  compensation of such officers should,  to the
extent possible, be similar to the total cash compensation of similarly situated
executives of peer group public  companies.  To date neither the Company nor the
Committee  has been able to establish a peer group which they feel is comparable
enough in size,  financial  structure and diversity of operations to establish a
valid comparison.

     No  executive  officer's  compensation  for 2002  exceeded  the $1  million
deduction  limit under Section 162(m) of the Internal  Revenue Code, as amended,
and the same result is  anticipated  for 2003. The Committee does not anticipate
that any executive officer's  compensation would approach the threshold level in
the foreseeable future.

     Base Salaries.  No salary  increases have been granted to the Company's top
two executive  officers since  September of 1990.  Because of the poor financial
results in 2000,  2001 and 2002, no changes in base salary are  currently  under
consideration  for  any of the  executive  officers.  Because  of the  Company's
deteriorating  cash position,  (i) the Chairman elected to defer one-half of his
salary  effective  October 16, 2000 and increased such deferral to 85% effective
July 16,  2002  and  (ii) the  President  elected  to  defer  40% of his  salary
effective February 1, 2003.

     Cash Bonuses.  All  employees and directors of the Company  receive a small
year-end  bonus  depending upon their length of service as employees of Beard or
Beard Oil. Because of the overall financial results,  no other cash bonuses have
been  paid to  executive  officers  during  the last  three  fiscal  years.  The
Chairman,  the President and all of the directors  elected to defer all of their
year-end bonuses for calendar years 2000, 2001 and 2002.

     Beard Group 401(k) Plan. One of the Company's  principal  benefits has been
its 401(k) Plan, which included a 100% match (up to a cap of 5% of gross salary)
in order to encourage  participation.  Due to the Company's  deteriorating  cash
position  the  Company on July 8, 2002  notified  all  Participants  that it was
suspending the 100% match effective July 16, 2002 until further  notice.  One of
the investment  options  available under the Company's 401(k) Plan is the option
for each participant to invest all or part of his investment  account in Company
common stock ("The Beard Company Stock Fund Investment  Option").  The Committee
feels that this option is important because it enables key management members to
increase their ownership in the Company,  further  aligning their interests with
those of the shareholders.

     Stock  Options.   The  Committee  desires  to  reward  long-term  strategic
management  practices and enhancement of shareholder  value through the award of
stock options.  The Committee  believes that stock options  encourage  increased
performance  by the Company's key employees by providing  incentive to employees
to elevate the long-term value of the Company's common stock,  thus aligning the
interests of the Company's  employees  with the  interests of its  shareholders.
Additionally,  stock options build stock ownership and provide  employees with a
long-term focus. However, because of their conviction that management should not
reap the benefit of a low option grant price until the Company's performance has
achieved a  recognizable  turnaround,  the  Committee  has not granted any stock
options since April of 1997.

     Deferred Stock  Compensation Plan. This Plan was adopted in 1995 to provide
a means to promote ownership by officers and directors of a greater  proprietary
interest in the Company,  thereby  aligning such interests more closely with the
interests  of the  shareholders.  Since  2000 the Plan has  become  increasingly
important as a mechanism to conserve the  Company's  cash until the  anticipated
McElmo Dome Settlement has been received.

CEO Compensation

     W. M. Beard has been  Chairman and CEO of the Company and its  predecessors
since 1974.  Mr.  Beard's 2002 base salary was  $132,000,  and has not increased
since 1990. He receives,  along with all other Beard employees, a small year-end
bonus based on length of service.  The 1994 stock option grant of 50,000  shares
to Mr. Beard reflected the Committee's desire to provide significant  incentives
which link long-term  executive  compensation to long-term  growth in equity for
all  shareholders,  as described  above.  The award also  reflected Mr.  Beard's
position  and  level of  responsibility  within  the  Company,  the  Committee's
qualitative  analysis  of his  performance  in  managing  the  Company,  and the
importance  of  the  role  he  plays  in  determining  the  Company's  strategic
direction. Based on the Company's profitability,  the granting of any additional
stock options to Mr. Beard or other key management members was not considered by
the  Committee  in 2002.  A  significant  portion of the  Company's  outstanding
options were exercised in 1998,  including 75% of his outstanding  option by Mr.
Beard.  The  Committee  may consider the awarding of  additional  options to key
management members,  including Mr. Beard, in 2004 and subsequent years. Any such
grants will depend upon the Company's  profitability  at such time,  the outlook
for its various  businesses  and the  Committee's  determination  of the need to
provide additional incentives to management.

                       COMPENSATION COMMITTEE
                                 Allan R. Hallock, Chairman
                                         Harlon E. Martin, Jr.
                                                         Ford C. Price
<PAGE>
                                STOCK PERFORMANCE

     The following  performance  graph compares The Beard  Company's  cumulative
total stockholder return on its common stock against the cumulative total return
of the  NASDAQ  Market  Index  and the SIC Code  Index of the  Bituminous  Coal,
Surface Mining  Industry  compiled by Media General  Financial  Services for the
period from December 31, 1997 through  December 31, 2002. The performance  graph
assumes that the value of the  investment  in The Beard  Company  stock and each
index was $100 on December 31, 1997 and that any dividends were reinvested.  The
Beard Company has never paid dividends on its common stock.

<TABLE>
<CAPTION>
                          ------------- ------------- ------------- ------------- ------------- -------------
                            December      December      December      December      December      December
                              1997          1998          1999          2000          2001          2002
                          ------------- ------------- ------------- ------------- ------------- -------------
<S>                          <C>           <C>           <C>           <C>           <C>            <C>
The Beard Company            100.00         61.90         35.71          6.67         13.33          4.38
                          ------------- ------------- ------------- ------------- ------------- -------------
Bituminous Coal, Surface
    Mining Industry Index    100.00         61.99         44.26         84.45         96.95         95.21
                          ------------- ------------- ------------- ------------- ------------- -------------
NASDAQ Market Index          100.00        141.04        248.76        156.35        124.64         86.94
                          ------------- ------------- ------------- ------------- ------------- -------------
</TABLE>

     The Industry Index chosen consists of the following  companies:  Arch Coal,
Inc., Consol Energy, Inc.,  Headwaters Inc., Peabody Energy Corp.,  Westmoreland
Coal Co. and Yanzhou Coal Mining Co.

Item 12.  Security  Ownership of Certain  Beneficial  Owners and  Management and
          Related Stockholder Matters

                 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

     The table below sets forth the name and address of each  shareholder who is
known to the  Company to own  beneficially  more than 5% of Beard's  outstanding
common stock or preferred stock, the number of shares beneficially owned by each
and the  percentage  of  outstanding  common or  preferred  stock so owned as of
February 28, 2003.  Unless otherwise noted, the person named has sole voting and
investment powers over the shares reflected opposite his name.

<TABLE>
<CAPTION>
                                                     Number of
                                                     Preferred                    Number of Common                      Combined
                                                    Shares and                       Shares and                        Common and
                                                     Nature of        Percent        Nature of         Percent      Preferred Voting
                                                     Ownership       of Class        Ownership       of Class (8)    Percentage (8)
                                                     ---------       --------        ---------       ------------    --------------
                Name and Address
                ----------------
<S>                                                   <C>             <C>          <C>                 <C>            <C>
John Hancock Financial Services,
Inc. ("Hancock")..................................    27,838          100.00%      234,030(1)(2)       12.80%(2)         17.89%
57th Floor
200 Clarendon Street
Boston, Massachusetts 02117

Dimensional Fund Advisors, Inc. ("DFA")...........      None            0.00%      112,296(3)           6.14%             5.78%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401

The Beard Group 401(k) Trust
c/o InvesTrust, N.A., Trustee.....................      None            0.00%      199,278(4)          10.90%            10.26%
5101 N. Classen, Suite 620
Oklahoma City, OK 73118

W. M. Beard.......................................      None            0.00%      939,903(5)          44.45%            42.19%
Enterprise Plaza, Suite 320
5600 North May Avenue
Oklahoma City, OK 73112

Lu Beard..........................................      None            0.00%      247,639(6)          13.54%            12.75%
Enterprise Plaza, Suite 320
5600 North May Avenue
Oklahoma City, OK 73112

Herb Mee, Jr......................................      None            0.00%      365,036(7)          19.57%            18.45%
Enterprise Plaza, Suite 320
5600 North May Avenue
Oklahoma City, OK 73112
---------------
<FN>
(1)  Shares are held by Hancock on behalf of itself and affiliated entities.

(2)  Excludes the Beard preferred shares which became  convertible  into 5.84% (113,513 shares) of the outstanding  common stock
     (after conversion) on January 1, 2003.

(3)  DFA, a registered  investment  advisor,  is deemed to have  beneficial  ownership of 112,296 shares as of December 31, 2002
     (latest  information  available),  all of which shares are held in portfolios of investment  companies and commingled group
     trusts and separate  accounts  which DFA serves as investment  advisor or  investment  manager.  DFA  disclaims  beneficial
     ownership of all such shares.

(4)  Represents  shares  owned by The Beard Group 401(k)  Trust (the  "401(k)  Trust") at February 28, 2003.  Shares held by the
     401(k) Trust are owned by the  participating  employees,  each of whom has sole voting and investment power over the shares
     held in his or her  account.  Includes  53,899  and  127,744  shares  held  for the  accounts  of  Messrs.  Beard  and Mee,
     respectively.

(5)  Includes 187,354 shares owned directly by Mr. Beard as to which he has sole voting and investment power; 240,380 shares (or
     13.14%) owned by the William M. Beard and Lu Beard 1988 Charitable  Unitrust (the  "Unitrust"),  of which Mr. Beard and his
     wife, Lu Beard,  serve as  co-trustees  and share voting and investment  power;  36,214 shares held by the William M. Beard
     Irrevocable  Trust "A," 51,324  shares held by the William M. Beard  Irrevocable  Trust "B," and 62,661  shares held by the
     William M. Beard Irrevocable Trust "C" (collectively,  the "Beard Irrevocable Trusts") of which Messrs. Beard and Herb Mee,
     Jr. are trustees and share voting and investment power;  5,053 shares each held by the John Mason Beard II Trust and by the
     Joseph G. Beard Trust as to which Mr. Beard is the trustee and has sole voting and investment  power;  2,442 shares held by
     the Rebecca Banner Beard Lilly Living Trust as to which Mr. Beard is a co-trustee  and shares voting and  investment  power
     with his daughter;  53,899 shares held by The Beard Group 401(k) Trust (the "401(k) Trust") for the account of Mr. Beard as
     to which he has sole voting and investment power; and 9,999 shares held by B & M Limited, a general partnership ("B&M"), of
     which Mr. Beard is a general  partner and shares  voting and  investment  power with Mr. Mee.  Also  includes  9,375 shares
     subject to presently  exercisable  options;  6,000 shares subject to presently  exercisable  warrants held by the Unitrust;
     5,000 shares subject to presently  exercisable  warrants held by B&M; and 265,149 shares reserved in Mr. Beard's account in
     the Company's  Deferred  Stock  Compensation  Plan (the "DSC Plan") which will be distributed  upon his death,  disability,
     retirement or termination. Excludes 1,259 shares owned by his wife as to which Mr. Beard disclaims beneficial ownership.

(6)  Includes 240,380 shares owned directly by the Unitrust and 6,000 shares subject to presently  exercisable warrants owned by
     the Unitrust,  as to all of which Mr. and Mrs.  Beard serve as  co-trustees  and share voting and  investment  power.  Also
     includes 1,259 shares owned directly by Mrs. Beard as to which she has sole voting and investment power.

(7)  Includes 21,560 shares owned directly by Mr. Mee as to which he has sole voting and investment power; 14,422 shares held by
     Mr. Mee and Marlene W. Mee as joint tenants as to which he shares voting and  investment  power with Mrs. Mee, 4,999 shares
     held by Mee Investments,  Inc., as to which Mr. Mee has sole voting and investment  power;  9,999 shares owned directly and
     5,000  shares  subject  to  presently  exercisable  warrants  held by B & M as to all of which Mr.  Mee  shares  voting and
     investment  power with Mr. Beard but as to which Mr. Mee has no present economic  interest;  and 127,743 shares held by the
     401(k) Trust for the account of Mr. Mee as to which he has sole voting and investment  power.  Also includes 150,199 shares
     held by the Beard  Irrevocable  Trusts as to which Mr. Mee is a co-trustee and shares voting and investment  power with Mr.
     Beard but as to which Mr. Mee has no pecuniary  interest and disclaims  beneficial  ownership.  Also includes 18,371 shares
     subject to presently  exercisable  options and 12,743  shares  reserved in Mr. Mee's  account in the DSC Plan which will be
     distributed upon his death,  disability,  retirement or termination.  Excludes 33 shares owned by Mrs. Mee, as to which Mr.
     Mee disclaims beneficial ownership.

(8)  All percentages reflected above exclude 295,053 common shares held by the Company as treasury stock.
</FN>
</TABLE>

                        SECURITY OWNERSHIP OF MANAGEMENT

     The following table sets forth certain information  regarding the number of
shares of Beard  common stock  beneficially  owned by each  director,  the Chief
Executive Officer ("CEO"), each named executive officer and by all directors and
executive  officers as a group and the percentage of outstanding common stock so
owned as of February 28, 2003.

                                            Amount and
                                            Nature of
                                            Beneficial      Percent
               Name and Address             Ownership     of Class (7)
               ----------------             ---------     ------------
W. M. Beard............................     939,903(1)      44.45%
Herb Mee, Jr...........................     365,037(2)      19.57%
Marc A. Messner........................      37,500          2.05%
Allan R. Hallock.......................      74,796(3)       3.97%
Ford C. Price..........................      54,384(4)       2.92%
Harlon E. Martin, Jr...................      28,577(5)       1.54%
Jack A. Martine........................      10,875(6)        ---(9)
Rebecca G. Witcher.....................       3,880(7)        ---(9)
All directors and executive
     officers as a group (8 in number).   1,349,754(8)      60.91%
---------------

(1)  See  footnote  (5) to  table  "Security  Ownership  of  Certain  Beneficial
     Owners."

(2)  See  footnote  (7) to  table  "Security  Ownership  of  Certain  Beneficial
     Owners."

(3)  Includes  1,875 shares held directly by Mr. Hallock as to which he has sole
     voting and investment power; 19,618 shares owned directly and 20,000 shares
     subject to presently  exercisable  warrants  held by A. R. Hallock & Co., a
     nominee  partnership for estate  planning  purposes as to which Mr. Hallock
     shares  voting and  investment  powers  with his wife;  and  33,303  shares
     reserved in Mr. Hallock's account in the DSC Plan which will be distributed
     upon his death, disability, retirement or termination.

(4)  Includes  17,561  shares  held by the FCP Trust as to which  Mr.  Price has
     shared  voting and  investment  power,  2,449 shares held by an IRA for the
     benefit of Mr. Price as to which he has sole voting and  investment  power,
     and 34,284  shares  reserved in Mr.  Price's  account in the DSC Plan which
     will be distributed upon his death, disabiliity, retirement or termination.

(5)  Includes  750 shares held  directly  by Mr.  Martin as to which he has sole
     voting and investment  power,  and 27,827 shares  reserved in Mr.  Martin's
     account  in the  DSC  Plan  which  will  be  distributed  upon  his  death,
     disability, retirement or termination.

(6)  Includes  1,500 shares held directly by Mr. Martine as to which he has sole
     voting  and  investment   power  and  9,375  shares  subject  to  presently
     exercisable options.

(7)  Includes 130 shares held directly by Mrs.  Witcher as to which she has sole
     voting  and  investment   power  and  3,750  shares  subject  to  presently
     exercisable options.

(8)  Includes  864,043 shares as to which directors and executive  officers have
     sole voting and investment  power and 485,711 shares as to which they share
     voting and investment power with others.

(9)  Reflects ownership of less than one (1) percent.

(10) See  footnote  (8) to  table  "Security  Ownership  of  Certain  Beneficial
     Owners."

Item 13.  Certain Relationships and Related Transactions.

     Unitrust  Credit Lines.  In April 2000,  William M. Beard and Lu Beard,  as
trustees  of the  William M. Beard and Lu Beard 1988  Charitable  Unitrust  (the
"Trustees")  provided a $1,000,000  revolving line of credit to the Company. The
original loan by the Trustees provided for a term of 15 months, 10% interest and
was subject to the terms of a  promissory  note and a letter loan  agreement  of
corresponding  dates.  The line of credit was increased to $1,500,000 in October
2000,  and the  maturity  was  extended  to April 1, 2002.  The credit  line was
increased to $1,750,000 in March 2001, to $2,000,000 in June 2001, to $2,250,000
in September  2001,  to  $2,500,000 in January 2002 and to $3,000,000 in October
2002.  The  interest  rate remains at 10% and the loan now matures on January 3,
2005. As of December 31, 2002,  the line of credit had been fully  utilized.  In
November 2002, the Unitrust provided a supplemental  $150,000  revolving line of
credit  maturing  on October 31,  2003.  The  supplemental  line was also at 10%
interest  and was subject to the terms of a promissory  note and a  supplemental
letter loan agreement of corresponding  date. As of December 31, 2002, there was
a principal  balance of $110,000  outstanding on the  supplemental  line. In May
2002,  the  Unitrust  also  purchased  $120,000  of 10%  Subordinated  Notes due
September 30, 2003 in connection with a private  placement of notes and warrants
by the Company.

     Borrowings from Other Related  Entities.  Three affiliates of the Company's
Chairman  loaned  $100,000 to the Company in 2001,  also at 10% interest,  under
notes  maturing  on April 1, 2003.  These loans were paid in full in April 2002.
One of these affiliates  purchased a $50,000 10% subordinated note in connection
with the  private  placement  of notes and  warrants  by the Company in February
2003.

Item 14.  Controls and Procedures.

     Within  the 90 days  prior to the date of this  report  we  carried  out an
evaluation,  under the supervision and with the participation of our management,
including  our Chief  Executive  Officer  and Chief  Financial  Officer,  of the
effectiveness  of the  design  and  operation  of our  disclosure  controls  and
procedures  pursuant to Rule 13a-14  promulgated  by the Securities and Exchange
Commission  under the  Securities  Exchange Act of 1934, as amended.  Based upon
that  evaluation,  our  Chief  Executive  Officer  and Chief  Financial  Officer
concluded  that our  disclosure  controls and procedures are effective in timely
alerting them to material  information  relating to our Company  (including  our
consolidated  subsidiaries) required to be included in our periodic filings with
the Securities and Exchange  Commission.  There have been no significant changes
in our internal  controls or in other factors which could  significantly  affect
internal controls subsequent to the date we carried out our evaluation.

                                     PART IV

Item 15.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K.

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

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

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

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

2      Plan  of  acquisition,   reorganization,   arrangement,   liquidation  or
       succession:

2(a)   Agreement and Plan of Reorganization  by and among Registrant,  Beard Oil
       Company ("Beard Oil") and New Beard, Inc., dated as of July 12, 1993 (see
       Addendum  A to  Part  I,  which  is  incorporated  herein  by  reference;
       schedules to the  Agreement  have been  omitted).  (This Exhibit has been
       previously  filed as Exhibit 3(b), filed on July 27, 1993 to Registrant's
       Registration  Statement  on Form  S-4,  File  No.  33-66598,  and same is
       incorporated herein by reference).

2(b)   Agreement and Plan of Merger by and between The Beard Company and The New
       Beard  Company,  dated as of 2(b)  September 16, 1997.  (This Exhibit has
       been previously filed as Exhibit B to Registrant's  Proxy Statement filed
       on September 12, 1997, and same is incorporated herein by reference).

2(c)   Certificate  of  Merger  merging  The  Beard  Company  into The New Beard
       Company as filed with the  Secretary of State of Oklahoma on November 26,
       1997.  (This  Exhibit  has  been  previously  filed  as  Exhibit  2.1  to
       Registrant's   Form  8-K,   filed  on  December  8,  1997,  and  same  is
       incorporated herein by reference).

3(i)   Certificate of  Incorporation  of The New Beard Company as filed with the
       Secretary of State of Oklahoma on September  11, 1997.  (This Exhibit has
       been previously filed as Exhibit C to Registrant's  Proxy Statement filed
       on September 12, 1997, and same is incorporated herein by reference).

3(ii)  Registrant's  By-Laws as  currently  in effect.  (This  Exhibit  has been
       previously  filed as  Exhibit  3(ii) to  Registrant's  Form  10-K for the
       period  ended  December 31,  1997,  filed on March 31, 1998,  and same is
       incorporated herein by reference).

4      Instruments defining the rights of security holders:

4(a)   Certificate   of   Designations,   Powers,   Preferences   and  Relative,
       Participating,  Option and Other Special Rights, and the  Qualifications,
       Limitations or  Restrictions  Thereof of the Series A Convertible  Voting
       Preferred  Stock of the  Registrant.  (This  Exhibit has been  previously
       filed as Exhibit 3(c) to Amendment  No. 2, filed on September 17, 1993 to
       Registrant's  Registration  Statement on Form S-4, File No. 33-66598, and
       same is incorporated herein by reference).

4(b)   Settlement Agreement,  with Certificate of Amendment attached thereto, by
       and among  Registrant,  Beard Oil, New York Life Insurance  Company,  New
       York Life  Insurance  and  Annuity  Company,  John  Hancock  Mutual  Life
       Insurance Company, Memorial Drive Trust and Sensor, dated as of April 13,
       1995.  (This  Exhibit  has  been  previously  filed  as  Exhibit  4(g) to
       Registrant's Form 10-K for the period ended December 31, 1994 and same is
       incorporated herein by reference).

10     Material contracts:

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

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

10(c)  The Beard  Company  1994  Phantom  Stock Units Plan as amended  effective
       October 23,  1997.  (This  Exhibit has been  previously  filed as Exhibit
       10(b) to  Registrant's  Form 10-K for the period ended December 31, 1999,
       filed on April 14, 2000, and same is incorporated herein by reference).*

10(d)  Amendment No. Three to The Beard Company Deferred Stock Compensation Plan
       dated  November 1, 1995, as amended  October 24, 2001.  (The Amended Plan
       supersedes  the original  Plan adopted on June 3, 1996.  This Exhibit has
       previously  been  filed  as  Exhibit  99  filed  on  April  10,  2002  to
       Registrant's  Registration Statement on Form S-8, File No. 333-85936, and
       same is incorporated herein by reference).*

10(e)  Amended and Restated  Nonqualified  Stock Option Agreement by and between
       Richard D. Neely and ISITOP,  Inc.  ("ISITOP"),  dated November 12, 1998.
       (This Exhibit has been previously  filed as Exhibit 10(g) to Registrant's
       Form 10-K for the period  ended  December  31,  1998,  filed on April 15,
       1999, and same is incorporated herein by reference).*

10(f)  Amended and Restated  Nonqualified  Stock Option Agreement by and between
       Jerry S. Neely and ISITOP,  dated  November 12, 1998.  (This  Exhibit has
       been previously filed as Exhibit 10(h) to Registrant's  Form 10-K for the
       period  ended  December 31,  1998,  filed on April 15, 1999,  and same is
       incorporated herein by reference).*

10(g)  Nonqualified Stock Option Agreement by and between Robert A. McDonald and
       ISITOP,  dated November 12, 1998. (This Exhibit has been previously filed
       as Exhibit 10(i) to Registrant's  Form 10-K for the period ended December
       31, 1998,  filed on April 15, 1999,  and same is  incorporated  herein by
       reference).*

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

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

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

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

10(m)  Guaranty  Agreement  between  Registrant  and  Oklahoma  Bank  and  Trust
       Company,  dated as of June 7, 1999.  (This  Exhibit  has been  previously
       filed as Exhibit  10(bb) to  Registrant's  Form 10-Q for the period ended
       June 30, 1999, filed on August 20, 1999, and same is incorporated  herein
       by reference).

10(n)  Letter Loan Agreement by and between  Registrant and The William M. Beard
       and Lu Beard 1988  Charitable  Unitrust (the  "Unitrust")  dated April 3,
       2000.  (This  Exhibit  has been  previously  filed as  Exhibit  10(cc) to
       Registrant's  Form 10-K for the period ended December 31, 1999,  filed on
       April 14, 2000, and same is incorporated herein by reference).

10(o)  Amended Letter Loan Agreement by and between  Registrant and the Unitrust
       dated  September  1, 2000.  (This  Exhibit has been  previously  filed as
       Exhibit 10(o) to  Registrant's  Form 10-Q for the period ended  September
       30, 2000, filed on November 20, 2000, and same is incorporated  herein by
       reference).

10(p)  Amended Letter Loan Agreement by and between  Registrant and the Unitrust
       dated March 31, 2001.  (This Exhibit has been previously filed as Exhibit
       10(p) to  Registrant's  Form 10-Q for the period  ended  March 31,  2001,
       filed on May 21, 2001, and same is incorporated herein by reference).

10(q)  Amended Letter Loan Agreement by and between  Registrant and the Unitrust
       dated June 30, 2001.  (This Exhibit has been previously  filed as Exhibit
       10(q) to Registrant's Form 10-Q for the period ended June 30, 2001, filed
       on August 14, 2001, and same is incorporated herein by reference).

10(r)  Amended Letter Loan Agreement by and between  Registrant and the Unitrust
       dated  September  30, 2001.  (This Exhibit has been  previously  filed as
       Exhibit 10(r) to  Registrant's  Form 10-Q for the period ended  September
       30, 2001, filed on November 19, 2001, and same is incorporated  herein by
       reference).

10(s)  Amended Letter Loan Agreement by and between  Registrant and the Unitrust
       dated  January  15,  2002.  (This  Exhibit has been  previously  filed as
       Exhibit 10(s) to Registrant's Form 10-K for the period ended December 31,
       2001,  filed on  April  16,  2002,  and same is  incorporated  herein  by
       reference).

10(t)  Amended Letter Loan Agreement by and between  Registrant and the Unitrust
       dated  February  28, 2002.  (This  Exhibit has been  previously  filed as
       Exhibit  10(t) to  Registrant's  Form 10-Q for the period ended March 31,
       2002, and same is incorporated herein by reference).

10(u)  Amended Letter Loan Agreement by and between  Registrant and the Unitrust
       dated October 3, 2002. (This Exhibit has been previously filed as Exhibit
       10(a) to Registrant's  Form 10-Q for the period ended September 30, 2002,
       filed  on  November  14,  2002,  and  same  is  incorporated   herein  by
       reference).

10(v)  Supplemental  Letter Loan  Agreement  by and between  Registrant  and the
       Unitrust dated November 7, 2002.

10(w)  Promissory  Note from  Registrant  to the Trustees of the Unitrust  dated
       April 3, 2000.  (This Exhibit has been previously filed as Exhibit 10(dd)
       to Registrant's  Form 10-K for the period ended December 31, 1999,  filed
       on April 14, 2000, and same is incorporated herein by reference).

10(x)  Renewal  Promissory  Note from Registrant to the Trustees of the Unitrust
       dated  September  1, 2000.  (This  Exhibit has been  previously  filed as
       Exhibit 10(q) to  Registrant's  Form 10-Q for the period ended  September
       30, 2000, filed on November 20, 2000, and same is incorporated  herein by
       reference).

10(y)  Renewal  Promissory  Note from Registrant to the Trustees of the Unitrust
       dated  October  20,  2000.  (This  Exhibit has been  previously  filed as
       Exhibit 10(w) to Registrant's Form 10-K for the period ended December 31,
       2000,  filed  on April  2,  2001,  and  same is  incorporated  herein  by
       reference).

10(z)  Renewal  Promissory  Note from Registrant to the Trustees of the Unitrust
       dated March 31, 2001.  (This Exhibit has been previously filed as Exhibit
       10(t) to  Registrant's  Form 10-Q for the period  ended  March 31,  2001,
       filed on May 21, 2001, and same is incorporated herein by reference).

10(aa) Renewal  Promissory  Note from Registrant to the Trustees of the Unitrust
       dated June 30, 2001.  (This Exhibit has been previously  filed as Exhibit
       10(v) to Registrant's Form 10-Q for the period ended June 30, 2001, filed
       on August 14, 2001, and same is incorporated herein by reference).

10(bb) Renewal  Promissory  Note from Registrant to the Trustees of the Unitrust
       dated  September  30, 2001.  (This Exhibit has been  previously  filed as
       Exhibit 10(x) to  Registrant's  Form 10-Q for the period ended  September
       30, 2001, filed on November 19, 2001, and same is incorporated  herein by
       reference).

10(cc) Renewal  Promissory  Note from Registrant to the Trustees of the Unitrust
       dated  January  15,  2002.  (This  Exhibit has been  previously  filed as
       Exhibit 10(z) to Registrant's Form 10-K for the period ended December 31,
       2001,  filed on  April  16,  2002,  and same is  incorporated  herein  by
       reference).

10(dd) Renewal  Promissory  Note from Registrant to the Trustees of the Unitrust
       dated  February  28, 2002.  (This  Exhibit has been  previously  filed as
       Exhibit 10(bb) to  Registrant's  Form 10-Q for the period ended March 31,
       2002, and same is incorporated herein by reference).

10(ee) Renewal  Promissory  Note from Registrant to the Trustees of the Unitrust
       dated October 3, 2002. (This Exhibit has been previously filed as Exhibit
       10(b) to Registrant's  Form 10-Q for the period ended September 30, 2002,
       filed  on  November  14,  2002,  and  same  is  incorporated   herein  by
       reference).

10(ff) Supplemental  Promissory  Note from  Registrant  to the  Trustees  of the
       Unitrust dated November 7, 2002.

10(gg) Promissory  Note from  Registrant  to the Trustee of the William M. Beard
       Irrevocable  Trust "B" (the "B  Trust")  dated  August  31,  2001.  (This
       Exhibit has been previously  filed as Exhibit 10(x) to Registrant's  Form
       10-Q for the period ended September 30, 2001, filed on November 19, 2001,
       and same is incorporated herein by reference).

10(hh) Promissory  Note from  Registrant  to the Trustee of the William M. Beard
       Irrevocable  Trust "C" (the "C  Trust")  dated  August  31,  2001.  (This
       Exhibit has been previously  filed as Exhibit 10(x) to Registrant's  Form
       10-Q for the period ended September 30, 2001, filed on November 19, 2001,
       and same is incorporated herein by reference).

10(ii) Promissory Note from Registrant to B & M Limited,  a General  Partnership
       ("B&M") dated August 31, 2001. (This Exhibit has been previously filed as
       Exhibit 10(x) to  Registrant's  Form 10-Q for the period ended  September
       30, 2001, filed on November 19, 2001, and same is incorporated  herein by
       reference).

10(jj) Promissory Note from Registrant to Bank of Oklahoma,  N.A.  ("BOK") dated
       August 30, 2000. (This Exhibit has been previously filed as Exhibit 10(r)
       to Registrant's  Form 10-Q for the period ended September 30, 2000, filed
       on November 20, 2000, and same is incorporated herein by reference).

10(kk) Extension  Promissory  Note from  Registrant  to BOK dated  September 30,
       2000.  (This  Exhibit  has  been  previously  filed as  Exhibit  10(s) to
       Registrant's  Form 10-Q for the period ended September 30, 2000, filed on
       November 20, 2000, and same is incorporated herein by reference).

10(ll) Extension  Promissory  Note from  Registrant to BOK dated March 15, 2001.
       (This Exhibit has been previously  filed as Exhibit 10(w) to Registrant's
       Form 10-Q for the period ended March 31, 2001, filed on May 21, 2001, and
       same is incorporated herein by reference).

10(mm) Extension  Promissory  Note from  Registrant  to BOK dated June 30, 2001.
       (This Exhibit has been previously  filed as Exhibit 10(z) to Registrant's
       Form 10-Q for the period ended June 30,  2001,  filed on August 14, 2001,
       and same is incorporated herein by reference).

10(nn) Extension  Promissory  Note from  Registrant  to BOK dated May 15,  2002.
       (This Exhibit has been previously  filed as Exhibit 10(b) to Registrant's
       Form 10-Q for the period  ended June 30, 2002,  and same is  incorporated
       herein by reference).

10(oo) 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(pp) 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(qq) Form of Deed of Trust,  Assignment of Production,  Security Agreement and
       Financing  Statement  dated as of May 16,  2002.  (This  Exhibit has been
       previously  filed as  Exhibit  10(c) to  Registrant's  Form  10-Q for the
       period ended September 30, 2002,  filed on November 14, 2002, and same is
       incorporated herein by reference).

10(rr) Guaranty  Agreement  between the  Unitrust and BOK dated August 30, 2000.
       (This Exhibit has been previously  filed as Exhibit 10(t) to Registrant's
       Form 10-Q for the period ended September 30, 2000,  filed on November 20,
       2000, and same is incorporated herein by reference).

10(ss) Guaranty  Agreement  between W. M. Beard and BOK dated  August 30,  2000.
       (This Exhibit has been previously  filed as Exhibit 10(u) to Registrant's
       Form 10-Q for the period ended September 30, 2000,  filed on November 20,
       2000, and same is incorporated herein by reference).

10(tt) Asset  Purchase and Sale Agreement  among Testco Inc. de Mexico,  S.A. de
       C.V. and ITS-Testco, LLC and PD Oilfield Services Mexicana, S. de R.L. de
       C.V.,  dated May 4, 2001.  (This  Exhibit  has been  previously  filed as
       Exhibit  10(z) to  Registrant's  Form 10-Q for the period ended March 31,
       2001,  filed  on May  21,  2001,  and  same  is  incorporated  herein  by
       reference).

10(uu) Asset Purchase and Sale Agreement between ITS-Testco,  LLC and Inter-Tech
       Drilling  Solutions,  Inc.,  dated May 4, 2001.  (This  Exhibit  has been
       previously  filed as  Exhibit  10(aa) to  Registrant's  Form 10-Q for the
       period  ended  March  31,  2001,  filed  on May  21,  2001,  and  same is
       incorporated herein by reference).

14     Code of Ethics

21     Subsidiaries of the Registrant

23     Consents of Experts and Counsel:

23(a)  Consent of Cole & Reed, P.C.

99     Additional exhibits:

99(a)  Chief Executive Officer Certification pursuant to 18 U.S.C. Section 1350,
       as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002.

99(b)  Chief Financial Officer Certification pursuant to 18 U.S.C. Section 1350,
       as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002.
-------------

*    Compensatory plan or arrangement

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

     (b)  The  following  reports on Form 8-K were filed during the last quarter
          of the period covered by this report:

     A report on Form 8-K was filed by the Company on  December  20,  2002.  The
matter  reported  was the filing of a suit by the  Company in the U.S.  District
Court for the Western  District of Oklahoma to terminate the Company's  business
relationship with American Bio Tech, Inc.

                                   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)

                                           HERB MEE, JR.
DATE:  April 8, 2003                   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.

Signature                       Title                           Date
---------                       -----                           ----

By    W.M. BEARD                Chief Executive Officer         April 8, 2003
      W.M. Beard

By    HERB MEE, JR.             President and Chief             April 8, 2003
      Herb Mee, Jr.             Financial Officer

By    JACK A. MARTINE           Controller and                  April 8, 2003
      Jack A. Martine           Chief Accounting Officer

By    W.M. BEARD                Chairman of the Board           April 8, 2003
      W.M. Beard

By    HERB MEE, JR.             Director                        April 8, 2003
      Herb Mee, Jr.

By    ALLAN R. HALLOCK          Director                        April 8, 2003
      Allan R. Hallock

By    HARLON E. MARTIN, JR.     Director                        April 8, 2003
      Harlon E. Martin, Jr.

By    FORD C. PRICE             Director                        April 8, 2003
      Ford C. Price

<PAGE>

<TABLE>
                                 EXHIBIT INDEX

Exhibit
No.    Description                                Method of Filing
---    -----------                                ----------------
<S>    <C>                                        <C>
2(a)   Agreement and Plan of  Reorganization  by  Incorporated herein by reference
       and among  Registrant,  Beard Oil Company
       ("Beard Oil") and New Beard,  Inc., dated
       as of July 12,  1993 (see  Addendum  A to
       Part I, which is  incorporated  herein by
       reference;  schedules  to  the  Agreement
       have been omitted).

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

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

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

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

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

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

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

10(b)  Form of  Indemnification  Agreement dated  Incorporated herein by reference
       December   15,   1994,   by  and  between
       Registrant and eight directors.

10(c)  The  Beard  Company  1994  Phantom  Stock  Incorporated herein by reference
       Units Plan as amended  effective  October
       23, 1997.

10(d)  Amendment  No. Three to The Beard Company  Incorporated herein by reference
       Deferred  Stock  Compensation  Plan dated
       November 1, 1995, as amended  October 24,
       2001.

10(e)  Amended and Restated  Nonqualified  Stock  Incorporated herein by reference
       Option  Agreement by and between  Richard
       D.  Neely and  ISITOP,  Inc.  ("ISITOP"),
       dated November 12, 1998.

10(f)  Amended and Restated  Nonqualified  Stock  Incorporated herein by reference
       Option  Agreement by and between Jerry S.
       Neely  and  ISITOP,  dated  November  12,
       1998.

10(g)  Nonqualified  Stock  Option  Agreement by  Incorporated herein by reference
       and  between   Robert  A.   McDonald  and
       ISITOP, dated November 12, 1998.

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

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

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

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

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

10(m)  Guaranty Agreement between Registrant and  Incorporated herein by reference
       Oklahoma Bank and Trust Company, dated as
       of June 7, 1999.

10(n)  Letter  Loan  Agreement  by  and  between  Incorporated herein by reference
       Registrant  and The  William M. Beard and
       Lu Beard 1988  Charitable  Unitrust  (the
       "Unitrust") dated April 3, 2000.

10(o)  Amended  Letter  Loan  Agreement  by  and  Incorporated herein by reference
       between Registrant and the Unitrust dated
       September 1, 2000.

10(p)  Amended  Letter  Loan  Agreement  by  and  Incorporated herein by reference
       between Registrant and the Unitrust dated
       March 31, 2001.

10(q)  Amended  Letter  Loan  Agreement  by  and  Incorporated herein by reference
       between Registrant and the Unitrust dated
       June 30, 2001.

10(r)  Amended  Letter  Loan  Agreement  by  and  Incorporated herein by reference
       between Registrant and the Unitrust dated
       September 30, 2001.

10(s)  Amended  Letter  Loan  Agreement  by  and  Incorporated herein by reference
       between Registrant and the Unitrust dated
       January 15, 2002.

10(t)  Amended  Letter  Loan  Agreement  by  and  Incorporated herein by reference
       between Registrant and the Unitrust dated
       February 28, 2002.

10(u)  Amended  Letter  Loan  Agreement  by  and  Incorporated herein by reference
       between Registrant and the Unitrust dated
       October 3, 2002.

10(v)  Supplemental Letter Loan Agreement by and  Filed herewith electronically
       between Registrant and the Unitrust dated
       November 7, 2002.

10(w)  Promissory  Note from  Registrant  to the  Incorporated herein by reference
       Trustees of the  Unitrust  dated April 3,
       2000.

10(x)  Renewal  Promissory  Note from Registrant  Incorporated herein by reference
       to the  Trustees  of the  Unitrust  dated
       September 1, 2000.

10(y)  Renewal  Promissory  Note from Registrant  Incorporated herein by reference
       to the  Trustees  of the  Unitrust  dated
       October 20, 2000.

10(z)  Renewal  Promissory  Note from Registrant  Incorporated herein by reference
       to the  Trustees  of the  Unitrust  dated
       March 31, 2001.

10(aa) Renewal  Promissory  Note from Registrant  Incorporated herein by reference
       to the  Trustees  of the  Unitrust  dated
       June 30, 2001.

10(bb) Renewal  Promissory  Note from Registrant  Incorporated herein by reference
       to the  Trustees  of the  Unitrust  dated
       September 30, 2001.

10(cc) Renewal  Promissory  Note from Registrant  Incorporated herein by reference
       to the  Trustees  of the  Unitrust  dated
       January 15, 2002.

10(dd) Renewal  Promissory  Note from Registrant  Incorporated herein by reference
       to the  Trustees  of the  Unitrust  dated
       February 28, 2002.

10(ee) Renewal  Promissory  Note from Registrant  Incorporated herein by reference
       to the  Trustees  of the  Unitrust  dated
       October 3, 2002.

10(ff) Supplemental    Promissory    Note   from  Filed herewith electronically
       Registrant   to  the   Trustees   of  the
       Unitrust dated November 7, 2002.

10(gg) Promissory  Note from  Registrant  to the  Incorporated herein by reference
       Trustee   of   the   William   M.   Beard
       Irrevocable  Trust  "B"  (the "B  Trust")
       dated August 31, 2001.

10(hh) Promissory  Note from  Registrant  to the  Incorporated herein by reference
       Trustee   of   the   William   M.   Beard
       Irrevocable  Trust  "C"  (the "C  Trust")
       dated August 31, 2001.

10(ii) Promissory  Note from Registrant to B & M  Incorporated herein by reference
       Limited,  a General  Partnership  ("B&M")
       dated August 31, 2001.

10(jj) Promissory  Note from  Registrant to Bank  Incorporated herein by reference
       of Oklahoma,  N.A.  ("BOK")  dated August
       30, 2000.

10(kk) Extension Promissory Note from Registrant  Incorporated herein by reference
       to BOK dated September 30, 2000.

10(ll) Extension Promissory Note from Registrant  Incorporated herein by reference
       to BOK dated March 15, 2001.

10(mm) Extension Promissory Note from Registrant  Incorporated herein by reference
       to BOK dated June 30, 2001.

10(nn) Extension Promissory Note from Registrant  Incorporated herein by reference
       to BOK dated May 15, 2002.

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

10(pp) Form of 2002 Warrant.                      Incorporated herein by reference

10(qq) Form  of  Deed of  Trust,  Assignment  of  Incorporated herein by reference
       Production,    Security   Agreement   and
       Financing  Statement  dated as of May 16,
       2002.

10(rr) Guaranty  Agreement  between the Unitrust  Incorporated herein by reference
       and BOK dated August 30, 2000.

10(ss) Guaranty  Agreement  between  W. M. Beard  Incorporated herein by reference
       and BOK dated August 30, 2000.

10(tt) Asset Purchase and Sale  Agreement  among  Incorporated herein by reference
       Testco Inc. de Mexico,  S.A. de C.V.  and
       ITS-Testco,  LLC and PD Oilfield Services
       Mexicana,  S. de R.L. de C.V.,  dated May
       4, 2001.

10(uu) Asset Purchase and Sale Agreement between  Incorporated herein by reference
       ITS-Testco,  LLC and Inter-Tech  Drilling
       Solutions, Inc., dated May 4, 2001.

14     Code of Ethics                             Filed herewith electronically

21     Subsidiaries of the Registrant             Filed herewith electronically

23(a)  Consent of Cole & Reed, P.C.               Filed herewith electronically

99(a)  Chief  Executive  Officer   Certification  Filed herewith electronically
       pursuant to 18 U.S.C.  Section  1350,  as
       adopted  pursuant  to Section  906 of the
       Sarbanes Oxley Act of 2002.

99(b)  Chief  Financial  Officer   Certification  Filed herewith electronically
       pursuant to 18 U.S.C.  Section  1350,  as
       adopted  pursuant  to Section  906 of the
       Sarbanes Oxley Act of 2002.
</TABLE>
<PAGE>

                          CERTIFICATIONS FOR FORM 10-K

I, William M. Beard, Chairman of the Board and Chief Executive Officer,  certify
that:

     1.   I have  reviewed  this annual report on Form 10-K of The Beard Company
          (the "registrant");

     2.   Based on my knowledge,  this annual report does not contain any untrue
          statement  of a  material  fact  or  omit to  state  a  material  fact
          necessary to make the statements  made, in light of the  circumstances
          under which such  statements were made, not misleading with respect to
          the period covered by this annual report;

     3.   Based on my knowledge,  the financial statements,  and other financial
          information  included in this  annual  report,  fairly  present in all
          material respects the financial  condition,  results of operations and
          cash flows of the registrant as of, and for, the periods  presented in
          this annual report;

     4.   The registrant's  other certifying  officers and I are responsible for
          establishing  and maintaining  disclosure  controls and procedures (as
          defined in Exchange  Act Rules  13a-14 and 15d-14) for the  registrant
          and we have:

          (a)  designed such  disclosure  controls and procedures to ensure that
               material  information  relating to the registrant,  including its
               consolidated  subsidiaries,  is made known to us by others within
               those  entities,  particularly  during  the  period in which this
               annual report is being prepared;

          (b)  evaluated  the  effectiveness  of  the  registrant's   disclosure
               controls and  procedures as of a date within 90 days prior to the
               filing date of this annual report (the "Evaluation Date"); and

          (c)  presented  in  this  annual  report  our  conclusions  about  the
               effectiveness of the disclosure  controls and procedures based on
               our evaluation as of the Evaluation Date;

     5.   The registrant's other certifying officers and I have disclosed, based
          on our most recent  evaluation,  to the registrant's  auditors and the
          audit  committee  of  registrant's  board  of  directors  (or  persons
          performing the equivalent function):

          (a)  all  significant  deficiencies  in the  design  or  operation  of
               internal  controls which could adversely  affect the registrant's
               ability to record,  process,  summarize and report financial data
               and have  identified for the  registrant's  auditors any material
               weaknesses in internal controls; and

          (b)  any fraud,  whether or not material,  that involves management or
               other employees who have a significant  role in the  registrant's
               internal controls; and

     6.   The  registrant's  other  certifying  officers and I have indicated in
          this annual report  whether or not there were  significant  changes in
          internal controls or in other factors that could significantly  affect
          internal   controls   subsequent  to  the  date  of  our  most  recent
          evaluation,   including   any   corrective   actions  with  regard  to
          significant deficiencies and material weaknesses.

                                     The Beard Company

                                     WILLIAM M. BEARD
Date:  April 8, 2003             By: William M. Beard
                                     Chairman of the Board and
                                     Chief Executive Officer
<PAGE>
                          CERTIFICATIONS FOR FORM 10-K

     I, Herb Mee, Jr., President and Chief Financial Officer, certify that:

     I have  reviewed  this annual report on Form 10-K of The Beard Company (the
"registrant");

     1.   Based on my knowledge,  this annual report does not contain any untrue
          statement  of a  material  fact  or  omit to  state  a  material  fact
          necessary to make the statements  made, in light of the  circumstances
          under which such  statements were made, not misleading with respect to
          the period covered by this annual report;

     2.   Based on my knowledge,  the financial statements,  and other financial
          information  included in this  annual  report,  fairly  present in all
          material respects the financial  condition,  results of operations and
          cash flows of the registrant as of, and for, the periods  presented in
          this annual report;

     3.   The registrant's  other certifying  officers and I are responsible for
          establishing  and maintaining  disclosure  controls and procedures (as
          defined in Exchange  Act Rules  13a-14 and 15d-14) for the  registrant
          and we have:

          (a)  designed such  disclosure  controls and procedures to ensure that
               material  information  relating to the registrant,  including its
               consolidated  subsidiaries,  is made known to us by others within
               those  entities,  particularly  during  the  period in which this
               annual report is being prepared;

          (b)  evaluated  the  effectiveness  of  the  registrant's   disclosure
               controls and  procedures as of a date within 90 days prior to the
               filing date of this annual report (the "Evaluation Date"); and

          (c)  presented  in  this  annual  report  our  conclusions  about  the
               effectiveness of the disclosure  controls and procedures based on
               our evaluation as of the Evaluation Date;

     4.   The registrant's other certifying officers and I have disclosed, based
          on our most recent  evaluation,  to the registrant's  auditors and the
          audit  committee  of  registrant's  board  of  directors  (or  persons
          performing the equivalent function):

          (a)  all  significant  deficiencies  in the  design  or  operation  of
               internal  controls which could adversely  affect the registrant's
               ability to record,  process,  summarize and report financial data
               and have  identified for the  registrant's  auditors any material
               weaknesses in internal controls; and

          (b)  any fraud,  whether or not material,  that involves management or
               other employees who have a significant  role in the  registrant's
               internal controls; and

     5.   The  registrant's  other  certifying  officers and I have indicated in
          this annual report  whether or not there were  significant  changes in
          internal controls or in other factors that could significantly  affect
          internal   controls   subsequent  to  the  date  of  our  most  recent
          evaluation,   including   any   corrective   actions  with  regard  to
          significant deficiencies and material weaknesses.

                                     The Beard Company

Date:  April 8, 2003                 By:  HERB MEE, JR.
                                          Herb Mee, Jr.
                                          President and Chief Financial Officer