UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 10-Q



(Mark One)



x
        QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


For the quarterly period ended June 30, 2008


or



o
        TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934






Commission File Number 1-12396THE BEARD COMPANY(Exact name of registrant as specified in its charter)Oklahoma
        73-0970298(State or other jurisdiction ofincorporation or organization)
        (I.R.S. EmployerIdentification No.)Enterprise Plaza, Suite 3205600 North May AvenueOklahoma City, Oklahoma73112(Address of principal executive offices)          (Zip Code)Registrants telephone number, including area code:(405) 842-2333Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.YesxNo oIndicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.Large accelerated filer o
        Accelerated filer o
        Non-accelerated filer o
        Smaller reporting companyxIndicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes oNoxIndicate the number of shares outstanding of each of the issuers classes of common stock as of August 13, 2008.Common Stock $.0006665 par value  6,611,247









THE BEARD COMPANY



INDEX



PART I. FINANCIAL INFORMATION
        Page




Item 1.
        Financial Statements




Balance Sheets  June 30, 2008 (Unaudited) and December 31, 2007




Statements of Operations - Three Months and Six Months ended June 30, 2008 and 2007 (Unaudited)



Statements of Shareholders Equity (Deficiency) - Year ended December 31, 2007

and Six Months ended June 30, 2008 (Unaudited)




Statements of Cash Flows - Six Months ended June 30, 2008 and 2007 (Unaudited)




Notes to Financial Statements (Unaudited)




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




Item 3.
        Quantitative and Qualitative Disclosures About Market Risk




Item 4.
        Controls and Procedures






PART II. OTHER INFORMATION



Item 1.
        Legal Proceedings
        .




Item 1A.Risk Factors




Item 2.
        Unregistered Sales of Equity Securities and Use of Proceeds




Item 3.
        Defaults Upon Senior Securities




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




Item 5.
        Other Information




Item 6.
        Exhibits




Signatures






2









PART I  FINANCIAL INFORMATION.Item 1. Financial StatementsTHE BEARD COMPANY AND SUBSIDIARIESBalance SheetsJune 30, 2008 (Unaudited) and December 31, 2007June 30,
        
        December 31,Assets
        2008
        
        2007Current assets:Cash and cash equivalents
        $    636,000
        
        $       61,000Accounts receivable, less allowance for doubtfulreceivables of $31,000 in 2008 and 2007
        198,000
        
        630,000Prepaid expenses and other assets
        7,000
        
        7,000Current maturities of notes receivable
        -
        
        35,000Assets of discontinued operations held for resale
        459,000
        
        487,000Total current assets
        1,300,000
        
        1,220,000Restricted certificate of deposit
        50,000
        
        50,000Investments and other assets
        117,000
        
        66,000Property, plant and equipment, at cost
        2,096,000
        
        2,306,000Less accumulated depreciation, depletion and amortization
        1,356,000
        
        1,445,000Net property,plant and equipment
        740,000
        
        861,000Intangible assets, at cost
        518,000
        
        518,000Less accumulated amortization
        424,000
        
        381,000Net intangible assets
        94,000
        
        137,000$ 2,301,000
        
        $ 2,334,000Liabilities and Shareholders Equity (Deficiency)Current liabilities:Trade accounts payable
        $    114,000
        
        $      53,000Accrued expenses
        620,000
        
        440,000Short-term debt
        -
        
        45,000Short-term debt - related entities
        -
        
        158,000Current maturities of long-term debt
        254,000
        
        1,672,000Current maturities of long-term debt - related entities
        315,000
        
        360,000Liabilities of discontinued operations held for resale
        1,851,000
        
        1,651,000Total current liabilities
        3,154,000
        
        4,379,000Long-term debt less current maturities
        997,000
        
        977,000Long-term debt - related entities
        4,811,000
        
        6,012,000Other long-term liabilities
        144,000
        
        151,000






3









Shareholders equity (deficiency):Convertible preferred stock of $100 stated value;5,000,000 shares authorized; 27,838 shares issuedand outstanding
        889,000
        
        889,000Common stock of $.0006665 par value per share;15,000,000 authorized;  6,553,847 and 5,657,715 sharesissued and outstanding in 2008 and 2007, respectively
        4,000
        
        4,000Capital in excess of par value
        38,930,000
        
        38,823,000Accumulated deficit
        (46,702,000)
        
        (48,954,000)Accumulated other comprehensive income
        74,000
        
        53,000Total shareholders equity (deficiency)
        (6,805,000)
        
        (9,185,000)Commitments and contingencies (note 7)$ 2,301,000
        
        $ 2,334,000See accompanying notes to financial statements.






4









THE BEARD COMPANY AND SUBSIDIARIESStatements of Operations(Unaudited)For Three Months Ended
        
        For Six Months EndedJune 30, 2008
        
        June 30, 2007
        
        June 30, 2008
        
        June 30, 2007Revenues:Coal reclamation
        $        21,000
        
        $                 -
        
        $       21,000
        
        $                 -Carbon dioxide
        317,000
        
        310,000
        
        662,000
        
        606,000e-Commerce
        -
        
        -
        
        5,000
        
        5,000Oil & gas
        35,000
        
        20,000
        
        63,000
        
        37,000373,000
        
        330,000
        
        751,000
        
        648,000Expenses:Coal reclamation
        133,000
        
        115,000
        
        270,000
        
        276,000Carbon dioxide
        64,000
        
        87,000
        
        95,000
        
        163,000e-Commerce
        38,000
        
        31,000
        
        69,000
        
        58,000Oil & gas
        6,000
        
        8,000
        
        13,000
        
        13,000Selling, general and administrative
        222,000
        
        172,000
        
        405,000
        
        325,000Depreciation, depletion & amortization
        37,000
        
        41,000
        
        73,000
        
        78,000500,000
        
        454,000
        
        925,000
        
        913,000Operating profit (loss):Coal reclamation
        (116,000)
        
        (117,000)
        
        (255,000)
        
        (281,000)Carbon dioxide
        247,000
        
        205,000
        
        554,000
        
        412,000e-Commerce
        (38,000)
        
        (30,000)
        
        (64,000)
        
        (52,000)Oil & gas
        25,000
        
        8,000
        
        43,000
        
        16,000Other, primarily corporate
        (245,000)
        
        (190,000)
        
        (452,000)
        
        (360,000)(127,000)
        
        (124,000)
        
        (174,000)
        
        (265,000)Other income (expense):Interest income
        5,000
        
        3,000
        
        6,000
        
        5,000Interest expense
        (181,000)
        
        (212,000)
        
        (403,000)
        
        (419,000)Equity in operations of unconsolidated affiliates
        -
        
        -
        
        1,000
        
        -Gain (loss) on sale of assets
        (5,000)
        
        -
        
        3,339,000
        
        2,000Other
        (4,000)
        
        -
        
        (1,000)
        
        21,000Earnings (loss) from continuing operationsbefore income tax benefit (expense)
        (312,000)
        
        (333,000)
        
        2,768,000
        
        (656,000)Income tax benefit (expense)
        29,000
        
        -
        
        (25,000)
        
        -Earnings (loss) from continuing operations
        (283,000)
        
        (333,000)
        
        2,743,000
        
        (656,000)Loss from discontinued operations
        (233,000)
        
        (278,000)
        
        (491,000)
        
        (528,000)Net earnings (loss)
        $    (516,000)
        
        $    (611,000)
        
        $  2,252,000
        
        $ (1,184,000)Net earnings (loss) per average common share outstanding:Basic:Earnings (loss) from continuing operations
        $(0.04)
        
        $(0.05)
        
        $0.44
        
        $(0.11)Loss from discontinued operations
        (0.04)
        
        (0.05)
        
        (0.08)
        
        (0.09)Net earnings (loss)
        $(0.08)
        
        $(0.10)
        
        $0.36
        
        $(0.20)Net earnings (loss) per average common share outstanding:Diluted:Earnings (loss) from continuing operations
        $(0.04)
        
        $(0.05)
        
        $0.28
        
        $(0.11)Loss from discontinued operations
        (0.04)
        
        (0.05)
        
        (0.05)
        
        (0.09)Net earnings (loss)
        $(0.08)
        
        $(0.10)
        
        $0.23
        
        $(0.20)Weighted average common shares outstanding:Basic
        6,416,000
        
        5,862,000
        
        6,289,000
        
        5,839,000Diluted
        6,416,000
        
        5,862,000
        
        9,655,000
        
        5,839,000See accompanying notes to financial statements.






5











6









THE BEARD COMPANY AND SUBSIDIARIESStatements of Shareholders Equity (Deficiency)Accumu-latedOther
        
        TotalPreferred
        
        Common
        
        Capital in
        
        
        
        Compre-hensive
        
        CommonShareholdersShares
        Stock
        
        Shares
        Stock
        
        Excess ofPar Value
        
        AccumulatedDeficit
        
        Income(loss)
        
        Equity(Deficiency)Balance, December 31, 2006
        27,838
        $889,000
        
        5,591,580
        $4,000
        
        $38,665,000
        
        $(46,928,000)
        
        $22,000
        
        $(7,348,000)Net loss
        -
        -
        
        -
        -
        
        -
        
        (2,026,000)
        
        -
        
        (2,026,000)Comprehensive income:Foreign currency translation adjustment
        -
        -
        
        -
        -
        
        -
        
        -
        
        31,000
        
        31,000Total comprehensive loss
        -
        -
        
        -
        -
        
        -
        
        -
        
        -
        
        (1,995,000)Share-based compensation related to employee stock compensation
        -
        -
        
        -
        -
        
        5,000
        
        -
        
        -
        
        5,000Reservation of shares pursuant to deferred compensation plan
        -
        -
        
        -
        -
        
        153,000
        
        -
        
        -
        
        153,000Issuance of shares pursuant to deferred compensation plan
        -
        -
        
        66,135
        -
        
        -
        
        -
        
        -
        
        -Balance, December 31, 2007
        27,838
        889,000
        
        5,657,715
        4,000
        
        38,823,000
        
        (48,954,000)
        
        53,000
        
        (9,185,000)Net earnings (unaudited)
        -
        -
        
        -
        -
        
        -
        
        2,252,000
        
        -
        
        2,252,000Comprehensive income (unaudited):Foreign currency translation adjustment (unaudited)
        -
        -
        
        -
        -
        
        -
        
        -
        
        21,000
        
        21,000Total comprehensive income (unaudited)
        -
        -
        
        -
        -
        
        -
        
        -
        
        -
        
        2,273,000Share-based compensation related to employee stock options (unaudited)
        -
        -
        
        -
        -
        
        5,000
        
        -
        
        -
        
        5,000











Issuance of stock for warrants exercised (unaudited)
        -
        -
        
        430,000
        -
        
        78,000
        
        -
        
        -
        
        78,000Reservation of shares pursuant to deferred compensation plan (unaudited)
        -
        -
        
        -
        -
        
        24,000
        
        -
        
        -
        
        24,000Issuance of shares pursuant to deferred compensation plan (unaudited)
        -
        -
        
        466,132
        -
        
        -
        
        -
        
        -
        
        -Balance, June 30, 2008 (unaudited)
        27,838
        $889,000
        
        6,553,847
        $4,000
        
        $38,930,000
        
        $(46,702,000)
        
        $74,000
        
        $(6,805,000)See accompanying notes to financial statements.






8









THE BEARD COMPANY AND SUBSIDIARIESStatements of Cash Flows(Unaudited)For the Six Months EndedJune 30,2008
        
        June 30, 2007Operating activities:Cash received from customers
        
        $        1,167,000
        
        $   662,000Cash paid to suppliers and employees
        
        (623,000)
        
        (765,000)Interest received
        
        6,000
        
        5,000Interest paid
        
        (1,035,000)
        
        (192,000)Operating cash flows of discontinued operations
        
        (389,000)
        
        (406,000)Net cash used in operating activities
        
        (874,000)
        
        (696,000)Investing activities:Acquisition of property, plant and equipment
        
        (20,000)
        
        (263,000)Acquisition of intangibles
        
        -
        
        (4,000)Proceeds from sale of assets
        
        3,500,000
        
        21,000Other
        
        -
        
        (1,000)Net cash provided by (used in) investing activities
        
        3,480,000
        
        (247,000)Financing activities:Proceeds from term notes
        
        375,000
        
        1,285,000Payments on line of credit and term notes
        
        (1,802,000)
        
        (463,000)Proceeds from related party debt
        
        -
        
        130,000Payments on related party debt
        
        (840,000)
        
        (330,000)Capitalized costs associated with issuance of debt
        
        -
        
        (47,000)Advance from related party for investment in fiftypercent-owned subsidiary in China
        
        173,000
        
        78,000Advance to related party
        
        (15,000)
        
        (14,000)Proceeds from exercise of warrants
        
        78,000
        
        -Payments received on notes receivable
        
        -
        
        35,000Other
        
        -
        
        2,000Net cash provided by (used in) financing activities
        
        (2,031,000)
        
        676,000Net increases (decreases) in cash and cash equivalents
        
        575,000
        
        (267,000)Cash and cash equivalents at beginning of period
        
        61,000
        
        270,000Cash and cash equivalents at end of period
        
        $           636,000
        
        $       3,000Continued











THE BEARD COMPANY AND SUBSIDIARIESStatements of Cash Flows(Unaudited)Reconciliation of Net earnings (loss) to Net Cash Used in Operating Activities:For the Six Months EndedJune 30,2008
        
        June 30, 2007Net earnings (loss)
        
        $        2,252,000
        
        $(1,184,000)Adjustments to reconcile net loss to net cashused in operating activities:Depreciation, depletion and amortization
        
        74,000
        
        78,000Depreciation, depletion and amortization on assets ofdiscontinuedoperations
        
        25,000
        
        19,000Gain on sale of assets
        
        (3,339,000)
        
        (2,000)Equity in operations of unconsolidated affiliates
        
        1,000
        
        -Noncash compensation expense
        
        29,000
        
        72,000Decrease in accounts receivable, prepaid expensesand other current assets
        
        469,000
        
        42,000Decrease in inventories
        
        8,000
        
        74,000Increase (decrease) in accounts payable, accruedexpenses and other liabilities
        
        (393,000)
        
        205,000Net cash used in operating activities
        
        $          (874,000)
        
        $   (696,000)See accompanying notes to financial statements.






10







THE BEARD COMPANY AND SUBSIDIARIES

Notes to Financial Statements



June 30, 2008 and 2007

(Unaudited)



(1)
        Summary of Significant Accounting Policies


Basis of Presentation

The accompanying financial statements and notes thereto have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, certain disclosures normally prepared in accordance with accounting principles generally accepted in the United States of America have been omitted. The accompanying financial statements and notes thereto should be read in conjunction with the audited consolidated financial statements and notes thereto included in The Beard Companys 2007annual report on Form 10-K.



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



The financial information included herein is unaudited; however, such information reflects solely normal recurring adjustments which are, in the opinion of management, necessary for a fair presentation of the results for the interim periods presented.



The results of operations for the three and six-month periods ended June 30, 2008, are not necessarily indicative of the results to be expected for the full year.



The Companys current significant operations are within the following segments:  (1) the Coal Reclamation (Coal) Segment, (2) the Carbon Dioxide (CO2) Segment, (3) thee-Commerce (e-Commerce) Segment, and (4) the Oil & Gas (Oil & Gas) Segment.



The Coal Segment is in the business of operating coal fines reclamation facilities in the United States of America and provides slurry pond core drilling services, fine coal laboratory analytical services and consulting services. The CO2 Segment consists of the production of CO2 gas. Thee-Commerce Segment consists of a 71%-owned subsidiary whose current strategy is to develop business opportunities to leverage starpays intellectual property portfolio of Internet payment methods and security technologies. The Oil & Gas Segment is in the business of producing oil and gas.



Stock-Based Compensation

On January 1, 2006, the Company adopted Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment, (SFAS 123R) which requires the measurement and recognition of compensation expense based on estimated fair values for all share-based payment awards made to employees and directors, including employee stock options. SFAS 123R supersedes the Companys previous accounting under Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (APB 25) for periods beginning in 2006. In March 2005, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 107 (SAB 107) relating to SFAS 123R. The Company has utilized the guidance of SAB 107 in its adoption of SFAS 123R.



SFAS 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized in the results of operations at their grant-date fair values. The Company adopted SFAS 123R using the modified prospective transition method, which requires the application of the accounting standard as of January 1, 2006, the first day of the Companys 2006 fiscal year. Under this transition method, compensation cost recognized in the first quarter of 2006 includes: (a) compensation cost for all share-based payments granted prior to but not yet vested as of December 31, 2005, based on the grant-date fair value estimated in accordance with the provisions of SFAS 123, and (b) compensation cost for all share-based payments granted subsequent to December 31, 2005, based on the grant date value estimated in accordance with the provisions of SFAS 123R. In accordance with
the modified prospective method of adoption, the Companys results of operations and financial position for prior periods have not been restated.



The Company reserved 100,000 shares of its common stock for issuance to key management, professional employees and directors under The Beard Company 2005 Stock Option Plan (the 2005 Plan) adopted in February 2005. There were 45,000 options granted under the 2005 Plan in the first quarter of 2005, however, on May 1, 2006, the Company cancelled



11







the 2005 Plan and all the options under the 2005 Plan. Also, on May 1, 2006, the Company replaced the 2005 Plan with the 2006 Stock Option Plan (the 2006 Plan). The Company granted 45,000 options under the 2006 Plan in replacement of the options that were cancelled under the 2005 Plan; 15,000 of these options were cancelled effective July 31, 2006 following the resignation of the holder thereof.



Grant-Date Fair Value

The Company uses the Black-Scholes option pricing model to calculate the grant-date fair value of an award. The fair value of the options granted in 2006 was calculated using the following estimated weighted average assumptions:



Expected volatility
        
        338.7%Expected risk term (in years)
        
        5.0Risk-free interest rate
        
        4.84%Expected dividend yield
        
        0%




The expected volatility is based on historical volatility over the two-year period prior to the date of granting of the unvested options. Beginning in 2006, the Company has adopted the simplified method outlined in SAB 107 to estimate expected lives for options granted during the period. The risk-free interest rate is based on the yield on zero coupon U. S. Treasury securities for a period that is commensurate with the expected term assumption. The Company has not historically issued any dividends and does not expect to in the future.



Share-Based Compensation Expense

The Company uses the straight-line attribution method to recognize expense for unvested options. The amount of share-based compensation recognized during a period is based on the value of the awards that are ultimately expected to vest. SFAS 123R requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The Company will re-evaluate the forfeiture rate annually and adjust as necessary. Share-based compensation expense recognized under SFAS 123R for the six months ended June 30, 2008 and 2007 was less than $5,000 and $2,000, respectively, and was charged to Other Activities. Prior to January 1, 2006, the Company accounted for its share-based compensation under the recognition and measurement principles of APB No. 25 and related interpretations, the disclosure-only provisions of
SFAS No. 123, Accounting for Stock-Based Compensation and the disclosures required by SFAS No. 148, Accounting for Stock-Based Compensation-Transition and Disclosure.  In accordance with APB No. 25, no share-based compensation was reflected in the Companys net income for grants of stock options to employees because the Company granted stock options with an exercise price equal to the fair market value of the stock on the date of grant.



As of June 30, 2008, there were $57,000 of total unrecognized compensation cost, net of estimated forfeitures, related to unvested share based awards, which is expected to be recognized over a weighted average period of 7.83 years.



On November 10, 2005, the Financial Accounting Standards Board (FASB) issued FASB Staff Position No. FAS 123R-3 Transition Election Related to Accounting for Tax Effects of Share-Based Payment Awards.  The Company has elected to adopt the alternative transition method provided in the FASB Staff Position for calculating the tax effects of stock-based compensation pursuant to SFAS 123R. The alternative transition method includes simplified methods to establish the beginning balance of the additional paid-in capital pool (APIC pool) related to the tax effects of employee stock-based compensation, and to determine the subsequent impact on the APIC pool and consolidated statements of cash flows of the tax effects of employee stock-based compensation awards that are outstanding upon adoption of SFAS 123R. SFAS 123R also requires the benefits of tax
deductions in excess of recognized compensation expense to be reported as a financing cash flow, rather than as an operating cash flow as prescribed under prior accounting rules. This requirement reduces net operating cash flows and increases net financing cash flows in periods after adoption. Total cash flow remains unchanged from what would have been reported under prior accounting rules. Since no material tax benefit was recorded for share based payment awards in the three- or six-month periods ended June 30, 2008 or 2007, the aforementioned provisions of SFAS 123R and the related FASB Staff Position No. FAS 123R-3 had no impact on the consolidated financial statements of the Company.



Option Activity

A summary of the activity under the Companys stock option plans for the six-month periods ended June 30, 2008 is presented below:





12









Weighted AverageWeighted
        Remaining
        AverageAverage
        Contractual Term
        IntrinsicShares
        Exercise Price
        (Years)
        ValueOptions outstanding at December 31, 2007:
        30,000
        $1.53
        8.33
        -Granted
        -
        -
        -
        -Exercised
        -
        -
        -
        -Canceled
        -
        -
        -
        -Options outstanding at June 30, 2008
        30,000
        $1.53
        7.83
        -Options exercisable at June 30, 2008
        20,000
        $1.53
        7.83
        -Options vested and options expected to
vest at June 30, 2008
        30,000
        $1.53
        7.83
        -




Reclassifications

Certain 2007 balances have been reclassified to conform to the 2008 presentation.



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


Overview

The accompanying financial statements have been prepared based upon the Companys belief that it will continue as a going concern. The Companys revenues from continuing operations increased in 2005 and 2006, but decreased in 2007 primarily as a result of sharp drops in both production and prices received in the Oil & Gas Segment.  The Company has incurred operating losses and negative cash flows from operations during each of the last six years. The Company commenced projects in both its Coal and China Segments in 2005. Both of these were projected to begin generating positive cash flow during the last half of 2006, but such projections were not attained. The Coal Segment did, however, reflect a slightly decreased operating loss in the first half of 2008, primarily as a result of an increase in revenue and small reductions in other costs. All efforts to make the China
Segment profitable have been unsuccessful, and in December of 2007 the segment was discontinued. Meanwhile, the Company is continuing to pursue an arrangement to manufacture product for a Chinese fertilizer company. If this company elects to proceed, our partner will then take over the Companys China fertilizer plant. The Company will retain a 2% interest in the partnership which owns the plant and be relieved of all of the existing debt. (See Additional Details below). Although the Company finalized its first licensing arrangement in its e-Commerce Segment in 2003, the arrangement did not make the segment profitable in any of the subsequent years and will not make it profitable in 2008. The segments operating loss for the first six months of 2008 increased to $64,000 versus a $52,000 operating loss in the 2007 first six months, reflecting increased legal costs associated with the Visa litigation. Although the CO2 Segment sold 35% of its interest in
the McElmo Dome field effective February 1, 2008, the segments operating profit increased 35% to $554,000 in the 2008 first six months compared to $412,000 in the 2008 first six months, primarily due to a $.46 per Mcf increase in the price received for our CO2 production in the current period. The segment reflected this improvement despite the fact that an additional 237 Mmcf of production was placed in long-term storage during the first half of 2008. The Oil & Gas Segment benefited from a 20% increase in production to the Companys interest and a 49% increase in price; these two factors combined to increase the operating profit for the segment from $16,000 for the first half of 2007 to $43,000 for the same period in 2008.



During the three years ended December 31, 2007, the Company took several steps which reduced its negative cash flow to some degree, including (i) salary deferrals by its Chairman and President (2005 only), (ii) deferrals of directors fees into its Deferred Stock Compensation Plans (the DSC Plans) and (iii) suspension of the Companys 100% matching contribution (up to a cap of 5% of gross salary) under its 401(k) Plan.



Five private debt placements raised gross proceeds of $4,184,000 during such period, including $105,000 in the first quarter of 2007. In the first half of 2005 the Company borrowed $850,000 from a related party to finance most of the cost of a fertilizer plant in China. In addition, the Company secured a $350,000 long-term bank credit facility (the 2006 Facility) in March of 2006 and borrowed $200,000 from one of the Companys Note holders in May of 2006. These financings were supplemented in 2007 by (i) the $105,000 of additional convertible notes discussed above, (ii) a $150,000 short-term loan from a shareholder of a former affiliate in March, (iii) $192,000  of short-term loans from the Companys Note holders, (iv) a $1,500,000 long-term bank facility (the 2007 Facility) in June, and (v) sale of the Companys interest in the Bravo Dome
CO2 field in October which generated net cash of $285,000. The remaining $220,000 principal balance of the 2006 Facility was paid from the proceeds of the 2007 Facility. In addition, the Coalition Managers Litigation was concluded, and the Company received approximately $96,000 from the defense fund in August of 2007. In March of 2008 the Company sold 35% of its interest in the McElmo Dome CO2 field, generating net cash of approximately $3,475,000. These measures enabled the Company to continue operating. As a result of the McElmo Dome



13







sale, the Companys balance sheet, liquidity and working capital have significantly improved from their year-end 2007 position.



The private placements resulted in additional dilution to the Companys common equity. 72,240 warrants were issued in 2005 and 12,869 warrants were issued in 2007 in connection with two of the private debt placements and 1,014,000 Stock Units (including 40,000 Units in the 2008 first quarter) were accrued in the participants accounts as a result of salary and fee deferrals into the various DSC Plans. During such period $4,184,000 of convertible notes were also issued which are convertible into 3,506,000 shares of common stock. On May 9 and May 12, 2008, two of the Companys 2004 warrant holders exercised their 2004 warrants to purchase 80,000 shares at $.14 per share and 200,000 shares at $.135 per share, respectively, of the Companys common stock. On May 10, 2008, one of the Companys 2002 warrant holders exercised its 2002 warrant to purchase 30,000 shares of
common stock at $.3568165 per share. As a result of the exercise of these 310,000 shares, the Companys total outstanding common shares increased to 6,553,847. Additional dilution also occurred due to an adjustment to the Preferred Stock conversion ratio resulting from the issuance of the warrants, the convertible notes and the salary deferrals. Termination of the 2003-2 DSC Plan resulted in the issuance of 218,000 common shares in 2005, 98,000 in 2006, 66,000 in 2007, and another 66,000 in the first quarter of 2008. In addition, 25,000 options were issued to a financial consultant in 2005 and 30,000 employee stock options were issued in 2006 (both figures net of forfeitures).



The Companys working capital position has improved significantly since December 31, 2007, when it was $(3,159,000), to $(1,854,000) at June 30, 2008---an improvement of $1,305,000. On March 26, 2008, the Company closed on the sale of 35% of its interest in the McElmo Dome CO2 Unit (consisting primarily of the 30% of the Companys McElmo Dome production that had been committed to sell at the Companys lowest prices) for $3,500,000. The sale, which was effective February 1, 2008, added approximately $3,478,000 to cash flow after legal costs. Because our interest in McElmo Dome served as the collateral for our primary lines of credit we entered into a new Change of Terms Agreement reducing the maximum available credit under the 2007 Facility from $1,500,000 to $1,000,000 while modifying the required monthly principal reduction from $75,000 per month beginning in
March of 2008 to $50,000 per month beginning in April of 2008. The outstanding principal balance under the facility was reduced down to zero. In addition, the outstanding loan agreement and related promissory note with The William M. Beard and Lu Beard 1988 Charitable Unitrust (the Unitrust) was amended to reduce the outstanding principal balance of the loan from $2,783,000 to $2,250,000, pay the accrued interest of $697,000 and extend the maturity date from April 1, 2009 to April 1, 2010. The Company also entered into a Release, Subordination and Amended and Restated Nominee Agreement whereby the Unitrust loan will continue to be subordinate to the Companys $390,000 note in favor of Boatright Family, L.L.C. (Boatright) and the 2007 Facility, and the Boatright note will continue to be subordinate to the 2007 Facility.



Additional Details

The Companys principal business is coal reclamation, and this is where a significant amount of managements operating attention has been focused. In 2005 the Coal Segment signed a contract to construct and operate a pond fines recovery project in West Virginia (the Pinnacle Project or the Project) for PinnOak Resources, LLC (PinnOak), the pond owner, which loaned more than $11,350,000, and an investor group (the Group) of PinnOak affiliates who provided $2,800,000 of equity in exchange for 50% ownership in the Pinnacle Project. In October of 2006 the Group elected to take control of the Project and the Companys interest was reduced to 25%. At that point the limited liability company that owned the Project ceased to be a consolidated entity and all of its assets and liabilities were removed from the Companys balance
sheet. In May of 2007 the Company and the PinnOak parties agreed to terminate most of the agreements governing the Project. The Company gave up its remaining 25% interest in the Project while remaining as contract operator. As part of the agreement, the Company was relieved of the guaranty made by a Company subsidiary of loans made by PinnOak totaling more than $11,350,000 secured by the subsidiarys 25% interest in the Project and the Companys ownership percentage in the Project was reduced to zero. During the third quarter of 2007 PinnOak sold the Pinnacle Project to a company which then sold it in February of 2008 to a subsidiary of the Coal Segments principal competitor.  The competitor then elected to terminate the Company as contract operator.



Due to cost over-runs of more than $3,000,000, the Group elected, effective October 1, 2006, to exercise their option to assume control of Beard Pinnacle, LLC (BPLLC), the limited liability company that owned the Pinnacle Project, and reduce the Companys interest therein to 25%. At that point BPLLC ceased to be a consolidated entity and all of its assets and liabilities were removed from the Companys balance sheet.



The Coal Segment is actively pursuing multi-project financing for its future coal projects through two separate investment banking sources. Meanwhile, it is continuing to develop projects so as to have them ready when the financing becomes available. The timing of the projects the Company is actively pursuing is uncertain and their continuing development is



14







subject to obtaining the necessary financing. There is no assurance that the required financing will be obtained or that any of the projects under development will materialize.



In December of 2007 the Company made the decision to discontinue the China Segment. The Company advanced a total of $117,000 during 2007 to fund the plants operations. The Company made additional advances totaling $20,000 during the first quarter of 2008, and an additional $40,000 during the second quarter. By oral agreement with our partner, any further advances by the Company will be limited to 2% of the total requirements. It is estimated that the Company may need to make additional advances of up to $5,000 while the exploratory efforts are being concluded.



The Company expects to generate cash of at least $50,000 from the disposition of the remaining assets from two of its discontinued segments, and expects to arrange short-term loans, if necessary, to satisfy its liquidity needs until the disposition of the China plant and the finalization of new production sales contracts at McElmo Dome have been concluded. The cash flow drain from the China Segment will have been almost entirely eliminated. The Coal Segment is expected to become self-sustaining by year-end.



(3)
        Discontinued Operations


BE/IM Segment

In 1999 the Management Committee of a joint venture 40%-owned by the Company adopted a formal plan to discontinue the business and dispose of its assets. The joint venture was dissolved in 2000 and the Company took over certain remaining assets and liabilities. The Company recorded no revenues for this segment for either the three or six-month periods ended June 30, 2008 or June 30, 2007. The Company recorded $1,000 in losses for this segment for each of the six-month periods ended June 30, 2008 and June 30, 2007. As of June 30, 2008, the significant assets related to the segments operations consisted primarily of equipment with no estimated net realizable value. The segment had no significant liabilities at June 30, 2008. The Company is actively pursuing opportunities to sell the segments few remaining assets and expects the disposition to be completed by December 31, 2008.



WS Segment

In 2001, the Company made the decision to cease pursuing opportunities in Mexico and the WS Segment was discontinued. The bulk of the segments assets were sold in 2001. The segment recorded no revenues for either the first six months of 2008 or 2007. The segment recorded losses of less than $200 for each of the first quarters of 2008 and 2007, respectively. Additional losses in the second quarters brought the total losses for each of the six-month periods of 2008 and 2007 up to $1,000. The Company is actively pursuing the sale of the remaining assets and expects to have them sold or otherwise disposed of by December 31, 2008. As of June 30, 2008, the significant assets of the WS Segment were fixed assets totaling $20,000. The significant liabilities of the segment consisted of trade accounts payable and other accrued expenses totaling $40,000. The Company anticipates that all of
the liabilities of the segment will be paid prior to December 31, 2008.



China Segment

In December of 2007, the Company elected to dispose of its fertilizer manufacturing operations and related interests in China. Revenues for the segment were $15,000 and $53,000 for the three and six-month periods ending June 30, 2008, respectively and $87,000 and $116,000 for the three and six-month periods ending June 30, 2007, respectively. The segment incurred losses of $232,000 and $490,000 for the three and six-month periods ended June 30, 2008, respectively, compared to losses of $277,000 and $527,000 for the three and six-month periods ended June 30, 2007, respectively. At June 30, 2008, the significant assets of the China Segment included (i) fixed assets of $319,000, (ii) inventory of $81,000 and (iii) cash, receivables and other current assets totaling $39,000. The significant liabilities of the segment included long-term debt of $850,000, current debt of $750,000 and trade
payables and accrued expenses of $210,000. The Company presently expects to dispose of the segments assets prior to December 31, 2008. The Company expects to (i) be relieved of all existing indebtedness and (ii) to pay its share of the other existing liabilities of the segment prior to December 31, 2008.



(4)
        Convertible Preferred Stock


Effective January 1, 2003, the Companys preferred stock became convertible into Beard common stock. Each share of Beard preferred stock was convertible into 10.66912983 shares on June 30, 2008 (total of 297,007 shares). The conversion ratio will be adjusted if additional warrants or convertible notes are issued or if additional shares of stock are credited to the accounts of the Companys Chairman or President in the Companys Deferred Stock Compensation Plan, in each case at an exercise, conversion or grant price below 1.38665703 per share. Fractional shares will not be issued, and cash will be paid in redemption thereof.



15







(5)
        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. In the fourth quarter of 2005 four of the five participants in the 2003-2 DSC Plan elected, irrevocably, to receive a portion of their shares in such Plan over periods ranging from two to 10 years. Those shares were included in the calculation of the common stock equivalents up to the date of those elections in 2005 but are excluded from the 2007 computation except for 23,765 shares which were distributed in June of 2007 and 42,370 shares which were distributed in July of 2007 and from the 2008 computation except for 66,135 shares which were distributed in January of 2008. As the remaining shares are distributed in future years, they will then be included in the computation of shares outstanding.
349,273 of such shares from the 2003-2 DSC Plan remain to be distributed in the years 2009 through 2014. Diluted earnings per share reflect the potential dilution that could occur if the Companys outstanding options and warrants were exercised (calculated using the treasury stock method) and if the Companys preferred stock and convertible notes were converted to common stock.



Diluted loss per share from continuing operations in the statements of operations for the three- and six-month periods ended June 30, 2007 and for the three-month period ended June 30, 2008 exclude all potential common shares issuable upon conversion of convertible preferred stock, convertible notes or exercise of options and warrants as the effect would be anti-dilutive due to the Companys losses from continuing operations.



For the Three  Months Ended
        
        For the Six  Months EndedJune 30,2008
        June 30,2007
        
        June 30,2008
        June 30,2007Basic EPS:Weighted average common
shares outstanding
        6,415,770
        5,802,187
        
        6,105,517
        5,776,417Shares in deferred stock
compensation plans treated
as common stock equivalents
        -
        59,476
        
        183,216
        62,7876,415,770
        5,861,663
        
        6,288,733
        5,839,204Diluted EPS:Weighted average common
shares outstanding
        6,415,770
        5,802,187
        
        6,105,517
        5,776,417Shares in deferred stock
compensation plans treated
as common stock equivalents
        -
        59,476
        
        183,216
        62,787Convertible debt amounts
considered to be common
stock equivalents
        -
        -
        
        2,909,042
        -Convertible Preferred Shares
considered to be common
stock equivalents
        -
        -
        
        297,007
        -Employee stock options
considered to be common
stock equivalents
        -
        -
        
        20,000
        -Warrants issued in connection
with debt offerings treated
as common stock equivalents
        -
        -
        
        140,109
        -6,415,770
        5,861,663
        
        9,654,891
        5,839,204




The assumed conversion of debt into 2,909,042 shares of common stock for the earnings per share calculation for the six-month period ending June 30, 2008 would result in the restoration of $49,000 in 2008 interest expense associated with the convertible debt to the numerator of the earnings per share calculation as prescribed by SFAS No. 128.  This increase in earnings increases the earnings per share for continuing operations for the six months ended June 30, 2008 for the basic and diluted earnings per share calculations to $0.45 and $0.29, respectively and the net earnings per share to $0.37 and $0.24, respectively.



(6)
        Income Taxes


In accordance with the provisions of the Statement of Financial Accounting Standard No. 109,  Accounting for Income Taxes (SFAS No. 109), the Companys net deferred tax asset is being carried at zero book value, which reflects the



16







uncertainties of the Companys utilization of the future net deductible amounts. The Company recorded a provision of $25,000 for federal alternative minimum taxes for the six-month period ended June 30, 2008, a tax benefit of $29,000 for the three-month period ending June 30, 2008 and no provisions for income taxes for either of the three- or six-month periods ended June 30, 2007.



At June 30, 2008, the Company estimates that it had the following income tax carryforwards available for both income tax and financial reporting purposes (in thousands):



ExpirationDate
        AmountFederal regular tax operating loss carryforwards
        2008
        $   20,500Federal regular tax operating loss carryforwards
        2021-2027
        $    4,500Tax depletion carryforward
        Indefinite
        $    3,000




(7)
        Commitments and Contingencies


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



(8)
        Business Segment Information


The Company manages its business by products and services and by geographic location (by country). The Company evaluates its operating segments performance based on earnings or loss from operations before income taxes. The Company had four reportable segments in the first half of 2008 and 2007. The segments are Coal, Carbon Dioxide, e-Commerce and Oil & Gas.



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. Thee-Commerce Segment consists of a 71%-owned subsidiary whose current strategy is to develop business opportunities to leverage the subsidiarys intellectual property portfolio of Internet payment methods and security technologies.The Oil & Gas Segment consists of the production of oil and gas.



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 (except for $15,000 per month of Other expenses charged to the China Segment beginning in December 2006) 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.



CarbonCoal
        Dioxide
        e-Commerce
        Oil & Gas
        TotalsThree months ended
June 30, 2008Revenues from external  customers
        $     21
        $     317
        $       -
        $       35
        $     373Segment profit (loss)
        (116)
        247
        (38)
        25
        118Three months ended
June 30, 2007Revenues from external  customers
        $       -
        $     310
        $       -
        $       20
        $     330Segment profit (loss)
        (117)
        205
        (30)
        8
        66Six months ended
June 30, 2008Revenues from external  customers
        $    21
        $     662
        $      5
        $       63
        $     751Segment profit (loss)
        (255)
        554
        (64)
        43
        278Segment assets
        303
        387
        4
        320
        1,014






17









Six months ended
June 30, 2007Revenues from external  customers
        $      -
        $     606
        $      5
        $       37
        $     648Segment profit (loss)
        (279)
        412
        (52)
        18
        99Segment assets
        232
        840
        18
        323
        1,413




Reconciliation of total reportable segment loss to consolidated earnings (loss) from continuing operations before income taxes is as follows for the three and six-month periods ended June 30, 2008 and 2007 (in thousands):



For the Three MonthsEnded
        
        
        For the Six MonthsEndedJune 30, 2008
        
        June 30, 2007
        
        June 30, 2008
        
        June 30, 2007Total earnings for reportable segments
        $118
        
        $66
        
        $278
        
        $99Net corporate earnings (expenses) notallocated to segments
        (430)
        
        (399)
        
        2,490
        
        (755)Total consolidated earnings (loss) forcontinuing operations before income taxes
        $(312)
        
        $(333)
        
        $2,768
        
        $(656)




(9)
        Subsequent Events


On July 10, 2008, one of the Companys 2003 warrant holders exercised his 2003 warrants to purchase 10,000 shares at $.242365 per share of the Companys common stock. On that same date three of the Companys officers (excluding the CEO and CFO) and two other employees were given bonuses in the form of awards of restricted stock totaling an aggregate of 24,900 shares.  On August 13, 2008, one of the Companys 2002 warrant holders exercised his 2002 warrants to purchase 22,500 shares at $.3570475 per share of the Companys common stock.  As a result of the issuance of this restricted stock and the exercise of these 32,500 shares, the Companys total outstanding common shares increased to 6,611,247.



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 OUR 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 WE BELIEVE THAT THE EXPECTATIONS REFLECTED IN SUCH FORWARD-LOOKING STATEMENTS ARE REASONABLE, WE CAN GIVE NO ASSURANCE THAT SUCH EXPECTATIONS WILL PROVE TO HAVE BEEN CORRECT. IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM OUR EXPECTATIONS (CAUTIONARY STATEMENTS) ARE DISCLOSED UNDER ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS AND ELSEWHERE IN THIS REPORT. ALL SUBSEQUENT WRITTEN AND ORAL FORWARD-LOOKING STATEMENTS ATTRIBUTABLE TO US, OR PERSONS ACTING ON OUR BEHALF, ARE EXPRESSLY QUALIFIED IN THEIR ENTIRETY BY THE CAUTIONARY STATEMENTS. WE ASSUME NO DUTY TO UPDATE OR REVISE OUR FORWARD-LOOKING STATEMENTS BASED ON CHANGES IN INTERNAL ESTIMATES OR EXPECTATIONS OR OTHERWISE.



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



The following discussion focuses on material changes in our financial condition since December 31, 2007 and results of operations for the quarter ended June 30, 2008, compared to the prior year second quarter and the six months ended June 30,



18







2008 compared to the prior year six months. Such discussion should be read in conjunction with the Companys financial statements including the related footnotes.



In preparing the discussion and analysis, we have presumed readers have read or have access to the discussion and analysis of the prior years results of operations, liquidity and capital resources as contained in our 2007 Form 10-K.



Overview



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. Thee-Commerce Segment is engaged in a strategy to develop business opportunities to leverage the subsidiarys intellectual property portfolio of Internet payment methods and security technologies. The Oil & Gas Segment consists of the production of oil and gas.



Our revenues from continuing operations have been on an uptrend, increasing in each of the three fiscal years ended in 2006. Most of the increase was attributable to the CO2 Segment where the implementation of the McElmo Dome settlement agreement resulted in increased production and better pricing. There was a reversal of this trend in  2007.  Our belief that this was a temporary aberration is supported by the fact that, despite the sale of 35% of our interest in the McElmo Dome field effective February 1 of 2008, CO2 revenues were 10% higher in the first six months of 2008 than they were a year ago, and segment operating profit increased 36%. The Oil & Gas Segment reflected improved results in the current six months as prices were up sharply. Anticipated production increases from the Pinnacle Plant in the Coal Segment and from our China fertilizer plant failed
to materialize due to (i) the deconsolidation of Beard Pinnacle and (ii) the failure of the China plant to meet its targeted sales and production goals, which led to the decision to discontinue the China Segment at year-end 2007. The Coal Segment reflected a decreased operating loss in the first half of 2008 as a result of an increase in revenue partially offset by reduced operating expenses. The discontinued China Segment generated a $490,000 loss in the first six months of 2008 versus a $527,000 loss in the comparable 2007 period.



Material changes in financial condition  June 30, 2008 as compared with December 31, 2007.



The following table reflects changes in the Companys financial condition during the periods indicated:



June 30,
        December 31,
        Increase2008
        2007
        (Decrease)Cash and cash equivalents
        $     636,000
        $       61,000
        $   575,000Working capital
        $(1,854,000)
        $(3,159,000)
        $1,305,000Current ratio
        0.41 to 1
        0.28 to 1






During the first half of 2008, our working capital position improved by $1,305,000 from $(3,159,000) as of December 31, 2007. We sold 35% of our interest in the McElmo Dome CO2 field for $3,500,000 and borrowed $375,000 on our credit facility at our bank. We used $2,642,000 to pay down debt and accrued interest. Our CO2  Segment provided working capital of $554,000. We used $255,000 of working capital to help fund the operations of the Coal Segment. We utilized a total of $389,000 in connection with the fertilizer operations in our discontinued China Segment. Also, we used $64,000 to fund the activities of thee-Commerce Segment. We utilized the remainder of the working capital to fund other operations. At June 30, 2008 we had $850,000 available on our reducing revolving credit line at the bank.



Our principal business is coal reclamation, and management continues to focus a significant portion of its attention to this area. Although the outcome of the Pinnacle Project was disappointing, the outlook for the Coal Segment remains bright. The segment is actively pursuing multi-project financing for its future projects through two separate investment banking sources. However, there is no assurance that their efforts will be successful or that any meaningful cash flow will be available from this source prior to 2009.



Our fertilizer manufacturing plant in China has failed to develop sales in commercial quantities, and this has necessitated that both we and our partner loan additional funds to support the operations until the plant starts generating positive cash flow. During the first half of 2008, we and our partner advanced a total of US$232,000 in order to support such operations. Any additional advances in 2008 by the Company after the date of this report should not exceed $5,000.



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We believe that our existing bank line of credit will provide sufficient working capital to sustain our activities until the cash flow from the coal recovery projects or other projects under development has increased enough to solve the problem. We also believe that, in view of improved CO2 pricing, we will be able to demonstrate sufficient reserves at McElmo Dome so that our bank will be willing to renew our credit facility beyond its present year-end maturity. If our projects under development do not generate sufficient cash flow or collateral value to cover the shortfall, or if the bank is unwilling to extend our loan facility on reasonable terms, then we must sell a portion of one of our investments in order to remedy our liquidity problem.



Material changes in results of operations - Quarter ended June 30, 2008 as compared with the Quarter ended June 30, 2007.



The net loss for the second quarter of 2008 was $516,000 compared to $611,000 for the 2007 second quarter. Continuing operations posted a net loss of $283,000 compared to $333,000 for the same period in 2007. In addition, our discontinued operations had losses totaling $233,000 for the second quarter of 2008 compared to $278,000 for the second quarter of 2007.



The Coal Segment had revenues of $21,000 for the second quarter of 2008 compared to less than $1,000 in the second quarter of 2007. The segments operating loss for the second quarter of 2008 was $116,000 compared to $117,000 for the same period in 2007 with the increase in revenue offset by increased operating and SG&A expenses. The operating profit in the CO2 Segment increased $42,000 to $247,000 compared to $205,000 a year earlier. The e-Commerce Segment incurred operating losses of $38,000 for the second quarter of 2008 compared to $30,000 in the second quarter of 2007. The Oil & Gas Segments operating profit increased $17,000 to $25,000 for the second quarter of 2008 compared to $8,000 for the same period in 2007. The operating loss in Other activities for the second quarter of 2008 increased $55,000 compared to the same period in 2007. As a result, the
operating loss for the current quarter increased $3,000 to $127,000 versus $124,000 in the corresponding quarter of the prior year.



Operating results of our primary operating Segments are reflected below:



2008
        2007Operating profit (loss):Coal reclamation
        $  (116,000)
        $  (117,000)Carbon dioxide
        247,000
        205,000e-Commerce
        (38,000)
        (30,000)Oil & gas
        25,000
        8,000Subtotal
        118,000
        66,000Other
        (245,000)
        (190,000)Total
        $  (127,000)
        $  (124,000)




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



Coal reclamation



The segment recorded revenues of $21,000 for the second quarter of 2008 compared to revenues of less than $1,000 for the same period in 2007 as a result of performing more consulting and coring jobs in the 2008 period. Operating costs increased $18,000 to $133,000 for the second quarter of 2008 compared to $115,000 for the same period in 2007. Increased administrative costs associated with research into new projects accounted for $16,000 of the change.



Carbon dioxide



Second quarter 2008 operations reflected an operating profit of $247,000 compared to $205,000 for the 2007 second quarter. The sole component of revenues for this segment is the sale of CO2 gas from the working and overriding royalty interests of the Companys carbon dioxide producing unit in Colorado. Operating revenues in this segment increased $7,000 to $317,000 for the second quarter of 2007 compared to $310,000 for the same period in 2007. The increase in revenue for the current quarter was due primarily to increased pricing as we received an average of $1.23 per mcf sold in the 2008 quarter versus $0.72 per mcf in the year earlier quarter. Additionally, lifting costs for the second quarter of 2008 decreased to $64,000 compared to $87,000 for the same period in 2007 and was attributable to decreased accruals for severance taxes for the current period.



20







e-Commerce



The e-Commerce Segment incurred an operating loss of $38,000 for the second quarter of 2008 versus an operating loss of $31,000 in the prior year quarter. The segment received $5,000 of revenues in each of the first quarters of 2007 and 2008. The provision for an annual license fee in the segments patent license agreement terminated in 2005. The segment will continue to receive royalty fee income according to the terms of the agreement. The increase in the operating loss is attributable to increased legal fees associated with the Visa litigation.



Oil & Gas



Our newest segment, Oil & Gas, is a familiar one to management. In recent years we have acquired federal and state oil and gas leases in several states. Through a farmout arrangement with another entity, eight gas wells were drilled on one of these leases in Colorado and placed in production in the fourth quarter of 2005. We have a 22.5% working interest in seven of these wells and a 3.6% override until payout and a 22.5% working interest after payout in the other well. We also have overriding royalty interests in 12 wells located in Wyoming which began production in 2005. The segment recorded $35,000 in revenues for the second quarter of 2008 compared to $20,000 for the same period in 2007. Operating costs totaled $6,000 and $8,000 for the second quarters of 2008 and 2007, respectively. The weighted average price received by the segment for its production increased by 73% for the
second quarter of 2008 compared to the same period in 2007 and this was accompanied by a 37% increase in production when comparing the same periods. As a result, the segment contributed $25,000 of operating profit for the second quarter of 2008 compared to $8,000 for the same period in the prior year.



Other corporate activities



Other corporate activities include general and corporate activities, as well as assets unrelated to our operating segments or held for investment. These activities generated operating losses of $245,000 for the second quarter of 2008 compared to $190,000 for the same period of 2007. This $55,000 increase in operating losses was due to increases in compensation and insurance expenses and in legal and accounting fees.



Selling, general and administrative expenses



Our selling, general and administrative expenses (SG&A) in the current quarter increased $50,000 to $222,000 compared to $172,000 for the second quarter of 2007.  The primary reasons for the increase were additional compensation, insurance and legal and accounting fees.



Depreciation, depletion and amortization expenses



DD&A expense for the second quarter of 2008 decreased $4,000 to $37,000 compared to $41,000 for the same period in 2007. The decrease was due primarily to lower depreciation expenses as a result of the sale of 35% of our interest in the equipment in McElmo Dome partially offset by an increase in amortization expense associated with capitalized costs related to our credit line with a local bank.



Other income and expenses



The other income and expenses for the second quarter of 2008 netted to a loss of $185,000 compared to a loss of $209,000 for the second quarter of 2007. Interest income was up $2,000 for the second quarter of 2008 versus the same period in 2007. Interest expense was $31,000 lower primarily as a result of the receipt of the funds from the sale of 35% of our interest in McElmo Dome allowed us to pay down some of our outstanding debt in February of 2008.  There was a $5,000 adjustment to the expenses associated with the McElmo Dome sale in 2008 with no comparable amount in the second quarter of 2007.



Income taxes



We recorded a benefit for federal alternative minimum taxes of $29,000 for the second quarter of 2008 compared to no provision for income taxes in either the second quarter of 2007. We have not recorded any financial benefit attributable to our various tax carryforwards due to uncertainty regarding their utilization and realization.



Discontinued operations



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Our financial results included losses of $233,000 from our discontinued operations for the second quarter of 2008 compared to $278,000 for the same period in 2007, as a result of the discontinuance of three of our segments. We made the decision to discontinue the China Segment during the fourth quarter of 2007. The losses attributable to this segment amounted to $232,000 for the second quarter of 2008 and $277,000 for the same period in 2007. Losses from the discontinued iodine manufacturing operation amounted to $1,000 for both the second quarters of 2008 and 2007. As of June 30, 2008, assets of discontinued operations held for resale totaled $459,000 and liabilities of discontinued operations totaled $1,851,000. We believe that all of the assets of the discontinued segments have been written down to their realizable value. We are actively pursuing opportunities to sell the remaining
assets and expect the dispositions to be completed by December 31, 2008.



Material changes in results of operations - Six months ended June 30, 2008 as compared with the Six months ended June 30, 2007.



We recorded earnings of $2,252,000 for the first six months of 2008 compared to a loss of $1,184,000 for the first half of 2007. Continuing operations reflected earnings of $2,743,000 for the first six months of 2008 compared to losses of $656,000 for the same period in 2007. The primary reason for the $3,436,000 improvement was the $3,339,000 gain we recognized on the sale, effective February 1, 2008, of 35% of our interest in the McElmo Dome field. In addition, we had losses from discontinued operations of $491,000 for the first half of 2008 compared to losses of $528,000 from such operations for the same period in 2007.



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



2008
        
        2007Operating profit (loss):Coal reclamation
        $    (255,000)
        
        $    (281,000)Carbon dioxide
        554,000
        
        412,000e-Commerce
        (64,000)
        
        (52,000)Oil & gas
        43,000
        
        16,000Subtotal
        278,000
        
        95,000Other
        (452,000)
        
        (360,000)Total
        $   (174,000)
        
        $   (265,000)




The Other in the above table reflects primarily general and corporate activities, as well as our other activities and investments.



Coal reclamation



Revenues were $21,000 for the first half of 2008 compared to less than $1,000 for the first six months of 2007 as the result of more consulting and coring jobs in the year 2008. Operating costs decreased by $6,000 to $270,000 for the first six months of 2008 compared to $276,000 for the same period in 2007. Labor costs decreased $21,000 for the second quarter of 2008 compared to the same period in 2007. This reduction was offset by $17,000 in other administrative costs.  As a result, the operating loss for the first six months of 2008 decreased $26,000 to $255,000 compared to $281,000 in the first six months of 2007.



Carbon dioxide



Operations for the first six months of 2008 resulted in an operating profit of $554,000 compared to $412,000 of operating profits for the 2007 first half. The sole component of revenues for this segment is the sale of CO2 gas from the working and overriding royalty interests of our carbon dioxide producing unit in Colorado. Segment operating revenues increased $56,000 or 9% to $662,000 for the first six months of 2008 compared to $606,000 for the same period in 2007. We recorded $68,000 less in operating costs associated with our properties in the first half of 2008 compared to the same period in 2007. The decrease in operating costs was attributable primarily to a reduction in severance taxes.  Production volumes for the Companys interest in the McElmo Dome field were reduced 167 Mcf for the first six months of 2008 compared to the same period in 2007 as 237 Mmcf were
placed in storage. The increase in revenue for the current six months was due principally to an increase in pricing for the product. We received an average of $1.11 per mcf sold in the first six months of 2008 versus $0.65 per mcf in the year earlier period.



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e-Commerce



Thee-Commerce Segment incurred an operating loss of $64,000 for the first half of 2008 versus an operating loss of $52,000 in the prior year period. The segment recorded revenues of $5,000 of royalty fee income in the first half of 2007 and the same amount for the first six months of 2008. The provision for an annual license fee in the segments patent license agreement terminated in 2005. The segment will continue to receive royalty fee income according to the terms of the agreement. A $14,000 increase in legal fees associated with the Visa litigation accounted for the increase in the losses when comparing the first half of 2008 to the same period in 2007. Net reductions, none of which were individually significant, of $2,000 in other expense categories accounted for the balance of the difference in losses when comparing the two periods.



Oil & Gas



Our newest segment, Oil & Gas, is a familiar one to management. In recent years we have acquired federal and state oil and gas leases in several states. Through a farmout arrangement with another entity, eight gas wells were drilled on one of these leases in Colorado and placed in production in the fourth quarter of 2005. We have a 22.5% working interest in seven of these wells and a 3.6% override until payout and a 22.5% working interest after payout in the other well. We also have overriding royalty interests in four wells located in Wyoming which began production in 2005. The segment recorded $63,000 in revenues for the first half of 2008 compared to $37,000 for the same period in 2007. Operating costs totaled $13,000 for both the first six months of 2007 and 2008, respectively. The weighted average price received by the segment for its production increased by 49% for the first
six months of 2008 compared to the same period in 2007 and this was accompanied by a 20% increase in production when comparing the same periods. As a result, the segment contributed $43,000 of operating profit for the first half of 2008 compared to $16,000 for the same period in the prior year.



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 losses of $452,000 for the first six months of 2008 compared to $360,000 for the first half of 2007. The $92,000 increase in operating losses was due primarily to increased compensation, insurance and legal and accounting fees along with increased amortization expenses.



Selling, general and administrative expenses



Our selling, general and administrative expenses (SG&A) in the first half of 2008 increased $80,000 to $405,000 from $325,000 for the 2007 six months. The primary reasons for the increase are increased compensation, insurance and legal and accounting fees along with additional amortization expenses associated with capitalized costs relating to our debt.



Depreciation, depletion and amortization expenses



DD&A expense decreased $5,000 from $78,000 for the six months ended June 30, 2007 to $73,000 for the same period in 2008. The decrease was primarily the result of reduced depreciation in the CO2 Segment due to the sale, effective February 1, 2008, of 35% of our interest in the McElmo Dome field.



Other income and expense



The other income and expense for the first six months of 2008 netted to earnings of $2,942,000 compared to a loss of $391,000 for the same period in 2007. Interest income increased to $6,000 for the first half of 2008 compared to $5,000 for the first six months of 2007. Interest expense for the first six months of 2008 was $403,000 compared to $419,000 for the same period in 2007. Receipt of the funds from the sale of 35% of our interest in McElmo Dome allowed us to pay down some of our outstanding debt in February of 2008. The lower principal balances enabled us to reduce interest expense $16,000, accounting for the decrease.   The sale resulted in a gain on sale of assets totaling $3,339,000 for the first six months of 2008 compared to a gain of $2,000 for the same period in 2007. Our equity in earnings of unconsolidated affiliates reflected net income of $1,000 for the first half of
2008 compared to none for the same period in 2007. Finally, in the first half of 2007, we recovered $20,000 in proceeds associated with a note receivable that had been written off in prior years. There was no such recovery in the first half of 2008.



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Income taxes



We recorded a provision of $25,000 for federal alternative minimum taxes for the first half of 2008 compared to none for the first half of 2007. We have not recorded any financial benefit attributable to our various tax carryforwards due to uncertainty regarding their utilization and realization.



Discontinued operations



Our financial results included losses of $491,000 from our discontinued operations for the first half of 2008 compared to $528,000 for the same period in 2007, as a result of the discontinuance of three of our segments. We made the decision to discontinue the China Segment during the fourth quarter of 2007. The losses attributable to this segment amounted to $490,000 for the first half of 2008 and $527,000 for the same period in 2007. Losses from the discontinued iodine manufacturing operation amounted to $1,000 for both the first half of 2008 and 2007.  As of June 30, 2008, assets of discontinued operations held for resale totaled $459,000 and liabilities of discontinued operations totaled $1,851,000. We believe that all of the assets of the discontinued segments have been written down to their realizable value. We are actively pursuing opportunities to sell the remaining assets and
expect the dispositions to be completed by December 31, 2008.



Item 3. Quantitative and Qualitative Disclosures About Market Risk.



At June 30, 2008, we had total debt of $7,977,000. This debt, including $1,600,000 in the discontinued China Segment, had fixed interest rates; therefore, our interest expense and operating results would not be affected by an increase in market interest rates for this portion of the debt. At June 30, 2008, a 10% increase in market interest rates would have reduced the fair value of our debt by $92,000.



We have no other market risk sensitive instruments.



Item 4. Controls and Procedures.



We, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, have evaluated the effectiveness of the design and operation of our disclosure controls and procedures. Based on that evaluation and due to the material weakness described below, the Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) were not effective as of June 30, 2008, to ensure that information required to be disclosed by us in reports that we file or submit under the 1934 Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms and that such information is accumulated and communicated to our management as appropriate to allow timely
decisions regarding required disclosures. We believe our consolidated financial statements included in this Form 10-Q fairly present in all material respects our financial position, results of operations and cash flows for the periods presented in accordance with United States generally accepted accounting principles.



Material weakness in internal control We have not made an assessment of internal controls over financial reporting at our China Segment, therefore, the design and operating effectiveness of those controls has not been determined. We believe operating results from the China Segment, for the three- and six-month periods ended June 30, 2008 and June 30, 2007, to be material to the consolidated financial statements taken as a whole. Currently, there are no plans to remediate this material weakness as we intend to reduce our ownership interest in the China Segment to a level immaterial to the ongoing operations of the Company.



PART II. OTHER INFORMATION.



Item 1. Legal Proceedings.



Visa Litigation.

In May of 2003 our 71%-owned subsidiary, starpay.com, l.l.c., along with VIMachine, Inc. filed a suit in the U. S. District Court for the Northern District of Texas, Dallas Division against Visa International Service Association and Visa USA, Inc., both d/b/a Visa (Case No. CIV:3-03-CV0976-L). VIMachine is the holder of U.S. Patent No. 5,903,878 (the VIMachine Patent) that covers, among other things, an improved method of authenticating the cardholder involved in an Internet payment transaction. In July of 2003, the Plaintiffs filed an Amended Complaint. The suit seeks damages and injunctive relief (i) related to Visas infringement of the VIMachine Patent; (ii) related to Visas breach of certain confidentiality agreements express or implied; (iii) for alleged fraud on the Patent Office based on Visas pending patent application; and (iv) under Californias



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common law and statutory doctrines of unfair trade practices, misappropriation and/or theft of starpays intellectual property and/or trade secrets. In addition, Plaintiffs are seeking attorney fees and costs related to the foregoing claims. If willfulness can be shown, Plaintiffs will seek treble damages.



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



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



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



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



In July of 2005 the Federal Circuit Court of Appeals issued anenbancdecision in the patent case ofPhillips v. AWH Corp. (the Phillips Case). Subsequent to the Federal Circuits decision in July, Defendants requested and the Court ordered supplemental briefs to the Court addressing Magistrate Judge Sandersons Report and Recommendation respective to the Markman hearing in light of the Federal Circuitsen bancdecision in the Phillips Case. Both parties filed their supplemental briefs in August 2005. Oral arguments regarding these issues were held in November of 2005. On January 19, 2006, Magistrate Judge Sanderson filed his final Report and Recommendation on the Markman
issues to District Judge Lindsey. In his report Judge Sanderson found no reason to change any portions of his recommendations filed on January 4, 2005, in light of the Federal Circuits decision in the Phillips Case. In mid-September District Judge Lindsey issued his final ruling on the Markman hearing. He adopted nine of the 14 claim constructions previously suggested by Magistrate Sanderson and modified five other claim constructions. Judge Lindsey did not modify Magistrate Sandersons previous finding that 24 of the 28 claims asserted by the Plaintiffs were valid.



This ruling allows the patent infringement action to proceed immediately as no appeal is allowed from this intermediate ruling. Noteworthy among the changes is the definition of a unique transaction identifier or UTID. Visa had asked that the UTID be defined as a globally unique data string, and Judge Lindsey refused to adopt that construction, construing the UTID more broadly in a manner more favorable to Plaintiffs patent infringement claims. Based on the ruling, Plaintiffs anticipate filing a motion for summary judgment asking the Court to rule in their favor as a matter of law, and Plaintiffs anticipate that Visa will also file a summary judgment motion.



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



In November of 2000 Visa publicly announced that it was testing VPAS. In September of 2001 Visa stated that, once rolled out globally, it expected VPAS to reduce Internet payment disputes by at least 50%. In an October 2004, news release, Visa depicted Verified by Visa as the leading security standard for authentication of Internet transactions.  In this release Visa announced that Verified by Visa had recorded an increase of close to 200% in the number of transactions for the quarter ending in September 2004, and that total Verified by Visa card volume for the first nine months of 2004 was $5.4 billion.  In April of 2005 Visa announced that transaction volume during the first quarter of 2005 had increased more than 230% over



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last year.  Towards the end of 2005 Visa announced that Verified by Visa had $7 billion in volume during the first half of the year......a 194% year-over-year increase.  Since late 2005, Plaintiffs have not seen or received public information bearing on the transaction volume within the Verified by Visa system. However, Visas current Verified by Visa Fact Sheet touts that more than 110,000 merchants have adopted Verified by Visa and 10,000 banks have made the service available to over 395 million consumers globally through implementation in more than 65 countries representing 99% of global e-commerce volume. Other Visa documents state that since Verified by Visa was implemented in 2003, there has been a 75% reduction in chargebacks on Verified by Visa compared with non-Verified by Visa transactions.



The parties mediated in January 2008. A settlement was reached, and starpay.com views the settlement as acceptable. However, questions are outstanding regarding the enforceability of the settlement agreement in view of objections of starpay.coms litigation partner to the terms thereof. Motions are currently being filed to address the issues presented by the dispute surrounding the settlement agreement. It is anticipated that the settlement will either be enforced in the near term, or it will be invalidated and the litigation will continue.



Item 1A. Risk Factors.



Only the Risk Factors enumerated below have changed since the Form 10-K:



Our Financial Position.Our net worth became negative as of December 31, 2001, and the deficiency increased to ($5,333,000) at year-end 2003. Receipt of the second installment of the Settlement reduced the deficiency to ($4,144,000) at year-end 2004. Such deficiency increased to ($6,805,000) at June 30, 2008, and will continue to increase until we are able to achieve profitability in our Coal Segment or in our other activities. Our business will continue to require substantial expenditures. Our inability to generate positive cash flow from operations has limited our ability to borrow funds and impacted our ability to achieve profitability. We must achieve a turnaround in the Coal Segment or in our other activities this year. If a turnaround is not successful or is only partially successful, we will need to sell some of our assets or pursue additional
outside financing which would likely involve further dilution to our shareholders. We cannot assure that we will be able to sell such assets or obtain additional financing on terms that we deem acceptable, or at all.



We have substantial indebtedness and may not have enough revenues to pay our debts.As of June 30, 2008, we had $7,977,000 of total debt outstanding. While only $567,000 of the total debt is due to be repaid in 2008, another $3,584,000 of the total currently outstanding is due to be repaid by December 31, 2009. We or our subsidiaries may become further indebted. This much debt could pose substantial risks to our business. The indebtedness may require us to use available funds for payment of principal and interest instead of funding our operations. The debt could also inhibit our ability to raise additional capital. It is possible that we will not have enough cash flow from our operations to pay the principal and interest on our debt. This would have a material adverse effect on us.



Limited Liquidity.Our common stock trades on the Over-The-Counter Bulletin Board. Although we currently have nine  firms making a market in our stock, the volume of trading has been relatively low and fairly sporadic. At June 30, 2008, 55.9% of our 6,553,847 outstanding shares were held by management and another 7.1% was held by a long-term institutional holder. In addition, there is substantial potential dilution, with preferred shares convertible into 297,000 shares, presently exercisable warrants and options totaling 160,000 shares, notes convertible into 3,413,000 shares at June 30, 2008 and a total of 349,000 shares at June 30, 2008 in a DSC Plan scheduled for distribution in 2009 and future years.



Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Not applicable.



Item 3. Default Upon Senior Securities.

Not applicable.



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

Not applicable.



Item 5. Other Information.

Not applicable.



Item 6. Exhibits.



(a)
        The following exhibits are filed with this Form 10-Q and are identified by the numbers indicated:






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3.1
        Restated Certificate of Incorporation of Registrant as filed with the Secretary of State of Oklahoma on September 20, 2000. (This Exhibit has been previously filed as Exhibit 3(i) to Registrants Form 10-Q for the period ended September 30, 2000, filed on November 20, 2000, and same is incorporated herein by reference).3.2
        Amended Certificate of Incorporation of Registrant as filed with the Secretary of State of Oklahoma on July 20, 2004, effective on the close of business August 6, 2004. (This Exhibit has been previously filed as Exhibit 3.2 to Registrants Form 10-K for the period ended December 31, 2005, filed on April 17, 2006.3.3
        Registrants By-Laws as currently in effect. (This Exhibit has been previously filed as Exhibit 3(ii) to Registrants Form 10-K for the period ended December 31, 1997, filed on March 31, 1998, and same is incorporated herein by reference).4
        Instruments defining the rights of security holders:4.1
        Certificate of Designations, Powers, Preferences and Relative, Participating, Option and Other Special Rights, and the Qualifications, Limitations or Restrictions Thereof of the Series A Convertible Voting Preferred Stock of the Registrant. (This Exhibit has been previously filed as Exhibit 3(c) to Amendment No. 2, filed on September 17, 1993 to Registrants Registration Statement on Form S-4, File No. 33-66598, and same is incorporated herein by reference).31
        Rule 13a-14(a)/15d-14(a) Certifications:31.1
        Chief Executive Officer Certification required by Rule 13a-14(a) or Rule 15d-14(a).31.2
        Chief Financial Officer Certification required by Rule 13a-14(a) or Rule 15d-14(a).32
        Section 1350 Certifications:32.1
        Chief Executive Officer Certification required by Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code.32.2
        Chief Financial Officer Certification required by Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code.


_______________

*  Compensatory plans or arrangements.



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



SIGNATURES



Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



(Registrant)THE BEARD COMPANY(Date)   August 15, 2008
        /s/  Herb Mee, Jr.Herb Mee, Jr., President and Chief Financial Officer(Date)   August 15, 2008
        /s/  Jack A. MartineController and Chief Accounting Officer








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ExhibitNo.
        Description
        Method of Filing3.1
        Restated Certificate of Incorporation of Registrant as filed with the Secretary of State of Oklahoma on September 20, 2000
        Incorporated herein by reference3.2
        Amended Certificate of Incorporation of Registrant as filed with the Secretary of State of Oklahoma on July 20, 2004, effective on the close of business August 6, 2004
        Incorporated herein by reference3.3
        Registrants By-Laws as currently in effect
        Incorporated herein by reference4.1
        Certificate of Designations, Powers, Preferences and Relative, Participating, Option and Other Special Rights, and the Qualifications, Limitations or Restrictions Thereof of the Series A Convertible Voting Preferred Stock of the Registrant
        Incorporated herein by reference31.1
        Chief Executive Officer Certification required by Rule 13a-14(a) or Rule 15d-14(a).
        Filed herewith electronically31.2
        Chief Financial Officer Certification required by Rule 13a-14(a) or Rule 15d-14(a).
        Filed herewith electronically32.1
        Chief Executive Officer Certification required by Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code.
        Filed herewith electronically32.2
        Chief Financial Officer Certification required by Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code.
        Filed herewith electronically






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