10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2006
	or
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________ to __________
	Commission file number 001-12396

THE BEARD COMPANY
(Exact name of registrant as specified in its charter)
Oklahoma (State or other jurisdiction of incorporation or organization)	73-0970298 (I.R.S. Employer Identification No.)
Enterprise Plaza, Suite 320 5600 North May Avenue Oklahoma City, Oklahoma73112 (Address of principal executive offices)                   (Zip Code)
Registrant's telephone number, including area code:   (405) 842-2333
Securities registered pursuant to Section 12(b) of the Act:
(Title of each class) None	(Name of each exchange on which registered) None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.0006665 par value

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.			Yes o     No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.			Yes o     No x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports, and (2) has been subject to such filing requirement for the past 90 days.			Yes x     No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form l0-K or any amendment to this Form 10-K.			o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).			Yes o     No x
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.
Large accelerated filer o	Accelerated filer o	Non-accelerated filer x

The aggregate market value of the voting common stock held by non-affiliates of the registrant, computed by using the last sale price of registrant's common stock on the OTC Bulletin Board as of the close of business on June 30, 2006, was $3,176,000.

The number of shares outstanding of the registrant's common stock as of March 31, 2007 was

Common Stock $.0006665 par value – 5,591,580

DOCUMENTS INCORPORATED BY REFERENCE:

Portions of the Registrant’s Proxy Statement for its 2007 Annual Meeting of Stockholders are incorporated by reference as to Part III, Items 10, 11, 12, 13 and 14.

THE BEARD COMPANY

FORM 10-K

For the Fiscal Year Ended December 31, 2006

TABLE OF CONTENTS

PART I
Item 1.	Business	3
Item 1A.	Risk Factors	20
Item 1B.	Unresolved Staff Comments	22
Item 2.	Properties	22
Item 3.	Legal Proceedings	22
Item 4.	Submission of Matters to a Vote of Security Holders	25
Item 4a.	Executive Officers and Significant Employees of the Registrant	25
PART II
Item 5.	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	28
Item 6.	Selected Financial Data	31
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operation	32
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	44
Item 8.	Financial Statements and Supplementary Data	46
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	78
Item 9A.	Controls and Procedures	78
Item 9B.	Other Information	78
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	78
Item 11.	Executive Compensation	78
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	78
Item 13.	Certain Relationships and Related Transactions, and Director Independence	79
Item 14.	Principal Accounting Fees and Services	79
PART IV
Item 15.	Exhibits and Financial Statement Schedules	79
SIGNATURES		86

THE BEARD COMPANY

FORM 10-K

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

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

PART I

Item 1. Business.

(a) General development of business.

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

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

We have been involved in numerous businesses during the last 29 years, many of them unsuccessful. Our operating activities are now comprised of five segments:

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

• The carbon dioxide (“CO₂”) Segment, which has profitably produced CO2 gas since the early 1980’s;

• The China (“China”) Segment, which manufactures fertilizer in China;

• The e-Commerce (“e-Commerce”) Segment, whose current strategy is to develop business opportunities to leverage starpay’s™ intellectual property portfolio of Internet payment methods and security technologies; and

• The oil and gas (“Oil & Gas”) Segment, which is in the business of producing oil and gas.

Net Operating Loss Carryforwards. We have approximately $44.1 million of unused net operating losses ("NOL's") available for carryforward, including $41.1 million which expire between 2007 and 2008 and $3 million which expire in 2021 through 2026, plus approximately $3 million in tax depletion carryforwards. The loss of the NOL's would have a negative impact on our future value. If we were to experience an “ownership change” as defined in Section 382 of the Internal Revenue Code, we would be severely limited in our ability to use our NOL’s in the future. Our Certificate of Incorporation contains provisions to prevent the triggering of such a change by restricting transfers of shares without ourBoard of Directors’ consent to any person if that person was, or would thereby become, a holder of 5% or more of the fair market value of our outstanding capital stock.

Effect of Recent Operations on Liquidity. Sustaining the operating activities of our unprofitable Coal, China and e-Commerce Segments, plus our overhead, has resulted in a serious outflow of cash during the past several years. We have managed this cash shortfall through a series of financings and the sale of various assets, principally those left over from our previously discontinued operations. These financings were supplemented by the $4,094,000 ($3,976,000 after tax) we received from the McElmo Dome litigation (the “Settlement” ---See “Item 3. Legal Proceedings—McElmo Dome Litigation” for complete details).

Private Debt Placements. The financings included private placements of (i) $1,200,000 of 10% Floating Rate Notes due November 30, 2006 (the “2006 Notes”) coupled with warrants and Production Paymentscompleted in June of 2004; (ii) $2,100,000 of 12% Convertible Subordinated Notes due February 15, 2010 (the “2010 Notes”) completed in October of 2004 and January of 2005; (iii) $2,004,102 of 12% Convertible Subordinated Notes due August 31, 2009 (the “2009 Notes”) completed in October of 2005 and February of 2006; and (iv) $1,268,000 of 12% Convertible Subordinated Notes due in 2008 (the “2008 Notes”) completed in November of 2006. In each case the Notes were offered to accredited investors and sold on a best efforts basis by us and by an investment banking firm which acted as a selling agent.

All of the 2006 and 2010 Notes were sold. A total of $1,328,000 of the 2009 Notes were sold, including $193,000 which were sold in the first quarter of 2006 and generated working capital of approximately $191,000. The exchange in 2005 of $624,000 of 2009 Notes for 2006 Notes generated $624,000 of working capital by converting current maturities of long-term debt to long-term debt. A total of $651,000 of the 2008 Notes were sold in 2006, including $568,000 of 2008 Notes which were exchanged for Production Payments. This exchange generated working capital of $568,000 in 2006 for the same reason.

The 2010, 2009 and 2008 Notes (collectively, the “Notes”) were convertible into 2,100,000, 650,000 and 651,000 shares of the Company’s common stock, respectively, at year-end 2006. The warrants issued with the 2006 Notes were convertible into 480,000 shares; 200,000 of the warrants have already been exercised. Conversion of the Notes and our outstanding 647,240 warrants will create a substantial amount of dilution on our future earnings per share. Sale of the Notes, net of the exchange and legal and other costs associated with the offerings, provided approximately $2,195,000 of net cash proceeds to us in 2005, $275,000 in 2006 and $105,000 in 2007. The note exchanges in 2005 and 2006 provided additional working capital of $1,192,000 as discussed

above. The working capital provided by the sales and exchanges of Notes substantially improved our liquidity and provided most of the working capital needed to “bridge the gap” until the coal projects we have under development can generate positive cash flow.

Bank Credit Facility on Colorado Gas Wells. On March 28, 2006, we closed on a $350,000 reducing revolving credit facility with a local bank secured by a first lien on our share of the production from eight gas wells in Yuma County, Colorado. The new credit facility provided an initial borrowing base of $350,000, with such commitment reducing at the rate of $10,000 per month. $115,000 of the initial borrowings of $175,000 under the facility were used to repay loans from related parties; the balance was added to working capital. Our borrowings under the facility peaked at $290,000 in July of 2006. Borrowings had been reduced to $260,000 at year-end 2006 and to $230,000 at March 31, 2007. The loan matures on September 30, 2007, with interest payable monthly at the Wall Street Journal Prime Rate plus 150 basis points.

Other Financings. The financings were further supplemented in 2007 by (i) a $150,000 short-term loan from a shareholder of a former affiliate, (ii) $39,000 of short-term loans from our Note holders, and (iii) $105,000 of additional 2010 Notes (convertible into 105,000 common shares) sold to a 2010 Note holder.

Coal Projects. We have several projects in various stages of development in the Coal Segment which, subject to arranging necessary financing, we ultimately expect to mature into operating projects. We have finalized definitive agreements with PinnOak Resources, LLC (“PinnOak”), to construct and operate a pond fines recovery project in West Virginia (the “Pinnacle Project” or the “Project”). Construction of the Project has been completed, and the facility is now in the ramp up stage. See “Recent Developments---Loans from and Agreements with PinnOak Resources” below and “Narrative description of operating segments---COAL RECLAMATION ACTIVITIES---Pinnacle Project”).

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

Recent Developments

Loans from and Agreements with PinnOak Resources. When the original agreement was signed in September of 2004 for the construction of the Pinnacle Project, PinnOak was anxious to start the Project despite the fact that the USDA guaranty needed to secure a $9,000,000 bank loan had not yet been obtained. Accordingly, during the fourth quarter of 2005, PinnOak loaned $1,100,000 to Beard Pinnacle, LLC (“BPLLC”), which owns the Project, to get construction started.

In February of 2006 Beard Technologies, Inc. ("BTI") and BPLLC executed a supplemental agreement (the “Agreement”) with PinnOak in connection with the Project. We had previously received and accepted a proposal from a lending institution to provide a $9,000,000 loan for the Project and affiliates of PinnOak had agreed to provide $2,800,000 of equity and own 50% of BPLLC. Both commitments were subject to the condition that the USDA guarantee at least 70% of the borrowed amount (the “Guaranty”).

The Agreement also provided that if BPLLC had not obtained the Guaranty or a third party loan in an amount sufficient to complete the Project on or before April 1, 2006, PinnOak was committed to assume control of the Project and be responsible for funding or arranging the funding of the Project. If additional funding was needed prior to receipt of the Guaranty, PinnOak agreed to provide additional loans to BPLLC and BPLLC and BTI agreed to provide certain collateral. As of April 12, 2006 PinnOak had advanced a total of $5,910,000 to finance the construction. On March 23, 2006, the amount of BPLLC’s note was increased from $5,100,000 to $9,000,000 and the “trigger date” for certain events was extended from April 1, 2006 to May 1, 2006. PinnOak elected not to take control at that time, while both PinnOak and BTI unsuccessfully pursued third party financing. Meanwhile, BTI unsuccessfully pursued the Guaranty, and PinnOak continued to provide additional loans to BPLLC to finance construction of the Project. On September 30, 2006, PinnOak elected to convert $2,800,000 of its loans to equity in BPLLC, which interest was acquired by the investor group. Effective October 1, 2006,

the PinnOak investor group exercised their option to assume control of BPLLC and increased their interest in BPLLC to 75%. BTI’s interest in BPLLC was reduced to 25% at that time and BP LLC ceased to be a consolidated subsidiary. As of March 31, 2007, PinnOak had advanced more than $14,150,000 to finance the Project, including the $2,800,000 of equity provided by its affiliates.

Because there have been cost over-runs of more than $3,000,000, neither we nor PinnOak have been able to secure an alternative source of financing, and their loans have become the permanent source of financing for the Project. Because of the low rate of production achieved during the ramp-up period due to initial start-up problems with the plant, we have agreed in principle to terminate most of the existing agreements governing the Project and give up our remaining 25% interest therein while remaining as the contract operator for the Project. Some of the details of this agreement are still being negotiated but we anticipate the new agreement will be effective in April, 2007. We are confident the Project will be economic. Despite the cost over-runs and the low price being paid for the coal produced from the Project, the Project will be highly economic to the pond owner. BTI will be relieved of its guaranty of all loans made by PinnOak (totaling more than $11,350,000) which was secured by BTI’s remaining 25% interest in BPLLC.

China Fertilizer Plant. To date our China fertilizer manufacturing plant has not demonstrated the ability to market sufficient product to reach its projected breakeven point, much less become profitable. Several new marketing initiatives have been undertaken, but all were unsuccessful. Because of the delay in reaching our targeted production rate, the plant owners have had to loan an additional US$885,000, including US$166,000 during the 2007 first quarter, to provide the working capital needed to keep the plant operating.We have engaged an investment banking firm to explore the alternatives available to us including, but not limited to: sale of the plant, merger of the operation with a competitor, or bringing in a new partner. We expect to have a recommendation concerning our best option before the end of the second quarter. Additional funds may need to be provided to keep the plant operating until the operative decision has been made.

Expansion of McElmo Dome Production Capacity. In May of 2006 Kinder Morgan CO2 Company, L.P. (“KM”), the operator of the McElmo Dome Unit, circulated an authorization for expenditure in connection with a planned $99,800,000 expansion of production capacity of the Unit. We elected to participate in the expansion for our 0.538142% working interest share (approximately $537,000). In March of 2007 KM advised us that the owner of a 40% working interest had elected not to participate in the expansion since they have sold their West Texas oil production and no longer need the CO2. Our share of the costs has accordingly increased to approximately $967,000. We and a number of other small working interest owners who also had elected to participate in the expansion have attempted to revoke our approval to participate and elect the opt out provision, but KM has to date refused our request. At this point the final determination is uncertain.

CONTINUING OPERATIONS

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

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

Operations in China. Our activities in China, which are conducted by Beard Environmental Engineering, LLC (“BEE”) through its consolidated subsidiaries, comprise the China Segment. BEE and its subsidiaries are focusing on the manufacture of organic chemical compound fertilizer ("OCCF") and liquid fertilizer in the Peoples Republic of China (the "PRC").

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

Oil and Gas Operations. Our oil and gas activities comprise the Oil & Gas Segment, consisting of the production of oil and gas which is conducted through BOC. We own non-operated working interests or overriding royalty interests in producing wells in Colorado and Wyoming. We also own undeveloped oil and gas leases in such states and in Mississippi.

(b) Financial information about industry segments.

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

(c) Narrative description of operating segments.

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

COAL RECLAMATION ACTIVITIES

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

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

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

Sharp Increase in Natural Gas Prices; Effect on Coal Demand.The sharp increase in natural gas prices in 2004 and 2005 had a major impact upon the electric power generating industry which began to focus on building new generating capacity utilizing coal-fired rather than gas-fired plants. Although warmer weather in 2006 resulted in some relief on natural gas prices, it appears that natural gas will continue to be in relatively short supply in future years. As a result, the price of coal when compared to the price of gas on a Btu basis remains

quite attractive. It now appears that coal, which accounts for over 50% of the nation’s power generating capacity, will remain the principal fuel source for electric power production for a number of years.

The rising price of natural gas drove the spot price of coal to record levels in 2005---prices that have not been seen in the coal industry since the oil crisis of 1974 and 1975. Although the warmer weather triggered pricing relief in 2006, many energy economists continue to believe that natural gas prices will remain high for many years to come. The strong coal market, plus added pressure from regulatory agencies to more quickly reclaim or re-mine abandoned slurry impoundments, has sparked renewed interest among pond owners and coal operators to move forward with pond recovery projects. Many of these recovery projects had been sitting on the back burner for a number of years because of marginal coal prices and stagnant demand.

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

Projects Under Development. This convergence of high coal prices with added regulatory agency pressure has resulted in BTI having more potential projects on the drawing board than at any other time in its existence. We have had more coal producers and utilities call us to discuss projects in the last three years than we had during the previous 13 years of BTI’s existence. In September of 2004 we signed an agreement to perform the Pinnacle Project. (See below). Currently, we are actively pursuing a number of other projects, mostof which are located in the Central Appalachian Coal Basin. We have a number of other projects in the pipeline for follow up once these projects have come to a resolution. However, we cannot assure you that any of the pond recovery projects currently under development will proceed.

Pinnacle Project. In 2004 we formed Beard Pinnacle, LLC (“BPLLC”), an Oklahoma limited liability company, and originally a wholly-owned subsidiary of BTI. BPLLC was formed to construct and operate a pond fines recovery facility, known as the Pinnacle Project, located at the Smith Branch Coal Refuse Disposal Facility owned by PinnOak’s wholly-owned subsididary, Pinnacle Mining Company, LLC, a coal mining and energy resources company (“PMC”). The facility is located near Pineville, West Virginia. BTI and PinnOak executed an agreement regarding the initial equity funding of BPLLC and its development and operation of the Pinnacle Project based upon the premise that BPLLC or its lender would receive a USDA loan guaranty of up to 70% of a $9,000,000 loan.

Based upon this premise, BPLLC commenced construction of the Pinnacle Project in September of 2005. As of March 31, 2007, PinnOak had advanced more than $14,150,000 to finance the Pinnacle Project, including $2,800,000 of equity provided by its affiliates. Effective September 30, 2006 the affiliates converted $2,800,000 of PinnOak’s advances to equity in BPLLC. Effective October 1, 2006, the PinnOak investor group exercised their option to assume control of BPLLC and increased their interest in BPLLC to 75%. BPLLC ceased to be a consolidated subsidiary, and our 25% interest therein has been reflected as equity in earnings (loss) of unconsolidated subsidiaries at year-end 2006. (See “Item 1. Business. General development of business---Recent Developments---Loans from and Agreements with PinnOak Resources” for additional details).

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

Principal Products and Services. The principal products and services supplied by our Coal Segment are (i) the capability to undertake large reclamation projects and the cleanup of slurry pond recovery sites; (ii) core

drilling of slurry ponds and evaluation of recoverable coal reserves; (iii) consulting reclamation technology; (iv) technical services; and (v) proprietary coal reclamation technology.

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

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

Fiscal Year Ended	Percent of Consolidated Revenues from Continuing Operations
12/31/06		1.2%
12/31/05		3.8%
12/31/04		19.4%

Since BPLLC is no longer a consolidated subsidiary, the sale of coal from the Pinnacle Project after October 1, 2006 is not reflected as revenues. Accordingly, the loss of PMC as a customer would not have a material adverse effect on the segment nor on us. We are unable to predict whether we will become dependent on a single customer in the future as additional projects under development by the segment are negotiated and finalized.

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

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

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

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

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

CARBON DIOXIDE OPERATIONS

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

Carbon Dioxide (CO2) Properties

McElmo Dome. The McElmo Dome field in Dolores and Montezuma Counties in western Colorado is a 240,000-acre unit which produces CO2 gas.

We own a 0.53814206% working interest (0.4526611% net revenue interest) and an overriding royalty interest equivalent to a 0.0920289% net revenue interest in the Unit, giving us a total 0.5446900% net revenue interest.

Deliveries of CO2 gas are transported through a 502-mile, 30-inch diameter pipeline to the Permian Basin in West Texas where such gas is utilized primarily for injection into mature oil fields. Kinder Morgan CO2 Company, L.P. (“KM”) serves as operator of the unit. There are 54 producing wells, ranging from 7,634 feet to 8,026 feet in depth, that produce from the Leadville formation. The wells produced a combined total of 972 million cubic feet per day in 2006. McElmo Dome is believed to be the largest producing CO2 field in the world. The Four Corners Geological Society in 1983 estimated that the field contained 17 trillion cubic feet (“TCF”) of CO2. The gas is approximately 98% CO2.

In 2006 we sold 1,933,000 Mcf attributable to our working and overriding royalty interests at an average price of $.0.79 per Mcf. In 2005 we sold 1,902,000 Mcf (thousand cubic feet) attributable to our working and overriding royalty interests at an average price of $.60 per Mcf. In 2004, we sold 1,787,000 Mcf attributable to our working and overriding royalty interests at an average price of $.42 per Mcf. We were underproduced by 8,000 Mcf on the sale of our share of McElmo Dome gas at year-end 2006.

As the result of the recent increase in oil prices, CO2 demand for tertiary recovery and McElmo Dome production has increased accordingly. CO2 production, which averaged 887 million cubic feet per day in 2004, increased to 957 million cubic feet per day in 2005, and increased further to 972 million cubic feet per day in 2006. We have been advised by the operator that the field is now capable of producing 1.2 billion cubic feet per day.

We consider our ownership interest in the McElmo Dome Field to be one of our most valuable assets. At year-end 2006 the field had produced 5.048 TCF of CO2, leaving more than nine TCF of remaining reserves (49 BCF to our net interest) per KM’s estimate of reserves. As a result of the settlement of the McElmo Dome litigation, the recent improvement in oil prices and the increased demand and improved pricing for CO2, we now believe that our interest in the field has a fair market value of approximately $10.7 million versus a book value of $384,000 at year-end 2006.

Our interest in the McElmo Dome Field is subject to a deed of trust lien in the amount of approximately (i) $635,000 in favor of a holder of our 2009 Notes and (ii) $3,243,000 in favor of a related party.

Anticipated Improvement in Pricing as a Result of the McElmo Dome Settlement. In addition to establishing a cash settlement fund to settle the litigation, the McElmo Dome Settlement Agreement also provided for the monitoring of pipeline tariffs, minimum prices and funding for a CO2 Claims Committee to enforce these provisions. (See “Item 3. Litigation”). We anticipate additional improvement in pricing from the above. Moreover, we are continuing to investigate marketing our share of the CO2 through other parties at a higher price.

Bravo Dome. We also own a 0.05863% working interest in the 1,000,000-acre Bravo Dome CO2 gas unit in northeastern New Mexico. Bravo Dome is believed to be the second largest producing CO2 field in the world. At December 31, 2006, we had produced 732,000 Mcf of CO2 gas which is presently in storage. We sold no CO2 gas from Bravo Dome in 2006, 2005 and 2004. Our solid CO2 segment, which was sold in 1997, had previously provided the market for such gas. We are continuing our efforts to market our share of the gas at a reasonable price, but such efforts have to date been unsuccessful.

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

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

Fiscal Year Ended	Net CO2 Production (Mcf)
12/31/06	1,933,000
12/31/05	1,902,000
12/31/04	1,787,000

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

Fiscal Year Ended	Average Sales Price Per Mcf of CO2	Average Lifting Cost Per Mcf of CO2
12/31/06	$0.79	$0.07
12/31/05	$0.60	$0.07
12/31/04	$0.42	$0.06

Market Demand and Competition. Our principal market for CO2 is for injection into mature oil fields in the Permian Basin, where industry demand is expected to grow modestly for the next several years. Our primary competitors for the sale of CO2 include suppliers that have an ownership interest in McElmo Dome, Bravo Dome and Sheep Mountain CO2 reserves, and Petro-Source Carbon Company, which gathers waste CO2 from natural gas production in the Val Verde Basin of West Texas. There is no assurance that new CO2 sources will not be discovered or developed, which could compete with us or that new methodologies for enhanced oil recovery will not replace CO2 flooding.

Dependence of the Segment on a Single Customer. The CO2 Segment accounted for the following percentages of our consolidated revenues from continuing operations for each of the last three years. Our CO2 revenues are received from two operators who market the CO2 gas to numerous end users on behalf of the

interest owners who elect to participate in such sales. In 2006, approximately 98% of our revenues from the sale of CO2 gas was derived from KM and approximately 2% was derived from Exxon Mobil.

Fiscal Year Ended	Percent of Consolidated Revenues from Continuing Operations
12/31/06	73.9%
12/31/05	84.6%
12/31/04	77.6%

Under the existing operating agreements, so long as any CO2 gas is being produced and sold from the field, we have the right to sell our undivided share of the production to either KM or Exxon Mobil and also have the right to sell such production to other users. During 2006 KM was offering a slightly higher price than Exxon Mobil, so more of the segment’s production was sold to KM. We believe that the loss of either KM or Exxon Mobil as a customer would have a material adverse effect on the segment and on us.

Productive Wells. Our principal CO2 properties are held through our ownership of working interests in oil and gas leases which produce CO2 gas. As of December 31, 2006, we held a working interest in a total of396 gross (0.45 net) CO2 wells located in the continental United States. The table below is a summary of such developed properties by state:

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

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

OPERATIONS IN CHINA

Background Information. In 1998 we opened an office in the People’s Republic of China (the “PRC” or “China”). In 1999 we established a Representative Office in Beijing. In 2001 Beijing Beard Bio-Tech Engineering Co., Ltd. (“BTEC”), a Chinese corporation, was organized as a wholly-owned subsidiary to serve as the operating entity for all of the China Segment’s activities in the PRC. In 2002 we formed BEE, a wholly-owned Oklahoma limited liability company, to serve as the parent company of BTEC and all of the segment’s subsidiaries in the PRC. In February of 2005 BEE and a private investor formed BEE/7HBF, LLC which is owned 50% each by BEE and the private investor. This new entity then formed a wholly foreign-owned enterprise (“WFOE”) in China, called Xianghe BH Fertilizer Co., Ltd. (“XBH”), that serves as the marketing arm for the fertilizer we produce in China and controls and manages the segment’s initial fertilizer manufacturing plant in the PRC.

Environmental Opportunities. China is a large country with serious environmental problems which include atmospheric pollution, ground water pollution and land pollution. To solve these problems the government has made the decision to permit the use of foreign equipment and technology. The amount of arable land in China is limited considering its dense population. China is the largest user of chemical fertilizers in the world.

Unfortunately, the carryover of fertilizers from one planting to the next and the considerable runoff into lakes and rivers has polluted much of China’s arable land and fresh water resources.

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

Formulation of Product. The formulation of our products will be based on the target crops and determined by leading soil scientists at China Agricultural University in Beijing and agronomists in each province. Our production amounts to less than 1% of total fertilizer demand in the province where we have constructed our initial facility. We believe that the sales price for our products will be commensurate with and that the quality will be superior to other similar products presently available. We expect to receive strong support for our products from these senior scientists and from the Provincial authorities.

Financing of Initial Fertilizer Manufacturing Plant in China. In February of 2005 we announced that a private investor had agreed to finance the cost of our initial fertilizer manufacturing facility in the PRC. Beard Environmental Engineering, L.L.C. (“BEE”) and the investor formed a limited liability company, BEE/7HBF, LLC (“BEE/7HBF”) to own all of our fertilizer operations in China. BEE/7HBF then formed XBH to serve as the marketing arm for the fertilizer we produce in China and control and manage the day-to-day operations of the facility. The investor and BEE each made a $50,000 cash contribution to and have a 50% ownership and equity in BEE/7HBF. The investor loaned $850,000 of additional funds to BEE/7HBF in the first half of 2005 to fund the capital costs and pre-operating costs of the facility. The lender can look only to available funds of BEE/7HBF for repayment, and neither we nor BEE will be liable for repayment of the loan.

The initial plant is located near Beijing and produces a new, environmentally friendly, OCCF. The new fertilizer will use up to 62% less chemicals and yet provide superior performance as compared to chemical fertilizers presently used in the PRC. The plant was initially targeted to produce about 32,000 metric tons per year of OCCF annually. However, in order to reduce the initial cost of the facility, it was later scaled back to a capacity of approximately 18,000 metric tons of OCCF per year. In addition, the plant has added equipment to produce a new line of liquid fertilizer which has added to its sales capacity. The facility has been sized to permit production capacity to be more than doubled to meet future market demand. The plant produced and shipped its initial product in October of 2005.

Method of Distribution. Our OCCF is distributed primarily through warehouse distributors who purchase our product in bulk and then market directly to end users who are primarily farmers. Presently, XBH distributes its production through small to mid-size warehouse distributors. These are fertilizer distributors that maintain one or more warehouses stocked with various fertilizer products and distribute on demand to 50 or more retail outlets. Some of the retail outlets may also be owned by the warehouse distributor, but the majority are independently owned or are part of a chain of retail outlets. Orders received from the warehouse distributor are generally priced Ex-Factory.

Sources and Availability of Raw Materials.We maintain at least two qualified sources of all raw materials necessary for producing our OCCF product. In addition, our purchasing department is continuously seeking better pricing while maintaining quality.

Backlog. At December 31, 2006, XBH had an immaterial backlog of orders. All of such orders are expected to be filled within the current fiscal year.

Dependence of the Segment on a Single Customer. As of December 31, 2006, XBH was not dependent upon a single customer. Loss of all of the segment’s customers at that time would not have a material adverse effect on the segment nor on us. The segment recorded revenues of US$368,000 in 2006, US$29,000 in 2005 and no revenues in 2004. The China Segment accounted for the following percentages of our consolidated revenue from continuing operations for each of the last three years:

Fiscal Year Ended		Percent of Consolidated Revenues from Continuing Operations
	12/31/06		17.6%
	12/31/05		2.1%
	12/31/04		0%

Principal Products and Services. The principal products and services supplied by our China Segment are the manufacture and production of OCCF and liquid fertilizer.

Facilities. XBH leases office, manufacturing and appurtenant space in Xianghe County, Hebei Province, located about 37 miles southeast of Beijing. The facility is sited on about 22 acres of land in an industrial development and is comprised of a workshop (approximately 30,000 square feet, three-story office building with third-floor apartments (approximately 9,500 square feet/floor), finished-goods warehouse (approximately 11,000 square feet), dormitory and shower/mechanical building (approximately 2,500square feet), two guardhouses and a coal storage building. The total area under roof is approximately 74,500 square feet.

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

Seasonality. Fertilizer sales in China are subject to seasonal swings in demand. In general, producers of row crops (e.g., wheat, corn and cotton) in our market area of China purchase fertilizers during two major buying seasons. Fertilizer is used at an increased rate in early spring to provide the boost winter crops require to become active again and to carry their growth through to harvest. Orders for spring sales begin in September and run through November. Again in the fall, fertilizer usage is increased as farmers prepare their fields for planting winter crops. Orders for winter sales, although not as significant as fall sales orders, begin in March and run through May. Alternately, greenhouse growers in this part of China generally have three growing seasons as a result of the type of vegetable crops raised there. Fertilizer sales into this market tend to be much less seasonal. As opposed to row crops farmers, who have two major application events each year, greenhouse growers apply fertilizers to their crops over a longer period of time during the growth cycle of the crop.

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

e-COMMERCE

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

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

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

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

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

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

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

On January 4, 2005, following a Markman hearing held in late October of 2004, the Magistrate Judge filed a Report and Recommendation of the United States Magistrate Judge addressing his findings and recommendations with respect to the claim constructions to be applied to the VIMachine Patent. The Magistrate Judge found that 24 of the 28 claims asserted by the Plaintiffs were valid. Both parties have pursued modifications of the

Magistrate’s recommendations in the form of an appeal to the District Court and are awaiting the Court’s final ruling on claim construction issues.

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

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

On March 28, 2003, starpay finalized a Patent License Agreement with Universal Certificate Group LLC (“UCG”), a private company based in New York City. UCG has developed a universal online gift certificate that is accepted as payment at hundreds of online stores through its subsidiary, GiveAnything.com, LLC. The Agreement, which remains in effect for the term of the patent, grants to UCG the exclusive, worldwide license to use, improve, enhance or sublicense the Voucher Patent. Under the Agreement, starpay received a license fee payable annually for three years plus a royalty payable semi-annually during the patent term. The $25,000 license fee which starpay received in 2005 was its final license fee under the Agreement. starpay also shares in any license fees or royalties paid to UCG for any sublicenses. UCG has the exclusive right to institute any suit for infringement under the Agreement. starpay has the right to jointly participate in any suit, in which case any damages obtained will be shared according to the fees and expenses borne by each party. UCG has the option to terminate the Agreement at any time without liability.

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

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

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

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

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

Fiscal Year Ended		Percent of Consolidated Revenues from Continuing Operations
	12/31/06		0.2%
	12/31/05		2.2%
	12/31/04		3.0%

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

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

OIL AND GAS OPERATIONS

The activities of the Oil and Gas Segment are conducted through our wholly-owned subsidiary, BOC. BOC is engaged in exploration for, development, production and sale of oil and gas. BOC was incorporated in Delaware in 1986 and is the successor to the original Beard Oil Company which was incorporated in Delaware in 1969 as the successor to the oil and gas business originally founded by a Beard family member in 1921.

Exploration Practices and Policy. BOC’s principal exploratory approach since re-entering the business has been to acquire oil and gas leases and then to encourage other operators to drill on or in close proximity to our acreage by supporting their exploratory wells with acreage contributions. BOC has also entered into arrangements with major and independent operators who make certain exploratory commitments relative to our acreage for an interest in one or more of our leaseholds while we retain some form of reversionary working interest or overriding royalty interest and may also retain the right to participate in the drilling of development wells. Since BOC does not have a production staff, it has not operated any wells since it has re-entered the oil and gas business.

A significant phase of BOC’s exploration effort involves the acquisition of oil and gas leases from the U. S. government and various state governments on a “non-competitive” basis. All of the undeveloped acreage we hold is under such governmental leases.

From time to time BOC also sells an interest in its undeveloped acreage and retains an overriding royalty. Such sale is commonly known as a “sublease”. In fiscal years 2006 and 2005, sublease activities accounted for revenues of $7,000 and $0, respectively.

Sandy Lake Field. In January of 2005 we announced that we were back in the oil and gas business. One of the leases which we acquired was a 640-acre tract covering all of Section 36, Township 3 North, Range 48 West, in Yuma County, Colorado.

In January of 2004 BOC entered into a farmout agreement with Vista Resources (“Vista”) of Pittsburgh, Pennsylvania. Vista drilled eight wells in the Niobrara Formation on the farmout lands. Under the farmout arrangement, BOC was carried for a 22.5% working interest in the initial well in which it owns a 3.6% overriding royalty interest until payout and a 22.5% working interest (19.6875% net revenue interest) thereafter. We paid our 22.5% share of the cost of the seven additional wells. All eight of the wells were completed as gas producers

in the Niobrara Formation at a depth of approximately 2,800 feet. The wells were placed on production in the fourth quarter of 2005, and are currently producing at an average rate of approximately 40-45 MCF per day from each well. Our share of the production from these wells totaled $121,000 in 2006 and $86,000 in 2005.

Big Porcupine Field. BOC also has a 4.5% overriding royalty interest in 12 wells which produce coal bed methane gas from the Mesaverde Formation from a 317-acre tract in Section 1, Township 41 North, Range 71 West, Campbell County, Wyoming. The wells were drilled by Peabody Natural Gas, LLC on a lease BOC sold to them in 2000 on which BOC retained an overriding royalty interest. Our share of production from these wells totaled $20,000 in 2006 and $8,000 in 2005.

Due to the limited pipeline capacity in the Rocky Mountain area, the price we have received for the gas we have sold to date has been lower than normally received in other areas of the U.S.

In addition to the producing tracts in Colorado and Wyoming, BOC owns undeveloped leases covering 41 acres in Colorado, 11,828 acres in Mississippi and 6,881 acres in Wyoming, a total of 18,750 acres.

Principal Products and Services. The principal products produced by our Oil & Gas Segment are oil and gas which accounted for the following percentage of total consolidated revenues from continuing operations for each of the last three fiscal years:

Fiscal Year Ended		Percent of Consolidated Revenues from Continuing Operations
	12/31/06		7.1%
	12/31/05		6.9%
	12/31/04		0%

Sources and Availability of Raw Materials. BOC is involved in an extractive enterprise which does not require the consumption of raw materials other than fuel, water and drilling mud and chemicals which are utilized by the drilling rigs employed to drill the wells in which it has an interest. Such materials are normally available to the drilling contractors employed by the operator, although the cost thereof may vary considerably between wells.

Seasonality. Because BOC’s acreage is located primarily in the Rocky Mountains, the Oil & Gas Segment’s operations are considered to be seasonal since any drilling activities conducted in the winter may be hindered or impaired by adverse weather conditions.

Working Capital Items. The Oil & Gas Segment does not carry significant amounts of inventory nor does it provide extended payment terms to its customers. The segment’s working capital is considered adequate to conduct its present and contemplated operations since its modus operandi is to let third parties pay for all of the costs of the wells in which it participates unless proven locations are involved and borrowings can be arranged to finance such drilling operations.

Dependence of the Segment on a Single Customer. The Oil & Gas Segment does not have any customers which accounted for 10% or more of Registrant’s consolidated revenues during the last three years. Accordingly, the loss of a single customer would not have a material adverse effect on us and our subsidiaries taken as a whole.

Markets, Competition and Regulation. Oil and gas production generally is sold at the wellhead to various pipeline companies. Market demand (and the resulting prices received for crude oil and natural gas) can be affected by weather conditions, economic conditions, import quotas, the availability and cost of alternative fuels, the proximity to, and capacity of, natural gas pipelines and other systems of transportation, by the effect of state regulation of production, and federal regulation of oil and/or gas sold in interstate and intrastate commerce, all of which factors are beyond our control.

At the present time the Oil & Gas Segment has no oil production. Our natural gas production is being sold on a “spot” basis to the only pipeline markets available in the two fields in which our properties are located. And, since both of our properties are non-operated, we have no control over the price we are receiving. In 2006 the price we received in Colorado ranged from $2.60 per mcf to $7.48 per mcf; in 2005 it ranged from $4.96 per mcf to $9.58 per mcf; in Wyoming the price we received ranged from $2.63 per mcf to $5.81 per mcf in 2006 and from $5.26 per mcf to $8.76 per mcf in 2005, the first year of production for the wells in these fields.

We encounter competition from other independent operators and from major oil and gas companies in acquiring properties suitable for exploration. Virtually all of these competitors have financial resources and staffs substantially larger then ours. Our ability to discover reserves in the future depends in part on our ability to select suitable prospects for future exploration.

Golden Bear Drilling & Services, LLC (“GBDS”). Partly as a result of (i) the connections we have developed over the last several years stemming from our activities in China, (ii) our renewed involvement in the oil and gas business, and (iii) our efforts in connection with the organization, promotion and development of the entity, we have a 14% interest (11% fully diluted) in GBDS, a Denver-based drilling and services company. We also provide certain management and accounting services to GBDS for a monthly fee.

GBDS was organized in May of 2005 with the concept of acquiring and transporting to the U. S. high quality drilling assets manufactured in the PRC. Since its organization, GBDS has acquired two new drilling rigs manufactured by a subsidiary of a large Chinese oil and gas exploration company. In each case a large privately-held exploration and production company based in Denver, Colorado, provided the funds to acquire the rigs, transport them to the U. S. and pay for all mobilization costs. The exploration company will own the rigs until they have recouped all of their initial purchase, transportation and mobilization costs plus interest at ten percent per year; after payout they will own 10% and GBDS will own 90% of each rig. GBDS receives a daily fee for operating each rig or a smaller fee if it is on stand-by. The exploration company provides the locations to be drilled. If they do not have a location ready, GBDS is free to drill for a third party; otherwise they will receive the stand-by fee until a location is available.

In addition, GBDS has been able to finance the acquisition of two top drives. One of these has been leased to the exploration company for $1,500 per day; the second will shortly be available for lease to third parties, hopefully at a higher rate.

It should be noted that the Chinese-manufactured rigs, which are of very high quality, cost less than a comparable rig manufactured in the U. S. GBDS hopes to arrange the financing for an additional five to 10 rigs and five to 10 top drives during the next three years.

REGULATION

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

affecting our coal reclamation activities could adversely impact the profitability of our future coal reclamation operations and the availability of those projects.

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

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

OTHER CORPORATE ACTIVITIES

Other Assets. During the last seven years we have disposed of most of the assets related to the operations which we discontinued in 1999 and 2001. However, we still have a few remaining assets and investments which we are in the process of liquidating as opportunities materialize. At year-end 2006 such assets consisted primarily of the residue of an iodine extraction plant and related equipment, drilling rig components and related equipment, wastewater storage tanks and a real estate limited partnership in which we are a limited partner. All of such assets are reflected on our books for less than their anticipated realizable value, which we estimate in total would not exceed $100,000. As excess funds become available from such liquidations they will be utilized for working capital, reinvested in our ongoing business activities or redeployed into newly targeted opportunities.

Office and Other Leases. We lease office space in Oklahoma City, Oklahoma, aggregating 5,817 square feet under a lease expiring September 30, 2007, at a current annual rental of $85,000. In addition, our subsidiaries lease space at other locations as required to serve their respective needs.

Employees. As of December 31, 2006, we employed 69 full time employees and one part time employee in all of our operations, including fivefull time employees and one part time employee on the corporate staff.

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

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

Item 1A.Risk Factors.

Lack of Profitable Operations in Recent Periods.Although we were profitable in 2004 as a result of the McElmo Dome Settlement (see “Item 3. Legal Proceedings---McElmo Dome Litigation” for complete details), we have suffered net operating losses during each of the last eight years. Until we can demonstrate the ability to generate positive cash flow from operations, this shortcoming will impede our ability to borrow funds and may impact our ability to achieve profitability in the future.

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

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. However, such deficiency increased to ($7,348,000) at year-end 2006 and will continue to increase until we are able to achieve profitability in our Coal and China Segments. 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 both our Coal and China Segments this year. If a turnaround is not successful or is only partially successful, we will need to pursue additional outside financing which would likely involve further dilution to our shareholders. We cannot assure that we will be able to obtain additional financing on terms that we deem acceptable, or at all. (See "Item 1. Business. General development of business---Recent Developments --- China Fertilizer Plant" for additional details).

We have substantial indebtedness and may not have enough revenues to pay our debts. As of December 31, 2006, we had $8,797,000 of total debt outstanding, including $391,000 of accrued interest to an affiliate of the Chairman, $471,000 of which is due in 2007. 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 year-end 2006, 56.5% of our 5,592,000 outstanding shares was held by management and another 8.4% was held by a long-term institutional holder. In addition, there is substantial potential dilution, with preferred shares convertible into 296,000 shares, presently exercisable warrants and options totaling 672,000 shares, notes convertible into 3,401,000 shares at year-end 2006 and a total of 629,000 shares at year-end 2006 in two DSC Plans scheduled for distribution in 2007 and future years.

History of Delays in Finalizing New Coal Projects.We have experienced delays in the past in finalizing our new coal projects. We may experience additional delays in the future. Although the financing for the Pinnacle Project has been provided by the pond owner, no definitive contracts have been signed in connection with the other projects currently under development in the Coal Segment, nor has any financing been arranged to date for these projects. Continued delays in finalizing our new coal projects may have a material adverse effect on us.

History of Delays in Finalizing Projects in China.We have experienced delays in the past in finalizing projects in China and may experience additional delays in the future. We successfully arranged the financing for our fertilizer plant in 2005. Although the project was completed under budget and in a timely manner, we have failed to achieve our projected rate of market penetration and the project has to date been uneconomic. Continued delays in meeting budgeted projections would have a material adverse effect on us.

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

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

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

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

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

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

• Renegotiation of contracts with governmental entities;

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

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

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

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

Item 1B.Unresolved Staff Comments.

Not applicable.

Item 2.Properties.

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

Item 3.Legal Proceedings.

Neither we nor any of our subsidiaries are engaged in any litigation or governmental proceedings which we believe will have a material adverse effect upon the results of operations or financial condition of any of such companies. However, we are involved in two lawsuits where our share of the amount at stake, exclusive of interest and costs, exceeded 10% of consolidated current assets at year-end 2006. The first suit has been settled, but there are follow-on issues still in dispute. See “McElmo Dome Litigation” below.

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

A Settlement Agreement was signed in 2001 (the “Settlement”). The Settlement became final in 2003 and we received our share in three installments totaling $4,094,000 in 2003 and 2004. The Settlement proceeds resulted in net income of $3,976,000, after alternative minimum taxes of $118,000.

Subsequent to the Settlement several issues have arisen concerning implementation of the Settlement Agreement that are currently in dispute which may result in additional money being owed to the Plaintiffs in the litigation. A mediation held in Denver in March of 2005 was unsuccessful. In July of 2005, the party who served as the court-appointed fairness expert in the McElmo Dome Litigation rendered his advisory opinion on the merits of several issues currently in dispute concerning implementation of the Settlement Agreement. While this advisory opinion was favorable to the Plaintiffs, it was nonbinding and failed to resolve the matter. In October 2005 the Plaintiffs initiated formal binding arbitration. A hearing on the merits was concluded in Albuquerque on June 30, 2006. By an Arbitration Opinion dated August 7, 2006, the Plaintiffs lost the arbitration. However, the Plaintiffs filed a Motion to Vacate the Opinion on November 6, 2006. Both the Court appointed Fairness Expert and Plaintiffs’ counsel believe reasonable grounds exist for vacating the Opinion. If the Opinion is vacated, another arbitration will occur unless the dispute is earlier settled.

The second suit also stems from issues involved in the Settlement. See “Coalition Managers Litigation” below.

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

The Coalition held back $1 million of the Settlement proceeds to defend the costs of the Ptasynski suit (and any other suits that might develop) until such time as its outcome has been determined. Presently approximately $529,000 remains in the defense fund. Once the case has been resolved, any remaining funds net of costs will be distributed to the Coalition members, including us. In March of 2004 the Court dismissed the claims against the attorneys and several of the claims against the managers but gave the Plaintiff the opportunity to make additional arguments as to why other claims should not be dismissed. In April of 2004 Plaintiff asked the Court not to dismiss the remaining claims and moved to file a Second Amended Complaint against the managers and, for the first time, against the Coalition. In May of 2004 the Defendants asked the Court to dismiss Plaintiff’s new Complaint.

On April 25, 2006, Magistrate Hagerty entered an Amended Scheduling Order in the civil action, pursuant to which discovery in this case was recommenced. Motions for summary judgment were entered by the Defendants on August 31, 2006. Unless a motion to dismiss is entered by the Judge or a settlement is reached in the meantime, a five-day trial is scheduled to proceed on April 16-20, 2007 in Denver.

We consider the Plaintiff’s claims to be without merit. We will receive approximately 22% of the remaining funds, if any, once the suit has been resolved.

We are also involved in a third suit where the claims involved could exceed, by a considerable margin, 10% of our consolidated current assets at year-end 2006. See “Visa Litigation” below.

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 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 have pursued modifications of the Magistrate’s recommendations in the form of an appeal to District Judge Lindsey and are awaiting the Court’s final ruling on claim construction issues.

In July of 2005 the Federal Circuit Court of Appeals issued an enbanc decision in the patent case of Phillips v. AWH Corp. (the “Phillips Case”). That is, instead of relegating the case to a three-judge panel, it was heard by the entire Federal Circuit bench. The Federal Circuit attempted to explain how the operative language in patents is to be interpreted. One key question before the Court was to which sources of information the trial court should refer when construing patent claims.

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’s en banc decision 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 Lindsay who will in turn provide the Court’s final ruling on claim construction issues. 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. A final Markman ruling is expected to occur at any time. Thereafter, a revised Scheduling Order will be prepared setting out a new trial date.

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 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.”

Until Judge Lindsey rules regarding pending claim construction issues, there is no scheduling order in place. Plaintiffs will push for a trial date as quickly as practical following a ruling on claim construction issues by Judge Lindsey.

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

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

Item 4a.Executive Officers and Significant Employees of the Registrant.

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

Name	Principal PositionsE	Executive Officer Or Significant Employee of Beard or Beard Oil Since	Age
W. M. Beard	Chairman of the Board and Chief Executive OfficerAB	June 1969	78
Herb Mee, Jr.	President & Chief Financial OfficerAB	November 1973	78
C. David Henry	President – Beard Technologies, Inc. and Beard Pinnacle, LLCC	July 2004	53
Riza E. Murteza	President & CEO – Beard Environmental Engineering, L.L.C. Chairman - Beijing Beard Sino-American Bio-Tech Engineering Co., Ltd. Chairman, President & CEO – Xianghe BH Fertilizer Co., Ltd.C	November 1998	77
Marc A. Messner	President – Advanced Internet Technologies, L.L.C., Sole Manager - starpay.com, l.l.c.D and Vice President Corporate Development of the Company	April 1999	45
Jack A. Martine	Controller and Chief Accounting Officer	October 1996	57
Harl R. Dubben	TreasurerB	July 1997	46

_________________

ADirector of the Company.

BTrustee of certain assets of the Company's 401(k) Trust.

^DDevotes most of his time to these subsidiaries.

^EIndicated entities are subsidiaries of the Registrant.

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

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

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

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

Riza E. Murteza has served as President and Chief Executive Officer of BEE since December 2002 and of its predecessor since November 1998. He has served as Chairman of BTEC since December 2001. He was appointed Senior Advisor to the United Nations Development Project for China, residing in China for one year

(1996-1997) while assisting large Chinese enterprises move to a market economy. Prior to that he served as General Manager and Project Manager for two large projects in Indonesia and a large project in the Soviet Union for periods totaling nine years.

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

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

Harl R. Dubben has served as our Treasurer since August 1, 2006. Prior to such time Mr. Dubben had served as Assistant to the Controller and Chief Accounting Officer since 2002.

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

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

PART II

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

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

(a)   Market information.

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

2006A	High	Low
Fourth quarter	$1.02	$0.76
Third quarter	1.40	0.70
Second quarter	1.53	0.60
First quarter	2.00	1.01

2005A	High	Low
Fourth quarter	$2.60	$0.90
Third quarter	2.75	1.75
Second quarter	2.85	1.70
First quarter	3.00	0.52

____________________

^AThe reported quotations were obtained from the OTCBB Web Site. Such quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions. The quotations reflect the high best bid and low best bid for each quarter. One market maker has frequently quoted a bid of $0.01 per share, and at other times a bid of $.0001 per share, and such bids are not considered to reflect a realistic bid for the shares.

(b)   Holders.

As of March 31, 2007, the Company had 425 record holders of common stock.

(c)   Dividends.

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

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

Plan category	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)		Weighted-average exercise price of outstanding options, warrants and rights (b)	Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)
Equity compensation plans approved by security holders	2003-2 DSC PlanB 2005 DSC PlanC 2006 SO Plan E	481,543 144,838 30,000	$1.01D $1.01D $1.53	None 55,162 70,000
Equity compensation plans not approved by security holders	Individual) Compensation) Arrangements)	72,240F 25,000G	$1.00F $0.70G	None None
Total	All Plans	753,621	$1.02	125,162

______________

^AThe numbers shown in the above table are as of December 31, 2006.

^BThe 2003-2 Deferred Stock Compensation Plan, as amended, which authorized 800,000 shares to be issued, was approved by the stockholders at the 2004 Annual Stockholders’ Meeting. At the time the Plan was terminated on November 17, 2005, a total of 797,812 Stock Units had been credited to the Participants’ Stock Unit Accounts based upon the Participants’ deferral of $425,100 of Fees or Compensation. At year-end 2006, a total of 316,265 shares had been distributed to the Participants, 4 fractional shares had been cashed out, and 481,543 additional shares remained to be distributed to Participants who had elected the equal annual installments distribution method.

^CThe 2005 Deferred Stock Compensation Plan, which authorized 100,000 shares to be issued, was adopted by the Board of Directors on November 17, 2005. On April 27, 2006, the Plan was amended to increase the authorized shares up to 200,000. The Plan, as amended, was approved by the stockholders at the 2006 Annual Stockholders’ Meeting. At year-end 2006, a total of 144,838 shares had been credited to the Participants’ Accounts, based upon the Participants’ deferral of $175,500 of Fees or Compensation. As of March 31, 2007, a total of 185,824 shares had been credited to the Participants’ Accounts, based upon the Participants’ deferral of $211,200 of Fees or Compensation.

^DSince the exercise price of the Stock Units in the DSC Plans is determined by the Fair Market Value of the shares on their date of distribution from the respective Plans, we have used the year-end 2006 price of $1.01 per share as the weighted-average exercise price of the outstanding Stock Units since the value on the distribution dates is not determinable.

^EThe 2006 Stock Option Plan (the “2006 SO Plan”), which superseded and replaced the 2005 Stock Option Plan (the “2005 SO Plan”), authorized the issuance of 100,000 shares of common stock to be issued. The 2006 SO Plan was adopted by the Board of Directors on May 1, 2006 and approved by the stockholders on July 11, 2006 at the 2006 Annual Stockholders’ Meeting. 15,000 ISO Options were granted to each of three officers on the date the 2006 SO Plan was adopted by the Board, replacing the ISO Options previously granted under the 2005 Plan. One of these new 2006 grants was cancelled on July 31, 2006 when the officer resigned.

Due to delays caused by the necessity to file an amended 2004 Form 10-K and amended Forms 10-Q for the three quarters of 2005, we had to file our 2005 Form 10-K 15 days late. This delayed the filing of our Proxy Statement and caused us to delay our 2006 Annual Meeting until July 11, 2006, more than 13 months after the Board approved the 2005 SO Plan. This meant that any stock issued under the 2005 SO Plan could not be registered with the SEC since we had exceeded the required 12 month period for stockholder approval. Accordingly, upon advise of counsel, the Board effective May 1, 2006: (i) cancelled the 2005 SO Plan and the options granted thereunder; (ii) adopted the 2006 SO Plan; and (iii) replaced the three previously granted ISO Options with new ISO Options at current market price.

^FReflects 5-year warrants, expiring in January of 2010, to purchase 72,240 shares of common stock issued to the Selling Agents as part of their commission in connection with the private placement by them of $1,806,000 of our 2010 Notes.

^GReflects a 2-year option, expiring in March of 2007, to purchase 25,000 shares of common stock issued to a consultant for providing certain financial services. The holder thereof elected not to exercise the option.

(e) Performance graph.

The following performance graph compares our cumulative total stockholder return on our common stock against the cumulative total return of the NASDAQ Market Indexand the SIC Code Index of the Bituminous Coal, Surface Mining Industry compiled by Hemscott, Inc. for the period from December 31, 2001 through December 31, 2006. The performance graph assumes that the value of the investment in our stock and each index was $100 on December 31, 2001, and that any dividends were reinvested. We have never paid dividends on our common stock.

COMPARE 5-YEAR CUMULATIVE TOTAL RETURN AMONG THE BEARD COMPANY,

NASDAQ MARKET INDEX AND SIC CODE INDEX

	December 2001	December 2002	December 2003	December 2004	December 2005	December 2006
The Beard Company	100.00	32.86	35.71	171.43	357.14	288.57
Bituminous Coal, Surface Mining Industry Index	100.00	98.20	167.09	256.52	389.24	365.04
NASDAQ Market Index	100.00	69.75	104.88	113.70	116.19	128.12

The Industry Index chosen consists of the following companies: Alliance Holdings GP LP, Alliance Resource Partners, Arch Coal, Inc., Consol Energy, Inc., Foundation Coal Holdings, International Coal Group Inc., James River Coal Company, National Coal Corp., Peabody Energy Corp., Penn Virginia GP Holdings, Westmoreland Coal Co. and Yanzhou Coal Mining Co.

Item 6.Selected Financial Data.

The following financial data are an integral part of, and should be read in conjunction with, the financial statements and notes thereto. Information concerning significant trends in the financial condition and results of operations is contained in Management's Discussion and Analysis of Financial Condition and Results of Operations on pages 32 through 45 of this report.

			2006		2005		2004		2003		2002
			(in thousands, except per share data)
	Statement of operations data:
	Revenues from continuing operations		$2,085		$1,379		$972		$593		$469
	Interest income		25		19		3		1		119
	Interest expense		(1,004)		(999)		(694)		(637)		(519)
	Earnings (loss) from continuing operations		(1,522)		(2,302)		937		(1,490)		(4,391)
	Earnings (loss) from discontinued operations		(32)		142		-		(121)		(223)
	Net earnings (loss)		(1,554)		(2,160)		937		(1,611)		(4,614)
	Net earnings (loss) attributable to common shareholders		(1,554)		(2,160)		937		(1,611)		(4,614)
Net earnings (loss) per share (a):
Basic:
Earnings (loss) from continuing operations		(0.27)		(0.39)		0.18		(0.33)		(1.05)
Earnings (loss) from discontinued operations (b)(c)(d)		0.00		0.02		0.00		(0.02)		(0.05)
Net earnings (loss)		(0.27)		(0.37)		0.18		(0.35)		(1.10)
Diluted:
Earnings (loss) from continuing operations		(0.27)		(0.39)		0.14		(0.33)		(1.05)
Earnings (loss) from discontinued operations (b)(c)(d)		0.00		0.02		0.00		(0.02)		(0.05)
Net earnings (loss)		(0.27)		(0.37)		0.14		(0.35)		(1.10)
Balance Sheet Data:
Working capital		(271)		(2,448)		(994)		(854)		(303)
Total assets		2,422		4,464		2,712		2,380		2,703
Long-term debt (excluding current maturities)		8,526		7,038		5,393		6,322		5,680
Convertible preferred stock		889		889		889		889		-
Redeemable preferred stock		-		-		-		-		889
Total common shareholders’ equity (deficiency)		(7,348)		(5,983)		(4,144)		(5,333)		(4,833)

__________________

(a)  All per share numbers have been adjusted to reflect the 2-for-1 stock split effected by us as of August 6, 2004.

(b)  In December 1999, management of North American Brine Resources (“NABR”), a 40%-owned subsidiary accounted for under the equity method, adopted a formal plan to discontinue the business and dispose of its assets. NABR represented Beard’s entire brine extraction/iodine manufacturing segment (the “BE/IM Segment”).

(c)  In May 2001, we sold the fixed assets of the 50%-owned subsidiary involved in natural gas well testing operations. In August 2001, we made the decision to cease pursuing opportunities in Mexico and the WS Segment was discontinued.

Page 32 of 86 Pages

(d)  Beard’s share of the BE/IM and WS Segments’ operating results have been reported as discontinued for all periods presented. (See note 3 of notes to financial statements).

Page 32 of 86 Pages

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

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

Overview

General. In 2006 we operated within the following operating segments: (1) the coal reclamation (“Coal”) Segment, (2) the carbon dioxide (“CO₂”) Segment, (3) the China Segment, (4) the e-Commerce Segment, and (5) the oil and gas (“Oil & Gas”) Segment.

The Coal Segment is in the business of operating coal fines reclamation facilities in the U.S. and provides slurry pond core drilling services, fine coal laboratory analytical services and consulting services. The CO2 Segment consists of the production of CO2 gas. The China Segment manufactures environmentally friendly organic chemical compound fertilizer (“OCCF”) and liquid fertilizer in China. The e-Commerce Segment is engaged in a strategy to develop business opportunities to leverage starpay’s intellectual property portfolio of Internet payment methods and security technologies. The Oil & Gas Segment consists of the production of oil and gas.

In 2006 our continuing operations reflected a loss of $1,522,000 compared to a loss of $2,302,000 in 2005 and earnings of $937,000 in 2004.

Beginning in 1999 we started discontinuing the operations of those segments that were not meeting their targeted profit objectives and which did not appear to have significant growth potential. This ultimately led to the discontinuance of four of our unprofitable segments. Such discontinued operations reflected a loss of $32,000 in 2006 compared to earnings of $142,000 in 2005. Losses in one segment of our discontinued operations were offset by earnings in another in 2004, resulting in no income or loss for that year. See “Discontinued Operations” below.

We are focusing our primary attention on the Coal, Carbon Dioxide and e-Commerce Segments, which we believe have significant potential for growth and profitability.

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

Operating results for 2006, 2005 and 2004 continue to be impacted by the lack of a coal contract generating operating profits since January of 1999. Although the Pinnacle Project is in the final ramp-up stage, it is not yet generating operating profits and our interest has been reduced to 25%. Termination of our last previous significant contract (see “Coal Reclamation Activities---The MCN Projects”) resulted in a severe decline in the segment’s revenues---from $8,585,000 in 1998 down to $25,000 in 2006---with a correspondingly dramatic impact on profitability. The segment, which had an operating profit of $1,678,000 in 1998, recorded operating losses of $682,000 in 2004, $783,000 in 2005 and $780,000 in 2006.

Operating profit of the CO2 Segment in 2006 increased $375,000, or 40%, from the prior year, as a result of both increased production and higher pricing. The operating losses of the China Segment increased to $873,000 in 2006 compared to $787,000 for the prior year as the segment incurred increased costs associated with the ongoing operations of its first fertilizer plant in China. $510,000 of the losses incurred by the segment during the year were incurred by BEE/7HBF, LLC (the “LLC”) which owns our fertilizer manufacturing operations and by its wholly-owned subsidiary, Xianghe BH Fertilizer Co., Ltd. (“XBH”). The operating loss of the e-Commerce Segment decreased to $95,000 from $139,000 in 2005 due to lower salary expenses. The operating loss from

corporate activities at the parent company level decreased $31,000, or 3%, primarily as a result of a $37,000 decrease in amortization expense. The Company’s overall results for 2006 were an improvement over the prior year but were still disappointing – a loss of $1,552,000 compared to $2,302,000 in 2005. Revenues increased $706,000 and expenses increased $271,000 compared to 2005. The Company recorded a decrease in equity in earnings of unconsolidated affiliates of $287,000 for 2006 compared to 2005. Gains on the disposition of assets and a portion of our interest in an LLC were $606,000 more in 2006 than in 2005 and the Company recorded $34,000 less income from minority interest in operations of unconsolidated affiliates in 2006 compared to 2005. The Company recorded a tax benefit of $17,000 in 2006 compared to tax expense of $35,000 for 2005, an improvement of $52,000.

Operating profit of the CO2 Segment in 2005 increased $364,000, or 62%, from the prior year, as a result of both increased production and higher pricing. The operating losses of the China Segment increased to $787,000 in 2005 compared to $549,000 for the prior year as the segment incurred increased costs associated with the construction and initial operations of its first fertilizer plant in China. $336,000 of the losses incurred by the segment during the year were incurred by the LLC and by XBH. The operating loss of the e-Commerce Segment increased to $139,000 from $124,000 the previous year as a result of increased expenses associated with its lawsuit against VISA. The operating loss from corporate activities at the parent company level increased $74,000, or 9%, primarily as a result of increased amortization of capitalized costs associated with debt. The Oil & Gas Segment recorded a profit of $12,000 compared to a loss of $35,000 in 2004 as 2005 was the initial year of production for the segment’s new gas wells. The Company’s overall results for 2005 were disappointing – a loss of $2,302,000 compared to earnings of $937,000 in 2004. While revenues for 2005 increased $407,000, expenses increased $424,000 compared to 2004 and the bottom line was severely impacted by a $305,000 increase in interest expense. Further, the results for 2004 reflected the receipt of $2,943,000 for the second and third installments of the McElmo Dome settlement with no comparable income amount in 2005.

Operating profit of the CO2 Segment in 2004 increased $222,000, or 61%, from the prior year, as a result of both increased production and higher pricing. The operating losses of the China Segment decreased to $549,000 in 2004 from $724,000 for the prior year as the segment incurred fewer administrative costs associated with the termination of a relationship with a former technology partner in China. The operating loss of the e-Commerce Segment increased to $124,000 from $100,000 the previous year as a result of increased expenses associated with its lawsuit against VISA. The operating loss in the Oil & Gas Segment decreased to $35,000 for 2004 compared to $116,000 for 2003 because the prior year included an $81,000 impairment of oil & gas leases held by the segment with no similar impairment in 2004. The operating loss from corporate activities at the parent company level decreased $150,000, or 15%, primarily as a result of lower professional fees and a reduction in amortization of capitalized costs associated with our debt offerings. The year reflected a reversal of our fortunes---going from a loss of $1,611,000 in 2003 to earnings of $937,000 in 2004, primarily reflecting (i) the receipt of $2,943,000 as the second and third installments of the McElmo Dome settlement versus $1,151,000 the prior year, (ii) a $379,000 increase in total revenues, and (iii) a reduction in operating costs of $59,000.

The recurring net losses and overall declines in financial condition and liquidity raise substantial doubts about our ability to continue as a going concern, as expressed in the independent auditors’ opinion on page 47.

Liquidity and capital resources

Capital resources.The Company's capital investment programs have required more cash than has been generated from operations during the past three years. Cash flows provided by (used in) operations during 2006, 2005 and 2004 were $(1,961,000), $(1,888,000), and $328,000, respectively, while capital additions from continuing operations (excluding the Pinnacle Project) were $154,000, $613,000, and $217,000, respectively, as indicated in the table below:

	2006	2005	2004
Coal*	$     25,000	$     20,000	$    183,000
Carbon dioxide	92,000	26,000	33,000
China	30,000	279,000	-
e-Commerce	3,000	-	1,000
Other	4,000	288,000	-
Total	$    154,000	$    613,000	$    217,000

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* Capital additions to the Pinnacle Plant have been excluded since BPLLC is no longer a consolidated subsidiary, and certain amounts for 2005 have been restated.

Our 2007 capital expenditure budget has tentatively been set at $602,000. This does not include the capital cost of any coal recovery plants that may be constructed by the Coal Segment since the timing and dollar amount of such projects are uncertain and the projects are subject to the availability of financing. It includes our $537,000 share of the $100 million cost of expanding the production capacity of the McElmo Dome Field.* Our share of such costs is preliminarily targeted to come from our cash flow from the present production; however, we are currently exploring alternative sources of financing. No capital expenditures are contemplated in 2007 by the China, e-Commerce or Oil & Gas Segments.

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* After executing the original authorization for expenditures for the expansion in May of 2006, we were advised by the operator in March of 2007 that the owner of approximately 40% of the Unit has opted out of the expansion and that our share of the costs have increased to approximately $967,000. We and a number of other small working interest owners are currently protesting this increase. However, to date there has been no resolution of the matter.

Liquidity. Because of the cost over-runs on the Pinnacle Project and the reduction of our interest therein to 25%, our anticipated share of the profits from the Project, if any, have been significantly diminished. Failure of the fertilizer plant in China to achieve its market plan has further clouded our near-term picture. Sustaining the operating activities of our three unprofitable segments, plus our overhead, has resulted in a serious outflow of cash during the past three years. We have managed to survive this cash shortfall to date through a series of financings and the sale of various assets, principally those left over from our discontinued operations. A $2,783,000 long-term line of credit from an affiliate of the Chairman, secured by our working and overriding royalty interests in the McElmo Dome Field, has been periodically extended and currently matures in April of 2008.

Three private debt placements were completed in June and December of 2004 and January of 2005 for gross proceeds of $3,300,000, of which $1,455,000 was received in 2004. In addition, we borrowed $125,000 from a bank in the first quarter of 2004. Such funds were needed to “bridge the gap” until the distribution of the McElmo Dome settlement had been completed. Receipt of the second and third installments of the McElmo Dome settlement improved our balance sheet and income statement. We received $2,826,000 of the settlement in March and $117,000 in May of 2004, respectively. Upon receipt of the second installment, we were able to eliminate $2,620,000 of our total indebtedness. (See “Item 3. Legal Proceedings---McElmo Dome Litigation”).

We borrowed an additional $200,000 from an unconsolidated subsidiary in November of 2004 to provide needed working capital until the $2,100,000 private placement was completed in January of 2005. Another private placement was commenced in June of 2005 and $1,135,000 of notes were sold by year-end, including $624,000 of notes which were exchanged for an earlier issue of notes. We sold another $193,000 of these notes

during the first quarter of 2006. On March 28, 2006, we obtained a $350,000 credit facility from a local bank, $290,000 of which was utilized to provide us with additional working capital since that date. In May of 2006, we borrowed $200,000 from a third party. In October of 2006, we initiated another private placement – selling $83,000 of notes due in August of 2008 and exchanging $568,000 of additional notes due in November of 2008 for the rights of the holders of a previous issue of our notes to receive a production payment due in November of 2006. In addition, $397,000 was borrowed by BEE/7HBF from our 50% partner in China. (See “PART I. Item 1. Business. General development of business. Private Debt Placements.” and “PART I. Item 1. Business. General development of business. Bank Credit Facility on Colorado Gas Wells” for additional details).

Our activities in 2004,2005 and 2006 were primarily funded from the proceeds of the private debt placements described above. Future cash flows and availability of credit are subject to a number of variables, including demand for our coal reclamation services and technology, continuing demand for CO2 gas, demand for our fertilizer products in China, demand for our oil and gas production, and the e-Commerce Segment’s success (i) in developing licensing agreements and other fee based arrangements with companies implementing technology in conflict with its intellectual property or (ii) resulting from its ongoing Visa litigation.

During 2006 we reduced the deficit in our working capital position by $2,176,000 to $(272,000) at year-end 2006 from $(2,448,000) at year-end 2005. Most of the improvement in our working capital position resulted from the deconsolidation of BPLLC. There had been a significant buildup of short-term debt in BPLLC, with a corresponding increase in our working capital deficit, prior to its deconsolidation. The Coal Segment used $25,000 to purchase equipment and $755,000 to fund operating losses. The China Segment required $505,000 to fund net advances for operations and $30,000 to purchase equipment. Another $95,000 was used to fund the activities of the e-Commerce Segment. We repaid $309,000 in debt and $550,000 in accrued interest expense. Other corporate activities utilized approximately $938,000 of working capital. The bulk of these expenditures were funded by a net additional $1,133,000 in debt, $1,540,000 from the sale of carbon dioxide and $290,000 from the sale of assets.

As a result, at December 31, 2006, we were still in a negative working capital position with working capital of $(271,000), and a current ratio of 0.76 to 1. Our near-term outlook is uncertain. As a result of the deconsolidation our interest in the Pinnacle Project has been reduced to 25% and we anticipate that it will be eliminated. (See “PART I. Item 1. Business. General development of business---Recent Developments---Loans from and Agreements with PinnOak Resources” for additional details). Although the Coal Segment has just received a commitment for a new coal recovery project, we have not yet secured the necessary permits or the financing for it. We can not reasonably anticipate that any cash flow will be available from this project prior to 2008. The China fertilizer plant has been unable to generate sufficient cash flow to sustain its operations, and the outlook for near-term liquidity from this source is highly unlikely. (See “PART I. Item 1. Business. General development of business---Recent Developments---China Fertilizer Plant” for additional details).

Our outlook for near-term liquidity has been further clouded as a result of the expansion of production capacity currently underway at McElmo Dome. (See “Item 1. Business. General development of business. RECENT DEVELOPMENTS---Expansion of McElmo Dome Production Capacity”). In recent years our cash flow from McElmo Dome has been the primary source of the Company’s operating cash flow. The increased cost of our share of the expansion significantly impacted the availability of this source. Accordingly, we have determined that we must sell a portion of one of our investments in order to remedy our liquidity problem until such time as (i) the cash flow from McElmo Dome has increased sufficiently to do so, and/or (ii) cash flow from the coal recovery projects under development has increased enough to solve the problem.

Our principal business is coal reclamation, and this is where management’s operating attention remains primarily focused. The recent chronology of the Pinnacle Project has been disappointing. Despite the recent setbacks, the outlook for the Coal Segment remains bright. The segment is actively pursuing a number of other

projects which it has under development. Although we have a signed letter of intent for the new project mentioned above, no definitive contracts have been signed and there is no assurance that the required financing will be obtained or that any of the projects will materialize.

We incurred losses from continuing operations totaling $2,887,000 during the past three years. We realized net earnings from discontinued operations totaling $110,000 during such period as the bulk of the assets of the four discontinued segments were sold. The problems from the discontinued segments are now behind us and management expects to dispose of the few assets remaining from such operations in 2007. We will pursue the sale of such assets as opportunities become available.

We expect to generate cash of at least $50,000 from the disposition of the remaining assets from two of our discontinued segments, and can sell certain other assets to generate cash if necessary. Moreover, we believe there is still a chance of receiving an award in connection with the binding arbitration we have on appeal. Even though we lost the arbitration, we and our counsel believe there are reasonable grounds for vacating the Opinion. However, there is no assurance that the matters in dispute will be resolved in our favor. See “Item 3. Legal Proceedings. McElmo Dome Litigation.”

In the near-term, it does not appear that the cash flow from our CO2 and Oil & Gas Segments will be sufficient to sustain our operations, and that we must generate funds from the sale of assets until the newly-committed coal project or other coal projects under development can generate positive cash flow or the anticipated increase in cash flow from McElmo Dome can cover the shortfall. Meanwhile, to the extent necessary, we must pursue additional outside financing, which would likely involve further dilution to our stockholders.

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

	2006	2005	2004
Cash and cash equivalents	$    270,000	$    363,000	$    127,000
Accounts and other receivables, net	313,000	215,000	167,000
Asset sales	290,000	246,000	63,000
Assets of discontinued operations held for resale	20,000	20,000	40,000
Liabilities of discontinued operations held for resale	40,000	42,000	95,000
Trade accounts payable	162,000	717,000	177,000
Current maturities of long-term and short-term debt	471,000	1,631,000	774,000
Long-term debt	8,526,000	7,038,000	5,393,000
Working capital	(271,000)	(2,448,000)	(994,000)
Current ratio	0.76 to1	0.25 to1	0.27 to1
Net cash provided by (used in) operations	(1,961,000)	(1,888,000)	328,000

In 2006, we had negative cash flow of $93,000. Operations of the Coal, China, and e-Commerce Segments and the discontinued operations resulted in cash outflows of $1,710,000, including $199,000 of operating losses for BPLLC before it became an unconsolidated equity investment. (See “Results of operations---Other corporate activities” below).

Our investing activities utilized cash of $10,244,000 in 2006. Proceeds from the sale of assets provided cash of $290,000. Net distributions from our investment in Cibola and a real estate partnership provided cash of

$37,000. Acquisitions of property, plant and equipment and intangible assets used $10,689,000 of the cash outflow, including $10,535,000 for the coal fines recovery project.

Our financing activities provided cash flows of $12,112,000 in 2006. We received net cash of $12,419,000 from our borrowings and from the exercise of warrants and utilized $309,000 for payments on lines of credit and term notes. Included in the net cash received from our borrowings was $11,516,000 from PinnOak for the construction and operation of the coal fines recovery project.

At December 31, 2006 we had no available lines of credit. Our liquidity position temporarily benefited during the first quarter from a $150,000 short-term loan from a shareholder of a former affiliate, $39,000 of short-term loans from our 2008 and 2009 Note holders, and the sale of $105,000 of additional 2010 Notes.

Material Trends and Uncertainties. We recorded a net loss of $1,554,000 in 2006 compared to a net loss of $2,160,000 in 2005 and net earnings of $937,000 in 2004. 2004 results benefited from the $2,943,000 received from the McElmo Dome settlement. We have generated operating losses for eight consecutive years. The recent trend has been positive. With the exception of 2005, which recorded an operating loss of $1,717,000 versus an operating loss of $1,700,000 the prior year, there has been a significant improvement in our operating margin in each of the last four years, with the operating loss declining to $1,282,000 in 2006 from $3,057,000 in 2002. Despite the amount of debt that we have incurred in recent years, we believe that we have the ability to finance our Coal projects on a project financing basis, as demonstrated by the financing of the Pinnacle Project in West Virginia. At the corporate level, future borrowings will likely be dependent upon our ability to generate positive cash flows from operations. It is unlikely that additional borrowings will be made available to us from a related party. As discussed above, to the extent that the cash flow from our CO2 and Oil & Gas Segments, the McElmo Dome and Visa litigation fail to support our operations, we must generate funds from the sale of assets to cover the shortfall. If the sale of assets is not sufficient, we may be forced to raise additional capital, which would likely further dilute our shareholder holdings. We cannot assure you that we would be able to raise additional capital on acceptable terms, or at all.

Our 2006, 2005 and 2004 financial results were burdened by losses from discontinued operations totaling $32,000 and $121,000, respectively in 2006 and 2004 and benefited from earnings from discontinued operations totaling $142,000 in 2005. At year-end 2006 our total assets, net of current assets of $840,000, had been written down to $1,582,000. $384,000 of this amount consisted of our McElmo Dome properties which generated revenues of $1,540,000 and operating profits of $1,324,000 in 2006. We believe it is highly unlikely that there will be any significant impairments going forward. Nor do we anticipate having any significant additional losses from the operations of the discontinued segments going forward. On the other hand, 2004 financial results benefited from the McElmo Dome settlement in the gross amount of $2,943,000. The Settlement is a non-recurring item, so we will not have this benefit in the future except to the extent that McElmo Dome operating results may benefit from improved pricing or reduced pipeline charges as a result of the Settlement.

In addition, the Company recorded impairments of investments and other assets of $4,465,000 and $3,087,000 related to its investment in Cibola Corporation for the years 2005 and 2004, respectively. While the Company owned 80% of the common stock of Cibola through November 30, 2005, it did not have financial or operating control of this gas marketing subsidiary. After considering the impairments mentioned, the Company recorded net earnings of $51,000, $338,000, and $409,000 for 2006, 2005 and 2004, respectively, from its investment in Cibola which represented actual distributions to the Company under terms of an agreement with Cibola which was terminated on December 1, 2005.

One uncertainty we are facing is the amount of litigation expense the e-Commerce Segment will incur in 2007 and possibly 2008 related to the litigation against Visa. It is difficult to estimate how much the segment’s one-half of the out-of-pocket expenses (excluding legal fees) associated with such litigation may total.

Results of operations

General. We discontinued four of our segments, all of which were unprofitable, during the period from 1998 to 2001. Management has since been focusing its attention on making the remaining operations profitable. Although we succeeded in bringing our initial fertilizer project in China on-line, its operating results to date have been disappointing. The Pinnacle Project began operations in the fourth quarter of 2006 and made its first coal shipment in November of 2006. However, for the reasons discussed above, we no longer expect it to contribute to our operating results. (See “PART I. Item 1. Business. General development of business---Recent Developments---Loans from and Agreements with PinnOak Resources” for additional details). Subject to obtaining the necessary financing, it appears that we will be bringing one of the other projects under development in the Coal Segment to reality later this year, but we do not anticipate any cash flow benefit from the project until 2008. Meanwhile, as mentioned above, we will need to pursue the sale of some of our assets and may also need to pursue additional outside financing, which would likely involve further dilution to our shareholders.

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

	2006	2005	2004
Operating profit (loss):
Coal	$   (780,000)	$   (783,000)	$   (682,000)
Carbon dioxide	1,324,000	949,000	585,000
China	(873,000)	(787,000)	(549,000)
e-Commerce	(95,000)	(139,000)	(124,000)
Oil & gas	80,000	12,000	(35,000)
Subtotal	(344,000)	(748,000)	(805,000)
Other - principally corporate	(938,000)	(969,000)	(895,000)
Total	$ (1,282,000)	$ (1,717,000)	$ (1,700,000)

Following is a discussion of results of operations for the three-year period ended December 31, 2006.

Coal reclamation. We have focused most of our attention in recent years on coal reclamation. The following table depicts segment operating results for the last three years:

	2006	2005	2004
Revenues	$     25,000	$     52,000	$    189,000
Operating costs	(430,000)	(520,000)	(719,000)
SG&A	(335,000)	(305,000)	(135,000)
Other expenses	(40,000)	(10,000)	(17,000)
Operating profit (loss)	$  (780,000)	$  (783,000)	$  (682,000)

The Coal Segment’s operating loss for 2006 was $3,000 less than that of 2005 primarily due to a $90,000 reduction in operating costs. This was offset by a $27,000 decrease in revenues as we concentrated on the startup activities of the Pinnacle plant in West Virginia. Additionally, SG&A costs were $30,000 higher in 2006 compared to 2005 as the segment expensed a $20,000 fee paid to a consultant hired to assist in securing a USDA guaranty in connection with a proposed loan for the Pinnacle Project. Depreciation and amortization was $30,000 greater in 2006 compared to the prior year because of additional equipment purchased for the Pinnacle Plant which commenced production in October of 2006. The 2005 operating loss for the segment was $101,000 greater than that of 2004 largely due to commencement of the Pinnacle Project in the fourth quarter and the resulting increase in SG&A type expenses. Limited lab analysis activity in 2005 also contributed to the higher

loss. The 2004 operating loss reflects the negative impact of the early termination of a contract that did not work out as expected. Except for the aforementioned contract, no new projects were undertaken during the three year period.

It had been contemplated that the Pinnacle Project would begin making a material contribution to the segment’s operating profit in late 2006 or early 2007. This will no longer be the case due to the deconsolidation of BPLLC, which will have a material unfavorable impact in terms of the revenues and cash flow from continuing operations that had been projected from the project.

Despite the loss of the contemplated contribution from the Pinnacle Project, the industry climate has improved during the last two years due to the increase in coal and natural gas prices, and the outlook for the segment has correspondingly improved, with a number of other projects currently under development.

Carbon dioxide. The primary component of revenues for this segment is the sale of CO2 gas from the working and overriding royalty interests of our two carbon dioxide producing units in Colorado and New Mexico. These units also provide very minor amounts of revenue from the sale of oil, natural gas and sulphur. The following table depicts operating results for the last three years:

	2006		2005		2004
Revenues		$ 1,540,000		$ 1,172,000		$   754,000
Operating expenses		(170,000)		(181,000)		(128,000)
DD&A		(46,000)		(42,000)		(41,000)
Operating profit		$ 1,324,000		$   949,000		$   585,000

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

	2006	2005	2004
Net production (Mcf)	1,972,000	1,902,000	1,787,000
Average sales price per Mcf	$0.77	$0.60	$0.42
Average lifting cost per Mcf	$0.07	$0.07	$0.06

As evidenced by the above, revenues, production and sales prices per Mcf are all trending up relatively significantly, while lifting costs per Mcf have remained relatively static. More importantly, the operating margin has trended sharply upward. As a result of additional development drilling currently underway in the field, the increase in oil prices which has increased the demand for CO2, and anticipated continuing improvement in CO2 pricing as a result of the McElmo Dome settlement, we look for continuing improvement in the outlook for the CO2 Segment in 2007. As mentioned in the capital investments discussion above, the McElmo Dome Field is currently undergoing a $99.8 million expansion designed to increase production by approximately 18%.

China. In 2003 and most of 2004 the China Segment focused its attention on the financing and construction of fertilizer plants utilizing composting technology licensed from third parties. These efforts were unsuccessful; accordingly, in the fall of 2004 the segment shifted its focus to the concept of a much smaller mini-plant which would not utilize the licensed technology. The initial mini-plant was constructed in 2005 and began operations in the fourth quarter of 2005, recording the segment’s first revenues of $29,000. Revenues increased to $368,000 in 2006. The segment had no revenues in 2004 and recorded $1,205,000, $802,000 and $548,000 of operating and SG&A expenses in 2006, 2005 and 2004, respectively, while pursuing its various marketing efforts. The segment recorded operating losses of $873,000, $787,000, and $549,000 attributable to its operations in China for the years 2006, 2005 and 2004, respectively.

As of March 31, 2007, all of the marketing initiatives undertaken by our China fertilizer manufacturing plant have been unsuccessful in terms of enabling the plant to reach the breakeven point. The Company is exploring its available alternatives including sale of the plant, merger of the operation with a competitor, or bringing in a new partner. Accordingly, the outlook and future direction of the China Segment is uncertain at this time. As a result, there is considerable uncertainty concerning the revenues and cash flow from continuing operations that had been projected from this initial plant, which has also clouded the outlook for building additional plants.

e-Commerce. In early 1999, we began developing our proprietary concept for an Internet payment system through starpay. starpay recorded revenues of $29,000 and $31,000 in 2004 and 2005, respectively. Revenues decreased to $5,000 in 2006, as the segment’s patent license agreement, which provided for an annual license fee of $25,000 during only its first three years, and the final fee was paid in the first quarter of 2005. The segment recorded $100,000, $168,000, and $147,000 of SG&A expenses, respectively, in 2006, 2005 and 2004. Operating results for 2004 and 2005 were burdened with additional expenses associated with the segment’s ongoing litigation against VISA and, as a result, operating losses increased from $124,000 in 2004 to $139,000 in 2005. Because, however, of the snail’s pace at which the VISA lawsuit had been progressing, in 2006 the Company granted the request of starpay’s managing member to spend a portion of his time assisting his spouse in a newly purchased business. Accordingly, he received only half his normal salary from February through September of that year. This was the primary reason the operating loss of starpay decreased $44,000 to $95,000 in 2006 compared to 2005.

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 $147,000 in revenues for 2006 compared to $95,000 for 2005. Operating costs totaled $51,000, $72,000 and $33,000 for 2006, 2005 and 2004, respectively. The segment’s depreciation, depletion and amortization of its equipment and oil & gas leases totaled $16,000, $11,000 and $2,000 for 2006, 2005 and 2004, respectively. As a result, the segment contributed operating profits of $80,000 and $12,000 for 2006 and 2005, respectively, compared to a loss of $35,000 for 2004.

Other corporate activities. Other corporate activities include general and corporate operations, as well as assets unrelated to our operating segments or held for investment. These activities generated operating losses of $938,000 in 2006, $969,000 in 2005 and $895,000 in 2004. The $31,000 reduction in the operating loss for 2006 compared to 2005 was primarily the result of a $37,000 reduction in amortization of intangibles. The increased operating loss in 2005 compared to 2004 was due to higher professional fees associated with the search for project financing and increased amortization of capitalized costs associated with our subordinated debt, including a $51,000 charge for capitalized costs associated with an unsuccessful search for new financing.

Selling, general and administrative expenses. Selling, general and administrative expenses (“SG&A”) increased to $863,000 in 2006 from $861,000 in 2005 after decreasing from $870,000 in 2004. The $2,000 increase for 2006 compared to 2005 was the net result of increases and decreases in numerous types of expenses with the largest increase being a $40,000 charge for accounting fees in connection with the audit of Cibola in 2006. This was offset by a net decrease in numerous other SG&A expenses. The $9,000 decrease in 2005 compared to 2004 was the result of reductions in many types of expenses, none of which were individually significant.

Depreciation, depletion and amortization. Depreciation, depletion and amortization expenses increased to $214,000 in 2006 after increasing to $187,000 in 2005 from $92,000 in 2004. The increases in 2006 and 2005

were due to higher depreciation costs associated with the plant in China, the coal plant operations in West Virginia and increased amortization expense associated with the issuance of debt in 2005 and 2006.

Interest income. Interest income increased to $25,000 in 2006 after increasing to $16,000 in 2005 from $3,000 in 2004. The increases are from short-term investments associated with increased levels of cash on hand as a result of our debt offerings.

Interest expense. Interest expense increased to $1,004,000 in 2006 from $999,000 in 2005 and from $694,000 in 2004 reflecting the increased level of debt in each year as we borrowed to meet our working capital and operating needs and to fund the activities of the Coal and China Segments. These amounts included $109,000 in 2005 and $119,000 in 2004 paid to Cibola Corporation for Beard’s investment in Cibola. There were no such amounts paid in 2006.

Equity in earnings of unconsolidated affiliates. Our equity in earnings of unconsolidated affiliates reflected net earnings of $49,000, $336,000 and $495,000 for 2006, 2005 and 2004, respectively, after the impairments discussed below.

In 2004, 2005 and through September 30, 2006, we had recorded 100% of the expenses of BPLLC inasmuch as the terms of the agreement governing the operation of the Project had not been finalized and we were in control of Project operations. The parties involved had been in the process of negotiating a loan based on the premise of obtaining a USDA guaranty of 70% thereof. In the interim and through September 30, 2006, our partner had advanced $10,805,000 to fund the construction of the Project’s physical plant. Effective September 30, 2006, affiliates of our partner (the investor group) elected to convert $2,800,000 of the partner’s loans to equity in BPLLC. Because the USDA-guaranteed loan had not been secured by such date, the investor group exercised their option to assume control of the Project effective October 1, 2006 and increased their ownership interest in BPLLC to 75%, at which point BPLLC ceased to be a consolidated subsidiary. The Company did not recognize any losses from this unconsolidated subsidiary for the period from October 1, 2006 through December 31, 2006 since the Company no longer had an investment at risk as the operations were funded by the 75% partner.

For 2006, the principal component of our earnings in unconsolidated affiliates was our share of the earnings of Cibola Corporation (“Cibola”). Although we owned 80% of the common stock of Cibola, we did not have operating or financial control of this gas marketing subsidiary which was formed in 1996. We recorded $4,803,000, and $3,496,000 representing our 80% share of the earnings of Cibola for 2005 and 2004, respectively. Due to the terms of an agreement with the minority and preferred shareholders of Cibola, however, that provided that the net worth of Cibola would have to reach $50,000,000 before we could begin to receive our 80% share of any excess over $50,000,000, we also recorded impairments of $4,451,000 and $3,087,000 for the years 2005 and 2004, respectively. Beard also wrote off $13,000 of its remaining investment in Cibola in the third quarter of 2005. Cibola, then, contributed a net $230,000 and $290,000 of our financial net income for fiscal years 2005 and 2004, respectively, after netting the interest charges above and these impairments against our 80% share of earnings, pursuant to this agreement. The agreement was terminated, according to its terms, by the minority common and preferred shareholders effective December 1, 2005. Cibola did not reach the aforementioned net worth position and accordingly we received from Cibola only the net amounts recorded above and already distributed. In 2006, we recorded $51,000 of earnings from Cibola according to terms of a negotiated settlement with the minority common and preferred shareholders of Cibola regarding the termination of the agreement above. In addition, in 2004, we recorded $86,000 in earnings from our investment in JMG-15, a real estate partnership in Texas that sold a parcel of land during the year, compared to losses of $2,000 for each of the years 2005 and 2006, respectively, from this partnership.

Gain on sale of controlling interest in subsidiary. When the investor group in BPLLC exercised their option to assume control of the operations and a 75% ownership interest in the Project, our interest in the LLC was reduced to 25%. The Company recorded a $383,000 gain as a result of being relieved of the debt obligations

which had funded the previously recorded losses of $423,000 offset by $40,000 of intangible assets previously capitalized but now written off.

Gain on sale of assets. Gains from the sale of assets totaled $287,000, $64,000 and $14,000 in 2006, 2005 and 2004, respectively. The large increase in 2006 is attributable to the Coal Segment recording a $280,000 gain resulting from the sale of certain assets to the 25%-owned LLC now operating the coal fines recovery project in West Virginia. The remaining gains for 2006, 2005 and 2004 reflected proceeds from the sale of certain other assets sold in such years.

Impairment of investments and other assets. The Company recorded impairments of $0, $4,465,000, and $3,087,000 for the years 2006, 2005 and 2004, respectively, which reduced the recorded earnings attributable to the Company’s investment in Cibola to the actual distributions received under the terms of an agreement which was terminated by the minority and preferred shareholders on December 1, 2005.

Income taxes. We have approximately $44.1 million of net operating loss carryforwards and $3 million of depletion carryforwards to reduce future income taxes. Based on our historical results of operations, it is not likely that we will be able to fully realize the benefit of our net operating loss carryforwards which began expiring in 2006. At December 31, 2006 and 2005, we have not reflected as a deferred tax asset any future benefit we may realize as a result of our tax credits and loss carryforwards. Our future regular taxable income for the next three years will be effectively sheltered from federal income tax as a result of our substantial tax credits and loss carryforwards. Continuing operations reflect foreign and state income and federal alternative minimum tax expense (benefit) of $(17,000), $35,000 and $118,000 for 2006, 2005 and 2004, respectively. It is anticipated that we may continue to incur minor alternative minimum tax in the future, despite our carryforwards and credits.

Discontinued operations. Bolstered by gains totaling $155,000 from the sales of equipment, discontinued operations recorded net earnings of $142,000 for the year 2005. As mentioned in the Overview above, our financial results from the discontinuance of these four segments were burdened by losses of $-0- and $32,000, respectively, in 2004 and 2006. As of December 31, 2006, the assets and liabilities of discontinued operations held for resale totaled $20,000 and $40,000, respectively. We believe that all of the assets of the discontinued segments have been written down to their realizable value. See Note 4 to the financial statements.

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

Impact of Recently Adopted Accounting Standards

In February 2006, the Financial Accounting Standards Board (“FASB”) issued Statement No. 155, “Accounting for Certain Hybrid Financial Instruments” (“SFAS No. 155”), which amends FASB Statements No. 133 and 140. This Statement permits fair value remeasurement for any hybrid financial instrument containing an embedded derivative that would otherwise require bifurcation, and broadens a Qualified Special Purpose Entity’s (“QSPE”) permitted holdings to include passive derivative financial instruments that pertain to other derivative financial instruments. This Statement is effective for all financial instruments acquired, issued or subject to a remeasurement event occurring after the beginning of an entity’s first fiscal year beginning after September 15, 2006. This Statement has no current applicability to the Company’s financial statements. Management plans to adopt this Statement on January 1, 2007 and it is anticipated that the initial adoption of this Statement will not have a material impact on the Company’s financial position, results of operations, or cash flows.

In June 2006, the FASB issued Interpretation 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”), an interpretation of FASB Statement No. 109, “Accounting for Income Taxes.” FIN 48 clarifies the accounting and reporting for income taxes where the interpretation of the law is uncertain. FIN 48 prescribes a comprehensive model for the financial statement recognition, measurement, presentation and disclosure of income tax uncertainties with respect to positions taken or expected to be taken in income tax returns. FIN 48 is effective for fiscal years beginning after December 15, 2006. This Statement has no current applicability to the Company’s financial statements. Management plans to adopt this Statement on January 1, 2007 and it is anticipated that the initial adoption of FIN 48 will not have a material impact on the Company’s financial position, results of operations, or cash flows.

In September 2006, the FASB issued Statement No. 157, “Fair Value Measurements” (“SFAS No. 157”). SFAS No. 157 addresses how companies should measure fair value when they are required to use a fair value measure for recognition or disclosure purposes under generally accepted accounting principles. SFAS No. 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007, with earlier adoption permitted. Management is assessing the impact of the adoption of this Statement.

In September 2006, the Securities Exchange Commission issued Staff Accounting Bulletin No. 108 (“SFAS No. 108”). SAB No. 108 addresses how the effects of prior year uncorrected misstatements should be considered when quantifying misstatements in current year financial statements. SAB No. 108 requires companies to quantify misstatements using a balance sheet and income statement approach and to evaluate whether either approach results in quantifying an error that is material in light of relevant quantitative and qualitative factors. When the effect of initial adoption is material, companies will record the effect as cumulative effect adjustment to beginning of year retained earnings and disclose the nature and amount of each individual error being corrected in the cumulative adjustment. SAB No. 108 is effective for years ending after November 15, 2006. The Company adopted this staff accounting bulletin for 2006 and its adoption did not have a material impact on the Company’s financial position, results of operations, or cash flows.

In February 2007, the FASB issued Statement No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities – Including an amendment of FASB Statement No. 115” (“SFAS No. 158”). SFAS No. 158 permits entities to choose to measure many financial instruments and certain other items at fair value. It requires companies to provide information helping financial statement users to understand the effect of a company’s choice to use the fair value on its earnings, as well as to display the fair value of the assets and liabilities a company has chosen to use fair value for on the face of the balance sheet. Additionally, SFAS No. 158 establishes presentation and disclosure requirements designed to simplify comparisons between companies that choose different measurement attributes for similar types of assets and liabilities. The Statement is effective as of the beginning of an entity’s first fiscal year beginning after November 15, 2007. Management is assessing the impact of this statement.

Critical Accounting Policies

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

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

Receivables and Credit Policies

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

Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of

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

Revenue Recognition

We recognize revenue when it is realized or receivable and earned. Revenue from the CO2 Segment is recognized in the period of production. Revenue from Coal Segment projects is recognized in the period the projects are performed. Revenue from the sale of inventory produced by our China Segment is recognized when the product is shipped or delivered and is recorded net of the applicable value-added tax. License fees from the e-Commerce segment are recognized over the term of the agreement.

Off-Balance Sheet Arrangements

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

Contractual Obligations

The table below sets forth our contractual cash obligations as of December 31, 2006:

		Payments Due By Period
Contractual Obligations	Total			2007	2008-2009			2010-2011	2012 and Beyond
Long-term debt obligations A	$11,591,000		$1,053,000			$5,838,000	$4,700,000		$          -
Capital lease obligations	42,000		13,000			23,000	6,000		-
Operating lease obligations	594,000		238,000			218,000	138,000		-
Purchase obligations	967,000		452,000			515,000	-		-
Other long-term liabilities	-		-			-	-		-
Total	$13,194,000		$1,756,000			$6,594,000	$4,844,000		$          -

^{______________________________}

^AAmounts include interest due to be paid on long-term debt obligations.

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

At December 31, 2006, we had notes receivable of $13,000 and total debt of $8,997,000, including accrued interest to related parties of $391,000. Debt in the amount of $8,346,000 has fixed interest rates; therefore, our interest expense and operating results would not be affected by an increase in market interest rates for this amount. Another $260,000 note is accruing interest at Wall Street Journal Prime plus 1.5%, or 9.75%, at year-end. A 10% increase in market interest rates above the year-end rates would have increased our interest expense by less than $3,000. At December 31, 2006, a 10% increase in market rates above the 10% floor would have reduced the fair value of our long-term debt by $95,000.

We have no other market risk sensitive instruments.

Item 8.Financial Statements and Supplementary Data

The Beard Company and Subsidiaries

Index to Financial Statements

Forming a Part of Form 10-K Annual Report

to the Securities and Exchange Commission

	Page Number
Report of Independent Registered Public Accounting Firm	47
Financial Statements:
Balance Sheets, December 31, 2006 and 2005	48
Statements of Operations, Years ended December 31, 2006, 2005 and 2004	49
Statements of Shareholders' Equity (Deficiency), Years ended December 31, 2006, 2005 and 2004	50
Statements of Cash Flows, Years ended December 31, 2006, 2005 and 2004	51
Notes to Financial Statements, December 31, 2006, 2005 and 2004	53

REPORT OF INDEPENDENT REGISTERED

PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders of

The Beard Company

Oklahoma City, Oklahoma

We have audited the accompanying consolidating balance sheets of The Beard Company and subsidiaries as of December 31, 2006 and 2005, and the related consolidated statements of operations, shareholders’ equity (deficiency) and cash flows for each of the years in the three-year period ended December 31, 2006. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of The Beard Company and subsidiaries as of December 31, 2006 and 2005, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2006, in conformity with accounting principles generally accepted in the United States of America.

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

Cole & Reed, P.C.

Oklahoma City, Oklahoma

April 17, 2007

THE BEARD COMPANY AND SUBSIDIARIES
Balance Sheets
			December 31,	December 31,
		Assets	2006	2005
Current assets:
	Cash and cash equivalents		$             270,000	$             363,000
	Accounts receivable, less allowance for doubtful receivables of $80,000 in 2006 and $97,000 in 2005		313,000	215,000
	Inventories		205,000	149,000
	Prepaid expenses and other assets		26,000	67,000
	Current maturities of notes receivable		6,000	6,000
	Assets of discontinued operations held for resale (note 3)		20,000	20,000
		Total current assets	840,000	820,000
Note receivable, less allowance for doubtful receivable of $30,000 in 2006 and 2005 (note 6)			7,000	14,000
Restricted certificate of deposit			50,000	50,000
Investments and other assets			58,000	36,000
Property, plant and equipment, at cost (note 7)			2,925,000	4,779,000
	Less accumulated depreciation, depletion and amortization		1,628,000	1,512,000
		Net property, plant and equipment	1,297,000	3,267,000
Intangible assets, at cost (note 8)			482,000	523,000
	Less accumulated amortization		312,000	246,000
		Net intangible assets	170,000	277,000
			$          2,422,000	$           4,464,000
		Liabilities and Shareholders' Equity (Deficiency)
Current liabilities:
	Trade accounts payable		$             162,000	$             717,000
	Accrued expenses		438,000	878,000
	Short-term debt		200,000	-
	Short-term debt - related entities (note 9)		-	1,100,000
	Current maturities of long-term debt (note 9)		271,000	215,000
	Current maturities of long-term debt - related entities (note 9)		-	316,000
	Liabilities of discontinued operations held for resale (note 3)		40,000	42,000
		Total current liabilities	1,111,000	3,268,000
Long-term debt less current maturities (note 9)			1,680,000	1,268,000

Long-term debt - related entities (note 9)			6,846,000	5,770,000
Other long-term liabilities			133,000	133,000
Minority interest in consolidated subsidiary			-	8,000
Shareholders' equity (deficiency):
	Convertible preferred stock of $100 stated value; 5,000,000 shares authorized; 27,838 shares issued and outstanding		889,000	889,000
	Common stock of $.0006665 par value per share; 15,000,000 authorized; 5,591,580 and 5,472,968 shares issued and outstanding in 2006 and 2005, respectively		4,000	4,000
	Capital in excess of par value		38,665,000	38,509,000
	Accumulated deficit		(46,928,000)	(45,374,000)
	Accumulated other comprehensive loss		22,000	(11,000)
		Total shareholders' equity (deficiency)	(7,348,000)	(5,983,000)
Commitments and contingencies (notes 4, 10, and 14)
			$          2,422,000	$            4,464,000
See accompanying notes to financial statements.

THE BEARD COMPANY AND SUBSIDIARIES
Statements of Operations
		Year Ended December 31,
		2006	2005	2004
Revenues:
	Coal reclamation	$           25,000	$           52,000	$          189,000
	Carbon dioxide	1,540,000	1,172,000	754,000
	China	368,000	29,000	-
	e-Commerce	5,000	31,000	29,000
	Oil & gas	147,000	95,000	-
		2,085,000	1,379,000	972,000
Expenses:
	Coa reclamation	764,000	825,000	854,000
	Carbon ioxide	170,000	181,000	128,000
	China	1,205,000	802,000	548,000
	e-Commerce	100,000	168,000	147,000
	Oil & gas	51,000	72,000	33,000
	Selling, general and administrative	863,000	861,000	870,000
	Depreciation,depletion and amortization	214,000	187,000	92,000
		3,367,000	3,096,000	2,672,000
Operating profit (loss):
	Coal reclamation	(780,000)	(783,000)	(682,000)
	Carbon dioxide	1,324,000	949,000	585,000
	China	(873,000)	(787,000)	(549,000)
	e-Commerce	(95,000)	(139,000)	(124,000)
	Oil & gas	80,000	12,000	(35,000)
	Other, principally corporate	(938,000)	(969,000)	(895,000)
		(1,282,000)	(1,717,000)	(1,700,000)
Other income (expense):
	Interest income	25,000	19,000	3,000
	Interest expense	(1,004,000)	(999,000)	(694,000)
	Equity in net earnings of unconsolidated affiliates	49,000	4,801,000	3,582,000
	Impairment of investments and other assets (notes 1, 5, 7, 8 and 16)	-	(4,465,000)	(3,087,000)
	Gain on settlement	-	-	2,943,000
	Gain on disposition of controlling interest in subsidiary	383,000	-	-
	Gain on sale of assets	287,000	64,000	14,000
	Minority interest in operations of unconsolidated subsidiaries	8,000	42,000	-
	Other	(5,000)	(12,000)	(6,000)
Earnings (loss) from continuing operations before income taxes		(1,539,000)	(2,267,000)	1,055,000
Income tax (expense) benefit (note 11)		17,000	(35,000)	(118,000)
Earnings (loss) from continuing operations		(1,522,000)	(2,302,000)	937,000
Discontinued operations (note 3):
	Earnings from discontinued brine extraction/iodine manufacturing activities	(3,000)	44,000	21,000
	Earnings (loss) from discontinued natural gas well servicing activities	(29,000)	98,000	(21,000)
	Earnings (loss) from discontinued operations	(32,000)	142,000	-
Net earnings (loss)		$     (1,554,000)	$     (2,160,000)	$          937,000
Net earnings (loss) attributable to common shareholders (note 4)		$     (1,554,000)	$     (2,160,000)	$         937,000
Net earnings (loss) per average common share outstanding:

Basic (notes 1 and 12):
	Earnings (loss) from continuing operations	$(0.27)	$(0.39)	$0.18
	Earnings (loss) from discontinued operations	0.00	0.02	-
	Net earnings (loss)	$(0.27)	$(0.37)	$0.18
Net earnings (loss) per average common share outstanding:
Diluted (notes 1 and 12):
	Earnings (loss) from continuing operations	$(0.27)	$(0.39)	$0.14
	Earnings (loss) from discontinued operations	0.00	0.02	-
	Net earnings (loss)	$(0.27)	$(0.37)	$0.14
Weighted average common shares outstanding:
	Basic	5,655,000	5,888,000	5,215,000
	Diluted	5,655,000	5,888,000	6,478,000
See accompanying notes to financial statements.

THE BEARD COMPANY AND SUBSIDIARIES
Statements of Shareholders' Equity (Deficiency)
	Preferred		Common		Capital in Excess of Par Value	Acccumulated Deficit	Accumulated Other Comprehensive Income (loss)	Total Common Shareholders' Equituy (Deficiency
	Shares	Stock	Shares	Stock
Balance, December 31, 2003	27,838	$889,000	4,657,690	$3,000	$37,941,000	$(44,151,000)	$(15,000)	$(5,333,000)
Net earnings	-	-	-	-	-	937,000	-	937,000
Comprehensive income:
Foreign currency translation adjustment	-	-	-	-	-	-	-	-
Total comprehensive income	-	-	-	-	-	-	-	937,000
Issuance of stock warrants	-	-	181,875	-	50,000	-	-	50,000
Reservation of shares pursuant to deferred compensation plan (note 12)	-	-	-	-	202,000	-	-	202,000
Balance, December 31, 2004	27,838	889,000	4,839,565	3,000	38,193,000	(43,214,000)	(15,000)	(4,144,000)
Net loss	-	-	-	-	-	(2,160,000)	-	(2,160,000)
Comprehensive income (loss):
Foreign currency translation adjustment	-	-	-	-	-	-	4,000	4,000
Total comprehensive loss	-	-	-	-	-	-	-	(2,156,000)
Issuance of stock warrants	-	-	415,750	1,000	122,000	-	-	123,000
Reservation of shares pursuant to deferred compensation plan (note 12)	-	-		-	194,000	-	-	194,000
Issuance of shares pursuant to deferred stock compensation plan (note 12)	-	-	217,653	-	-	-	-	-
Balance, December 31, 2005	27,838	889,000	5,472,968	4,000	38,509,000	(45,374,000)	(11,000)	(5,983,000)
Net loss	-	-	-	-	-	(1,554,000)	-	(1,554,000)
Comprehensive income (loss):
Foreign currency translation adjustment	-	-	-	-	-	-	33,000	33,000
Total comprehensive loss	-	-	-	-	-	-	-	(1,521,000)
Issuance of stock warrants	-	-	10,000	-	4,000	-	-	4,000
Issuance of stock with debt	-	-	10,000	-	6,000	-	-	6,000

Share-based compensation related to employee stock compensation (note 1)	-	-	-	-	1,000	-	-	1,000
Reservation of shares pursuant to deferred compensation plan (note 12)	-	-	-	-	145,000	-	-	145,000
Issuance of shares pursuant to deferred stock compensation plan (note 12)	-	-	98,612	-	-	-	-	-
Balance, December 31, 2006	27,838	$889,000	5,591,580	4,000	$38,665,000	$(46,928,000)	$22,000	$(7,348,000)
See accompanying notes to financial statements.

THE BEARD COMPANY AND SUBSIDIARIES
Statements of Cash Flows
		Year Ended December 31,
		2006	2005	2004
Operating activities:
	Cash received from customers	$     1,914,000	$     1,349,000	$       894,000
	Gain on settlement	-	-	2,943,000
	Cash paid to suppliers and employees	(3,349,000)	(2,456,000)	(2,670,000)
	Interest received	26,000	18,000	3,000
	Interest paid	(513,000)	(600,000)	(830,000)
	Taxes paid	(11,000)	(119,000)	-
	Operating cash flows of discontinued operations	(28,000)	(80,000)	(12,000)
	Net cash provided by (used in) operating activities	(1,961,000)	(1,888,000)	328,000
Investing activities:
	Acquisition of property, plant and equipment	(10,667,000)	(2,097,000)	(221,000)
	Acquisition of intangibles	(22,000)	(44,000)	(34,000)
	Proceeds from sale of assets	287,000	139,000	14,000
	Proceeds from sale of assets of discontinued operations	3,000	107,000	49,000
	Other investments	155,000	396,000	418,000
	Net cash provided by (used in) investing activities	(10,244,000)	(1,499,000)	226,000
Financing activities:
	Proceeds from line of credit and term notes	12,012,000	2,017,000	755,000
	Proceeds from related party debt	403,000	2,321,000	1,065,000
	Payments on line of credit and term notes	(92,000)	(219,000)	(1,397,000)
	Payments on related party debt	(217,000)	(415,000)	(1,069,000)
	Proceeds from exercise of warrants	4,000	123,000	45,000
	Member contribution to a consolidated partnership	-	25,000	-
	Capitalized costs associated with issuance of subordinated debt	(16,000)	(203,000)	(42,000)
	Other	18,000	(26,000)	-
	Net cash provided by (used in) financing activities	12,112,000	3,623,000	(643,000)
Net increase (decrease) in cash and cash equivalents		(93,000)	236,000	(89,000)
Cash and cash equivalents at beginning of year		363,000	127,000	216,000
Cash and cash equivalents at end of year		$       270,000	$       363,000	$       127,000
See accompanying notes to financial statements.

THE BEARD COMPANY AND SUBSIDIARIES
Statements of Cash Flows
Reconciliation of Net Earnings (Loss) to Net Cash Provided by (Used In) Operating Activities:
		Year Ended December 31,
		2006	2005	2004
Net earnings (loss)		$     (1,554,000)	$     (2,160,000)	$      937,000
Adjustments to reconcile net earnings (loss) to net cash provided by (used in) operating activities:
	Depreciation, depletion and amortization	215,000	187,000	92,000
	Provision for abandonment costs	-	30,000	-
	Gain on sale of assets	(287,000)	(64,000)	(14,000)
	Gain on sale of assets of discontinued operations	(3,000)	(154,000)	(33,000)
	Non cash interest expense	208,000	-	-
	Gain on disposition of controlling interest in subsidiary	(383,000)	-	-
	Equity in net earnings of unconsolidated affiliates	(49,000)	(4,801,000)	(3,582,000)
	Impairment of investments and other assets	-	4,465,000	3,087,000
	Non cash compensation expense and stock warrants	145,000	194,000	206,000
	Minority interest in consolidated partnership	(8,000)	(42,000)	-
	Other	1,000	(21,000)	5,000
	Net change in assets and liabilities of discontinued operations	(2,000)	(33,000)	-
	Increase in accounts receivable, other receivables, prepaid expenses and other current assets	(89,000)	(86,000)	(126,000)
	Increase in inventories	(56,000)	(149,000)	-
	Increase (decrease) in trade accounts payable, accrued expenses and other liabilities	(99,000)	746,000	(244,000)
	Net cash provided by (used in) operating activities	$     (1,961,000)	$     (1,888,000)	$       328,000
See accompanying notes to financial statements.

THE BEARD COMPANY AND SUBSIDIARIES

Notes to Financial Statements

December 31, 2006, 2005, and 2004

(1)Summary of Significant Accounting Policies

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

Nature of Business

The Company’s current significant operations are within the following segments: (1) the Coal Reclamation (“Coal”) Segment, (2) the Carbon Dioxide (“CO2”) Segment, (3) the China (“China”) Segment, (4) the e-Commerce (“e-Commerce”) Segment, and (5) the Oil and 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. The China Segment is in the business of manufacturing fertilizer in China. The e-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.

Principles of Consolidation and Basis of Presentation

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

Use of estimates

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

Cash and Cash Equivalents

There were no cash equivalents at December 31, 2006 or 2005. For purposes of the statements of cash flows, the Company considers all highly liquid debt instruments with original maturities of three months or less at the date of purchase to be cash equivalents.

Receivables and Credit Policies

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

Inventory

At December 31, 2006, inventory consisted of raw materials ($73,000), work-in-process ($29,000) and finished goods ($103,000) located at our fertilizer plant in China and is valued at the lower of cost or market.

Property, Plant and Equipment

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

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

Intangible Assets

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

Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of

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

The Company recorded impairments to its investments and other assets of $4,465,000 and $3,087,000 related to its investment in Cibola Corporation (“Cibola”) for the years 2005 and 2004, respectively. There were no such impairments in 2006. See Note 5 for additional information related to the Company’s investment in Cibola.

Other Long-Term Liabilities

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

Fair Value of Financial Instruments

The carrying amounts of the Company’s cash and cash equivalents, accounts receivable, other current assets, trade accounts payables, and accrued expenses approximate fair value because of the short maturity of those instruments. At December 31, 2006 and 2005, the fair values of the long-term debt and notes receivable were not significantly different than their carrying values due to interest rates relating to the instruments approximating market rates on those dates.

Revenue Recognition

The Company recognizes revenue when it is realized or receivable and earned. Revenue from the CO2 and Oil & Gas Segments are recognized in the period of production. Revenue from Coal Segment projects is recognized in the period the projects are performed. License fees from the e-Commerce segment are recognized over the term of the agreement. Revenue from the sale of fertilizer produced by the China Segment is recognized when the product is shipped or delivered and is shown net of value-added taxes due on sales.

Income Taxes

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

Share-Based Compensation Expense

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 175,000 shares of its common stock for issuance to key management, professional employees and directors under The Beard Company 1993 Stock Option Plan (the "1993 Plan") adopted in August 1993. In April 1998 the Board of Directors voted to increase the number of shares authorized under the 1993 Plan to 275,000, and the shareholders approved the increase in June 1998. As a result of the 3-for-4 reverse stock split effected in September 2000 and the 2-for-1 stock split effected in August 2004, the number of shares authorized under the 1993 Plan was increased to 412,500. The 1993 Plan terminated on August 26, 2003. The remaining 26,250 options outstanding under the 1993 Plan lapsed without exercise in 2006. At December 31, 2006 there were no options outstanding under the 1993 Plan.

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 the 2005 Plan and all the options under the 2005 Plan and 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	264.5%
Expected risk term (in years)	5.25
Risk-free interest rate	4.90%
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 year ended December 31, 2006 was less than $1,000 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. Had the Company used the fair value based accounting method for share-based compensation expense prescribed by SFAS Nos. 123 and 148 for the periods ended December 31, 2004 and 2005, the Company’s consolidated net loss and net loss per share would have been as illustrated in the pro forma amounts shown below:

	For the Year Ended
	(in thousands, except per share data)
		December 31, 2005		December 31, 2004
Earnings (loss) from continuing operations, as reported		$    (2,302)		$       937
Earnings from discontinued operations, as reported		142		-
Net earnings (loss), as reported		$    (2,160)		$       937
Earnings (loss) from continuing operations, as reported		$    (2,302)		$       937
Less: total stock-based employee compensation determined under fair value based method for all awards, net of tax		(5)		-
Pro forma net earnings (loss) from continuing operations		$    (2,307)		$       937
Earnings from discontinued operations, as reported		142		-
Pro forma net earnings (loss)		$    (2,165)		$       937
Net earnings (loss) per average common share outstanding, as reported: Basic: Earnings (loss) from continuing operations Earnings from discontinued operations		$     (0.39) 0.02	$       0.18 0.00
Net earnings (loss), as reported		$     (0.37)	$       0.18
Net earnings (loss) per average common share outstanding, as reported: Diluted: Earnings (loss) from continuing operations Earnings from discontinued operations		$     (0.39) 0.02	$       0.14 0.00
Net earnings (loss), as reported		$     (0.37)	$       0.14
Net earnings (loss) per average common share outstanding, pro forma: Basic: Earnings (loss) from continuing operations Earnings from discontinued operations		$     (0.39) 0.02	$       0.18 0.00
Net earnings (loss)-basic, pro forma		$     (0.37)	$       0.18
Net earnings (loss) per average common share outstanding, pro forma: Diluted: Earnings (loss) from continuing operations Earnings from discontinued operations		$     (0.39) 0.02	$       0.18 0.00
Net earnings (loss) - diluted, pro forma		$     (0.37)	$       0.18

Weighted average common shares outstanding, As reported:
	Basic	5,888,000	5,215,000
	Diluted	5,888,000	6,478,000

Weighted average common shares outstanding, Pro forma:
	Basic	5,888,000	5,215,000
	Diluted	5,888,000	6,478,000

As of December 31, 2006, there was $29,000 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 10 years.

Option Activity

A summary of the activity under the Company’s stock option plans for the periods indicated is as follows:

		Weighted
		Average
	Shares	Exercise Price
Options outstanding at December 31, 2003	81,742	$1.58
Granted	-	-
Exercised	-	-
Cancelled	-	-
Expired	55,492	-
Options outstanding at December 31, 2004	26,250	$2.08
Granted	45,000	2.70
Exercised	-
Cancelled	-
Expired	-
Options outstanding at December 31, 2005:	71,250	$2.47
Granted	45,000	1.53
Exercised	-	-
Cancelled A	45,000	2.70
Forfeited	15,000	1.53
Expired	26,250	2.08
Options outstanding at December 31, 2006	30,000	$1.53
Options exercisable at December 31, 2006	-
Options vested and options expected to vest at December 31, 2006A	30,000	$1.53

_________________

^A The Company’s 2005 Stock Option Plan was cancelled on May 1, 2006 and replaced by the 2006 Stock Option Plan. All options under the 2005 Plan were cancelled and replaced by options under the new plan on such date.

At December 31, 2006, the weighted-average remaining contractual life of outstanding options was 9.33 years.

Convertible Preferred Stock

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

Earnings (Loss) Per Share

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

warrants were exercised and if the Company’s preferred stock, convertible notes and deferred stock compensation units were converted to common stock.

Diluted earnings (loss) per share from continuing operations in the statements of operations exclude potential common shares issuable upon conversion of preferred stock, convertible notes, termination of the deferred stock compensation plan, or exercise of stock options and warrants as a result of losses from continuing operations in 2005 and 2006, because such potential common shares are antidilutive.

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

	For the Year Ended
	December 31, 2006	December 31, 2005	December 31, 2004
Basic EPS:
Weighted average common shares outstanding	5,564,504	5,219,553	4,708,580
Weighted average shares in deferred stock compensation plan treated as common stock equivalents	90,522	668,198	506,026
	5,655,026	5,887,751	5,214,606
Diluted EPS:
Weighted average common shares outstanding	5,564,504	5,219,553	4,708,580
Weighted average shares in deferred stock compensation plan treated as common stock equivalents	90,522	668,198	506,026
Convertible Preferred Shares considered to be common stock equivalents	-	-	287,558
Warrants issued in connection with debt offerings treated as common stock equivalents	-	-	975,750
	5,655,026	5,887,751	6,477,914

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of accounts and notes receivable. Accounts receivable fromtwo parties comprised approximately38% of the December 31, 2006 balances of accounts receivable. Generally, the Company does not require collateral to support accounts and notes receivable.

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

Comprehensive Income

SFAS No. 130 establishes standards for reporting and display of “comprehensive income” and its components in a set of financial statements. It requires that all items that are required to be recognized under accounting standards as components of comprehensive income be reported in a financial statement that is displayed with the same prominence as other financial statements. During 2005 and 2006, the Company’s only significant items of comprehensive income related to foreign currency translation adjustments resulting from its equity investment in Xianghe BH Fertilizer Co., Ltd (“XBH”). The assets and liabilities of XBH, a wholly-owned subsidiary of BEE/7HBF, LLC, in which Beard owns 50% through Beard Environmental Engineering, LLC (“BEE”), a wholly-owned subsidiary of Beard, and Beijing Beard Sino-American Bio-Tech Engineering Co., Ltd. (“BTEC”), a wholly-owned subsidiary of Beard, are stated in the local currency (the Chinese yuan renminbi, “RMB”) and are translated into U.S. dollars using the current exchange rate in effect at the balance sheet date, while income and expenses are translated at average rates for the respective periods. Translation adjustments have no effect on net loss and are included in accumulated other comprehensive loss.

Reclassifications

Certain 2005 and 2004 balances have been reclassified to conform to the 2006 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 have increased in each of the years 2004, 2005 and 2006. The Company has incurred operating losses and negative cash flows from operations during each of the last five 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 have not been attained. (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 2004, 2005 or 2006 and will not make it profitable in 2007. On the positive side, progress has been made in the CO₂ Segment where revenues, profit and cash flow have continued their sharp upward trend. Such results have been bolstered to a small degree by the contribution made by the new Oil & Gas Segment, whose operating profit in 2006 almost offset the operating loss of the e-Commerce Segment.

During the three years ended December 31, 2006, the Company took several steps which reduced its negative cash flow to some degree, including salary deferrals by its Chairman and President and deferrals of directors’ fees into its Deferred Stock Compensation Plans (the “DSC Plans”) and 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 $5,279,000 during such period and an additional $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. Starting in the fourth quarter of 2005, the Company borrowed $1,100,000 from the pond owner to begin constructing the plant for its coal fines recovery project in West Virginia. That funding had increased to more than $14,150,000 as of March 31, 2007, including $2,800,000 of equity provided by affiliates of the pond owner. In addition, the Company secured a $350,000 long-term bank credit facility in March of 2006. These financings were supplemented in 2007 by (i) a $150,000 short-term loan from a shareholder of a former affiliate, (ii) $39,000 of short-term loans from the Company’s Note holders and (iii) the $105,000 of additional convertible notes discussed above. These measures have enabled the Company to continue operating.

The negative result of the above has been a substantial amount of dilution to the Company’s common equity. From January 1, 2004 through March 31, 2007, a total of 552,240 warrants (as adjusted for the 2-for-1 stock split effected in August of 2004) were issued in connection with the private debt placements, and 800,000 Stock Units (as adjusted for the 2-for-1 stock split effected in August of 2004) were accrued in the participants’ accounts as a result of salary and fee deferrals into the various DSC Plans. During such period the $4,184,000 of convertible notes were also issued which were convertible into 3,506,000 shares of common stock. Additional dilution also occurred due to an adjustment to the Preferred Stock conversion ratio resulting from the issuance of the warrants, the convertible notes and the salary deferrals. Termination of the 2003-2 DSC Plan resulted in the issuance of 218,000 common shares in November of 2005 and 56,000 in January of 2006. 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).

Additional Details

The Company’s principal business is coal reclamation, and this is where management’s operating attention is primarily focused. The Coal Segment had a signed contract to construct and operate a pond fines recovery project in West Virginia (the “Pinnacle Project” or the “Project”) and commenced construction on the project in September of 2005. The Company obtained commitments for (i) $2,800,000 of equity for the Project provided by a group of investors who are affiliates of the pond owner in exchange for 50% ownership in the Project; and (ii) a $9,000,000 bank loan subject to obtaining a USDA guaranty of 70% of the loan amount. The pond owner committed to fund or to arrange the funding for the project if the guaranty was not obtained.

Due to cost over-runs of more than $3,000,000, the investor group has elected, effective October 1, 2006, to exercise their option to assume control of Beard Pinnacle, LLC (“BPLLC”), the limited liability company which owns the Project, and reduce the Company’s interest therein to 25%. As a result, the Company was precluded from obtaining the USDA-guaranteed financing for the Project and the pond owner become the permanent source of financing. The Project, which produced its first coal on October 23, 2006, achieved a low rate of production during the ramp-up period due to initial start-up problems with the plant. Consequently, the Company has agreed in principle to terminate most of the agreements governing the Project and give up its remaining 25% interest while remaining as contract operator for the Project. Some of the details of this agreement are still being negotiated but the Company anticipates that the new agreement will be effective in April 2007. In so doing the Company will be relieved of the guaranty made by a Company subsidiary of loans made by the pond owner totaling more than $11,350,000 secured by the subsidiary’s 25% interest in the Project.

Despite the fact that the pond owner was providing all of the financing for the Project, the Company was deemed to own 100% of the Project until the investor group subscribed to their ownership effective September 30, 2006. Effective October 1, 2006 the Company's ownership percentage was reduced to 25% and the investor group took control of the Project. 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.

Meanwhile, the segment is actively pursuing a number other projects which it has under development, and has recently signed a letter of intent for a new project. The timing of this project and the other projects the Company is actively pursuing is uncertain and their continuing development is subject to obtaining the necessary financing. No definitive contracts have as yet been signed on the newly-committed project, and there is no assurance that the required financing will be obtained or that it or any of the other projects under development will materialize.

To date the China fertilizer plant has not marketed sufficient product to reach its projected breakeven point. Several new marketing initiatives have been undertaken, but all were unsuccessful. The Company has engaged an investment banking firm to explore available alternatives including, but not limited to: sale of the plant, merger of the operation with a competitor, or bringing in a new partner.

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 can sell certain other assets to generate cash if necessary. In addition, the Company believes that there is still a chance of receiving an award in connection with the binding arbitration the Plaintiffs lost in August of 2006. An appeal concerning the decision reached on the arbitration was filed in November of 2006.

The Company's working capital position has improved significantly as a result of the deconsolidation of BPLLC. Nonetheless, liquidity remains extremely tight. The Company is currently pursuing the sale of a portion of one of its investment assets which it believes will provide sufficient working capital to sustain the Company’s activities until the operations of the projects currently under development in the Coal Segment and/or the China fertilizer plant are generating positive cash flow from operations. If such funds are not sufficient, and if the McElmo Dome arbitration should not be successful or is only partially successful, then the Company will need to pursue additional outside financing, which would likely involve further dilution to our shareholders.

(3)Discontinued Operations

BE/IM Segment

In 1999, the Management Committee of a joint venture 40%-owned by the Company adopted a formal plan to discontinue the business and dispose of its assets. The venture was dissolved in 2000 and the Company took over certain remaining assets and liabilities. The majority of the assets of the segment were sold prior to 2003. In 2004, the Company recorded $21,000 of earnings related to this segment, resulting from the sale of equipment in excess of the impaired value on the books. In 2005, the Company recorded earnings of $44,000 related to this segment, which included $48,000 in gains from the sale of equipment. The net loss of the segment for 2006 was $3,000. The Company expects no further material charges to earnings related to the remaining assets.

As of December 31, 2006, 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 December 31, 2006. The Company is actively pursuing opportunities to sell the segment’s few remaining assets and expects the disposition to be completed by December 31, 2007.

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 net loss of the segment for 2004 was $21,000. In 2005, the segment recorded earnings of $98,000, which included gains from the sale of equipment totaling $107,000. The net loss of the segment for 2006 was $29,000. As of December 31, 2006, the significant assets of the WS Segment were fixed assets totaling $20,000. The Company is actively pursuing the sale of the remaining assets and expects to have them sold or otherwise disposed of by December 31, 2007. The significant liabilities of the segment consisted of trade accounts payable and other accrued expenses totaling $43,000. It is anticipated that all of the liabilities of the segment will be paid prior to December 31, 2007.

(4)1993 Restructure; Convertible Preferred Stock

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

The Company’s preferred stock was mandatorily redeemable through December 31, 2002 from one-third of Beard’s consolidated net income. At January 1, 2003, the stock was no longer redeemable, and each share of Beard preferred stock became convertible into 4.26237135 (118,655) shares (pre-split) of Beard common stock. The conversion ratio is adjusted

periodically (i) for stock splits, (ii) as additional warrants or convertible notes are issued, and (iii) as additional shares of stock are credited to the accounts of the Company’s Chairman or President in the Company’s Deferred Stock Compensation Plans, in each case at a value of less than $1.29165 per share. Fractional shares will not be issued, and cash will be paid in redemption thereof. At December 31, 2006 (after giving effect to a 2-for-1 stock split effected in August of 2004) each share of Beard preferred stock was convertible into 10.65535311 (296,624)shares of Beard common stock. The preferred stockholder is entitled to one vote for each full share of common stock into which its preferred shares are convertible. In addition, preferred shares that have not been converted have preference in liquidation to the extent of their $100 per share stated value.

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

At December 31, 2006 and 2005, the convertible preferred stock was recorded at its estimated fair value of $889,000 or $31.93 per share versus its aggregate stated value of $2,784,000.

(5)Investments and Other Assets

Investments and other assets consisted of the following:

	December 31,
	2006	2005
Investment in Cibola Corporation	$              -	$       7,000
Investment in real estate limited partnerships	13,000	13,000
Other assets	45,000	16,000
	$     58,000	$     36,000

Investment in Cibola Corporation

Through November 30, 2005, the Company owned 80% of the outstanding common stock of Cibola Corporation (“Cibola”), a natural gas marketing company, but did not consolidate the assets, liabilities, revenues or expenses of Cibola because Cibola’s assets were controlled by its minority common stockholders and preferred stockholders. According to the terms of an agreement with the minority common and preferred shareholders of Cibola, the net worth of Cibola would have had to reach $50,000,000 before Beard could begin to receive its 80% share of any excess. Beard had issued a $1,439,000 note payable bearing interest at 8.25% for its common stock of Cibola. The interest charges related to this note amounted to $109,000 for the eleven months of 2005 and $119,000 for 2004. This note was due to be repaid on June 30, 2006. The stock was subject to a call option at the sole discretion of the minority common and preferred shareholders of Cibola. In recording the Company’s share of earnings according to the agreement, Beard recorded $4,803,000 and $3,496,000 as earnings from unconsolidated affiliates for the years 2005 and 2004, respectively. Since Beard management developed concerns that the net worth of Cibola would never reach the requisite amount, the Company also recorded impairments to these earnings amounts of $4,451,000 and $3,087,000 for 2005 and 2004, respectively. In 2005, Beard also wrote off $13,000 of its remaining investment in Cibola. These impairments to earnings from unconsolidated affiliates and the interest charges on the note payable to Cibola reduced the net earnings to the Company for its investment in Cibola to the actual cash distributions of $243,000, and $290,000 for the years 2005 and 2004, respectively. The minority common and preferred shareholders exercised the call option for the Company’s common stock in Cibola in November of 2005. The stock was surrendered in full payment of the note payable and Beard ceased to be a shareholder of Cibola effective December 1, 2005. The Company recorded $51,000 as its share of earnings from Cibola in 2006; primarily as the result of a negotiated settlement with the minority common and preferred shareholders regarding the termination of the agreement in 2005.

In making its determination that the Company should account for its investment in Cibola using the equity method and not consolidate Cibola Corporation, Beard personnel reviewed the pertinent accounting literature, most especially Emerging Issues Task Force (“EITF”) 96-16 and Financial Accounting Standards Board (“FASB”) No. 94, Consolidation of All Majority-Owned Subsidiaries, and noted that Cibola’s corporate governance arrangements, the comparable economic interests and investments at risk precluded consolidation of the entity. Specifically, FASB 94 indicates that “consolidation is appropriate when one entity has a controlling interest in another entity and that the usual condition for a controlling interest is ownership of a majority voting interest, but the statement acknowledges that in some circumstances control does not rest with the majority owner...these (minority) rights may be so restrictive as to call into question whether control rests with a majority owner.” EITF 96-16 lists several factors to consider in analyzing the rights of the minority shareholders and how restrictive they are in determining where “control” rests and, in the case of Cibola, these factors are determinative and conclusive. The minority common shareholders of Cibola had the right to select three of the five board members and all major decisions, including the payment of dividends, were made at the board level, not the shareholder level. All of the Cibola officers were minority shareholders. Any changes to the Cibola Articles of Incorporation or Bylaws required an affirmative vote of 85% of

the common shares outstanding - not just a simple majority and more than the 80% owned by Beard. The call option gave the minority shareholders the ability to remove Beard as a shareholder and this ability was exercised in November of 2005. The $1,439,000 note payable of Beard to Cibola for its 80% share of the common stock was non-recourse. Beard’s actual total investment in Cibola was less than $15,000. The minority shareholders’ initial investment was more than $2,000,000 – an amount at risk far greater than Beard’s. Therefore, Beard determined that the equity method of accounting for its investment in Cibola was appropriate.

The summarized financial information of Cibola as of December 31, 2004 and for the year ended December 31, 2004 is as follows:

	2004
	(audited)
Current assets	$        776,000
Current liabilities	(480,000)
Working capital	296,000
Restricted assets;
Cash and cash equivalents	3,742,000
Investment securities	11,912,000
Notes receivable and accrued interest	7,662,000
Certificates of deposit	-
Stockholders’ equity:
Common & Preferred stock	2,130,000
Contributed capital	1,474,000
Retained earnings	20,409,000
Accumulated other comprehensive income	1,039,000
Note receivable – common stock	(1,439,000)
Total stockholders’ equity	$    23,613,000
Revenue	$     7,262,000
Net earnings	$     3,813,000
Other comprehensive income – unrealized securities gains	271,000
Comprehensive income	$     4,084,000

Investment in Real Estate Limited Partnerships

The Company owns a limited partnership interest in a real estate limited partnership whose only asset consists of a tract of undeveloped land near Houston, Texas, most of which was sold in 2004. The Company recorded losses of $2,000 in 2005 and 2006 and income of $86,000 in 2004 resulting from its share of the limited partnership’s operations for those years. The Company received a distribution of $122,000 from this investment in 2004 as its share of proceeds from the sale of the portion of land sold by the partnership.

Other assets

These assets consist primarily of deposits on hand with various regulatory agencies. There were no impairments of these assets in 2004, 2005 or 2006.

(6)Notes Receivable

At December 31, 2006 and 2005, the Company had a note receivable totaling $30,000 resulting from the sale of equipment. This note was determined to be uncollectible in December of 2003 and the note was fully impaired. The $30,000 was charged against an impairment reserve. In addition, at December 31, 2006 and 2005, the Company had other notes receivable totaling $13,000 and $21,000, respectively, from the sale of equipment.

(7)Property, Plant and Equipment

Property, plant and equipment consisted of the following:

	December 31,
	2006	2005
Oil and gas leases	$        84,000	$       124,000
Proved carbon dioxide properties	1,414,000	1,324,000
Buildings and land improvements	49,000	149,000
Machinery and equipment	1,064,000	2,893,000
Other	314,000	289,000
	$   2,925,000	$   4,779,000

The Company incurred $136,000, $79,000, and $71,000, of depreciation expense for 2006, 2005, and 2004, respectively.

(8)Intangible Assets

Intangible assets are summarized as follows:

	December 31,
	2006	2005
Debt issuance costs	$     460,000	$     444,000
Patent costs	12,000	12,000
Other	10,000	67,000
	$     482,000	$     523,000

Accumulated amortization is summarized as follows:

	December 31,
	2006	2005
Debt issuance costs	$     304,000	$     236,000
Patent costs	2,000	2,000
Other	6,000	8,000
	$     312,000	$     246,000

During 2005, the Company capitalized $228,000 of costs associated with the issuance of the 12% Convertible Subordinated Notes due August 31, 2009, the 12% Convertible Subordinated Notes due February 15, 2010 and an $850,000 3.83% Note due February 14, 2010. The costs of the 12% notes due in 2009 will be fully amortized by the end of August, 2009; the costs of the 12% notes due in 2010 and the 3.83% note due also in February, 2010,are being amortized over five years and will be fully amortized by the first quarter of 2010, all as a result of such notes having been paid off.

During 2006, the Company capitalized $16,000 of costs associated with the issuance of the 12% Convertible Subordinated Series A and Series B Notes due August 30, 2008 and November 30, 2008, respectively. The costs of the 12% notes due in 2008 will be fully amortized by the end of November, 2008

The Company incurred $78,000, $57,000, and $21,000 of amortization expense for 2006, 2005 and 2004, respectively. In addition, in 2005 the Company wrote off another $51,000 of previously unamortized costs associated with an unsuccessful effort to obtain funding for either or both of the China or Coal Segments. If no capital assets are added, amortization expense is expected to be as follows.

Year	Amount
2007	$     55,000
2008	51,000
2009	46,000
2010	5,000
	$    157,000

(9)Long-term Debt

Long-term debt is summarized as follows:

	December 31,
	2006	2005
Coal (a)	$       38,000	$   1,149,000
10% Participating Notes due November, 2006 (b) (g) (h)	-	520,000
12% Convertible Subordinated Notes due February, 2010 (b) (c)	2,100,000	2,100,000
12% Convertible Subordinated Notes due August, 2009 (d)	1,328,000	1,135,000
3.83% Loan due February, 2010 (e)	850,000	850,000
6% Loan due January, 2008 (e)	397,000	-
12% Loan due May, 2007 (h)	200,000	-
Revolving Credit Facility (i)	260,000	-
Series A 12% Convertible Subordinated Notes due August 30, 2008 (g)	83,000	-
Series B 12% Convertible Subordinated Notes due November 30, 2008 (g)	568,000	-
Loans including accrued interest – affiliated entities (f)	3,173,000	2,915,000
	8,997,000	8,669,000
Less current maturities	471,000	1,631,000
Long-term debt	$   8,526,000	$   7,038,000

(a) At December 31, 2006, the Company’s Coal Segment had two notes payable with total balances due of $38,000. The notes bear interest at zero% and 8.5%, require monthly payments of principal and interest totaling $1,100 and mature in 2009 and 2010, respectively. The notes are secured by automobiles with approximate book value of $37,000 at December 31, 2006.

At December 31, 2005, the Coal Segment also had a $1,100,000 note payable to a related party for the construction the Pinnacle Project in West Virginia (see Note 2). The note bore interest at Wall Street Prime plus 2% and was due July 1, 2006. The note was subject to an agreement (the “February 8 Agreement”) between Beard Technologies, Inc. (“BTI”) and Beard Pinnacle, LLC, (“BPLLC”), the operator of the plant, and PinnOak Resources, LLC (“PinnOak”), a partner in BPLLC and the owner of the note. There were $11,516,000 of additions in 2006 to the note before BPLLC was deconsolidated in October, 2006. See Note 17 below for additional details. At December 31, 2005, the Company had accrued interest on this note totaling $19,000 which had been capitalized as a cost of the Project.

(b) In June of 2004, the Company completed the sale of $1,200,000 of its 10% Participating Notes (the “10% Notes”) raising a net of $1,163,000 of working capital after reductions for expenses. The 10% Notes were accompanied by warrants to purchase a total of 480,000 shares of Beard Company stock at exercise prices ranging from $0.135 to $0.23 per share. The number and exercise prices of the warrants have been adjusted to reflect the 2-for-1 stock split effected as of August 6, 2004. The 10% Notes bore interest at an annual rate equal to the Wall Street Journal Prime Rate plus 4%, with a floor of 10% and were to mature on November 30, 2006. The Company paid interest only until November 30, 2004. The Company then began amortizing the 10% Notes with equal payments of principal and interest over the ensuing eight quarters. The note holders also were to collectively receive at maturity a bonus/production payment (the “Production Payment”) equivalent to approximately $1 per ton for the coal expected to be recovered during the term of the 10% Notes from a coal project described in the offering document. The total amount of the Production Payment was expected to equal $568,000. The amount of the Production Payment accrued was $366,000 on December 31, 2005. As a result of the estimated Production Payment, the 10% Notes had an effective interest rate of 29%. Related entities purchased a total of $700,000 of these notes. One of the related parties, which purchased $500,000 of the notes, borrowed the funds for the purchase from an unrelated third party which received a 15% interest rate on its loan and also received the 200,000 warrants which would otherwise have gone to the related party. The unrelated third party, which held $388,818 of the 10% Notes, participated in the exchange. As further consideration, the third party was also granted a security interest in the Company’s McElmo Dome property that was superior to the lien held by the related party. (See footnote (f) below). The related party purchased the notes for the Company’s benefit in order to facilitate the sale of the remainder of the offering, which was subsequently fully subscribed. The Company prepaid $280,000 of the 10% Notes, along with accrued interest totaling $14,000, on February 10, 2005. None of the note to the related party was prepaid. In June and July, 2005, certain note holders holding $624,000 of the notes exchanged their 10% Notes for a like amount of the Company’s 12% Convertible Subordinated Notes due August 31, 2009. In October of 2006, all of the original note holders exchanged their right to receive the Production Payment (a total of $568,000) for an equal amount of the Company’s Series B 12% Convertible Subordinated Notes due November 30, 2008. See (g) below. On November 30, 2006, the remaining outstanding $42,000 of the 10% Participating Notes were repaid, along with accrued interest.

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

(d) In June of 2005, the Company arranged for an investment banking firm to commence a private debt placement of up to $2,004,102 of its 12% Convertible Subordinated Notes (the “2009 Notes”) due August 31, 2009. As part of the offering, holders of the remaining $804,102 of 10% Notes due November 30, 2006 were given the right to exchange such notes for the 2009 Notes. Holders of $624,000 of the 10% Notes did exchange their notes and the Company sold an additional $511,000 of the 2009 Notes bringing the total of the 2009 Notes outstanding to $1,135,000 at December 31, 2005. The Company began paying interest only on a semi-annual basis effective February 28, 2006. Such payments will be made until the August 31, 2009 maturity date, at which time the Company will make a balloon payment of the outstanding principal balance plus accrued and unpaid interest. The 2009 Notes are convertible into shares of the Company’s common stock. The conversion price for the 2009 Notes was determined by the weighted average price of Beard common stock during the 90-day period preceding the date each subscription was received by the Company, subject to the proviso that all notes issued in connection with subscriptions received on or before July 15, 2005, would have a conversion price of $2.25. The Company has the right to force conversion of the 2009 Notes after February 28, 2007 if the weighted average sales price of its common stock has been more than two times the conversion price for more than 60 consecutive trading days. These notes are convertible into 504,444 shares of the Company’s common stock. The unrelated third party which purchased $500,000 of the 10% Notes---see footnote (b) above---was allowed to retain its security interest in the McElmo Dome collateral to the extent of $388,818 (the remaining principal balance of such notes). In February of 2006, the Company sold another $193,000 of the 2009 Notes. These notes are convertible into 145,415 shares of the Company’s common stock.

(e) On February 14, 2005, the Company borrowed $850,000 from its 50%-partner in the U.S limited liability company which owns Xianghe BH Fertilizer Co., Ltd. (“XBH”), the owner and operator of the China Segment’s fertilizer plant. XBH was formed in and operates solely in China. The note bears interest at 3.83%, which was the Applicable Federal Mid Term rate on the date of the note. Interest is payable annually commencing on February 14, 2006 and will be paid until the maturity of the note, February 14, 2010. At December 31, 2006, the Company had accrued interest totaling $29,000 on this unsecured note. During 2006, the Company borrowed an additional $397,000 from its 50% partner in the U.S. limited liability company which owns XBH. The note bears interest at 6%, payable semi-annually, with the principal balance due at maturity on January 13, 2008. At December 31, 2006, the Company had accrued interest totaling $12,000 on this unsecured note.

(f) At December 31, 2005, the Company had borrowed $2,783,000 from an affiliated entity of the Chairman of the Company under terms of a note that bears interest at 10%. Such borrowings are subject to a Deed of Trust, Assignment of Production, Security Agreement and Financing Statement recorded against the Company’s working and overriding royalty interests in the McElmo Dome Field. At December 31, 2006, the Company owed $391,000 of accrued interest on this note. The note, which was due to be repaid on April 1, 2007, has been extended to April 1, 2008.

(g) In October of 2006, the Company arranged for an investment banking firm to commence a private debt placement of up to $700,000 of its Series A 12% Convertible Subordinated Notes (the “Series A Notes”) due August 30, 2008 and up to $568,000 of its Series B 12% Convertible Subordinated Notes (the “Series B Notes”) due November 30, 2008. As part of the offering, holders of the Company’s outstanding Production Payment totaling $568,000 associated with the 10% Participating Notes due November 30, 2006 were given the opportunity to tender their Production Payment in exchange for a like amount of the Series B Notes and all such holders elected to do so. Holders of the Production Payment that exchanged their Production Payment and holders of the Company’s other outstanding convertible subordinated debt were given the right to purchase Series A Notes. Under these terms, the Company placed an additional $83,000 of the Series A Notes. The Series A and B Notes bear interest at an annual rate of 12%. The initial payment of interest on the Series A Notes was due on February 28, 2007 and is payable semi-annually thereafter. The initial payment of interest on the

Series B Notes was on November 30, 2006 and is also payable semi-annually thereafter. Only interest will be paid until the respective maturity dates of the Series A and B Notes, which are convertible into shares of the Company’s common stock. The conversion price for the Notes is determined by the weighted average closing price of Beard common stock during the 90-day period preceding the date each subscription was received by the Company with a floor of $1.00 per share, subject to the proviso that all notes issued in connection with subscriptions received on or before October 19, 2006, would have a conversion price of $1.00. The Company has the right to force conversion of the Series A and B Notes after March 31, 2008 if the weighted average closing sales price of its common stock has been more than two times the conversion price for more than 40 consecutive trading days. These notes are convertible into 651,000 shares of the Company’s common stock.

(h) On May 22, 2006, the Company borrowed $200,000 from a third party. The note bears interest at 12% and the principal and all accrued interest is due to be repaid May 22, 2007. Such borrowing is subject to a Deed of Trust, Assignment of Production, Security Agreement and Financing Statement recorded against the Company’s working and overriding royalty interests in the McElmo Dome property, which is superior to both the lien held by the Chairman’s affiliate referred to in (b) above and by the $388,818 prior lien already held by the third party referred to in (d) above. In addition and in order to obtain this financing, the Company issued the lender 10,000 shares of its common stock which had a fair market value of $1.05 per share on the date of issuance. At December 31, 2006, the Company had accrued interest of $15,000 related to this note.

(i) On March 28, 2006, the Company obtained a $350,000 revolving credit facility from a local bank. Terms of the facility provide that on April 30, 2006, and on the last day of each month thereafter, the principal amount of the note is to be reduced by $10,000. Such borrowing is subject to a Deed of Trust, Assignment of Production, Security Agreement and Financing Statement recorded against the Company’s working and overriding royalty interests in the Yuma County, Colorado gas wells. The Company borrowed a maximum of $290,000 under the terms of this facility, and the balance outstanding at December 31, 2006 was $260,000. The note bears interest at the Wall Street Journal Prime Rate plus 1.5% and is payable monthly. The note matures on September 30, 2007.

At December 31, 2006, the annual maturities of long-term debt were $471,000 in 2007, $4,233,000 in 2008, $1,337,000 in 2009 and, $2,956,000 in 2010.

The Company incurred $725,000, $713,000 and $455,000 of interest expense relating to debt to related parties in 2006, 2005 and 2004, respectively. The Company paid $384,000, $464,000 and $189,000 of those amounts for 2006, 2005 and 2004, respectively.

The weighted average interest rates for the Company’s short-term borrowings were 11% and 9% as of December 31, 2006 and 2005, respectively.

The above financings were further supplemented in 2007 by (i) a $150,000 short-term loan from a shareholder of a former affiliate, (ii) $39,000 of short-term loans from our Note holders, and (iii) $105,000 of additional 2010 Notes sold to a 2010 Note holder.

(10)Operating Leases

Noncancelable operating leases relate principally to office space, vehicles and operating equipment. Gross future minimum payments under such leases as of December 31, 2006 are summarized as follows:

Year	Amount
2007	$      238,000
2008	130,000
2009	88,000
	$      456,000

Rent expense under operating leases aggregated $323,000, $296,000, and $281,000, in 2006, 2005, and 2004, respectively.

(11)Income Taxes

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

	Year ended December 31,
	2006	2005	2004
Continuing operations	$          (17,000)	$          35,000	$           118,000

Discontinued operations	-	-	-
	$          (17,000)	$          35,000	$           118,000

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

	Year ended December 31,
	2006	2005	2004
U. S. federal	$         (17,000)	$          35,000	$         118,000
Various states	-	-	-
	$         (17,000)	$          35,000	$         118,000

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

	Year ended December 31,
	2006	2004	2004
Computed U. S. federal statutory expense (benefit)	$          (561,000)	$          (815,000)	$          401,000
Federal alternative minimum tax (benefit)	(17,000)	35,000	118,000
Increase (decrease) in the valuation allowance for deferred tax assets	561,000	815,000	(401,000)
State income tax (benefit)	-	-	-
	$          (17,000)	$             35,000	$          118,000

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

	December 31,
	2006	2005
Deferred tax assets – tax effect of:
Net operating loss carryforwards	$    16,781,000	$    17,073,000
Statutory depletion and investment tax credit carryforwards	1,275,000	1,275,000
Other, principally investments and property, plant and equipment	356,000	328,000
Total gross deferred tax assets	$    18,412,000	$    18,676,000
Less valuation allowance	(18,371,000)	(18,629,000)
Deferred tax liabilities	(41,000)	(47,000)
Net deferred tax asset/liability	$                    -	$                    -

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

At December 31, 2006, the Company had federal regular tax operating loss carryforwards (the “NOL’s”) of approximately $44.1 million and tax depletion carryforwards of approximately $3.45 million. $41.1 million of the NOL’s will expire from 2007 to 2008 and $3 million will expire from 2021 to 2026. These carryforwards may be limited if the Company undergoes a significant ownership change.

(12)Deferred Compensation Plans

The Company has adopted a series of deferred compensation plans for certain key executives and the board of directors which provide for payments in the form of the Company’s common stock upon (i) the death, disability, retirement or termination of the participant or (ii) termination of the plans. Under such plans, the number of shares of stock credited to each participant’s

account is equal to the amount of compensation deferred divided by the fair market value of the stock on the deferral date. 700,000 shares of stock were issued effective January 31, 2003, upon termination of the initial plan adopted in 1996. 300,000 shares were issued effective September 30, 2003, upon termination of a second plan. 800,000 shares of stock were authorized for issuance under the third plan (the “2003-2 Plan”), adopted in September of 2003 and amended in February of 2004. As of December 31, 2004, there were 712,716 shares reserved for distribution under the 2003-2 Plan and another85,095 shares werereserved for distribution in 2005 before the plan’s termination on November 17, 2005. A total of 217,653 shares from the 2003-2 Plan were distributed to the participants in 2005, along with an immaterial cash payment for fractional shares. Another 98,612 shares from the 2003-2 Plan were distributed to the participants in 2006. The Company will distribute the remaining 481,543 shares in the following years, according to the binding elections of the participants:

Year(s)	Total Shares
2007-2009 (66,135 shares per year)	198,405
2010-2011 (66,134 shares per year)	132,268
2012	66,132
2013-2014 (42,369 shares per year)	84,738
Total	481,543

The Company adopted a fourth plan, the 2005 Deferred Stock Compensation Plan, on November 17, 2005 and 100,000 total shares of stock are authorized for issuance under this plan. On April 27, 2006 the authorized shares were increased to 200,000. As of December 31, 2006, 144,838 shares were reserved for distribution under this plan, none of which have been issued to date.

The weighted-average fair values of stock units issued under the plans were $1.177, $1.887, and $0.371 for 2006, 2005 and 2004, respectively.

(13)Employee Benefit Plan

Employees of the Company participate in either of two defined contribution plans with features under Section 401(k) of the Internal Revenue Code. The purpose of the Plans is to provide retirement, disability and death benefits for all full-time employees of the Company who meet certain service requirements. One of the plans allows voluntary "savings" contributions up to a maximum of 50%, and the Company matches 100% of each employee’s contribution up to 5% of such employee's compensation. The second plan covers those employees in the Coal Segment and allows voluntary “savings” contributions up to a maximum of 40%. Under this plan, the Company contributes $1.00 per hour of service performed for hourly employees and up to 6% of compensation for salaried employees regardless of the employees’ contribution. The Company’s contributions under both plans are limited to the maximum amount that can be deducted for income tax purposes. Benefits payable under the plans are limited to the amount of plan assets allocable to the account of each plan participant. The Company retains the right to modify, amend or terminate the plans at any time. Effective July 16, 2002 the Company notified all participants in the two plans that it was suspending the 100% match until further notice. In November 2006 the Company, according to the terms of a union contract, notified the union participants employed at the Coal Segment’s coal fines recovery facility in West Virginia that it had re-instituted the 100% match (effective with each employee’s date of hire), and $9,000 of contributions were made to the plan during the remainder of the year. No other contributions were made to the plans in 2004, 2005, or 2006.

(14)Commitments and Contingencies

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

(15)Business Segment Information

The Company manages its business by products and services and by geographic location (by country). The Company evaluates its operating segments’ performance based on earnings or loss from operations before income taxes. The Company had four reportable segments in 2005 and 2004 and five reportable segments in 2006. The segments are Coal, Carbon Dioxide, China, and e-Commerce, with the new Oil & Gas Segment added as a reportable segment in 2006.

The Coal Segment is in the business of operating coal fines reclamation facilities in the U.S. and provides slurry pond core drilling services, fine coal laboratory analytical services and consulting services. The CO2 Segment consists of the production of CO2 gas. The China Segment manufactures fertilizer in China. The e-Commerce Segment consists of a 71%-owned subsidiary whose current strategy is to develop business opportunities to leverage a subsidiary’s intellectual property

portfolio of Internet payment methods and security technologies. The Oil & Gas Segment is in the business of producing of oil and gas.

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

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

General corporate assets and expenses are not allocated to any of the Company’s operating segments; therefore, they are included as a reconciling item to consolidated total assets and loss from continuing operations before income taxes reported in the Company’s accompanying financial statements.

	Coal	Carbon Dioxide	China	e-Commerce	Oil & Gas	Totals
2006
Revenues from external customers	$     25	$ 1,540	$   368	$       5	$    147	$  2,085
Interest income	-	-	-	-	2	2
Interest expense	2	-	45	-	-	47
Depreciation, depletion and    amortization	40	46	35	-	15	136
Segment profit (loss)	(120)	1,324	(923)	(95)	89	275
Segment assets	301	557	769	18	343	1,988
Expenditures for segment assets	25	92	30	3	-	150
2005
Revenues from external customers	$     52	$ 1,172	$     29	$      31	$     95	$  1,379
Interest income	-	-	1	-	1	2
Interest expense	19	-	24	-	-	43
Depreciation, depletion and    amortization	9	42	13	3	5	72
Segment profit (loss)	(783)	949	(787)	(139)	12	(748)
Segment assets	1,816	522	1,068	13	401	3,820
Expenditures for segment assets	1,991	34	587	-	277	2,889
2004
Revenues from external customers	$    189	$    754	$        -	$      29	$       -	$    972
Interest income	-	-	-	-	-	-
Interest expense	-	-	-	1	-	1
Depreciation, depletion and    amortization	17	40	1	6	2	66
Segment profit (loss)	(682)	585	(549)	(124)	(20)	(790)
Segment assets	259	485	31	4	58	837
Expenditures for segment assets	216	35	1	1	-	253

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

	2006	2005	2004
Total revenues for reportable segments	$       2,085	$       1,379	$         972
Revenues from corporate activities not allocated to segments	-	-	-
Total consolidated revenues	$       2,085	$       1,379	$         972

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

	2006	2005	2004
Total interest expense for reportable segments	$          47	$          43	$             1
Interest expense from corporate activities not allocated to segments	957	956	693

Total consolidated interest expense $     1,004 $        999 $         694

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

	2006	2005	2004
Total depreciation, depletion and amortization for reportable segments	$136	$67	$64
Corporate depreciation and amortization not allocated to segments	78	120	28
Total consolidated depreciation, depletion and amortization	$214	$187	$92

Reconciliation of total reportable segment profit (loss) to consolidated loss from continuing operations before income taxes is

as follows (in thousands):

	2006	2005	2004
Total loss for reportable segments	$275	$(748)	$(790)
Net corporate income (costs) not allocated to segments	(1,814)	(1,519)	1,845
Total consolidated earnings (loss) from continuing operations	$(1,539)	$(2,267)	$1,055

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

	2006	2005
Total assets for reportable segments	$1,988	$3,820
Assets of discontinued operations	20	20
Corporate assets not allocated to segments	414	624
Total consolidated assets	$2,422	$4,464

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

	2006	2005
Total expenditures for assets for reportable Segments	$          150	$          2,889
Corporate expenditures not allocated to segments	19	-
Total expenditures for assets	$          169	$          2,889

All of 2004 segment revenues were derived from customers in the United States of America. All of the China Segment’s revenues for 2005 and 2006 totaling $29,000 and $368,000, respectively, were derived from customers in China. Certain long-lived assets with recorded values approximating $372,000 at December 31, 2006 were located in China. All remaining segment assets are located in the United States of America.

During the year 2006, two customers accounted for 91% of the Coal Segment’s and 1% of the Company’s revenues. During the year 2005, three customers accounted for 87% of the Coal Segment’s and 4% of the Company’s revenues. For the year 2004, one customer accounted for 71% of the Coal Segment’s and 14% of the Company’s revenues. Six customers accounted for 65% of the China Segment’s revenues and 12% of the Company’s revenues for 2006. For 2005, five customers accounted for 66% of the China Segment’s revenues and 1% of the Company’s revenues. All of the e-Commerce Segment’s 2004, 2005 and 2006 revenues were derived from one customer. The Company’s CO2 revenues are received from two operators in the

CO2 Segment who market the CO2 gas to numerous end users on behalf of the interest owners who elect to participate in such sales. During 2006, 2005 and 2004, sales by these two operators accounted for 74%, 85%, and 78%, respectively, of the Company’s segment revenues and all of the Carbon Dioxide Segment’s revenues. The Company’s oil and gas revenues are received from two operators in the Oil & Gas Segment who market the oil and natural gas to numerous end users on behalf of the interest owners who elect to participate in such sales. During 2006, 2005 and 2004, sales by these two operators accounted for 7%, 7% and 0%, respectively, of the Company’s segment revenues and all of the Oil & Gas Segment’s revenues.

(16) Quarterly Financial Data (unaudited)

	Three Months Ended
	March 31, 2006	June 30, 2006	September 30, 2006	December 31, 2006
	(in thousands except per share data)
Revenues	$     482	$     509	$     571	$     523
Operating loss	(422)	(423)	(136)	(301)
Earnings (loss) from continuing operations	(605)	(667)	(374)	124
Earnings (loss) from discontinued operations	(28)	2	(1)	(5)
Net earnings (loss)	(633)	(665)	(375)	119
Basic earnings (loss) per share	(0.11)	(0.12)	(0.07)	0.03
Diluted earnings (loss) per share	(0.11)	(0.12)	(0.07)	0.03

	Three Months Ended
	March 31, 2005	June 30, 2005	September 30, 2005	December 31, 2005
	(in thousands except per share data)
Revenues	$     243	$     327	$     344	$     465
Operating loss	(380)	(300)	(429)	(608)
Earnings (loss) from continuing operations	(463)	(437)	(568)	(834)
Earnings (loss) from discontinued operations	88	62	(6)	(2)
Net earnings (loss)	(375)	(375)	(574)	(836)
Basic earnings (loss) per share	(0.07)	(0.06)	(0.10)	(0.14)
Diluted earnings (loss) per share	(0.07)	(0.06)	(0.10)	(0.14)

The quarterly information presented above has been restated to conform to the final year-end 2006 presentation.

The Company recorded no economic impairments in the fourth quarter of 2004, 2005 or 2006.

(17)Subsequent events

Loans from and Agreement with PinnOak Resources

Because there have been cost over-runs of more than $3,000.000 on the Pinnacle Project, neither the Company nor PinnOak has been able to secure an alternative source of financing, and PinnOak’s loans have become the permanent source of financing for the Project. Because of the low rate of production achieved during the ramp-up period due to initial start-up problems with the plant, the Company has agreed to terminate most of the existing agreements governing the Project and give up its remaining 25% interest therein while remaining as the contract operator for the Project. Some of the details of this agreement are still being negotiated but the Company anticipates that the agreement will be effective in April, 2007. The Company remains confident the Project will be economic despite the cost over-runs and the low price being paid for the coal produced from the Project. The Project will be highly economic to the pond owner. Upon execution of the new agreement,

BTI will be relieved of its guaranty of all loans made by PinnOak (totaling more than $11,350,000) which is secured by BTI’s remaining 25% interest in the Project.

China Fertilizer Plant. As of March 31, 2007, the production from the Company’s fertilizer manufacturing plant near Beijing has lagged significantly behind its original projections. The plant has not demonstrated the ability to market sufficient product to reach its projected breakeven point, much less become profitable. Several new marketing initiatives have been undertaken, but all have been unsuccessful. The Company has engaged an investment banking firm to explore the alternatives available to it including, but not limited to, sale of the plant, merger of the operation with a competitor, or bringing in a new partner. The Company expects to have a recommendation concerning its best option before the end of the second quarter. Because of the delay in reaching the Company’s targeted production rate, the plant owners have had to loan an additional US$166,000 in the first quarter of 2007 to provide the additional working capital needed until the plant can generate sufficient funds to sustain its own operations.

Additional financing. During the first quarter of 2007, the Company supplemented the financings in detailed in Note (9) by (i) a $150,000 short-term loan from a shareholder of a former affiliate, (ii) $39,000 of short-term loans from our Note holders, and (iii) $105,000 of additional 2010 Notes sold to a 2010 Note holder.

(18)Impact of Recently Issued Accounting Pronouncements

In February 2006, the Financial Accounting Standards Board (“FASB”) issued Statement No. 155, “Accounting for Certain Hybrid Financial Instruments” (“SFAS No. 155”), which amends FASB Statements No. 133 and 140. This Statement permits fair value remeasurement for any hybrid financial instrument containing an embedded derivative that would otherwise require bifurcation, and broadens a Qualified Special Purpose Entity’s (“QSPE”) permitted holdings to include passive derivative financial instruments that pertain to other derivative financial instruments. This Statement is effective for all financial instruments acquired, issued or subject to a remeasurement event occurring after the beginning of an entity’s first fiscal year beginning after September 15, 2006. This Statement has no current applicability to the Company’s financial statements. Management plans to adopt this Statement on January 1, 2007 and it is anticipated that the initial adoption of this Statement will not have a material impact on the Company’s financial position, results of operations, or cash flows.

In June 2006, the FASB issued Interpretation 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”), an interpretation of FASB Statement No. 109, “Accounting for Income Taxes.” FIN 48 clarifies the accounting and reporting for income taxes where the interpretation of the law is uncertain. FIN 48 prescribes a comprehensive model for the financial statement recognition, measurement, presentation and disclosure of income tax uncertainties with respect to positions taken or expected to be taken in income tax returns. FIN 48 is effective for fiscal years beginning after December 15, 2006. This Statement has no current applicability to the Company’s financial statements. Management plans to adopt this Statement on January 1, 2007 and it is anticipated that the initial adoption of FIN 48 will not have a material impact on the Company’s financial position, results of operations, or cash flows.

In September 2006, the FASB issued Statement No. 157, “Fair Value Measurements” (“SFAS No. 157”). SFAS No. 157 addresses how companies should measure fair value when they are required to use a fair value measure for recognition or disclosure purposes under generally accepted accounting principles. SFAS No. 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007, with earlier adoption permitted. Management is assessing the impact of the adoption of this Statement.

In September 2006, the Securities Exchange Commission issued Staff Accounting Bulletin No. 108 (“SFAS No. 108”). SAB No. 108 addresses how the effects of prior year uncorrected misstatements should be considered when quantifying misstatements in current year financial statements. SAB No. 108 requires companies to quantify misstatements using a balance sheet and income statement approach and to evaluate whether either approach results in quantifying an error that is material in light of relevant quantitative and qualitative factors. When the effect of initial adoption is material, companies will record the effect as cumulative effect adjustment to beginning of year retained earnings and disclose the nature and amount of each individual error being corrected in the cumulative adjustment. SAB No. 108 is effective for years ending after November 15, 2006. The Company adopted this staff accounting bulletin for 2006 and its adoption did not have a material impact on the Company’s financial position, results of operations, or cash flows.

In February 2007, the FASB issued Statement No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities – Including an amendment of FASB Statement No. 115” (“SFAS No. 158”). SFAS No. 158 permits entities to choose to measure many financial instruments and certain other items at fair value. It requires companies to provide information helping financial statement users to understand the effect of a company’s choice to use the fair value on its earnings, as well as to display the fair value of the assets and liabilities a company has chosen to use fair value for on the face of the balance sheet. Additionally, SFAS No. 158 establishes presentation and disclosure requirements designed to simplify comparisons between companies that choose different measurement attributes for similar types of assets and liabilities. The Statement is effective as of the beginning of an entity’s first fiscal year year beginning after November 15, 2007. Management is assessing the impact of this statement.

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

No matters require disclosure here.

Item 9A.Controls and Procedures.

We, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, have evaluated the effectiveness of the design and operation of our disclosure controls and procedures. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures (as defined in Rule a-15(f) under the Exchange Act) were effective as of December 31, 2006 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.

There were no changes in our internal control over financial reporting during our fiscal fourth quarter ended December 31, 2006, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B.Other Information.

There was no information required to be disclosed in a report on Form 8-K during the fourth quarter ended December 31, 2006, that was not reported.

PART III

Item 10.Directors, Executive Officers and Corporate Governance.

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

The information regarding our executive officers has been furnished in a separate item captioned “Executive Officers and Significant Employees of the Registrant” and included as Item 4a in Part I of this report at pages 25 through 27.

Item 11.Executive Compensation.

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

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

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

Item 13.Certain Relationships and Related Transactions, and Director Independence.

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

Item 14.Principal Accounting Fees and Services.

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

PART IV

Item 15.Exhibits and Financial Statement Schedules.

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

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

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

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

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

10.1*	Amendment No. One to The Beard Company 1993 Stock Option Plan dated August 27, 1993, as amended June 4, 1998. (The Amended Plan supersedes the original Plan adopted on August 27, 1993. This Exhibit has previously been filed as Exhibit A, filed on April 30, 1998 to Registrant’s Proxy Statement dated April 30, 1998, and same is incorporated herein by reference).
10.2*	The Beard Company 2005 Stock Option Plan adopted on June 9, 2005. (This Exhibit has been previously filed as Exhibit 10.3 to Registrant’s Form 10-Q for the period ended June 30, 2005, filed on August 19, 2005, and same is incorporated herein by reference).
10.3*	The Beard Company 2006 Stock Option Plan adopted on May 1, 2006. (This Exhibit has been previously filed as Exhibit C to Registrant’s Proxy Statement filed on May 1, 2006, and same is incorporated herein by reference).
10.4*	Form of Indemnification Agreement dated December 15, 1994, by and between Registrant and eight directors. (This Exhibit has been previously filed as Exhibit 10(b) to Registrant’s Form 10-K for the period ended December 31, 2000, filed on April 2, 2001, and same is incorporated herein by reference).
10.5*	Amendment No. One to The Beard Company 2003-2 Deferred Stock Compensation Plan as amended effective February 13, 2004. (This Amendment, which supersedes the original Plan adopted on September 30, 2003, has been previously filed as Exhibit 10.5 to Registrant’s Form 10-K for the period ended December 31, 2003, filed on March 30, 2004, and same is incorporated herein by reference).
10.6*	Amendment No. One to The Beard Company 2005 Deferred Stock Compensation Plan as amended effective April 27, 2006. (This Amendment, which supersedes the original Plan adopted on November 17, 2005, has been previously filed as Exhibit B to Registrant’s Proxy Statement filed on May 1, 2006, and same is incorporated herein by reference).
10.7	Notice letter by and among the Shareholders of Cibola Corporation and Registrant dated November 14, 2005. (This Exhibit has been previously filed as Exhibit 99 to the Registrant’s Form 8-K, Current Report, filed on December 1, 2005, and same is incorporated herein by reference).
10.8	Amendment to Restated and Amended Letter Loan Agreement by and between Registrant and The William M. Beard and Lu Beard 1988 Charitable Unitrust (the”Unitrust”) dated June 25, 2004. (This Exhibit has been previously filed as Exhibit 10.11 to Registrant’s Form 10-K for the period ended December 31, 2004, filed on March 31, 2005, and same is incorporated herein by reference).
10.9	Restated and Amended Letter Loan Agreement by and between Registrant and the Unitrust dated March 3, 2006. (This Exhibit, which superseded all prior Agreements between the parties (except for the third paragraph of Exhibit 10.8), has been previously filed as Exhibit 10.1 to Registrant’s Form 10-Q for the period ended March 31, 2006, filed on May 22, 2006, and same is incorporated herein by reference).

10.10	Second Replacement Renewal and Extension Promissory Note from Registrant to the Trustees of the Unitrust dated effective February 14, 2005. (This Exhibit, which superseded all prior Notes between the parties, has been previously filed as Exhibit 10.2 to Registrant’s Form 10-Q for the period ended March 31, 2006, filed on May 22, 2006, and same is incorporated herein by reference).
10.11	Form of 2002 Warrant. (This Exhibit has been previously filed as Exhibit 10(d) to Registrant’s Form 10-Q for the period ended June 30, 2002, and same is incorporated herein by reference).
10.12	Form of 2003 Warrant. (This Exhibit has been previously filed as Exhibit 10(c) to Registrant’s Form 10-Q for the period ended March 31, 2003, filed on May 15, 2003, and same is incorporated herein by reference).
10.13	Form of Deed of Trust, Assignment of Production, Security Agreement and Financing Statement dated as of February 21, 2003. (This Exhibit has been previously filed as Exhibit 10(d) to Registrant’s Form 10-Q for the period ended March 31, 2003, filed on May 15, 2003, and same is incorporated herein by reference).
10.14	Subordination and Nominee Agreement dated February 21, 2003. (This Exhibit has been previously filed as Exhibit 10.26 to Registrant’s Form 10-K for the period ended December 31, 2003, filed on March 30, 2004, and same is incorporated herein by reference).
10.15	Form of 10% Participating Note due November 30, 2006. (This Exhibit has been previously filed as Exhibit 10.1 to Registrant’s Form 10-Q for the period ended June 30, 2004, filed on August 16, 2004, and same is incorporated herein by reference).
10.16	Form of 2004 Warrant. (This Exhibit has been previously filed as Exhibit 10.2 to Registrant’s Form 10-Q for the period ended June 30, 2004, filed on August 16, 2004, and same is incorporated herein by reference).
10.17	Form of 2004 Production Payment. (This Exhibit has been previously filed as Exhibit 10.3 to Registrant’s Form 10-Q for the period ended June 30, 2004, filed on August 16, 2004, and same is incorporated herein by reference).
10.18	Form of Deed of Trust, Assignment of Production, Security Agreement and Financing Statement by and between Registrant and McElmo Dome Nominee, LLC, dated as of May 21, 2004. (This Exhibit has been previously filed as Exhibit 10.25 to Registrant’s Form 10-K for the period ended December 31, 2004, filed on March 31, 2005, and same is incorporated herein by reference).
10.19	Subordination and Nominee Agreement dated May 21, 2004, by and between the Unitrust and Boatright Family, L.L.C. (“Boatright”) (This Exhibit has been previously filed as Exhibit 10.27 to Registrant’s Form 10-K for the period ended December 31, 2004, filed on March 31, 2005, and same is incorporated herein by reference).
10.20	Form of 12% Convertible Subordinated Promissory Note due February 15, 2010. (This Exhibit has been previously filed as Exhibit 10.1 to Registrant’s Form 10-Q for the period ended March 31, 2005, filed on May 16, 2005, and same is incorporated herein by reference).

10.21	Security and Collateral Agent Agreement, by and among Registrant, InvesTrust, N.A. and Beard Technologies, Inc., dated as of January 26, 2005. (This Exhibit has been previously filed as Exhibit 10.2 to Registrant’s Form 10-Q for the period ended March 31, 2005, filed on May 16, 2005, and same is incorporated herein by reference).
10.22	Form of 2005 Warrant. (This Exhibit has been previously filed as Exhibit 10.3 to Registrant’s Form 10-Q for the period ended March 31, 2005, filed on May 16, 2005, and same is incorporated herein by reference).
10.23	Letter Agreement by and between 7HBF, Ltd. (“7HBF”) and Registrant dated February 7, 2005. (This Exhibit has been previously filed as Exhibit 10.4 to Registrant’s Form 10-Q for the period ended March 31, 2005, filed on May 16, 2005, and same is incorporated herein by reference).
10.24	Unsecured Promissory Note from BEE/7HBF, LLC to 7HBF dated February 14, 2005. (This Exhibit has been previously filed as Exhibit 10.5 to Registrant’s Form 10-Q for the period ended March 31, 2005, filed on May 16, 2005, and same is incorporated herein by reference).
10.25	Beard Boatright 12% Convertible Subordinated Promissory Note due August 31, 2009. (This Exhibit has been previously filed as Exhibit 99.1 to the Registrant’s Form 8-K, Current Report, filed on July 25, 2005, and same is incorporated herein by reference).
10.26	Form of 12% Convertible Subordinated Promissory Note due August 31, 2009 issued to all other 2009 Note purchasers. (This Exhibit has been previously filed as Exhibit 99.2 to the Registrant’s Form 8-K, Current Report, filed on July 25, 2005, and same is incorporated herein by reference).
10.27	Note Assumption Agreement and Release by and among the Unitrust, Registrant and Boatright. (This Exhibit has been previously filed as Exhibit 99.3 to the Registrant’s Form 8-K, Current Report, filed on July 25, 2005, and same is incorporated herein by reference).
10.28	Subordination and Nominee Agreement dated as of July 22, 2005, by and among the Unitrust, Boatright and Nominee. (This Exhibit has been previously filed as Exhibit 99.4 to the Registrant’s Form 8-K, Current Report, filed on July 25, 2005, and same is incorporated herein by reference).
10.29	Form of Amended and Restated Deed of Trust, Assignment of Production, Security Agreement and Financing Statement by and between Registrant, the Public Trustee of ______ County, Colorado, for the benefit of Nominee, dated as of July 22, 2005. (This Exhibit has been previously filed as Exhibit 99.5 to the Registrant’s Form 8-K, Current Report, filed on July 25, 2005, and same is incorporated herein by reference).
10.30	Form of 12% Convertible Subordinated Series A Promissory Note due August 30, 2008.
10.31	Form of 12% Convertible Subordinated Series B Promissory Note due November 30, 2008.
10.32	Letter Agreement by and among Registrant, Pinnacle Mining Company, LLC (“PMC”), PinnOak Resources, LLC (“PinnOak”) and Beard Technologies, Inc.(“BTI”), dated July 29, 2005, with attached Exhibits “A”, “A-1”, “A-2” and “A-3”. (This Exhibit has been previously filed as Exhibit 10.29 to Registrant’s Form 10-K for the period ended December 31, 2005, filed on April 17, 2006, and same is incorporated by reference).

10.33	Amended and Restated Promissory Note in the amount of $1,100,000 by and between Beard Pinnacle, LLC (“BPLLC”) and PinnOak dated October 7, 2005. This Exhibit superseded and replaced a prior Note between the parties dated September 29, 2005, in the amount of $400,000. (This Exhibit has been previously filed as Exhibit 10.36 to Registrant’s Form 10-K for the period ended December 31, 2005, filed on April 17, 2006, and same is incorporated by reference).
10.34	Letter Agreement by and among PinnOak, BTI and BPLLC dated February 7, 2006. (This Exhibit has been previously filed as Exhibit 99.1 to Registrant’s Form 8-K filed on February 8, 2006, and same is incorporated by reference).
10.35	Amended and Restated Promissory Note from BPLLC to PinnOak dated February 7, 2006 (the “2/7/06 Note”), but effective as of October 7, 2005. (This Exhibit has been previously filed as Exhibit 99.2 to Registrant’s Form 8-K filed on February 8, 2006, and same is incorporated by reference).
10.36	Guaranty of the 2/7/06 Note by BTI dated February 7, 2006. (This Exhibit has been previously filed as Exhibit 99.3 to Registrant’s Form 8-K filed on February 8, 2006, and same is incorporated by reference).
10.37	Second Amended and Restated Promissory Note in the amount of $9,000,000 from BPLLC to PinnOak dated March 22, 2006 (the “3/22/06 Note”), but effective as of October 7, 2005. (This Exhibit has been previously filed as Exhibit 10.6 to Registrant’s Form 10-Q for the period ended March 31, 2005, filed on May 22, 2006, and same is incorporated herein by reference).
10.38	Guaranty of the 3/22/06 Note by BTI dated March 22, 2006. (This Exhibit has been previously filed as Exhibit 10.7 to Registrant’s Form 10-Q for the period ended March 31, 2005, filed on May 22, 2006, and same is incorporated herein by reference).
10.39	Third Amended and Restated Promissory Note in the amount of $9,000,000 from BPLLC to PinnOak dated May 1, 2006 (the “5/1/06 Note”), but effective as of October 7, 2005. (This Exhibit has been previously filed as Exhibit 99.1 to Registrant’s Form 8-K filed on May 5, 2006, and same is incorporated by reference).
10.40	Amended Guaranty of the 5/1/06 Note by BTI dated May 1, 2006. (This Exhibit has been previously filed as Exhibit 99.2 to Registrant’s Form 8-K filed on May 5, 2006, and same is incorporated by reference).
10.41	Schedule of Advances under the 5/1/06 Note as amended effective May 4, 2006. (This Exhibit has been previously filed as Exhibit 99.3 to Registrant’s Form 8-K filed on May 5, 2006, and same is incorporated by reference).
10.42	Schedule of Advances under the 5/1/06 Note as amended effective May 23, 2006. (This Exhibit has been previously filed as Exhibit 99.2 to Registrant’s Form 8-K filed on May 25, 2006, and same is incorporated by reference).
10.43	Schedule of Advances under the 5/1/06 Note as amended effective July 3, 2006. (This Exhibit has been previously filed as Exhibit 99.1 to Registrant’s Form 8-K filed on July 5, 2006, and same is incorporated by reference).

10.44	Fourth Amended and Restated Promissory Note in the amount of $11,800,000 from BPLLC to PinnOak dated July 26, 2006 but effective as of October 7, 2005 (the “7/26/06 Note”),. (This Exhibit has been previously filed as Exhibit 99.2 to Registrant’s Form 8-K filed on August 15, 2006, and same is incorporated by reference).
10.45	Amended Guaranty of the 7/26/06 Note by BTI dated July 26, 2006.
10.46	Schedule of Advances under the 7/26/06 Note as amended effective August 14, 2006. (This Exhibit has been previously filed as Exhibit 99.3 to Registrant’s Form 8-K filed on August 15, 2006, and same is incorporated by reference).
10.47	Schedule of Advances under the 7/26/06 Note as amended effective August 28, 2006. (This Exhibit has been previously filed as Exhibit 10.4 to Registrant’s Form 10-Q filed on November 20, 2006, and same is incorporated by reference).
10.48	Schedule of Advances under the 7/26/06 Note as amended effective October 2, 2006. (This Exhibit has been previously filed as Exhibit 10.5 to Registrant’s Form 10-Q filed on November 20, 2006, and same is incorporated by reference).
10.49	Schedule of Advances under the 7/26/06 Note as amended effective October 18, 2006.
10.50	Schedule of Advances under the 7/26/06 Note as amended effective November 27, 2006.
10.51	Schedule of Advances under the 7/26/06 Note as amended effective December 21, 2006.
10.52	Operating Agreement of BPLLC dated June 10, 2004. (This Exhibit has been previously filed as Exhibit 10.6 to Registrant’s Form 10-Q filed on November 20, 2006, and same is incorporated by reference).
10.53	First Amendment to Operating Agreement of BPLLC dated February 21, 2006. (This Exhibit has been previously filed as Exhibit 10.7 to Registrant’s Form 10-Q filed on November 20, 2006, and same is incorporated by reference).
10.54	Contract Operating Agreement dated October 19, 2005, by and between BTI and BPLLC. (This Exhibit has been previously filed as Exhibit 10.8 to Registrant’s Form 10-Q filed on November 20, 2006, and same is incorporated by reference).
10.55	Assignment and Assumption Agreement dated October 19, 2005, by and between BTI and BPLLC. (This Exhibit has been previously filed as Exhibit 10.9 to Registrant’s Form 10-Q filed on November 20, 2006, and same is incorporated by reference).
10.56	Construction Contract by and between BTI and Boyce, Graybeal & Sayre, Inc. dated August 17, 2005. (This Exhibit has been previously filed as Exhibit 10.10 to Registrant’s Form 10-Q filed on November 20, 2006, and same is incorporated by reference).
10.57	Letter Agreement by and among PinnOak, BTI and BPLLC dated February 7, 2006. (This Exhibit has been previously filed as Exhibit 10.11 to Registrant’s Form 10-Q filed on November 20, 2006, and same is incorporated by reference).

10.58	Security Agreement by and between BPLLC and PinnOak dated as of August 9, 2006. (This Exhibit has been previously filed as Exhibit 10.12 to Registrant’s Form 10-Q filed on November 20, 2006, and same is incorporated by reference).
10.59	Pledge Agreement by and between BTI and PinnOak dated as of August 9, 2006. (This Exhibit has been previously filed as Exhibit 10.13 to Registrant’s Form 10-Q filed on November 20, 2006, and same is incorporated by reference).
10.60	Subscription Agreement by and among BPLLC and seven investors (referred to collectively as the “Pinnacle Investment Group Parties” or the “Group”), dated as of August 10, 2006. (This Exhibit has been previously filed as Exhibit 10.14 to Registrant’s Form 10-Q filed on November 20, 2006, and same is incorporated by reference).
10.61	Letter Agreement by and among PinnOak, BPLLC and the Group, dated August 29, 2006. (This Exhibit has been previously filed as Exhibit 10.15 to Registrant’s Form 10-Q filed on November 20, 2006, and same is incorporated by reference). (This Exhibit has been previously filed as Exhibit 10.15 to Registrant’s Form 10-Q filed on November 20, 2006, and same is incorporated by reference).
10.62	Amended and Restated Agreement for a Pond Fines Recovery Facility between BPLLC and PMC, dated October 31, 2006 but effective as of September 1, 2005.
10.63	Amended and Restated Contract Operating Agreement between BTI and BPLLC, dated October 31, 2006.
10.64	Amended and Restated Operating Agreement of BPLLC, dated October 31, 2006.
10.65	Co-Investment Agreement dated October 31, 2006 between BTI and PinnOak.
10.66	Business Loan Agreement dated March 28, 2006 by and between Registrant and First Fidelity Bank, N.A.
10.67	Deed of Trust, Assignment, Security Agreement and Financing Statement dated March 28, 2006 by and between Registrant and the Public Trustee of Yuma County, Colorado for the benefit of First Fidelity Bank, N.A.
10.68	Promissory Note dated March 28, 2006, by and between Registrant and First Fidelity Bank, N.A.
10.69	The Beard Company Audit Committee Charter as amended effective March 9, 2006. (This Exhibit has been previously filed as Exhibit A to Registrant’s Proxy Statement filed on May 1, 2006, and same is incorporated by reference).
14	Code of Ethics as amended March 9, 2006.
21	Subsidiaries of the Registrant.
23	Consents of Experts and Counsel:
23.1	Consent of Cole & Reed, P.C.
31	Rule 13a-14(a)/15d-14(a) Certifications:

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

_____________________

*Compensatory plans or arrangements.

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

SIGNATURES

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

	THE BEARD COMPANY            (Registrant)
	By   /s/ Herb Mee, Jr.        Herb Mee, Jr., President
Date:  April 17, 2007

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

Signature	Title	Date
By    /s/ W.M. Beard         W.M. Beard	Chief Executive Officer	April 17, 2007
By    /s/ Herb Mee, Jr.          Herb Mee, Jr.	President and Chief Financial Officer	April 17, 2007
By    Jack A. Martine          Jack A. Martine	Controller and Chief Accounting Officer	April 17, 2007

By    /s/ W.M. Beard         W.M. Beard	Chairman of the Board	April 17, 2007
By    /s/ Herb Mee, Jr.          Herb Mee, Jr.	Director	April 17, 2007
By    /s/ Allan R. Hallock         Allan R. Hallock	Director	April 17, 2007
By    /s/ Harlon E. Martin, Jr.         Harlon E. Martin, Jr.	Director	April 17, 2007
By    /s/ Ford C. Price         Ford C. Price	Director	April 17, 2007

EXHIBIT INDEX

Exhibit No.	Description	Method of Filing
3.1	Restated Certificate of Incorporation of Registrant as filed with the Secretary of State of Oklahoma on September 20, 2000.	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.	Incorporated herein by reference
3.3	Registrant’s By-Laws as currently in effect.	Incorporated herein by reference
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.	Incorporated herein by reference
10.1	Amendment No. One to The Beard Company 1993 Stock Option Plan dated August 27, 1993, as amended June 4, 1998.	Incorporated herein by reference
10.2	The Beard Company 2005 Stock Option Plan adopted on June 9, 2005.	Incorporated herein by reference
10.3	The Beard Company 2006 Stock Option Plan adopted on May 1, 2006.	Incorporated herein by reference
10.4	Form of Indemnification Agreement dated December 15, 1994, by and between Registrant and eight directors.	Incorporated herein by reference

10.5	Amendment No. One to The Beard Company 2003-2 Deferred Stock Compensation Plan as amended effective February 13, 2004	Incorporated herein by reference
10.6	Amendment No. One to The Beard Company 2005 Deferred Stock Compensation Plan as amended effective April 27, 2006	Incorporated herein by reference
10.7	Notice letter by and among the Shareholders of Cibola Corporation and Registrant dated November 14, 2005.	Incorporated herein by reference
10.8	Amendment to Restated and Amended Letter Loan Agreement by and between Registrant and The William M. Beard and Lu Beard 1988 Charitable Unitrust (the”Unitrust”) dated June 25, 2004.	Incorporated herein by reference
10.9	Restated and Amended Letter Loan Agreement by and between Registrant and the Unitrust dated March 3, 2006.	Incorporated herein by reference
10.10	Second Replacement Renewal and Extension Promissory Note from Registrant to the Trustees of the Unitrust dated effective February 14, 2005.	Incorporated herein by reference
10.11	Form of 2002 Warrant.	Incorporated herein by reference
10.12	Form of 2003 Warrant.	Incorporated herein by reference
10.13	Form of Deed of Trust, Assignment of Production, Security Agreement and Financing Statement dated as of February 21, 2003.	Incorporated herein by reference
10.14	Subordination and Nominee Agreement dated February 21, 2003.	Incorporated herein by reference
10.15	Form of 10% Participating Note due November 30, 2006.	Incorporated herein by reference
10.16	Form of 2004 Warrant.	Incorporated herein by reference
10.17	Form of 2004 Production Payment.	Incorporated herein by reference
10.18	Form of Deed of Trust, Assignment of Production, Security Agreement and Financing Statement by and between Registrant and McElmo Dome Nominee, LLC, dated as of May 21, 2004.	Incorporated herein by reference
10.19	Subordination and Nominee Agreement dated May 21, 2004, by and between the Unitrust and Boatright Family, L.L.C. (“Boatright”).	Incorporated herein by reference

10.20	Form of 12% Convertible Subordinated Promissory Note due February 15, 2010.	Incorporated herein by reference
10.21	Security and Collateral Agent Agreement, by and among Registrant, InvesTrust, N.A. and Beard Technologies, Inc., dated as of January 26, 2005.	Incorporated herein by reference
10.22	Form of 2005 Warrant.	Incorporated herein by reference
10.23	Letter Agreement by and between 7HBF, Ltd. (“7HBF”) and Registrant dated February 7, 2005.	Incorporated herein by reference
10.24	Unsecured Promissory Note from BEE/7HBF, LLC to 7HBF dated February 14, 2005.	Incorporated herein by reference
10.25	Beard Boatright 12% Convertible Subordinated Promissory Note due August 31, 2009.	Incorporated herein by reference
10.26	Form of 12% Convertible Subordinated Promissory Note due August 31, 2009 issued to all other 2009 Note purchasers.	Incorporated herein by reference
10.27	Note Assumption Agreement and Release by and among the Unitrust, Registrant and Boatright.	Incorporated herein by reference
10.28	Subordination and Nominee Agreement dated as of July 22, 2005, by and among the Unitrust, Boatright and Nominee.	Incorporated herein by reference
10.29	Form of Amended and Restated Deed of Trust, Assignment of Production, Security Agreement and Financing Statement by and between Registrant, the Public Trustee of ______ County, Colorado, for the benefit of Nominee, dated as of July 22, 2005.	Incorporated herein by reference
10.30	Form of 12% Convertible Subordinated Series A Promissory Note due August 30, 2008.	Filed herewith electronically
10.31	Form of 12% Convertible Subordinated Series B Promissory Note due November 30, 2008.	Filed herewith electronically
10.32	Letter Agreement by and among Registrant, Pinnacle Mining Company, LLC (“PMC”), PinnOak Resources, LLC (“PinnOak”) and Beard Technologies, Inc.(“BTI”), dated July 29, 2005, with attached Exhibits “A”, “A-1”, “A-2” and “A-3”.	Incorporated herein by reference

10.33	Amended and Restated Promissory Note in the amount of $1,100,000 by and between Beard Pinnacle, LLC (“BPLLC”) and PinnOak dated October 7, 2005. This Exhibit superseded and replaced a prior Note between the parties dated September 29, 2005, in the amount of $400,000.	Incorporated herein by reference
10.34	Letter Agreement by and among PinnOak, BTI and BPLLC dated February 7, 2006.	Incorporated herein by reference
10.35	Amended and Restated Promissory Note from BPLLC to PinnOak dated February 7, 2006 (the “2/7/06 Note”), but effective as of October 7, 2005.	Incorporated herein by reference
10.36	Guaranty of the 2/7/06 Note by BTI dated February 7, 2006.	Incorporated herein by reference
10.37	Second Amended and Restated Promissory Note in the amount of $9,000,000 from BPLLC to PinnOak dated March 22, 2006 (the “3/22/06 Note”), but effective as of October 7, 2005.	Incorporated herein by reference
10.38	Guaranty of the 3/22/06 Note by BTI dated March 22, 2006.	Incorporated herein by reference
10.39	Third Amended and Restated Promissory Note in the amount of $9,000,000 from BPLLC to PinnOak dated May 1, 2006 (the “5/1/06 Note”), but effective as of October 7, 2005.	Incorporated herein by reference
10.40	Amended Guaranty of the 5/1/06 Note by BTI dated May 1, 2006.	Incorporated herein by reference
10.41	Schedule of Advances under the 5/1/06 Note as amended effective May 4, 2006.	Incorporated herein by reference
10.42	Schedule of Advances under the 5/1/06 Note as amended effective May 23, 2006.	Incorporated herein by reference
10.43	Schedule of Advances under the 5/1/06 Note as amended effective July 3, 2006.	Incorporated herein by reference
10.44	Fourth Amended and Restated Promissory Note in the amount of $11,800,000 from BPLLC to PinnOak dated July 26, 2006 but effective as of October 7, 2005 (the “7/26/06 Note”).	Incorporated herein by reference
10.45	Amended Guaranty of the 7/26/06 Note by BTI dated July 26, 2006.	Filed herewith electronically
10.46	Schedule of Advances under the 7/26/06 Note as amended effective August 14, 2006.	Incorporated herein by reference

10.47	Schedule of Advances under the 7/26/06 Note as amended effective August 28, 2006.	Incorporated herein by reference
10.48	Schedule of Advances under the 7/26/06 Note as amended effective October 2, 2006.	Incorporated herein by reference
10.49	Schedule of Advances under the 7/26/06 Note as amended effective October 18, 2006.	Filed herewith electronically
10.50	Schedule of Advances under the 7/26/06 Note as amended effective November 27, 2006.	Filed herewith electronically
10.51	Schedule of Advances under the 7/26/06 Note as amended effective December 21, 2006.	Filed herewith electronically
10.52	Operating Agreement of BPLLC dated June 10, 2004.	Incorporated herein by reference
10.53	First Amendment to Operating Agreement of BPLLC dated February 21, 2006.	Incorporated herein by reference
10.54	Contract Operating Agreement dated October 19, 2005, by and between BTI and BPLLC.	Incorporated herein by reference
10.55	Assignment and Assumption Agreement dated October 19, 2005, by and between BTI and BPLLC.	Incorporated herein by reference
10.56	Construction Contract by and between BTI and Boyce, Graybeal & Sayre, Inc. dated August 17, 2005.	Incorporated herein by reference
10.57	Letter Agreement by and among PinnOak, BTI and BPLLC dated February 7, 2006.	Incorporated herein by reference
10.58	Security Agreement by and between BPLLC and PinnOak dated as of August 9, 2006.	Incorporated herein by reference
10.59	Pledge Agreement by and between BTI and PinnOak dated as of August 9, 2006.	Incorporated herein by reference
10.60	Subscription Agreement by and among BPLLC and seven investors (referred to collectively as the “Pinnacle Investment Group Parties” or the “Group”), dated as of August 10, 2006.	Incorporated herein by reference
10.61	Letter Agreement by and among PinnOak, BPLLC and the Group, dated August 29, 2006.	Incorporated herein by reference
10.62	Amended and Restated Agreement for a Pond Fines Recovery Facility between BPLLC and PMC, dated October 31, 2006 but effective as of September 1, 2005.	Filed herewith electronically

10.63	Amended and Restated Contract Operating Agreement between BTI and BPLLC, dated October 31, 2006.	Filed herewith electronically
10.64	Amended and Restated Operating Agreement of BPLLC, dated October 31, 2006.	Filed herewith electronically
10.65	Co-Investment Agreement dated October 31, 2006 between BTI and PinnOak.	Filed herewith electronically
10.66	Business Loan Agreement dated March 28, 2006 by and between Registrant and First Fidelity Bank, N.A.	Filed herewith electronically
10.67	Deed of Trust, Assignment, Security Agreement and Financing Statement dated March 28, 2006 by and between Registrant and the Public Trustee of Yuma County, Colorado for the benefit of First Fidelity Bank, N.A.	Filed herewith electronically
10.68	Promissory Note dated March 28, 2006, by and between Registrant and First Fidelity Bank, N.A.	Filed herewith electronically
10.69	The Beard Company Audit Committee Charter as amended effective March 9, 2006. (This Exhibit has been previously filed as Exhibit A to Registrant’s Proxy Statement filed on May 1, 2006, and same is incorporated by reference).	Incorporated herein by reference
14	Code of Ethics as amended March 9, 2006.	Filed herewith electronically
21	Subsidiaries of the Registrant.	Filed herewith electronically
23.1	Consent of Cole & Reed, P.C.	Filed herewith electronically
31.1	Chief Executive Officer Certification required by Rule 13a-14(a) or Rule 15d-14(a).	Filed herewith electronically
31.2	Chief Financial Officer Certification required by Rule 13a-14(a) or Rule 15d-14(a).	Filed herewith electronically
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.	Filed herewith electronically
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.	Filed herewith electronically

EX-10.30

Series A

THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER ANY FEDERAL OR STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR OTHERWISE DISPOSED OF ABSENT REGISTRATION UNDER THE SECURITIES ACT OF 1933 AND ANY APPLICABLE STATE SECURITIES LAWS UNLESS AND UNTIL THE HOLDER HEREOF PROVIDES (i) INFORMATION REASONABLY NECESSARY TO CONFIRM THAT SUCH REGISTRATION IS NOT REQUIRED OR (ii) AN OPINION OF COUNSEL TO THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED.

CONVERTIBLE SUBORDINATED PROMISSORY NOTE

$___________ _____________, 2006

THE BEARD COMPANY, an Oklahoma corporation (the “Company”), promises to pay to the order of ____________________________________________ at Suite 320, 5600 North May Avenue, Oklahoma City, Oklahoma 73112, or at such other place as may be designated in writing by the Holder, the amount of _____________________________________ DOLLARS ($________.00) and interest thereon at the rate stated below.

The holder of this Note shall be referred to as the “Holder.”

This Note is part of a series of promissory notes issued in connection with a private offering (the “Private Placement Offering”) made by the Company pursuant to a Private Placement Memorandum dated October 3, 2006. The promissory notes shall be referred to collectively as the “Notes.”

1.Terms of the Note

1.1 Payment of Principal and Interest.

(a)Prior to an Event of Default, the unpaid principal balance of this Note will accrue interest at 12% per annum. Commencing on February 28, 2007, and continuing on each August 30 and February 28 thereafter until the Maturity Date the Company shall pay all accrued interest.

(b)All interest will be computed on the basis of a 365-day year for the actual number of days in the period for which interest is payable.

(c)The entire unpaid principal balance of this Note plus all accrued interest shall be due and payable without notice on August 30, 2008 (the “Maturity Date”).

(d)All payments received by the Holder shall be applied first to interest and any balance shall be applied to principal. During the existence of any Event of Default, the Holder may apply payments received as the Holder may determine.

(e)The obligations of the Company to pay principal and interest and any other amounts under this Note are collectively referred to as the “Obligations.”

1.2Payments. Whenever any payment required by this Note is due on a day other than a Business Day, the payment shall be made on the next succeeding Business Day and the payment shall include interest for the days the payment due date was so extended.

1.3Expenses. The Company will pay to the Holder its reasonable attorneys' fees, court costs, and other expenses incurred in collecting this Note.

1.4Additional Interest. Any amount not paid when due shall accrue interest at the rate specified above plus 3% per annum (the “Additional Interest”) and all Additional Interest shall be paid as a condition precedent to curing any Event of Default hereunder.

1.5Events of Default. Events of Default are: (a) the Company’s failure to pay any Obligation when due that is not cured within 30 days; (b) the occurrence of any “Event of Default” as defined in the Security Agreement; or (c) the Company’s failure to perform its obligations under Section 2.9 of this Note when due.

1.6Acceleration. Subject to the provisions of the Security Agreement, upon the occurrence of an Event of Default, the Holder may at any time thereafter declare the Obligations evidenced hereby immediately due and payable.

2.Conversion of the Note

2.1Conversion Agent. The Company shall initially serve as its own conversion agent. The Company may appoint another conversion agent at any time. The Company shall send Holder written notice within 30 days of any change of conversion agent. References in this Note to the “Conversion Agent” shall refer to the Company unless the Company has appointed another conversion agent in which case “Conversion Agent” shall mean the acting conversion agent appointed by the Company.

2.2Conversion Privilege. At any time following the date of original issuance of this Note and prior to the close of business on the business day immediately preceding August 30, 2008, the Holder of this Note may convert such Note or any portion thereof into shares of the Company’s common stock (the “Common Stock”) (the shares of Common Stock issuable upon such conversion, the “Conversion Shares”), at the Conversion Price then in effect. The number of shares of Common Stock issuable upon conversion of this Note shall be determined by dividing the principal amount of the Note or portion thereof surrendered for conversion by the Conversion Price in effect on the conversion date. The initial conversion price of the Note is $1.00 per share (the “Conversion Price”) and is subject to adjustment as provided in Section 2.7.

Upon conversion of only a portion of the principal balance of the Notes surrendered for conversion, the Company shall issue and deliver upon the written order of the Holder, at the expense of the Company, a new Note for any remaining unpaid principal balance so surrendered as well as a certificate or certificates for the number of shares of Common Stock

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to which such Holder is entitled, as provided below. The Holder is not entitled to any rights of a holder of Common Stock until such Holder has converted this Note into Common Stock.

2.3Conversion Procedure. To convert this Note, the Holder must (i) complete and manually sign the Conversion Notice, a form of which is attached hereto as Exhibit A and deliver it to the Conversion Agent (ii) surrender the Note to the Conversion Agent, (iii) furnish appropriate endorsements and transfer documents to theConversion Agent and (iv) pay any transfer or other tax, if required. The date on which the Holder satisfies all of the foregoing requirements is the conversion date. As soon as practicable after the conversion date, the Company shall deliver to the Holder through its transfer agent a certificate for the number of whole shares of Common Stock issuable upon the conversion.

No fractional shares of Common Stock shall be issued upon conversion of the Note. If more than one Note shall be surrendered for conversion at one time by the same holder, the number of full shares which shall be issuable upon conversion shall be computed on the basis of the aggregate principal amount of the Notes (or specified portions thereof to the extent permitted hereby) so surrendered. If any fractional share of Common Stock would be issuable upon the conversion of any Note or Notes, the Conversion Agent shall make an adjustment thereof in cash at the current market value thereof. For these purposes, the current market value of a share of Common Stock shall be the closing price on the first business day immediately preceding the day on which the Note or Notes are deemed to have been converted.

The person in whose name the certificate is registered shall be deemed to be a stockholder of record on the conversion date; provided, however, that no surrender of this Note on any date when the stock transfer books of the Company shall be closed shall be effective to constitute the person or persons entitled to receive the shares of Common Stock upon such conversion as the record holder or holders of such shares of Common Stock on such date, but such surrender shall be effective to constitute the person or persons entitled to receive such shares of Common Stock as the record holder or holders thereof for all purposes at the close of business on the next succeeding day on which such stock transfer books are open; provided, further, that such conversion shall be at the Conversion Price in effect on the date that this Note shall have been surrendered for conversion, as if the stock transfer books of the Company had not been closed. Upon conversion of this Note, Holder shall no longer be a Holder of this Note.

No payment or adjustment will be made for accrued interest on a converted Note or for dividends or distributions on shares of Common Stock issued upon conversion of a Note, but if any Holder surrenders this Note for conversion between the record date for the payment of an installment of interest and the next interest payment date, then, notwithstanding such conversion, the interest payable on such interest payment date shall be paid to the Holder on such record date.

If the Holder converts more than one Note at the same time, the number of shares of Common Stock issuable upon the conversion shall be based on the aggregate principal amount of Notes converted.

2.4Forced Conversion. At any time after March 31, 2008, if the weighted average closing price of the Company’s common stock has been more than two times the Conversion Price for forty (40) consecutive trading days, the Company may give the Note

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holders written notice that they must convert their Notes within thirty (30) days after the date of such notice or that the Notes will terminate and become void as of 5:00 p.m., New York time on the thirty-first (31^st) day (the “Forced Conversion Date”) after the date of such notice.

Upon such Forced Conversion, the person or persons entitled to receive the shares of Common Stock issuable upon such conversion will be treated for all purposes as the record holder or holders of such Common Stock on the Forced Conversion Date whether or not such holder or holders shall have surrendered their Notes to the Conversion Agent. Upon the Forced Conversion Date, the principal balance of the Notes shall be deemed paid and all interest on the Notes shall cease to accrue. As soon as practicable after the surrender in accordance with the procedures set forth in Section 2.3, the Company shall then issue and the Conversion Agent shall deliver to such holder a certificate or certificates for the number of shares of Common Stock to which such holder shall be entitled.

2.5Taxes on Conversion. If the Holder converts a Note, he shall pay any documentary, stamp or similar issue or transfer tax due on the issue of shares of Common Stock upon such conversion. The Conversion Agent may refuse to deliver the certificates representing the Common Stock being issued in a name other than the Holder’s name until the Conversion Agent receives a sum sufficient to pay any tax which will be due because the shares are to be issued in a name other than the Holder’s name. Nothing herein shall preclude any tax withholding required by law or regulations.

2.6Company To Provide Stock. The Company shall reserve out of its authorized but unissued Common Stock a sufficient number of shares of Common Stock to permit the conversion of all outstanding Notes for shares of Common Stock. The shares of Common Stock or other securities issued upon conversion of this Notes shall bear the following legend:

THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER ANY FEDERAL OR STATE SECURITIES LAWS AND MAY NOT BE SOLD TRANSFERRED ASSIGNED OR OTHERWISE DISPOSED OF ABSENT REGISTRATION UNDER THE SECURITIES ACT OF 1933 AND ANY APPLICABLE STATE SECURITIES LAWS UNLESS AND UNTIL THE HOLDER HEREOF PROVIDES (i) INFORMATION REASONABLY NECESSARY TO CONFIRM THAT SUCH REGISTRATION IS NOT REQUIRED OR (ii) AN OPINION OF COUNSEL TO THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED.

The Company covenants that all shares of Common Stock delivered upon conversion of the Notes, shall be duly authorized, validly issued, fully paid and non-assessable and shall be free from preemptive rights and free of any lien or adverse claim.

2.7Adjustment of Conversion Price. The Conversion Price shall be that price set forth in Section 2.2 of this Note and shall be adjusted from time to time by the Conversion Agent in the event the Company shall (i) pay a dividend or other distribution in shares of Common Stock to holders of

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Common Stock, (ii) subdivide its outstanding Common Stock into a greater number of shares, (iii) combine its outstanding Common Stock into a smaller number of shares or (iv) reclassify its outstanding Common Stock, the Conversion Price in effect immediately prior thereto shall be adjusted so that the Holder of any Note thereafter surrendered for conversion shall be entitled to receive the number of shares of Common Stock which it would have owned or have been entitled to receive had such Note been converted immediately prior to the happening of such event. An adjustment made pursuant to this Section 2.7 shall become effective immediately after the record date in the case of a dividend or distribution and shall become effective immediately after the effective date in the case of subdivision, combination or reclassification.

2.8Notice of Adjustment. Whenever the Conversion Price is adjusted the Company shall promptly mail to the Holder a notice of the adjustment briefly stating the facts requiring the adjustment and the manner of computing it.

2.9 Notice of Certain Transactions. In case:

(a)the Company shall declare a dividend (or any other distribution) on its Common Stock (other than in cash out of retained earnings); or

(b)of any reclassification of the Common Stock of the Company (other than a subdivision or combination of its outstanding Common Stock, or a change in par value, or from par value to no par value, or from no par value to par value), or of any consolidation or merger to which the Company is a party and for which approval of any stockholders of the Company is required, or of the sale or transfer of all or substantially all of the assets of the Company; or

(c)of the voluntary or involuntary dissolution, liquidation or winding-up of the Company;

the Company shall cause to be mailed to each the Holder at its address appearing below or such other address as specified by the Holder, as promptly as possible but in any event at least ten days prior to the applicable date hereinafter specified, a notice stating (i) the date on which a record is to be taken for the purpose of a dividend, or, if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend is to be determined, or (ii) the date on which such reclassification, consolidation, merger, sale, transfer, dissolution, liquidation or winding-up is expected to become effective or occur, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their Common Stock for securities or other property deliverable upon such reclassification, consolidation, merger, sale, transfer, dissolution, liquidation or winding-up. Failure to give such notice, or any defect therein, shall not affect the legality or validity of such dividend, distribution, reclassification, consolidation, merger, sale, transfer, dissolution, liquidation or winding-up.

2.10Effect of Reclassification, Consolidation, Merger or Sale on Conversion Privilege. If any of the following shall occur, namely: (i) any reclassification or change of outstanding shares of Common Stock (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination); (ii) any consolidation, combination or merger to which the Company is a party other than a merger in which the Company is the continuing corporation and

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which does not result in any reclassification of, or change (other than a change in name, or par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination) in, outstanding shares of Common Stock; or (iii) any sale or conveyance of all or substantially all of the assets of the Company (“Asset Sale”), then lawful provision shall be made so that the Holder shall thereafter be entitled to receive upon conversion of the Note, at a per share valuation equal to the Conversion Price then in effect, the number of shares of stock or other securities or property of the successor Company resulting from such reclassification, consolidation, consolidation, combination, merger, or Asset Sale that the Holder of the would have been entitled to receive in such reclassification, consolidation, consolidation, combination, merger, or Asset Sale if the Note had been converted immediately before such reclassification, consolidation, consolidation, combination, merger, or Asset Sale, all subject to further adjustment as provided herein. The foregoing provisions of this Section 2.10 shall similarly apply to successive reorganizations, consolidations, mergers, sales and transfers and to the stock or securities of any other Company that are at the time receivable upon the conversion of the Notes.

3.Subordination of the Note

3.1Note Subordinate to Senior Indebtedness. The Obligations are and shall be junior and subordinate in right of payment, exercise of remedies, and all other respects to the prior indefeasible payment in full of the Senior Indebtedness. Without limiting the foregoing, the priority of the security interest granted in the Security Agreement shall be subordinate in all respects to the priority of any security interest or lien granted to or for the benefit of the holders of the Senior Indebtedness. So long as there is no default under any of the Senior Indebtedness and the Company’s payment of the Obligations would not result in a default thereunder, the Company may pay the Obligations in accordance with the terms of this Note. The provisions of this Section 3.1 are made for the benefit of the holders of Senior Indebtedness. The holders of the Senior Indebtedness need not prove reliance on these subordination provisions.

3.2Default on Senior Indebtedness. In the event and during the continuation of any default in the payment of principal, premium, interest or any other payment due on any Senior Indebtedness, or in the event that any event of default with respect to any Senior Indebtedness shall have occurred and be continuing and shall have resulted in such Senior Indebtedness becoming or being declared due and payable prior to the date on which it would otherwise have become due and payable (unless and until such event of default shall have been cured or waived or shall have ceased to exist and such acceleration shall have been rescinded or annulled) or in the event any judicial proceeding such event of default, then no payment shall be made by the Company with respect to the principal of, or interest on, this Note; provided, however, nothing in this Section shall prohibit the Holder from accelerating the Obligations due under this Note. In the event that, notwithstanding the foregoing, any payment shall be received by the Holder when such payment is prohibited by this Section 3.2, such payment shall be held in trust for the benefit of, and shall be paid over or delivered to, the holders of Senior Indebtedness or their respective representatives, or to the trustee or trustees under any indenture pursuant to which any of such Senior Indebtedness may have been issued, as their respective interests may appear, but only to the extent that the holders of the Senior Indebtedness (or their representative or representatives or a trustee) notify the Holder within 30 days of such payment of the amounts then due and owing on the Senior Indebtedness and only the amounts specified in such notice to the Holder shall be paid to the holders of Senior Indebtedness; provided, however,

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that holders of Senior Indebtedness shall not be entitled to receive payment of any such amounts to the extent that such holders would be required by the subordination provisions of such Senior Indebtedness to pay such amounts over to the obligees on trade accounts payable or other liabilities arising in the ordinary course of the Company’s business.

3.3Definition of Senior Indebtedness. “Senior Indebtedness” means, unless expressly subordinated to or made on a parity with the amounts due under this Note, the principal of (and premium, if any), unpaid interest on, penalties, amounts reimbursable, fees, expenses, costs of enforcement and any other amounts due in connection with (i) indebtedness of the Company, or with respect to which the Company is a guarantor, to banks, commercial finance lenders, insurance companies, leasing or equipment financing institutions or other lending institutions regularly engaged in the business of lending money (excluding venture capital, investment banking or similar institutions which sometimes engage in lending activities but which are primarily engaged in investments in equity securities), which is for money borrowed, or purchase or leasing of equipment in the case of lease or other equipment financing, whether or not secured, (ii) indebtedness of the Company, or with respect to which the Company is a guarantor, to any person or entity making any loan or loans to finance, in whole or part, any pond fines or similar coal recovery project or operation in which the Company and/or any one or more of its subsidiaries are involved or participating, either directly or through an entity in which any of them has an equity or ownership interest, and (iii) any such indebtedness or any debentures, notes or other evidence of indebtedness issued in exchange for such Senior Indebtedness, or any indebtedness arising from the satisfaction of such Senior Indebtedness by a guarantor.

4.Piggyback Registration Rights

4.1Participation. Subject to Section 4.2 and 4.3 hereof, if at any time after the date hereof the Company proposes to file a Registration Statement (other than a registration on Form S-4 or S-8 or any successor form to such Forms or any registration of securities as it relates to an offering and sale to management of the Company pursuant to any employee stock plan or other employee benefit plan arrangement) with respect to an offering that includes any shares of Common Stock, then the Company shall give notice of the proposed filing (the “Piggyback Notice”) to all Registrable Security Holder as promptly as practicable (but in no event less than fifteen (15) days before the anticipated filing date). The Piggyback Notice shall offer the Registrable Security Holders the opportunity to register such number of shares of Registrable Securities as the Registrable Security Holders may request and shall set forth (i) the anticipated filing date of such Registration Statement and (ii) the number of shares of Common Stock that is proposed to be included in such Registration Statement. The Company shall include in such Registration Statement such shares of Registrable Securities for which it has received written requests to register such shares within ten (10) days after the Piggyback Notice has been given.

4.2Underwriter’s Cutback. Notwithstanding the foregoing, if a Registration pursuant to this Article 4 involves an underwritten offering and the managing underwriter or underwriters of such proposed underwritten offering delivers an opinion to the Registrable Security Holders that the total or kind of securities which such Registrable Security Holders and any other persons or entities intend to include in such offering are reasonably likely to significantly adversely affect the price, timing or distribution of the securities offered in such offering, then the Company shall include in such Registration:

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(a)If such Registration was a primary registration by the Company of its securities, the Company will include in such Registration to the extent of the number of securities which the managing underwriter advises can be sold in such Underwritten Offering: first, the securities proposed by the Company to be sold for its own account; second, any Registrable Securities requested to be included in such Registration by the Registrable Security Holders, pro rata on the basis of the number of securities sought to be sold by the requesting Registrable Security Holders; and third, other securities of the Company proposed to be included in such Registration, allocated among the Company and the holders thereof in accordance with the priorities then existing among the Company and such holders.

(b)If such Registration was requested other than by the Registrable Security Holders or the Company, the Company will include in such Registration to the extent of the number of securities which the managing underwriter advises can be sold in such Underwritten Offering: first, the securities proposed to be sold by the security holder initiating the Registration; second, any Registrable Securities requested to be included in such Registration, pro rata on the basis of the number of securities sought to be sold by the requesting Registrable Security Holders; third, any securities of the Company proposed by any other Persons to be included in such Registration, pro rata on the basis of the number of securities proposed to be sold by the requesting Persons; and fourth the securities proposed by the Company to be sold for its own account.

4.3Limitation on Participation. Holders of Registrable Securities that are able to sell 100% of their Registrable Securities without registration under Rule 144 of the Securities Act of 1933, as amended, within a period of three consecutive months are not entitled to any Piggyback Registration Rights under this Article 4.

4.4Expenses. The Company will pay all Registration Expenses in connection with each registration of Registrable Securities requested pursuant to this Article 4.

4.5Company Control. The Company may decline to file a Registration Statement after giving the Piggyback Notice, or withdraw a Registration Statement after filing and after such Piggyback Notice, but prior to the effectiveness of the Registration Statement, provided that the Company shall promptly notify each Registrable Security Holder in writing of any such action and provided further that the Company shall bear all reasonable expenses incurred by such Registrable Security Holder or otherwise in connection with such withdrawn Registration Statement.

5.Miscellaneous

5.1Governing Law. This Note is to be construed according to the internal laws of the State of Oklahoma.

5.2Loss, Theft, Destruction or Mutilation of Note. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Note and, in the case of loss, theft or destruction, delivery of an indemnity agreement reasonably satisfactory in form and substance to the Company or, in the case of mutilation, on surrender and cancellation of this Note, the Company shall execute and deliver, in lieu of this Note, a new Note executed in the same manner as this Note, in the same principal amount as the unpaid principal

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amount of this Note and dated the date to which interest shall have been paid on this Note or, if no interest shall have yet been so paid, dated the date of this Note.

5.3Pari Passu Notes. The Holder acknowledges and agrees that the payment of all or any portion of the outstanding principal amount of and all interest on this Note shall be pari passu in right of payment and in all other respects to the other Notes issued by the Company in the Private Placement Offering. In the event the Holder receives payments in excess of its pro rata share of Company’s payments to the holders of all of the Notes, then the Holder shall hold in trust all such excess payments for the benefit of the holders of the other Notes and shall pay such amounts held in trust to such other holders upon demand by such holders.

5.4Payment. All payments under this Note shall be made in lawful tender of the United States.

5.5Usury. In the event any interest is paid on this Note which is deemed to be in excess of the then legal maximum rate, then that portion of the interest payment representing an amount in excess of the then legal maximum rate shall be deemed a payment of principal and applied against the principal of this Note.

5.6Notices. Any notice, request or other communication required or permitted hereunder shall be given in accordance with the Subscription Agreement.

5.7Successors and Assigns. This Note may be only assigned or transferred by the Holder in compliance with all applicable federal and state securities law. The rights and obligations of the Company and the Holder of this Note shall be binding upon and benefit the successors, permitted assigns, heirs, administrators and transferees of the parties.

IN WITNESS WHEREOF, the Company has executed this instrument effective the date first above written

THE BEARD COMPANY, an Oklahoma corporation

By

Herb Mee, Jr., President

(the “Company”)

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EXHIBIT A

CONVERSION NOTICE

To convert this Note into common stock of the Company, check the box: o

To convert only part of this Note, state the amount:

[ $__________ ]

If you want the stock certificate made out in another person’s name, fill in the form below:

_________________________________________________________________

(Insert other person’s social security or tax I.D. number)

_________________________________________________________________

_________________________________________________________________

_________________________________________________________________

(Print or type assignee’s name, address and zip code)

_________________________________________________________________

Date: ____________________

(Signature)

_________________________________________________________________

(Sign exactly as your name appears on this Note)

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EX-10.31

Series B

THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER ANY FEDERAL OR STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR OTHERWISE DISPOSED OF ABSENT REGISTRATION UNDER THE SECURITIES ACT OF 1933 AND ANY APPLICABLE STATE SECURITIES LAWS UNLESS AND UNTIL THE HOLDER HEREOF PROVIDES (i) INFORMATION REASONABLY NECESSARY TO CONFIRM THAT SUCH REGISTRATION IS NOT REQUIRED OR (ii) AN OPINION OF COUNSEL TO THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED.

CONVERTIBLE SUBORDINATED PROMISSORY NOTE

$___________ _____________, 2006

THE BEARD COMPANY, an Oklahoma corporation (the “Company”), promises to pay to the order of ____________________________________________ at Suite 320, 5600 North May Avenue, Oklahoma City, Oklahoma 73112, or at such other place as may be designated in writing by the Holder, the amount of _____________________________________ DOLLARS ($________.00) and interest thereon at the rate stated below.

The holder of this Note shall be referred to as the “Holder.”

This Note is part of a series of promissory notes issued in connection with a private offering (the “Private Placement Offering”) made by the Company pursuant to a Private Placement Memorandum dated October 3, 2006. The promissory notes shall be referred to collectively as the “Notes.”

1.Terms of the Note

1.1 Payment of Principal and Interest.

(a)Prior to an Event of Default, the unpaid principal balance of this Note will accrue interest at 12% per annum. Commencing on November 30, 2006, and continuing on each May 30 and November 30 thereafter until the Maturity Date the Company shall pay all accrued interest.

(b)All interest will be computed on the basis of a 365-day year for the actual number of days in the period for which interest is payable.

(c)The entire unpaid principal balance of this Note plus all accrued interest shall be due and payable without notice on November 30, 2008 (the “Maturity Date”).

(d)All payments received by the Holder shall be applied first to interest and any balance shall be applied to principal. During the existence of any Event of Default, the Holder may apply payments received as the Holder may determine.

(e)The obligations of the Company to pay principal and interest and any other amounts under this Note are collectively referred to as the “Obligations.”

1.2Payments. Whenever any payment required by this Note is due on a day other than a Business Day, the payment shall be made on the next succeeding Business Day and the payment shall include interest for the days the payment due date was so extended.

1.3Expenses. The Company will pay to the Holder its reasonable attorneys' fees, court costs, and other expenses incurred in collecting this Note.

1.4Additional Interest. Any amount not paid when due shall accrue interest at the rate specified above plus 3% per annum (the “Additional Interest”) and all Additional Interest shall be paid as a condition precedent to curing any Event of Default hereunder.

1.5Events of Default. Events of Default are: (a) the Company’s failure to pay any Obligation when due that is not cured within 30 days; (b) the occurrence of any “Event of Default” as defined in the Security Agreement; or (c) the Company’s failure to perform its obligations under Section 2.9 of this Note when due.

1.6Acceleration. Subject to the provisions of the Security Agreement, upon the occurrence of an Event of Default, the Holder may at any time thereafter declare the Obligations evidenced hereby immediately due and payable.

2.Conversion of the Note

2.1Conversion Agent. The Company shall initially serve as its own conversion agent. The Company may appoint another conversion agent at any time. The Company shall send Holder written notice within 30 days of any change of conversion agent. References in this Note to the “Conversion Agent” shall refer to the Company unless the Company has appointed another conversion agent in which case “Conversion Agent” shall mean the acting conversion agent appointed by the Company.

2.2Conversion Privilege. At any time following the date of original issuance of this Note and prior to the close of business on the business day immediately preceding August 30, 2008, the Holder of this Note may convert such Note or any portion thereof into shares of the Company’s common stock (the “Common Stock”) (the shares of Common Stock issuable upon such conversion, the “Conversion Shares”), at the Conversion Price then in effect. The number of shares of Common Stock issuable upon conversion of this Note shall be determined by dividing the principal amount of the Note or portion thereof surrendered for conversion by the Conversion Price in effect on the conversion date. The initial conversion price of the Note is $1.00 per share (the “Conversion Price”) and is subject to adjustment as provided in Section 2.7.

Upon conversion of only a portion of the principal balance of the Notes surrendered for conversion, the Company shall issue and deliver upon the written order of the Holder, at the expense of the Company, a new Note for any remaining unpaid principal balance so surrendered as well as a certificate or certificates for the number of shares of Common Stock to which such Holder is entitled, as provided below. The Holder is not entitled to any rights of a holder of Common Stock until such Holder has converted this Note into Common Stock.

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2.3Conversion Procedure. To convert this Note, the Holder must (i) complete and manually sign the Conversion Notice, a form of which is attached hereto as Exhibit A and deliver it to the Conversion Agent (ii) surrender the Note to the Conversion Agent, (iii) furnish appropriate endorsements and transfer documents to theConversion Agent and (iv) pay any transfer or other tax, if required. The date on which the Holder satisfies all of the foregoing requirements is the conversion date. As soon as practicable after the conversion date, the Company shall deliver to the Holder through its transfer agent a certificate for the number of whole shares of Common Stock issuable upon the conversion.

No fractional shares of Common Stock shall be issued upon conversion of the Note. If more than one Note shall be surrendered for conversion at one time by the same holder, the number of full shares which shall be issuable upon conversion shall be computed on the basis of the aggregate principal amount of the Notes (or specified portions thereof to the extent permitted hereby) so surrendered. If any fractional share of Common Stock would be issuable upon the conversion of any Note or Notes, the Conversion Agent shall make an adjustment thereof in cash at the current market value thereof. For these purposes, the current market value of a share of Common Stock shall be the closing price on the first business day immediately preceding the day on which the Note or Notes are deemed to have been converted.

The person in whose name the certificate is registered shall be deemed to be a stockholder of record on the conversion date; provided, however, that no surrender of this Note on any date when the stock transfer books of the Company shall be closed shall be effective to constitute the person or persons entitled to receive the shares of Common Stock upon such conversion as the record holder or holders of such shares of Common Stock on such date, but such surrender shall be effective to constitute the person or persons entitled to receive such shares of Common Stock as the record holder or holders thereof for all purposes at the close of business on the next succeeding day on which such stock transfer books are open; provided, further, that such conversion shall be at the Conversion Price in effect on the date that this Note shall have been surrendered for conversion, as if the stock transfer books of the Company had not been closed. Upon conversion of this Note, Holder shall no longer be a Holder of this Note.

No payment or adjustment will be made for accrued interest on a converted Note or for dividends or distributions on shares of Common Stock issued upon conversion of a Note, but if any Holder surrenders this Note for conversion between the record date for the payment of an installment of interest and the next interest payment date, then, notwithstanding such conversion, the interest payable on such interest payment date shall be paid to the Holder on such record date.

If the Holder converts more than one Note at the same time, the number of shares of Common Stock issuable upon the conversion shall be based on the aggregate principal amount of Notes converted.

2.4Forced Conversion. At any time after March 31, 2008, if the weighted average closing price of the Company’s common stock has been more than two times the Conversion Price for forty (40) consecutive trading days, the Company may give the Note holders written notice that they must convert their Notes within thirty (30) days after the date of such notice or that the Notes will terminate and become void as of 5:00 p.m., New York time on the thirty-first (31^st) day (the “Forced Conversion Date”) after the date of such notice.

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Upon such Forced Conversion, the person or persons entitled to receive the shares of Common Stock issuable upon such conversion will be treated for all purposes as the record holder or holders of such Common Stock on the Forced Conversion Date whether or not such holder or holders shall have surrendered their Notes to the Conversion Agent. Upon the Forced Conversion Date, the principal balance of the Notes shall be deemed paid and all interest on the Notes shall cease to accrue. As soon as practicable after the surrender in accordance with the procedures set forth in Section 2.3, the Company shall then issue and the Conversion Agent shall deliver to such holder a certificate or certificates for the number of shares of Common Stock to which such holder shall be entitled.

2.5Taxes on Conversion. If the Holder converts a Note, he shall pay any documentary, stamp or similar issue or transfer tax due on the issue of shares of Common Stock upon such conversion. The Conversion Agent may refuse to deliver the certificates representing the Common Stock being issued in a name other than the Holder’s name until the Conversion Agent receives a sum sufficient to pay any tax which will be due because the shares are to be issued in a name other than the Holder’s name. Nothing herein shall preclude any tax withholding required by law or regulations.

2.6Company To Provide Stock. The Company shall reserve out of its authorized but unissued Common Stock a sufficient number of shares of Common Stock to permit the conversion of all outstanding Notes for shares of Common Stock. The shares of Common Stock or other securities issued upon conversion of this Notes shall bear the following legend:

THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER ANY FEDERAL OR STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR OTHERWISE DISPOSED OF ABSENT REGISTRATION UNDER THE SECURITIES ACT OF 1933 AND ANY APPLICABLE STATE SECURITIES LAWS UNLESS AND UNTIL THE HOLDER HEREOF PROVIDES (i) INFORMATION REASONABLY NECESSARY TO CONFIRM THAT SUCH REGISTRATION IS NOT REQUIRED OR (ii) AN OPINION OF COUNSEL TO THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED.

The Company covenants that all shares of Common Stock delivered upon conversion of the Notes, shall be duly authorized, validly issued, fully paid and non-assessable and shall be free from preemptive rights and free of any lien or adverse claim.

2.7Adjustment of Conversion Price. The Conversion Price shall be that price set forth in Section 2.2 of this Note and shall be adjusted from time to time by the Conversion Agent in the event the Company shall (i) pay a dividend or other distribution in shares of Common Stock to holders of Common Stock, (ii) subdivide its outstanding Common Stock into a greater number of shares, (iii) combine its outstanding Common Stock into a smaller number of shares or (iv) reclassify its outstanding Common Stock, the Conversion Price in effect immediately prior thereto shall be adjusted so that the Holder of any Note thereafter surrendered for conversion shall be entitled to

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receive the number of shares of Common Stock which it would have owned or have been entitled to receive had such Note been converted immediately prior to the happening of such event. An adjustment made pursuant to this Section 2.7 shall become effective immediately after the record date in the case of a dividend or distribution and shall become effective immediately after the effective date in the case of subdivision, combination or reclassification.

2.8Notice of Adjustment. Whenever the Conversion Price is adjusted the Company shall promptly mail to the Holder a notice of the adjustment briefly stating the facts requiring the adjustment and the manner of computing it.

2.9 Notice of Certain Transactions. In case:

(a)the Company shall declare a dividend (or any other distribution) on its Common Stock (other than in cash out of retained earnings); or

(b)of any reclassification of the Common Stock of the Company (other than a subdivision or combination of its outstanding Common Stock, or a change in par value, or from par value to no par value, or from no par value to par value), or of any consolidation or merger to which the Company is a party and for which approval of any stockholders of the Company is required, or of the sale or transfer of all or substantially all of the assets of the Company; or

(c)of the voluntary or involuntary dissolution, liquidation or winding-up of the Company;

the Company shall cause to be mailed to each the Holder at its address appearing below or such other address as specified by the Holder, as promptly as possible but in any event at least ten days prior to the applicable date hereinafter specified, a notice stating (i) the date on which a record is to be taken for the purpose of a dividend, or, if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend is to be determined, or (ii) the date on which such reclassification, consolidation, merger, sale, transfer, dissolution, liquidation or winding-up is expected to become effective or occur, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their Common Stock for securities or other property deliverable upon such reclassification, consolidation, merger, sale, transfer, dissolution, liquidation or winding-up. Failure to give such notice, or any defect therein, shall not affect the legality or validity of such dividend, distribution, reclassification, consolidation, merger, sale, transfer, dissolution, liquidation or winding-up.

2.10Effect of Reclassification, Consolidation, Merger or Sale on Conversion Privilege. If any of the following shall occur, namely: (i) any reclassification or change of outstanding shares of Common Stock (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination); (ii) any consolidation, combination or merger to which the Company is a party other than a merger in which the Company is the continuing corporation and which does not result in any reclassification of, or change (other than a change in name, or par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination) in, outstanding shares of Common Stock; or (iii) any sale or conveyance of all or substantially all of the assets of the Company (“Asset Sale”), then lawful

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provision shall be made so that the Holder shall thereafter be entitled to receive upon conversion of the Note, at a per share valuation equal to the Conversion Price then in effect, the number of shares of stock or other securities or property of the successor Company resulting from such reclassification, consolidation, consolidation, combination, merger, or Asset Sale that the Holder of the would have been entitled to receive in such reclassification, consolidation, consolidation, combination, merger, or Asset Sale if the Note had been converted immediately before such reclassification, consolidation, consolidation, combination, merger, or Asset Sale, all subject to further adjustment as provided herein. The foregoing provisions of this Section 2.10 shall similarly apply to successive reorganizations, consolidations, mergers, sales and transfers and to the stock or securities of any other Company that are at the time receivable upon the conversion of the Notes.

3.Subordination of the Note

3.1Note Subordinate to Senior Indebtedness. The Obligations are and shall be junior and subordinate in right of payment, exercise of remedies, and all other respects to the prior indefeasible payment in full of the Senior Indebtedness. Without limiting the foregoing, the priority of the security interest granted in the Security Agreement shall be subordinate in all respects to the priority of any security interest or lien granted to or for the benefit of the holders of the Senior Indebtedness. So long as there is no default under any of the Senior Indebtedness and the Company’s payment of the Obligations would not result in a default thereunder, the Company may pay the Obligations in accordance with the terms of this Note. The provisions of this Section 3.1 are made for the benefit of the holders of Senior Indebtedness. The holders of the Senior Indebtedness need not prove reliance on these subordination provisions.

3.2Default on Senior Indebtedness. In the event and during the continuation of any default in the payment of principal, premium, interest or any other payment due on any Senior Indebtedness, or in the event that any event of default with respect to any Senior Indebtedness shall have occurred and be continuing and shall have resulted in such Senior Indebtedness becoming or being declared due and payable prior to the date on which it would otherwise have become due and payable (unless and until such event of default shall have been cured or waived or shall have ceased to exist and such acceleration shall have been rescinded or annulled) or in the event any judicial proceeding such event of default, then no payment shall be made by the Company with respect to the principal of, or interest on, this Note; provided, however, nothing in this Section shall prohibit the Holder from accelerating the Obligations due under this Note. In the event that, notwithstanding the foregoing, any payment shall be received by the Holder when such payment is prohibited by this Section 3.2, such payment shall be held in trust for the benefit of, and shall be paid over or delivered to, the holders of Senior Indebtedness or their respective representatives, or to the trustee or trustees under any indenture pursuant to which any of such Senior Indebtedness may have been issued, as their respective interests may appear, but only to the extent that the holders of the Senior Indebtedness (or their representative or representatives or a trustee) notify the Holder within 30 days of such payment of the amounts then due and owing on the Senior Indebtedness and only the amounts specified in such notice to the Holder shall be paid to the holders of Senior Indebtedness; provided, however, that holders of Senior Indebtedness shall not be entitled to receive payment of any such amounts to the extent that such holders would be required by the subordination provisions of such Senior Indebtedness to pay such amounts over to the obligees on trade accounts payable or other liabilities arising in the ordinary course of the Company’s business.

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3.3Definition of Senior Indebtedness. “Senior Indebtedness” means, unless expressly subordinated to or made on a parity with the amounts due under this Note, the principal of (and premium, if any), unpaid interest on, penalties, amounts reimbursable, fees, expenses, costs of enforcement and any other amounts due in connection with (i) indebtedness of the Company, or with respect to which the Company is a guarantor, to banks, commercial finance lenders, insurance companies, leasing or equipment financing institutions or other lending institutions regularly engaged in the business of lending money (excluding venture capital, investment banking or similar institutions which sometimes engage in lending activities but which are primarily engaged in investments in equity securities), which is for money borrowed, or purchase or leasing of equipment in the case of lease or other equipment financing, whether or not secured, (ii) indebtedness of the Company, or with respect to which the Company is a guarantor, to any person or entity making any loan or loans to finance, in whole or part, any pond fines or similar coal recovery project or operation in which the Company and/or any one or more of its subsidiaries are involved or participating, either directly or through an entity in which any of them has an equity or ownership interest, and (iii) any such indebtedness or any debentures, notes or other evidence of indebtedness issued in exchange for such Senior Indebtedness, or any indebtedness arising from the satisfaction of such Senior Indebtedness by a guarantor.

4.Piggyback Registration Rights

4.1Participation. Subject to Section 4.2 and 4.3 hereof, if at any time after the date hereof the Company proposes to file a Registration Statement (other than a registration on Form S-4 or S-8 or any successor form to such Forms or any registration of securities as it relates to an offering and sale to management of the Company pursuant to any employee stock plan or other employee benefit plan arrangement) with respect to an offering that includes any shares of Common Stock, then the Company shall give notice of the proposed filing (the “Piggyback Notice”) to all Registrable Security Holder as promptly as practicable (but in no event less than fifteen (15) days before the anticipated filing date). The Piggyback Notice shall offer the Registrable Security Holders the opportunity to register such number of shares of Registrable Securities as the Registrable Security Holders may request and shall set forth (i) the anticipated filing date of such Registration Statement and (ii) the number of shares of Common Stock that is proposed to be included in such Registration Statement. The Company shall include in such Registration Statement such shares of Registrable Securities for which it has received written requests to register such shares within ten (10) days after the Piggyback Notice has been given.

4.2Underwriter’s Cutback. Notwithstanding the foregoing, if a Registration pursuant to this Article 4 involves an underwritten offering and the managing underwriter or underwriters of such proposed underwritten offering delivers an opinion to the Registrable Security Holders that the total or kind of securities which such Registrable Security Holders and any other persons or entities intend to include in such offering are reasonably likely to significantly adversely affect the price, timing or distribution of the securities offered in such offering, then the Company shall include in such Registration:

(a) If such Registration was a primary registration by the Company of its securities, the Company will include in such Registration to the extent of the number of securities which the managing underwriter advises can be sold in such Underwritten Offering: first, the securities proposed by the Company to be sold for its own account; second, any

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Registrable Securities requested to be included in such Registration by the Registrable Security Holders, pro rata on the basis of the number of securities sought to be sold by the requesting Registrable Security Holders; and third, other securities of the Company proposed to be included in such Registration, allocated among the Company and the holders thereof in accordance with the priorities then existing among the Company and such holders.

(b) If such Registration was requested other than by the Registrable Security Holders or the Company, the Company will include in such Registration to the extent of the number of securities which the managing underwriter advises can be sold in such Underwritten Offering: first, the securities proposed to be sold by the security holder initiating the Registration; second, any Registrable Securities requested to be included in such Registration, pro rata on the basis of the number of securities sought to be sold by the requesting Registrable Security Holders; third, any securities of the Company proposed by any other Persons to be included in such Registration, pro rata on the basis of the number of securities proposed to be sold by the requesting Persons; and fourth the securities proposed by the Company to be sold for its own account.

4.3Limitation on Participation. Holders of Registrable Securities that are able to sell 100% of their Registrable Securities without registration under Rule 144 of the Securities Act of 1933, as amended, within a period of three consecutive months are not entitled to any Piggyback Registration Rights under this Article 4.

4.4Expenses. The Company will pay all Registration Expenses in connection with each registration of Registrable Securities requested pursuant to this Article 4.

4.5Company Control. The Company may decline to file a Registration Statement after giving the Piggyback Notice, or withdraw a Registration Statement after filing and after such Piggyback Notice, but prior to the effectiveness of the Registration Statement, provided that the Company shall promptly notify each Registrable Security Holder in writing of any such action and provided further that the Company shall bear all reasonable expenses incurred by such Registrable Security Holder or otherwise in connection with such withdrawn Registration Statement.

5.Miscellaneous

5.1Governing Law. This Note is to be construed according to the internal laws of the State of Oklahoma.

5.2Loss, Theft, Destruction or Mutilation of Note. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Note and, in the case of loss, theft or destruction, delivery of an indemnity agreement reasonably satisfactory in form and substance to the Company or, in the case of mutilation, on surrender and cancellation of this Note, the Company shall execute and deliver, in lieu of this Note, a new Note executed in the same manner as this Note, in the same principal amount as the unpaid principal amount of this Note and dated the date to which interest shall have been paid on this Note or, if no interest shall have yet been so paid, dated the date of this Note.

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5.3Pari Passu Notes. The Holder acknowledges and agrees that the payment of all or any portion of the outstanding principal amount of and all interest on this Note shall be pari passu in right of payment and in all other respects to the other Notes issued by the Company in the Private Placement Offering. In the event the Holder receives payments in excess of its pro rata share of Company’s payments to the holders of all of the Notes, then the Holder shall hold in trust all such excess payments for the benefit of the holders of the other Notes and shall pay such amounts held in trust to such other holders upon demand by such holders.

5.4Payment. All payments under this Note shall be made in lawful tender of the United States.

5.5Usury. In the event any interest is paid on this Note which is deemed to be in excess of the then legal maximum rate, then that portion of the interest payment representing an amount in excess of the then legal maximum rate shall be deemed a payment of principal and applied against the principal of this Note.

5.6Notices. Any notice, request or other communication required or permitted hereunder shall be given in accordance with the Subscription Agreement.

5.7Successors and Assigns. This Note may be only assigned or transferred by the Holder in compliance with all applicable federal and state securities law. The rights and obligations of the Company and the Holder of this Note shall be binding upon and benefit the successors, permitted assigns, heirs, administrators and transferees of the parties.

IN WITNESS WHEREOF, the Company has executed this instrument effective the date first above written

THE BEARD COMPANY, an Oklahoma corporation

By

Herb Mee, Jr., President

(the “Company”)

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EXHIBIT A

CONVERSION NOTICE

To convert this Note into common stock of the Company, check the box: o

To convert only part of this Note, state the amount:

[ $__________ ]

If you want the stock certificate made out in another person’s name, fill in the form below:

_________________________________________________________________

(Insert other person’s social security or tax I.D. number)

_________________________________________________________________

_________________________________________________________________

_________________________________________________________________

(Print or type assignee’s name, address and zip code)

_________________________________________________________________

Date: ____________________

(Signature)

_________________________________________________________________

(Sign exactly as your name appears on this Note)

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EX-10.45

AMENDED GUARANTY

For value received, Beard Technologies, Inc., an Oklahoma corporation whose address is Enterprise Plaza, Suite 320, 5600 North May Avenue, Oklahoma City, Oklahoma 73112, guarantees payment of principal and interest of that certain Fourth Amended and Restated Promissory Note executed on July 26, 2006, but effective for all purposes as of October 7, 2005. This Guaranty supersedes and replaces our previous Guarantees dated September 29, 2005, February 7, 2006, March 22, 2006 and May 1, 2006.

Dated: July 26, 2006 BEARD TECHNOLOGIES, INC.

By   /s/Herb Mee, Jr.

Herb Mee, Jr., Vice President

EX-10.49

Corrected

Exhibit A

Schedule of Advances

Date	Amount of Advance
October 7, 2005	$    400,000.00
November 4, 2005	700,000.00
January 24, 2006	250,000.00
February 2, 2006	625,000.00
February 8, 2006	750,000.00
February 22, 2006	865,000.00
March 8, 2006	1,015,000.00
March 22, 2006	766,834.56
March 23, 2006	123,165.44
April 12, 2006	415,000.00
May 4, 2006	940,000.00
May 23, 2006	835,000.00
June 21,2006	655,000.00
July 3, 2006	660,000.00
July 26, 2006	600,000.00
August 14, 2006	675,000.00
August 28, 2006	530,000.00
September 29, 2006*	(2,800,000.00)
October 2, 2006	965,000.00
October 4, 2006	129,000.00
October 18, 2006	717,000.00
November 9, 2006	729,000.00
Total	$10,545,000.00

_________________

*To reflect the conversion of $2,800,000 of the previous advances to equity in Beard Pinnacle, LLC.

(Exhibit A as amended effective November 9, 2006)	/s/HMJr
	(Initials)

EX-10.50

Exhibit A

Schedule of Advances

Date	Amount of Advance
October 7, 2005	$    400,000.00
November 4, 2005	700,000.00
January 24, 2006	250,000.00
February 2, 2006	625,000.00
February 8, 2006	750,000.00
February 22, 2006	865,000.00
March 8, 2006	1,015,000.00
March 22, 2006	766,834.56
March 23, 2006	123,165.44
April 12, 2006	415,000.00
May 4, 2006	940,000.00
May 23, 2006	835,000.00
June 21,2006	655,000.00
July 3, 2006	660,000.00
July 26, 2006	600,000.00
August 14, 2006	675,000.00
August 28, 2006	530,000.00
September 29, 2006*	(2,800,000.00)
October 2, 2006	965,000.00
October 4, 2006	129,000.00
October 18, 2006	717,000.00
November 9, 2006	729,000.00
November 27, 2006	400,000.00
Total	$10,945,000.00

_______________

*To reflect the conversion of $2,800,000 of the previous advances to equity in Beard Pinnacle, LLC.

(Exhibit A as amended effective November 27, 2006)	/s/HMJr
	(Initials)

EX-10.51

Exhibit A

Schedule of Advances

Date	Amount of Advance
October 7, 2005	$    400,000.00
November 4, 2005	700,000.00
January 24, 2006	250,000.00
February 2, 2006	625,000.00
February 8, 2006	750,000.00
February 22, 2006	865,000.00
March 8, 2006	1,015,000.00
March 22, 2006	766,834.56
March 23, 2006	123,165.44
April 12, 2006	415,000.00
May 4, 2006	940,000.00
May 23, 2006	835,000.00
June 21,2006	655,000.00
July 3, 2006	660,000.00
July 26, 2006	600,000.00
August 14, 2006	675,000.00
August 28, 2006	530,000.00
September 29, 2006*	(2,800,000.00)
October 2, 2006	965,000.00
October 4, 2006	129,000.00
October 18, 2006	717,000.00
November 9, 2006	729,000.00
November 27, 2006	400,000.00
December 21, 2006	265,000,000
Total	$11,210,000.00

_______________

*To reflect the conversion of $2,800,000 of the previous advances to equity in Beard Pinnacle, LLC.

(Exhibit A as amended effective December 21, 2006)	/s/HMJr
	(Initials)

EX-10.62

AMENDED AND RESTATED

AGREEMENT

for a

POND FINES RECOVERY FACILITY

between

BEARD PINNACLE, LLC

and

PINNACLE MINING COMPANY, LLC

(Original Agreement dated September 7, 2004)

(Amended as of July 1, 2005)

(Amended and Restated Amendment dated October 31, 2006

Effective as of September 1, 2005)

This Amended and Restated Agreement (this “Agreement”), dated as of October 31, 2006 but effective as of this September 1, 2005, by and between Pinnacle Mining Company LLC, a limited liability company (herein “PMC”), and Beard Pinnacle, LLC, an Oklahoma limited liability company (herein “BP”)

RECITALS:

Whereas, PMC is willing to lease to BP the necessary property for construction and operation of a Pond Fines Recovery Facility, to permit BP to process Raw Slurry and to accept from BP all or a portion of the Recovered Pond Fines in exchange for a processing fee in accordance with the terms of this Agreement. The Pond Fines Recovery Facility will be located at the Smith Branch Coal Refuse Disposal Facility at PMC’s Pinnacle Preparation Plant near Pineville, Wyoming County, West Virginia. The Pond Fines Recovery Facility is depicted on the map entitled BTI Recovery Plant – Layout and Site attached hereto as Exhibit A.

Whereas, BP intends to construct and operate a pond fine recovery plant, a recovery dredge, a power distribution system, and other miscellaneous capital facilities necessary to process and deliver reclaimed pond fines to the Delivery Point at PMC’s Pinnacle Preparation Plant - as depicted on the map entitled BTI Delivery Point that is attached hereto as Exhibit A. Now therefore, in consideration of the mutual covenants set forth in this agreement, the Parties, intending to be legally bound, hereby agree as follows:

1.0 Definitions:

Each term set forth below in this Section 1.0 in bold print is a defined term. Each other term in this Agreement that is set forth in parentheses and enclosed by quotation marks is also a defined term. Certain defined terms used in this Agreement are defined in this Section 1.0 and the remaining defined terms used in this Agreement are defined in the body, the preamble and the recitals of this Agreement. When used in this Agreement, the terms defined in this Agreement shall have the meanings ascribed to them in this Agreement. The following terms shall have the meanings specified adjacent to them (those meanings to be equally applicable to the singular and plural forms thereof):

Approval - Acceptance by PMC of a process, procedure, design or other stipulation submitted by BP for review by PMC, as required elsewhere in this Agreement. By Approval of a process, procedure or other stipulation, PMC acknowledges and approves the intended action by Beard, but PMC does not assume any responsibility or liability for the accuracy, validity or economic viability of an approved process, procedure, or any other stipulation. Approvals must be granted in writing.

Clean Coal - Conforming Clean Coal or Non-Conforming Clean Coal processed from Raw Slurry at the Pond Fines Recovery Facility.

Conforming Clean Coal - Coal processed at the Pond Fines Recovery Facility that either meets or improves upon Quality Specifications and may be accepted by PMC at the Standard Compensation Rate.

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Delivery Point - A location where all coal processed by BP and accepted by PMC shall be delivered by BP. The Delivery Point is located west of the DTE facility and near the Pinnacle Preparation Plant clean coal stockpile as shown on Exhibit A.

Minimum Base Amount - The minimum amount (20,000 tons) of Conforming Clean Coal that PMC shall accept (and with respect to which it will, if delivered as provided herein, pay as a processing fee to Beard in each month during the Term of this Agreement subject to the terms hereof).

Non-Conforming Clean Coal - Clean Coal that does not meet or improve upon the Quality Specifications.

Operational Date - The first day of the calendar month immediately following the day that the Pond Fines Recovery Facility is (i) fully staffed and equipped to conduct BP’s intended operations at that Facility and (ii) able to operationally produce 20,000 tons of Conforming Clean Coal during a calendar month.

Operations Plan - A written submittal from BP to PMC describing anticipated operational events for the initial Term of this Agreement. It shall include (i) a timetable in the form of a Gantt Chart for the completion of the construction of all facilities contemplated by this Agreement, and plant start-up and commissioning, (ii) production and quality forecasts, and (iii) manning chart, and (iv) other material matters relevant to the conduct of Pond Recovery Operations.

Parties - PMC and BP

Penalties - Price reductions to the Standard Compensation Rate based upon Clean Coal deliveries from BP to PMC that do not meet the quality specifications set out in Section 13.2 of this Agreement.

PMC’s Thickener Underflow - Waste material resulting from the operation of Pinnacle Preparation Plant that is pumped and deposited in the Smith Branch Refuse Impoundment, or delivered directly to the Pond Fines Recovery Facility.

Pond Fines Recovery Facility - The complete facility required to excavate, process, produce, deliver and receive, as applicable, Raw Slurry and Clean Coal. The facility includes but is not limited to a processing plant, a refuse dewatering plant, a dredge and one or more access roads, an electric substation, and miscellaneous utilities, pipes and valves.

Pond Recovery Operations - All operations at the Pond Fines Recovery Facility which are intended to convert or facilitate the conversion of Raw Slurry into Clean Coal and tailings, or are incidental thereto. Those operations include but are not limited to (i) the dredging, removal and transport of raw slurry from the Slurry Pond Site to the Pond Fines Recovery Facility, (ii) the washing of the Raw Slurry, (iii) the drying of the Clean Coal and Tailings, (iv) the re-deposition of the Tailings in the impoundment, (v) the delivery of Clean Coal to the Delivery Point, (vi) the treatment of process water for both the Pond Fines Recovery Facility and Pinnacle Preparation Plant and (vii) all other activities as are necessary or incidental to the foregoing.

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Processing Fee - The Standard Compensation Rate paid by PMC to BP for excavating, transporting and cleaning Raw Slurry; including the sampling, analyzing and transporting of the clean coal from the Pond Fines Recovery Facility to the Delivery Point, and the transporting and disposing of Tailings and the treatment of process water for both the Pond Fines Recovery Facility and the Pinnacle Preparation Plant.

Production Year - A 12 month period that commences with the beginning of the first full month after the Operational Date and ends 12 months later. The same anniversary dates serve as the beginning and ending dates for all Production Years included in the Agreement.

Profit Share Credit - A credit to be applied against amounts due to BP from PMC calculated pursuant to Section 13.5 of this Agreement.

Quality Specifications - The maximum quantitative level of moisture, ash, sulfur and oxidation (as provided in Section 10.2 of this Agreement) that Clean Coal can contain in order to be defined as Conforming Clean Coal and be subject to the Standard Compensation Rate.

Raw Slurry - All coal fines, coal waste, thickener undertow, or other materials deposited in the Smith Branch Refuse Impoundment or contained in the thickener discharge piping.

Raw Slurry Cost - Applicable for direct sales by BP as defined in Section 13.5.

Slurry Pond Site - The Smith Branch Refuse Impoundment as shown and depicted as such on Exhibit A.

Standard Compensation Rate - As defined in Section 3.2.

Tailings - Waste material resulting from the processing of Raw Slurry and the production of Clean Coal at the Pond Fines Recovery Facility, including the remnant of Raw Slurry processed at the Pond Fines Recovery Facility that did not yield a marketable clean coal product.

Term - The period during which this Agreement is in full force and effect, as provided in Section 3.1.

Toe Ponds - Existing sedimentation ponds, as shown on Exhibit A, that are located at the downstream base of the Smith Branch embankment.

Ton(s) - Two Thousand (2000) pounds of dry coal calculated on a moisture free basis.

Undesirable Flowability - A condition where either the Clean Coal by itself, or the blend of Clean Coal and Mine 50 coal causes plugging, fouling and jamming of chutes, silos, rail cars and barges in the storage or transportation system.

2.0 PMC Property

Section 2.1 - Non-Exclusive Easement - PMC shall grant and by this Agreement does grant to BP a non-exclusive right and easement (i) for access by vehicular traffic and pedestrians over and across the lands leased or owned by PMC, (ii) along the haul roads identified in Exhibit A

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for access to, from and between the public road, and the Slurry Pond Site, (iii) on and over the Slurry Pond Site for the purpose of Pond Recovery Operations, including the right to dredge, and (iv) for installation of utilities which BP reasonably believes are necessary to conduct the Pond Recovery Operations provided, however, that Beard’s use of easement shall not unreasonably interfere with PMC’s operations. The location of utilities shall be subject to the written approval of PMC. Such Approval will not be unreasonably withheld, conditioned or delayed, prior to the installation of utilities along the easements.

BP shall be responsible for maintaining all haul roads used exclusively by BP for the delivery of coal, except for haul roads used by other parties for delivery of coal or other materials. If other parties use the haul roads, the cost of road maintenance shall be proportionally split between BP and such other parties in accordance with tons of coal respectively hauled.

Section 2.2 - Lease for Recovery Operations - PMC shall grant or cause to grant a lease (in the form of the attached Exhibit C) for the amount of $1.00 payable by BP, that will encompass all the lands and property shown on Exhibits A for (i) the construction, installation, and operation of the Pond Fines Recovery Facility, a refuse plant, and an electrical substation, (ii) the stockpiling of Clean Coal, (iii) storage and office trailers, (iv) the storage of supplies and spare parts, (v) for the parking of equipment and employee vehicles, and (vi) other matters incidental to and in furtherance of the Pond Recovery Operations. The term of the lease shall run concurrent with the Term.

Section 2.3 - Raw Slurry - PMC shall grant BP the exclusive right to remove and recover Raw Slurry for processing in the Pond Fines Recovery Facility (i.e. subject to the terms of this Section 2.3). This processing shall include the re-deposition by BP of Tailings resulting from the Pond Recovery Operations into the Smith Branch Refuse Impoundment. BP’s disposal of Tailings into the Smith Branch Refuse Impoundment shall be in accordance with all applicable plans, laws, or regulations stipulated in active permits concerning the disposal of those Tailings and as approved by PMC, which Approval will not be unreasonably withheld, conditioned or delayed if the disposal or the proposed disposal complies with those plans, laws, regulations and permits. Raw Slurry shall be available to BP on an “as-is” basis where deposited by PMC within the Smith Branch Refuse Impoundment or available from PMC’s Thickener Underflow discharge pipe. Title of ownership to Raw Slurry and processed clean coal shall remain with PMC. PMC shall pay BP a fee for processing and delivering clean coal acceptable to PMC to the delivery point. Title to coal not accepted by PMC will vest in BP as provided in Section 13.5. BP shall dispose of the Tailings in the manner required by this Agreement and/or applicable law and in such manner as not to interfere with PMC operations or operations conducted under this Agreement.

3.0 Term of Agreement

Section 3.1 - Term - Unless sooner terminated pursuant to Section 16 of this Agreement, the initial Term of this Agreement (the “Term”) shall commence on the date hereof and shall end six years from that date (the “Initial Term”). The Initial Term shall be renewable for a second term of (4) four years (the “Second Term”), if sixty (60) days prior to the expiration of the Initial Term exercised by notice pursuant to Article 15 of the General Terms and Conditions (Exhibit B) the Parties meet to discuss and determine if (i) there remain significant amounts of

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recoverable clean coal in the Pond, (ii) BP is in substantial compliance with all of its covenants and obligations under this Agreement and (iii) the parties mutually agree to renew, which agreement will not be unreasonably withheld, delayed or conditioned by either party if the conditions in items (i) and (ii) of this sentence are satisfied. The Second Term shall commence immediately following expiration of the Initial Term. The term of all easements, exclusive and non-exclusive rights, and leases granted in Sections 2.1, 2.2, and 2.3 shall run concurrently with the term of this agreement.

Section 3.2 - Market Price Cost Re-openers - With the exception of the penalties and the discounts set out in Sections 13.2 and 13.3 of this Agreement, the Standard Compensation Rate for Conforming Clean Coal processed and delivered by BP to the Delivery Point and acceptable to PMC will be $24.00 per Ton (moisture-free dry basis) for the first four years of the Initial Term. On the (i) four year anniversary of the Agreement, (ii) six year anniversary of the Agreement, and (iii) the eight year anniversary of the Agreement, either Party seeking an adjustment to the Standard Compensation Rate can request a Market Price Re-opener by giving the other party 90 days notice of its intent to call for a re-opener. The Parties will use their best commercial efforts in good faith to negotiate an adjusted Standard Compensation Rate that takes into account published changes in the cost of power, labor and supplies (a recognized index) in the previous 4 years.

4.0 Facility Design

Section 4.1 – Delivery of Proposed Design - Within (30) Thirty days after the date hereof, BP shall submit a proposed design for a two hundred (200) TPH Pond Fines Recovery Facility to PMC for Approval. Within fourteen (14) days after PMC’s receipt of BP’s proposed design of that Facility, PMC either will grant Approval of BP’s design or will submit to BP its written proposed revisions to the design of that Facility. If PMC submits proposed revisions to BP’s proposed design, BP will promptly incorporate into the proposed design of the Facility all mutually acceptable revisions and resubmit the design of the Facility to PMC for its Approval.

Within seven (7) days after PMC’s receipt of that revised design, PMC will provide written Approval or rejection of the design to BP. Promptly after receipt of PMC’s written Approval of the proposed design of the Pond Fines Recovery Facility and BP’s receipt of required state and federal regulatory authorizations, BP, at its sole expense, shall commence construction and installation of the Pond Fines Recovery Facility.

Section 4.2 - Bonus/Penalty

BP will use its commercially reasonable efforts to bring the production and staffing level of the Pond Fines Recovery Facility up to 20,000 tons of Clean Coal per month (i.e. “Operational Date”) within 240 calendar days of receiving all of the required Federal, State and local authorizations needed, to begin the construction of the Pond Recovery Facility and installation of the various ancillary components related to power distribution, pond water level controls, delivery system, and make-up water system.

In the event that the Pond Recovery Facility is producing the Minimum Base Amount earlier than the Operational Date, PMC will grant bonus compensation to BP in the amount of $1.00 per

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Ton for all coal processed and accepted by PMC prior to 240 days after receiving the required authorizations (“Target Operational Date”).

After receipt of state and federal regulatory authorizations, BP shall provide written notice to PMC of the Operational Date and Penalty Date. Both dates shall be approved by PMC within 14 days.

No Bonuses or Penalties will be credited to or assessed against BP, for any reason, if BP is unable to ship the Minimum Base Amount between the Target Operational Date and the Penalty Date.

5.0 Operations Plan

Section 5.1 - Within seven (7) days of the date hereof, BP shall submit to PMC the Operations Plan for approval. Within fourteen (14) days after PMC’s receipt of the Operations Plan, the Approval of the Plan shall be returned to BP.

6.0 BP Covenants

Section 6.1 - Install & Operate a Pond Fines Recovery Facility - BP will install and operate the Pond Fines Recovery Facility and other equipment and machinery necessary to conduct the Pond Recovery Operations during the Term, conditioned upon the prior mutual agreement of PMC and BP concerning the design of the Pond Fines Recovery Facility, as provided in Section 4.1 of this Agreement and the terms of the Operating Plan, as provided in Section 5.1 of this Agreement.

Section 6.2 - Recover the Maximum amount of Clean Coal - BP will use its commercially reasonable efforts to recover the maximum amount of Conforming Clean Coal from the Raw Slurry. Those efforts shall be in compliance with the Operating Plan.

Section 6.3 - Comply With all Applicable Laws, Permits, etc. - BP will conduct Pond Recovery Operations in compliance with all applicable laws, permits and terms contained herein.

Section 6.4 - Pond Recovery Operations Carried out in a Workman like Fashion - Pond Recovery Operations will be performed in a workman like manner consistent with industry standards.

Section 6.5 - Maintain the Pond Fines Recovery Facility - BP will be solely responsible for maintaining the Pond Fines Recovery Facility.

Section 6.6 - Payment of Beard Employees and Contractors - BP will be solely responsible for compensating its employees and contractors in connection with the performance of the Pond Recovery Operations.

Section 6.7 - Payment of Taxes Related to Employees - BP will be solely responsible for payment of worker’s compensation insurance, employment taxes, and any benefits provided by signatory labor agreements satisfying in all respects the requirements of applicable laws or agreements for its employees involved in any aspect of the Pond Recovery Operations.

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Section 6.8 - Insurance - During the term of this Agreement and while conducting facility closing, reclamation or any work on PMC’s premises, BP will maintain, and BP will require its agents, contractors, affiliates and successors to maintain insurance coverage in amounts and limits as shown on Exhibit B attached hereto and PMC will be named as an additional insured.

Section 6.9 - Electrical Power - BP will promptly reimburse all costs paid by PMC for electricity consumed by the Pond Fines Recovery Facility. Beard will install and read an electric meter at the Recovery Plant to determine monthly usage and demand factor. PMC shall have the right to audit the readings at any time. The amount for reimbursement will be determined by PMC with the utmost good faith and reasonableness, and in accordance with BP’s monthly usage and PMC’s cost for electricity.

Section 6.10 - Production of Minimum Base Amount - From and after the Operational Date, BP will process sufficient Raw Slurry to produce and deliver to PMC at least the Minimum Base Amount each month during the Initial Term of this Agreement and any subsequent renewal thereof.

Section 6.11 - BP Deliveries to Delivery Point - Deliveries will be scheduled as required to permit the uniform blending of Clean Coal with Pinnacle Preparation Plant product. Any re-handling of Clean Coal within or from the Delivery Point to the Clean Coal Stockpile Reclaim Bunker shall be the responsibility of PMC.

Section 6.12 - Clean Coal Quality & Truck Weights - BP will provide all required equipment and labor to weigh, sample and arrange for lab analyses of Clean Coal processed from Raw Slurry in accordance with the terms set out in Section 11 of the Agreement

Section 6.13 - Discharge of the Pinnacle Plant Thickener Underflow - BP shall not prohibit PMC from discharging its thickener underflow directly into Smith Branch. The parties recognize that BP may elect to direct Thickener Underflow straight to the Pond Recovery Facility.

BP will prepare a fail-safe plan to insure that BP’s handling of thickener underflow does not disrupt operations at the PMC plant. The plan will be submitted within 30 days of the date hereof, and PMC shall Approve or suggest revisions within 30 days of receiving the plan. If Thickener Underflow has been directed to the Pond Recovery Facility and such facility cannot process it in a manner to avoid disruptions at the PMC plant, PMC will have the right to immediately redirect such flow to the Smith Branch.

Section 6.14 - Demolition of Pond Fines Recovery Facility - BP shall, at its expense, commence demolition of the Pond Fines Recovery Facility within sixty (60) days after the termination of this Agreement. All structures, equipment, piping, access roads, and other appurtenances incidental to the facility shall be removed, soils contaminated with fuels, oils, processing chemicals or other contaminants shall be reclaimed, and disturbed areas shall be re-graded to pre-Agreement condition and seeded, all to be completed by BP within 180 days after termination of this Agreement.

Prior to construction of the Pond Fines Recovery Facility, soil samples shall be taken and analyzed by BP to serve as a baseline for comparison purposes should there be contamination that needs to be reclaimed after the facility is removed.

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7.0 PMC’s Covenants

Section 7.1 - PMC will provide Electrical Power for use by BP - Power for the Pond Fines Recovery Facility will be from PMC’s existing 34.5 kV power distribution systems. BP will assume all tie-in costs payable to third parties.

Section 7.2 - PMC’s Minimum Processing Fee & Sales to Third Parties. - PMC will accept delivery of and pay processing fees for the Minimum Base Amount of Conforming Clean Coal in each month of the Initial Term and any renewal term in accordance with stipulations contained in this Agreement. Additional Conforming Clean Coal in excess of the Minimum Base Amount or Non-Conforming Clean Coal may be accepted at the sole discretion of PMC. If any Conforming Clean Coal is not accepted by PMC within 60 days of its proposed delivery by BP, then BP may, subject to the terms of this Agreement and with PMC’s consent, sell that Clean Coal to third parties, title to such Clean Coal passing to BP immediately prior thereto. BP will remit to PMC out of the proceeds of such sales any amounts due and payable by PMC to Natural Resource Partners, L.P. or its affiliates in respect of such sales.

Section 7.3 - Weekly Operating Schedule - PMC will provide BP with a weekly operating schedule for the Pinnacle Preparation Plant indicating when Mine 50 coal will be processed in the Pinnacle Preparation Plant and the amount of Conforming Clean Coal desired by PMC. The schedule will be communicated to BP by fax, e-mail or other agreed written method, before 5:00 pm, each Friday during the Term of this Agreement. PMC assumes no responsibility for the use of this schedule by BP. PMC reserves the right to change the operating schedule as reasonably required. When changes to the operating schedule occur, PMC shall use reasonable. efforts to promptly inform BP of the changes.

Section 7.4 - Reclamation of Smith Branch Coal Refuse Disposal Facility - With the exception of work described in Section 6.14 of this Agreement, PMC will perform all final reclamation work required at Smith Branch Coal Refuse Disposal Facility.

8.0 Reservations

Section 8.1 - Warranty - It is understood and accepted by BP that PMC does not warrant the condition, quantity, quality of the Raw Slurry or the Pond Fines Recovery Facility performance, pond recovery plant efficiency, refuse dewatering plan or economic viability of the Operations Plan for recovery of any pond fines that may exist within the Smith Branch Impoundment. PMC warrants to BP that, to PMC’s knowledge, there is no “hazardous substance”, as defined in the federal Comprehensive Environmental Response, Compensation and Liability Act (42 USC, 9601 et seq.), in the Smith Branch Refuse Impoundment in violation of any applicable law.

Section 8.2 - Agreement Limited to Clean Coal From Slurry - Except as otherwise provided in this Agreement with respect to BP’s recovery, processing and use of Raw Slurry, it is understood and agreed by BP that any and all of the naturally occurring and in-place timber, coal, gas, hydrocarbons, gob gas, other minerals, and any and all substances, whether known or which may come to be known in the future, in the Smith Branch Impoundment or any other property of PMC, are the sole property of PMC. Except as otherwise permitted in this Agreement, BP shall

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not have the right to cut, use, remove, damage, or destroy any natural resources without the prior written consent from PMC.

9.0 Access to Other’s Facilities

Section 9.1 - Access to Pond Fines Recovery Facility - PMC may observe and inspect the Pond Fine Recovery Facility. Prior to entering BP facilities, PMC will provide the BP employee in-charge with date and time of the proposed visit, number of persons who will be visiting and the expected duration of visit. Observations and inspections will be conducted in such a manner as to cause minimal interference with the Pond Recovery Operations. PMC shall be solely responsible for the safety of all such visitors and any damages caused by all such visitors.

Section 9.2 - Access to PMC Facilities - BP personnel may observe and inspect PMC processing facilities. Prior to entering PMC facilities, BP will provide PMC’s shift foreman with the date and time of the proposed visit, area to be inspected, number of persons who will be visiting and the expected duration of visit. Observations and inspections will be conducted in such a manner as to cause minimal interference with PMC operations. BP shall be solely responsible for the safety of all such visitors and any damages caused by all such visitors.

10.0 Recovered Pond Fines

Section 10.1 - PMC Option - BP hereby grants PMC the exclusive option to accept all, or any portion, of BP’s Conforming Clean Coal or Non-Conforming Clean Coal processed and delivered at the Standard Compensation Rate, less any applicable Penalties and any Bonuses as set forth in Sections 4, 5 & 10 of this Agreement.

No later than the 20th day of each calendar month, BP shall specify to PMC the anticipated volume and quality of Conforming Clean Coal and Non-Conforming Clean Coal projected by BP to be processed in the following calendar month. PMC shall provide BP with its written election to exercise its option to accept Clean Coal in excess of the Minimum Base Amount no later than the 10th day of that same following month. PMC’s election shall contain the number of Tons of Conforming Clean Coal and Non-Conforming Clean Coal that PMC will accept and for which the processing fee will be due.

If PMC does not make the election by the 10th day of the following month, or makes that election but does not elect to accept all the Clean Coal held longer than 60 days by BP, then BP may, at its sole election and with the deemed consent of PMC, sell all or any of that excess Clean Coal in a Direct Sale to third parties.

Section 10.2 - Conforming Clean Coal - If the weighted average of all Clean Coal produced at the Pond Fines Recovery Facility during a calendar day satisfies the Quality Specifications for Conforming Clean Coal, then all of the Clean Coal produced during that day is deemed to be Conforming Clean Coal. Conforming Clean Coal shall meet or exceed the following Quality Specifications on a dry basis.

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Total Moisture:	Less than or equal to	17.0%
Ash:	Less than or equal to	5.50%
Sulfur:	Less than or equal to	0.80%
Oxidation	Greater than or equal to	80.0%
Flowability	Free flowing - Non-clumping

Section 10.3 - Coal Handling Problems - Should there be any Undesirable Flowability problems resulting from either the Recovered Clean Coal or the blend, PMC maintains the right to suspend deliveries while BP and PMC take whatever corrective measures are necessary to remedy the fouling and plugging problems. If deliveries are delayed because of handling problems, BP will have the right to examine and evaluate the blending procedures in effect at the Delivery Point and make recommendations for corrective action.

11.0 Measurement of Coal Deliveries

Section 11.1 - Establishment of Tonnage - BP shall install, maintain and cause to be certified for accuracy, a belt scale at the Pond Recovery Plant and a truck scale near the Delivery Point. The type, location and accuracy of scales shall be approved by PMC, which Approval will not be unreasonably withheld, delayed or conditioned. Each operating day during the term, BP shall deliver to PMC a daily log of deliveries, showing a listing by truck number, time loaded or weighed, tare weight, as-received coal weight, and moisture free coal weight.

BP shall prepare and submit to PMC for approval a sampling plan which shall be an approved truck sampling program which will determine quality specification and the amount of dry tons of delivered coal. The plan will be provided to PMC within 60 days of the date hereof, and PMC shall either Approve the plan or suggest adjustments to the procedures, and return the plan for BP.

Section 11.2 - Sampling Size and Frequency - BP shall implement procedures to determine sample size and sample frequency of the Clean Coal. Samples shall be of sufficient size and frequency to accurately predict with at least 95% confidence, the quality parameters of the Clean Coal.

12.0 Stipulations

Section 12.1 - Force Majeure - In the event the Minimum Base Amount of Conforming Clean Coal is unable to be delivered by BP to PMC for any cause beyond the reasonable control of BP (other than as a result of the fault or negligence of BP) which wholly or partially prevents BP’s performance of its obligations under this Agreement, that tonnage is deemed Force Majeure as defined in Article 14 of the General Terms and Conditions (Exhibit B).

13.0 Compensation

Section 13.1 - Standard Compensation Rate - PMC shall compensate BP $24.00 for each Ton of Conforming Clean Coal processed, delivered and blended with Mine 50 Coal. The Standard Compensation Rate shall be subject to Penalties for Non-Conforming Clean Coal.

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Section 13.2 - Penalties for Non-Conforming Clean Coal - If PMC accepts deliveries during any one-day period of Non-Conforming Clean Coal, the Standard Compensation Rate for deliveries for that day will be reduced as follows:

Moisture -	$1.00 per ton for coal with moisture ranges between 17-19%
Ash -	$2.00 per ton for coal with ash content ranges between 5.5-6%
Sulfur -	$1.00 per ton for coal with sulfur content ranges between 0.80-0.90%

The processing fee for Non-Conforming Coal exceeding any of the upper most ranges shall be negotiated if and when accepted by PMC.

Section 13.3 - Production Taxes - PMC shall be responsible for the payment of black lung excise taxes, state reclamation taxes, federal reclamation taxes, and West Virginia severance tax attributable to, or imposed in connection with the extraction, excavation, processing, production, transportation, distribution or sale of the recovered pond fines. A credit equal to the production taxes applicable to direct sales by BP (Section 13.4) will be made by PMC against amounts due to BP.

Section 13.4 - Direct Sales by BP - BP may, with the deemed consent of PMC, sell to third-parties any or all Recovered Pond Fines that PMC does not accept and that BP purchases from PMC for $.25 per raw ton. PMC will credit against amounts due to BP an amount equal to $.25 per ton for all raw slurry processed for third party sales. BP shall provide PMC by the tenth (10th) day of the first month of each quarter notification of quantity and price for all Direct Third-Party Sales made by BP for the previous quarter.

For sales to such third-parties, a Profit Share Calculation shall be made by deducting from the third party sales price: (i) $20.00 per Ton for the BP production cost, (ii) raw slurry cost to PMC of $0.25 per Ton and (iii) any applicable production taxes paid by PMC. The remainder of the third party sales price will be distributed between BP and PMC as follows: 50% PMC and 50% BP.

Section 13.5 - Billing - Subject to the provisions of Sections 13.1, 13.2, and 13.3, BP shall invoice PMC for Conforming and Non-conforming Clean Coal accepted by PMC by the tenth (10th) day of each month for the preceding month. PMC shall pay such invoices within 30 days of receipt of such invoice.

Section 13.6 - Payment - PMC shall invoice BP for Electrical Power identified in Section 6.9 by the twentieth (20th) day of each month for the preceding month. BP shall provide PMC meter readings indicating electricity consumption and demand factor by the tenth (l 0th) day of each month for the preceding month. BP shall pay such invoices within 30 days of receipt of such invoice.

At the end of every production year there shall be a reconciliation of the monthly payments and discounts earned for the full year. If there are discrepancies between monthly and yearly amounts appropriate adjustments and payments will be made.

Section 13.7 - Section 29 Tax Credits - All current Section 29 tax credits, if eligible, or any future tax credits resulting from the mining or processing of raw slurry and / or subsequent sale

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of clean coal or other activities covered by this Agreement shall be solely owned and applied by PMC.

Section 13.8 - Accounting, Banking, Marketing and Purchasing by BP - Effective January 1, 2007, BP will contract with PinnOak Resources, LLC to perform all accounting, banking, marketing and purchasing activities for BP.

14.0 Permits

Section 14.1 - Permits - BP shall apply for and maintain an Air Quality permit covering the Pond Recovery Operations. BP shall pay for all costs in obtaining an Air Quality Permit covering its operations at PMC.

Section 14.2 - Permit Revisions - All required Permit revisions must be in the name of PMC, and must be secured by PMC personnel. BP shall assist PMC employees and their consultants in any way that is requested in securing the needed Permit changes, and in obtaining permission for an early start of construction. Some of the permits that must be revised are: Mine Safety Health Administration ID Number 1211WV40700-01, WVDEP Office of Mining and Reclamation Permit No. 0-4022-92 and NPDES Permit Number 13883. BP shall assist with obtaining permit revisions in the name of PMC at no cost to PMC. Any other costs in obtaining permit revisions shall be for the account of PMC.

Section 14.3 - Compliance - BP shall have full responsibility and liability for compliance with terms and conditions of all permits, regardless whether the permittee is BP or PMC. Any fees, fines, assessments, civil penalties, bond premiums, and other expenditures resulting from federal, state, and local law, rule regulation, or order, enforcement or over-site thereof by the regulatory authority, including maintenance of environmental compliance during the course of Pond Recovery Operations, shall be at BP’s expense.

Section 14.4 - Water Quality - BP shall not discharge water from the Pond Recovery Operations to any drainage course other than the Toe Ponds downstream of the Smith Branch Impoundment. Any water discharged from the recovery operations to the Toe Ponds shall meet or exceed the following NPDES permit limits (such limits shall automatically be adjusted from time to time to reflect any future changes to the applicable NPDES levels):

Iron:	3.0 mg/1 average	6.0 mg/l maximum
Suspended Solids:	35 mg/1 average	70 mg/1 maximum
Ph:	6.0 minimum	9.0 maximum

15.0 Process Water

Section 15.1 - Process Water - During the term of this agreement, BP shall furnish process water to Pinnacle Preparation Plant. A pipeline with required valves and controls, approved by PMC, shall be installed by BP to furnish and maintain the water level in the Pinnacle Preparation Plant head-tank in excess of 75% full. Water furnished to the head tank shall contain no higher than 3.0 mg/1 of iron, contain 35 mg/1 or less of suspended solids and have Ph between 7.0 and 7.9. Pond Recovery Operations shall not preclude BP’s obligation to furnish PMC sufficient quantity or quality of process water for the successful operation of Pinnacle Preparation Plant. In the

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event of insufficient quantity or unacceptable quality of process water for Pinnacle Preparation Plant, BP shall suspend Pond Recovery Operations and make necessary process, equipment or any other modifications required.

16.0 Termination of Agreement

Section 16.1 - This agreement shall terminate on a date prior to the date referred to in Section 3.1 under the following circumstances:

(a) If PMC and BP mutually agree;

(b) In the event of a material breach of any provision hereof by either Party, which breach is not cured within 180 days (“the Cure Period”) after receipt of written notice thereof from the other Party, the non-breaching Party may terminate this Agreement by giving notice of termination in writing to the Party in breach, but any such breach shall not release either Party of any obligations incurred prior to such termination, if such breach cannot reasonably be cured within such 180 day period and the Party in breach has commenced and is diligently pursuing such cure within such 180 day period, then the Party in breach shall have an additional period of time (not to exceed 60 days after receipt of written notice of such breach from the other Party) to cure such breach, and such other Party may not terminate this Agreement during such extended cure period;

(c) If an event of Force Majeure results in a complete cessation of PMC or BP operations for a period of 180 consecutive days, the aggrieved Party, at its sole option, may terminate this agreement by giving the other Party notice of termination on or before the 30th day following the expiration of the 180 day period;

(d)

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If PMC ceases, abandons, or significantly reduces mining levels by limiting operation of the long wall mining system and coal processing operations at Mine 50, and BP is not in substantial breach of any of the terms of the Agreement, BP, at its sole option and expense, may (i) agree to terminate this agreement, or (ii) may exercise its option to continue operating under all of the terms of the Agreement. PMC would retain its exclusive option to accept all or any portion of the Conforming and Non-Conforming Clean Coal in accordance with the terms of the Agreement. In the case where PMC significantly reduces production at Mine 50, it would be released from its obligation to accept the Minimum Base Amount of Clean Coal.

(e) If either Party shall become insolvent or generally unable to pay its debts as they become due, apply for, consent to, or acquiesce in the appointment of a trustee, receiver, or custodian for it or any of its property, or make a general assignment for the benefit of its creditors, permit or suffer to exist the commencement of any bankruptcy, reorganization, debt arrangement or other case or proceeding under any bankruptcy or insolvency law.

Section 16.2 - Additional Remedies - In addition to the remedies specified herein, upon the occurrence of a material breach referred to in Section 16.0 (b) that is not cured within the cure period provided above, the non-defaulting Party shall have other remedies as are available to it under law or in equity.

Section 16.3 - Post Agreement Ownership of Facilities - At the termination of this Agreement, BP shall retain responsibility and/or ownership of all equipment, structures, pipelines or other facilities installed to operate the Pond Fines Recovery Facility. The equipment, structures pipeline and other facilities shall be removed as described in Section 6.14.

17.0 Dispute Resolutions

Section 17.1 - The parties agree to attempt to resolve all disputes arising hereunder promptly, equitably and in a good faith manner, and to provide each other with reasonable access during business hours to any and all non-privileged records, information and data pertaining to any such dispute.

Section 17.2 - Arbitration - It is understood and agreed that any dispute, controversy or claim under this agreement between the Parties that cannot be resolved between the Parties, including any matter relating to the formation and interpretation of this Agreement shall be submitted to binding arbitration. The obligations of the Parties shall remain in full force and effect pending the award in such arbitration proceedings. Arbitrations between Parties shall be conducted pursuant to the then applicable Commercial Arbitration Rules of the American Arbitration Association. Arbitrations shall take place in Pineville, West Virginia, or such other location as the Parties mutually agree.

Unless the Parties otherwise agree, the arbitration shall be conducted before a tribunal composed of three arbitrators. Each Party shall appoint an arbitrator. The two-Party appointed arbitrators shall jointly appoint the third (who shall be the chairperson). The arbitrators shall have the

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power and authority to determine the arbitrability of any dispute arising or relating to this Agreement. The Parties waive any claim to any damages in the nature of special, punitive, exemplary, consequential, or statutory damage in excess of compensatory damages and the tribunal is specifically divested of any power to award such damages. The judgment of the tribunal shall be final and binding (not subject to appeal) on the Parties. Any court having jurisdiction thereof may enter a judgment upon any arbitration award.

BP and PMC shall each bear one-half of the out-of-pocket third party costs and expenses of arbitration.

18.0 General Terms and Conditions

Section 18.1 - General Terms and Conditions shall be as set-forth in Exhibit B, “General Terms and Conditions to Agreement for a Pond Fines Recovery Facility between Beard Technologies, Inc. and Pinnacle Mining Company, LLC” and which General Terms and Conditions are incorporated into this Agreement by this reference as if set forth verbatim herein.

This Agreement may not be amended, revised, modified or supplemented except by a written agreement expressly stating the provisions to be amended, revised, modified or supplemented which agreement has been signed by PMC and BP and consented to by Beard Technologies, Inc. (“BTI”). Solely for purposes of this Section 18.1, BTI shall be a third party beneficiary of, and entitled to enforce and have have rights of remedy and redress with respect to any breach of the second paragraph of this Section 18.1.

Section 18.2 – This Agreement embodies the entire agreement and understanding of the Parties with respect to the subject matter hereof. This Agreement shall be binding upon the Parties and their respective successors and assigns.

In Witness Whereof, the Parties have caused this Agreement to be executed by a duly authorized officer or agent on the day and year first hereinabove written.

PINNACLE MINING COMPANY, LLC

By:   /s/Benjamin M. Statler

Benjamin M. Statler

Its: President

BEARD PINNACLE, LLC

By:   /s/W.M. Beard

W. M. Beard

Its: Chairman

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EX-10.63

AMENDED AND RESTATED CONTRACT OPERATING AGREEMENT

This Amended and Restated Contract Operating Agreement is made and entered into this 31st day of October 2006 (this “Agreement”), between Beard Technologies, Inc., an Oklahoma corporation (“BTI”), and Beard Pinnacle, LLC (“BP”), an Oklahoma limited liability company, with respect to the following circumstances:

A.Pursuant to an Assignment and Assumption signed on October 19, 2005, BTI assigned all its rights and delegated all its obligations to BP under (i) that certain Amended and Restated Agreement for a Pond Fines Recovery Facility effective as of September 1, 2005 (the “Pond Fines Agreement”), between BTI and Pinnacle Mining Company, LLC (“PMC”), and (ii) that certain Lease made and entered into as of September 7, 2004 (the “PMC Lease”), between BTI, as lessee, and PMC and Pinnacle Land Company, LLC (“PLC”), as lessors, all as more particularly provided in the Assignment and Assumption.

B.BP accepted, and BTI made that assignment and delegation conditioned upon the parties’ contemporaneous signing of a contract operating agreement, which the parties entered into contemporaneously with that assignment and delegation (the “Original Contract Operating Agreement”).

C. PMC and PLC consented to that assignment and delegation.

D.The parties want this Agreement to amend, restate, and supersede the Original Contract Operating Agreement.

I. Engagement

For and in consideration of the foregoing premises, the mutual covenants made in this Agreement, and other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, BP hereby engages BTI to discharge and perform as contract operator for BP the following obligations and undertakings to the extent not heretofore fully performed and accomplished (hereinafter individually and collectively referred to as the “Work”), and BTI hereby accepts that engagement, subject to and in accordance with the terms of this Agreement:

(a) BP’s obligations and undertakings provided for in Sections 2.1, 2.3, 4.1, 4.2, 5.0, 6.1, 6.2, 6.3, 6.4, 6.5, 6.9, 6.10, 6.11, 6.12, 6.13, 6.14, 7.1, 8.2, 9.2, 10.1, 11.1, 11.2, 13.4, 13.5, 13.6, 14.1, 14.2, 14.3, 14.4, 15.1, 16.3, and 18.1 of the Pond Fines Agreement in accordance with the terms thereof;

(b) BP’s obligations and undertakings provided for in paragraphs numbered 4, 6, 8, 10, 14 and 17 of the PMC Lease; and

(c) such other undertakings and obligations agreed to in writing for or after the date hereof by BP and BTI.

II. Agreement

For the considerations stated above, the parties agree as follows:

1. Performance of Work.

1.1BTI shall diligently perform and discharge all of the Work in a good, safe, and workmanlike manner free from defects in accordance with (i) the applicable provisions of the Pond Fines Agreement, the Lease and this Agreement, (ii) BP’s specific written instructions, if any, (iii) generally accepted prudent and proficient industry standards applicable to the Work, and (iv) all applicable laws and governmental permits and authorizations.

1.2BTI may use and occupy, as applicable, the equipment, facilities, and lands owned or leased by BP at the pond site at which the Work will be performed by BTI. BTI shall furnish all employees, expertise, and supervision, and all other materials, supplies and equipment (“Materials”) reasonably necessary to perform the Work in accordance with this Agreement. All Materials provided by BTI shall meet the applicable specifications of the Pond Fines Agreement, any reasonable written specifications provided by BP to BTI, and the requirements of all applicable laws and governmental permits and authorizations.

1.3BTI shall meet all time requirements specified in the Pond Fines Agreement, except for any agreed written change thereto by BP and except as excused under the Pond Fines Agreement.

2.Suspension of Work. BP may, with good reason or cause, require BTI to suspend, delay, change or stop any of the Work. BTI shall use its reasonable efforts to mitigate to the fullest extent possible any increase in costs attributable to any such suspension, delay, change or stoppage of Work.

3.Term. Unless earlier terminated in accordance with Section 5, this Agreement shall commence on the date hereof and continue until the Pond Fines Agreement is terminated in accordance with the terms thereof.

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4. License of BTI Intellectual Property.

4.1BTI hereby grants BP a nonassignable, nontransferable, nonexclusive royalty-free license to use the BTI Intellectual Property (as defined in Section 4.3 hereof) solely for the purpose of, and as reasonably necessary for the performance of BP’s obligations and responsibilities under the Pond Fines Agreement for a term ending upon termination of the Pond Fines Agreement (the “License”). The License shall terminate and be of no further force or effect upon termination of the Pond Fines Agreement. Except as represented by BTI in Subsection 4.2, BP’s use of the License shall be at its sole risk, without representation or warranty of any kind from BTI.

4.2BTI hereby represents and warrants that to its actual knowledge, the BTI Intellectual Property is free and clear of all liens and encumbrances and does not infringe upon the intellectual property rights of any third person.

4.3For purposes of this Agreement, the term “BTI Intellectual Property” means all of BTI’s rights available under U.S. Patent No. 5,231,797, (Process for Treating Moisture Laden Coal Fines) issued on August 3, 1993, and other proprietary and legally protected know how, show how and technology owned by BTI that is used or useful in the construction and operation of a pond fines recovery plant. For purposes of this Article 4, the term “actual knowledge of BTI” shall mean the personal knowledge, as of the date hereof, of W.M. Beard and Herb Mee, Jr. without independent investigation of the matters being represented.

4.4In connection with the License, BP will execute and deliver and will cause PinnOak Resources, LLC (“PinnOak”), to execute and deliver a confidentiality agreement with respect to the BTI Intellectual Property in substantially the same form as attached hereto as Exhibit A.

5. Termination.

5.1Termination. This Agreement may be terminated by either party (excluding those provisions surviving the termination of this Agreement) under the following circumstances:

(a)Either party may terminate this Agreement as a result of a material default or breach of any provision of this Agreement by the other party which is not remedied and cured to the reasonable satisfaction of the non-breaching party within 180 days after the breaching party’s receipt of written notification thereof. Any such termination shall be effective on the date stated in the notice of termination.

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(b)Either party may terminate this Agreement immediately if the other party (i) makes a general assignment for the benefit of its creditors, (ii) suffers or permits the appointment of a receiver for its business or assets, (iii) commences or is the subject of any proceeding as debtor under the federal Bankruptcy Act or any statute of any state relating to insolvency or the protection of rights of creditors, or (iv) engages in any fraud or makes a material misrepresentation with respect to its performance of, or obligations or undertakings provided in, this Agreement.

(c)If BTI, in the performance and discharge of the Work is (i)(a) unable to produce Conforming Clean Coal at a rate of at least twenty thousand tons per month not due to constraints imposed by PMC or BP; or (b) unable to produce Conforming Clean Coal at an average cost that is less than the Standard Compensation Rate for Conforming Clean Coal in any month, and (ii) in either such event, BTI’s failure does not result from any cause beyond its reasonable control (other than as a result of the fault or negligence of BTI), such as the occurrence of an event of Force Majure, as that term is defined in Article 14 of Exhibit B to the Pond Fines Agreement, then BP may by written notice to BTI (which notice will specify in reasonable detail the failure of BTI) declare an event of default under this Agreement and if BTI is unable remedy or cure the event of default to the reasonable satisfaction of BP within thirty days after the receipt of the written notice of default, BP may terminate this Agreement. This provision shall not apply to any calendar month in which there has been or is a suspension of Work under Section 2 which lasts more than two consecutive days or three days in the aggregate.

5.2Effect of Termination. The termination of this Agreement in accordance with this Article shall not impair, impede or otherwise adversely affect any right, claim or cause of action that a party may have arising prior to or as a result of that termination, including, without limitation, the right to obtain and receive any payment owing under this Agreement. This Section, and Sections 10 and 12, and Subsection 11.3 shall survive the termination of this Agreement.

5.3Mine 50. BTI’s rights and obligations under this Agreement shall be subject in all respects to Section 16.0 of the Pond Fines Agreement.

6. Independent Contractor.

6.1BTI shall exercise BTI’s independent business judgment in connection with BTI’s discharge of the Work, subject to BP’s reasonable direction and control. BTI shall be solely responsible for compensating its employees and permitted subcontractors with respect to their respective involvement in BTI’s performance of the Work. BTI may use whatever employees that BTI reasonably determines are necessary and qualified to perform Work, but BTI shall ensure and be responsible for each such employee’s compliance with the terms of this Agreement.

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6.2This Agreement does not create, and shall not be construed as creating, a partnership, business association, joint venture or the relationship of principal and agent, or employer and employee between the parties. This Agreement has been entered into solely for the benefit of BTI and BP, and is not intended to create any legal, equitable or beneficial interest, right or benefit in any other person.

6.3Neither party shall have any authority to enter into, execute or deliver any contract, agreement or other instrument in the name or on behalf of the other party, and nothing contained in this Agreement shall authorize or empower either party to assume or create any obligation, liability or responsibility whatsoever, expressed or implied, on behalf or in the name of the other party, or to bind the other party in any manner, or to make any commitment on behalf of the other party.

7. Subcontractors.

7.1BTI shall not subcontract any of the Work or have any other person or entity perform any of the Work without BP’s prior written consent, which consent shall not be unreasonably withheld, delayed or conditioned, but which may be withdrawn at any time by BP with cause upon notice to BTI. No permitted subcontracting by BTI shall discharge BTI from its obligations under this Agreement, and BTI shall remain responsible for any and all acts and omissions of its employees and subcontractors in any manner related to the Work or the performance thereof. BP may demand that the BTI fulfill its obligations under this Agreement without first having to make that request to any subcontractor.

7.2BTI shall require each permitted subcontractor to procure and maintain in force at all times while such subcontractor’s agreement relating to the Work is in effect, at such subcontractor’s own expense, the insurance required to be obtained by BTI under this Agreement. All other insurance coverages of any subcontractor shall be at the determination of BTI, but BTI shall remain fully responsible for all obligations and performance of each such subcontractor with respect to the Work, and BTI shall not be relieved of any liability or obligation under this Agreement as a result of any insurance required of, or carried by, any subcontractor.

8. Compensation.

8.1Each of BTI and PinnOak shall be entitled to the following compensation for its performance of the Work or administrative services, as the case may be, as follows:

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(a)BP shall pay Two Hundred Fifty Thousand Dollars ($250,000) to BTI as project start-up and development costs in connection with the “Pond Recovery Operations”, as defined in the Pond Fines Agreement (the “Smith Branch Project Development Charge”), paid over the five (5) calendar month period commencing in the month following the date upon which BP has satisfied in full that certain promissory note dated October 7, 2005, as amended payable to PinnOak. Notwithstanding the foregoing, no payments of the Smith Branch Project Development Charge shall be paid in any month in which BP owes any monies to PinnOak under the PinnOak Revolver Account, as such term is defined in the Amended and Restated Operating Agreement of BP dated as of October 31, 2006 (the “BP Operating Agreement”).

(b) Intentionally Omitted.

(c)Commencing on the first day of the month following any thirty consecutive day period in which the Project produces 20,000 tons of Conforming Clean Coal in conformity with the Pond Fines Agreement (“Start-up of the Operations”) and continuing each calendar month thereafter until Pond Recovery Operations are terminated (including, without limitation, all reclamation and clean-up activities), BP shall pay to BTI, as contract operator under the Pond Fines Agreement, a monthly operating and administrative overhead cost of Thirty Thousand Dollars ($30,000) in connection with the Pond Recovery Operations (the “Smith Branch Project Monthly Overhead Charge”). Each Smith Branch Project Monthly Overhead Charge shall be paid in accordance with the provisions of Section 6.1.1 of the BP Operating Agreement provided that BP shall use commercially reasonable efforts to pay the Smith Branch Project Monthly Overhead Charge on or before the fifteenth (15^th) day of the calendar month immediately succeeding the calendar month in which the Smith Branch Project Monthly Overhead Charge was incurred.

(d)Commencing on the first day of the month following Start-up of the Operations and continuing each calendar month thereafter until Pond Recovery Operations are terminated (including, without limitation, all reclamation and clean-up activities), BP shall pay to PinnOak, as administrative services provider under the Pond Fines Agreement, a monthly operating and administrative overhead cost of Twenty Thousand Dollars ($20,000) in connection with the services provided (the “Smith Branch Project Monthly Service Charge”). Each Smith Branch Project Monthly Service Charge shall be paid in accordance with the provisions of Section 6.1.1 of the BP Operating Agreement provided that BP shall use commercially reasonable efforts to pay the Smith Branch Project Monthly service Charge on or before the fifteenth (15^th) day of the calendar month immediately succeeding the calendar month in which the Smith Branch Project Monthly Service Charge was incurred. In any month in which the Smith Branch Project Monthly Overhead Charge is not paid, the Smith Branch Project Monthly Service Charge will be deferred until such time as the Smith Branch Project Monthly Overhead Charge has been paid.

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8.2The Smith Branch Project Development Charge and the Smith Branch Project Monthly Overhead Charge are intended to fully compensate BTI for its administrative office overhead expenses, and BTI shall not be entitled to charge, recover, recoup or collect from BP or any of the “PinnOak Parties”, as defined in the Subscription Agreement, any additional generally recurring indirect management or support costs associated with the Pond Recovery Operations and attendant or related operations with respect to the Smith Branch pond project. In no event shall the PinnOak Parties have any liability to BTI, as contract operator under the Pond Fines Agreement with respect to the costs, expenses and charges provided for in this Subsection 8.2.

8.3In addition to the compensation and reimbursements provided for in Subsections 8.1 and 8.2 of this Agreement, BP shall promptly reimburse BTI for all costs and expenses incurred by BTI that are directly associated with activities at the Smith Branch pond site or in connection with the Pond Recovery Operations, including, without limitation, start-up, operation, management, maintenance, and the following costs and expenses:

(a)salaries and wages of persons (including BTI employees) directly employed at the Smith Branch pond site or engaged in Pond Recovery Operations;

(b)the cost of insurance covering Pond Recovery Operations and related operations;

(c)the cost of goods, materials, supplies, and equipment acquired or leased for use in Pond Recovery Operations and/or similar operations;

(d)the cost of transporting the persons identified at Subsection 7.3(a) and the items identified at Subsection 8.3(c) to and from the Smith Branch pond site;

(e) the cost of utilities used at the Smith Branch pond site;

(f)all outside legal and accounting expenses, and court costs and outside expert fees incurred in any litigation;

(g)all sales, use, ad valorem, mining, and similar taxes; and

(h)the cost of repair or replacement of personal property and fixtures due to matters not covered by insurance.

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9.Payment of Taxes. BTI shall report and pay all taxes, licenses and fees properly levied or assessed on BTI by any governmental authority in accordance with applicable law in connection with BTI’s performance of any of the Work or agreed to be paid by BP under the Pond Fines Agreement, excluding any local, state or federal income tax required to be paid by BP for income received by BP.

10.Financial Audit. During the course of the Work, BTI shall maintain complete and accurate records pertaining to Work and in support of all BTI’s charges to BP under this Agreement. BTI shall retain those records for not less than two (2) years after completion of the applicable Work. BP shall have the right, at any reasonable time within that two-year period, to inspect, audit and make copies of those records by its authorized representatives at BP’s sole expense. BTI shall require its subcontractors to maintain similar records and provide similar rights of inspection and audit to BP and its representatives.

11. General Insurance Requirements.

11.1As a separate and independent obligation, BTI shall obtain, carry and maintain while performing the Work insurance coverage of the types and in the amounts, deductibles and limits no less favorable than those set forth in Exhibit B to the Pond Fines Agreement. All such insurance shall be with a company or companies reasonably satisfactory to BP and each policy shall name BP, PMC and PLC as additional insureds.

11.2All insurance coverage procured by BTI pursuant to this Agreement shall be primary insurance with respect to BTI’s obligations under this Agreement, and shall not be or be considered contributing insurance with any of BP’s policies of insurance. No recovery by BP under any policy of insurance procured by BTI pursuant to this Agreement shall limit, waive or bar any other claim that BP may have under this Agreement or applicable law against BTI.

11.3Worker’s Compensation Coverage. As between BTI and BP, BTI shall be solely responsible for all deductibles required under such policies with respect to any liability of BTI under this Agreement. All insurance policies and limits shall be per occurrence, not claims made.

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12. Resolution of Disputes.

12.1All disputes, controversies, and claims arising under this Agreement, including, without limitation, any dispute, controversy or claim concerning the terms, performance, breach, alleged breach or interpretation of this Agreement, shall be submitted to binding arbitration before a neutral arbitrator selected by the American Arbitration Association (“AAA”). The arbitration shall proceed under the then current commercial rules and regulations of the AAA, including, without limitation, its discovery rules. The arbitrator may, in his or her discretion, limit or expand discovery in any arbitration proceeding. Each party expressly covenants and agrees to be bound by the decision of the arbitrator as a final determination of the matter in dispute, and a judgment thereon may be entered in any court of competent jurisdiction.

12.2The arbitration shall occur in Pittsburgh, Pennsylvania. BP shall pay one-half (1/2) of the fees and costs of the AAA and for the arbitrator and BTI shall pay the remainder (i.e., the other one-half), subject to the arbitrator’s right to reallocate same in favor of the prevailing or successful party in the arbitration. The arbitrator shall be empowered and directed to enter an award by default against any party who declines to pay when required by the arbitrator that party’s share of such fees and costs. The prevailing party, as determined by the arbitrator, shall be entitled to recover that party’s reasonable attorneys’ fees and expert fees incurred in connection with that party’s preparation for and participation in the arbitration.

13. Assignment.

13.1This Agreement is a personal services contract and, accordingly, BTI shall not assign any of BTI’s rights or delegate any of BTI’s duties or obligations under this Agreement without BP’s prior written consent, which consent may be withheld for any reason.

13.2BP may assign its rights and delegate its obligations hereunder to an Affiliate of BP, but shall not otherwise assign its rights or delegate any of its obligations under this Agreement without BTI’s prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed. Subject to the restrictions provided in this Section, this Agreement shall be binding upon and inure to the benefit of the parties, their respective successors and assigns.

14.Entire Agreement. This Agreement constitutes the entire understanding and agreement between the parties with respect to the subject matter hereof and may only be amended by a written instrument signed by the parties. This Agreement supersedes and replaces any and all prior and contemporaneous agreements, proposals, negotiations, statements, representations and understandings, whether oral or written, by or between the parties with respect to the subject matter of this Agreement, including, without limitation, the Original Contract Operating Agreement.

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15. Waiver.

15.1No party’s rights under this Agreement shall be deemed waived except by a writing signed by that party and, then, only to the extent provided for in that writing. No course of dealing between the parties nor any failure by any party at any time, or from time to time, to enforce any term or condition of this Agreement shall constitute a waiver of that term or condition, nor shall that course of dealing or failure affect that term or condition in any way or the right of a party at any time to avail itself of such remedies as it may have for any breach or default of such term or condition.

15.2No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (whether or not similar), nor shall such waiver constitute a continuing waiver unless otherwise expressly provided in the writing waiver.

16.References. The rights and other legal relations of the parties shall be determined from this Agreement as an entirety and without regard to its division into Sections and without regard to headings prefixed to those Sections. References in this Agreement to Sections or Subsections are to such Sections or Subsections of this Agreement unless otherwise specified.

17.Notices. All notices and communications required or permitted to be given under this Agreement shall be in writing and shall be delivered personally, or sent by bonded overnight courier, or mailed by U.S. Express Mail, or sent by facsimile transmission (provided any such facsimile transmission is confirmed either orally or by written confirmation), addressed to the address for that party shown below or at such other address as that party shall have theretofore designated by written notice delivered to the party giving such notice:

(a) If to BTI:

Beard Technologies, Inc.

355 William Pitt Way

Pittsburgh, Pennsylvania 15238

Attention: C. David Henry, President

Telephone: (412) 826-5396

Facsimile: cdavidhenry@earthlink.net

and

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(b) If to BP:

Beard Pinnacle, LLC

5600 North May Avenue, Suite 320

Oklahoma City, Oklahoma 73112

Attention: Herb Mee, Jr.

Telephone: (405) 842-2333

Facsimile: (405) 842-9901

E-Mail: hmee@beardco.com

Any notice given in accordance with this Section shall be deemed to have been given when delivered to the addressee in person, or if transmitted by facsimile transmission, upon receipt of the oral or written confirmation of receipt. A party may change the address, telephone number, and facsimile number to which such communications are to be addressed by giving written notice to the other party in the manner provided in this Section.

18.Pond Fines Agreement.BP shall not amend, revise, change, alter or terminate the Pond Fines Agreement without the prior written consent of BTI, which consent shall not be unreasonably withheld.

This Agreement is signed by the parties as of the day first above written, but shall be effective for all purposes as of September 1, 2005.

“BP”

Beard Pinnacle, LLC

By:  /s/W. M. Beard

Name: W. M. Beard

Title: Chairman

“BTI”

Beard Technologies, Inc.

By: /s/Herb Mee, Jr.

Name: Herb Mee, Jr.

Title: Vice President

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EX-10.64

AMENDED AND RESTATED

OPERATING AGREEMENT

OF

BEARD PINNACLE, LLC

This Amended and Restated Operating Agreement of Beard Pinnacle, LLC, effective as of the 31st day of October 2006 (the “Effective Date”), is entered into by and among the Persons listed on Schedule I attached hereto (hereafter collectively referred to as the “PinnOak Parties” and individually as a “PinnOak Party”), and Beard Technologies, Inc., an Oklahoma corporation having its principal office at 5600 North May Avenue, Suite 320, Oklahoma City, Oklahoma 73112 (“BTI”), with respect to the following matters:

Whereas, on or about June 10, 2004, BTI formed Beard Pinnacle, LLC (the “Company”) and entered into an Operating Agreement for the Company (the “Operating Agreement”) for the purpose of forming the Company and prescribing the terms and conditions under which the Company would be governed, managed and operated;

Whereas, each of the PinnOak Parties has acquired a membership interest in and was admitted as a member of a Company pursuant to a Subscription Agreement entered into between the PinnOak Parties and the Company (the “Subscription Agreement”);

Whereas, the PinnOak Parties and BTI want this Agreement (i) to amend, restate, supersede, and replace the Operating Agreement, (ii) to govern the management and operation of the Company, and (iii) to set forth the rights, obligations, duties, and relationship of the owners of the Company;

Now, therefore, in consideration of the foregoing premises, the mutual covenants contained in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the PinnOak Parties and BTI agree as follows:

Article 1

Defined Terms

1.1Definitions. Each of the following terms enclosed by quotation marks in this Article shall be a defined term, and each term enclosed by parentheses and quotation marks in the preamble, recitals or body of this Agreement, or specified as a defined term in this Agreement, shall also be a defined term. Wherever used in this Agreement, each term defined in this Agreement shall have the meaning ascribed to it in this Agreement. Each term that is defined in this Agreement in the singular shall include the plural of such term, and each term that is defined in this Agreement in the plural shall include the singular of such term.

“Act” means the Oklahoma Limited Liability Company Act, as hereafter amended from time to time.

“Adjusted Capital Account” shall mean the Capital Account maintained for each Member as provided in Article 5 as of the end of each fiscal year, (a) increased by an amount equal to such Member’s allocable share of Minimum Gain as computed on the last day of such fiscal year in accordance with the applicable Treasury Regulations and (b) reduced by the adjustments provided for in Treasury Regulation §1.704-1(b)(2)(ii)(d)(4)-(6).

“Affiliate” means (i) any Person owning any of the equity ownership of a Member, (ii) any Person who can direct or cause the direction of the management and policies of a Member, whether by contract, ownership, order of a Governmental Authority or otherwise, (iii) any Person in which a Member owns more than ten percent (10%) of the equity ownership (a “Member Subsidiary”), (iv) any Person in which any Member and/or one or more Member Subsidiaries own more than ten percent (10%) of the equity voting ownership, or (v) any Person that a Member and/or one or more Member Subsidiaries can direct or cause the direction of the management and policies of that Person, whether by contract, ownership, order of a Governmental Authority or otherwise.

“Agreement” means this Amended and Restated Operating Agreement of Beard Pinnacle, LLC, as originally signed by the Members and as may be amended, modified, supplemented or restated from time to time in accordance with the terms hereof.

“Annual Net Cash Flow” means the amount equal to the cumulative revenues of the Company in a fiscal year over the expenses of the Company in that fiscal year determined in accordance with generally accepted accounting principles consistent with past practices, less (i) increases in components of working capital excluding cash and the current portion of debt and (ii) capital expenditures related to property, plant and equipment in such fiscal year, plus (i) decreases in components of working capital excluding cash and the current portion of debt and (ii) depreciation and amortization expenses for such fiscal year.

“Articles of Organization” means the Articles of Organization of the Company filed at the office of the Secretary, as may be amended, restated, modified or supplemented from time to time.

“Beard Designated Managers” shall have the meaning provided for that term in Section 4.2.

“Board of Managers” means the Persons duly elected, designated, selected or appointed, and then serving as Managers in accordance with this Agreement.

“Capital Contribution” means the total amount of cash and the fair market value of any other assets contributed or deemed contributed under the Code to the Company by a Member, net of liabilities assumed by the Company or to which the assets contributed are subject.

“Carrying Value” means with respect to any asset, the value of such asset as reflected in the Capital Accounts of the Members. The Carrying Value of any asset shall be such asset’s adjusted basis for federal income tax purposes, except as follows:

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(a)The initial Carrying Value of any asset contributed by a Member to the Company will be the fair market value of theasset on the date of the contribution, as reasonably determined by the Manager;

(b)The Carrying Value of all Company assets shall be adjusted to equal their respective fair market values, as reasonably determined by the Manager, upon (i) the acquisition of an additional interest in the Company by any new or existing Member in exchange for a Capital Contribution that is not de minimis; (ii) the distribution by the Company to a Member of Company property that is not de minimis as consideration for an interest in the Company; and (iii) the liquidation of the Company as provided in Section 6.7;

(c)The Carrying Value of any Company asset distributed to any Member shall be adjusted to equal the fair market value of suchasset on the date of distribution, as reasonably determined by the Manager;

(d)The Carrying Value of an asset shall be adjusted by Depreciation taken into account with respect to such asset for purposes of computing Net Profits and Net Losses; and

(e)The Carrying Value of Company assets shall be adjusted at such other times as required in the applicable Treasury Regulations.

“Code” means the United States Internal Revenue Code of 1986, as amended from time to time, and the regulations promulgated pursuant thereto.

“Company” means Beard Pinnacle, LLC, the limited liability company governed by this Agreement.

“Company Nonrecourse Liabilities” shall mean nonrecourse liabilities (or portions thereof) of the Company for which no Member, or Person related to a Member, bears the economic risk of loss.

“Depreciation” means for each fiscal year or other period, an amount equal to the depreciation, amortization or other cost recovery deduction allowable with respect to an asset for such year or other period, except that if the Carrying Value of an asset differs from its adjusted basis for federal income tax purposesat the beginning of such year or other period, Depreciation shall be an amount which bears the same ratio to such beginning Carrying Value as the federal income tax depreciation, amortization or other cost recovery deduction for such year or other period bears to such beginning adjusted tax basis (unless the adjusted tax basis is equal to zero, in which event Depreciation shall be determined under any reasonable method selected by the Manager), except that Depreciation for any property as to which the Company uses the “remedial allocation method” shall be computed in accordance with Treasury Regulation Section 1.704-3(d)(2).

“Effective Date” has the meaning provided for that term in the preamble or opening paragraph of this Agreement.

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“Lien” means any lien, mortgage, pledge, deed of trust, indenture, security interest or charge against, covering, affecting or encumbering any real or personal property, or fixture, to secure the payment of a debt or performance of an obligation or undertaking.

“Majority Vote of the Managers” means the affirmative vote of a majority of the number of Managers then serving on the Board of Managers (i.e., more than 50%) who are entitled to vote upon the matter before the Board of Managers in accordance with this Agreement, which vote may be evidenced by a written consent of that Manager or those Managers.

“Majority Vote of the Members” means the affirmative vote of the Member or Members having a majority (i.e., more than 50%) of the aggregate percentage Membership Interests, which vote may be evidenced by a written consent of that Member or those Members, as applicable.

“Manager” means a Person elected or appointed to the Company’s Board of Managers in accordance with this Agreement to manage the Company as provided for in this Agreement.

“Member” means a Person who is (i) the owner of a Membership Interest or subsequently obtains or acquires a Membership Interest, and (ii) admitted as a member of the Company. As of the Effective Date, the Members are the PinnOak Parties and BTI.

“Member Nonrecourse Debt” shall mean any nonrecourse debt of the Company for which any Member, or Person related to a Member, bears the economic risk of loss.

“Member Nonrecourse Deductions” shall mean the amount of deductions, losses and expenses equal to the net increase during the year in Minimum Gain attributable to a Member Nonrecourse Debt, reduced (but not below zero) by proceeds of such Member Nonrecourse Debt distributed during the year to the Members who bear the economic risk of loss for such debt, as determined in accordance with applicable Treasury Regulations.

“Membership Interest” means an ownership or equity interest in the Company, which embodies and encompasses the owner’s rights in the Company, as provided for in this Agreement with respect to that ownership or equity interest, including, without limitation, the owner’s share of profits and losses of the Company, the right to receive distributions of the Company’s assets, and the right to vote or participate in management, all as more particularly provided for in this Agreement.

“Minimum Gain” attributable to Company Nonrecourse Liabilities or Member Nonrecourse Debt means an amount determined by computing, with respect to each Company Nonrecourse Liability or Member Nonrecourse Debt, as the case may be, the amount of gain (of whatever character), if any, that would be realized by the Company if it disposed of (in a taxable transaction) the Company property subject to such liability in full satisfaction thereof, and by then aggregating the amounts so computed. Such amount shall be determined in a manner consistent with treasury Regulation Section 1.704-2(d).

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“Net Profit” or “Net Loss” shall mean, with respect to any fiscal year or other fiscal period, the net income or net loss of the Company for such period, determined in accordance with federal income tax accounting principles and Section 703(a) of the Internal Revenue Code (including any items that are separately stated for purposes of Section 702(a) of the Internal Revenue Code), with the following adjustments:

(a)any income of the Company that is exempt from federal income tax shall be included as income;

(b)any expenditures of the Company that are described in Section 705(a)(2)(B) of the Internal Revenue Code or treated as so described pursuant to Treasury Regulation §1.704-1(b)(2)(iv)(i) shall be treated as current expenses;

(c)if Company assets are distributed to the Members in kind, such distributions shall be treated as sales of such assets for cash at their respective fair market values in determining Net Profit and Net Loss;

(d)in the event the Carrying Value of any Company asset is adjusted as provided in this Agreement, the amount of such adjustment shall be taken into account as gain or loss from the disposition of such asset for purposes of computing Net Profit or Net Loss;

(e)gain or loss resulting from any disposition of Company property with respect to which gain or loss is recognized for federal income tax purposesshall be computed by reference to the Carrying Value of the property disposed of, notwithstanding that the adjusted tax basis for such property differs from its Carrying Value;

(f)in lieu of the depreciation, amortization and other cost recovery deductions taken into account in computing such taxable income or loss, there shall be taken into account Depreciation for such fiscal year or other period; and

(g) items specially allocated under Section 6.5.3 shall be excluded.

“Person” means a natural person, corporation, general partnership, limited partnership, association, limited liability company, limited liability partnership, trust, or other legal entity, whether acting in an individual, fiduciary or other capacity.

“PinnOak Designated Manager” shall have the meaning provided for that term in Section 4.2.

“PinnOak Promissory Note” shall mean that certain promissory note dated October 7, 2005 evidencing amounts owed by the Company to PinnOak.

“PinnOak Revolver Account” shall mean amounts owed to PinnOak by the Company under that certain loan agreement dated as of _______________, 2007.

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“Pond Fines Agreement” means that certain Amended and Restated Agreement for a Pond Fines Recovery Facility dated October 1, 2006, but effective as of September 1, 2005, between the Company and Pinnacle Mining Company, LLC.

“Pond Recovery Operations” shall have the meaning provided for that term in the Pond Fines Agreement.

“Prohibited Transactions” shall have the meaning provided for that term at Section 4.9.

“Secretary” means the Secretary of State of Oklahoma.

“Smith Branch Project Development Charge” shall have the meaning set forth in the Amended and Restated Contract Operating Agreement dated October 1, 2006 by and between BTI and the Company (the “Contract Operating Agreement”).

“Smith Branch Project Monthly Overhead Charge” shall have the meaning set forth in the Contract Operating Agreement.

“Smith Branch Project Monthly Service Charge” shall have the meaning set forth in the Contract Operating Agreement.

1.2 Construction.

1.2.1The headings and titles in this Agreement are for guidance and convenience of reference only and do not limit or otherwise affect or interpret the provisions of this Agreement. Each reference made in this Agreement to a Section, Subsection or Article refers to the applicable Section, Subsection or Article in this Agreement, unless the context clearly indicates otherwise.

1.2.2The words “this Agreement”, “herein”, “hereby”, “hereunder”, “hereof”, and words of similar import refer to this Agreement as a whole and not to any particular part of this Agreement unless the context clearly indicates otherwise.

1.2.3Each reference made in this Agreement to an Exhibit refers to the applicable Exhibit attached hereto, unless the context clearly indicates otherwise. Each Exhibit attached hereto is made a part hereof.

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Article 2

Organization of the Company

2.1Formation. The Members hereby ratify, confirm, and approve the formation of the Company pursuant to the Act and the filing of the Articles of Organization at the office of the Secretary. From and after the date of this Agreement, the rights and obligations of the Members and the affairs of the Company shall be governed first by the mandatory provisions of the Act that as a matter of applicable law are required to control over any conflicting provision, second by the Articles of Organization, third by this Agreement, and fourth by the optional provisions of the Act. In the event of any conflict among the foregoing preferences, the conflict shall be resolved in the order of priority set forth in the immediately preceding sentence.

2.2Name of the Company. The name of the limited liability company formed by the Members under this Agreement and pursuant to the provisions of the Act shall be “Beard Pinnacle, LLC”.

2.3Purpose. The Company may and is organized to engage in any lawful business, purpose or activity permitted under the Act so long as that business, purpose or activity is related in any manner to the Company’s conduct of or involvement in coal reclamation and recovery operations or any activity incidental thereto, including, without limitation, the Pond Recovery Operations. The Company may also engage in any other lawful activity or business agreed upon by all the Managers.

2.4Term. The term of the existence of the Company shall begin upon the filing of the Articles of Organization with the Secretary and shall be perpetual, unless terminated pursuant to Article 8.

2.5Principal Office. The principal office and place of business of the Company shall be located at 355 William Pitt Way, Pittsburgh, Pennsylvania 15238, or at any other location decided upon by a Majority Vote of the Members.

2.6Resident Agent. The name and address of the Company's resident agent and office in the State of Oklahoma shall be Herb Mee, Jr., 5600 North May Avenue, Suite 320, Oklahoma City, Oklahoma 73112.

2.7Powers. The Company shall have the authority and power permitted and provided under the Act for limited liability companies generally.

Article 3

Members

3.1Members. The name, present mailing address, and taxpayer identification number of each Member are set forth on Exhibit “A” attached hereto.

3.2Membership Interests. The Company is hereby authorized to issue one class of Membership Interest. A Membership Interest may, but is not required to be evidenced by a certificate of Membership.

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3.3 Voting.

3.3.1Except for any vote by the Members concerning (i) the appointment, selection, election, designation, removal or replacement of any Manager or (ii) any request by BTI or the Board of Managers for the Members to authorize the Company to undertake any one or more of the Prohibited Transactions provided for at Section 4.9, each Member shall be entitled to vote at every meeting of the Members at which there is a vote by the Members on any matter, based upon such Member's percentage Membership Interest as of the date of such meeting. As of the Effective Date, the percentage Membership Interest of each Member is set forth on Exhibit “A” attached hereto. Unless otherwise expressly provided herein, all matters which require approval or consent of the Members shall be decided by the affirmative vote or consent of a Majority Vote of the Members.

3.3.2Each Manager shall be appointed, elected, designated, selected, replaced, and removed as provided for in Article 4.

3.3.3A Member may vote either in person or by written proxy signed by the Member or by the Member's duly authorized attorney-in-fact. Unless otherwise provided by applicable law, a proxy shall be in writing and shall be void and not counted in any vote occurring after one hundred eighty (180) days from the date the proxy is made, as set forth on its face.

3.3.4Any action of the Members may be taken without a meeting if the Members required to consent to the action to be taken, if the action had been taken at a meeting of Members, consent to such action in writing. The written consents shall be filed with the records of the meetings of the Members. Such actions by consent shall be treated for all purposes as actions taken at a meeting. Any Manager acting with the written consent of the Members may make any decisions on behalf of the Company.

3.4 Meetings of the Members.

3.4.1A meeting of the Members may be called at any time by any Member. Meetings of Members shall be held at the Company's principal place of business in Pittsburgh, Pennsylvania, or at any other place agreed upon by a Majority Vote of the Members. Not less than ten (10) nor more than ninety (90) days before each meeting, the Member calling the meeting shall give written notice of the meeting to each Member. The notice shall state the time, place, and purpose of the meeting. If agreed upon by a Majority Vote of the Members, the meeting may be conducted by telephone.

3.4.2Each Member shall be conclusively deemed to have waived notice of any meeting if before or after the meeting the Member signs a waiver of the notice which is recorded in the Company’s records of the Members' meetings, or such Member is present at the meeting in person or by proxy. At each meeting of the Members, the presence in person or by proxy of a Member or Members who has or have, as applicable, a Majority Vote of the Members shall constitute a quorum unless this Agreement provides otherwise.

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3.5Unauthorized Actions. Notwithstanding any other provision in this Agreement to the contrary, any Member or Manager who takes any action or binds the Company in violation of this Agreement shall be solely responsible for any and all losses, damages, and expenses incurred by the Company as a result of the unauthorized action, and such Member or Manager, as applicable, shall defend, indemnify, and hold harmless the Company with respect to any such loss, damage or expense.

3.6Personal Services. No Member shall be required to perform services for the Company solely by virtue of being a Member. Unless provided in a written agreement approved in accordance with Section 3.3.3 hereof, no Member shall be entitled to compensation for services performed for the Company or reimbursement for expenses incurred in connection with the activities of the Company.

3.7Indemnification. The Company shall defend, indemnify and hold harmless each Member from and against any liability or damages for any act performed by the Member with respect to the Company’s activities, unless such act constituted (i) a breach by the Member of this Agreement or of the Member's duty of loyalty, (ii) was not in good faith, (iii) involved intentional misconduct or knowing violation of law, (iv) resulted in the receipt of an improper personal benefit, or (v) constituted gross negligence.

3.8Business Activities. Nothing in this Agreement shall be deemed to restrict in any way the rights of any Member, or of any Affiliate of any Member, to conduct any other business or activity whatsoever, and no Member shall be accountable to the Company or to any other Member with respect to that business or activity unless it constitutes a violation of this Agreement. The organization of the Company shall be without prejudice to the Members' respective rights (or the rights of their respective Affiliates) to maintain, expand, or diversify such other interests and activities and to receive and enjoy profits or compensation therefrom. Each Member waives any rights the Member might otherwise have to share or participate in such other interests or activities of any other Member or the Member's Affiliates.

Article 4

Board of Managers

4.1Board of Managers. Except as otherwise provided in this Agreement, the day-to-day operation and the business and affairs of the Company shall be managed and conducted by and under the direction of the Board of Managers. Except as otherwise expressly provided in this Agreement, the Board of Managers shall exercise control over all aspects of, and have full and complete authority and discretion to make any and all decisions concerning the Company's business and affairs. The Board of Managers shall also perform all orders and resolutions of the Members, as decided by a Majority Vote of the Members. A Manager may, but is not required to be a Member.

4.2Number of Managers. The Board of Managers shall consist of three (3) Managers, one (1) of which shall be designated or appointed by BTI (the “Beard Designated Managers”) and two (2) of which shall be designated or appointed by the PinnOak Parties (the “PinnOak Designated Managers”). The initial Beard Designated Manager shall be C. David Henry; the initial PinnOak Designated Managers shall be Joe Wetzel and Bob Helmandolar.

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4.3Term of Managers. Each Manager on the Board of Managers shall be elected for a term of one (1) year and until his or her successor is duly elected and qualified, or until his or her earlier resignation or removal. Each Member may replace or substitute any Manager selected by it at its sole discretion at any time and from time to time, but no such substitution or replacement shall be effective until the other Member receives written notice of that replacement or substitution. If a Beard Designated Manager resigns or is removed as a member of the Board of Managers, BTI shall designate his or her successor. If a PinnOak Designated Manager resigns or is removed as a member of the Board of Managers, the PinnOak Parties shall designate his or her successor.

4.4Delegation; Officers. Subject to Section 3.6, the Board of Managers shall designate and delegate such authority to its employees or other Persons to perform tasks assigned by the Board of Managers to those employees or other Persons, as the Board of Managers deems necessary or advisable, and in the best interests of the Company. Except as otherwise expressly provided herein, all decisions, actions and approvals by the Board of Managers shall be made or effected by a Majority Vote of the Managers. The day to day operations of the Company shall be managed by the officers of the Company who will be elected by the Board of Managers. The officers shall consist of a Chairman, Vice Chairman, President, one or more Vice Presidents, a Secretary, a Treasurer and may consist of such other officers and assistant officers as the Board of Managers may determine. Each officer or assistant officer shall serve at the pleasure of the Board of Managers. The compensation, if any, of all officers and assistant officers shall be fixed by, or pursuant to authority delegated by, the Board of Managers from time to time. Any two or more offices may be held by the same person. The following officers of the Company shall serve at the pleasure of the Board of Managers until their successors are elected: Chairman-William M. Beard; Vice Chairman-Herb Mee, Jr.; President-C. David Henry; and Vice President, Secretary and Treasurer-Michael F. Nemser.

4.5Indemnity of Managers. No Manager of the Company shall be liable, responsible or accountable for damages or otherwise to the Members or the Company for any act taken or performed or for any omission to act, if that act or failure to act does not constitute willful misconduct or recklessness. In any threatened, pending or completed action, suit or investigation in which any Manager was or is a party by virtue of his status as a Manager, the Company shall, solely from the Company’s assets, indemnify that Manager against judgments, settlements, penalties, fines or expenses, including, without limitation, attorneys' fees, incurred by such Manager in connection therewith, so long as that Manager’s action or failure to act does not constitute willful misconduct, recklessness, a breach of loyalty, lack of good faith, knowing violation of applicable law, or a transaction from which that Manager derived an improper personal benefit. The indemnification rights herein contained shall be cumulative of, and in addition to, any and all other rights and remedies to which the Managers shall be entitled, whether pursuant to some other provision of this Agreement under applicable law.

4.6Resignation of Manager. Any Manager may resign from the Board of Managers at any time by giving written notice to the Company. The resignation of any Manager shall take effect upon the later of the Company’s receipt of that notification or at such other time specified in the notice. The Company’s acceptance of any Manager’s resignation shall not be necessary to make the resignation effective.

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4.7Removal of Managers. A Manager may be removed at any time, with or without cause, by the Member or Members who selected or appointed that Manager.

4.8Vacancies. Any vacancy on the Board of Managers shall be promptly filled by the Member or Members, as applicable, who selected or designated the Manager who is no longer serving on the Board of Managers.

4.9Restrictions on Managers’ Authority. The authority of the Board of Managers to control, manage and direct the day-to-day business operations of the Company shall not include the following concerns (the “Prohibited Transactions”), unless authorized by a Majority Vote of the Members which Majority Vote must include the vote of BTI:

(a)The Company’s issuance, sale or redemption of any Membership Interest, or any right or option to acquire any Membership Interest or approval of admission of any new Member or the transfer of any Membership Interest;

(b)The Company’s acquisition of any capital stock, membership interest or other equity ownership interest in any other Person;

(c)The Company’s acquisition of all or substantially all the assets and properties or any business of any Person;

(d)The Company’s sale of all or substantially all of its assets in a single transaction or series of related transactions, except sales of products and services to the Company’s customers in the ordinary course of the Company’s business;

(e)The Company’s entering into any transaction or series of related transactions (excluding the Pond Fines Agreement) between the Company, on the one hand, and any Member or Manager, or any Affiliate of any Member or Manager, which involve the aggregate sum of Fifty Thousand Dollars ($50,000) or more;

(f)The Company’s commencement of any bankruptcy or similar proceedings involving the Company as debtor;

(g)The Company’s amendment or modification to its Articles of Organization;

(h)The Company’s execution of any promissory note, guarantee or similar debt instrument whereby the Company becomes obligated to repay an indebtedness to or of any Person;

(i) The Company’s loan to any Person;

(j)The Company’s grant of any Lien, except a Permitted Lien, covering any of the assets of the Company, except in the ordinary course of the Company’s business;

(k)The Company’s compromise or renegotiation of debts owing by or to the Company;

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(l)The Company’s change of its fiscal year or method of accounting, except as required by applicable Law; and

(m)The Company’s expenditure of funds for any purpose not in the ordinary course of the Company’s business.

(n) Materially change the purpose or scope of the Company’s business.

(o) Approve the annual operating plan and budget of the Company.

(p)Approve the selection of or change of the independent accountants to the Company.

4.10Meetings of the Managers. Except as otherwise agreed by a Majority Vote of the Members, the Board of Managers shall meet at least once each calendar month and may be called upon the request of any Manager. Meetings of the Board of Managers may be held by telephone. At each meeting of the Managers, the presence of one Manager appointed by BTI and one Manager appointed by the PinnOak Parties shall constitute a quorum for the transaction of business.

Article 5

Capital; Capital Accounts

5.1Capital Accounts. The Company shall establish and maintain a Capital Account for each Member. A Member’s Capital Account shall be credited with the amount of (i) the Member’s capital contributions made to the Company, (ii) the Member’s distributive share of the Net Profits of the Company and (iii) any items in the nature of income or gain that are specially allocated to the Member pursuant to Section 6.5.3 aside from subsection (g) thereof. A Member’s Capital Account shall be debited with (i) the amount of the Member’s allocation of net losses of the Company, (ii) the amount of cash distributions made to it, (iii) the fair market value of any non-cash assets distributed to it (net of liabilities secured by those assets that the Member is considered to assume or take subject to under the Code) and (iv) any items in the nature of loss or deduction that are specially allocated to the Member pursuant to Section 6.5.3 aside from subsection (g) thereof. A Member’s Capital Account shall otherwise appropriately reflect transactions of the Company and the Members with respect to the Company.

5.2Capital Contributions. If, from time to time after the date of this Agreement, either Member contributes money or other property to the Company in furtherance of the purposes of the Company, or for the purpose of permitting the Company to satisfy its obligations to any third party, such Member shall be treated as having made a Capital Contribution equal to the value of such money or other property, except as otherwise provided in this Agreement.

5.3No Additional Capital Contributions Required. No Member shall be required to contribute any additional capital to the Company, and no Member shall have any personal liability for any obligations of the Company.

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5.4Return of Capital Contributions. Except as otherwise provided in this Agreement, no Member shall have the right to the return of or to withdraw any Capital Contribution. No Member or Manager shall be personally liable for the return of any Capital Contribution of any Member. Any return of Capital Contributions shall be made solely from the assets of the Company. Except as otherwise provided in this Agreement, if a Member is entitled to receive a return of a Capital Contribution, the Company may distribute cash, notes, property, or a combination thereof to the Member in return of the Capital Contribution. No Member shall be entitled to receive interest on its Capital Account or any contributions or distributions made to the Member by the Company.

Article 6

Profits, Losses, Distributions and Loans

6.1 Distribution of Net Cash Flow.

6.1.1No later than forty-five (45) days after each fiscal year of the Company, the Board of Managers shall inform the Members in writing whether the Board of Managers recommends that the Company make a distribution of Annual Net Cash Flow for that fiscal year to the Members and the amount, if any, of that distribution. If the Company has Annual Net Cash Flow for a fiscal year but the Board of Managers recommends that some or all of that Annual Net Cash Flow not be distributed to the Members, then the Board of Managers shall inform the Members with reasonable specificity in its recommendation the basis for its decision. A distribution of Annual Net Cash Flow shall not be made if and to the extent, in the reasonable opinion of the Managers, as determined by a Majority Vote of the Managers, the Company would not have sufficient working capital (i) to timely satisfy the Company’s debts and obligations as they become due including, without limitation, the obligations under any sale-leaseback transaction entered into by the Company; (ii) to distribute to the Members an amount equal to thirty-five percent (35%) of the Net Profits, if any, allocable to the Members in such fiscal year; (iii) to satisfy in full any interest and principal owing under the PinnOak Revolver Account; (iv) to pay any past due and current monthly payments of interest and principal under the PinnOak Promissory Note; (v) to pay any past due and current monthly payments of the Smith Branch Project Monthly Overhead Charge and the Smith Branch Project Monthly Service Charge: (vi) provided the PinnOak Promissory Note has been paid in full and there is no unpaid principal under the PinnOak Revolver Account, to pay any past due and current payments of the Smith Branch Project Development Charge; and (vii) to distribute any excess Annual Net Cash Flow in accordance with the terms of Section 6.1.3 hereof. The Members expressly authorize the Managers to borrow funds under the PinnOak Revolver Account if necessary to fund payments and/or distributions under Sections 6.1.1 (i) and (ii) of this Agreement. Distributions of cash by the Company to the Members (other than distributions for taxes under Section 6.1.1(ii) hereof) shall be deemed to relate to Annual Net Cash Flow on a “first in first out” basis such that if in any year the Company does not distribute the full amount of the Annual Net Cash Flow any distributions of cash in future years shall be deemed to be distributions of the remaining balance of the Annual Net Cash Flow from the prior year(s). Any distribution of prior year Annual Net Cash Flow shall be distributed in accordance with Section 6.1.3 hereof giving appropriate credit for prior distributions of such year’s Annual Net Cash Flow.

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6.1.2If any Manager does not vote in favor of a distribution of Annual Net Cash Flow because the Manager has reasonably concluded that the Company may not have sufficient working capital to satisfy its contractual or on-going operational obligations and undertakings during the immediately succeeding fiscal year, then that Manager shall be conclusively deemed to not have breached any duty, obligation or responsibility of any nature or kind to any Member as a result of that vote.

6.1.3If the Managers have authorized a distribution of Annual Net Cash Flow with respect to any year, the amount authorized shall be promptly distributed by the Company as follows:

(a)One hundred percent (100%) of the first Five Hundred Thousand Dollars ($500,000) of Annual Net Cash Flow authorized to be distributed shall be distributed to the PinnOak Parties in accordance with their respective Membership Interests set forth at Exhibit “A”.

(b)After the distribution provided for in Section 6.1.3(a) is made, fifty percent (50%) of the next Three Hundred Thousand Dollars ($300,000) of Annual Net Cash Flow authorized to be distributed shall be distributed to the PinnOak Parties in accordance with their respective Membership Interest set forth as Exhibit “A” and the remaining fifty percent (50% shall be distributed to BTI.

(c)After the distribution provided for in Section 6.1.3(b) is made, eighty percent (80%) of the next One Million Dollars ($1,000,000) of Annual Net Cash Flow authorized to be distributed for that fiscal year shall be distributed to PinnOak in accordance with their respective Membership Interests set forth at Exhibit “A” and the remaining twenty percent (20%) of such amount shall be distributed to BTI.

(d)After the distribution provided for in Section 6.1.3(c) is made, seventy-seven point five percent (77.5%) of the next Five Hundred Thousand Dollars ($500,000) of Annual Net Cash Flow authorized to be distributed for that fiscal year shall be distributed to the PinnOak Parties in accordance with their respective Membership Interests set forth at Exhibit “A” and the remaining twenty-two point five percent (22.5%) of such amount shall be distributed to BTI.

(e)After the distribution provided for in Section 6.1.3(d) is made, seventy five percent (75%) of all remaining Annual Net Cash Flow authorized to be distributed for that fiscal year shall be distributed to the PinnOak Parties in accordance with their respective Membership Interests set forth at Exhibit “A” and the remaining twenty five percent (25%) of such amount shall be distributed to BTI.

6.2Preparation of Annual Net Cash Flow Statement. Within sixty (60) days after each fiscal year of the Company, the Company shall provide to the Members a written statement reflecting the Annual Net Cash Flow for that fiscal year and itemizing with reasonable specificity by type and amount all revenues received, and the types and amounts of expenses incurred, during that fiscal year and a calculation of the Annual Net Cash Flow, if any, as of the end of that fiscal year.

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6.3Deficit Balances. No Member shall have any obligation to the Company by reason of the existence of any negative Annual Net Cash Flow, deficit or loss by the Company. No distribution of Annual Net Cash shall be subject to refund because of a negative Annual Net Cash Flow in a subsequent fiscal year.

6.4Audit. The Company shall maintain at its principal place of business in Pittsburgh, Pennsylvania, or at such other location in the United States determined by a Majority Vote of the Managers, at the Company’s sole election, books of accounts and records in accordance with acceptable accounting and bookkeeping practices, detailing the Company’s financial status and reflecting the status of the Company’s profits and losses. Any Member and its representatives (subject to their agreement to the confidentiality provisions of this Agreement) may, at that Member’s sole expense and upon at least thirty (30) days’ prior notice to the Company, examine, inspect, review, audit and make copies of all such books and records.

6.5Allocation of Tax Items. The Members shall share Net Profits and Net Losses and all related items of income, gain, loss, deduction and credit for federal income tax purposes as follows:

6.5.1Net Profits or Net Loss for any fiscal year shall be allocated among the Members in such manner as shall cause the Capital Accounts of the Members to equal, as nearly as possible, the amounts such Members would receive if all cash on hand at the end of such year were distributed to the Members under Section 6.1.3, and all assets on hand at the end of such year were sold for cash at the Carrying Values of such assets, all Company liabilities were satisfied to the extent required by their terms (limited, with respect to any Company Nonrecourse Liabilities and Member Nonrecourse Debt, to the Carrying Values of the assets securing each such liability) and any remaining cash were distributed to the Members under Section 6.1.3.

6.5.2The Manager shall make the foregoing allocations as of the last day of each fiscal year; provided, however, that if during any fiscal year of the Company there is a change in any Member’s interest in the Company, the Manager shall make the foregoing allocations as of the date of each such change in a manner which takes into account the varying interests of the Members and in a manner the Manager reasonably deems appropriate.

6.5.3Notwithstanding any of the provisions of this Section 6.5 to the contrary:

(a)If during any fiscal year of the Company there is a net increase in Minimum Gain attributable to a Member Nonrecourse Debt that gives rise to Member Nonrecourse Deductions, each Member bearing the economic risk of loss for such Member Nonrecourse Debt shall be allocated items of Company deductions and losses for such year (consisting first of cost recovery or depreciation deductions with respect to property that is subject to such Member Nonrecourse Debt and then, if necessary, a pro rata portion of the Company’s other items of deductions and losses, with any remainder being treated as an increase in Minimum Gain attributable to Member Nonrecourse Debt in the subsequent year) equal to such Member’s share of Member Nonrecourse Deductions, as determined in accordance with applicable Treasury Regulations.

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(b)If for any fiscal year of the Company there is a net decrease in Minimum Gain attributable to Company Nonrecourse Liabilities, each Member shall be allocated items of Company income and gain for such year (consisting first of gain recognized from the disposition of Company property subject to one or more Company Nonrecourse Liabilities and then, if necessary, a pro rata portion of the Company’s other items of income and gain, and if necessary, for subsequent years) equal to such Member’s share of such net decrease (except to the extent such Member’s share of such net decrease is caused by a change in debt structure with such Member commencing to bear the economic risk of loss as to all or part of any Company Nonrecourse Liability or by such Member contributing capital to the Company that the Company uses to repay a Company Nonrecourse Liability), as determined in accordance with applicable Treasury Regulations.

(c)If for any fiscal year of the Company there is a net decrease in Minimum Gain attributable to a Member Nonrecourse Debt, each Member bearing the economic risk of loss for such Member Nonrecourse Debt shall be allocated items of Company income and gain for such year (consisting first of gain recognized from the disposition of Company property subject to Member Nonrecourse Debt, and then, if necessary, a pro rata portion of the Company’s other items of income and gain, and if necessary, for subsequent years) equal to such Member’s share of such net decrease (except to the extent such Member’s share of such net decrease is caused by a change in debt structure such that the Member Nonrecourse Debt becomes partially or wholly a Company Nonrecourse Liability or by the Company’s use of capital contributed by such Member to repay the Member Nonrecourse Debt) as determined in accordance with applicable Treasury Regulations.

(d)The Net Losses allocated pursuant to this Article shall not exceed the maximum amount of Net Losses that can be allocated to a Member without causing or increasing a deficit balance in the Member’s Adjusted Capital Account balance. All Net Losses in excess of the limitations set forth in this Section 6.5 shall be allocated to Members with positive Adjusted Capital Account balances remaining at such time in proportion to such positive balances.

(e)In the event that a Member unexpectedly receives any adjustment, allocation or distribution described in Treasury Regulation § 1.704-1(b)(2)(ii)(d)(4), (5) or (6) that causes or increases a deficit balance in such Member’s Adjusted Capital Account, items of Company income and gain shall be allocated to that Member in an amount and manner sufficient to eliminate the deficit balance as quickly as possible.

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(f)The allocations set forth in subsections (a), (b), (c), (d) and (e) of this Section 6.5 (collectively, the “Regulatory Allocations”) are intended to comply with certain requirements of the Treasury Regulations. It is the intent of the Members that, to the extent possible, all Regulatory Allocations that are made be offset either with other Regulatory Allocations or with special allocations pursuant to this Section 6.5.3(f). Therefore, notwithstanding any other provisions of this Section 6.5 (other than the Regulatory Allocations), such offsetting special allocations shall be made in such manner so that, after such offsetting allocations are made, each Member’s Adjusted Capital Account balance is, to the extent possible, equal to the Adjusted Capital Account balance such Member would have had if the Regulatory Allocations were not part of the Agreement and all Company items were allocated pursuant to Sections 6.5.1 and 6.5.2.

(g)In the case of any property the Carrying Value of which differs from its adjusted tax basis, items of income, gain, loss and deduction shall, solely for income tax purposes, be allocated as required under Section 704(c) of the Internal Revenue Code and the applicable Treasury Regulations to take account of such difference. In making such allocations (including, but not limited to, allocations of tax items under Treasury Regulation Section 1.704-1(b) (4) (i)), the Company shall use the remedial allocation method as set forth in Treasury Regulation Section 1.704-3(d).

(h)In the event Membership Interests are issued to a Person and the issuance of such Membership Interests results in items of income or deduction to the Company, such items of income or deduction shall be allocated to the Members immediately before the issuance of such Membership Interests.

6.6 Nonliquidating Distributions.

6.6.1In the event of any non-liquidating distributions of property in kind, the distributed property shall be treated as if sold for its fair market value during the year in which the property is distributed, as reasonably determined by the Company, and the Capital Accounts of the Members shall be adjusted to reflect any gain or loss which would have been realized on the books of the Company had the property been sold for its fair market value and the proceeds received. Any such distribution shall be made in accordance with Article 6.

6.6.2No distribution from the Company to a Member may be made if, after giving effect to the distribution, the Company would not be able to pay its debts as they become due in the usual course of business or the Company’s total assets would be less than the sum of its total liabilities, and no distributions shall be made by the Company or any fund therefore be established by the Company at such time as the terms and provisions of any loan agreement or any similar agreement to which the Company is then a party and which is then in effect, specifically prohibit such distribution or establishment of such fund, or provide that such distribution or establishment of such fund would constitute a breach thereof or a default (or event which with notice or the passage of time, or both, could become an event of default) thereunder.

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6.7Duration, Termination, and Liquidation Distributions. Upon the termination or liquidation of the Company, a final audit shall be made by the Company's auditors, and all of the properties and assets of the Company shall be distributed in liquidation as follows:

(a)All of the property and assets, if any, other than cash, shall be sold or collected and, to the extent feasible, reduced to cash within a period of one (1) year (or such shorter or longer period as may be agreed) from the date of such termination. Each Member shall have the right to bid on and purchase any or all of the property and assets being sold.

(b)All the Company's debts, liabilities and obligations, including any loans or advances or amounts paid as guarantees by a Member, shall be promptly paid in full or reserves therefore shall be set aside. A reasonable time shall be allowed for the orderly liquidation and discharge of the liabilities of the Company. Each Member shall be furnished with a statement, prepared by the Company's auditors, setting forth the total amount of the assets available for distribution after satisfaction of all liabilities.

(c)All remaining cash and other assets shall then be distributed to the Members in accordance with Article 6.

If the liabilities of the Company shall exceed the assets available for distribution, no Members shall be obligated to make a loan or Capital Contribution to the Company to satisfy those liabilities.

6.8Loans. If by a Majority Vote of the Members, the Members determine that the Company requires additional funds for operations or to repay indebtedness incurred by the Company for such purpose, or for any other purpose consistent with the purposes of the Company, any one or more of the Members or their respective Affiliates may, but shall not be required to, loan such funds to the Company as may then be required by the Company. Each loan made pursuant to this Section shall not constitute additional capital contributions and shall be payable in accordance with this Section. Each such loan shall be in writing and shall contain such terms and conditions as the Managers may reasonably determine and shall be approved by the Members as set forth in Section 3.3.3 hereof.

6.9Obligations. The obligations of the Members, including, without limitation, any obligation to make Capital Contributions or other contributions to the Company, to guaranty obligations of the Company, or reimburse other Members, may be enforced only by the Company or by the other Members and do not constitute “supporting obligations” under the Oklahoma Uniform Commercial Code. Under no circumstances shall any third party have any rights under this Agreement or otherwise to enforce any obligation of the Company against any Member. None of the provisions of this Agreement shall be for or are intended to be for the benefit of or enforceable by any creditors of the Company, except as otherwise expressly and specifically provided in this Agreement.

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Article 7

Dissolution, Liquidation, and

Termination of the Company

7.1Events of Dissolution. The Company shall dissolve and its affairs shall be wound up only upon the earlier of (i) the unanimous written consent of the Members or (ii) the entry of a decree of dissolution of the Company under the Act.

7.2Procedure for Winding Up and Dissolution. If the Company is dissolved, the remaining Members shall wind up its affairs. On winding up of the Company, the assets of the Company shall be distributed, first, to creditors of the Company, including Members who are creditors, in satisfaction of the liabilities of the Company, and then to the Members in accordance with Article 6, except as otherwise provided in this Agreement or mandated by the Act.

7.3Filing of Articles of Dissolution. If the Company is dissolved, the Members shall promptly file Articles of Dissolution or other applicable certifications with the Secretary. If there are no remaining Members, the Articles shall be filed by the last Person to be a Member; if there are no remaining Members, or a Person who last was a Member, the Articles shall be filed by the legal or personal representatives of the Person who last was a Member.

Article 8

Books, Records, Accounting, and Tax Elections

8.1Books and Records. The Company shall maintain its books and records on such basis as shall be determined by the Members and in accordance with sound and generally accepted accounting principles, showing all costs, expenditures, sales, receipts, assets and liabilities, and profits and losses and all other records necessary, convenient or incidental to recording the Company's business and affairs and sufficient to record the allocation of profits, losses and distributions as provided in this Agreement. In connection therewith, the Company may employ, on behalf of and at its expense, such employees and accountants as in its discretion may be necessary or desirable. Books and records concerning the Capital Accounts and financial affairs of the Company shall be kept at the Company’s principal place of business or at such other place within the United States agreed upon by the Managers. Those records shall be open at all reasonable times to access and inspection by the Members.

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8.2Fiscal Year; Reports. The Company’s fiscal year shall be the calendar year, unless changed by a Majority Vote of the Members. At least quarterly or more frequently if required by a Majority Vote of the Members, an unaudited statement of operations of the Company shall be prepared and submitted to the Members. If requested by a Member, the Company shall have an audit of its books made by a firm of public accountants as reasonably selected by a Majority Vote of the Members. The Managers shall have prepared at Company expense, the following documents: (i) within ninety (90) days following the end of the Company’s Fiscal Year, Internal Revenue Service Form K-1 or similar form as may be required by the Service stating the Member’s allocation of income, gain, loss or credit for the fiscal year (“Tax Statements”) (if and so long as the Company is taxed under Subchapter K of the Code); (ii) monthly management reports (to consist of an unaudited profit and loss statement, an unaudited statement of cash flows and an unaudited condensed balance sheet) (“Monthly Management Reports”); and (iii) financial statements (balance sheet, statement of profits or losses, Members’ equity, and changes in financial position) on an annual basis, which shall be prepared in accordance with GAAP and shall present fairly the financial condition and results of operations of the Company as of the end of and for the period covered thereby (“Financial Statements”). The Managers, at Company expense, shall cause to be prepared and timely filed with appropriate federal and statement regulatory and administrative bodies, all reports required to be filed with such entities under then-current applicable laws, rules and regulations. Such reports shall be prepared on the accounting or reporting basis required by such regulatory bodies. Any Member shall be provided with a copy of any such report upon request and without expense to such Member. The Managers shall cause all income tax information returns for the Company to be prepared and timely filed with the appropriate authorities.

8.3Tax Election / Tax Matters Member. The Company shall at all times elect to be treated as a pass-through entity for the income tax purposes. The Regent Investment Company, LP shall be the tax matters Member (the “Tax Matters Member”). The Tax Matters Member shall have the responsibility of a tax matters partner specified under the Code. The Tax Matters Member shall give notice to all Members of any audit or review of the Company by the Internal Revenue Service or state tax authority and shall make such additional reports to all the Members as are reasonably necessary to keep them informed of the status of any such review or audit and any negotiations, proposed settlements or litigation related thereto and shall inform the Members of the manner in which they may opt out of any proposed settlements.

8.4Bank Accounts. All receipts, funds and income of the Company shall be deposited in such banks and on such terms as is determined by a Majority Vote of the Managers. There shall be no commingling of the moneys and funds of the Company with moneys and funds of any other Person, and the Company’s monies and funds shall be maintained in separate and distinct accounts.

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Article 9

Transfers; New Members

9.1Transfer of Interest in the Company. Except for the transfers authorized in this Section, no Member shall transfer any Membership Interest or any other legal or equitable interest in the Company. Except for a transfer of all the Membership Interest of a Member to an Affiliate of that Member, no transfer of any interest in the Company shall be permitted without the prior written approval of a Majority Vote of the Members. If approved by the Members, the transfer to a non-Affiliate must be on the terms described by the proposed transfer to the Members. Except for a transfer of a Membership Interest by a Member to an Affiliate of that Member, each Member shall have the right to acquire all (but only all) the Membership Interest proposed to be transferred by a Member to any other Person in a proposed transfer approved by a Majority Vote of the Members upon the same terms as described in the meeting held by the Members to vote upon the approval of the proposed transfer. Each Member must exercise that preferential right within five (5) days after the meeting in which the transfer in question was approved. In the event the preferential right is oversubscribed, the Membership Interest so offered shall be allocated among the Members who exercise the preferential right pro rata in accordance with their respective Membership Interest. Any act in violation of this Article shall be null and void. For purposes of this Article, “transfer” shall include any and all means by which a Member may be divested of record or beneficial ownership of all or any part of his interest in the Company, including divestment by sale, exchange, gift, assignment, operation of law, merger, pledge or otherwise.

9.2Record Ownership. The name and address of each Member of the Company shall be recorded in the Company’s books and records. The Company shall be entitled to treat the record Member as the owner in fact of the interest in the Company and, accordingly, shall not be bound to recognize any equitable or other claim to ownership of such Membership Interest, whether it shall have express or other notice thereof, except as required by Oklahoma law.

9.3Transfer of Membership Interest. A Transfer of Membership Interest shall be made on the books of the Company only by an instrument in writing executed by the Person named as the owner of the Membership Interest or such Person’s attorney-in-fact, lawfully constituted in writing.

9.4 Admission of New Members.

9.4.1Upon a Transfer of a Membership Interest permitted by this Agreement, the transferee of such Membership Interest shall be accorded the rights of a mere assignee of a limited liability company interest (i.e., shall have no governance or management rights) and shall not become a Member unless and until (i) the transferor delivers to the Company a written assignment of the Membership Interest, (ii) the transferee agrees in writing to be bound by the terms of this Agreement, and (iii) the Members by a Majority Vote of the Members consent in writing to the Transfer and approve the admittance of the transferee as a Member, which approval may be granted or withheld by each of the Members in its sole and absolute discretion, except with respect to any transfer to an Affiliate of a Member.

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9.4.2The admission of a transferee as a Member with respect to a transferred Membership Interest shall become effective on the date the Members give their unanimous written consent to the admission and the books and records of the Company have been modified to reflect such admission. A Member may only transfer all of its Membership Interests and shall cease to be a Member of the Company upon a transfer of that Membership Interests in accordance with this Article and the execution of a counterpart of this Agreement by the transferee and shall have no further rights as a Member in or with respect to the Company.

9.5Withdrawal of a Member. A Member has neither the power nor the right to withdraw as a Member until the Member obtains the prior written consent of a Majority Vote of the Members. A Member who withdraws without obtaining the prior written consent of a Majority Vote of the Members shall thereafter not be entitled to participate or have its designated Manager participate in the management or governance of the Company including, without limitation, any decision making, votes or meetings concerning the operation or management of the Company, and shall forfeit its right to designate, replace, remove or retain a Manager.

9.6Issuance of Additional Membership Interests. Additional Membership Interests may be authorized and issued by the Company upon such terms and conditions as may be approved by a Majority Vote of the Members. Upon the proposed issuance of any such additional Membership Interests, each existing Member shall have the preemptive right, but not the obligation, to purchase such portion of the newly issued Membership Interests equal to the result obtained by multiplying (i) the number of Membership Interests or percentage ownership in the Company evidenced by those Membership Interests by (ii) the percentage ownership in the Company owned by such Member, together with such Member’s proportionate share of the other newly issued Membership Interests as to which other Members fail to exercise their preemptive rights.

Article 10

Miscellaneous

10.1Entire Agreement. This Agreement (including the exhibits attached hereto and made a part hereof) is the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior written and oral agreements between the parties with respect to the subject matter hereof.

10.2Amendment. This Agreement may not be altered, amended, revised, modified or supplemented except by a written agreement signed by all the parties expressly specifying the provisions altered, amended, revised, modified or supplemented. Any party to whom performance is owed under this Agreement may by an instrument in writing extend the time for or waive the performance of any of the obligations of another party or waive compliance by such other party with any of the provisions contained herein.

10.3Notices. All notices and elections required or permitted hereunder shall be given in writing and delivered in person, sent by bonded overnight courier (e.g., Federal Express, UPS), sent by U.S. Mail postage prepaid, return receipt requested, or by facsimile transmission (provided any such facsimile transmission is confirmed orally or by written confirmation) addressed to the appropriate party at the address for that party set forth below:

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If to BTI:

Beard Technologies, Inc.

5600 North May Avenue, Suite 320

Oklahoma City, OK 73112

Attention: Herb Mee, Jr., Vice President

If to PinnOak Parties:

Point Plaza, Suite 300

601 Technology Drive

Canonsburg, PA 15317

Attention: Chief Financial Officer

The address and facsimile number of any party may be changed by notice given in the manner provided in this Section. Any notice given in accordance with this Section shall be deemed to have been given when delivered to the addressee in person, or if transmitted by facsimile transmission, upon receipt of the oral or written confirmation of receipt. A party may change the address, telephone number, and facsimile number to which such communications are to be addressed or made by giving written notice to the other party in the manner provided in this Section.

10.4Benefits and Binding Effect. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and assigns.

10.5Severability. If any provision of this Agreement, or the application of any provision of this Agreement to any party or circumstance, shall be determined by any court of competent jurisdiction to be invalid or unenforceable to any extent, the remainder of this Agreement or the application of such provision to such Person or circumstance, other than those as to which it is so determined invalid or unenforceable, shall not be affected thereby, and each provision hereof shall be valid and shall be enforced to the fullest extent permitted by applicable law.

10.6Governing Law. This Agreement shall be governed by, and construed and enforced in accordance with, Oklahoma law and to the extent applicable federal law.

10.7Waiver. The failure of a Member to exercise a right provided for in this Agreement or to give notice of any other Member’s breach or its or the Company’s nonfulfillment of any term or condition of this Agreement shall not constitute a waiver thereof, nor shall the waiver of any right of or any breach or nonfulfillment of any term or condition constitute a waiver of any other right or breach or nonfulfillment of another term or condition.

10.8Counterparts. This Agreement may be executed in several counterparts, each of which when so executed and delivered shall be an original, but all of which documents shall constitute one instrument.

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10.9 Arbitration.

10.9.1All controversies, claims, disputes or counterclaims arising under or relating to this Agreement, whether they involve a disagreement about its meaning, interpretation, application, performance, breach, termination, enforceability or validity and whether based on statute, tort, contract, common law or otherwise (a “Dispute”) shall be subject exclusively to final and binding arbitration (an “Arbitration”). Any such Arbitration shall be conducted before a single neutral arbitrator of the American Arbitration Association (“AAA”) at Pittsburgh, Pennsylvania and the judgment rendered by the arbitrator may be entered in any court having jurisdiction thereof.

10.9.2In any such Arbitration, the arbitrator shall determine all questions of arbitrability, including, without limitation, the scope of this agreement to arbitrate a Dispute, whether an agreement to arbitrate exists and if so whether it covers the Dispute in question or any other form of disagreement or conflict among the parties to this Agreement whether such Dispute existed prior to or arises after the date of this Agreement.

10.9.3Any such Arbitration shall be administered by the AAA in accordance with its Commercial Arbitration Rules. Discovery shall be permitted, subject to the discretion and supervision of the arbitrator. The arbitration award shall be in writing. The arbitrator may not make any ruling, finding or award that does not conform to the terms and conditions of this Agreement. The arbitrator shall have the authority to award any remedy or relief that a court of competent jurisdiction could order or grant; provided, however, that the arbitrator shall not be empowered to award damages in excess of compensatory damages, including punitive damages.

10.9.4Each party to the Arbitration shall pay its share of the fees and costs of the AAA and for the arbitrator, subject to the arbitrator’s right to reallocate same in favor of the prevailing party or successful party in the Arbitration, provided that the AAA shall be empowered and directed to enter an award by default against any party who declines to pay when required by the AAA its share of such fees and costs.

IN WITNESS WHEREOF, the Members have executed, or caused this Agreement to be executed, as of the date set forth hereinabove.

“Company”

Beard Pinnacle, LLC

By: /s/W. M. Beard

Name:W. M. Beard

Title: Chairman

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“BTI”

Beard Technologies, Inc.

By:    /s/Herb Mee, Jr.

Name:  Herb Mee, Jr.

Title:  Vice President

“PinnOak Parties”

Questor Partners Fund II, LP

By: Questor General Partners II, L.P., its general partner

By:   /s/Robert D. Denious

Name:  Robert D. Denious

Title:  Managing Director

Questor Side-By-Side Partners II, LLP

By: Questor General Partners II, L.P., its general partner

By:   /s/ Robert D. Denious

Name:   Robert D. Denious

Title:   Managing Director

Questor Side-By-Side Partners II3(c)1, LP

By: Questor General Partners II, L.P., its general partner

By:   /s/ Robert D. Denious

Name:   Robert D. Denious

Title:   Managing Director

Questor Partners Fund II AIV-1, LLC

By: Questor General Partners II, L.P., its general partner

By:   /s/ Robert D. Denious

Name:   Robert D. Denious

Title:   Managing Director

The Regent Investment Company, L.P.

By:  /s/Benjamin M. Statler

Name:  Benjamin M. Statler

Title:____________________

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Statler Family Investment Company, LP

By:  /s/Benjamin M. Statler

Name:  Benjamin M. Statler

Title:____________________

PinnOak Resources Employee Equity Incentive Plan, LLC

By:   /s/Michael F. Nemser

Name:  Michael F. Nemser

Title:  Member

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Schedule I

PinnOak Parties

Questor Partners Fund II, LP

Questor Side-By-Side Partners II, LP

Questor Side-By-Side Partners II 3(c)1, LP

Questor Partners Fund II AIV-1, LLC

The Regent Investment Company, L.P.

Statler Family Investment Company, LP

PinnOak Resources Employee Equity Incentive Plan, LLC

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Exhibit “A”

Name and Address	Taxpayer ID No.	Membership Interest
Beard Technologies, Inc. 5600 North May Avenue Suite 320 Oklahoma City, OK 73112	73-1372181	25.0000%
Questor Partners Fund II, LP		19.0425%
Questor Side-By-Side Partners II, LP		1.5765%
Questor Side-By-Side Partners II 3(c)1, LP		0.5940%
Questor Partners Fund II AIV-1, LLC		13.6620%
The Regent Investment Company, L.P.		19.4250%
Statler Family Investment Company, LP		15.4500%
PinnOak Resources Employee Equity Incentive Plan, LLC		5.2500%
Total		100.0%

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EX-10.65

CO-INVESTMENT AGREEMENT

This Co-Investment Agreement is made and entered into this 31st day of October 2006 (the “Agreement”), between Beard Technologies, Inc., an Oklahoma corporation (“BTI”), and PinnOak Resources LLC, a Delaware limited liability company (“PinnOak”).

WHEREAS, BTI has formed Beard Pinnacle, LLC (“Beard Pinnacle”) to construct and operate a pond fines recovery project at Pinnacle Mining Company, LLC;

WHEREAS, the equity owners of PinnOak (said owners referred to as the “PinnOak Parties”) have agreed to purchase a fifty percent ownership interest in Beard Pinnacle;

WHEREAS, BTI and PinnOak desire to develop a framework whereby PinnOak and/or the PinnOak Parties can invest in future pond fines recovery projects to be developed by BTI or one or more of its affiliates;

NOW, THEREFORE, in consideration of the foregoing premises and other good and valuable considerations and intending to be legally bound hereby, the parties hereto agree as follows:

Article 1 Definitions

1.1Defined Terms. Each of the following terms enclosed by quotation marks in this Article shall be a defined term, and each term enclosed by parentheses and quotation marks in the preamble, recitals or body of this Agreement, or that is specified as a defined term in this Agreement, shall also be a defined term. Wherever used in this Agreement, each term defined in this Agreement shall have the meaning ascribed to it in this Agreement. Each term defined in this Agreement in the singular shall include the plural of that term, and each term defined in this Agreement in the plural shall include the singular of that term.

“Accepted Pond Project” shall have the meaning provided for that term in Subsection 2.2.6.

“Affiliate” means (i) any Person owning any of the equity ownership of a Party, (ii) any Person who can direct or cause the direction of the management and policies of a Party, whether by contract, ownership, order of a Governmental Authority or otherwise, (iii) any Person in which a Party owns more than ten percent (10%) of the equity ownership (a “Party Subsidiary”), (iv) any Person in which any Party and/or one or more Party Subsidiaries own more than ten percent (10%) of the equity voting ownership, or (v) any Person that a Party and/or one or more Party Subsidiaries can direct or cause the direction of the management and policies of that Person, whether by contract, ownership, order of a Governmental Authority or otherwise.

“Annual Net Cash Flow” shall have the meaning set forth in the BP Operating Agreement.

“Beard Entity” means (i) BTI, (ii) The Beard Company, an Oklahoma corporation and the sole shareholder of BTI, and (iii) any Affiliate of BTI or The Beard Company.

“BP Operating Agreement” means the Amended and Restated Operating Agreement attached hereto at Exhibit “A”, a conformed original of which shall be entered into by BTI and the PinnOak Parties.

“Change of Control” shall be deemed to occur upon any Person other than a Permitted Transferee (i) owning or controlling (whether legally, beneficially, equitably, directly or indirectly) a majority of the equity interests of another Person, or (ii) having the ability to control (either directly or indirectly) the management, policies and day-to day operations of such Person.

“Fully Funded Project LLC” shall have the meaning provided for that term in Subsection 2.3.2.

“Governmental Authority” means any federal, provincial, state, county, city, municipal or tribal governmental body, commission, council, legislature, court, agency or board.

“Governmental Authorization” means any authorization, permit, license, certification or consent required by applicable Law or a Governmental Authority in connection with the performance of any Work.

“Guaranteed Third-Party Loan” means a USDA guaranteed loan obtained or to be obtained by a Project LLC from an Unrelated Third Person.

“Initial Project Meeting” shall have the meaning provided for that term in Subsection 2.2.2.

“Laws” means any and all constitutional provisions, decrees, rules, codes, regulations, statutes, ordinances, enactments, judicial and administrative orders, decisions and rulings adopted, enacted, promulgated or issued by any Governmental Authority, including the common law and legal duties owed to others.

“Membership Interest” means an ownership or equity interest in a Project LLC embodying and encompassing the owner’s rights in the Project LLC, as provided for in the Project LLC Operating Agreement with respect to that ownership or equity interest, including, without limitation, the owner’s share of profits and losses of the Project LLC, the owner’s right to receive distributions of a Project LLC’s assets, and the owner’s right to vote or participate in management, all as more particularly provided for in the Project LLC operating agreement.

“Partially Funded Project LLC” shall have the meaning provided for that term in Subsection 2.3.3.

“Parties” means BTI and PinnOak.

“Party Subsidiary” shall have the meaning provided for that term in the definition of Affiliate in this Section 1.1.

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“Permitted Assignment” shall have the meaning provided for that term in Section 4.4.

“Permitted Transferee” means any one or more of the following: (i) a PinnOak Party, (ii) a Person who is an owner of a PinnOak Party on the date hereof, (iii) a Person in which one or more of the current owners of the PinnOak Parties own more than seventy percent (70%) of such Person’s voting ownership or securities, and control the management, policies and day-to-day operations of such Person, or (iv) any other Person who obtains any voting ownership or securities of PinnOak or a PinnOak Party with the prior written consent of BTI, which consent shall not be unreasonably withheld.

“Person” means a natural person, corporation, general partnership, limited partnership, limited liability company, limited liability partnership, trust, governmental authority, tribal authority, joint venture, or other legal entity.

“PinnOak Parties” shall mean the equity owners of PinnOak identified on Schedule A attached hereto.

“Pond Fines Agreement” means that certain Amended and Restated Agreement for a Pond Fines Recovery Facility effective as of September 1, 2005 between BTI and Pinnacle Mining Company, LLC, as amended.

“Pond Project” shall have the meaning provided for that term in Subsection 2.1, but shall not include the Smith Branch Refuse Impoundment as depicted on Exhibit A to the Pond Fines Agreement.

“Preferential Right” means the option and preferential right granted to the PinnOak Parties under Section 2.1.

“Project LLC” shall have the meaning provided for that term in Subsection 2.2.2, but shall not include Beard Pinnacle.

“Project Proposal” shall have the meaning provided for that term in Subsection 2.2.2.

“Third Party Pond Project” means any Pond Project that is subject to the Preferential Right and at which an Unrelated Third Person owns or controls the right to conduct pond recovery operations at the pond site for that Pond Project, or has contractually agreed to allow a Beard Entity or a Project LLC to conduct those operations.

“Third Party Owner” means an Unrelated Third Person who owns or controls the right to conduct pond recovery operations at a pond site for a Third Party Pond Project.

“Transfer” means any and all ways by which a Person may dispose or be divested of all or any portion of the Preferential Right, or any right or interest therein, whether voluntary or involuntary, including, without limitation, a divestment or disposition of the Preferential Right by sale, grant, merger, consolidation, court order, exchange, gift, assignment, transfer, redemption, operation of applicable law, pledge, hypothecation, foreclosure or otherwise.

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“Unfunded Project LLC” means the Project LLC formed for an Accepted Pond Project for which a Beard Entity needs one hundred percent (100%) of the equity funding required for that Project LLC to qualify for a Guaranteed Third-Party Loan.

“Unrelated Third Person” means any Person other than a Beard Entity, PinnOak, a PinnOak Party or an Affiliate of a PinnOak Party.

1.2 Construction.

1.2.1The headings and titles in this Agreement are for guidance and convenience of reference only and do not limit or otherwise affect or interpret the provisions of this Agreement. Each reference made in this Agreement to a Section, Subsection or Article refers to the applicable Section, Subsection or Article in this Agreement, unless the context clearly indicates otherwise.

1.2.2The words “this Agreement”, “herein”, “hereby”, “hereunder”, and “hereof” and words of similar import, refer to this Agreement as a whole and not to any particular part hereof unless the context clearly or expressly provides or indicates otherwise. The words “this Article”, “this Section”, “this Subsection”, and words of similar import, refer only to the Articles, Sections or Subsections hereof in which those words occur.

1.2.3Each reference made in this Agreement to an Exhibit refers to the applicable Exhibit attached hereto, unless the context clearly indicates otherwise. Each Exhibit attached hereto is made a part hereof.

Article 2

PinnOak’s Preferential Right

2.1 Preferential Right.

2.1.1Subject to the terms of this Article and except as provided for in Subsection 2.1.2, PinnOak shall have the initial option and preferential right to participate in any pond recovery operation conducted by a Beard Entity intended to convert or facilitate the conversion of raw slurry consisting of coal fines, coal waste, thickener underflow or other materials deposited in a pond, impoundment or similar structure into commercially marketable clean coal and tailings (a “Pond Project”). The Smith Branch Refuse Impoundment, which is identified in the definition of a Pond Project in Article 1, shall not be subject to this Article 2.

2.1.2The Preferential Right described in Subsection 2.1.1 shall not apply or pertain to (i) research oriented coal or pond reclamation or recovery operation, technology, method or related services conducted by any Person in connection with any Pond Project, including, without limitation, any U.S. Department of Energy sponsored or funded operation, (ii) any entity conducting any such operation, method, technology or related service, and/or (iii) any intellectual property obtained, discovered, generated or employed with respect to any such operation, technology, method or service.

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2.1.3Except as is permitted by the terms of Section 4.5 of this Agreement, neither PinnOak nor any PinnOak Party shall Transfer all or any portion of the Preferential Right or any right or interest therein or thereto to any Person other than a Permitted Transferee. Any Transfer or purported Transfer of the Preferential Right or any right or interest therein or thereto to any Person other than a Permitted Transferee shall be null and void ab initio and without force or effect. Except for Transfers to Permitted Transferees, BTI shall not have any obligation of any nature or kind with respect to, or be bound by any (i) Transfer of the Preferential Right or any right or interest therein or thereto, (ii) proposed Transfer of the Preferential Right or any right or interest therein or thereto, or (iii) purported Transfer of the Preferential Right or any right or interest therein or thereto to any Person other than a Permitted Transferee.

2.2 Identification of Pond Project.

2.2.1BTI shall notify PinnOak within thirty (30) days after a Beard Entity identifies a Pond Project with respect to which it intends to participate.

2.2.2Promptly after PinnOak’s receipt of that notification, BTI and PinnOak shall schedule a meeting to be held at BTI’s principal place of business in Pittsburgh, Pennsylvania, or at such other location agreed upon by the Parties (the “Initial Project Meeting”), at which BTI shall provide PinnOak with a detailed and comprehensive presentation and evaluation of the proposed Pond Project (a “Project Proposal”), which shall include (i) the equity funding levels and concomitant percentages of equity ownership available to PinnOak, as determined in accordance with the provisions of Section 2.3, in a limited liability company to be formed by the Beard Entity to develop the proposed Pond Project (the “Project LLC”), (ii) BTI’s estimates of the commercially marketable coal reserves, the cost of development, the probable net profits, and the timing of developmental activities attributable to the proposed Pond Project, and (iii) a date by which the equity funding must be made.

2.2.3Prior to the Initial Project Meeting, PinnOak shall sign and provide BTI with a legally binding and enforceable non-disclosure and non-compete agreement, which shall be in a form and substance reasonably acceptable to BTI and PinnOak, covering the Project Proposal and the proposed Pond Project.

2.2.4PinnOak shall have thirty (30) days after the Initial Project Meeting to provide BTI with their affirmative written election to accept in all material respects the Project Proposal made at the Initial Project Meeting. If PinnOak does not provide BTI with that affirmative election before the expiration of that 30-day period, PinnOak shall be conclusively deemed to have rejected that Project Proposal.

2.2.5BTI shall promptly and comprehensively respond to all reasonable inquiries from PinnOak concerning the Project Proposal during that 30-day period.

2.2.6If PinnOak accepts a Project Proposal in accordance with Subsection 2.2.4 (an “Accepted Pond Project”), PinnOak shall be obligated to participate in the Accepted Pond Project in accordance with the terms provided for that Accepted Pond Project in the Initial Project Meeting, as may be or have been modified in writing by agreement of the Parties.

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2.2.7PinnOak’s involvement and participation in each Accepted Pond Project shall be (i) limited to its becoming an equity owner together with BTI and/or one or more other Beard Entities in the Project LLC formed by BTI for that Accepted Pond Project and (ii) subject to the terms of an operating agreement for that Project LLC having substantially the same terms as the BP Operating Agreement, except conforming to the allocation of annual net cash flow as determined in accordance with this Agreement for that Project LLC, and except for such other exceptions agreed upon in writing by the Parties. Under no circumstances shall PinnOak’s participation and involvement in any Accepted Pond Project be as a cotenant or sublessee. Notwithstanding the allocation of Annual Net Cash Flow for any Project LLC, as determined in accordance with this Agreement, the Beard Entities shall own not less than fifty percent (50%) of the aggregate equity ownership or membership interest in each Project LLC, unless one or more of the Beard Entities assign a portion of such membership interest to an Unrelated Third Person, including, without limitation, a Third Party Owner or its affiliate with respect to a Third Party Pond Project.

2.2.8Each Project LLC and BTI shall enter into a pond fines recovery facility agreement having terms similar to those contained in the Pond Fines Agreement, but which shall be expressly tailored for the Accepted Pond Project. BTI and each Project LLC shall enter into a contract operating agreement designating BTI as the contract operator of that Accepted Pond Project. BTI’s obligations and compensation as contract operator under each such contract operating agreement shall be substantially similar to the obligations and compensation provided for or referenced in the Amended and Restated Contract Operating Agreement entered into between BP and BTI concerning the Pond Recovery Operations.

2.2.9If PinnOak rejects or is deemed to have rejected a Project Proposal, then no Beard Entity shall have any obligation or responsibility of any nature or kind to PinnOak with respect to that Pond Project or Project Proposal provided there is no material modification of the terms of the Project Proposal and the Project Proposal accurately describes the Pond Project.

2.2.10The Preferential Right shall terminate upon the occurrence of the earliest of midnight on (i) July 31, 2012 or (ii) the thirty-first (31^st) day after BTI has made its sixth (6^th) Project Proposal to PinnOak.

2.3 Equity Participation; Distributions of Annual Net Cash Flow.

The management of each Project LLC formed for an Accepted Pond Project shall be provided and set forth in the Project LLC’s operating agreement the terms and conditions of which shall be the same in all material respects as the BP Operating Agreement. The allocation of each Project LLC’s distribution of Annual Net Cash Flow, if any, among its owners shall be determined in accordance with this Section 2.3.

2.3.1 Unfunded Projects.

(a)If PinnOak exercises the Preferential Right to participate in any Unfunded Project LLC (i.e., a Project LLC formed for an Accepted Pond Project for which a Beard Entity needs 100% of the equity funding required for that Project LLC to qualify for a Guaranteed Third-Party Loan), then PinnOak shall contribute all the equity funding necessary for that

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Unfunded Project LLC to qualify for a Guaranteed Third-Party Loan in accordance with the equity funding schedule provided for in the Project Proposal for that Unfunded Project LLC.

(b)Upon an Unfunded Project LLC’s receipt of the equity funding provided for in Subsection 2.3.1 (a) from PinnOak, the Unfunded Project LLC shall issue an equity or membership interest in that Unfunded Project LLC to PinnOak up to a maximum of 50% of the aggregate membership interests. One or more of the Beard Entities shall own the remaining equity or membership interest in that Unfunded Project LLC.

(c)The management and operation of each Unfunded Project LLC shall be governed by an operating agreement signed by the members thereof, which shall be the same in all material respects as the BP Operating Agreement except that BTI shall own fifty percent (50%) of the membership interests in such Unfunded Project LLC.

(d)The distribution of Annual Net Cash Flow, if any, generated by an Unfunded Project LLC shall be as follows:

Annual Net Cash Flow	Beard’s Distributive Share	PinnOak’s Distributive Share
First $500,000	0.00%	100.00%
Next $300,000	100.00%	0.00%
Next $1,000,000	40.00%	60.00%
Next $500,000	45.00%	55.00%
All Remaining	50.00%	50.00%

(e)If PinnOak exercises the Preferential Right to acquire less than fifty percent (50%) of all the equity or membership interest in an Unfunded Project LLC, then PinnOak’s percentage distributive share of Annual Net Cash Flow from that Unfunded Project LLC shall be equal to the result obtained by multiplying each corresponding “PinnOak’s Distributive Share” percentage, as set forth in the chart in Subsection 2.3.1(d), by a fraction, the numerator of which is the percentage equity ownership in the Project LLC acquired by PinnOak and the denominator of which is fifty percent (50%).

2.3.2 Fully Funded Project.

(a)With respect to any Pond Project for which one or more Beard Entities has provided one hundred percent (100%) of the equity funding (whether by one or more capital contributions consisting of cash, cash equivalents and/or other personal property, such as equipment) required by the Project LLC formed for that Accepted Pond Project to qualify for a Guaranteed Third-Party Loan (a “Fully Funded Project LLC”), PinnOak shall be entitled to exercise the Preferential Right to purchase up to, but not more than fifty percent (50%) of all the equity ownership in that Fully Funded Project LLC from the Beard Entities owning it for a purchase price equal to the result obtained by multiplying the sum of the amount of cash and cash equivalents contributed by the Beard Entities plus the fair market value of any equipment contributed by the Beard Entities as of the date of the closing of that sale to PinnOak by the percentage equity ownership which PinnOak elected to acquire in that Fully Funded Project LLC. Each Fully Funded Project LLC shall be governed by an operating agreement signed by

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the members thereof, which shall be the same in all material respects as the BP Operating Agreement provided, that the voting rights of members shall reflect the membership interests of the members.

(b)If PinnOak exercises the Preferential Right to acquire fifty percent (50%) of all the equity or membership interest in a Fully Funded Project LLC, then the Parties shall be entitled to the following percentage distributive shares of Annual Net Cash Flow, if any, from that Fully Funded Project LLC:

Annual Net Cash Flow	Beard’s Distributive Share	PinnOak’s Distributive Share
First $500,000	50.00%	50.00%
Next $300,000	100.00%	0.00%
Next $1,000,000	70.00%	30.00%
Next $500,000	72.50%	27.50%
All Remaining	75.00%	25.00%

(c)If PinnOak elects to acquire less than fifty percent (50%) of all equity or membership interest in a Fully Funded Project LLC, then PinnOak’s percentage distributive share of Annual Net Cash Flow for each annual period from that Fully Funded Project LLC shall be equal to the result obtained by multiplying each corresponding “PinnOak’s Distributive Share” percentage, as set forth in the chart in Subsection 2.3.2(b), by a fraction, the numerator of which is the percentage equity ownership in the Project LLC acquired by PinnOak and the denominator of which is fifty percent (50%).

2.3.3 Partially Funded Projects.

(a)With respect to any Pond Project for which a Beard Entity is providing some but less than one hundred percent (100%) of all the equity funding required for the Project LLC formed for that Pond Project (a “Partially Funded Project LLC”) to qualify for a Guaranteed Third-Party Loan, PinnOak may exercise the Preferential Right to fund the remaining equity capital necessary for the Partially Funded Project LLC to qualify for that loan, subject to the terms provided in Section 2.4. In such event, the equity or membership interest to be issued to PinnOak in the Partially Funded Project LLC shall be an amount equal to fifty percent (50%) multiplied by a fraction, the numerator of which is the total equity or capital contribution made by PinnOak and the denominator of which is the sum of all equity or capital contributions made by all of the Parties. Each Partially Funded Project LLC shall be governed by an operating agreement signed by the members thereof which shall be the same in all material respects as the BP Operating Agreement provided, that the voting rights of members shall reflect the membership interest of the members.

(b)PinnOak’s percentage distributive shares of Annual Net Cash Flow from a Partially Funded Project LLC shall be determined by multiplying each corresponding percentage distributive share of Annual Net Cash Flow set forth in the chart in Subsection 2.3.1(d) for

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PinnOak by a fraction, the numerator of which is the percentage equity ownership in the Project LLC acquired by PinnOak and the denominator of which is fifty percent (50%).

(c)If PinnOak exercises the Preferential Right to fund the remaining equity capital necessary for a Partially Funded Project LLC to qualify for a Third-Party Guaranteed Loan, then the Beard Entity’s percentage distributive percentage shares of Annual Net Cash Flow from that Partially Funded Project LLC shall be determined by subtracting each corresponding percentage distributive share of Annual Net Cash Flow of PinnOak for that Partially Funded Project LLC from one hundred percent (100%).

2.3.4Non Guaranteed Projects. If a Project Proposal provides for one hundred percent (100%) of the funding of a Project LLC’s pond recovery operations from a loan, which is not a Guaranteed Third-Party Loan, then PinnOak may exercise the Preferential Right to acquire up to a thirty percent (30%) equity ownership interest in that Project LLC. PinnOak’s percentage distributive share of Annual Net Cash Flow from that Project LLC shall be equal to the result obtained by multiplying each corresponding “PinnOak’s Distributive Share” percentage, as set forth in the chart in Section 2.3.2(b), by a fraction, the numerator of which is the percentage equity ownership in the Project LLC acquired by PinnOak from the Beard Entities and the denominator of which is fifty percent (50%). The management and operation of each non-guaranteed project LLC shall be governed by an operating agreement signed by the members thereof, which shall be the same in all material respects as the BP Operating Agreement provided that the voting rights of members shall reflect the membership interests of the members.

2.4 Third Party Projects.

2.4.1Each Beard Entity involved in any negotiations or discussions concerning any prospective Third Party Pond Project shall use its good faith efforts (fairly taking into consideration PinnOak’s rights by virtue of the Preferential Right) to obtain a commercially reasonable and feasible agreement or arrangement with each Third Party Owner of the pond site for that Pond Project.

2.4.2Notwithstanding anything to the contrary in Section 2.1, 2.2 or 2.3, the Prospect Proposal for any Third Party Pond Project shall provide PinnOak with the option to acquire by virtue of the Preferential Right no less than fifty percent (50%) of the Beard Entities’ cumulative equity or membership interest of the Project LLC formed for that Third Party Pond Project.

2.4.3If PinnOak exercises the Preferential Right to acquire an ownership interest in a Project LLC formed for a Third Party Pond Project, the distribution of cumulative Annual Net Cash Flow attributable to PinnOak’s ownership in that Project LLC shall be made as provided for in Section 2.3.1(d) except that each “PinnOak’s Distributive Share” percentage set forth in the chart in Section 2.3.1(d) shall be replaced by the result obtained by multiplying that “PinnOak Distributive Share” percentage by a fraction, the numerator of which is the percentage ownership in that Project LLC acquired by PinnOak and the denominator of which is one hundred percent (100%).

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2.4.4If there is any direct conflict between, or any ambiguity or uncertainty resulting from the construction of, any provision in this Section 2.4 and any provision in Section 2.1, 2.2 and/or 2.3 or (ii) any disagreement between the Parties concerning the distribution of Annual Net Cash Flow from a Project LLC, the Parties shall use their good faith, reasonable efforts to resolve the ambiguity, uncertainty or conflict by reference to the attachments to the Pond Fines Agreement titled “Terms of Equity Financing by PinnOak for the Pinnacle Project” and the “PinnOak Preferential Right to Purchase”.

Article 3

Representations and Warranties

3.1Representations and Warranties of PinnOak Parties. PinnOak hereby represents and warrants to BTI as follows:

(a)Organization. PinnOak is a limited liability company duly organized, validly existing and in good standing under the Laws of the State of Delaware, and is duly authorized and qualified, and has all applicable Governmental Authorizations required under applicable Laws to conduct its business as it is presently conducted.

(b)Authorization. This Agreement has been duly authorized, signed, and delivered by PinnOak.

(c)Enforceability. This Agreement constitutes the legal, valid and binding agreement of PinnOak, enforceable against PinnOak in accordance with its terms, except as enforceability may be limited by general principles of equity and by bankruptcy, insolvency, reorganization or similar Laws and judicial decisions affecting the rights of creditors generally.

3.2Representations and Warranties of BTI. BTI hereby represents and warrants to PinnOak as follows:

(a)Organization. BTI is a corporation duly organized, validly existing and in good standing under the Laws of the State of Oklahoma and is duly authorized and qualified, and has all applicable Governmental Authorizations required under applicable Laws to conduct its business as it is presently conducted.

(b)Authorization. This Agreement has been duly authorized, signed and delivered by BTI.

(c)Enforceability. This Agreement constitutes the legal, valid and binding agreement of BTI, enforceable against BTI in accordance with its terms, except as enforceability may be limited by general principles of equity and by bankruptcy, insolvency, reorganization or similar Laws and judicial decisions affecting the rights of creditors generally.

3.3Survival of Representations. The representations and warranties contained in Sections 3.1 and 3.2 shall survive the execution and delivery of this Agreement.

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Article 4

Miscellaneous

4.1 Modification and Waiver.

4.1.1This Agreement may not be altered, amended, revised, modified or supplemented except by a written agreement signed by all the Parties expressly specifying the provisions altered, amended, revised, modified or supplemented. Any Party to whom performance is owed under this Agreement may by an instrument in writing extend the time for or waive the performance of any of the obligations of another Party or waive compliance by such other Party with any of the provisions contained herein.

4.1.2The failure of any Party at any time or times to require performance of any provision hereof shall in no manner affect that Party’s right at a later date to enforce that provision. No waiver by any Party of any breach of this Agreement, whether by conduct or otherwise, in any one or more instances shall be construed as a further or continuing waiver of that breach or a waiver of any condition or of any other breach of this Agreement.

4.2 Notices.

4.2.1All notices and elections required or permitted hereunder shall be given in writing and delivered in person, sent by bonded overnight courier (e.g., Federal Express, UPS), sent by U.S. Mail postage prepaid, return receipt requested, or by facsimile transmission (provided any such facsimile transmission is confirmed orally or by written confirmation) addressed to the appropriate Party at the address for that Party set forth below.

(a) If to BTI:

5600 North May Avenue, Suite 320

Oklahoma City, Oklahoma 73112

Attention: Herb Mee, Jr., Vice President

Telephone: (405) 842-2333

Facsimile: (405) 842-9901

E-Mail: hmee@beardco.com

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(b) If to PinnOak:

601 Technology Drive

Pointe Plaza, Suite 300

Canonsburg, PA 15317

Attention: Michael Nemser, Chief

Financial Officer

Telephone: (724) 338-9104

Facsimile: (724) 743-4531

E-Mail: mfn@nb.net

4.2.2The address and facsimile number of any Party may be changed by notice given in the manner provided in this Section 4.2. Any notice given in accordance with this Section shall be deemed to have been given when delivered to the addressee in person, or if transmitted by facsimile transmission, upon receipt of the oral or written confirmation of receipt. A Party may change the address, telephone number, and facsimile number to which such communications are to be addressed or made by giving written notice to the other Party in the manner provided in this Section.

4.3Publicity. The Parties shall consult with each other with regard to all publicity and other releases concerning this Agreement and the transactions contemplated hereby and, except as required by applicable Law, by any Governmental Authority or stock exchange, neither shall issue any such publicity or other release without the prior written consent of the other, which consent shall not be unreasonably withheld.

4.4Non-assignment. BTI acknowledges that PinnOak may (1) distribute any Membership Interest acquired hereunder to the PinnOak Parties immediately following receipt thereof, (2) any PinnOak Party may transfer a Membership Interest to one or more other PinnOak Parties at any time and from time to time, (3) assign the right to acquire any Membership Interest to be acquired hereunder to the PinnOak Parties, or (4) assign this Agreement to PinnOak Parties (each a “Permitted Assignment”) if that distribution or assignment, as applicable, does not result in BP, BTI or PinnOak’s noncompliance with or violation of any applicable state or federal securities Laws, including, without limitation, the Securities Act of 1933, as amended. Except for the Permitted Assignment, this Agreement shall not be assignable by any Party without the written consent of all the other Parties, which consent shall not be unreasonably withheld. This Agreement shall be binding upon and inure to the benefit of the Parties and their respective permitted successors, distributees, and assigns.

4.5Change of Control. PinnOak shall assign (i) all of its interest, rights, ownership, obligations and duties with respect to the Preferential Right and (ii) the Membership Interests acquired hereunder to the PinnOak Parties immediately prior to the consummation of any transaction that would result in PinnOak having a Change of Control unless BTI shall have provided its written consent to such transaction, which consent shall not be unreasonably withheld. BTI may withhold its consent to any transaction if such Change of Control results

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from a Transfer to any Person who engages on a regular basis in the coal extraction or mining industry or is owned or controlled by any such Person.

4.6Counterparts. This Agreement may be signed in any number of counterparts, including counterparts transmitted by facsimile, with the same effect as if the signatures to each counterpart were upon the same physical copy of this Agreement, each of which counterparts shall be deemed an original, but all of which shall constitute one and the same instrument.

4.7Entire Agreement. This Agreement and the agreements referred to herein embody the entire agreement and understanding of the Parties with respect to the subject matter hereof and thereof, and supersede all prior agreements or understandings (whether written or oral) with respect to the subject matter hereof and thereof. This Agreement shall be binding upon the Parties and their respective successors, assigns, and distributees including, without limitation, the PinnOak Parties. As a condition to the Permitted Assignment, PinnOak shall obtain a legally binding and enforceable written agreement from each of the PinnOak Parties agreeing to be bound by the terms and provisions of this Agreement and to sign the BP Operating Agreement.

4.8Governing Law. This Agreement shall be governed by and construed in accordance with the Laws of the State of Oklahoma without regard to the conflicts of Laws principles thereof.

4.9No Third Party Beneficiaries. Nothing herein expressed or implied is intended to confer upon any Person, other than the Parties or their respective permitted assigns and successors, any rights, remedies, obligations or liabilities under or by reason of this Agreement.

4.10Expenses. Except as specifically provided herein, each Party shall pay all legal and other costs and expenses incurred by such Party in connection with this Agreement and the transactions contemplated hereby.

4.11Further Assurances. Each Party shall cooperate and shall take such further action and shall sign and deliver such further documents as may be reasonably requested by any other Party in order to carry out the provisions and purposes of this Agreement.

Signed by the Parties as of the day first above written.

“BTI”

Beard Technologies, Inc.

By:   /s/ Herb Mee, Jr.

Name:   Herb Mee, Jr.

Title:   Vice President

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“PinnOak”

PinnOak Resources, LLC

By   /s/ Michael F. Nemser

Name:  Michael F. Nemser

Title:   CFO

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Exhibit “A”

(BP Operating Agreement)

Schedule “A”

Questor Partners Fund II, LP

Questor Side-By-Side Partners II, LP

Questor Side-By-Side Partners II 3(c)1, LP

Questor Partners Fund II AIV-1, LLC

The Regent Investment Company, LP

Statler Family Investment Company, LP

PinnOak Resources Employee Equity Incentive Plan, LLC

EX-10.66

BUSINESS LOAN AGREEMENT

THIS AGREEMENT is made effective as of March 28, 2006, by and among THE BEARD COMPANY, an Oklahoma corporation, having an address of Enterprise Plaza, Suite 320, 5600 North May Avenue, Oklahoma City, Oklahoma 73112 (“Borrower”) and FIRST FIDELITY BANK. N.A., a national banking association, whose address is 5101 North Classen, Oklahoma City, Oklahoma 73118 (“Lender”).

WHEREAS, the Borrower and the Lender have agreed to one or more extensions of credit by the Lender to the Borrower which shall be subject to the terms and conditions of this Agreement and, therefore, in consideration of the mutual covenants and agreements herein contained, the parties hereto agree as follows:

1.Definitions. Terms used in this Agreement with their initial letters capitalized shall have the meanings set forth in Section 11 of this Agreement, except where the context otherwise requires.

2.Loan. Subject to the terms and conditions hereof, and the terms and conditions of the other Loan Documents, the Lender agrees to extend credit to the Borrower and the Borrower agrees to such extensions of credit from the Lender, in the maximum principal amount of $350,000.00, but not to exceed the Borrowing Base Amount. Such extensions of credit shall be evidenced by and payable in accordance with the terms and conditions of the Note.

3.Conditions of Lending. The obligation of the Lender to perform this Agreement and to extend the Loan as described herein is subject to the performance of the following conditions precedent: (i) this Agreement, the Note, the Loan Documents, and all other documents required by the Lender shall have been duly executed, acknowledged (where appropriate) and delivered to the Lender, all in form and substance satisfactory to the Lender; (ii) Borrower and any Guarantor shall have furnished to the Lender such financial statements and other information as the Lender shall have requested; (iii) no Events of Default shall have occurred and be continuing under this Agreement or the Loan Documents and all representations and warranties contained herein shall be true and correct; (iv) Borrower shall have delivered to the Lender such authorizations and other documents reasonably required by Lender to authorize the execution, delivery and performance of the Loan Documents, all in form and substance satisfactory to the Lender; (v) Lender shall have received satisfactory evidence that no litigation, investigation or proceeding before or by an arbitrator, administrative agency or court is continuing or threatened against the Borrower, any Guarantor or the Collateral; (vi) Borrower shall have provided to the Lender evidence satisfactory to Lender of the existence of insurance on Borrower’s properties, assets and business in such amounts and against such risks as Lender shall deem appropriate in its sole discretion, with endorsements to all such insurance policies of the Borrower naming Lender as a loss payee or an additional insured as Lender’s interest may appear; (vii) Borrower shall have paid all of the Lender’s costs and expenses, including reasonable fees of legal counsel, incurred in the preparation of the Loan Documents and in closing and perfecting the Liens and rights of the Lender under the Loan Documents; and (viii) Borrower shall have provided Lender with any such other information as Lender might reasonably request.

3.1Real Estate and Oil and Gas Secured Loan. The Lender shall have received such of the following items as may be indicated, all of which shall be satisfactory to Lender after reasonable opportunity for review by Lender and its representatives:

(a) Title Evidence.  The Lender shall have received satisfactory evidence of the Borrower’s ownership interest in the Oil and Gas Properties.

(b) Engineering Information. The Lender shall have received satisfactory engineering reports and other information concerning the production capabilities of the Oil and Gas Properties.

(c) Division Orders, Evidence of Production Payments, Division Order Title Opinions. Lender shall have received copies of all division orders, evidence of production payments, and division order title opinions applicable to the Oil and Gas Properties, review of which must be acceptable to Lender.

(d) Environmental Information.  The Lender shall have received, reviewed and approved environmental information with respect to the Oil and Gas Properties, the results of which shall be satisfactory to the Lender.

(e) UCC and Lien Search. The Lender shall have received a UCC and lien search with respect to the Borrower, the results of which shall be satisfactory to the Lender.

(f) Inspections.  At the Lender's sole election, the Lender may conduct such physical inspections of the Collateral as the Lender deems necessary, the results of which shall be satisfactory to the Lender.

(g) Loan Documents.  The Lender shall have received all of the Loan Documents fully executed by Borrower.

(h) Other Information.  The Borrower shall have provided the Lender with any such other information concerning the Borrower or Collateral as the Lender might reasonably require.

(i) No Default.  No Event of Default shall have occurred and be continuing under any of the Loan Documents.

4.Representations and Warranties. To induce the Lender to extend the Loan and enter into this Agreement, the Borrower represents and warrants to the Lender during the term of the Loan and any and all renewals and extensions thereof, as follows: (i) this Agreement and the Loan Documents, when duly executed and delivered, will constitute legal, valid, and binding obligations of the Borrower, fully enforceable in accordance with their respective terms; (ii) all financial statements and information which have been or may hereafter be furnished to the Lender in connection herewith, do or shall fairly represent the financial condition of the Borrower and any Guarantor as of the dates and the results of operations for the periods for which the same are furnished, and shall be accurate, correct and complete; (iii) there is no action, suit, investigation or proceeding pending or threatened against the Borrower, any Guarantor or any of the Collateral; (iv) Borrower and any Guarantors have timely filed all tax returns that are required to be filed and have paid all taxes due pursuant to such returns or pursuant to any assessment received by the Borrower or any Guarantor; (v) except for Permitted Liens, all of the Collateral is free and clear of all Liens, and Borrower (or any other party for whom Lender has been provided proper evidence of ownership) has good and marketable title to such Collateral; (vi) there is no material fact that Borrower has not disclosed to Lender which could have a material adverse effect on the properties, business,

prospects or condition (financial or otherwise) of Borrower or any Guarantor; (vii) Borrower and all Guarantors are not in violation of any law, rule, regulation, order or decree which is applicable to Borrower, any Guarantor or their properties; (viii) the Collateral is insured in accordance with the coverages approved by Lender, with the Lender named as a loss payee or an additional insured to the extent of its interest therein and Borrower and all other applicable parties are in full compliance with all such insurance contracts, the same are in full force and effect and are enforceable in accordance with their terms; and (ix) no Event of Default has occurred and is continuing

4.1Survival of Representations. All of the representations and warranties made by the Borrower herein will survive the delivery of the Loan Documents and any renewal and extension of the Loan hereunder. All statements contained in any certificate or other instrument delivered by or on behalf of the Borrower or any Guarantor under or pursuant to this Agreement or in connection with the transactions contemplated hereby shall constitute representations and warranties made by the Borrower hereunder as applicable.

5.Security. The Loan shall be secured by first and prior Liens on the Collateral in favor of the Lender pursuant to the Loan Documents, subject only to Permitted Liens and such other exceptions or other liens or encumbrances as may be consented to by the Lender in writing. From time to time during the term of this Agreement, the Lender may reasonably require the Borrower to execute and deliver other and further Loan Documents to confirm and further secure the interest of the Lender in the Collateral, which Borrower agrees it will so execute and deliver upon request.

5.1 Guaranty. The Loan shall be unconditionally guaranteed by the Guarantors.

6.Affirmative Covenants. Until payment in full of the Loan, the Borrower agrees, unless the Lender shall otherwise consent in writing, to perform or cause to be performed the following agreements:

6.1Financial Statements and Information. Borrower shall provide, or cause to be provided, to Lender within the time limits designated, the following financial statements and other information:

(a) Annual Audited Financial Statements of Borrower within 90 days of the end of Borrower’s fiscal year beginning with the year ending December 31, 2006.

(b) Quarterly Unadited Financial Statements of Borrower within 45 days of Borrower quarter end, beginning with the quarter ending March 31, 2006.

(c) Semi-Annual engineering information for the Oil and Gas Properties in form and substance satisfactory to Lender, within 30 days of the end of each semi-annual period ending on June 30 and December 31 of each year.

(d) Semi-annual production information for the Oil and Gas Properties, including detailed revenue and expense summaries, within 30 days of the end of the semi-annual period ending on June 30 and December 31 of each year.

6.2Expenses. The Borrower shall pay all costs and expenses required to satisfy the conditions of this Agreement. Without limitation of the generality of the foregoing Borrower will pay: (i) all of the reasonable fees and expenses of counsel employed by the Lender in connection with preparing and perfecting the loan documentation; (ii) all of the fees, expenses and costs of perfecting the Liens on the Collateral; (iii) all reasonable costs and expenses of Lender (including, without limitation, the reasonable attorneys’ fees of Lender’s legal counsel) incurred by Lender in connection with the preservation and enforcement of this Agreement, the Note, and/or the other Loan Documents; and (iv) all reasonable costs and expenses, including any reasonable fees and expenses of counsel employed by the Lender, in regard to any litigation arising out of or relating to this transaction and all other reasonable costs, fees and expenses involved in the enforcement or defense of this Agreement, the Loan Documents or any instrument executed pursuant hereto.

(a) Borrower shall also pay all fees associated with any third party analysis of the engineering reports and related information with respect to Borrower’s Oil and Gas Properties.

7.Negative Covenants. Until payment in full of the Loan, the Borrower shall not, unless the Lender shall otherwise consent in writing, violate or cause to be violated the following:

7.1Limitation on Liens.  Borrower shall not create, incur, permit or suffer to exist any Lien upon any of the Collateral, except Permitted Liens.

7.2Sale or Disposition of Collateral. Borrower shall not sell, assign, lease, dispose or otherwise transfer any of the Collateral to any other person or entity.

8.Events of Default. The following shall constitute Events of Default hereunder and under each of the Loan Documents: (i) default in payment when due of any principal or interest due and owing on any Note after five (5) days written notice thereof; (ii) default in payment when due of any other amount payable to the Lender under the terms of this Agreement or the Loan Documents; (iii) Default by the Borrower in the performance or observance of any covenant or agreement contained in this Agreement, the Loan Documents, or any agreement made in connection therewith, or under the terms of any other instrument delivered to the Lender in connection with this Agreement, and the continuance of such default without cure for a period of thirty (30) calendar days after the occurrence of such default; (iv) any representation or warranty herein or under any Loan Document, or any representation, statement, certificate, schedule or report made or furnished to the Lender on behalf of the Borrower or any Guarantor proves to be false or erroneous in any material respect at the time of making thereof or any warranty ceases to be complied with in any material respect; (v) Borrower or any Guarantor shall: (a) apply for or consent to the appointment of a receiver, trustee or liquidator of their respective properties; (b) admit in writing their inability to pay debts as they mature; (c) make a general assignment for the benefit of creditors; or (d) any material part of their assets or properties shall be placed in the hands of a receiver, trustee or other officers or representatives of a court or of creditors; (vi) Borrower or any Guarantor shall be adjudged bankrupt or any voluntary proceeding shall be instituted by Borrower or any Guarantor in insolvency or bankruptcy or for readjustment, extension or composition of debts or for any other relief of debtors; (vii) any involuntary proceeding shall be instituted against Borrower or any Guarantor in insolvency or for readjustment, extension, or composition of debts, which proceeding is not dismissed within thirty (30) days after the filing of the commencement of

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the same; (viii) entry by any court of a final judgment against Borrower or any Guarantor, or the institution of any levy, attachment, garnishment or charging order against the Borrower or any Guarantor which has a material adverse effect as determined by Lender on the financial condition of the Borrower or any Guarantor; or (ix) death of both of the individual Borrowers (provided the death of both Borrowers shall not be an Event of Default if (i) the obligations evidenced by the Note remain current at all times and are assumed by or otherwise become a valid obligation of the estate or surviving trust of said Borrowers that receives ownership of the Collateral, and (ii) the Collateral continues to secure the Note).

9.Remedies. Upon the occurrence of any Event of Default, which has not been timely cured, the Lender may, at its option: (i) declare all Notes and all sums outstanding under the Loan Documents to be immediately due and payable, and the Lender will be entitled to proceed to selectively and successively enforce the Lender’s rights under the Notes and all Loan Documents; (ii) terminate any of the Lender’s obligations hereunder, (iii) exercise any right of offset, (iv) without notice of default or demand, pursue and enforce any of the Lender’s rights and remedies under the Loan Documents, or otherwise provided under or pursuant to any applicable law or agreement, or (v) exercise any other remedy at law or in equity. Lender may waive any Event of Default in writing, and, in such event, the Lender and the Borrower will be restored to their respective former positions, rights and obligations hereunder. Any Event of Default so waived will for all purposes of this Agreement be deemed to have been cured and not to be continuing; but no such waiver will extend to any subsequent or other Event of Default or impair any consequence of such subsequent or other Event of Default.

10. General Conditions. The following conditions shall be applicable throughout the term of this Agreement:

10.1Waiver; Modification.  No failure to exercise, and no delay in exercising, on the part of Lender, any right hereunder or under any Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right. The rights of Lender hereunder and under the Loan Documents shall be in addition to all other rights provided by law. No modification or waiver of any provision of this Agreement, any Note or any Loan Document, nor consent to departure therefrom, shall be effective unless in writing signed by Lender and no such consent or waiver shall extend beyond the particular case and purpose involved. No notice or demand given in any case shall constitute a waiver of the right to take other action in the same, similar or other instances without such notice or demand.

10.2Notices.  Any notices or other communications required or permitted to be given by this Agreement or any other Loan Documents must be (i) given in writing, and (ii) personally delivered or mailed by prepaid mail or overnight courier, to the address of such party as provided at the beginning of this Agreement. Any such notice or other communication shall be deemed to have been given (whether actually received or not) on the day three days after it is mailed by prepaid certified or registered mail, one day after sent by over night courier, or on the day it is personally delivered as aforesaid, and otherwise when actually received. Any party may, for purposes of the Loan Documents, change its address or the person to whom a notice or other communication is marked to the attention of, by giving notice of such change to the other parties pursuant hereto.

10.3Governing Law; Choice of Forum.  This Agreement has been executed and delivered in the State of Oklahoma, and the substantive laws of Oklahoma and the applicable federal laws of the United States shall govern the validity, construction, enforcement and interpretation of this Agreement and all of the Loan Documents. Any suit, action or proceeding against Borrower with respect to this Agreement or any Loan Document may be brought in the courts of Oklahoma County, Oklahoma, or in the United States courts located in Oklahoma County, Oklahoma as Lender in its sole discretion may elect and Borrower hereby submits to the non-exclusive jurisdiction of such courts for the purpose of any such suit, action or proceeding. Borrower hereby irrevocably waives any objections which Borrower may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or any Loan Document brought in the courts located in Oklahoma County, Oklahoma, and hereby further irrevocably waives any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.

10.4No Oral Agreements; Invalid Provisions; Multiple Counterparts.  THIS WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS OF THE PARTIES.  If any provision of any Loan Document is held to be illegal, invalid or unenforceable under present or future laws during the term of this Agreement, such provision shall be fully severable; such Loan Document shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part of such Loan Document; and the remaining provisions of such Loan Document shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provisions or by its severance from such Loan Document. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same agreement, and any of the parties hereto may execute this Agreement by signing any such counterpart.

10.5Binding Effect; No Third-Party Beneficiary.  The Loan Documents shall be binding upon and inure to the benefit of Borrower and Lender and their respective successors, assigns and legal representatives; provided, however, that Borrower may not, without the prior written consent of Lender, assign any rights, powers, duties or obligations thereunder.   Nothing contained in the Loan Documents, nor any conduct or course of conduct by any or all of the parties hereto, before or after signing this Agreement or any other Loan Document, shall be construed as creating any right, claim or cause of action against Lender, or any of its officers, directors, agents or employees, in favor of any materialman, supplier, contractor, subcontractor, purchaser or lessee of any property owned by Borrower, nor to any other person or entity.

11.Definitions. As used in this Agreement, the following terms with their initial letters capitalized shall have the following meanings except where the context otherwise requires:

“Agreement” shall mean this Business Loan Agreement, as amended, supplemented or modified from time to time.

“Borrowing Base Amount” shall mean the loan value of the Oil and Gas Properties of the Borrower as determined by the Lender using the engineering reports and other pertinent information as the Lender may request and determine, with the Lender making such determination of value on a semi-annual basis or at such other or additional times as the Lender may, in its sole discretion, elect.

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All such determinations of value shall be made by the Lender in its sole discretion and in accordance with its customary practices and standards for loans of a similar nature applicable at the time of determination.

“Collateral” means all of Borrower’s right, title and interest in and to all of the Oil and Gas Properties and, and such other property as may be described in any other Loan Document made and delivered as security for the Loan.

“GAAP” means the generally accepted accounting principles, practices and procedures, set forth by the Accounting Principles Board and the American Institute of Certified Public Accountants and the Financial Accounting Standards Board, which are applicable as of the date of the end of the fiscal quarter immediately preceding such date of determination.

“Guarantor” shall mean any guarantor of the Loan who may hereafter execute a Guaranty.

“Guaranty” shall mean any unconditional and absolute guaranty of the Loan by a Guarantor pursuant to a guaranty agreement in form satisfactory to the Lender.

“Lien” means any lien, mortgage, deed of trust, security interest, tax lien, pledge, encumbrance, conditional sale or title retention arrangement, or any other interest in property designed to secure the repayment of debt, whether arising by agreement or under any statute or law, or otherwise.

“Loan” means any loan or credit extensions contemplated by this Agreement or that may be evidenced by a Note or any other Loan Document.

“Loan Documents” collectively means this Agreement, any Note, any Guaranty, all mortgages, deeds of trust, security agreements, assignments, and financing statements securing the Loan, and all other promissory notes, guaranties, agreements and all other documents, agreements, certificates and instruments executed and delivered in connection with the Loan described herein and any renewals, amendments, supplements or modifications thereof or thereto.

“Maximum Commitment Amount” shall have the meaning of such term as contained in the Note.

“Note” means any Promissory Note from the Borrower payable to the order of the Lender, whether now or hereafter made and delivered to Lender, together with all renewals, extensions, modifications and substitutions thereto and therefor.

“Oil and Gas Properties” means the oil, gas and mineral interests and properties described on Exhibit “A” attached hereto and made a part hereof.

“Permitted Liens” means any Lien designated as a Permitted Lien under any Loan Document and any other Lien approved in writing by Lender.

“Reducing Revolving Amount” shall mean (i) the initial principal amount of $350,000.00, and (ii) on April 30, 2006, and on the last day of each month thereafter, the principal amount resulting from the reduction of $10,000.00 per month throughout the term of the Note.

“Uniform Commercial Code” means the Uniform Commercial Code of the State of Oklahoma (12A O.S. §1-101 et. seq.), inclusive of Uniform Commercial Code – Secured Transactions of the State of Oklahoma (12A O.S. §1-9-101 et. seq.), as amended from time to time.

12.          Conflicts. In the event of a conflict between the terms and conditions of this Agreement and any other Loan Document, this Agreement shall prevail.

IN WITNESS WHEREOF, the undersigned have executed this Agreement as of day and year first above written.

“BORROWER” THE BEARD COMPANY,

an Oklahoma corporation

By:   /s/ Herb Mee, Jr.

Herb Mee, Jr., President

“LENDER” FIRST FIDELITY BANK, N.A.

a national banking association

By:   /s/ Danny Lawson

Danny Lawson,

Executive Vice President

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EXHIBIT A

Yuma County, Colorado

All of Borrower’s right, title and interest in and to all oil, gas and mineral leases, and all rights derived therefrom, including without limitation, all working interests, royalty interests, overriding royalty interests and other interests of any kind, as described in any Loan Document made in connection herewith, and covering, in whole or in part, the lands described as:

Section 36, Township 3 North, Range 48 West, Yuma County, Colorado,

Including Lease No. 00/7284-S between State of Colorado and Beard Oil Company covering said lands,

And including all interests in the following wells located within such lands:

Yuma 5 State 12-36 Well (SW/4 NW/4, Section 36, T3N, R48W);

Yuma 5 State 21-36 Well (NE/4 NW/4, Section 36, T3N, R48W);

Yuma 5 State 23-36 Well (NE/4 SW/4, Section 36, T3N, R48W);

Yuma 5 State 32-36 Well (SW/4 NE/4, Section 36, T3N, R48W);

Yuma 5 State 33-36 Well (NW/4 SE/4, Section 36, T3N, R48W);

Yuma 5 State 42-36 Well (SE/4 NE/4, Section 36, T3N, R48W);

Yuma 5 State 43-36 Well (NE/4 SE/4, Section 36, T3N, R48W);

Yuma 5 State 44-36 Well (SE/4 SE/4, Section 36, T3N, R48W);

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EX-10.67

UPON RECORDATION RETURN TO:

First Fidelity Bank, N.A.

5101 North Classen

Oklahoma City, Oklahoma 73118

Attention: Danny Lawson

DEED OF TRUST, ASSIGNMENT,

SECURITY AGREEMENT AND FINANCING STATEMENT

[YUMA COUNTY, COLORADO]

STATE OF COLORADO §

§

COUNTY OF YUMA §

THIS DEED OF TRUST, ASSIGNMENT, SECURITY AGREEMENT AND FINANCING STATEMENT (herein called the “Mortgage”) is made effective as of March 28, 2006, between THE BEARD COMPANY (“Borrower”), and the PUBLIC TRUSTEE OF YUMA COUNTY, COLORADO (“Trustee”) for the benefit of FIRST FIDELITY BANK, N.A., a national banking association, 5101 North Classen, Oklahoma City, Oklahoma 73118 (the “Beneficiary”).

A POWER OF SALE HAS BEEN GRANTED IN THIS DEED OF TRUST. A POWER OF SALE MAY ALLOW THE TRUSTEE TO TAKE THE PROPERTIES IN TRUST AND SELL THEM WITHOUT GOING TO COURT IN A FORECLOSURE ACTION UPON DEFAULT BY THE BORROWER UNDER THIS DEED OF TRUST.

THIS INSTRUMENT CONTAINS AFTER ACQUIRED PROPERTY PROVISIONS, SECURES THE PAYMENT OF FUTURE ADVANCES, AND COVERS PROCEEDS OF COLLATERAL.

WITNESSETH:

WHEREAS, the Borrower is justly indebted to Beneficiary up to the aggregate principal amount of Three Hundred Fifty Thousand and No/100 Dollars ($350,000.00), as evidenced by a certain Promissory Note of even date herewith and as further described herein, and desires to secure its obligations to the Beneficiary with property of the Borrower as hereafter described.

NOW THEREFORE, for good and valuable consideration, including the debt hereinafter described, and the uses and trusts created hereby (“Trust”), the legal sufficiency of which is hereby expressly acknowledged by all the parties, Borrower does hereby GRANT, BARGAIN, SELL, TRANSFER, ASSIGN, AND CONVEY unto Trustee, and its successors and assigns, in the Trust, all of the following:

A.            All of the Borrower’s interest in and to the oil, gas and/or mineral leases and estates and other interests through which the Borrower derives its rights in connection with the production, exploration, development and operation of the oil, gas and other minerals in, on, under and produced from the properties described in Exhibit “A” attached hereto and made a part hereof, whether now owned by Borrower or hereafter acquired, by operation of law or otherwise, subject to the overriding royalties and other burdens on production existing on the effective date hereof and the other matters, instruments and agreements effecting the properties described in Exhibit “A” attached hereto and made a part hereof and all of the Borrower’s interest in all other oil, gas and/or mineral interests with which any of the interests and estates arising from the properties described in Exhibit “A” are now or hereafter may be pooled or unitized, in whole or in part;

B.            Without limitation of the foregoing, all of the Borrower’s interest in all other rights, titles, interests and estates of whatever kind or character, whether now owned by Borrower or hereafter acquired by operation of law or otherwise, in and to (i) the lands, leases and property interests described or referred to in Exhibit “A” (or described in any of the instruments described or referred to in Exhibit “A”) and (ii) all other oil, gas and other mineral interests with which any of the interests and properties described in subparagraph (i) herein may be pooled or unitized, in whole or in part;

C.            All of the Borrower’s interest, whether now owned by Borrower or hereafter acquired by operation of law or otherwise, in and to all presently existing and hereafter created oil, gas and/or mineral unitization, pooling and/or communitization agreements, declarations and/or orders, and in and to the

properties covered and the units created thereby (including, without limitation, units formed under orders, rules, regulations or other official acts of any federal, state or other authority having jurisdiction and so called “working interest units” created under operating agreements or otherwise), which cover, affect or otherwise relate to the properties described in clauses A and B above;

D.            All of the Borrower’s interest, whether now owned by Borrower or hereafter acquired by operation of law or otherwise, in and to the rights under all presently existing and hereafter created operating agreements, equipment leases, production sales, purchase, exchange and/or processing agreements, transportation agreements, and other contracts and/or agreements which cover, affect, or otherwise relate to the properties described in clauses A, B and C above or to the operation of such properties or to the treating, handling, storing, transporting or marketing of oil, gas or other minerals produced from (or allocated to) such properties; and

E.            All of the Borrower’s interest, whether now owned by Borrower or hereafter acquired by operation of law or otherwise, in and to all equipment, improvements, materials, supplies, fixtures and other property (including, without limitation, all wells, pumping units, wellhead equipment, tanks, pipelines, flow lines, gathering lines, compressors, dehydration units, separators, meters, buildings, injection facilities, salt water disposal facilities, and power, telephone and telegraph lines) and all easements, servitudes, rights-of-way, surface leases and other surface rights, which are now or hereafter used, or held for use, in connection with the properties described in clauses A, B, C and D above, or in connection with the operation of such properties, or in connection with the treating, handling, storing, transporting or marketing of oil, gas or other minerals produced from (or allocated to) such properties.

TO HAVE AND TO HOLD the foregoing rights, interests and properties, and all rights, estates, powers and privileges appurtenant thereto (herein collectively called the “Mortgaged Properties”, or singularly a “Mortgaged Property”), unto the Trustee, his successors or substitutes in the Trust and his or their assigns, forever. Borrower hereby binds Borrower and Borrower’s successors and assigns to forever WARRANT and DEFEND the Mortgaged Properties and every part of it unto the Trustee, his successors or substitutes in the Trust, and his or their assigns, against the claims and demands of every person whomsoever lawfully claiming or to claim it or any part of it.

“Borrower’s interest” as described above shall mean all of the Borrower’s net revenue interest and working interest in and to the Mortgaged Properties in at least the minimum amounts as disclosed to the Beneficiary.

In order to further secure the payment of the indebtedness hereinafter referred to, and the performance of the obligations, covenants, agreements and undertakings of Borrower hereinafter described, Borrower hereby grants to Beneficiary a security interest in and to Borrower’s interest in: (a) all oil, gas, and other hydrocarbons and other minerals produced from or allocated to the Mortgaged Properties and all products processed or obtained therefrom, the proceeds thereof, and all accounts, contracts rights and general intangibles under which such proceeds may arise, (b) all (whether now owned or hereafter acquired by operation of law or otherwise) equipment, improvements, materials, supplies, fixtures, goods and personal property of whatever nature now or hereafter used, or held for use, in connection with the Mortgaged Properties (or in connection with the operation thereof or the treating, handling, storing, transporting or marketing of oil, gas or other minerals produced therefrom or allocated thereto), and all accessions and appurtenances thereto and all renewals or replacements thereof or substitutions therefor, (c) all contract rights, contractual rights and other general intangibles related to the Mortgaged Properties or to the operation thereof or the treating, handling, storing, transporting or marketing of oil, gas or other minerals produced therefrom or allocated thereto, (d) all funds, accounts, instruments, documents, notes or chattel paper of the Borrower arising from or by virtue of any transactions related to the Borrower’s interest in the Mortgaged Properties, including any joint interest billings or accounts owed to Borrower by any other joint interest owner in the Mortgaged Properties, (e) all other funds, accounts, contract rights, contractual rights, documents, instruments, notes, chattel paper and general intangibles of the Borrower of whatsoever kind or character (all of the properties, rights and interests described in parts (a), (b), (c), (d) and (e) above being herein sometimes collectively called the “Collateral”), and (f) all proceeds of the Collateral (the Mortgaged Properties, the Collateral, and the proceeds of the Collateral are herein sometimes collectively called the “Property”).

ARTICLE I.

SECURED INDEBTEDNESS

1.1.          This Mortgage is made to secure and enforce the payment of the following promissory notes, guaranties, obligations, indebtedness and liabilities:

(a)           All indebtedness now or hereafter incurred or arising pursuant to the provisions of a Promissory Note dated even date herewith, made by the Borrower in favor of the Beneficiary obligating the Borrower to the Beneficiary in the aggregate principal amount of $350,000.00, and all renewals, extensions, modifications and substitutions thereof and thereto (herein referred to as the “Note”); and

(b)           All indebtedness now or hereafter incurred or arising pursuant to or permitted by the provisions of the Note, this Mortgage or any other instrument now or hereafter evidencing, governing or securing the same or any part thereof or otherwise executed in connection with the loan evidenced by the Note, including without limitation that certain Business Loan Agreement dated even date herewith, between the Borrower and Beneficiary (herein referred to as the “Loan Agreement”) and all other loan and security documents, instruments and agreements made in connection therewith (herein collectively referred to as the

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“Loan Documents”), together with all other indebtedness of Borrower to Beneficiary now or hereafter incurred of whatever nature, and all future advances on any of said indebtedness.

1.2.          The indebtedness referred to in Section 1.1, and all renewals, extensions and modifications thereof, and all substitutions therefor, in whole or in part, are hereinafter sometimes referred to as the “secured indebtedness” or the “indebtedness secured hereby”.

ARTICLE II

PARTICULAR WARRANTIES, REPRESENTATIONS AND COVENANTS

2.1.          The Borrower hereby represents and warrants, and, so long as any part of the indebtedness secured hereby remains unpaid, covenants and agrees as follows:

(a)           The Borrower has title to the Mortgaged Properties in a proportionate amount not less than the net revenue interests described in Exhibit “A” attached to the Loan Agreement, free and clear of all liens, security interests, and encumbrances except for (i) the matters set forth in the descriptions of certain of the Mortgaged Properties on Exhibit “A” hereto, if any, (ii) the liens and security interests evidenced by this Mortgage, (iii) statutory liens for taxes which are not yet delinquent, and (iv) liens under operating agreements and unitization agreements (only to the extent the same are properly perfected under applicable law), pooling orders, and mechanics and materialmen’s liens with respect to obligations which are not yet due (the matters described in the foregoing clauses (i), (ii), (iii) and (iv) being herein called the “Permitted Encumbrances”). Borrower will defend title to the Property, subject as aforesaid, against the claims and demands of all persons now or hereafter claiming the same or any part thereof, and the Borrower will maintain and preserve the lien hereby created so long as any of the indebtedness secured hereby remains unpaid. The ownership of Borrower will, (i) with respect to each tract of land described in Exhibit “A” hereto in connection with such Mortgaged Properties, (A) entitle Borrower to receive (subject to the terms and provisions of this Mortgage) a decimal share of the oil and gas produced from, or allocated to, such tract equal to not less than the decimal share set forth in Exhibit “A” to the Loan Agreement in connection with such tract below the words “Net Revenue Interest” (or words of similar import), (B) cause Borrower to be obligated to bear a decimal share of the cost of exploration, development and operation of such tract of land at not less than the decimal share set forth in Exhibit “A” to the Loan Agreement in connection with such tract below the words “Working Interest” (or words of similar import), and (ii) if such tract of land is shown in Exhibit “A” to be subject to unit or units, with respect to each such unit, (A) entitle Borrower to receive (subject to the terms and provisions of this Mortgage) a decimal share of all substances covered by such unit which are produced from, or allocated to, such unit equal to not less than the decimal share set forth in Exhibit “A” to the Loan Agreement in connection with such Mortgaged Property below the words “Unit Net Revenue Interest” or words of similar import (and if such tract of land is subject to more than one unit, words identifying such interest with such unit), and (B) obligate Borrower to bear a decimal share of the cost of exploration, development and operation of such unit at not less than the decimal share set forth in Exhibit “A” to the Loan Agreement in connection with such Mortgaged Property below the words “Unit Working Interest” or words of similar import (and if such tract of land is subject to more than one unit, words identifying such interest with such unit); such shares or production which Borrower is entitled to receive, and shares of expenses which Borrower is obligated to bear, are not subject to change, except, and only to the extent that, such changes: (i) are reflected in Exhibit “A” to the Loan Agreement; (ii) are pursuant to operating agreements effecting the Mortgaged Properties; or (iii) arise as a result of laws, rules, regulations or other official acts of any federal, state or other governmental authority having jurisdiction over the Mortgaged Properties.

(b)           All oil and gas leases relating to the properties described or referred to in Exhibit “A” hereto are valid and subsisting and in full force and effect; all of the express and implied terms and provisions of such leases and all laws, rules and regulations applicable thereto have been complied with and all rentals, royalties and taxes payable with respect thereto or with respect to production therefrom have been paid; all wells on the properties described or referred to in Exhibit “A” have been drilled and have been and will be operated in accordance with the laws, rules and regulations of all governmental bodies and agencies exercising jurisdiction over such wells; that on the date of this Mortgage, Borrower is entitled to receive all proceeds from present and future production of oil, gas, casinghead gas and other hydrocarbons attributable to the Borrower’s interest covered by this Mortgage; and the Borrower hereby warrants and agrees to forever defend all and singular the Property against every person whomsoever lawfully claiming or to claim the same or any part thereof.

(c)           The Borrower will keep or cause to be kept in full force and effect the oil and gas leases covering the properties described or referred to in Exhibit “A” hereto, will comply with all of the express and implied terms and provisions thereof and all laws, rules and regulations applicable thereto or cause the same to be complied with and will pay or cause to be paid all rentals, royalties and other payments payable with respect thereto.

(d)           The Borrower will do or cause to be done all things necessary to preserve and keep the Property in good repair and efficient operating condition and will promptly make or cause to be made from time to time all repairs, renewals and replacements required for that purpose. The Borrower will do or cause to be done all things which may reasonably be necessary in accordance with accepted practices of prudent operators in the industry to maintain, and to protect from diminution, the productive capacity of each producing well now or hereafter included in the Mortgaged Properties including, but not limited to, cleaning out and reconditioning of wells, recompletion of wells at higher levels, drilling of substitute wells to the same formation and drilling of additional wells to conform to changed spacing regulations or to satisfy offset requirements as would a prudent operator. The Borrower will continuously operate or cause to be operated the Mortgaged Properties in a careful and efficient manner and in compliance with all applicable proration and conservation laws and all other laws, rules and

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regulations of all governmental bodies and agencies exercising jurisdiction. The Borrower shall notify the Beneficiary of any change in the present proration laws or in any existing order, rule or regulation pertaining thereto that may prejudicially and materially affect the security of this Mortgage. The Borrower will do or cause to be done such development work as may reasonably be necessary for the prudent and economical handling of the Mortgaged Properties in accordance with accepted practices of prudent operators in the industry.

(e)           The Borrower will pay or cause to be paid promptly, as the same become due (or, as to any thereof which are being contested in good faith, promptly after the final determination of such contest) all taxes, assessments and governmental charges lawfully levied or assessed or imposed upon the Property or any part thereof or upon any production or income therefrom, including, without limitations, all ad valorem taxes assessed against the Mortgaged Properties or any part thereof and all gross production, severance and similar taxes, imposed or assessed with respect to or measured by or charged against production attributable to the Mortgaged Properties.

(f)            Unless the Beneficiary shall first give its written consent thereto, which consent shall not be unreasonably withheld, the Borrower will not sell, convey, assign or otherwise dispose of any of the Mortgaged Properties. Further, the Borrower shall give notice to the Beneficiary of any surrender, abandonment, leasing or subleasing of any of the Mortgaged Properties and any removal of any of the Collateral from the county in which the same is located. Upon any pooling or unitization, the lien and security interest created hereby shall apply to the interest of the Borrower in the unit so formed attributable to such portion of the Mortgaged Properties as is included in such unit. The Borrower will keep the Property at all times free, clear and discharged from all liens, security interests, charges, encumbrances or assessments, regardless of the priority thereof (other than the lien and security interest created by this instrument and the Permitted Encumbrances hereunder), unless the Beneficiary shall have given its written consent thereto. The Borrower shall promptly pay or cause to be paid all laborers and materialmen furnishing labor or material to the Property, but nothing herein shall be deemed a waiver of the priority hereof as against the claims of any such laborer or materialman or to give any such laborer or materialman any rights hereunder or any right of action upon this covenant.

(g)           The Borrower will at all times keep or cause to be kept such of the Property as is of an insurable nature (except for any portions of the Property Borrower has determined in good faith have no material insurable value) insured against loss or damage by fire, tornado and such other casualties as are usually insured against, to the extent that insurance can be obtained thereon, with such deductibles as Borrower shall deem appropriate, and in companies and amounts acceptable to Beneficiary, and with the Beneficiary as co-insured, and on the request of the Beneficiary will deliver such policies or certified copies thereof to the Beneficiary. In the event of any damage or loss of any kind to any of the Property resulting from any cause whatever, such damage or loss shall be repaired or remedied forthwith unless the same is unnecessary to the protection or preservation of the Property. The Borrower will also maintain or cause to be maintained such liability, property damage and other insurance as is usually maintained by companies operating properties similar to the property as may reasonably be requested from time to time by the Beneficiary, with Beneficiary named as an additional insured to the extent of its interest.

(h)           If the title or the rights of the Beneficiary in or to any of the Mortgaged Properties shall be endangered, or shall be attacked directly or indirectly, or if any legal proceedings are instituted against the Borrower or the Beneficiary with respect thereto, the Borrower will promptly give written notice thereof to the Beneficiary and at the Borrower’s cost and expense will take such action as may be necessary or proper to remedy and cure any defect or claimed defect which shall have given rise to such danger, attack or legal proceedings and to prosecute or defend all such suits, actions or other proceedings as may be appropriate for such purpose. It being agreed that the Beneficiary may, if it so elects, intervene in, bring or defend any such action, suit or proceeding and may prosecute or defend the same through counsel of its own choice and the Borrower will, upon demand, pay to the Beneficiary all of its reasonable costs, damages and expenses, including reasonable legal fees and court costs, which it may ever incur by reason of any such defect, claimed defect, attack, suit, action or proceeding, all of which shall be secured hereby, and this covenant shall continue in full force and effect as a personal covenant, even though this instrument be released and the lien hereof discharged.

(i)            The Borrower will, subject to any applicable notice and curative periods required by the Loan Documents or provided herein, duly and punctually pay each and every obligation owing on account of the Note in accordance with the terms thereof and all other indebtedness secured hereby.

(j)            The Borrower shall execute and deliver and the Beneficiary will promptly, and (insofar as not contrary to applicable law) at Borrower’s expense, record and rerecord, file and refile and register and reregister this instrument and every other instrument in addition or supplemental hereto that shall be required by law in order to perfect and maintain the lien and security interest intended to be created hereby in such manner and places and within such times as may be necessary to perfect and maintain such lien and security interest and preserve and protect the rights and remedies of the Beneficiary, and will furnish satisfactory evidence of every such recording, filing and registration to the Beneficiary.

(k)           The Borrower agrees that, subject to any applicable notice and curative periods required by the Loan Documents or provided herein, if it fails to perform any act which it is required to perform hereunder, or to pay any money which it is required to pay hereunder, the Beneficiary may, but shall not be obligated to, perform or cause to be performed such act or pay such money, and any expense thereby incurred by the Beneficiary and any money so paid shall be a demand obligation owing by the Borrower and shall bear interest at the default rate of interest described in the Loan Documents from the date of making such payment until paid, but only after any applicable grace period to cure any defaults as described in the Loan Documents or provided herein, and shall be

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part of the indebtedness secured hereby and the Beneficiary shall be subrogated to all of the rights of the person, corporation or body politic receiving such payment.

ARTICLE III

ASSIGNMENT OF PRODUCTION

3.1.          The Borrower for valuable consideration, the receipt of which is hereby acknowledged does grant, bargain, sell, convey, assign and transfer unto the Beneficiary, its successors and assigns, all oil, gas and other hydrocarbons, together with all proceeds derived from the sale thereof (including, but not limited to, all moneys due and to become due under sales contracts, transportation contracts and processing contracts), produced and to be produced to the credit of the Mortgaged Properties. All parties producing, purchasing, taking, processing or receiving any oil, gas or other hydrocarbons attributable to the Mortgaged Properties or having in their possession any such oil, gas or other hydrocarbons, or proceeds thereof, for which they or others are accountable to the Beneficiary by virtue of the provisions hereof, are, upon the occurrence of any Event of Default hereunder which Borrower fails to cure under the applicable notice and curative periods provided in the Loan Documents and herein, hereby authorized by the Borrower to treat the Beneficiary as the assignee and transferee of the Borrower and entitled in the place and stead of the Borrower to receive the same; and such parties, and each of them, shall be fully protected in so treating the Beneficiary and shall be under no obligation to see to the proper application by the Beneficiary of any such proceeds received by it. The Borrower hereby authorizes and empowers the Beneficiary, upon the occurrence of any Event of Default hereunder which Borrower fails to cure under the applicable notice and curative periods provided in the Loan Documents and herein, to demand, collect and receive said oil, gas and other hydrocarbons and the proceeds therefrom, and to execute any and all transfer orders, division orders, and other instruments which may be necessary to effect such demand, collection and receipt; nevertheless, the Borrower agrees that, upon the occurrence of any Event of Default hereunder which Borrower fails to cure under the applicable notice and curative periods provided in the Loan Documents and herein, the Borrower will execute and deliver any and all transfer orders, division orders, and other instruments which may be requested by the Beneficiary for the purpose of effectuating the payment to the Beneficiary of the proceeds assigned hereby. The Beneficiary shall have no responsibility to enforce collection of any proceeds so assigned and shall have no other responsibility in connection therewith, except to account for funds actually received. All funds received by the Beneficiary by virtue of the assignment hereby made shall be applied upon the indebtedness secured by this instrument except as otherwise agreed by the Borrower and the Beneficiary. The assignment in this Article III is effective for all purposes as of as of the date of this Mortgage.

ARTICLE IV

REMEDIES IN EVENT OF DEFAULT

4.1.         In case any one or more of the following events shall occur and be continuing, it shall constitute an Event of Default:

(a)           Failure by the Borrower to pay any interest upon or principal of the Note, or failure of Borrower or the obligor under any other indebtedness (including any future advances made under the Loan Documents) secured hereby, to pay the same when the same shall become due and payable (whether by acceleration or otherwise); or

(b)           Default by the Borrower in the due performance or observance of any covenant, warranty, or condition herein contained, or the occurrence of an Event of Default as described in the Loan Documents, subject to any applicable notice and curative periods provided therein; or

(c)           The failure of the Borrower to pay over to the Beneficiary, upon the occurrence of any Event of Default hereunder which Borrower fails to cure under the applicable notice and curative periods provided in the Loan Documents and herein, any proceeds from the sale of the oil, gas, casinghead gas or other hydrocarbons produced, saved and sold from or allocated to the Mortgaged Properties which are paid to Borrower rather than to Beneficiary; or

(d)           The failure of the lien and priority of this instrument to be fully maintained at all times, or of any right, title, interest or estate herein covenanted or warranted to be held or owned by the Borrower, or Borrower is found not to have good right and lawful authority to encumber and otherwise involve the Property or any part thereof, as herein provided.

4.2.         In the event the Borrower shall cure or cause to be cured the foregoing Events of Default to the reasonable satisfaction of the Bank within thirty (30) days (except for failure to pay principal or interest on the Note in which the time to cure shall be five (5) days) after mailing notice to the defaulting party, the parties shall be restored to their respective rights and obligations under this Mortgage as if no such Event or Events of Default had occurred.

4.3.         Upon the occurrence of an Event of Default which Borrower fails to cure under the applicable notice and curative periods provided in the Loan Documents and herein, the Beneficiary may declare the entire unpaid indebtedness secured hereby, including interest then accrued thereon, to be forthwith due and payable, whereupon the same shall become and be forthwith due and payable, without other notice or demand of any kind, and the Beneficiary shall have all and any of the following remedies:

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(a)           The Beneficiary may institute suit to foreclose the lien of this Mortgage in any court having jurisdiction. Borrower further agrees that, in the event of any foreclosure sale, the Mortgaged Properties or any part thereof, may be sold with or without appraisement as the Beneficiary may elect. Such election may be exercised at any time prior to the entry of the decree of foreclosure. Should the Beneficiary elect to have the Mortgage Properties sold without appraisement, the Borrower hereby expressly waives appraisement. Beneficiary may elect to have such Property sold together or in separate parcels, and at any such sale, if the Beneficiary is the highest bidder, may become the purchaser thereof. The proceeds from any such sale, after paying therefrom the cost advanced or incurred by the Beneficiary in the foreclosure suit, including the cost of the sale and all costs and expenses incurred in the operation of the Mortgaged Properties by Beneficiary or a receiver appointed upon the application of the Beneficiary, shall be applied first to the payment of all costs and expenses incurred by the Beneficiary in the operation of the Mortgaged Properties, if the same be so operated, and any and all sums advanced by the Beneficiary for the purpose of protecting the security, with interest at a rate equal to the default rate of interest described in the Loan Documents, and second to the payment of all indebtedness secured hereby, including interest and attorneys’ fees, in such order of application as the Beneficiary may elect.

(b)           The Beneficiary may take possession of the Property or any part thereof (the Borrower agreeing to give immediate peaceful possession) and collect and maintain, operate or control the same, and may apply all or any part of the income and proceeds to the payment of any development, operation or maintenance expenses incident in any order or application as the Beneficiary may elect; provided, that in the event of any dispute or question whatsoever concerning such income and proceeds or the application thereof, the Beneficiary may hold the same in a special account until such dispute or question is finally settled to the Beneficiary's satisfaction. Should the Beneficiary elect to collect such income and proceeds, this indenture shall constitute full and complete authority to any purchaser of oil, gas, casinghead gas, condensate or other hydrocarbons from the Mortgaged Properties or allocated thereto, or any part thereof, to deliver directly to the Beneficiary all proceeds from the sale of such products, and notice hereof without the requirement of anything more shall constitute an unqualified order on such purchaser to make such delivery. Every such purchaser is hereby authorized and directed to accept as sufficient the Beneficiary's written statement to the effect that a default has occurred hereunder and that the Beneficiary, subject to any applicable notice and curative opportunities required by the Loan Documents or provided herein, is entitled to such proceeds; and every such purchaser is hereby relieved from all responsibility with respect to the delivery of said proceeds for the Beneficiary’s application thereof;

(c)        In addition to the rights afforded the Beneficiary in this Mortgage with respect to foreclosures by judicial process, it shall be the duty of the Trustee and of his successors and substitutes in the Trust, on Beneficiary’s request (which request is hereby presumed) to enforce the Trust by selling the Mortgaged Properties as hereafter provided. The Beneficiary shall have the right to declare a violation of any of the covenants herein contained and elect to advertise the Mortgaged Properties for sale and demand such sale, then, upon filing notice of such election and demand for sale with the Trustee, who shall upon receipt of such notice of election and demand for sale cause a copy of the same to be recorded in the office of the Clerk and Recorder of the county in which the Mortgaged Properties are situated, it shall and may be lawful for the Trustee to sell and dispose of the same (en masse or in separate parcels, as Beneficiary may designate), and all the right, title and interest of said Borrower, their successors or assigns therein, at public auction at the main front door of the Courthouse in the county in which the Mortgaged Properties are located or on the Mortgaged Properties or any part thereof, or such other place as may be authorized or permitted by law, as may be specified in the notice of said sale, for the highest and best price the same will bring in cash, four weeks’ public notice having been previously given of the time and place of such sale, by advertisement weekly, in some newspaper of general circulation at that time published in said county, a copy of which notice shall be mailed within ten (10) days from the date of the first publication thereof to the Borrower at the address herein given and to such person or persons appearing to have acquired a subsequent record interest in the Mortgaged Properties at the address given in the recorded instrument evidencing such interest, and where only the county and state are given as the address, then such notice shall be mailed to the county seat, and to make and give to the purchaser or purchasers of the Mortgaged Properties at such sale, a certificate or certificates in writing describing such Mortgaged Properties purchased, and the sum or sums paid therefor, and the time when the purchaser or purchasers (or other person entitled thereto) shall be entitled to a deed or deeds therefor, unless the same shall be redeemed as is provided by law; and the Trustee shall, upon demand by the person or persons holding the said certificate or certificates of purchase, when said demand is made, or upon demand by the person entitled to a deed to and for the Mortgaged Properties purchased, at the time such demand is made the time for redemption having expired, make and execute to such person or persons a deed or deeds to the Mortgaged Properties purchased, which said deed or deeds shall be in the ordinary form of a conveyance, and shall be signed, acknowledged and delivered by the Trustee, as Borrower, and shall convey and quit claim to such person or persons entitled to such deed, as grantee, the Mortgaged Properties purchased as aforesaid and all the right, title, interest, benefit and equity of redemption of the Borrower its heirs, successors and assigns therein, and shall recite the sum or sums for which the Mortgaged Properties were sold and shall refer to the power of sale herein contained, and to the sale or sales made by virtue hereof; and in case of an assignment of such certificate or certificates of purchase, or in the case of the redemption of the Mortgaged Properties by a subsequent encumbrancer, such assignment or redemption shall also be referred to in such deed or deeds; but the notice of sale need not be set out in such deed or deeds and the Trustee shall, out of the proceeds or avails of such sale, after first paying and retaining all fees, charges and costs of making said sale, pay to Beneficiary the principal and interest due on the Notes according to the tenor and effect thereof, and all monies advanced by Noteholders as applicable with interest thereon at the default rate set forth in the Notes, rendering the overplus, if any, unto Borrower, its legal representatives or assigns; which sale or sales and said deed or deeds so made shall be a perpetual bar, both in law and equity, against Borrower, its heirs, successors and assigns, and all other persons claiming the Mortgaged Properties, or any part thereof, by, from, through or under the Borrower. The holder or holders of the Notes may purchase the Mortgaged Properties or any part thereof; and it shall not be obligatory upon the purchaser or purchasers at any such sale to see to the application of the purchase

-6-

money. Nothing herein pertaining to foreclosure proceedings or specifying particular actions to be taken by Beneficiary shall be deemed to contradict or add to the requirements and procedures (now or hereafter existing) of Colorado law and any such conflict or inconsistency shall be resolved in favor of Colorado law applicable at the time of foreclosure.

(d)           All remedies herein expressly provided for are cumulative of any and all other remedies existing at law or in equity, and the Beneficiary shall, in addition to the remedies herein provided, be entitled to avail itself to all such other remedies as may now or hereafter exist at law or in equity for the collection of said indebtedness and enforcement of the covenants herein, and the foreclosure of the liens evidenced hereby and the resort to any remedy provided for hereunder or provided for by law shall not prevent the concurrent or subsequent employment of any other appropriate remedy or remedies.

(e)           The Beneficiary may resort to any security given by this instrument or to any other security now existing or hereafter given to secure the payment of the indebtedness secured hereby in whole or in part and in such portions and in such order as may seem best to the Beneficiary, in its sole and reasonable discretion, and any such action shall not in anywise be considered as a waiver of any of the rights, benefits or liens evidenced by this instrument.

(f)           Beneficiary shall have and may exercise any and all other rights and remedies which Beneficiary may have at law or in equity, or under the Uniform Commercial Code of the applicable jurisdiction (“UCC”), or otherwise.

4.4.          Appraisement of the Mortgaged Properties is hereby expressly waived or not waived, at the option of the Beneficiary, its successors or assigns, said option to be exercised, as to any item or portion of the Mortgaged Properties, prior to or at the time sale thereof takes place or judgment is rendered in any foreclosure hereof, whichever occurs first. The Borrower waives, to the extent that it lawfully may, all right to have the Property marshaled.

4.5.         Upon the occurrence of an Event of Default, subject to any applicable notice and curative periods required by the Loan Documents or provided herein, the Beneficiary may exercise its rights of enforcement with respect to the Property under the Uniform Commercial Code of the applicable jurisdiction and in conjunction with, in addition to or in substitution for those rights and remedies:

(a)           The Beneficiary may enter upon Mortgaged Properties to take possession of, assemble and collect the Collateral or to render it unusable to the extent of the Borrower's interest therein;

(b)           The Beneficiary may require Borrower to assemble the Collateral and make it available at a place the Beneficiary designates which is mutually convenient to allow the Beneficiary to take possession or dispose of the Collateral;

(c)           Written notice mailed to Borrower as provided herein at least ten (10) days prior to the date of any public sale or the date after which private sale of the Collateral will be made shall constitute reasonable notice;

(d)           In the event of a foreclosure sale, whether made by the Beneficiary under the terms hereof, or under judgment of a court, the Collateral and the Property may, at the option of the Beneficiary, be sold as a whole;

(e)           It shall not be necessary that the Beneficiary take possession of the Collateral or any part thereof prior to the time that any sale pursuant to the provisions of this section is conducted and it shall not be necessary that the Collateral or any part thereof be present at the location of such sale;

(f)            Prior to application of proceeds of disposition of the Collateral to the secured indebtedness, such proceeds shall be applied to the reasonable expenses of retaking, holding, preparing for sale or lease, selling, leasing and the like and the reasonable attorneys' fees and legal expenses incurred by the Beneficiary; and

(g)           The Beneficiary may appoint or delegate any one or more persons as agent to perform any act or acts necessary or incident to any sale held by the Beneficiary, including the sending of notices and the conduct of the sale, but in the name and on behalf of the Beneficiary.

ARTICLE V

DEFEASANCE

5.1.         If all indebtedness secured hereby be paid, the lien, security interest and assignment of production hereby created and granted by the Borrower shall cease, terminate and become null and void, and the Mortgaged Properties shall become wholly free and clear thereof, and the Beneficiary upon the request and at the expense of the Borrower shall in due course execute and deliver to the Borrower a release of this instrument and such other instruments of satisfaction as may be appropriate.

-7-

ARTICLE VI

MISCELLANEOUS PROVISIONS

6.1.          All options and rights of election herein provided to or for the benefit of the Beneficiary are continuing, and the failure to exercise any such option or right of election upon a particular default or breach or upon any subsequent default or breach shall not be construed as waiving the right to exercise such option or election at any later date. No exercise of the rights and powers herein granted and no delay or omission in the exercise of such rights and powers shall be held to exhaust the same or prevent their exercise at any time and from time to time.

6.2.          The Beneficiary may at any time and from time to time release any part of the Property from the lien and security interest created hereby and any such release may be made without notice to the Borrower and without affecting the personal liability of the indebtedness hereby secured. No release of any part of the Property shall in anywise alter, vary or diminish the force or effect of this instrument on the balance of the Property.

6.3.          Any notice, request, demand, report or other instrument which may be required or permitted to be given to or furnished to or served upon any party hereto or other person succeeding to any interest of a party hereto shall be deemed sufficiently given, furnished or served if done so in compliance with the notice provisions of the Loan Agreement.

6.4.         If any provision hereof is invalid or unenforceable in any jurisdiction, the other provisions hereof shall remain in full force and effect in such jurisdiction and the remaining provisions hereof shall be liberally construed in favor of the Beneficiary in order to effectuate the provisions hereof, and the invalidity or unenforceability of any provision hereof in any jurisdiction shall not affect the validity or enforceability of any such provision in any other jurisdiction.

6.5.          This instrument is made with full substitution and subrogation of the Beneficiary in and to all covenants and warranties by others heretofore given or made in respect of the Property or any part of either thereof.

6.6.          The terms, provisions, covenants and conditions hereof shall bind and inure to the benefit of the respective personal representative, successors and assigns of the Borrower and the Beneficiary.

6.7.          This instrument may be executed in several counterparts, each of which shall be deemed an original and all of which shall together constitute one and the same instrument.

6.8         In case of absence, death, inability, refusal or failure of the Trustee in this Mortgage named to act, or in case he should resign (and he is hereby authorized to resign without notice to or consent of Borrower), or if Beneficiary shall desire, with or without cause, to replace the Trustee in this Mortgage named, or to replace any successor or substitute previously named, Beneficiary may name, constitute and appoint a successor and substitute trustee (or another one) without other formality than an appointment and designation in writing, which need not be filed or recorded to be effective. Upon such appointment, this conveyance shall automatically vest in such substitute trustee, as Trustee, the estate in and title to all of the Mortgaged Properties, and such substitute Trustee so appointed and designated shall thereupon hold, possess and exercise all the title, rights, powers and duties in this Mortgage conferred on the Trustee named and any previous successor or substitute Trustee, and his conveyance to the purchaser at any such sale shall be equally valid and effective as if made by the Trustee named in this Mortgage. Such right to appoint a substitute Trustee shall exist and may be exercised as often and whenever from any of said causes, or without cause, Beneficiary elects to exercise it.

-8-

IN WITNESS WHEREOF, the said Borrower has executed and delivered these presents at Oklahoma City, Oklahoma, effective as of the date first above written.

BORROWER:

THE BEARD COMPANY,

an Oklahoma corporation

ATTEST:

By /s/ Rebecca G. Voth By   /s/ Herb Mee, Jr.

Rebecca G. Voth, Secretary Herb Mee, Jr., President

BENEFICIARY:

FIRST FIDELITY BANK, N.A.,

a national banking association

By   /s/ Danny Lawson

Danny Lawson

Executive Vice President

STATE OF OKLAHOMA §

§

COUNTY OF OKLAHOMA §

BEFORE ME, a notary public in and for said county and state on this 28^th day of March, 2006, personally appeared Herb Mee, Jr., known to me to be the identical person who subscribed his name to the foregoing instrument as President of The Beard Company, and acknowledged to me that he executed the same as his free and voluntary act and deed, and as the free and voluntary act and deed of such corporation, for the uses and purposes therein set forth.

IN WITNESS WHEREOF, I have hereunto set my official signature and affixed my notary seal the day and year first above written.

My Commission Expires: /s/ Linda Shrum

Notary Public, State of Oklahoma

October 30, 2006 Commission No.   02017703

(Seal)

STATE OF OKLAHOMA §

§

COUNTY OF OKLAHOMA §

BEFORE ME, a notary public in and for said county and state on this 28th day of March, 2006, personally appeared Danny Lawson, known to me to be the identical person who subscribed his name to the foregoing instrument as Executive Vice President of First Fidelity Bank, N.A., a national banking association, and acknowledged to me that he executed the same as his free and voluntary act and deed, and as the free and voluntary act and deed of such corporation for the uses and purposes therein set forth.

IN WITNESS WHEREOF, I have hereunto set my official signature and affixed my notary seal the day and year first above written.

My Commission Expires:  /s/Linda Shrum

Notary Public, State of Oklahoma

October 30, 2006 Commission No.    02017703

(Seal)

-9-

EXHIBIT A

		Yuma County, Colorado*
Well Name	Working Interest	Net Revenue Interest	Overriding Royalty Interest	Legal Description
Yuma 5 State 12-36	0.225	0.196875	None	SW/4 NW/4 36, T3N, R48W
Yuma 5 State 21-36	0.225	0.196875	None	NE/4 NW/4 36, T3N, R48W
Yuma 5 State 23-36	0.225	0.196875	None	NE/4 SW/4 36, T3N, R48W
Yuma 5 State 32-36	0.225	0.196875	None	SW/4 NE/4 36, T3N, R48W
Yuma 5 State 33-36	0.225	0.196875	None	NW/4 SE/4 36, T3N, R48W
Yuma 5 State 42-36	0.225	0.196875	None	SE/4 NE/4 36, T3N, R48W
Yuma 5 State 43-36	None#	0.036000#	0.036000#	NE/4 SE/4 36, T3N, R48W
Yuma 5 State 44-36	0.225	0.196875	None	SE/4 SE/4 36, T3N, R48W

_________________________

* Lease No. 00/7284 between State of Colorado and Beard Oil Company covering Section 36, Township 3 North, Range 48 West, Yuma County, Colorado.

# After payout the ORRI will convert to a 0.225 working interest (0.196875 net revenue interest).

EX-10.68

PROMISSORY NOTE

$350,000.00 March 28, 2006

FOR VALUE RECEIVED, THE BEARD COMPANY, an Oklahoma corporation, having as address of Enterprise Plaza, Suite 320, 5600 North May Avenue, Oklahoma City, Oklahoma 73112 (“Borrower”), hereby promises to pay to the order of FIRST FIDELITY BANK, N.A., a national banking association (“Lender”), the principal sum of Three Hundred Fifty Thousand Dollars ($350,000.00) or so much thereof as may be advanced and outstanding from time to time, and interest from the date hereof on the balance of principal from time to time outstanding, in United States currency, at the rates and at the times hereinafter described.

This Note is issued by Borrower pursuant to that certain Business Loan Agreement of even date herewith (the “Loan Agreement”) entered into between Borrower and Lender. This Note evidences the Loan (as defined in the Loan Agreement) and is a revolving line of credit which can be advanced, repaid and readvanced in compliance with the terms and conditions of this Note, the Loan Agreement and the other Loan Documents. Payment and enforcement of this Note is governed by the Loan Agreement, the terms of which are incorporated herein by express reference as if fully set forth herein. Capitalized terms used and not otherwise defined herein shall have the meanings given to them in the Loan Agreement.

1.Maximum Commitment Amount. The Lender shall have no obligation to make any advance under this Note which, when added to the outstanding principal balance of this Note at the time of such advance, shall exceed the lesser of (i) the Borrowing Base Amount, or (ii) the Reducing Commitment Amount (the “Maximum Commitment Amount”).

2.            Interest. The principal amount hereof outstanding from time to time shall bear interest per annum until paid in full at the Effective Rate, calculated on the basis of actual number of days elapsed, but computed as if each calendar year consisted of a 360-day year, with the Effective Rate to change on the date of any change in the Prime Rate without notice. For purposes of this Note, “Effective Rate” shall mean that variable rate of interest per annum equal to the Prime Rate plus one and one-half percent (1.50%) and the “Prime Rate” shall mean that rate of interest designated from time to time as the “Prime Rate” as published in the Money Rates Section of the Wall Street Journal, Southwest Edition.

3.             Payment. During the term of this Note, the Borrower shall make monthly payments of all accrued interest on the outstanding principal balance of this Note. Such monthly payments shall be due and payable on the last day of each and every month, beginning on April 30, 2006, and shall continue through the Maturity Date. Additionally, in the event the outstanding principal balance of this Note shall ever exceed the Maximum Commitment Amount, Borrower shall, within thirty (30) days of written notice from the Lender, either (i) pay the principal amount in excess of the Maximum Commitment Amount, or (ii) grant a first and prior Lien in favor of the Lender on additional property of the Borrower or any acceptable third party of quality and quantity satisfactory to Lender to further secure this Note.

All payments on account of the indebtedness evidenced by this Note shall be made to Lender not later than 2:00 p.m. Oklahoma City, Oklahoma time on the day when due in lawful money of the United States and shall be first applied to late charges, costs of collection or enforcement and other similar amounts due, if any, to the extent payable by Borrower under this Note and any of the other Loan Documents, then to interest due and payable hereunder and the remainder to principal due and payable hereunder.

4.            Maturity Date. The indebtedness evidenced hereby shall mature on September 30, 2007 (the “Maturity Date”). On the Maturity Date, the entire outstanding principal balance hereof, together with accrued and unpaid interest and all other sums evidenced by this Note, shall, if not sooner paid, become due and payable. During the continuance of an Event of Default under any of the Loan Documents, Lender shall have the right (among all other rights and remedies set forth in the Loan Documents and available at law and in equity) to declare this Note immediately due and payable.

5.             Prepayment. This Note may be prepaid at any time, in whole or in part, without premium or penalty, and any such prepayment shall be applied first to accrued interest and then to principal in inverse order of payments due. Any such prepayment will not waive or defer any scheduled monthly payment.

6.             Commitment Fee. The Borrower shall pay to the Lender, in immediately available funds, a loan commitment fee of $3,500.00 (“Commitment Fee”), which shall be due upon execution of this Note.

7. General Provisions.

(a)           In the event (i) the principal balance hereof is not paid when due whether by acceleration or upon the Maturity Date or (ii) an Event of Default exists, then the principal balance hereof shall bear interest at the Default Rate during the continuance of either such event. “Default Rate” shall mean the Effective Rate plus five percent (5%).

(b)           Borrower agrees that the obligation evidenced by this Note is an exempt transaction under the Truth-in-Lending Act, 15 U.S.C. § 1601, et seq.

(c)           If any provision or provisions, or if any portion of any provision or provisions, in this Note is found by a court of law to be in violation of any applicable local, state or federal ordinance, statute, law, administrative or judicial decision, or public policy, to be illegal, invalid, unlawful, void or unenforceable as written, then it is the intent of all parties hereto that such portion, provision or provisions shall be given force to the fullest possible extent that they are legal, valid and enforceable, that the remainder of this Note shall be construed as if such illegal, invalid, unlawful, void or unenforceable portion, provision or provisions were not contained therein, and that the rights, obligations and interest of Borrower and the holder or holders hereof under the remainder of this Note shall continue in full force and effect. All agreements herein are expressly limited so that in no contingency or event whatsoever, whether by reason of advancement of the proceeds hereof, acceleration of maturity of the unpaid principal balance hereof, or otherwise, shall the amount paid or agreed to be paid to the holders hereof for the use, forbearance or detention of the money to be advanced hereunder exceed the highest lawful rate permissible under applicable usury laws. If, from any circumstances whatsoever,

the fulfillment of any provision hereof, at the time performance of such provision shall be due, shall involve transcending the limit of validity prescribed by law which a court of competent jurisdiction may deem applicable hereto, then, ipsofacto, the obligation to be fulfilled shall be reduced to the limit of such validity and if from any circumstance the holder hereof shall ever receive as interest an amount which would exceed the highest lawful rate, such amount which would be excessive interest shall be applied to the reduction of the unpaid principal balance due hereunder and not to the payment of interest.

(d)           This Note and all provisions hereof shall be binding upon Borrower and all persons claiming under or through Borrower, and shall inure to the benefit of Lender, together with its successors and permitted assigns, including each owner and holder from time to time of this Note.

(e) Time is of the essence as to all dates set forth herein.

(f)           Borrower agrees that its liability shall not be in any manner affected by any indulgence, extension of time, renewal, waiver, or modification granted or consented to by Lender; and Borrower consents to any indulgences and all extensions of time, renewals, waivers, or modifications that may be granted by Lender with respect to the payment or other provisions of this Note, and to any substitution, exchange or release of the Collateral, or any part thereof, with or without substitution, and agrees to the addition or release of any makers, endorsers, guarantors, or sureties, all whether primarily or secondarily liable, without notice to Borrower and without affecting its liability hereunder.

(g)           Borrower hereby waives and renounces for itself, its successors and assigns, all rights to the benefits of any statute of limitations and any moratorium, reinstatement, marshalling, forbearance, valuation, stay, extension, redemption, appraisement, or exemption and homestead laws now provided, or which may hereafter be provided, by the laws of the United States and of any state thereof against the enforcement and collection of the obligations evidenced by this Note.

(h)           If this Note is placed in the hands of attorneys for collection or is collected through any legal proceedings, Borrower promises and agrees to pay, in addition to the principal, interest and other sums due and payable hereon, all reasonable out-of-pocket costs of collecting or attempting to collect this Note, including all reasonable attorneys’ fees and disbursements.

(i)            All parties now or hereafter liable with respect to this Note, whether Borrower, principal, surety, guarantor, endorsee or otherwise hereby severally waive presentment for payment, demand, notice of nonpayment or dishonor, protest and notice of protest. No failure to accelerate the indebtedness evidenced hereby, acceptance of a past due installment following the expiration of any cure period provided by this Note, any Loan Document or applicable law, or indulgences granted from time to time shall be construed (i) as a novation of this Note or as a reinstatement of the indebtedness evidenced hereby or as a waiver of such right of acceleration or of the right of Lender thereafter to insist upon strict compliance with the terms of this Note, or (ii) to prevent the exercise of such right of acceleration or any other right granted hereunder or by the laws of any State. Borrower hereby expressly waives the benefit of any statute or rule of law or equity now provided, or which may hereafter be provided, which would produce a result contrary to or in conflict with the foregoing.

(j)            THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF OKLAHOMA AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.

(k)           In the event of a conflict between the terms of this Note and the terms of the Loan Agreement, the applicable terms of the Loan Agreement shall be controlling.

IN WITNESS WHEREOF Borrower has executed and delivered this Note as of the day and year first set forth above.

BORROWER: THE BEARD COMPANY, an Oklahoma corporation By:      /s/ Herb Mee, Jr. Herb Mee, Jr., President

- 2 -

EX-14

THE BEARD COMPANY

Finance Department Code of Ethics

(As Amended 3/9/06)

As a public company it is of critical importance that our filings with the Securities and Exchange Commission be accurate and timely. Depending on their position with us, employees may be called upon to provide information to assure that our public reports are complete, fair and understandable. We expect all of our personnel to take this responsibility very seriously and to provide prompt and accurate answers to inquiries related to our public disclosure requirements.

The Finance Department bears a special responsibility for promoting integrity throughout the organization, with responsibilities to stakeholders both inside and outside of the Company. The Chief Executive Officer, the Chief Financial Officer, the Chief Accounting Officer and the Treasurer have a special role both to adhere to these principles themselves and also to ensure that a culture exists throughout the Company as a whole that ensures the fair and timely reporting of our financial results and condition.

Because of this special role, the Chief Executive Officer and all members of our Finance Department* are bound by the following Financial Officer Code of Ethics, and by accepting the Code of Business Conduct as set forth below, each agrees that he or she will:

• Act with honesty and integrity, avoiding actual or apparent conflicts of interest in personal and professional relationships.

• Provide information that is accurate, complete, objective, relevant, timely and understandable to ensure full, fair, accurate, timely, and understandable disclosure in reports and documents that we file with, or submit to, government agencies and in other public communications.

• Comply with rules and regulations of federal, state, provincial and local governments, and other appropriate private and public regulatory agencies.

• Act in good faith, responsibly, with due care, competence and diligence, without misrepresenting material facts or allowing one’s independent judgment to be subordinated.

___________

* In addition to the members of our Finance Department,, the Chief Executive Officer and Principal Accounting Officers of (i) Beard Technologies, Inc. and Beard Environmental Engineering, L.L.C. shall also be bound by this Code of Ethics.

• Respect the confidentiality of information acquired in the course of one’s work except when authorized or otherwise legally obligated to disclose. Confidential information acquired in the course of one’s work will not be used for personal advantage.

• Achieve responsible use of and control over all assets and resources employed or entrusted.

• Promptly report to the Chairman of the Audit Committee any conduct that the individual believes to be a violation of law or business ethics, or of any provision of this Code of Business Conduct, including any transaction or relationship that reasonably could be expected to give rise to such a conflict.

Violations of this Financial Officer Code of Ethics, including failures to report potential violations by others, will be viewed as a severe disciplinary matter that may result in personnel action, including termination of employment. If you believe that a violation of the Financial Officer Code of Ethics has occurred, please contact the Audit Committee of the Board of Directors at the following address:

• Ford C. Price, Chairman

Audit Committee

The Beard Company

6608 N. Western #627

Oklahoma City, OK 73116

It is against our policy to retaliate against any employee for good faith reporting of violations of this Code.

EX-21

Subsidiaries

of the Registrant (6)

The following is a list of the Company's consolidated subsidiaries as of December 31, 2006:

Subsidiary	State or Country of Organization	Percent of Voting Securities Owned
The Beard Company (1)	Oklahoma	Registrant
Advanced Internet Technologies, L.L.C. (2)	Oklahoma	71%
Beard Environmental Engineering, L.L.C. (3)	Oklahoma	100%
Beard Oil Company	Delaware	100%
Beard Sino-American Resources Co., Inc.	Oklahoma	100%
Beard Technologies, Inc. (4)	Oklahoma	100%
BEE/7HBF, LLC (5)	Oklahoma	50%
Beijing Beard Sino-American Bio-Tech Engineering Co., Ltd.	China	100%
starpay. com, l.l.c.	Oklahoma	71%
Xianghe BH Fertilizer Co., Ltd.	China	50%

(1)	The consolidated financial statements of the Company include accounts of Registrant and the subsidiaries controlled by the Registrant.
(2)	Owns 100% of starpay. com, l.l.c.
(3)	Owns 100% of Beijing Beard Sino-American Bio-Tech Engineering Co., Ltd. and Beard Sino-American Resources Co., Inc. and 50% of BEE/7HBF, LLC.
(4)	Owns 100% of Beard Pinnacle, LLC.
(5)	Owns 100% of Xianghe BH Fertilizer Co., Ltd.
(6)	Excludes those subsidiaries treated as equity investments, and those subsidiaries which, considered in the aggregate as a single subsidiary, would not constitute a significant subsidiary as of the end of the year covered by this report.

EX-23.1

[Logo] COLE+REED P.C.

CERTIFIED PUBLIC ACCOUNTANTS

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to incorporation by reference in the Registration Statement (no.33-87110, 33-98482, 333-06757 and 333-85936) on Form S-8 of The Beard Company our report dated April 17, 2007, relating to the balance sheets of The Beard Company and subsidiaries as of December 31, 2006 and 2005, and the related statements of operations, shareholders' equity (deficiency) and cash flows for the years ended December 31, 2006, 2005 and 2004, which report appears in the December 31, 2006, annual report on Form 10-K of The Beard Company.

/s/ COLE & REED P.C.

Oklahoma City, Oklahoma

April 17, 2007

EX-31.1

CERTIFICATIONS FOR FORM 10-K

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

1. I have reviewed this annual report on Form 10-K of The Beard Company referred to as the registrant;

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

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

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a- 15(f) and 15d-15(f)) for the registrant and have:

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

b. Reserved;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this annual report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: April 17, 2007	THE BEARD COMPANY
Signature: Title	/s/ William M. Beard William M. Beard Chairman of the Board and Chief Executive Officer

EX-31.2

CERTIFICATIONS FOR FORM 10-K

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

1. I have reviewed this annual report on Form 10-K of The Beard Company referred to as the registrant;

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

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

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a- 15(f) and 15d-15(f)) for the registrant and have:

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

b. Reserved;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this annual report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: April 17, 2007	THE BEARD COMPANY
Signature: Title	/s/ Herb Mee, Jr. Herb Mee, Jr. President and Chief Financial Officer

EX-32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with The Beard Company’s (the “Company”) annual report on Form 10-K for the period ended December 31, 2006, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, William M. Beard, Chairman of the Board and Chief Executive Officer of the Company, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition of the Company at December 31, 2006, and results of the Company’s operations for the year ended December 31, 2006.

Date: April 17, 2007 By: /s/ William M. Beard William M. Beard
Chairman of the Board and
   Chief Executive Officer

EX-32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with The Beard Company’s (the “Company”) annual report on Form 10-K for the period ended December 31, 2006, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Herb Mee, Jr., President and Chief Financial Officer of the Company, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition of the Company at December 31, 2006, and results of the Company’s operations for the year ended December 31, 2006.

Date: April 17, 2007 By: /s/ Herb Mee, Jr. Herb Mee, Jr.
President and Chief Financial Officer