Item 9A. Controls and Procedures
ITEM 9A. CONTROLS AND PROCEDURES.
Disclosure Controls and Procedures
As of June 30, 2021, under the supervision and with
the participation of the Company's President and Principal Financial Officer (the same person), management has evaluated the effectiveness
of the design and operations of the Company's disclosure controls and procedures. Based on that evaluation, the President and Principal
Financial Officer concluded that the Company's disclosure controls and procedures were not effective as of June 30, 2021 as a result of
the material weakness in internal control over financial reporting discussed below.
45
Changes in Internal Control over Financial Reporting
There were no changes in internal control over financial
reporting that occurred during the last fiscal quarter covered by this report that have materially affected, or are reasonably likely
to materially affect, the Company's internal control over financial reporting.
Management's Report on Internal Control over
Financial Reporting
Our management is responsible for establishing and
maintaining adequate internal control over financial reporting, as such term is defined in the Securities Exchange Act of 1934 Rule 13a-15(f).
Our Chief Executive Officer and Principal Financial Officer (the same person) conducted an evaluation of the effectiveness of our internal
control over financial reporting based on the framework in Internal Control - Integrated Framework, issued by the Committee of Sponsoring
Organizations of the Treadway Commission ("COSO Framework") and the related guidance provided in Internal Control Over Financial
Reporting – Guidance for Smaller Public Companies, also issued by the Committee of Sponsoring Organizations.
Based on this evaluation, management has concluded
that our internal control over financial reporting was not effective as of June 30, 2021. Our President and Principal Financial Officer
concluded we have a material weakness due to our control environment, and one condition caused by this is an inadequate of segregation
of duties as well as a lack of timely review and approval of related party transactions. Our size has prevented us from being able to
employ sufficient resources to enable us to have an adequate level of supervision and segregation of duties within our internal control
system. There is one person involved in the processing of the Company's accounting and banking transactions and a single person with overall
supervision and review of the cash disbursements and receipts and the overall accounting process. Therefore, while there are some compensating
controls in place, it is difficult to ensure effective segregation of accounting duties. While we strive to segregate duties as much as
practicable, there is an insufficient volume of transactions to justify additional full time staff. As a result of this material weakness,
we have implemented remediation procedures whereby in May 2006 we engaged an outside accounting and consulting firm with SEC and US GAAP
experience to assist us with the preparation of our financial statements, evaluation of complex accounting issues and the implementation
of systems to improve controls and review procedures over all financial statement and account balances. We believe that this outside consultant's
review improved our disclosure controls and procedures. If this review is effective throughout a period of time, we believe it will help
remediate the segregation of duties material weakness. However, we may not be able to fully remediate the material weakness unless we
hire more staff. We will continue to monitor and assess the costs and benefits of additional staffing.
This annual report does not include an attestation
report of the Company's independent registered public accounting firm regarding internal control over financial reporting. Management's
report was not subject to attestation by the Company's independent registered public accounting firm pursuant to rules of the SEC that
permit the Company to provide only management's report on internal control in this annual report.
Website: Hacking/Theft
On Saturday morning, July 17, 2021, our historical website domain –
biontech.com – and email services were compromised and disabled. Research indicated that an unknown party had ‘hijacked’
the domain in a theft attempt.
On September 10, 2021, the Company filed a federal
lawsuit ‘in rem’ to recover the <biontech.com> domain and the unknown ‘John Doe’ who hacked and attempted
to steal the website. The litigation has been filed in the United States District Court for the Eastern District of Virginia, Alexandria
Division under the heading ‘Bion Environmental Technologies, Inc., Plaintiff, vs John Doe and <biontech.com>, Defendants’
(Case No. 1:21-cv-01034), seeking recovery of the domain name and other relief as set forth therein.
No shareholder, sensitive or confidential information
was available to be breached which has limited damages from the hack/theft to date. However, the Company’s email operations have
been subject disruption and expenses have been incurred related to the matter including legal fees.
The Company has had to create ‘work-arounds’
as a result. While these issues are being resolved, Bion Environmental Technologies, Inc. has moved our website (and email) to a new domain:
bionenviro.com . Website access is now www.bionenviro.com . To send emails to Bion personnel, one uses the same name identifier
previously used, but in the address, substitute ‘bionenviro.com’ for ‘biontech.com’: For example, cscott@biontech.com
(no longer functional) will now be cscott@bionenviro.com and mas@biontech.com (no longer functional) will now be mas@bionenviro.com.
ITEM 9B. OTHER INFORMATION
None.
46
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
Our directors, executive officers and significant
employees/consultants, along with their respective ages and positions are as follows:
Name
Age
Position
Directors and Officers:
Mark A. Smith
71
Executive Chairman, President, General Counsel, Chief Financial Officer and Director
Edward T. Schafer
72
Vice Chairman and Director
Jon Northrop
78
Secretary and Director
Dominic Bassani
74
Chief Executive Officer
Mark A. Smith (71) currently serves
Bion Environmental Technologies, Inc. as Executive Chairman, President, General Counsel, Chief Financial Officer and a director and has
continually served in senior positions since late March 2003. Since that time, he has also served as sole director, President and General
Counsel of Bion's wholly-owned subsidiaries including Project Group and Services Group. Since mid-February 2003, Mr. Smith has served
as sole director and President and General Counsel of Bion's majority-owned subsidiary, Centerpoint Corporation. Mr. Smith also serves
as Manager of Bion PA1, LLC and Bion PA2, LLC. Previously, from May 21, 1999 through January 31, 2002, Mr. Smith served as a director
of Bion. From July 23, 1999, when he became President of Bion, until mid-2001 when he ceased to be Chairman, Mr. Smith served in senior
positions with Bion on a consulting basis. Additionally, Mr. Smith was the president of RSTS Corporation prior to its acquisition of Bion
Technologies, Inc. in 1992. Mr. Smith received a Juris Doctor Degree from the University of Colorado School of Law, Boulder, Colorado
(1980) and a BS from Amherst College, Amherst, Massachusetts (1971). Mr. Smith has engaged in the private practice of law in Colorado
since 1980. In addition, Mr. Smith has been active in running private family companies, Stonehenge Corporation (until 1994), LoTayLingKyur,
Inc. (1994-2002) and LoTayLingKyur, LLC (2007-present). Until returning to Bion during March 2003, Mr. Smith had been in retirement with
focus on charitable work and spiritual retreat. From July 2018 to March 2020 Mr. Smith served as a senior executive and director at Grow-Ray
Technologies, Inc., a private LED lighting company based in Boulder, Colorado, on a consulting basis.
Edward T. Schafer (74) Edward Schafer
previously served the Company's senior management team as Executive Vice Chairman and has been a member of the Company's Board of Directors
since January 1, 2011. Mr. Schafer has served as a consultant to Bion since July 2010. Mr. Schafer served as a director of Continental
Resources (NYSE-CLR) 2011-2016. He also chairs the Board of Directors of Dynamic Food Ingredients and the Theodore Roosevelt Medora Foundation.
In addition he has served on the Board of Governors of Amity Technology LLP since 2009, the Board of Directors of AGCO-Amity JV since
it was formed in 2011. Mr. Schafer served as a trustee of the Investors Real Estate Trust (NASDAQGS-IRET) from September 2009 to October
2011. He also served as a trustee of the IRET from September 2006 through December 2007, when he resigned from the IRET's Board to serve
as Secretary of the U.S. Department of Agriculture under President George W. Bush. Mr. Schafer, a private investor, is a two-term
former Governor of North Dakota. He served as Chief Executive Officer of Extend America, a telecommunications company, from 2001 to 2006,
and he has been a member of the Boards of RDO Equipment Co., a privately-owned agricultural and construction equipment company (August
2001 to July 2003) and the University of North Dakota Foundation (June 2005 to December 2007). Since 2019 Mr. Schafer has served on the
Board of Directors of Cellular Biomedicine Group (NASDAQ: CBMG) and is Chairman of its Audit Committee. Mr. Schafer serves as a board
member of the Center for Innovation at the University of North Dakota and teaches a leadership class at North Dakota State University.
Mr. Schafer is a past chair of the Republican Governors Association, the Midwestern Governors’ Association, the Interstate Oil and
Gas Compact, the Western Governors’ Association and served as the 29th United States Secretary of Agricultural from 2008 to 2009.
Mr. Schafer holds a Master’s degree in Business Administration from the University of Denver. Mr. Schafer brings the following experience,
qualifications, attributes and skills to the Company: general business management, budgeting and strategic planning experience from his
service as Chief Executive Officer of Extend America and extensive government, regulatory, strategic planning, budgeting administrative
and public affairs experience from his service as Governor of North Dakota and Secretary of the US Department of Agriculture.
47
Jon Northrop (78) has served as our
Secretary and a Director since March of 2003. Since September 2001 he has been self employed as a consultant with a practice focused on
business buyer advocacy. Mr. Northrop is one of our founders and served as our Chief Executive Officer and a Director from our inception
in September 1989 until August 2001. Before founding Bion Technologies, Inc., he served in a wide variety of managerial and executive
positions. He was the Executive Director of Davis, Graham & Stubbs, one of Denver's largest law firms, from 1981 to 1989. Prior to
his law firm experience, Mr. Northrop worked at Samsonite Corporation's Luggage Division in Denver, Colorado, for over 12 years. His experience
was in all aspects of manufacturing, systems design and implementation, and planning and finance, ending with three years as the Division's
Vice President, Finance. Mr. Northrop has a bachelor's degree in Physics from Amherst College, Amherst, Massachusetts (1965), an MBA in
Finance from the University of Chicago, Chicago, Illinois (1969), and spent several years conducting post graduate research in low energy
particle physics at Case Institute of Technology, Cleveland.
Dominic Bassani (74) has served as Chief
Executive Officer of Bion Environmental Technologies, Inc. since April 2011. Previously he was a full-time consultant to the Company and
served as the General Manager of Bion's Projects Group subsidiary from April 2003 through September 2006. From September 15, 2008 he has
served as Director-Special Projects and Strategic Planning of the Company and our Projects Group subsidiary. He has been an investor in
and consultant to Bion since December 1999. He is an independent investor and since 1990 has owned and operated Brightcap, a management
consulting company that provides management services to early stage technology companies. He was a founding investor in 1993 in Initial
Acquisition Corp. that subsequently merged in 1995 with Hollis Eden Corp. (HEPH), a biotech company specializing in immune response drugs.
From early 1998 until June 1999 he was a consultant to Internet Commerce Corp. (re-named EasyLink Services International Corporation)
(ESIC), a leader in business-to-business transactions using the Internet. He is presently an investor in numerous private and public companies
primarily in technology related businesses. From 1980 until 1986, Mr. Bassani focused primarily on providing management reorganization
services to manufacturing companies and in particular to generic pharmaceutical manufacturers and their financial sponsors.
Family Relationships
There are currently no family relationships among
our Directors and Executive Officers.
Compliance with Section 16(a) of the Exchange
Act
Section 16(a) of the Exchange Act requires our officers
and directors, and stockholders owning more than ten percent of a registered class of our equity securities, to file reports of ownership
and changes in ownership with the Securities and Exchange Commission. The Company is not aware of any persons who failed to timely file
reports under this section.
Involvement in Legal Proceedings
To the best of our knowledge, during the past five
years, none of the following occurred with respect to our directors or executive officers:
(1) any
bankruptcy petition filed by or against any business of which one of them was a general partner or executive officer either at the time
of the bankruptcy or within two years prior to that time;
(2) any
conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
(3) being
subject to any order, judgment or decree of any court of competent jurisdiction, permanently or temporarily inquiring, barring, suspending
or otherwise limiting involvement in any type of business, securities or banking activities; and
(4) being
found by a court of competent jurisdiction, the SEC or the CFTC to have violated Federal or state securities or commodities laws.
Audit Committee
The Company has no audit committee and is not now
required to have one, or an audit committee financial expert.
Code of Ethics
To date, the Company has not adopted a code of business
conduct and ethics applicable to its officers, directors or accounting officer.
48
ITEM 11. EXECUTIVE COMPENSATION.
The Company does not have a compensation committee due to its small size
and limited resources. The Board of Directors directly reviews and authorizes all compensation matters.
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation paid
to, or accrued for, each of our current executive officers during each of our last two fiscal years.
Summary Compensation
Name and Principal Position
Fiscal Year
Salary
(1)
Bonus
Stock Awards
Option Awards (2)
Non-Equity Incentive Plan
Compen- sation
Nonqualified
Deferred Compensation Earnings
Other Compen -sation
Total
Mark A. Smith (3)
2021
$
229,460
$
—
$
—
277,500
—
—
—
$
506,960
President and Chief
2020
$
216,000
$
—
$
—
115,000
—
—
—
$
331,000
Financial Officer Since March 25, 2003,
Director
Brightcap/Dominic Bassani (4)
2021
$
372,000
$
—
$
—
277,500
—
—
—
$
649,500
VP - Special Projects & Strategic
2020
$
372,000
$
—
$
—
90,000
—
—
—
$
462,000
Planning and Chief Executive Officer
Edward Schafer (5)
2021
$
—
$
—
$
—
55,500
—
—
—
$
55,500
Executive Vice Chairman and Director
2020
$
—
$
—
$
—
33,250
—
—
—
$
33,250
1. Includes compensation paid by Bion Environmental Technologies, Inc. and our wholly owned subsidiaries.
2. Reflects the dollar amount expensed by the Company during the applicable fiscal year for financial statement
reporting purposes pursuant to ASC 718.
3. Since October 2016, the Company approved a month to month contract extension with Smith which included
a monthly deferred salary of $18,000 and the right to convert up to $300,000 of deferred compensation, at his a monthly deferred salary
of $18,000 and the right to convert up to $300,000 of deferred compensation, at his sole election, at $0.75 per share until December 31,
2022. Smith also has the right to convert his deferred compensation in whole or in part, at this sole election, at any time in an amount
at "market" or into securities sold in the Company's most current/recent private offering. During fiscal year 2021 the Company
paid Smith $13,460 for payroll taxes on his deferred compensation conversions which was treated as salary.
4. On February 10, 2015, Mr. Bassani agreed to an extension to continue his employment through December 31,
2017 at an annual salary of $372,000 effective January 1, 2015. During October 2016, Bassani was granted the right to convert up to $125,000
of his deferred compensation, at his sole election, at $0.75 per share which was expanded on April 27, 2017 to the right to convert up
to $300,000). During February 2018, the Company agreed to the material terms of a binding two-year extension agreement, while a fully
executed agreement is still being negotiated. Bassani's annual salary will remain at $372,000 and the Company agreed to pay him $2,000
per month to be applied to life insurance premiums. The Company granted Bassani 2,000,000 fully vested options at $0.75 per share with
an expiry date of December 31, 2024 which contain a 90% execution bonus and the options may be extended for an additional 5 years at $0.01
per share per extension year. On August 1, 2018, his agreement was extended to provide services to the Company on a full-time basis through
December 31, 2022 plus two years after that on a part-time basis.
5. Mr. Schafer's compensation is determined periodically based on evaluation by the board of directors.
49
Employment Agreements:
Mark A. Smith (“Smith”) has held the positions
of Director, President and General Counsel of Company and its subsidiaries under various agreements and terms since March 2003 (details
regard earlier years and periods between 2003 and 2011 may be found in the Company’s prior Forms 10-K and other SEC filings). During
July 2011, the Company entered into an extension agreement pursuant to which Smith continued to hold his current positions in the Company
through a date no later than December 31, 2012. Commencing January 1, 2012, Smith’s monthly salary was $20,000, which has been accrued
and deferred. In addition, Smith has been issued 90,000 shares of the Company’s common stock in two tranches of 45,000 shares on
each of January 15, 2013 and 2014, respectively. As part of the extension agreement, Mr. Smith was also granted 200,000 options, which
vested immediately, to purchase common shares of the Company at a price of $3.00 per share and which options expire on December 31, 2019.
Effective July 15, 2012, the Company entered into an extension agreement pursuant to which Smith will continue to hold his current positions
in the Company through a date no later than June 30, 2014. Effective September 2012, Smith’s monthly salary became $21,000 (which
is currently being deferred). In addition, Smith was issued 150,000 shares of the Company’s common stock in two tranches of 75,000
shares on each of January 15, 2014 and 2015, which shares vested immediately. As part of the extension agreement, Smith was also granted
a bonus of $25,000 paid in warrants, which vested immediately, to purchase 250,000 shares of the Company’s common stock at a price
of $2.10 per share and which warrants expire on December 31, 2018 and a contingent stock bonus of 100,000 shares payable on the date on
which the Company’s stock price first reaches $10.00 per share (regardless of whether Smith is still providing services to the Company
on such date). Mr. Smith has voluntarily reduced his monthly deferred salary accrual to $14,000 due to the Company’s financial situation.
During September 2014, Smith agreed to continue his employment agreement through April 15, 2015 and also agreed to continue to defer his
temporarily reduced salary of $14,000 per month. On February 10, 2015, the Company executed an Extension Agreement with Smith pursuant
to which Smith extended his employment with the Company to December 31, 2015 (with the Company having an option to extend his employment
an additional six months). As part of the Extension Agreement, the balance of Smith’s existing convertible note payable of
$854,316 as of December 31, 2014, adjusted for conversions subsequent to that date, was replaced with a new convertible note with an initial
principal amount of $760,519 with terms that i) materially reduced the interest rate by 50% (from 8% to 4%), ii) increased the conversion
price by 11% (from $0.45 to $0.50), iii) set the conversion price at a fixed price so there can be no further reductions, iv) reduced
the number of warrants received on conversion by 75% (from 1 warrant per unit to 1/4 per unit) and v) extended the maturity date to December
31, 2017 (which maturity date was subsequently extended to July 1, 2019). Additionally, pursuant to the Extension Agreement, Smith:
i) continued to defer his cash compensation ($18,000 per month) until the Board of Directors re-instates cash payments to all employees
and consultants who are deferring their compensation, ii) cancelled 150,000 contingent stock bonuses previously granted to him by
the Company, iii) has been granted 150,000 new options which vested immediately and iv) outstanding options and warrants owned by Smith
(and his donees) have been extended and had the exercise prices reduced to $1.50 (if above that price). Due to expiration of his most
recent extension, Mr. Smith is currently serving the Company on a month-to –month basis.
Dominic Bassani (“Bassani”) has served
in senior management positions with the Company (as a full-time consultant) since 2001 (see prior Forms 10-K for earlier years and other
filings with the SEC). Since March 31, 2005, the Company has had various agreements with Brightcap, Bassani’s family consulting
company, through which the services of Bassani were provided through 2011. On September 30, 2009 the Company entered into an extension
agreement with Brightcap pursuant to which Bassani provided services to the Company through September 30, 2012 for $312,000 annually (currently
deferred). The Board appointed Bassani as the Company's CEO effective May 13, 2011. On July 15, 2011, Bassani, Brightcap and the Company
agreed to an extension/amendment of the existing agreement with Brightcap which provided that Bassani serve as CEO through June 30, 2013
and would continue to provide full-time services to the Company in other capacities through June 30, 2014 at a salary of $26,000 per month.
In addition Bassani was to be issued 300,000 shares of the Company’s common stock issuable in three tranches of 100,000 shares on
each of January 15, 2015, 2016 and 2017, respectively. Bassani was also granted 725,000 options, which vested immediately, to purchase
shares of the Company’s common stock at $3.00 per share which options expired on December 31, 2019. Effective July 15, 2012, Bassani,
Brightcap and the Company agreed to a further extension/amendment of the existing agreement with Brightcap which provided that Bassani
would continue to provide the services of CEO through June 30, 2014. Bassani continued to provide full-time services to the Company at
a cash salary of $26,000 per month (which has been deferred) and Bassani would be issued 300,000 shares of the Company’s common
stock issuable in two tranches of 150,000 shares on each of January 15, 2015 and 2016, respectively, which shares would be immediately
vested upon issuance. As part of the extension agreement, Bassani was also granted a bonus of $5,000 paid in warrants, which vested immediately,
to purchase 50,000 shares of the Company’s common stock at a price of $2.10 per share and which warrants expired on December 31,
2018. During September 2014, Bassani agreed to extend his employment agreement until April 15, 2015 and that previously issued and expensed
share grants of 100,000 and 150,000 shares that were to be issued on January 15, 2015, would be deferred until January 15, 2016. On
February 10, 2015, the Company executed an Extension Agreement with Bassani pursuant to which Bassani extended the term of his service
to the Company to December 31, 2017, (with the Company having an option to extend the term an additional six months.) As part of
the agreement, the Company’s existing loan payable, deferred compensation and convertible note payable to Bassani, were restructured
into two promissory notes as follows: a) The of sum of the cash loaned by Bassani to the Company of $279,000 together with $116,277 of
unreimbursed expenses through December 31, 2014 were placed into a new promissory note with initial principal of $395,277 which was due
and payable on December 31, 2015. In connection with these sums and the new promissory note, Bassani was issued warrants to purchase
592,916 shares of the Company’s common stock at a price of $1.00 until December 31, 2020; and b) the remaining balances of the Company’s
accrued obligations to Bassani ($1,464,545) were replaced with a new convertible promissory note with terms that compared with the largest
prior convertible note obligation to Bassani: i) materially reduced the interest rate by 50% (from 8% to 4%), ii) increased the
conversion price by 11% (from $0.45 to $0.50), iii) set the conversion price at a fixed price so there can be no further reductions, iv)
reduced the number of warrants received on conversion by 75% (from 1 warrant per unit to 1/4 per unit) and v) extended the maturity date
to December 31, 2017 (See Note 6 to Financial Statements) (which maturity date was subsequently extended to July 1, 2019. Additionally,
pursuant to the Extension Agreement, Bassani i) will continue to defer his cash compensation ($31,000 per month) until the Board
of Directors re-instates cash payments to all employees and consultants who are deferring their compensation, ii) cancelled 250,000 contingent
stock bonuses previously granted to him by the Company, iii) has been granted 450,000 new options which vested immediately and iv) outstanding
options and warrants owned by Bassani (and his donees) have been extended and had the exercise prices reduced to $1.50(if above that price).
On May 5, 2013, the Board of Directors approved agreements with Bassani and Smith, with effective date of May 15, 2013, in which Bassani
and Smith agreed to continue to defer their respective cash compensation through April 30, 2014 (unless the Board of Directors elected
to re-commence cash payment on an earlier date) and extended the due dates of their respective deferred cash compensation until January
15, 2015. The Company provided Bassani and Smith with convertible promissory notes which reflected all the terms of these agreements to
which future accruals were added as additional principal. These convertible promissory notes were altered as set forth in the paragraphs
below. As part of the agreements, Bassani and Smith also forgave any possible obligations that Bion may have owed each of them in relation
to unused vacation time for periods (over 10 years) prior to June 30, 2012. In consideration of these agreements, Bassani and Smith: a)
have been granted 50% ‘execution/exercise’ bonuses to be effective upon future exercise of outstanding (or subsequently acquired)
options and warrants owned by Bassani and Smith (and their respective donees) and in relation to contingent stock bonuses; b) their warrants
and options, if due to expire prior to December 31, 2018, were extended to that date (and later further extended); and c) other modifications
were made.
50
Effective January 1, 2011, the Company entered into
an employment agreement with Edward Schafer (“Schafer”) pursuant to which for a period of three years, Schafer provided senior
management services to the Company on an approximately 75% full time basis, initially as Executive Vice Chairman and as a director. Compensation
for Schafer’s services were initially set at an annual rate of $250,000, which was to consist of $150,000 in cash compensation and
$100,000 payable in the Company’s common stock. Commencing the month following the first calendar month-end after the Company has
completed an equity financing in excess of $3,000,000 (net of commissions and other offering expenses), Schafer’s compensation was
to be at an annual rate of $225,000, all of which would have been payable in cash. Effective July 15, 2012, the Company entered into a
deferral/employment/ compensation agreement with Schafer pursuant to which Schafer provided senior management services to the Company
on an approximately 75% full time basis, as Executive Vice Chairman and as a director. Basic compensation for Schafer’s services
remained unchanged and Schafer was issued 100,000 options to purchase shares of the Company’s common stock at $2.10 per share until
December 31, 2018, which options immediately vested and a contingent stock bonus of 25,000 shares payable on January 1 of the first year
after the Company’s stock price first reaches $10.00 per share (regardless of whether Schafer is still providing services to the
Company on such date). Since May 15, 2012 Schafer has deferred the cash portion of the compensation due him from the Company, in consideration
of which he has been granted a 50% ‘execution/exercise’ bonus to be effective upon future exercise of outstanding (or subsequently
acquired) options and warrants owned by Schafer (and his donees) and in relation to contingent stock bonuses. Effective January 1, 2014,
Mr. Schafer agreed to continue his services to the Company as Director and Executive Vice-Chairman without periodic compensation in light
of the Company’s financial situation. Mr. Schafer agreed not to receive any periodic compensation (cash or deferred) commencing
January 1, 2014 and agreed to be compensated with bonuses from time-to-time as determined to be appropriate by the Board of Directors.
No such bonuses have been declared to date. On February 10, 2015, the Company entered into an agreement with Schafer pursuant to which
Schafer continued to provide services to the Company through December 31, 2015. As part of the agreement, unreimbursed expenses
of $15,956 due to Schafer at December 31, 2014 were replaced with a new promissory note with initial principal of $15,956 which was due
and payable on December 31, 2015 and Schafer was issued warrants to purchase 7,978 shares of the Company’s common stock at a price
of $1.00 until December 31, 2020. Schaefer’s deferred compensation for 2014 (and prior years) in the amount of $394,246 (including
a sum of $120,000 for calendar year 2014) was placed in a convertible promissory note (See Note 6 to Financial Statements). Additionally,
pursuant to the agreement, i) the exercise period of outstanding options and warrants owned by Schafer have been extended, ii) certain
of Schafer’s outstanding options and warrants had the exercise prices reduced to $1.50 (if above that price), and iii) 25,000 contingent
stock bonuses previously granted to Schafer have been cancelled by the Company. Effective June 30, 2016, Schafer and the Company determined
that due to other obligations Schafer’s involvement with the Company during the 2016 fiscal year was less than anticipated and reduced
his fiscal year 2016 compensation (all of which had been deferred) by $160,000 and agreed that future compensation will be determined
periodically based on evaluation by the board of directors.
Bassani, Smith and Schafer each agreed, effective
June 30, 2017, to extend the maturity date of the outstanding convertible promissory notes set forth in the paragraphs above from December
31, 2017 to July 1, 2019 which maturity date was subsequently extended to July 1, 2021.
On February 6, 2020 Bassani, Smith and Schafer
(and a shareholder) each agreed to extend the maturity dates of their 2020 Convertible Obligations (“CVObligations”)(formerly
convertible promissory notes) to July 1, 2024. If any of the CVObligations are converted, the warrants in units received will be exercisable
through a date 3 years after conversion date.
Effective May 4, 2020 the Company agreed that all options and warrants
owned (or subsequently acquired by conversion of CvObligations) by its officers, directors and key employees and consultants (including
Jon Northrop (director), Bassani, Smith and Schafer) and their donees be amended to: a) lower the exercise price to $0.75 for any options/warrants
with higher exercise prices and b) extend the expiration dates to December 31, 2024.
Other Agreements
The Company has declared contingent deferred
stock bonuses to its key employees and consultants at various times throughout the years. The stock bonuses were contingent upon the Company’s
stock price exceeding a certain target price per share, and the grantees still being employed by or providing services to the Company
at the time the target prices are reached. During the year ended June 30, 2017, pursuant to agreement with the employees and a consultant
who had been granted the outstanding contingent stock bonuses, the Company cancelled all 117,500 outstanding contingent stock bonuses.
In consideration for the cancellations, the Company granted 109,500 fully vested options to these employees and a consultant to purchase
common stock of the Company at $1.00 per share until December 31, 2024 (including recent extensions).
51
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
The following table sets forth the number of shares
of common stock covered by outstanding stock option awards that are exercisable and unexercisable, and the number of shares of common
stock covered by unvested restricted stock awards for each of our named executive officers as of June 30, 2021.
Outstanding Equity Awards at Fiscal Year-End
Option
Awards
Stock
Awards
Name
Number
of
Securities
Underlying Unexercised
Options (#) Exercisable
Number
of
Securities
Underlying
Unexercised
Options (#)Unexercisable
Equity
Incentive Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options (#)
Option
Exercise
Price ($)
Option
Expiration
Date
Number
of
Shares or
Units of
Stock That
Have Not
Vested (#)
Market
Value of
Shares or
Units of
Stock That
Have Not
Vested
Equity
Incentive Plan
Awards:
Number of
Unearned Shares,
Units or Other
Rights That Have
Not Vested
Equity
Incentive Plan
Awards:
Market or
Payout Value of
Unearned Shares,
Units or Other
Rights That Have
Not Vested
Mark A. Smith (1)
100,000
—
—
0.60
2024
—
—
—
—
Mark A. Smith (1)
1,675,000
—
—
0.75
2024
—
—
—
—
Mark A. Smith (2)
200,000
—
—
0.75
2024
—
—
—
—
Mark A. Smith (1)
250,000
—
—
1.20
2026
—
—
—
—
Brightcap/ Dominic Bassani (1)
1,675,000
—
—
0.75
2024
—
—
—
—
Brightcap/ Dominic Bassani (2)
2,000,000
—
—
0.75
2024
—
—
—
—
Brightcap/ Dominic Bassani (1)
250,000
—
—
1.20
2026
—
—
—
—
Edward Schafer (3)
25,000
—
—
0.60
2024
—
—
—
—
Edward Schafer (3)
300,000
—
—
0.75
2024
—
—
—
—
Edward Schafer (1)
600,000
—
—
0.75
2024
—
—
—
—
Edward Schafer (2)
190,000
—
—
0.75
2024
—
—
—
—
Edward Schafer (1)
50,000
—
—
1.20
2026
—
—
—
—
(1) Options are subject to a 75% execution/exercise bonus upon
notice of intent to exercise.
(2) Options are subject to a 90% execution/exercise bonus upon
notice of intent to exercise.
(3) Options are subject to a 50% execution/exercise bonus upon
notice of intent to exercise.
Director Compensation
Members of the Board of Directors do not currently
receive any cash compensation for their services as Directors, but are entitled to be reimbursed for their reasonable expenses in attending
meetings of the Board. However, it is the Company's intention to begin to pay cash compensation to Board members at some future date.
52
DIRECTOR COMPENSATION
The following table sets forth certain information
regarding the compensation paid to directors during the fiscal year ended June 30, 2021:
Director Compensation
Name
Fees
Earned
or
Paid
in
Cash
($)
Stock
Awards
($)
Option
Awards
($) (1)
Non-equity
Incentive
Plan
Com-
pensation
($)
Nonqualified
Deferred
Compensation
Earnings ($)
All
Other
Compen-
sation
($)
Total
($)
Jon Northrop
—
—
27,750
—
—
—
27,750
(1) Reflects the dollar amount expensed by the Company during the applicable fiscal year for financial statement reporting purposes pursuant
to ASC 718.
ITEM 12. SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
As of August 1, 2021, the Registrant had 41,431,986 shares of
common stock issued and 40,727,677 shares of common stock outstanding. (the balance of 704,309 shares are owned by Centerpoint, the Company's
majority-owned subsidiary).
The following table sets forth certain information
regarding the beneficial ownership of our common stock as of August 1, 2020 by:
● each person that is known by us to beneficially own more than 5% of our common stock;
● each of our directors;
● each of our executive officers and significant employees; and
● all our executive officers, directors and significant employees as a group.
Under the rules of the Securities and Exchange Commission, beneficial ownership
includes voting or investment power with respect to securities and includes the shares issuable under stock options, warrants and convertible
securities that are exercisable/convertible within sixty (60) days of August1, 2021. Those shares issuable under stock options,
warrants and/or convertible securities are deemed outstanding for computing the percentage of each person holding options, warrants and/or
convertible securities but are not deemed outstanding for computing the percentage of any other person. The percentage of beneficial
ownership schedule is based upon 40,727,677 shares outstanding as of August 1, 2021. The address for those individuals for
which an address is not otherwise provided is c/o Bion Environmental Technologies, c/o PO Box 323, Old Bethpage, NY 11804. To our
knowledge, except as indicated in the footnotes to this table and pursuant to applicable community property laws, the persons named in
the table have sole voting power and investment power with respect to all shares of common stock listed as owned by them.
53
Name and Address
Number
Percent of Class Outstanding
Entitled To Vote
Centerpoint Corporation (1)
c/o PO Box 323
Old Bethpage, NY 11604
704,309
1.7
%
—
Dominic Bassani (2)
64 Village Hills Drive
Dix Hills, NY 11746
13,938,655
25.9
%
26.2
%
Mark A. Smith (3)
401 N. Riverside Drive, Unit 408
Pompano Beach, FL 33062
10,102,766
19.8
%
17.2
%
Christopher B. Parlow (4)
23 Longbow Drive
Commack, NY 11725
8,361,547
16.9
%
17.2
%
Danielle Lominy (5)
c/o Dominic Bassani
64 Village Hill Drive
Dix Hills, NY 11746
8,351,543
16.9
%
17.2
%
Anthony Orphanos (6)
c/o Blacksmith Advisors, LLC
320 Park Avenue 18 th floor
New York, NY 10022
2,992,282
7.1
%
7.2
%
Edward T. Schafer (7)
2,828,825
6.4
%
6.5
%
Jon Northrop (8)
563,135
1.3
%
1.4
%
All executive officers and directors as a group (4 persons)
27,433,391
41.2
%
41.6
___________________________
(1)
Centerpoint Corporation is currently majority owned by the Company. Under Colorado law, Centerpoint Corporation is not entitled
to vote these shares unless otherwise ordered by a court. These shares of common stock may be distributed to the shareholders of Centerpoint
Corporation at a future date pursuant to a dividend declared during July 2004. The shares distributed to Bion, if any, will be cancelled
immediately upon receipt
(2)
Includes 62,201 shares, 2,825,000 shares underlying options and 965,000 shares underlying warrants held directly by Mr. Bassani;
354,342 shares and 250,000 shares underlying warrants held by Mr. Bassani’s wife; and, 839,933 shares held in IRA accounts of Mr.
Bassani and his wife. Also included are the shares set forth below owned (directly and indirectly) by Mr. Bassani’s daughter, Danielle
Lominy (formerly Danielle Bassani) who resides within his residence and are included in Mr. Bassani’s beneficial ownership for purposes
of the calculation including: a) 570,000 shares directly b) 646,458 shares underlying warrants owned directly; and c) Danielle Lominy
is the 50% beneficiary of the Dominic Bassani 2019 Irrevocable Trust (“2019Trust”) which owns: i) 3,000,000 warrants and 1,000,000
options to purchase shares of the Company’s common stock and, as a result, Danielle Lominy is the beneficial owner of 1,500,000
shares underlying warrants and 500,000 shares underlying options and ii) $2,173,729.57 principal amount of the Company’s 2020 Convertible
Obligation (“CVObligation”) which is convertible into 4,347,459 shares and 2,899,756 warrants and, as a result, Danielle Lominy
is the beneficial owner of 2,173,730 shares underlying conversion of the CVObligation and 1,449,878 shares underlying the warrants issuable
on conversion of the CVObligation. The total also includes: a) 674,043 shares of common stock that could be issued on the conversion (at
the election of Bassani) by Mr. Bassani of convertible notes in the amount of $337,021.32, (@ $0.50 price) and b) 619,695 shares of common
stock that could be issued on the conversion (at the election of Bassani) by Mr. Bassani of convertible notes in the amount of $371,817
(@ $0.60 price) and c) 508,375 shares of common stock that could be issued on the conversion (at the election of Bassani) of deferred
compensation in the amount of $441,970.73. Mr. Bassani disclaims ownership of 1,511,477 shares underlying warrants held by the Danielle
Christine Bassani Trust, which is separately itemized herein. Mr. Bassani’s adult daughter Danielle Lominy (formerly Danielle Bassani),
who resides within his residence, is the beneficiary of the Danielle Christine Bassani Trust and Mr. Bassani is not one of the trustees
of the trust. Mr. Bassani further disclaims beneficial ownership of shares and warrants owned by various other family members (including
Christopher Parlow who is itemized separately), none of whom live with him or are his dependents, and such shares are not included in
this calculation.
54
(3) Includes 331,469 shares held jointly by Mark A. Smith with his wife, 62,535 shares held by Mark Smith
in an IRA; 2,225,000 shares underlying options held directly by Mr. Smith, 1,536,520 shares underlying warrants held directly by Mr. Smith;
53,756 shares held by his wife in her IRA, 12,681 shares of common stock held by LoTayLingKyur Foundation and 153,432 shares of common
stock and 100,001 underlying warrants held by LoTayLingKyur LLC which is controlled by Mr. Smith and his wife. Also includes 2,813,686
shares and 2,813,686 warrants underlying units that could be issued on the conversion (at the election of Mr. Smith) by Mr. Smith of his
2020 Convertible Obligations in the aggregate amount of $1,406,843. Mr. Smith has the option to convert this amount into units with each
unit consisting of 1 share of common stock and 1 warrant exercisable at $0.75 per share. The conversion price will be $0.50 per unit.
Does not include shares and warrants owned by various family members of which Mr. Smith disclaims beneficial ownership. Mr. Smith is also
the President of Centerpoint, although shares owned by Centerpoint are not entitled to a vote while held by Centerpoint.
(4)
Includes 2,005 shares held directly by Christopher Parlow, 65,000 shares held jointly with wife, 250,000 shares owned by the Christopher
Parlow Trust and 50,000 shares owned by Christopher Parlow’s minor daughters. Also includes 1,614,000 shares underlying warrants
held by the Christopher Parlow Trust, 147,154 shares underlying warrants held jointly with wife, 150,000 warrants held directly by Mr.
Parlow and 459,780 shares underlying warrants held by Mr. Parlow’s minor daughters. In addition, Christopher is the 50% beneficial
owner of the Dominic Bassani 2019 Irrevocable Trust (“2019 Trust”) which owns 3,000,000 warrants to purchase shares of the
Company’s common stock and 1,000,000 options and as a result, Christopher Parlow is the beneficial owner of 1,500,000 shares underlying
exercise of the warrants and 500,000 shares underlying exercise of the options. Additionally, the 2019 Trust owns $2,173,729.57 principal
amount of the Company’s 2020 Convertible Obligation (“CVObligation”) which is convertible @$0.50 into 4,347,459 shares
and 2,899,756 warrants. As a result, Christopher Parlow is the beneficial owner of 2,173,730 shares underlying conversion of the CVObligation
and 1,449,878 shares underlying the warrants issuable on conversion of the CVObligation.
(5)
Includes 170,000 shares held directly by Danielle Lominy (formerly Danielle Bassani), 1,511,477 shares underlying warrants held
by The Danielle Christine Bassani Trust, Anthony Orphanos and Donald Codignotto, trustees; 400,000 shares owned by the Danielle Bassani
Trust, 311,458 shares underlying warrants, 105,000 shares underlying warrants owned jointly with husband and 230,000 shares underlying
warrants owned by Danielle Lominy’s daughter. In addition, Danielle is the 50% beneficial owner of the Dominic Bassani 2019 Irrevocable
Trust (“2019 Trust”) which owns 3,000,000 warrants to purchase shares of the Company’s common stock and 1,000,000 options
and, as a result Danielle Lominy is the beneficial owner of 1,500,000 shares underlying exercise of the warrants and 500,000 shares underlying
exercise of the options. Additionally, the 2019 Trust owns $2,173,729.57 principal amount of the Company’s 2020 Convertible Obligation
(“CVObligation”) which is convertible @ $0.50 into 4,347,459 shares and 2,899,756 warrants. As a result, Danielle Lominy is
the beneficial owner of 2,173,730 shares underlying conversion of the CVObligation and 1,449,878 shares underlying the warrants issuable
on conversion of the CVObligation.
(6) Includes 570,063 shares held directly by Mr. Orphanos; 156,750 shares underlying warrants held directly
by Mr. Orphanos;120,263 shares held jointly with his wife; 1,425,374 shares held in IRA accounts; and 719,832 shares of common stock that
could be issued on conversion of $431,898.97 convertible notes (.60 conversion price). Not included are 400,000 shares and 1,511,477 shares
underlying warrants held by the Danielle Christine Bassani Trust, of which Mr. Orphanos is a co-trustee, and 2,921,777 common shares owned
by certain clients of Blacksmith Advisors, over which Mr. Orphanos exercises discretionary authority (which shares include: a) 839,933
shares held in IRA accounts for Mr. Bassani and his wife; b) 354,342 shares held by Mr. Bassani’s wife; c) 5,624 shares held by
Mr. Bassani personally; and d) 170,000 shares owned by Danielle Lominy (formerly Danielle Bassani). Mr. Orphanos disclaims beneficial
ownership of the shares listed in the preceding sentences because he has no pecuniary interest in the shares.
(7)
Includes 158,254 shares held directly by Mr. Schafer, options to purchase 1,165,000 shares and warrants to purchase 23,934 shares.
Also includes 965,264 shares and 482,632 warrants underlying units that could be issued on the conversion by Mr. Schafer of a deferred
compensation promissory note in the amount of $482,631.93. Mr. Schafer has the option to convert this amount into units with each unit
consisting of 1 share of common stock and ½ warrant exercisable at $0.75 per share until December 31, 2024. The conversion price
is $0.50 per unit. Also includes 33,741 shares of common stock that could be issued on the conversion (at the election of Mr. Schafer)
by Mr. Schafer of a convertible note in the amount of $20,244.45. The conversion price will be $0.60 per share.
(8)
Includes 120,635 shares held directly by Jon Northrop and options to purchase 442,500 shares held by Jon Northrop. Does not include
shares or options owned by the adult children of Jon Northrop nor his former wife.
55
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,
AND DIRECTOR INDEPENDENCE.
Other than the employment/consulting agreements, deferred
compensation arrangements and conversions of debt described above in Item 1 Business and Item 11 Executive Compensation, there are no
related party transactions except that:
No directors of the Company are considered to be independent
directors.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
Audit Fees
In January 2017 the Company engaged Eide Bailly LLP
as its independent registered public accounting firm. The aggregate fees billed for the fiscal years ended June 30, 2021 and June
30, 2020 by Eide Bailly LLP for professional services rendered for the audit of the Company's annual financial statements and reviews
of interim financial statements included in the Company's quarterly reports on Form 10-Q (and related matters) were $56,800 and $55,000,
respectively.
Audit Related Fees
There were no fees billed by Eide Bailly LLP for audit-related
fees in each of the last two fiscal years ended June 30, 2021 and June 30, 2020.
Tax Fees
The aggregate fees billed for tax services rendered
by Eide Bailly LLP for tax compliance and related services for the two fiscal years ended June 30, 2021 and June 30, 2020 were $3,600
and $12,300, respectively.
All Other Fees
None.
Audit Committee Pre-Approval Policy
Under provisions of the Sarbanes-Oxley Act of 2002,
the Company's principal accountant may not be engaged to provide non-audit services that are prohibited by law or regulation to be provided
by it, and the Board of Directors (which serves as the Company's audit committee) must pre-approve the engagement of the Company's principal
accountant to provide audit and permissible non-audit services. The Company's Board has not established any policies or procedures other
than those required by applicable laws and regulations.
56
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
Exhibit
Number Description and Location
3.1 Articles
of Incorporation. (1)
3.2 Bylaws.
(1)
10.1 Subscription
Agreement dated January 10, 2002 between Bion Environmental Technologies, Inc. and Centerpoint
Corporation regarding issuance of stock in exchange for cash and claims regarding Aprilia.
(1)
10.2 Agreement
dated March 15, 2002 and effective January 15, 2002 between Bion Environmental Technologies,
Inc. and Centerpoint Corporation regarding purchase of warrant and management agreement.
(1)
10.3 Agreement
dated February 12, 2003 between Bion Environmental Technologies, Inc. and Centerpoint Corporation
canceling provisions of the Subscription Agreement by and between Bion Environmental Technologies,
Inc. and Centerpoint Corporation. (1)
10.4 Promissory
Note and Security Agreement between Bion Environmental Technologies, Inc. and Bright Capital,
LLC. (1)
10.5 First
Amendment to Lease between Bion Environmental Technologies, Inc. and Pan Am Equities Corp.
(1)
10.6 Agreement
between Bion Environmental Technologies, Inc. and Bergen Cove. (1)
10.7 Agreement
between Bion Environmental Technologies, Inc. and David Mitchell dated April 7, 2003. (1)
10.8 Letter
Agreement with Bright Capital, Ltd. (1)
10.9 Agreement
with OAM, S.p.A. dated May 2003. (1)
10.10 Amended
Agreement with Centerpoint Corporation dated April 23, 2003. (1)
10.11 Form
of Series A Secured Convertible Notes issued in August 2003. (1)
10.12 Financing
Documents for Bion Dairy Corporation. (1)
10.13 Form
of Class SV/DB Warrant. (1)
10.14 Form
of Class SV/DM Warrant. (1)
10.15 Form
of Series A* Secured Convertible Notes issued in April 2004. (1)
10.16 Form
of Series B Secured Convertible Notes issued in Spring 2004. (1)
10.17 Form
of Series B* Secured Convertible Notes issued in June 2004. (1)
10.18 Form
of Series C Notes issued in September 2005. (1)
10.19 Form
of 2006 Series A Convertible Promissory Notes issued in September 2006. (1)
10.20 Form
of Non-Disclosure Agreement used by the Company. (1)
10.21 Promissory
Note and Conversion Agreement between Bion Environmental Technologies, Inc. and Mark A. Smith
related to deferred compensation. (1)
57
10.22 Promissory
Note and Conversion Agreement between Bion Environmental Technologies, Inc. and Bright Capital,
Ltd. related to deferred compensation. (1)
10.23 Employment
agreement with Mark A. Smith. (1)
10.24 Employment
agreement with Salvatore Zizza. (1)
10.25 Employment
agreement with Bright Capital, Ltd. (1)
10.26 Employment
agreement with Jeff Kapell. (1)
10.27 Employment
agreement with Jeremy Rowland. (1)
10.28 Office
lease at 641 Lexington Avenue, 17th Floor, New York. (1)
10.29 2006
Consolidated Incentive Plan. (1)
10.30 Memo
to Dominic Bassani & Bright Capital, Ltd. dated October 16, 2006 regarding Change in
Title/Status of DB/Amendment to Brightcap Agreement. (1)
10.31 Letter
Agreement between Bion Dairy Corporation and Fair Oaks Dairy Farms dated June 19, 2006. (2)
10.32 Waiver
and Release Agreement with Ardour Capital Investments, LLC. (2)
10.33 Promissory
Note and Conversion Agreement for Mark Smith, dated January 1, 2007. (2)
10.34 Promissory
Note and Conversion Agreement for Salvatore Zizza, dated January 1, 2007. (2)
10.35 Promissory
Note and Conversion Agreement for Bright Capital, Ltd., dated January 1, 2007. (2)
10.36 Extension
Agreement dated March 31, 2007 between the Company and Mark A Smith. (3)
10.37 Form
of Note dated March 31, 2007 in the amount of $151,645.89 in favor of Mark A. Smith. (3)
10.38 Form
of Note dated March 31, 2007 in the amount of $379,389.04 in favor of Salvatore Zizza. (3)
10.39 Form
of Note dated March 31, 2007 in the amount of $455.486.30 in favor of Bright Capital, Ltd.
(3)
10.40 Stipulation
and Agreement of Compromise and Release dated May 21, 2007 between Centerpoint Corporation,
Bion Environmental Technologies, Richard Anderson and Joseph Foglia, as Plaintiffs, and Comtech
Group, Inc., OAM S.p.A., Invested Ernst & Company and others as Defendants. (4)
10.41 Stipulation
and Agreement of Compromise, Settlement and Release dated May 15, 2007 between TCMP3 Partners,
LLP as Plaintiff and Bion Environmental Technologies, Inc. and Bion Dairy Corporation, among
others, as Defendants. (4)
10.42 Stipulation
and Agreement of Compromise, Settlement and Release as to Certain Defendants dated May 15,
2007 between TCMP3 Partners, LLP as Plaintiff and certain defendants other than Bion Environmental
Technologies, Inc. and Bion Dairy Corporation. (4)
10.43 Letter
of Intent dated August 18, 2007 between Bion Environmental Technologies, Inc. and Evergreen
Farm, Inc. (5)
10.44 Memorandum
of Understanding with Kreider Farms. (6)
10.45 Subscription
Agreement from Bright Capital, Ltd. (7)
10.46 Amendment
to 2006 Consolidated Incentive Plan. (7)
10.47 Agreement
between the Company and Mark A. Smith dated May 31, 2008. (7)
58
10.48 2007
Series AB Convertible Promissory Note. (8)
10.49 Promissory
Note between Bion Environmental Technologies, Inc. and Salvatore Zizza. (9)
10.50 Promissory
Note between Bion Environmental Technologies, Inc. and Dominic Bassani. (9)
10.51 Agreement
between Jeff Kapell and Bion dated November 1, 2008. (10)
10.52 Agreement
between David Mager and Bion dated November 1, 2008. (10)
10.53 Promissory
Note between Anthony Orphanos and Bion dated October 30, 2008, Guaranteed by Dominic Bassani.
(10)
10.54 Addendum
to Settlement Agreement and Release Stipulation from Bion, Bion Dairy and Mark Smith dated
October 31, 2008. (10)
10.55 Kreider
Farms Agreement (September 25, 2008): REDACTED. (11)
10.56 Agreement
between Salvatore Zizza and Bion effective December 31, 2008. (12)
10.57 Amendment
#3 to 2006 Consolidated Incentive Plan. (12)
10.58 Agreement
between Bright Capital, Ltd. and Dominic Bassani and Bion effective January 11, 2009. (13)
10.59 Agreement
between Mark A. Smith and Bion effective January 12, 2009. (13)
10.60 Orphanos
Extension Agreement dated January 13, 2009. (13)
10.61 Articles
of Amendment including Statement of Designation and Determination of Preferences of Series
B Convertible Preferred Stock. (14)
10.62 Lease
Agreement between Ronald Kreider and Kreider Farms and Bion PA 1 LLC dated June 26, 2009.
(15)
10.63 Capitalization
Agreement between Bion Companies and Bion PA 1 LLC dated June 30, 2009. (15)
10.64 Zizza
Notice re Master Sublease Option Exercise (November 20, 2009). (16)
10.65 Town
of Schroeppel resolution (December 10, 2009). (16)
10.66 Articles
of Amendment including Statement of Designation and Determination of Preferences of Series
C Convertible Preferred Stock. (17)
10.67 Extension
Agreement with Mark A. Smith. (18)
10.68 Agreement
with Edward Schafer. (18)
10.69 Accepted
Funding Offer (base loan agreement) (without exhibits) with PENNVEST for Kreider Farms Project
Loan -- effective November 3, 2010. (19)
10.70 Short
Form Agreement. (20)
10.71 Resume
of William O’Neill. (20)
10.72 Loan
& Security Agreement with Milestone Bank. (21)
10.73 O'Neill
Employment Agreement (dated December 22, 2010). (22)
10.74 Schafer
Employment Agreement (dated December 21, 2010). (22)
10.75 Biography
of Edward T. Schafer. (22)
59
10.76 James
Morris Employment Agreement. (23)
10.77 John
R. Grabowski Employment Agreement. (23)
10.78 Kreider
Farms Clarification Agreement. (23)
10.79 Resignation
of William O’Neill (effective May 13, 2011). (24)
10.80 PADEP
Certification of Kreider Poultry Credits. (25)
10.81 Bassani/Bright
Capital Extension Agreement (executed August 31, 2011) (26)
10.82 Smith
Extension Agreement (executed August 31, 2011) (26)
10.83 Bloom
Employment Agreement (executed September 30, 2011) (27)
10.84 Extension/Conversion
Agreement with Smith and Bassani (dated March 31, 2012) (28)
10.85 Memorialization
of extension of Maturity of Bassani convertible deferred compensation (dated July 31, 2012)
(29)
10.86 Kreider
Permit (dated August 1, 2012) (29)
10.87 Memorialization
of Smith Extension Agreement (dated August 14, 2012) (30)
10.88 Memorialization
of Bassani Extension Agreement (dated August 14, 2012) (30)
10.89 Memorialization
of Schafer Agreement (dated August 21, 2012) (30)
10.90 Board
Ratification dated May 5, 2013 (31)
10.91 Demand
Promissory Note dated May 13, 2013 (31)
10.92 Pennvest
Demand Letter (dated September 25, 2014) (32)
10.93 Extension
Agreement with Mark A. Smith (w/o exhibits) (February 10, 2015) (33)
10.94 Extension
Agreement with Dominic Bassani (w/o exhibits) (February 10, 2015) (33)
10.95 Agreement
with Edward Schafer (w/o exhibits) (February 10, 2015) (33)
10.96 Convertible
Promissory Note between the Company and Dominic Bassani dated September 8, 2015 (34)
10.97 Convertible
Promissory Note between the Company and Edward Schafer dated September 8, 2015 (34)
10.98 Convertible
Promissory Note between the Company and Anthony Orphanos dated September 8, 2015 (34)
10.99 Kreider
Poultry Joint Venture Agreement (May 5, 2016) (35)
10.100 Bassani
Warrant Purchase effective August 1, 2018 (36)
10.101 Smith
Warrant Purchase effecitve August 1, 2018 (36)
10.102 Amendment
#9 to 2006 Consolidated Incentive Plan, as amended (36)
10.103 Lease (executed September 23, 2021) (37)
21 Subsidiaries
of the Registrant. (1)
60
31.1 Certification
of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 - Filed
herewith electronically.
31.2 Certification
of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
- Filed herewith electronically.
32.1 Certification
of Chief Executive Officer Pursuant to Section 18 U.S.C. Section 1350 - Filed herewith electronically.
32.2 Certification
of Principal Financial Officer Pursuant to Section 18 U.S.C. Section 1350 - Filed herewith
electronically.
_______________
(1) Filed
with Form 10SB12G on November 14, 2006.
(2) Filed
with Form 10SB12G/A on February 1, 2007.
(3) Filed
with Form 8-K on April 3, 2007.
(4) Filed
with Form 8-K on August 13, 2007.
(5) Filed
with Form 8-K on August 22, 2007.
(6) Filed
with Form 8-K on February 27, 2008.
(7) Filed
with Form 8-K on June 3, 2008.
(8) Filed
with Form 8-K on June 19, 2008.
(9) Filed
with Form 8-K on September 30, 2008.
(10) Filed
with Form 8-K on November 13, 2008.
(11) Filed
with September 30, 2008 Form 10-Q on November 14, 2008.
(12) Filed
with Form 8-K on January 6, 2009.
(13) Filed
with Form 8-K on January 15, 2009.
(14) Filed
with March 31, 2009 Form 10-Q on May 14, 2009.
(15) Filed
with Form 8-K on July 2, 2009.
(16) Filed
with Form 8-K on December 15, 2009.
(17) Filed
with December 31, 2009 Form 10-Q on February 9, 2010.
(18) Filed
with Form 8-K on August 18, 2010.
(19) Filed
with Form 8-K on November 3, 2010.
(20) Filed
with Form 8-K on November 22, 2010.
(21) Filed
with Form 8-K on December 6, 2010.
(22) Filed
with Form 8-K on December 28, 2010.
(23) Filed
with Form 8-K on March 16, 2011.
(24) Filed
with Form 8-K on May 13, 2011.
(25) Filed
with Form 8-K on June 1, 2011.
(26) Filed
with Form 8-K on September 2, 2011.
(27) Filed
with Form 8-K on October 4, 2011.
(28) Filed
with Form 8-K on April 4, 2012.
(29) Filed
with Form 8-K on August 3, 2012
(30) Filed
with Form 8-K on August 21, 2012.
(31) Filed
with March 31, 2013 Form 10-Q on May 14, 2013.
(32) Filed
with June 30, 2014 10-K on September 26, 2014.
(33) Filed
with December 31, 2014 Form 10-Q on February 11, 2015
(34) Filed
with June 30, 2015 Form 10-K on September 22, 2016
(35) Filed
with March 31, 2016 Form 10-Q on May 9, 2016
(36) Filed
with June 30, 2019 Form 10-K on September 24, 2019
(37) Filed
with Form 8-K on September 29, 2021
(b) Financial Statement Schedules
Our consolidated financial statements being filed
as part of this Form 10-K are filed on Item 8 of this Form 10-K. All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are inapplicable,
and therefore have been omitted.
61
Report of Independent Registered Public Accounting Firm
F-2
Consolidated balance sheets
F-4
Consolidated statements of operations
F-5
Consolidated statements of changes in stockholders’ equity (deficit)
F-6
Consolidated statements of cash flows
F-7
Notes to consolidated financial statements
F-8 - F-26
F- 1
Report
of Independent Registered Public Accounting Firm
To the Board
of Directors and Stockholders
Bion Environmental Technologies, Inc.
Old Bethpage,
New York
Opinion
on the Financial Statements
We
have audited the accompanying consolidated balance sheets of Bion Environmental Technologies, Inc. (the “Company”) as of
June 30, 2021 and 2020, and the related consolidated statements of operations ,
changes in stockholders’ equity (deficit), and cash flows, for the years then ended, and the related notes (collectively referred
to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the
financial position of Bion Environmental Technologies, Inc. as of June 30, 2021 and 2020, and the results of its operations and its cash
flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Going
Concern
The
accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note
1 to the financial statements, the Company has not generated significant revenue and has suffered recurring losses from operations. These
factors raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters
are also discussed in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis
for Opinion
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 are a public accounting firm registered with the Public Company Accounting Oversight Board (United
States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We
conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company
is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits
we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion
on the effectiveness of the entity’s internal control over financial reporting. Accordingly, we express no such opinion.
F- 2
Our
audits included performing procedures to assess the risk of material misstatement of the financial statements, whether due to error or
fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding
the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits
provide a reasonable basis for our opinion.
Critical
Audit Matter
The
critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated
or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial
statements and (2) involved especially challenging, subjective or complex judgments. The communication of critical audit matters does
not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters
below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Equity
Transactions
As discussed
in Note 7 to the financial statements, the Company has entered into various equity-based compensation agreements. These agreements include
transactions, including the original issuance and subsequent modifications of warrants and stock options, that are required to be measured
and accounted for at estimated fair value. These transactions resulted in recording of stock-based compensation expense of $1,107,700,
modification of options of $8,775, warrant issuances of $2,500, and warrant modifications of $212,645 for the year ended June 30, 2021.
The
Company’s determination of the estimated fair values involves the identification of related financial instruments and a clear understanding
of the terms of the agreements. Auditing management’s estimates of fair value requires a high degree of auditor judgment and an
increased extent of effort, including the need to carefully examine to understand the true nature of the related agreements.
The
primary procedures we performed to address this critical audit matter included:
· We
gained an understanding of management's process and methodology to develop the estimates
· We
examined agreements and agreed terms utilized in calculations
· We
evaluated the reasonableness of the inputs and assumptions used by management in developing
the estimates
· We
recalculated the amounts and compared to management’s calculation
· W e
evaluated the adequacy of the disclosures related to these fair value measurements.
/s/
Eide Bailly LLP
We
have served as Bion Environmental Technologies, Inc. auditor since 2017.
Denver,
Colorado
September
29, 2021
F- 3
BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30,
June 30,
2021
2020
ASSETS
Current assets:
Cash
$ 4,216,321
$ 560,828
Prepaid expenses
124,049
7,965
Deposits
1,000
1,000
Total current assets
4,341,370
569,793
Property and equipment, net (Note 3)
541
1,368
Total assets
$ 4,341,911
$ 571,161
LIABILITIES AND EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued expenses
$ 570,050
$ 628,926
Series B Redeemable Convertible Preferred stock, $0.01 par value,
50,000 shares authorized; 200 shares issued and outstanding,
liquidation preference of $40,000 and $38,000, respectively (Note 7)
37,400
35,400
Paycheck Protection Program loan (Note 5)
—
14,933
Deferred compensation (Note 4)
479,208
778,217
Loan payable and accrued interest (Note 5)
9,868,495
9,585,883
Total current liabilities
10,955,153
11,043,359
Paycheck Protection Program loan (Note 5)
—
19,919
Convertible notes payable - affiliates (Note 6)
4,793,097
4595,841
Total liabilities
15,748,250
15,659,119
Deficit:
Bion's stockholders' equity (deficit):
Series A Preferred stock, $0.01 par value, 50,000 shares authorized,
no shares issued and outstanding
—
—
Series C Convertible Preferred stock, $0.01 par value,
60,000 shares authorized; no shares issued and outstanding
—
—
Common stock, no par value, 100,000,000 shares authorized, 41,315,986
and 31,409,005 shares issued, respectively; 40,611,677
and 30,704,696 shares outstanding, respectively
—
—
Additional paid-in capital
121,399,067
114,266,683
Subscription receivable - affiliates (Note 8)
(504,650 )
(504,650 )
Accumulated deficit
(132,339,873 )
(128,891,893 )
Total Bion's stockholders’ deficit
(11,445,456 )
(15,129,860 )
Noncontrolling interest
39,117
41,902
Total deficit
(11,406,339 )
(15,087,958 )
Total liabilities and deficit
$ 4,341,911
$ 571,161
See notes to consolidated financial statements
F- 4
BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED JUNE 30, 2021 AND 2020
2021
2020
Revenue
$
—
$
—
Operating expenses:
General and administrative (including stock-based
compensation (Note 7))
2,078,248
3,089,689
Depreciation
827
1,248
Research and development (including stock-based
compensation (Note 7))
748,545
1,123,836
Total operating expenses
2,827,620
4,214,773
Loss from operations
(2,827,620 )
(4,214,773 )
Other (income) expense:
Gain on extinguishment of liabilities
—
(122,423 )
Forgiveness of debt
(34,800 )
—
Other income
—
(6,000 )
Interest expense
657,945
466,891
Total other expense
623,145
338,468
Net loss
(3,450,765 )
(4,553,241 )
Net loss attributable to the noncontrolling interest
2,785
7,506
Net loss applicable to Bion's common stockholders
$ (3,447,980 )
$ (4,545,735 )
Net loss applicable to Bion's common stockholders
per basic and diluted common share
$ (0.10 )
$ (0.16 )
Weighted-average number of common shares outstanding:
Basic and diluted
33,068,832
29,031,106
See notes to consolidated financial statements
F- 5
BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS'
EQUITY (DEFICIT)
YEARS ENDED JUNE 30, 2021 AND 2020
Bion's Shareholders'
Series A Preferred Stock
Series C Preferred Stock
Common Stock
Additional paid-in
Subscription Recivables for
Accumulated
Noncontrolling
Total
Shares
Amount
Shares
Amount
Shares
Amount
capital
Shares
deficit
interest
equity/(deficit)
Balances, July 1, 2019
—
$
—
—
$
—
28,068,688
$
—
$
110,126,802
$
(504,650
)
$
(124,346,158
)
$
49,408
$
(14,674,598
)
Issuance of common stock for services
—
—
—
—
29,000
—
16,350
—
—
—
16,350
Vesting of options for services
—
—
—
—
—
—
429,200
—
—
—
429,200
Sale of units
—
—
—
—
3,168,001
—
1,584,000
—
—
—
1,584,000
Commissions on sale of units
—
—
—
—
—
—
(147,900
)
—
—
—
(147,900
)
Modification of options
—
—
—
—
—
—
626,058
—
—
—
626,058
Modification of warrants
—
—
—
—
—
—
1,558,015
—
—
—
1,558,015
Issuance of warrants
—
—
—
—
—
—
2,500
—
—
—
2,500
Conversion of debt and liabilities
—
—
—
—
143,316
—
71,658
—
—
—
71,658
Net loss
—
—
—
—
—
—
—
—
(4,545,735
)
(7,506
)
(4,553,241
)
Balances, June 30, 2020
—
—
—
—
31,409,005
—
114,266,683
(504,650
)
(128,891,893
)
41,902
(15,087,958
)
Sale of units
—
—
—
—
3,720,000
—
1,860,000
—
—
—
1,860,000
Commissions on sale of units and warrant exercises
—
—
—
—
129,364
—
(164,537
)
—
—
—
(164,537
)
Vesting of options for services
—
—
—
—
—
—
1,017,700
—
—
—
1,017,700
Modification of options
—
—
—
—
—
—
8,775
—
—
—
8,775
Modification of warrants
—
—
—
—
—
—
212,645
—
—
—
212,645
Issuance of warrants
—
—
—
—
—
—
2,500
—
—
—
2,500
Warrants exercised for common shares
—
—
—
—
4,065,988
—
3,049,490
—
—
—
3,049,490
Sale of common shares
—
—
—
—
300,000
—
300,000
—
—
—
300,000
Issuance of units for services
—
—
—
—
144,000
—
72,000
—
—
—
72,000
Conversion of debt and liabilities
—
—
—
—
1,547,629
—
773,811
—
—
—
773,811
Net loss
—
—
—
—
—
—
—
—
(3,447,980
)
(2,785
)
(3,450,765
)
Balances, June 30, 2021
—
$
—
—
$
—
41,315,986
$
—
$
121,399,067
$
(504,650
)
$
(132,339,873
)
$
39,117
$
(11,406,339
)
See notes to consolidated financial statements
F- 6
BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 2021 AND 2020
2021
2020
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss
$ (3,450,765 )
$ (4,553,241 )
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense
827
1,248
Forgiveness of debt
(34,800 )
—
Gain on extinguishment of liabilities
—
(122,423 )
Accrued interest on loans payable, deferred compensation and other
694,793
502,934
Stock-based compensation
1,126,481
2,589,134
(Increase) decrease in prepaid expenses
(116,084 )
40
(Decrease) increase in accounts payable and accrued expenses
(6,516 )
95,376
Increase in deferred compensation
396,604
520,525
Net cash used in operating activities
(1,389,460 )
(966,407 )
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of units
1,860,000
1,584,000
Commissions on sale of units
(161,000 )
(147,900 )
Proceeds from sale of common shares
300,000
—
Proceeds from exercise of warrants
3,049,490
—
Commissions on exercise of warrants
(3,537 )
—
Proceeds from Paycheck Protection Program loan
—
34,800
Proceeds from loans payable - affiliates
—
35,000
Repayment of loans payable - affiliates
—
(20,000 )
Net cash provided by financing activities
5,044,953
1,485,900
Net increase in cash
3,655,493
519,493
Cash at beginning of period
560,828
41,335
Cash at end of period
$ 4,216,321
$ 560,828
Supplemental disclosure of cash flow information:
Cash paid for interest
$ 28
$ —
Non-cash investing and financing transactions:
Conversion of debt and liabilities into common units
$ 773,811
$ 71,658
Conversion of deferred compensation into notes payable - related party
$ —
$ 636,081
Warrants issued for unit commissions
$ 16,100
$ 16,509
Shares issued for warrant exercise commissions
$ 97,023
$ —
Shares issued for accounts payable and accrued expenses
$ —
$ 6,750
See notes to consolidated financial statements
F- 7
BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2021 AND 2020
1. ORGANIZATION,
NATURE OF BUSINESS, GOING CONCERN AND MANAGEMENT’S PLANS:
Organization and nature of business:
Bion Environmental Technologies, Inc.'s ("Bion,"
"Company," "We," "Us," or "Our") was incorporated in 1987 in the State of Colorado. Our patented
and proprietary technology provides comprehensive environmental solutions to one of the greatest water air and water quality problems
in the U.S. today: pollution from large-scale livestock production facilities (also known as “Concentrated Animal Feeding Operations”
or “CAFOs"). Application of our technology and technology platform can simultaneously remediate environmental problems
and improve operational/resource efficiencies by recovering value high-value co-products from the CAFOs’ waste stream that have
traditionally been wasted or underutilized, including renewable energy, nutrients (including ammonia nitrogen) and water.
From 2016 to 2021 fiscal years, the Company has focused
a large portion of its activities on developing, testing and demonstrating the 3rd generation of its technology and technology platform
(“3G Tech”) with emphasis on increasing the efficiency of production of valuable co-products from the waste treatment process,
including ammonia nitrogen in the form of organic ammonium bicarbonate products. The Company’s initial ammonium bicarbonate liquid
product completed its Organic Materials Review Institute (“OMRI”) application and review process with approval during May
2020. An application for our first solid ammonium bicarbonate product – AD Nitrogen – has been filed and is in the review
process.
Bion is now focused primarily on: i) development/construction
of its initial commercial-scale 3G Tech installation, ii) developing applications and markets for its organic fertilizer products and
its sustainable (conventional and organic) animal protein products, and iii) initiation and development of joint ventures (“JVs”
as discussed below) (and related projects) based on the augmented capabilities of our 3G Tech, while (iv) continuing to pursue development
opportunities related to large retrofit projects (such as the Kreider poultry project JV described below) and ongoing R&D activities.
The $175 billion U.S. livestock industry is under
intense scrutiny for its environmental and public health impacts – its ‘environmental sustainability’-- at the same
time it is struggling with declining revenues and margins (derived in part from clinging to its historic practices and resulting limitations
and impacts) which threaten its ‘economic sustainability’. Its failure to adequately respond to consumer concerns ranging
including food safety, environmental impacts, and humane treatment of animals have provided impetus for plant-based alternatives such
as Beyond Meat and Impossible Burger (and many others) being marketed as “sustainable” alternatives for this growing consumer
segment of the market.
The Company believes that its 3G Tech, in addition
to providing superior environmental remediation, creates opportunities for large scale production of i) verifiably sustainable-branded
livestock products and ii) verifiably sustainable organic-branded livestock products that will command premium pricing (in part due to
ongoing monitoring and third-party verification of environmental performance which will provide meaningful assurances to both consumers
and regulatory agencies). Each of these two distinct market segments (which the Company intends to pursue in parallel) presents a large
production/marketing opportunity for Bion. Our 3G Tech will also produce (as co-products) biogas and valuable organic fertilizer products,
which can be utilized in the production of organic grains for use as feed for raising organic livestock (some of which may be utilized
in the Company’s JV projects) and/or marketed to the growing organic fertilizer market.
During late September 2021, Bion entered into a lease
for the development site of its initial commercial scale 3G Tech project in September 2021(“Initial Project”), which Initial
Project will be located on approximately four (4) acres of leased land near Fair Oaks, Indiana (see Note 14 below). Terms for an additional
related agreement regarding disposal of certain manure effluent have been agreed upon with the Curtis Creek Dairy unit of Fair Oaks Farms
(“FOF”) and the Company expects the agreement to be finalized by the end of the first full week of October 2021. Design and
pre-development work commenced during August 2021 and preparation for active surveying, site engineering and other work is now underway.
The Initial Project will be an environmentally sustainable beef cattle feeding facility, equipped with state-of-the-art housing and Bion’s
3G-Tech platform to provide waste treatment and resource recovery. Bion has designed the project to house and feed approximately 300 head
of beef cattle. The facility will include Bion’s 3G Tech platform including: i) covered barns with solar photovoltaic generation,
ii) anaerobic digestion for renewable energy recovery; iii) livestock waste treatment and resource recovery technology; iv) Bion’s
ammonium bicarbonate recovery and crystallization technology and iv) data collection software to document system efficiencies and environmental
benefits (with the Bion 3G Tech facilities capable of treating the waste from approximately 1,500 head). The facility will be large enough
to demonstrate engineering capabilities of Bion’s 3G Tech at commercial scale, but small enough that it can be constructed and commissioned
quickly, with operations targeted to commence sometime during the Spring of 2022. This project is not being developed at economic commercial
scale or with an expectation of profitability due to its limited scale. However, successful installation, commissioning, and operations
will demonstrate scalability, determine operating parameters at scale, and provide ongoing production and engineering capabilities, all
being critical steps that must be accomplished before developing large projects with JV partners.
F- 8
Specifically, the Initial Project is being developed
to provide and/or accomplish the following:
i.
Proof of 3G Tech platform scalability
- Document system efficiency and environmental
benefits and enable final engineering modifications to optimize each unit process within the Bion 3G technology platform.
- Environmental benefits will include (without
limitation) renewable energy production (natural gas recovery from AD and solar electric from integrated roof top photovoltaic generation);
nutrient recovery and conversion to stable organic fertilizer; pathogen destruction; water recovery and reuse; air emission reductions.
ii. Use Bion’s data collection system to support 3 rd party verified system efficiency requirement to qualify for USDA
Process-Verified-Program (PVP): certification of sustainable branded beef (and potentially pork) product metrics.
iii. Produce sufficient ammonium bicarbonate nitrogen fertilizer (“AD Nitrogen”) for commercial testing by potential joint
venture partners and/or purchasers and for university growth trials.
iv. Produce sustainable beef products for initial test marketing efforts.
Upon achieving optimized and steady-state operations
at the Initial Project during 2022, coupled with obtaining an OMRI listing for its AD Nitrogen product, Bion expects to be ready to move
forward with its plans for development of much larger facilities. The Company anticipates that discussions and negotiations regarding
potential JVs with strategic partners in the financial and livestock industries to develop large scale projects will commence during the
construction of the Initial Project. Additionally, the Company believes there will also be opportunities to proceed with selected ‘retrofit
projects’ of existing facilities (see ‘Retrofit 3G Tech Project: Kreider Poultry JV below as an example).
Bion intends to move forward on its one of its primary
commercial goals: establishing JV’s for large scale projects that will produce both sustainable and sustainable-organic corn-fed
beef. The products will be supported by a USDA PVP-certified sustainable brand that will, initially, highlight reductions in carbon and
nutrient footprint, as well as pathogen reductions associated with foodborne illness and antibiotic resistance, along with the organic
designation where appropriate. Bion has successfully navigated the USDA PVP application process previously, having received conditional
approval of its 2G Tech platform, pending resubmission and final site audits, and is confident it will be successful in qualifying its
3G Tech platform.
Bion believes that substantial unmet demand currently
exists– potentially very large – for ‘real’ meat/ dairy/ egg products that offer the verifiable/believable sustainability
consumers seek, but with the taste and texture they have come to expect from American beef and pork, dairy and poultry. Numerous studies
demonstrate the U.S. consumers’ preferences for sustainability. For example, 2019 NYU Stern’s Center for Sustainable Business
study found that ‘products marketed as sustainable grew 5.6 times faster than those that were not…’ and that ‘…in
more than 90 percent of consumer-packaged-goods (CPG) categories, sustainability-marketed products grew faster than their conventional
counterparts.’ Sales growth of plant-based alternatives, including both dairy and more recently ground meat (Beyond Meat, Impossible
Foods, etc.) have shown that a certain segment of consumers are choosing seemingly sustainable offering, and are also willing to pay a
premium for it. Numerous studies also support the consumers’ ‘willingness-to-pay’ (WTP) for sustainable choices, including
a recent meta-analysis of 80 worldwide studies with results that calculate the overall WTP premium for sustainability is 29.5 percent
on average .
As one of the largest contributors to some of the
greatest air and water quality problems in America, it is clear that livestock waste cleanup, at scale, represents one of the greatest
opportunities we have to reduce negative environmental impacts of the food supply chain on air and water quality. Bion’s 3G Tech
platform, along with its business model, enables the cleanup of the ‘dirtiest’ part of the food supply chain: animal protein
production and creates the opportunity to produce and market verifiably sustainable organic and conventional ‘real meat’ products
that can participate in the growth and premium pricing that appears to be readily available for the ‘right’ products.
Bion believes the at least a premium segment of the
US beef industry (and potentially other livestock industry groups) is at the doorstep of a transformative opportunity to address the growing
demand for sustainable food product offerings, while pushing back against today’s anti-meat messaging. At $66 billion/year (2021
retail value), the beef industry is a fragmented, commodity industry whose practices date back decades. In 1935 inflation-adjusted terms,
beef is 63% more expensive today, while pork and chicken, which are now primarily raised in covered barns, at CAFOs with highly integrated
supply chains, are 12% and 62% cheaper, respectively. In recent years, the beef industry has come under increasing fire from advocacy
groups, regulatory agencies, institutional investors, and ultimately, their own consumers, over concerns that include climate change,
water pollution, food safety, and the treatment of animals and workers.
F- 9
Advocacy groups targeting livestock and the beef industry
have recently been joined by competitors that produce animal protein alternatives in seeking to exploit the industry’s environmental
and economic weaknesses. Their global anti-meat messaging has had a substantial chilling effect on the relationships the beef industry
has with its institutional investors; retail distributors, such as fast-food restaurants; and mostly, its consumers. Led by the United
Nations Food and Agriculture Organization, a coordinated anti-meat messaging campaign has targeted consumers worldwide, primarily focused
on the industry’s impacts on climate change. Meat alternatives, especially plant-based protein producers like Beyond Meat and Impossible
Foods, are being heavily promoted by themselves and the media, and have enjoyed steady sales growth. A 2018 NielsenIQ Homescan survey
last year found that 39% of Americans are actively trying to eat more plant-based foods. Some of the recent growth in plant-based proteins
results from increasing lactose intolerance and other health concerns; however, most of that growth is attributed to consumers’
growing concerns for the environmental impacts of real meat and dairy. Several large US companies that have traditionally focused on livestock
production, including Cargill, ADM, Perdue Foods, and Tyson, have recently entered the plant protein space. In terms of changing customer
preferences, ‘saving the planet’ has proven to be a more compelling argument than the traditional animal activism/ welfare
pitch. To date, the only ‘industry response’ to this has been grass-fed beef, which is regarded as a generally more sustainable
offering than grain-fed. However grass-fed beef has had only limited acceptance in U.S. markets, because it is less flavorful and tougher
than the traditional corn-fed beef consumers have grown to enjoy.
It should be noted that these plant-based protein
producers are primarily expected to be able to serve the ground/ processed meat market, which represents only about 10 percent of the
overall animal protein market. Further, there has recently been pushback to these plant-based products, focusing on their highly processed
nature and unproven health benefits, scalability/ pricing, and their uncertain carbon footprint. There have also been several companies
recently enter the cellular and 3D-printed meat arena. While facing myriad challenges and further out on the development timeline, some
people believe cellular agriculture (aka cultured, clean, lab-grown, cultivated) meat may have the potential to service a much larger
percentage of the market than plant-based protein, including cuts like steaks, chops and roasts, but the likely cost remains very uncertain
at this point.
Each of these items supports Bion’s belief that
there is a potentially very large opportunity to supply premium sustainable beef products that satisfy these concerns. We believe that
the real meat/beef products that can be cost-effectively produced today using our 3G Tech platform, both sustainable and/or organic, can
provide an affordable product that satisfies the consumer’s desire for sustainability, but with the superior taste and texture those
consumers have grown to prefer.
Sustainable Beef
Bion’s goal is to be first to market with meaningfully
sustainable, and verified, beef products that can be produced at sufficient scale to service national market demand. The cattle produced
at a Bion facility will enjoy a substantially lower carbon footprint, dramatically reduced nutrient impacts to water, and an almost total
pathogen kill in the waste stream. A Bion sustainable beef facility will be comprised of covered barns with slotted floors, which allow
the waste to pass through and be collected quickly and frequently to reduce ammonia volatilization and loss, as well as odors. Covered
barns will reduce weather impacts on the livestock and have been demonstrated to promote improved general health and weight gain in the
cattle housed in them. The barns represent a very large roof surface area, which will be utilized in appropriate geographical locations
for the installation of photovoltaic solar generation systems to produce electricity for the facility, as well as export to the grid.
Waste treatment and resource recovery will be provided by Bion’s advanced 3G Tech platform, which Bion believes offers the most
comprehensive solution for livestock waste available today. In addition to direct environmental benefits every pound of nitrogen that
is captured, upcycled, and returned to the agricultural nitrogen cycle as high-quality fertilizer (vs lost to contaminate downstream waters),
is also a pound of nitrogen that will not have to be produced as synthetic urea or anhydrous ammonia, with their tremendous carbon cost.
System performance and environmental benefits will be monitored and verified through third parties, with USDA PVP certification of the
sustainable brand that Bion also believes will be the most comprehensive available in the market.
Sustainable Organic Beef
Bion believes it has a unique opportunity to produce,
at scale, affordable corn-fed organic beef that is certified as sustainable. In addition to the sustainable practices described above,
organic-sourced beef cows would be finished on organic corn, which would be produced using the ammonium bicarbonate fertilizer captured
by the 3G Tech platform. Bion believes its meat products will meet consumer demands with respect to sustainability and safety (organic)
and provide the tenderness and taste American consumers have come to expect from premium conventional American beef. Such products are
largely unavailable in the market today. We believe Bion’s unique ability to produce the fertilizer needed to grow a supply of low-cost
organic corn, and the resulting opportunity to produce organic beef, will dramatically differentiate us from potential competitors. This
organic opportunity is dependent on successfully establishing Bion’s fertilizer products as acceptable for use in organic grain
production.
Today, organic beef demand is limited and mostly supplied
with grass-fed cattle. While organic ground/ chopped meat has enjoyed success in U.S. markets, grass-fed steaks have seen limited acceptance,
mostly resulting from consumer issues with taste and texture. In other words, it’s tough. Regardless, such steaks sell for a significant
premium over conventional beef. A grain-finished organic beef product is largely unavailable in the marketplace today due to the higher
costs of producing organic corn and grain. The exception is offerings that are very expensive from small ‘boutique’ beef producers.
Like all plants, corn requires nitrogen to grow. Corn is especially sensitive to a late-season application of readily available nitrogen
– the key to maximizing yields. With non-organic field corn, this nitrogen is supplied by an application of a low-cost synthetic
fertilizer, such as urea or anhydrous ammonia. However, the cost for suitable nitrogen fertilizer that can be applied late-season in organic
corn production is so high that the late-season application becomes uneconomical, resulting in substantially lower yields – a widely
recognized phenomena known as the ‘yield gap’ in organic production. The yield gap results in higher costs for organic corn
that, in turn, make it uneconomical to feed that corn to livestock. As is the case for sustainable but not organic beef, Bion believes
there is a potentially large unmet demand for affordable beef products that are both sustainable AND organic, but with the taste and texture
consumers have come to expect from American beef. Bion’s ability to produce the low-cost nitrogen fertilizer that can close the
organic yield (and affordability) gap puts the company in a unique, if not exclusive at this time, position to participate in JV’s
that will benefit from this opportunity starting next year.
F- 10
The demonstrated willingness of consumers to purchase
sustainable products (along with numerous research and marketing studies confirming consumers are seeking, and are willing to pay a premium
for, sustainable products)---in combination with the threat to the livestock industry market (primarily beef and pork) posed by plant-based
alternatives (heightened by pandemic conditions)--- has succeeded in focusing the large scale livestock industry on how to meet the plant-based
market challenge by addressing the consumer sustainability issues. The consumer demand for sustainability appears to be a real and lasting
trend, but consumers remain skeptical of generalized claims of ‘sustainability’. To date, a large portion of the industry
responses have been at a superficial level or consist of ‘green washing’, a deceptive marketing practice where companies promote
non-substantive initiatives. Real sustainability for the livestock industry will require implementation of advanced waste treatment technology
at or near the livestock production facilities (“Concentrated Animal Feeding Operations” or “CAFOs”) – where
most of the negative environmental impacts take place.
Technology Deployment: Bion 3G Tech
Widespread deployment of waste treatment technology,
and the sustainability it enables, is largely dependent upon generating sufficient additional revenues to offset the capital and operating
costs associated with technology adoption. Bion’s 3G Tech has been developed to create opportunities for such augmented revenue
streams, while providing third party verification of sustainability claims. The 3G Tech platform has been designed to maximize the value
of co-products produced during the waste treatment/recovery processes, including pipeline-quality renewable natural gas (biogas) and commercial
fertilizer products approved for organic production. All processes will be verifiable by third parties (including regulatory authorities
and certifying boards) to comply with environmental regulations and trading programs and meet the requirements for: a) renewable energy
and carbon credits, b) organic certification of the fertilizer coproducts and c) USDA PVP certification of an ‘Environmentally Sustainable’
brand (see discussion below), and d) payment for verified ecosystem services. The Company’s first patent on its 3G Tech was issued
during 2018. In August 2020, the Company received a Notice of Allowance on its third patent which significantly expands the breadth and
depth of the Company’s 3G Tech coverage, and the Company has additional applications pending and/or planned.
Bion’s business model and technology platform
can create the opportunity for JVs (in various contractual forms) between the Company and large livestock/food/fertilizer industry participants,
based upon the supplemental cash flow generated by implementation of our 3G Tech business model, which will support the costs of technology
implementation (including related debt). We anticipate this will result in long term value for Bion. In the context of such JVs, we believe
that the verifiable sustainable branding opportunities (conventional and organic) may expand to represent the single largest enhanced
revenue contributor provided by Bion to the JVs (and Bion licensees). The Company believes that the largest portion of its business with
be conducted through such JVs, but a material portion may involve licensing and or other approaches.
In parallel with technology development, Bion has
worked (which work continues) to implement market-driven strategies designed to stimulate private-sector participation in the overall
U.S. nutrient and carbon reduction strategy. These market-driven strategies can generate “payment for ecosystem services”,
in which farmers or landowners are rewarded for managing their land and operations to provide environmental benefits, that will generate
additional revenues. Existing renewable energy credits for the production and use of biogas are an example of payment for ecosystem services.
Another such strategy is nutrient trading (or water quality trading), which will potentially create markets (in Pennsylvania and other
states) that will utilize taxpayer funding for the purchase of verified pollution reductions from agriculture (“nutrient credits”)
by the state (or others) through competitively-bid procurement programs. Such credits can then be used as a ‘qualified offset’
by an individual state (or municipality) to meet its federal clean water mandates at significantly lower cost to the taxpayer. Market-driven
strategies, including competitive procurement of verified credits, is supported by US EPA, the Chesapeake Bay Commission, national livestock
interests, and other key stakeholders. Legislation in PA to establish the first such state competitive procurement program passed the
Pennsylvania Senate by a bi-partisan majority during March 2019. However, the Covid-19 pandemic and related financial/budgetary crises
have slowed progress for this and other policy initiatives and, as a result, it is not currently possible to project the timeline for
completion (or meaningful progress) of this and other similar initiatives (see discussion below).
The livestock industry and its markets are already
changing; with a commercial-ready technology and business model, Bion believes it has a ‘first-mover advantage’ over others
that will seek to exploit the opportunities that will arise from the industry’s inevitable transformation. Bion anticipates moving
forward with the development process of its initial commercial installations utilizing its 3G Tech, during the current 2022 fiscal year.
We believe that Bion’s 3G Tech platform and business model can provide a pathway to true economic and environmental sustainability
with ‘win-win’ benefits for at least a premium sector of the livestock industry, the environment, and the consumer, an opportunity
which the Company intends to pursue.
F- 11
The Livestock Problem
The livestock industry is under tremendous pressure
from regulatory agencies, a wide range of advocacy groups, institutional investors and the industry’s own consumers, to adopt sustainable
practices. Environmental cleanup is inevitable and has already begun - and policies have already begun to change, as well. Bion’s
3G Tech was developed for implementation on large scale livestock production facilities, where scale drives both lower treatment costs
and efficient co-products production, as well as dramatic environmental improvements. We believe that scale, coupled with Bion’s
verifiable treatment technology platform, will create a transformational opportunity to integrate clean production practices at (or close
to) the point of production—the primary source of the industry’s environmental impacts. Bion intends to assist the forward-looking
segment of the livestock industry to bring animal protein production in line with 21st Century consumer demands for meaningful sustainability.
In the U.S. (according to the USDA’s 2017 agricultural
census) there are over 9M dairy cows, 90M beef cattle, 60M swine and more than 2 billion poultry which provides an indication of both
the scope of the problem addressed by Bion’s technology, as well as the size of Bion’s opportunity. Environmental impacts
from livestock production include surface and groundwater pollution, greenhouse gas emissions, ammonia, and other air pollution, excess
water use, and pathogens related to foodborne illnesses and antibiotic resistance. While the most visible and immediate problems are related
to nutrient runoff and its effects on water quality, the industry has recently been targeted by various stakeholder groups for its impacts
on climate change.
Estimates of total annual U.S. livestock manure waste
vary widely, but start around a billion tons, between 100 and 130 times greater than human waste. However, while human waste is generally
treated by septic or municipal wastewater plants, livestock waste – raw manure – is spread on our nation’s croplands
for its fertilizer value. Large portions of U.S. feed crop production (and most organic crop production) are fertilized, in part, in this
manner. Under current manure management practices, 80% or more of total nitrogen from manure, much of it in the form of ammonia, escapes
during storage, transportation, and during and after soil application, representing both substantial lost value and environmental costs.
More than half of the nitrogen impacts from livestock
waste come from airborne ammonia emissions, which are extremely volatile, reactive and mobile. Airborne ammonia nitrogen eventually settles
back to the ground through atmospheric deposition - it ‘rains’ everywhere. While some of this nitrogen is captured and used
by plants, most of it runs off and enters surface waters or percolates down to groundwater. It is now well-established that most of the
voluntary conservation practices, such as vegetated buffers that ‘filter’ runoff (often referred to as “BMPs”
or “Best Management Practices” that have traditionally been implemented to attempt to mitigate nutrient runoff), are considerably
less effective than was previously believed to be the case. This is especially true with regard to addressing the volatile and mobile
nitrogen from ammonia emissions, because BMPs are primarily focused on surface water runoff, directly from farm fields in current production,
versus the re-deposition that takes place everywhere or groundwater flow.
Runoff from livestock waste has been identified in
most of our major watersheds as a primary source of excess nutrients that fuel algae blooms in both fresh and saltwater. Over the last
several years, algae blooms have become increasingly toxic to both humans and animals, such as the Red Tides on the Florida and California
coasts, and the Lake Erie algae bloom that cut off the water supply to Toledo, Ohio, residents in 2014. When the nutrient runoff subsides,
it leaves the algae blooms with no more ‘food’ and the blooms die. The algae’s decomposition takes oxygen from the water,
leading to ‘dead zones’ in local ponds, lakes, and ultimately, the Great Lakes, as well as the Chesapeake Bay, Gulf of Mexico,
and other estuary waters. Both the toxic algae blooms and the low/no-oxygen dead zones devastate marine life, from shrimp and fish to
higher mammals, including dolphins and manatees. US EPA already considers excess nutrients “one of America’s most widespread,
costly and challenging environmental problems”. Nutrient runoff is expected to worsen dramatically in the coming decades due to
rising temperatures and increasing rainstorm intensity as a result of climate change.
Nitrate-contaminated groundwater is of growing concern
in agricultural regions nationwide, where it has been directly correlated with nutrient runoff from upstream agricultural operations using
raw manure as fertilizer. Pennsylvania, Wisconsin, California and Washington, and others, now have regions where groundwater nitrate levels
exceed EPA standards for safe drinking water. High levels of nitrate can cause blue baby syndrome (methemoglobinemia) in infants and affect
women who are or may become pregnant, and it has been linked to thyroid disease and colon cancer. EPA has set an enforceable standard
called a maximum contaminant level (MCL) in water for nitrates at 10 parts per million (ppm) (10 mg/L) and for nitrites at 1 ppm (1 mg/L).
Federal regulations require expensive pretreatment for community water sources that exceed the MCL; however, private drinking water
wells are not regulated, and it is the owners’ responsibility to test and treat their wells. Additionally, groundwater flows also
transport this volatile nitrogen downstream where, along its way, it intermixes with surface water, further exacerbating the runoff problem.
Like atmospheric deposition, the current conservation practices we rely on to reduce agricultural runoff are largely bypassed by this
subsurface flow.
Additionally, in arid climates, such as California,
airborne ammonia emissions from livestock manure contribute to air pollution as a precursor to PM2.5 formation, small inhalable particulate
matter that is a regulated air pollutant with significant public health risks. Whether airborne or dissolved in water, ammonia can only
be cost-effectively controlled and treated at the source-- before it has a chance to escape into the environment where it becomes extremely
expensive to ‘chase’, capture and treat.
F- 12
High phosphorus concentrations in soils fertilized
with raw manure are another growing problem. The ratio of nitrogen to phosphorus in livestock waste is fixed, and because manure application
rates are calculated based on nitrogen requirements, often phosphorus is overapplied as an unintended consequence. Phosphorus accumulation
in agricultural soils reduces its productivity, increases the risk of phosphorus runoff, and represents a waste of a finite resource.
Decoupling the nitrogen from the phosphorus would allow them to be precision-applied, independently of each other, when and where needed.
The livestock industry has recently come under heavy
fire for its impacts on climate change, which has become a rallying cry for the anti-meat campaign discussed above. Estimates of the magnitude
of those impacts vary widely, but the general consensus is that globally, livestock account for 14.5 percent of greenhouse emissions.
In the U.S. however, that number drops to 4.2 percent, due to the increased efficiencies of American beef production. The greatest impacts
come from direct emissions of methane from enteric fermentation (belches), methane and nitrous oxide emissions from the manure, with arguably
the largest being the massive carbon footprint of the synthetic nitrogen fertilizers used to grow the grains to feed the livestock.
For decades the livestock industry has overlooked
and/or socialized its environmental problems and costs. Today, the impacts of livestock production on public health and the environment
can no longer be ignored and are coming under increasing scrutiny from environmental groups and health organizations, regulatory agencies
and the courts, the media, consumers, and activist institutional investors. The result has been a significant and alarming loss of market
share to plant-based protein and other alternative products. Bion’s 3G Tech platform was designed to resolve these environmental
issues and bring the industry in line with twenty-first century consumer expectations.
Going concern and management’s plans:
The consolidated financial statements have been prepared
assuming the Company will continue as a going concern. The Company has not generated significant revenues and has incurred net losses
(including significant non-cash expenses) of approximately $3,451,000 and $4,553,000 during the years ended June 30, 2021 and 2020, respectively.
At June 30, 2021, the Company has a working capital deficit and a stockholders’ deficit of approximately $6,614,000 and $11,445,000,
respectively. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying
consolidated financial statements do not include any adjustments relating to the recoverability or classification of assets or the amounts
and classification of liabilities that may result should the Company be unable to continue as a going concern. The following paragraphs
describe management’s plans with regard to these conditions.
The Company continues to explore sources of additional
financing (including potential agreements with strategic partners – both financial and ag-industry) to satisfy its current and future
operating and capital expenditure requirements as it is not currently generating any significant revenues.
During the years ended June 30, 2021 and 2020, the
Company received gross proceeds of approximately $5,209,000 and $1,584,000, respectively, from the sale of its debt and equity securities.
During fiscal years 2021 and 2020, the Company has
faced progressively less difficulty in raising equity funding (but substantial equity dilution has gone along with the larger amounts
of equity financing during the periods). However, the Company anticipates substantial increases in demands for capital and operating expenditures
as it moves toward commercial implementation of its 3G Tech and development of JVs and, therefore, is likely to continue to face, significant
cash flow management challenges due to limited capital resources and working capital constraints which have only recently begun to be
alleviated. To partially mitigate these working capital constraints, the Company’s core senior management and several key employees
and consultants have been deferring (and continue to defer) all or part of their cash compensation and/or are accepting compensation in
the form of securities of the Company (Notes 4 and 6) and members of the Company’s senior management have made loans to the Company
from time to time. During the year ended June 30, 2018, senior management and certain core employees and consultants agreed to a one-time
extinguishment of liabilities owed by the Company which in aggregate totaled $2,404,000. Additionally, the Company made reductions in
its personnel during the years ended June 30, 2014 and 2015 and again during the year ended June 30, 2018. The constraint on available
resources has had, and continues to have, negative effects on the pace and scope of the Company’s efforts to develop its business.
The Company has had to delay payment of trade obligations and has had to economize in many ways that have potentially negative consequences.
If the Company is able to continue its recent increased success in its efforts to raise needed funds during the remainder of the current
fiscal year (and subsequent periods), of which there is no assurance, management will not need to consider deeper cuts (including additional
personnel cuts) and curtailment of ongoing activities including research and development activities.
The Company will need to obtain additional capital
to fund its operations and technology development, to satisfy existing creditors, to develop Projects (including JV Projects, Integrated
Projects and the Kreider 2 facility) and CAFO Retrofit waste remediation systems. The Company anticipates that it will seek to raise from
$5,000,000 to $50,000,000 or more debt and/or equity through joint ventures, strategic partnerships and/or sale of its equity securities
(common, preferred and/or hybrid) and/or debt (including convertible) securities, and/or through use of ‘rights’ and/or warrants
(new and/or existing) during the next twelve months. However, as discussed above, there is no assurance, especially in light of the difficulties
the Company has experienced in many recent years and the extremely unsettled capital markets that presently exist for small companies
like us), that the Company will be able to obtain the funds that it needs to stay in business, complete its technology development or
to successfully develop its business and Projects.
There is no realistic likelihood that funds required
during the next twelve months (or in the periods immediately thereafter) for the Company’s basic operations and/or proposed JVs
and/or Projects will be generated from operations. Therefore, the Company will need to raise sufficient funds from external sources such
as debt or equity financings or other potential sources. The lack of sufficient additional capital resulting from the inability to generate
cash flow from operations and/or to raise capital from external sources would force the Company to substantially curtail or cease operations
and would, therefore, have a material adverse effect on its business. Further, there can be no assurance that any such required funds,
if available, will be available on attractive terms or that they will not have a significantly dilutive effect on the Company’s
existing shareholders. All of these factors have been exacerbated by the extremely limited and unsettled credit and capital markets presently
existing for small companies like Bion.
F- 13
Covid-19 pandemic related matters:
The Company faces risks and uncertainties and factors
beyond our control that are magnified during the current Covid-19 pandemic and the unique economic, financial, governmental and health-related
conditions in which the Company, the country and the entire world now reside. To date the Company has experienced direct impacts in various
areas including but without limitation: i) government ordered shutdowns which have slowed the Company’s research and development
projects and other initiatives, ii) shifted focus of state and federal governments which is likely to negatively impact the Company’s
legislative initiatives in Pennsylvania and Washington D. C., iii) strains and uncertainties in both the equity and debt markets which
have made discussion and planning of funding of the Company and its initiatives and projects with investment bankers, banks and potential
strategic partners more tenuous, iv) strains and uncertainties in the agricultural sector and markets have made discussion and planning
more difficult as future industry conditions are now more difficult to assess and predict, v) constraints due to problems experienced
in the global industrial supply chain which have delayed certain research and development testing and may delay construction of the initial
3G Tech installation if equipment remains difficult to acquire in a timely manner, vi) due to the age and health of our core management
team, all of whom are age 70 or older and have had one or more existing health issues, the Covid-19 pandemic places the Company at greater
risk than was previously the case (to a higher degree than would be the case if the Company had a larger, deeper and/or younger core management
team), and vii) there almost certainly will be other unanticipated consequences for the Company as a result of the current pandemic emergency
and its aftermath.
2. SIGNIFICANT
ACCOUNTING POLICIES
Principles of consolidation:
The consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiaries, Bion Integrated Projects Group, Inc. (“Projects Group”), Bion Technologies,
Inc., BionSoil, Inc., Bion Services, PA1, and PA2; and its 58.9% owned subsidiary, Centerpoint Corporation (“Centerpoint”).
All significant intercompany accounts and transactions have been eliminated in consolidation.
Cash and cash equivalents:
The Company considers all highly liquid investments purchased with an original
maturity of three months or less to be cash and cash equivalents.
Property and equipment:
Property and equipment are stated at cost and are
depreciated, when placed into service, using the straight-line method over the estimated useful lives of the related assets, generally
three to twenty years. The Company capitalizes all direct costs and all indirect incrementally identifiable costs related to the design
and construction of its Integrated Projects. The Company reviews its property and equipment for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss would be recognized based on
the amount by which the carrying value of the assets or asset group exceeds its estimated fair value, and is recognized as a loss from
operations.
Patents:
The Company has elected to expense all costs and
filing fees related to obtaining patents (resulting in no related asset being recognized in the Company’s consolidated balance sheets)
because the Company believes such costs and fees are immaterial (in the context of the Company’s total costs/expenses) and have
no direct relationship to the value of the Company’s patents.
Stock-based compensation:
The Company follows the provisions of Accounting Standards
Codification (“ASC”) 718, which generally requires that share-based compensation transactions be accounted and recognized
in the statement of operations based upon their grant date fair values.
F- 14
Derivative Financial Instruments:
Pursuant to ASC Topic 815 “Derivatives and Hedging”
(“Topic 815”), the Company reviews all financial instruments for the existence of features which may require fair value accounting
and a related mark-to-market adjustment at each reporting period end. Once determined, the Company assesses these instruments as derivative
liabilities. The fair value of these instruments is adjusted to reflect the fair value at each reporting period end, with any increase
or decrease in the fair value being recorded in results of operations as an adjustment to fair value of derivatives.
Warrants:
The Company has issued warrants to purchase common
shares of the Company. Warrants are valued using a fair value based method, whereby the fair value of the warrant is determined at the
warrant issue date using a market-based option valuation model based on factors including an evaluation of the Company’s value as
of the date of the issuance, consideration of the Company’s limited liquid resources and business prospects, the market price of
the Company’s stock in its mostly inactive public market and the historical valuations and purchases of the Company’s warrants.
When warrants are issued in combination with debt or equity securities, the warrants are valued and accounted for based on the relative
fair value of the warrants in relation to the total value assigned to the debt or equity securities and warrants combined.
Concentrations of credit risk:
The Company's financial instruments that are exposed
to concentrations of credit risk consist of cash. The Company's cash is in demand deposit accounts placed with federally insured financial
institutions and selected brokerage accounts. Such deposit accounts at times may exceed federally insured limits. The Company has not
experienced any losses on such accounts.
Noncontrolling interests:
In accordance with ASC 810,
“Consolidation”, the Company separately classifies noncontrolling interests within the equity section of the consolidated
balance sheets and separately reports the amounts attributable to controlling and noncontrolling interests in the consolidated statements
of operations. In addition, the noncontrolling interest continues to be attributed its share of losses even if that attribution results
in a deficit noncontrolling interest balance.
Fair value measurements:
Fair value is defined as the price that would be received
to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the
principal or most advantageous market. The Company uses a fair value hierarchy that has three levels of inputs, both observable and unobservable,
with use of the lowest possible level of input to determine fair value.
Level 1 – quoted prices (unadjusted) in active
markets for identical assets or liabilities;
Level 2 – observable inputs other than Level
1, quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets and liabilities in
markets that are not active, and model-derived prices whose inputs are observable or whose significant value drivers are observable; and
Level 3 – assets and liabilities whose significant
value drivers are unobservable.
Observable inputs are based on market data obtained
from independent sources, while unobservable inputs are based on the Company’s market assumptions. Unobservable inputs require significant
management judgment or estimation. In some cases, the inputs used to measure an asset or liability may fall into different levels of the
fair value hierarchy. In those instances, the fair value measurement is required to be classified using the lowest level of input that
is significant to the fair value measurement. Such determination requires significant management judgment.
The fair value of cash and accounts payable approximates
their carrying amounts due to their short-term maturities. The fair value of the loan payable is indeterminable at this time due to the
nature of the arrangement with a state agency and the fact that it is in default. The fair value of the redeemable preferred stock approximates
its carrying value due to the dividends accrued on the preferred stock which are reflected as part of the redemption value. The fair value
of the deferred compensation and convertible notes payable - affiliates are not practicable to estimate due to the related party nature
of the underlying transactions.
Revenue Recognition:
The Company currently does not generate revenue and
if and when the Company begins to generate revenue the Company will comply with the provisions of ASC 606 “Revenue from Contracts
with Customers”.
F- 15
Income taxes:
The Company recognizes deferred
tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts
of existing assets and liabilities and their tax bases, as well as net operating losses.
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 effect on deferred tax assets or liabilities of a change in tax rates is recognized in the period in which
the tax change occurs. A valuation allowance is provided to reduce the deferred tax assets by 100%, since the Company believes that at
this time it is more likely than not that the deferred tax asset will not be realized.
The Company is no longer subject to U.S. federal
and state tax examinations for fiscal years before 2009. Management does not believe there will be any material changes in the Company’s
unrecognized tax positions over the next 12 months.
The Company's policy is to recognize interest
and penalties accrued on any unrecognized tax benefits as a component of income tax expense. As of June 30, 2021, there were no penalties
or accrued interest amounts associated with any unrecognized tax benefits, nor was any interest expense recognized during the years ended
June 30, 2021 and 2020.
Loss per share:
Basic loss per share amounts are calculated using
the weighted average number of shares of common stock outstanding during the period. Diluted loss per share assumes the conversion, exercise
or issuance of all potential common stock instruments, such as options or warrants, unless the effect is to reduce the loss per share
or increase the earnings per share. During the years ended June 30, 2021 and 2020, the basic and diluted loss per share was the same,
as the impact of potential dilutive common shares was anti-dilutive.
The following table represents the warrants, options
and convertible securities excluded from the calculation of basic loss per share:
June 30,
2021
June 30,
2020
Warrants
21,931,903
20,378,513
Options
10,471,600
9,511,600
Convertible debt
10,183,558
10,285,241
Convertible preferred stock
20,000
19,000
The following is a reconciliation of the denominators
of the basic and diluted loss per share computations for the years ended June 30, 2021 and 2020:
Year
ended
June 30,
2021
Year
ended
June 30,
2020
Shares
issued – beginning of period
31,409,005
28,068,688
Shares
held by subsidiaries (Note 7)
(704,309 )
(704,309 )
Shares outstanding
– beginning of period
30,704,696
27,364,379
Weighted
average shares issued
during the period
2,364,136
1,666,727
Diluted
weighted average shares –
end of period
33,068,832
29,031,10 6
Use of estimates:
In preparing the Company’s consolidated financial
statements in conformity with accounting principles generally accepted in the United States of America, management is required to make
estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure 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.
Recent Accounting Pronouncements:
The Company continually assesses any new accounting
pronouncements to determine their applicability. When it is determined that a new accounting pronouncement affects the Company’s
financial reporting, the Company undertakes a study to determine the consequences of the change to its financial statements and assures
that there are proper controls in place to ascertain that the Company’s financial statements properly reflect the change.
In June 2018, the FASB issued ASU No. 2018-07 “Compensation
– Stock Compensation – Improvements to Nonemployee Share-Based Payment Accounting” to simplify the accounting for share
based payments granted to nonemployees and was adopted by the Company effective July 1, 2019. Under this guidance, payments to nonemployees
are aligned with the requirements for share based payments granted to employees. The adoption of this guidance did not have a material
impact on the Company’s financial statements as previously issued share-based payments to nonemployees had already reached a measurement
date.
F- 16
3. PROPERTY AND EQUIPMENT:
Property and equipment consist of the following:
June 30,
2021
June 30,
2020
Machinery and equipment
$ 2,222,670
$ 2,222,670
Buildings and structures
401,470
401,470
Computers and office equipment
171,485
171,485
2,795,625
2,795,625
Less accumulated depreciation
(2,795,084 )
(2,794,257 )
$ 541
$ 1,368
As of June 30, 2021, the net book value of Kreider
1 was zero. Management has reviewed the remaining property and equipment for impairment as of June 30, 2021 and believes that no impairment
exists.
Depreciation expense was $827 and $1,248 for the years
ended June 30, 2021 and 2020, respectively.
4. DEFERRED
COMPENSATION:
The
Company owes deferred compensation to various employees, former employees and consultants totaling $479,208 and $778,217 as of June 30,
2021 and 2020, respectively. Included in the deferred compensation balances as of June 30, 2021, are $399,971 and nil owed Dominic Bassani
(“Bassani”), the Company’s Chief Executive Officer, and Mark A. Smith (“Smith”), the Company’s President ,
respectively, pursuant to extension agreements effective January 1, 2015, whereby
unpaid compensation earned after January 1, 2015, accrues interest at 4% per annum and can be converted into shares of the Company’s
common stock at the election of the employee during the first five calendar days of any month. The conversion price shall be the average
closing price of the Company’s common stock for the last 10 trading days of the immediately preceding month. The deferred compensation
owed Bassani and Smith as of June 30, 2020 was $172,103 and $54,659, respectively. The Company also owes various consultants and an employee,
pursuant to various agreements, for deferred compensation of $6,738 and $478,955 as of June 30, 2021 and 2020, respectively, with similar
conversion terms as those described above for Bassani and Smith, with the exception that the interest accrues at 3% per annum. The Company
also owes a former employee $72,500, which is not convertible and is non-interest bearing.
Bassani and Smith have each been granted the right
to convert up to $300,000 of deferred compensation balances at a price of $0.75 per share until December 31, 2022 (to be issued pursuant
to the 2006 Plan). Smith also has the right to convert all or part of his deferred compensation balance into the Company’s securities
(to be issued pursuant to the 2006 Plan) “at market” and/or on the same terms as the Company is selling or has sold its securities
in its then current (or most recent if there is no current) private placement.
During the year ended June 30, 2020, Smith elected
to convert $3,828 of deferred compensation into units of the Company at its $0.50 per unit offering price (Note 7). Bassani and Smith
also elected to transfer $436,508 and $199,573, respectively, of their respective deferred compensation into their 2020 Convertible Obligations
(formerly the January 2015 Convertible Notes) (Note 6). In connection with the agreements related to Smith’s December 31, 2019 transfer,
Smith received the right to transfer future deferred compensation to his 2020 Convertible Obligation at his election.
During the year ended June 30, 2021, Smith elected
to convert $128,039 of deferred compensation into units of the Company at its $0.50 per unit offering price (Note 7).
During the year ended June 30, 2021, the Board
of Directors approved elections by two consultants to convert $593,411, in aggregate, of deferred compensation into units of the Company’s
securities at its $0.50 per unit offering price (Note 7).
The Company recorded interest expense of $25,838
($12,249 with related parties) and $23,439 ($11,937 with related parties) for the years ended June 30, 2021 and 2020, respectively.
F- 17
5. LOANS PAYABLE:
Pennvest
PA1, the Company’s wholly-owned subsidiary,
owes $9,868,495 as of June 30, 2021 under the terms of the Pennvest Loan related to the construction of the Kreider 1 System including
accrued interest and late charges totaling $2,114,495 as of June 30, 2021. The terms of the Pennvest Loan provided for funding of up to
$7,754,000 which was to be repaid by interest-only payments for three years, followed by an additional ten-year amortization of principal.
The Pennvest Loan accrues interest at 2.547% per annum for years 1 through 5 and 3.184% per annum for years 6 through maturity. The Pennvest
Loan required minimum annual principal payments of approximately $5,886,000 in fiscal years 2013 through 2021, and $846,000 in fiscal
year 2022, $873,000 in fiscal year 2023 and $149,000 in fiscal year 2024. The Pennvest Loan is collateralized by the Kreider 1 System
and by a pledge of all revenues generated from Kreider 1 including, but not limited to, revenues generated from nutrient reduction credit
sales and by-product sales. In addition, in consideration for the excess credit risk associated with the project, Pennvest is entitled
to participate in the profits from Kreider 1 calculated on a net cash flow basis, as defined. The Company has incurred interest expense
related to the Pennvest Loan of $246,887 and $246,887 for the years ended June 30, 2021 and 2020, respectively. Based on the limited development
of the depth and breadth of the Pennsylvania nutrient reduction credit market to date, PA1 commenced negotiations with Pennvest related
to forbearance and/or re-structuring the obligations under the Pennvest Loan. In the context of such negotiations, PA1 elected not to
make interest payments to Pennvest on the Pennvest Loan since January 2013. Additionally, the Company has not made any principal payments,
which were to begin in fiscal 2013, and, therefore, the Company has classified the Pennvest Loan as a current liability as of June 30,
2021.
On September 25, 2014, Pennvest exercised its right
to declare the Pennvest Loan in default and accelerated the Pennvest Loan and demanded that PA1 pay $8,137,117 (principal, interest plus
late charges) on or before October 24, 2014. PA1 did not make the payment and does not have the resources to make the payments demanded
by Pennvest. PA1 commenced discussions and negotiations with Pennvest concerning this matter but Pennvest rejected PA1’s proposal
made during the fall of 2014. PA1 made a new proposal to Pennvest during September 2021 which proposal is presently under consideration
by Pennvest. PA1 provides Pennvest with its financial statements (which include a description of system status) annually. During the 2021
fiscal year, Pennvest’s auditors requested a ‘corrective action plan’ and PA1 informed Pennvest that “…
there is no viable corrective action plan for the Pennvest Loan (‘Loan’). The facility funded by the Loan has been shut down
for many years (which has been disclosed in the annual financial reports to Pennvest and in public filings by the parent of Bion PA 1,
LLC) and the technology utilized in the facility is now obsolete. The facility has not been commercially operated for approximately six
years and has generated zero income. We recommend that Pennvest take appropriate steps to remove and sell the equipment.” Pennvest
responded favorably to the approach of selling the equipment but no actions have yet taken place. PA1 and the Company are currently discussing
proposals with Pennvest seeking full resolution of these matters. The Company anticipates additional communication with Pennvest on this
matter during the current year. It is not possible at this date to predict the final outcome of this matter, but the Company believes
it is likely that that the equipment will be sold with the proceeds delivered to Pennvest during the 2022 fiscal year. However, the resolution
of these matters including the manner and means of such equipment sale has not been agreed upon as of this date. PA1 will evaluate the
appropriate manner to resolve/wrap-up its business over the balance of the current fiscal year.
In connection with the Pennvest Loan financing
documents, the Company provided a ‘technology guaranty’ regarding nutrient reduction performance of Kreider 1 which was structured
to expire when Kreider 1’s nutrient reduction performance had been demonstrated. During August 2012 the Company provided Pennvest
(and the PADEP) with data demonstrating that the Kreider 1 System had surpassed the requisite performance criteria and that the Company’s
‘technology guaranty’ was met. As a result, the Pennvest Loan is solely an obligation of PA1.
Paycheck Protection Program
During the year ended June 30, 2020, the Company
received proceeds from a loan in the amount of $34,800 from Covenant Bank as the lender, pursuant to the Small Business Administration
(“SBA”) Paycheck Protection Program (“PPP”) under the Coronavirus Aid, Relief, and Economic Security (“CARES”)
Act. The loan was uncollateralized, had a fixed interest rate of one percent, a term of two years and the first payment is deferred for
six months. Under the CARES Act, borrowers were eligible for forgiveness of principal and interest on PPP loans to the extent that the
proceeds were used to cover eligible payroll costs, rent and utility costs over either an 8 or 24-week period after the loan was made.
As of June 30, 2021, the total PPP loan and accrued interest was fully forgiven by the SBA.
F- 18
6. CONVERTIBLE NOTES PAYABLE
- AFFILIATES:
2020 Convertible Obligations
The 2020 Convertible Obligations, which accrue interest
at either 4% per annum or 4% compounded quarterly and effective January 1, 2020 are due and payable on July 1, 2024. The 2020 Convertible
Obligations (including accrued interest, plus all future deferred compensation added subsequently), are convertible, at the sole election
of the holder, into Units consisting of one share of the Company’s common stock and one half to one warrant to purchase a share
of the Company’s common stock, at a price of $0.50 per Unit until July 1, 2024. The warrant contained in the Unit was originally
exercisable at $1.00 per unit but was modified to $0.75 during the year ended June 30, 2020 and is exercisable until a date three years
after the date of the conversion. During the year ended June 30, 2021, the Company approved the increase of warrants by one-third to be
received by the noteholder if a conversion takes place. The original conversion price of $0.50 per Unit approximated the fair value of
the Units at the date of the agreements; therefore, no beneficial conversion feature exists. Management evaluated the terms and conditions
of the embedded conversion features based on the guidance of ASC 815-15 “Embedded Derivatives” to determine if there was an
embedded derivative requiring bifurcation. An embedded derivative instrument (such as a conversion option embedded in the deferred compensation)
must be bifurcated from its host instruments and accounted for separately as a derivative instrument only if the “risks and rewards”
of the embedded derivative instrument are not “clearly and closely related” to the risks and rewards of the host instrument
in which it is embedded. Management concluded that the embedded conversion feature of the deferred compensation was not required to be
bifurcated because the conversion feature is clearly and closely related to the host instrument, and because of the Company’s limited
trading volume that indicates the feature is not readily convertible to cash in accordance with ASC 815-10, “Derivatives and Hedging”.
As of June 30, 2021, the 2020 Convertible Obligation
balances, including accrued interest, owed Bassani (and his donees), Smith and Edward Schafer (“Schafer”), the Company’s
Vice Chairman, were $2,502,880, $1,186,926 and $481,119, respectively. As of June 30, 2020, the 2020 Convertible Obligation balances,
including accrued interest, owed Bassani, Smith and Schafer were $2,408,432, $1,123,736 and $462,963, respectively. During the year ended
June 30, 2020, Bassani and Smith elected to transfer $436,508 and $199,573, respectively, from deferred compensation owed them to their
2020 Convertible Obligations.
The Company recorded interest expense of $175,794
and $137,130 for the years ended June 30, 2021 and 2020, respectively.
September 2015 Convertible Notes
During the year ended June 30, 2016, the Company entered
into September 2015 Convertible Notes with Bassani, Schafer and a Shareholder which replaced previously issued promissory notes. The September
2015 Convertible Notes bear interest at 4% per annum, originally had maturity dates of December 31, 2017 but during the year ended June
30, 2019 the maturity dates were extended to July 1, 2021, and may be converted at the sole election of the noteholders into restricted
common shares of the Company at a conversion price of $0.60 per share. During the year ended June 30, 2020, the maturity dates of the
September 2015 Convertible Notes were further extended until July 1, 2024. As the conversion price of $0.60 approximated the fair value
of the common shares at the date of the September 2015 Convertible Notes, no beneficial conversion feature exists.
The balances of the September 2015 Convertible Notes
as of June 30, 2021, including accrued interest owed Bassani, Schafer and Shareholder, are $171,343, $20,190 and $430,639, respectively.
The balances of the September 2015 Convertible Notes as of June 30, 2020, including accrued interest, were $165,653, $19,535 and $415,522,
respectively.
The Company recorded interest expense of $21,462 and
$21,462 for the years ended June 30, 2021 and 2020, respectively.
7. STOCKHOLDERS' EQUITY:
Series B Preferred stock:
Since July 1, 2014, the Company has 200 shares of
Series B redeemable convertible Preferred stock outstanding with a par value of $0.01 per share, convertible at the option of the holder
at $2.00 per share, with dividends accrued and payable at 2.5% per quarter. The Series B Preferred stock is mandatorily redeemable at
$100 per share by the Company three years after issuance and accordingly was classified as a liability. The 200 shares have reached their
maturity date, but due to the cash constraints of the Company have not been redeemed.
During the years ended June 30, 2021 and 2020, the
Company declared dividends of $2,000 and $2,000 respectively. At June 30, 2021, accrued dividends payable are $20,000. The dividends are
classified as a component of operations as the Series B Preferred stock is presented as a liability in these financial statements.
Common stock:
Holders of common stock are entitled to one vote per
share on all matters to be voted on by common stockholders. In the event of liquidation, dissolution or winding up of the Company, the
holders of common stock are entitled to share in all assets remaining after liabilities have been paid in full or set aside and the rights
of any outstanding preferred stock have been satisfied. Common stock has no preemptive, redemption or conversion rights. The rights of
holders of common stock are subject to, and may be adversely affected by, the rights of the holders of any outstanding series of preferred
stock or any series of preferred stock the Company may designate in the future.
Centerpoint holds 704,309 shares of the Company’s
common stock. These shares of the Company’s common stock held by Centerpoint are for the benefit of its shareholders without any
beneficial interest.
F- 19
During the year ended June 30, 2020, the Company issued
29,000 shares of the Company’s common stock at prices ranging from $0.48 to $0.75 per share for services valued at $16,350 in the
aggregate, to two consultants.
During the year ended June 30, 2020, the Company entered
into a subscription agreement to sell units for $0.50 per unit, with each unit consisting of one share of the Company’s restricted
common stock and one warrant to purchase one half of a share of the Company’s restricted common stock for $0.75 per share with an
expiry date of December 31, 2020, and pursuant thereto, the Company issued 18,000 units for total proceeds of $9,000, net proceeds of
$8,100 after commissions of $900. The Company allocated the proceeds from the 18,000 shares and the 9,000 warrants based upon their relative
fair values, using the share price on the day each of the subscription agreements were entered into and the fair value of the warrants,
which was determined to be $0.05 per warrant. As a result, $333 was allocated to the warrants and $8,667 was allocated to the shares,
and both were recorded as additional paid in capital.
During the year ended June 30, 2020, the Company entered
into subscription agreements to sell units for $0.50 per unit, with each unit consisting of one share of the Company’s restricted
common stock and one warrant to purchase one share of the Company’s restricted common stock for $0.75 per share with an expiry date
of December 31, 2020, and pursuant thereto, the Company issued 2,000,001 units for total proceeds of $1,000,000, net proceeds of $910,500
after commissions of $89,500. The Company allocated the proceeds from the 2,000,001 shares and the 2,000,001 warrants based upon their
relative fair values, using the share price on the day each of the subscription agreements were entered into and the fair value of the
warrants, which was determined to be $0.05 per warrant. As a result, $48,604 was allocated to the warrants and $951,396 was allocated
to the shares, and both were recorded as additional paid in capital.
During the year ended June 30, 2020, the Company entered
into subscription agreements to sell units for $0.50 per unit, with each unit consisting of one share of the Company’s restricted
common stock and one warrant to purchase one share of the Company’s restricted common stock for $0.75 per share with an expiry date
of December 31, 2021, and pursuant thereto, the Company issued 1,150,000 units for total proceeds of $575,000, net proceeds of $517,500
after commissions of $57,500. The Company allocated the proceeds from the 1,150,000 shares and the 1,150,000 warrants based upon their
relative fair values, using the share price on the day each of the subscription agreements were entered into and the fair value of the
warrants, which was determined to be $0.05 per warrant. As a result, $25,041 was allocated to the warrants and $549,959 was allocated
to the shares, and both were recorded as additional paid in capital.
During the year ended June 30, 2020, Smith elected
to convert deferred compensation, loan payable - affiliates and accounts payable of $3,828, $15,000 and $52,830, respectively, into an
aggregate 143,316 units at $0.50 per unit, with each unit consisting of one share of the Company’s restricted common stock and one
warrant to purchase one share of the Company’s restricted common stock for $0.75 per share until December 31, 2020, which were subsequently
extended to December 31, 2024.
During the year ended June 30, 2021, the Company entered
into subscription agreements, under three different offerings, to sell units for $0.50 per unit, with each unit consisting of one share
of the Company’s restricted common stock and one warrant to purchase one share of the Company’s restricted common stock for
$0.75 per share with an expiry date of December 31, 2021, and pursuant thereto, the Company issued 3,720,000 units for total proceeds
of $1,860,000, net proceeds of $1,699,000 after commissions of $161,000. The Company allocated the proceeds from the 3,720,000 shares
and the 3,720,000 warrants based upon their relative fair values, using the share price on the day each of the subscription agreements
were entered into and the fair value of the warrants, which was determined to be $0.05 per warrant. As a result, $114,148 was allocated
to the warrants and $1,745,852 was allocated to the shares, and both were recorded as additional paid in capital.
During the year ended June 30, 2021, 300,000 share
of the Company’s restricted company stock were sold to an investor for $300,000.
During the year ended June 30, 2021, Smith elected
to convert deferred compensation and accounts payable of $128,039 and $52,361, respectively, into an aggregate 360,805 units at $0.50
per unit, with each unit consisting of one share of the Company’s restricted common stock and one warrant to purchase one share
of the Company’s restricted common stock for $0.75 per share until December 31, 2024.
During the year ended June 30, 2021, two consultants
elected to convert deferred compensation of $593,411, into an aggregate 1,186,824 units at $0.50 per unit, with each unit consisting of
one share of the Company’s restricted common stock and one warrant to purchase one share of the Company’s restricted common
stock for $0.75 per share until December 31, 2023.
During the year ended June 30, 2021, the Company
issued 144,000 units to Smith for salary of $72,000, with each unit consisting of one share of the Company’s restricted common stock
and one warrant to purchase one share of the Company’s restricted common stock for $0.75 per share with an expiry date of December
31, 2024.
During the year ended June 30, 2021, 4,065,988
warrants were exercised to purchase 4,065,988 shares of the Company’s common stock at $0.75 per share for total proceeds of $3,049,490.
During the year ended June 30, 2021, the Company
issued 129,364 shares of the Company’s common stock to a broker as commissions for the warrant exercises. As the issuance was both
a reduction and addition to additional paid in capital there was no impact to the financial statements. The company also paid a broker
$3,537 in commissions for the warrant exercises.
F- 20
Warrants:
As of June 30, 2021, the Company had approximately
21.9 million warrants outstanding, with exercise prices from $0.60 to $1.50 and expiring on various dates through June 30, 2025.
The weighted-average exercise price for the outstanding
warrants is $0.73, and the weighted-average remaining contractual life as of June 30, 2021 is 2.8 years.
During the year ended June 30, 2021, the Company entered
into subscription agreements, under three different offerings, to sell units for $0.50 per unit, with each unit consisting of one share
of the Company’s restricted common stock and one warrant to purchase one share of the Company’s restricted common stock for
$0.75 per share with an expiry date of December 31, 2021, and pursuant thereto, the Company issued 3,720,000 units for total proceeds
of $1,860,000, net proceeds of $1,699,000 after commissions of $161,000. The Company allocated the proceeds from the 3,720,000 shares
and the 3,720,000 warrants based upon their relative fair values, using the share price on the day each of the subscription agreements
were entered into and the fair value of the warrants, which was determined to be $0.05 per warrant. As a result, $114,148 was allocated
to the warrants and $1,745,852 was allocated to the shares, and both were recorded as additional paid in capital.
During the year ended June 30, 2021, the Company issued
50,000 warrants to a consultant to purchase 50,000 shares of the Company’s restricted common stock at an exercise price of $0.90
per share and an expiration date of December 31, 2021. The warrants were in exchange for services expensed at $2,500.
During the year ended June 30, 2021, Smith elected
to convert deferred compensation and accounts payable of $128,039 and $52,361, respectively, into an aggregate 360,805 units at $0.50
per unit, with each unit consisting of one share of the Company’s restricted common stock and one warrant to purchase one share
of the Company’s restricted common stock for $0.75 per share until December 31, 2024.
During the year ended June 30, 2021, the Company
agreed to extend the expiration dates of 4,497,924 warrants owned by certain individuals which were scheduled to expire at various dates
from December 31, 2020 through December 31, 2021. The Company recorded non-cash compensation of $25,506 and interest expense of $187,139
related to the modification of the warrants.
During the year ended June 30, 2021, warrants
to purchase 164,251 shares of the Company’s common stock at prices ranging from $0.75 to $2.00 expired.
During the year ended June 30, 2021, 4,065,988
warrants were exercised to purchase 4,065,988 shares of the Company’s common stock at $0.75 per share for total proceeds of $3,049,490.
During the year ended June 30, 2021, the Company
issued warrants to brokers as commissions to purchase 322,000 shares of the Company’s common stock at an exercise price of $0.75
per share and an expiration of December 31, 2022. As the issuance was both a reduction and addition to additional paid in capital there
was no impact to the financial statements.
During the year ended June 30, 2021, the Company
issued 144,000 units to Smith for salary of $72,000, with each unit consisting of one share of the Company’s restricted common stock
and one warrant to purchase one share of the Company’s restricted common stock for $0.75 per share with an expiry date of December
31, 2024.
Stock options:
The Company’s 2006 Consolidated Incentive Plan,
as amended during the year ended June 30, 2021 (the “2006 Plan”), provides for the issuance of options (and/or other securities)
to purchase up to 36,000,000 shares of the Company’s common stock. Terms of exercise and expiration of options/securities granted
under the 2006 Plan may be established at the discretion of the Board of Directors, but no option may be exercisable for more than ten
years.
During the year ended June 30, 2020, the Company
approved the modification of existing stock options held by certain employees, directors and consultants, which extended certain expiration
dates and reduced certain exercise prices. The modifications resulted in incremental non-cash compensation of $626,058 (including $184,550,
$110,625, $116,970 and $32,700 for Bassani, Smith, Schafer and Jon Northrop (“Northrop”), the Company’s other board
member, respectively).
During the year ended June 30, 2021, the Company
approved the modification of existing stock options held by two former consultants, which extended certain expiration dates. The modifications
resulted in incremental non-cash compensation of $8,775.
F- 21
The Company recorded compensation expense related
to employee stock options of $1,107,700 and $429,200 for the years ended June 30, 2021 and 2020, respectively. The Company granted 960,000
and 2,210,000 options during the years ended June 30, 2021 and 2020, respectively. During the year ended June 30, 2021 the Company issued
250,000, 250,000, 50,000 and 25,000 options to Bassani, Smith, Schafer and Northrop, respectively and recorded compensation expense of
$277,500, $277,500, $55,500 and $27,500 for Bassani, Smith, Schafer and Northrop, respectively. During the year ended June 30, 2020 the
Company issued 500,000, 600,000, 175,000 and 150,000 options to Bassani, Smith, Schafer and Northrop, respectively and recorded compensation
expense of $90,000, $115,000, $33,250 and $28,750 for Bassani, Smith, Schafer and Northrop, respectively.
The fair value of the options granted during the years
ended June 30, 2021 and 2020 were estimated on the grant date using the Black-Scholes option-pricing model with the following assumptions:
Weighted
Average,
June 30,
2021
Range,
June 30,
2021
Weighted
Average,
June 30,
2020
Range,
June 30,
2020
Volatility
65 %
58% -65 %
61 %
60%-70 %
Dividend yield
—
—
—
—
Risk-free interest rate
0.79 %
0.47% – 0.82 %
0.60 %
0.36%-1.75%
Expected term (years)
5.8
5.0 to 5.9
4.8
4.7 to 5.2
The expected volatility was based on the historical
price volatility of the Company’s common stock. The dividend yield represents the Company’s anticipated cash dividend on common
stock over the expected term of the stock options. The U.S. Treasury bill rate for the expected term of the stock options was utilized
to determine the risk-free interest rate. The expected term of stock options represents the period of time the stock options granted are
expected to be outstanding based upon management’s estimates.
A summary of option activity under the 2006 Plan for the years
ended June 30, 2021 and 2020 is as follows:
Options
Weighted-
Average
Exercise
Price
Weighted-
Average
Remaining
Contractual
Life
Aggregate
Intrinsic
Value
Outstanding at July 1, 2019
7,411,600
$ 1.08
3.1
$ 20,375
Granted
2,210,000
0.72
Exercised
—
—
Forfeited
—
—
Expired
(110,000 )
0.69
Outstanding at June 30, 2020
9,511,600
$ 0.74
4.5
$ —
Granted
960,000
1.10
Exercised
—
—
Forfeited
—
—
Expired
—
—
Outstanding at June 30, 2021
10,471,600
$ 0.77
3.7
$ 6,064,335
Exercisable at June 30, 2021
10,471,600
$ 0.77
3.7
$ 6,064,335
The following table presents information relating
to nonvested stock options as of June 30, 2021:
Options
Weighted Average
Grant-Date Fair
Value
Nonvested at July 1, 2020
—
$ —
Granted
960,000
1.06
Vested
(960,000 )
(1.06 )
Nonvested at June 30, 2021
—
$ —
The total fair value of stock options that vested
during the years ended June 30, 2021 and 2020 was $1,017,700 and $429,200 respectively. As of June 30, 2021, the Company had no unrecognized
compensation cost related to stock options.
F- 22
Stock-based employee compensation charges in operating expenses
in the Company’s financial statements for the years ended June 30, 2021 and 2020 are as follows:
Year
ended
June 30,
2021
Year
ended
June 30,
2020
General
and administrative:
Change
in fair value from modification of
option terms
$ 8,775
$ 511,448
Change
in fair value from modification of
warrant terms
25,506
1,064,503
Fair
value of stock options expensed
816,050
355,100
Total
$ 850,331
$ 1,931,051
Research
and development:
Change
in fair value from modification of
option terms
$ —
$ 114,610
Change
in fair value from modification of
warrant terms
—
457,273
Fair
value of stock options expensed
201,650
74,100
Total
$ 201,650
$ 645,98 3
8. SUBSCRIPTION
RECEIVABLE - AFFILIATES:
As of June 30, 2021, the Company has three interest
bearing, secured promissory notes with an aggregate principal amount of $428,250 ($483,387, including interest), from Bassani as consideration
to purchase warrants to purchase 5,565,000 shares of the Company’s restricted common stock, which warrants have exercise prices
ranging from $0.60 to $1.00 and have expiry dates ranging from December 31, 2020 to December 31, 2025. The promissory notes bear interest
at 4% per annum, and are secured by portions of Bassani’s 2020 Convertible Obligation and Bassani’s September 2015 Convertible
Notes. The secured promissory notes were payable July 1, 2020 but were extended to July 1, 2024 during the year ended June 30, 2020. Also,
during the year ended June 30, 2020, warrants with exercise prices greater than $0.75 were reduced to $0.75 and warrants with expiry dates
prior to December 31, 2024 were extended to December 31, 2024.
As of June 30, 2021, the Company has an interest bearing,
secured promissory note for $30,000 ($33,491 including interest) from Smith as consideration to purchase warrants to purchase 300,000
shares of the Company’s restricted common stock, which warrants are exercisable at $0.60 and have expiry dates of December 31, 2023.
During the year ended June 30, 2020, the expiry dates of the warrants were extended to December 31, 2024. The warrants have a 75% exercise
bonus and the promissory note bears interest at 4% per annum, and is secured by $30,000 of Smith’s 2020 Convertible Obligations.
The secured promissory note was payable on July 1, 2020 but was extended to July 1, 2024 during the year ended June 30, 2020.
As of June 30, 2021, the Company has two interest
bearing, secured promissory notes with an aggregate principal amount of $46,400 ($53,158 including interest) from two former employees
as consideration to purchase warrants to purchase 928,000 shares of the Company’s restricted common stock, which warrants are exercisable
at $0.75 and have expiry dates of December 31, 2020. During the year ended June 30, 2020, the expiry dates of the warrants were extended
to December 31, 2024. These warrants have a 90% exercise bonus. The promissory notes bear interest at 4% per annum, are secured by a perfected
security interest in the warrants, and were payable on July 1, 2020 but were extended to July 1, 2024 during the year ended June 30, 2020.
F- 23
9. COMMITMENTS
AND CONTINGENCIES:
Employment and consulting agreements:
Smith has held the positions of Director, President
and General Counsel of Company and its subsidiaries under various agreements (and extensions) and terms since March 2003. On October 10,
2016, the Company approved a month to month contract extension, with Smith which includes provisions for i) a monthly deferred salary
of $18,000 until the Board of Directors re-instates cash payments to all employees and consultants who are deferring compensation, ii)
the right to convert up to $300,000 of his deferred compensation, at his sole election, at $0.75 per share, until December 31, 2022),
and iii) the right to convert his deferred compensation in whole or in part, at his sole election, at any time in any amount at “market”
or into securities sold in the Company’s current/most recent private offering at the price of such offering to third parties. Smith
agreed effective July 29, 2018 to continue to serve the Company under the same basic terms.
Since March 31, 2005, the Company has had various
agreements with Brightcap and/or Bassani, through which the services of Bassani are provided (any reference to Brightcap or Bassani for
all purposes are the same individual). The Board appointed Bassani as the Company's CEO effective May 13, 2011. On February 10, 2015,
the Company executed an Extension Agreement with Bassani pursuant to which Bassani extended the term of his service to the Company to
December 31, 2017, (with the Company having an option to extend the term an additional six months.) Pursuant to the Extension Agreement,
Bassani continued to defer his cash compensation ($31,000 per month) until the Board of Directors re-instates cash payments to all employees
and consultants who are deferring their compensation. During October 2016 Bassani was granted the right to convert up to $125,000 of his
deferred compensation, at his sole election, at $0.75 per share, until March 15, 2018 (which was expanded on April 27, 2017 to the right
to convert up to $300,000 of his deferred compensation, at his sole election, at $0.75 per share, and subsequently extended until December
31, 2022). During February 2018, the Company agreed to the material terms for a binding two-year extension agreement for Bassani’s
services as CEO, while a detailed, fully executed agreement is still being negotiated and will be finalized in the future. Bassani’s
salary will remain $372,000 per year, which will continue to be accrued until there is adequate cash available while negotiations proceed
toward the re-instatement of a least a partial cash payment. Additionally, the Company has agreed to pay him $2,000 per month to be applied
to life insurance premiums. On August 1, 2018, in the context of extending his agreement to provide services to the Company on a full-time
basis through December 31, 2022) plus 2 years after that on a part-time basis, the Company received an interest bearing secured promissory
note for $300,000 from Bassani as consideration to purchase warrants to purchase 3,000,000 shares of the Company’s restricted common
stock, which warrants are exercisable at $0.60 and have expiry dates of June 30, 2025. The promissory note is secured by a portion of
Bassani’s 2020 Convertible Obligations and as of June 30, 2021, the principal and accrued interest was $335,965. For the years ended
June 30, 2021 and 2020, Brightcap was paid $155,000 and $135,000, respectively.
Execution/exercise bonuses:
As part of agreements the Company entered into with
Bassani and Smith effective May 15, 2013, they were each granted the following: a) a 50% execution/exercise bonus which shall be applied
upon the effective date of the notice of intent to exercise (for options and warrants) or issuance event, as applicable, of any currently
outstanding and/or subsequently acquired options, warrants and/or contingent stock bonuses owned by each (and/or their donees) as follows:
i) in the case of exercise by payment of cash, the bonus shall take the form of reduction of the exercise price; ii) in the case of cashless
exercise, the bonus shall be applied to reduce the exercise price prior to the cashless exercise calculations; and iii) with regard to
contingent stock bonuses, issuance shall be triggered upon the Company’s common stock reaching a closing price equal to 50% of currently
specified price; and b) the right to extend the exercise period of all or part of the applicable options and warrants for up to five years
(one year at a time) by annual payments of $.05 per option or warrant to the Company on or before a date during the three months prior
to expiration of the exercise period at least three business days before the end of the expiration period. Effective January 1, 2016 such
annual payments to extend warrant exercise periods have been reduced to $.01 per option or warrant.
During the year ended June 30, 2021, the Company applied
a 75% execution/exercise bonus on 3,000,000 warrants held by a trust owned by Bassani.
As of June 30, 2021, the execution/exercise bonuses
ranging from 50-90% were applicable to 10,326,600 of the Company’s outstanding options and 16,742,789 of the Company’s outstanding
warrants.
Litigation:
On September 10, 2021, the Company filed a federal lawsuit ‘in rem’
to recover the <biontech.com> domain and the unknown ‘John Doe’ who hacked and attempted to steal the website. The litigation
has been filed in the United States District Court for the Eastern District of Virginia, Alexandria Division under the heading ‘Bion
Environmental Technologies, Inc., Plaintiff, vs John Doe and <biontech.com>, Defendants’ (Case No. 1:21-cv-01034), seeking
recovery of the domain name and other relief as set forth therein.
On September 25, 2014, the Pennsylvania Infrastructure
Investment Authority (“Pennvest”) exercised its right to declare the PA1’s Pennvest Loan in default, accelerated the
Pennvest Loan and demanded that PA1 pay $8,137,117 (principal, interest plus late charges) on or before October 24, 2014. PA1 did not
make the payment and does not have the resources to make the payments demanded by Pennvest. PA1 commenced discussions and negotiations
with Pennvest concerning this matter but Pennvest rejected PA1’s proposal made during the fall of 2014. PA1 made a new proposal
to Pennvest during September 2021 which proposal is presently under consideration by Pennvest. PA1 provides Pennvest with its financial
statements (which include a description of system status) annually. During the 2021 fiscal year, Pennvest’s auditors requested a
‘corrective action plan’ and PA1 informed Pennvest that “… there is no viable corrective action plan for the
Pennvest Loan (‘Loan’). The facility funded by the Loan has been shut down for many years (which has been disclosed in the
annual financial reports to Pennvest and in public filings by the parent of Bion PA 1, LLC) and the technology utilized in the facility
is now obsolete. The facility has not been commercially operated for approximately six years and has generated zero income. We recommend
that Pennvest take appropriate steps to remove and sell the equipment.” Pennvest responded favorably to the approach of selling
the equipment but no actions have yet taken place. PA1 and the Company are currently discussing proposals with Pennvest seeking full resolution
of these matters. The Company anticipates additional communication with Pennvest on this matter during the current year. It is not possible
at this date to predict the final outcome of this matter, but the Company believes it is likely that that the equipment will be sold with
the proceeds delivered to Pennvest during the 2022 fiscal year. However, the resolution of these matters including manner and means of
such equipment sale has not been agreed upon as of this date. PA1 will evaluate the appropriate manner to resolve/wrap-up its business
over the balance of the current fiscal year.
F- 24
During August 2012, the Company provided Pennvest
(and the PADEP) with data demonstrating that the Kreider 1 system met the ‘technology guaranty’ standards which were incorporated
in the Pennvest financing documents and, as a result, the Pennvest Loan is now solely an obligation of PA1. No litigation has commenced
related to this matter but such litigation is likely if negotiations do not produce a resolution (Note 1 and Note 5).
The Company currently is not involved in any other material litigation.
10. RELATED
PARTY TRANSACTIONS:
The Coalition for Affordable Bay Solutions (“CABS”),
a not-for-profit organization that engages in political and legislative lobbying and educational activities regarding the competitive
bidding procurement and nutrient credit trading program in Pennsylvania (and elsewhere), shares certain key management members with the
Company.
During the years ended June 30, 2021 and 2020, the
Company received nil and nil for expense reimbursements from CABS, respectively. During the years ended June 30, 2021 and 2020, the Company
paid CABS nil and $52,540, respectively for consulting expenses.
11. GAIN ON EXTINGUISHMENT OF LIABILITIES:
During the year ended June 30, 2020, the Company
recognized other income due to the extinguishment of liabilities of $122,423, resulting from the legal release of certain accounts payable.
These accounts payable were outstanding for over 6 years and the vendors had not made attempts to collect these amounts from the Company
over the past several years. The extinguishment of liabilities was recorded after a review of the statute of limitations in the state
in which the original liability was incurred and in which the Company operates it business, as applicable.
12. INCOME
TAXES:
The reconciliation between the expected federal
income tax benefit computed by applying the Federal statutory rate to loss before income taxes and the actual benefit for taxes on loss
for the years ended June 30, 2021 and 2020 is as follows:
2021
2020
Expected
income tax benefit at statutory rate
$ (724,000 )
$ (955,000 )
State
taxes, net of federal benefit
(126,000 )
(166,000 )
RTP
– Excess Business Interest
115,000
(103,000 )
Permanent
differences and other
8,000
9,000
Expiration
of net operating allowances
802,000
71,000
Change
in valuation allowance
(75,000 )
1,144,000
Income
tax benefit
$ —
$ — ;
The Company has net operating loss carry-forwards
(“NOLs”) for tax purposes of approximately $47,321,000 as of June 30, 2021. These NOLs expire on various dates through 2041.
The utilization of the NOLs may be limited under
Section 382 of the Internal Revenue Code.
The Company’s deferred tax assets for the
years ended June 30, 2021 and 2020 are estimated as follows:
2021
2020
NOL
Carryforwards (Federal and State)
$ 11,784,000
$ 11,975,000
Stock-based
compensation
5,350,000
5,073,000
Impairment
1,340,000
1,340,000
Business
interest
264,000
217,000
Deferred
compensation
986,000
1,194,000
Gross
deferred tax assets
19,724,000
19,799,000
Valuation
allowance
(19,724,000 )
(19,799,000 )
Net
deferred tax assets
$ —
$ —
The Company has provided a valuation allowance of
100% of its net deferred tax asset due to the uncertainty of generating future profits that would allow for the realization of such deferred
tax assets.
F- 25
13.
401(k) PLAN:
The Company has adopted the Bion Technologies,
Inc. 401(k) Profit Sharing Plan and Trust (the “401(k) Plan”), a defined contribution retirement plan for the benefit of its
employees. The 401(k) Plan is currently a salary deferral only plan and at this time the Company does not match employee contributions.
The 401(k) is open to all employees over 21 years of age and no service requirement is necessary.
14. SUBSEQUENT
EVENTS:
The Company has evaluated events that occurred subsequent
to June 30, 2021 for recognition and disclosure in the financial statements and notes to the financial statements.
From July 1, 2021 through September 27, 2021,
139,334 warrants were exercised to purchase 139,334 shares of the Company’s common stock at $0.75 per share for total proceeds of
approximately $104,500.
From July 1, 2021 through September 27, 2021,
the Company issued 10,000 warrants to a broker as commissions to purchase 10,000 shares of the Company’s common stock at an exercise
price of $0.75 per share and an expiration of December 31, 2022.
From July 1, 2021 through September 27, 2021,
Smith elected to convert accounts payable of $5,126 into an aggregate 10,253 units at $0.50 per unit, with each unit consisting of one
share of the Company’s restricted common stock and one warrant to purchase one share of the Company’s restricted common stock
for $0.75 per share until December 31, 2024.
On September 16, 2021, PA1 made a new proposal
to Pennvest which proposal is presently under consideration by Pennvest. See Notes 5 and 9 above for related information.
On September 23, 2021 the Company executed an
agreement to lease land near Fair Oaks, Indiana to construct its initial 3G Tech commercial scale installation which will include customized
covered barns for up to 300 head of cattle, an anaerobic digester and a Bion 3G Tech waste treatment/recovery system (“Lease”).
Pursuant to the Lease, an initial $60,000 rent payment is due on October 10, 2021 and, commencing on the earlier of December 31, 2022
or the date on which the barns are populated (“Start Date”), monthly rent of $7,250 will be payable. The Lease has an initial
2-year term from the Start Date. The impact of ASC 842 has not been determined for the lease. Terms for an additional related agreement
regarding disposal of certain manure effluent have been agreed upon with the Curtis Creek Dairy unit of Fair Oaks Farms and the Company
expects the agreement to be finalized by the end of the first full week of October 2021. Pre-development work commenced during August
2021 and preparation for active surveying, site engineering and other work is now underway. Note 1 for more information.
F- 26
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 thereunder
duly authorized.
BION ENVIRONMENTAL TECHNOLOGIES, INC.
Dated: September 29, 2021
By: /s/ Mark A. Smith
Mark A. Smith, President and Chief
Financial Officer (Principal Financial
and Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:
SIGNATURE
TITLE
DATE
/s/ Mark A. Smith
Executive Chairman,
September 29, 2021
Mark A. Smith
President, Chief Financial Officer
and Director
/s/ Dominic Bassani
Chief Executive Officer
September 29, 2021
Dominic Bassani
/s/ Jon Northrop
Secretary and Director
September 29, 2021
Jon Northrop
/s/ Edward Schafer
Vice Chairman
September 29, 2021
Edward Schafer
and Director
62
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.