ITEM 1A. RISK FACTORS.
Not applicable.
ITEM 1B. UNRESOLVED STAFF COMMENTS.
Not applicable.
ITEM 2. PROPERTIES.
The Company maintains its corporate offices at 9 East
Park Court, Old Bethpage, New York 11804, the home of its office manager/bookkeeper, and its main corporate telephone number is (516)
586-5643.
We are the sole owner of seven United States patents.
Bion also owns one Australian patent, two Canadian patents, one patent from New Zealand and two patents from Mexico. Additionally, Bion
has one United States patent application pending and has three International patent applications currently pending (See Item 1, “Patents”
above).
ITEM 3. LEGAL PROCEEDINGS.
The Company is currently involved in no litigation
matters excerpt :
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, 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 PA1) 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 recently 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 to 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 our current 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 this calendar year.
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. However, the Company’s
consolidated balance sheet as of June 30, 2021 reflects the Pennvest Loan as a liability of $9,868,495 despite the fact that the obligation
(if any) solely an obligation of PA 1.
Litigation has not commenced in this matter
but has been threatened by Pennvest. Such litigation is likely if negotiations do not produce a resolution (although the likelihood is
somewhat reduced by the passage of time).
The Company currently is not involved in any other material litigation.
ITEM 4. MINE SAFETY DISCLOSURES.
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY,
RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
(a) Market Information
Our common stock is quoted on the Over-The-Counter
Electronic Bulletin Board under the symbol "BNET." The following quotations reflect inter dealer prices, without
retail mark up, markdown or commissions and may not represent actual transactions.
Fiscal Year Ended June 30, High Low High Low
(b) Holders
The number of holders of record of our common
stock at September 1, 2021 was approximately 1,400. Many of our shares of common stock are held by brokers and other institutions on behalf
of stockholders, so we are unable to estimate the number of stockholders represented by these record holders.
The transfer agent for our common stock is Equiniti,
3200 Cherry Creek Drive South, Suite 430, Denver, Colorado 80209.
(c) Dividends
We have never paid any cash dividends on our common
stock. Our board of directors does not intend to declare any cash dividends in the foreseeable future, but instead intends to retain earnings,
if any, for use in our business operations. The payment of dividends, if any, in the future is within the discretion of the board of directors
and will depend on our future earnings, if any, our capital requirements and financial condition, and other relevant factors.
During each of fiscal year 2021 and 2020 the Company
paid an aggregate dividend of $0 and $0, respectively, on shares of Series B Preferred Stock and Series C Preferred Stock which were outstanding
during the year. A dividend of $2,000 was accrued on Series B Preferred Stock during each of the 2021 and 2020 fiscal years.
(d) Securities Authorized for Issuance
Under Equity Compensation Plans
In June 2006 the Company adopted its 2006 Consolidated
Incentive Plan, as amended ("Plan"), which terminated all prior plans and merged them into the Plan. The Plan was ratified
by the Company's shareholders in October 2006 (and has been amended multiple times since initial ratification). Under the Plan,
Directors may grant Shares, Options, Stand Alone Stock Appreciation Rights ("SAR's"), shares of Restricted Stock, shares of
Phantom Stock and Stock Bonuses and other items with respect to a number of Common Shares that in the aggregate does not exceed 36,000,000
shares. The maximum number of Common Shares for which Incentive Awards, including Incentive Stock Options, may be granted to any one Participant
shall not exceed 2,000,000 shares in any one calendar year; and the total of all cash payments to any one participant pursuant to the
Plan in any calendar year shall not exceed $1,500,000. As of August 1, 2021, 10,471,600 options have been granted and are outstanding
under the Plan (as amended), including all options granted under prior merged plans, and options granted from July 1, 2021 through August
1, 2021, all of which options are vested as of August 1, 2021. As of June 30, 2021 and June 30, 2020, the Company had no outstanding
contingent Stock Bonuses.
Equity Compensation Plan Information
The following table summarizes share and exercise
price information about the Company’s equity compensation plans as of June 30, 2021:
Equity compensation Plan table
Equity compensation plans
Equity compensation plans not
approved by security holders — — —
(e) Recent Sales of Unregistered Securities
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.
During the year ended June 30, 2021 300,000 shares
of the Company’s restricted company stock were sold to an investor for $300,000.
During the year ended June 30, 2021, 129,364 shares
of its unregistered common stock were issued as commission.
During the year ended June 30, 2021, the company issued 1,186,824
units to various employees/consultants upon the conversion of debt pursuant to the 2006 Consolidated Incentive Plan with each unit
consisting of one share of the common stock and one warrant to purchase one share of the Company’s stock for $0.75 per share until
June 30, 2023.
During the year ended June 30, 2021, Mark Smith elected
to convert deferred compensation, accrued interest and accounts payable of $124,698, $3342 and $52,360 respectively into an aggregate
of 360,805 units at $0.50 per unit, pursuant to the 2006 Consolidated Incentive Plan with each unit consisting of one share of the common
stock and one warrant to purchase one share of the Company’s stock for $0.75 per share until December 31, 2024.
During the year ended June 30, 2021, the Company issued
144,000 units to Mr. Smith for salary of $72,000, pursuant to the 2006 Consolidated Incentive Plan with each unit consisting of one share
of the common stock and one warrant to purchase one share of the Company’s stock for $0.75 per share until 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 $3,049,491.
During the year ended June 30, 2020, the Company sold
3,168,001 shares of its unregistered common stock (not including 29,000 shares issued to entities for services and 143,316 shares issued
upon conversion of debt). During the year ended June 30, 2020, the Company sold 18,000 units at $0.50 per unit
and received gross proceeds of $9,000 and net proceeds of $8,100; each unit consisting of one share of the Company’s restricted
common stock and one half warrant to purchase half a share of the Company’s restricted common stock at $0.75 until December
31, 2020. During the year ended June 30, 2020, the Company also sold 2,000,001 units at $0.50 per unit, and received
gross proceeds of $1,000,000 and net proceeds of $910,500 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 at $0.75 per share until December 31, 2020.
In addition, the Company also sold 1,150,000 units at $0.50 per unit and received gross proceeds of $575,000 and net proceeds of $517,500
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 at $0.75 until December 31, 2021. During the year ended June 30, 2020, Mark Smith
elected to convert a loan payable, accrued expenses and interest of $15,000, $52,830 and $3,828 respectively, into an aggregate 143,316
units at $0.50 per unit, pursuant to the 2006 Consolidated Incentive Plan with each unit consisting of one share of the common stock and
one warrant to purchase one share of the Company’s stock for $0.75 per share until December 31, 2024.
ITEM 6. SELECTED FINANCIAL DATA.
N/A
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Included in ITEM 8 are the audited Consolidated Financial
Statements for the fiscal years ended June 30, 2021 and 2020 ("Financial Statements").
Statements made in this Form 10-K that are not
historical or current facts, which represent the Company's expectations or beliefs including, but not limited to, statements concerning
the Company's operations, performance, financial condition, business strategies, and other information, involve substantial risks and
uncertainties. The Company's actual results of operations, most of which are beyond the Company's control, could differ materially. These
statements often can be identified by the use of terms such as "may," "will," "expect," "believe,"
anticipate," "estimate," or "continue" or the negative thereof. We wish to caution readers not to place undue
reliance on any such forward looking statements, which speak only as of the date made. Any forward-looking statements represent management's
best judgment as to what may occur in the future. However, forward looking statements are subject to risks, uncertainties and important
factors beyond our control that could cause actual results and events to differ materially from historical results of operations and events
and those presently anticipated or projected.
These factors include adverse economic conditions,
entry of new and stronger competitors, inadequate capital, unexpected costs, failure (or delay) to gain product or regulatory approvals
in the United States (or particular states) or foreign countries, loss (permanently or for any extended period of time) of the services
of members of the Company’s small core management team (all of whom are age 70 or older) and failure to capitalize upon access to
new markets. Additional risks and uncertainties that may affect forward looking statements about Bion's business and prospects include
the possibility that markets for nutrient reduction credits (discussed below) and/or other ways to monetize nutrient reductions will be
slow to develop (or not develop at all), the existing default by PA1 on its loan secured by the Kreider 1 system, the possibility that
competitors will develop more comprehensive and/or less expensive environmental solution, delays in market awareness of Bion and our Systems,
uncertainties and costs related to research and development efforts to update and improve Bion’s technologies and applications thereof,
and/or delays in Bion's development of JVs, Projects and failure of marketing strategies, each of which could have both immediate and
long term material adverse effects by placing us behind our competitors and requiring expenditures of our limited resources.
THESE RISKS, UNCERTAINTIES AND FACTORS BEYOND OUR
CONTROL ARE MAGNIFIED DURING THE CURRENT UNCERTAIN PERIOD RELATED TO THE COVID-19 PANDEMIC AND THE UNIQUE ECONOMIC, FINANCIAL, GOVERNMENTAL
AND HEALTH-RELATED CONDITIONS IN WHICH THE COMPANY, THE ENTIRE COUNTRY AND THE ENTIRE WORLD NOW RESIDE. TO DATE THE COMPANY HAS
EXPERIENCED DIRECT IMPACTS IN VARIOUS AREAS INCLUDING 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 GOVERNMENT WHICH IS
LIKELY TO NEGATIVELY IMPACT THE COMPANY’S LEGISLATIVE INITIATIVES IN PENNSYLVANIA AND WASHINGTON DC, III) STRAINS AND UNCERTAINTIES
IN BOTH THE EQUITY AND DEBT MARKETS 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 OF FUNDING OF THE COMPANY AND ITS INITIATIVES AND PROJECTS MORE DIFFICULT AS FUTURE INDUSTRY
CONDITIONS ARE NOW MORE DIFFICULT TO ASSESS/PREDICT, V) CONSTRAINTS DUE TO PROBLEMS EXPERIENCED IN THE GLOBAL INDUSTRIAL SUPPLY CHAIN,
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.
Bion disclaims any obligation subsequently to revise
any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated
or unanticipated events.
The following discussion and analysis should be
read in conjunction with the Consolidated Financial Statements and Notes to Consolidated Financial Statements filed with this Report.
BUSINESS OVERVIEW
Our patented and proprietary technology provides economically
sustainable 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 mitigate environmental problems and improve operational/resource
efficiencies by recovering high-value co-products from the CAFOs’ waste stream that have traditionally been wasted or underutilized,
including renewable energy, nutrients (including ammonia nitrogen and phosphorus) and water.
During the 2016 to 2021 fiscal years, the Company
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 (see discussion at “Organic Fertilizer products” at Item 1 above).
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 above) (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 above) 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 the 2021 fiscal year, Bion completed a series
of core optimization trials of its 3G Tech platform that were required to move forward with its initial commercial scale 3G Tech project.
As described in more detail in Item 1above, Bion is now engaged in activities to develop a sustainable beef demonstration facility on
approximately four (4) leased acres near Fair Oaks, Indiana. The project, as presently planned, will include a covered barn for up to
300 head of cattle, designed to allow daily manure production to flow into Bion’s 3G Tech waste treatment/resource recovery platform
that includes an anaerobic digester (“AD”) to generate biogas and CO2, followed by Bion’s patented 3G Tech ammonia recovery
process to produce organic ammonium bicarbonate and nutrient-rich solids.
We believe that Bion’s 3G Tech platform, coupled
with common-sense policy changes to U.S. clean water strategy that are already underway, will combine to 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.
Bion’s business model and technology can open
up 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 our 3G Tech business model (described and discussed below) which will
support the costs of technology implementation (including related debt). We anticipate this will result in long term value for Bion. Long
term, Bion anticipates that the sustainable branding opportunity may expand to represent the single largest contributor to the economic
opportunity provided by Bion.
During 2018 the Company had its first patent issued
on its 3G Tech and has continued its work to expand its patent coverage for our 3G Tech. During October 2020, the Company the Company’s
third 3G patent, which patent significantly expands the breadth and depth of the Company’s 3G Tech coverage. The Company has filed
and anticipates filing additional patent applications (and/or continuations of existing patents) related to its technology developments
during the next 12 months. 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 and organic commercial fertilizer products. All processes will be verifiable
by third-parties (including regulatory authorities, certifying boards and consumers) to comply with environmental regulations and trading
programs and meet the requirements for: a) renewable energy credits, b) organic certification of the fertilizer coproducts and c) the
USDA PVP ‘Environmentally Sustainable’ branding program (See discussion at Item 1 above and elsewhere herein.) Bion anticipates
moving forward with the development process of its initial large-scale commercial installations of its 3G technology during the 2022 calendar
year on a JV basis.
In parallel, Bion has worked (which work continues)
to advance public policy initiatives that will potentially create markets (in Pennsylvania and other states) that will utilize taxpayer
funding for the purchase of verified pollution reductions from agriculture (“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. Competitive procurement of verified credits is now supported
by US EPA, the Chesapeake Bay Commission, national livestock interests, and other key stakeholders. Legislation in Pennsylvania 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 subsequently slowed progress for this and other policy initiatives and,
as a result, it is not currently possible to project the timeline for this and other similar initiatives (see discussion at Item 1 above
and below herein).
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 - policies are already changing. Bion’s 3G technology was developed for implementation
on large scale livestock production facilities, where scale drives lower treatment costs and efficient production of co-products. 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 source from which most of the industry’s environmental
impacts are initiated. Bion intends to assist the forward-looking segment of the livestock industry in actually bringing animal protein
production in line with Twenty-first Century consumer demands for sustainability.
Bion’s 3G Tech and technology platform are designed
to capture four revenue streams under one umbrella and provide the basis for joint ventures between the Company and larger livestock producers
seeking to produce environmental/sustainable product lines. The revenue streams are: a) renewable energy and associated greenhouse gas
credits (including US Renewable Fuel Standard (RFS) and/or Low Carbon Fuel Standard (LCFS) credits)(the value and availability of which
will vary based on livestock type, geographical locations, and state regulatory programs), b) verified nutrient reductions (primarily
nitrogen and phosphorus) that can be used as qualified offsets to the federal Chesapeake Bay mandate and US EPA TMDL (‘total maximum
daily limit’) requirements (the value of which will vary based on livestock type, geographical locations, and state regulatory programs),
c) co-products consisting of high value fertilizer for use in organic food production for human consumption and/or to grow feed for use
by livestock in Projects, and d) an environmentally sustainable USDA certification that will be incorporated into a “brand”
that can address the consumer concerns regarding food safety and sustainability (based on incorporation of all of the third party verified
data for greenhouse gas reductions, nutrient reductions and fertilizer products into a digital register). The Company believes that the
“branding” opportunity will offer large scale livestock producer / processor / distributors of livestock products the opportunity
to differentiate and identify their products in the marketplace and, thereby creates the opportunity to achieve “premium pricing”
by addressing consumer concerns related to safety and sustainability in a manner similar to the premiums achieved by organic producers.
Operational results from the initial commercial
system (Kreider 1 utilizing our 2G Tech) confirmed the ability of Bion’s technologies to meet nutrient reduction goals at commercial
scale for an extended period of operation. Bion’s 3G Tech platform (and the new variations under development) center on its patented
and proprietary processes that separate and aggregate the various assets in the CAFO waste stream so they become benign, stable and/or
transportable. Bion systems can: a) remove up to 95% of the nutrients (primarily nitrogen and phosphorus) in the effluent, b) reduce greenhouse
gases by 90% (or more) including elimination of virtually all ammonia emissions, c) while materially reducing pathogens, antibiotics and
hormones in the livestock waste stream. Our core technology and its primary CAFO applications were now proven in the Kreider 1 commercial
operations. It has been accepted by the Environmental Protection Agency (“EPA”) and other regulatory agencies and it is protected
by Bion’s portfolio of U.S. and international patents (both issued and applied for).
Currently, our research and development activities
are underway to improve, update and commercialization of our 3G Tech systems (which is ready to be implemented) during the current fiscal
year to meet the needs of JVs in various geographic and climate areas with nutrient release constraints and to increase the recovery and
generation of valuable co-products while adding the capability to treat dry (poultry) waste streams in addition to wet manure streams
at lower capital costs and operating costs
Bion business activity is focused on development of its initial
3G Tech installation and using applications of its 3G Tech for utilization in JVs and Projects (including Integrated Projects) in which
the Company will participate as developer, technology provider and direct participant. Currently our efforts and funds are being expended
on pre-development activities related to: 1) sustainable/organic grain-finished beef JV and 2) the Kreider 2 poultry JV.
KREIDER 1 (HISTORY AND STATUS)
During 2008 the Company commenced actively pursuing
the opportunity presented by environmental retrofit and remediation of the waste streams of existing CAFOs which effort has met with very
limited success to date. The first commercial activity in this area is represented by our agreement with Kreider Farms (“KF”),
pursuant to which the Kreider 1 system to treat KF's dairy waste streams to reduce nutrient releases to the environment while generating
marketable nutrient credits and renewable energy was designed, constructed and entered full-scale operation during 2011. On January 26,
2009 the Board of the Pennsylvania Infrastructure Investment Authority (“Pennvest”) approved a $7.75 million loan to Bion
PA 1, LLC (“PA1”), a wholly-owned subsidiary of the Company, for the initial Kreider Farms project (“Kreider 1 System”).
After substantial unanticipated delays, on August 12, 2010 PA1 received a permit for construction of the Kreider 1 System based our 2G
Tech (which the Company is no longer implementing). Construction activities commenced during November 2010. The closing/settlement of
the Pennvest Loan took place on November 3, 2010. PA1 finished the construction of the Kreider 1 System and entered a period of system
‘operational shakedown’ during May 2011. The Kreider 1 System reached full, stabilized operation by the end of the 2012 fiscal
year. During 2011 the PADEP re-certified the nutrient credits for this project. The PADEP issued final permits for the Kreider 1 System
(including the credit verification plan) on August 1, 2012 on which date the Company deemed that the Kreider 1 System was ‘placed
in service’. As a result, PA1 commenced generating nutrient reduction credits for potential sale while continuing to utilize the
Kreider 1 System to test improvements and add-ons. However, to date liquidity in the Pennsylvania nutrient credit market has failed
to develop significant breadth and depth, which limited liquidity/depth has negatively impacted Bion’s business plans and has resulted
in insurmountable challenges to monetizing the nutrient reductions created by PA1’s existing Kreider 1 project and Bion’s
other proposed projects. These difficulties have prevented PA1 from generating any material revenues from the Kreider 1 project to date
and raise significant questions as to when, if ever, PA1 will be able to generate such revenues from the Kreider 1 System which has now
been inactive for several years. PA1 had sporadic discussions/negotiations with Pennvest related to forbearance and/or re-structuring
its obligations pursuant to the Pennvest Loan for more than 7 years. In the context of such discussions/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. Due to the failure of the Pennsylvania nutrient reduction credit market to develop, the Company determined that the carrying amount
of the property and equipment related to the Kreider 1 project exceeded its estimated future undiscounted cash flows based on certain
assumptions regarding timing, level and probability of revenues from sales of nutrient reduction credits and, therefore, PA1 and the Company
recorded impairments related to the value of the Kreider 1 assets of $1,750,000 and $2,000,000 at June 30, 2015 and June 30, 2014, respectively.
During the 2016 fiscal year, PA1 and the Company recorded an impairment of $1,684,562 to the value of the Kreider 1 assets which reduced
the value on the Company’s books to zero. This impairment reflects management’s judgment that the salvage value of the Kreider
1 assets roughly equals PA1’s contractual obligations related to the Kreider 1 System, including expenses related to decommissioning
of the Kreider 1 System.
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 PA1) 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 recently 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 to 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 our current 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 this calendar year.
The economics (potential revenues, profitability
and continued operation) of the Kreider 1 System were based almost entirely on the long-term sale of nutrient (nitrogen and/or phosphorus)
reduction credits to meet the requirements of the Chesapeake Bay environmental clean-up. See below for further discussion.
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 has been (and is now) solely an obligation of PA1 since that date.
However, the Company’s consolidated balance sheet as of June 30, 2021 reflects the Pennvest Loan as a liability of $9,868,495 despite
the fact that the obligation (if any) solely an obligation of PA 1.
PA1 is currently maintaining some equipment at
the Kreider 1 System pending its potential inclusion within the Kreider 2 Project discussed below.
3G TECH KREIDER 2 POULTRY PROJECT
Bion has done extensive pre-development work related
to a waste treatment/renewable energy production facility to treat the waste from KF’s approximately 6+ million chickens (planned
to expand to approximately 9-10 million) (and potentially other poultry operations and/or other waste streams) ('Kreider Renewable Energy
Facility' or ‘ Kreider 2 Project’). On May 5, 2016, the Company executed a stand-alone joint venture agreement with Kreider
Farms covering all matters related to development and operation of Kreider 2 system to treat the waste streams from Kreider’s poultry
facilities in Bion PA2 LLC (“PA2”). During May 2011 the PADEP certified a smaller version of the Kreider 2 Project (utilizing
our 3G Tech) for 559,457 nutrient credits under the old EPA’s Chesapeake Bay model. The Company has been in ongoing discussions
with the PADEP regarding the appropriate credit calculation methodology for large-scale technology-based nutrient reduction installations
such as the KF2 Project utilizing our 3G Tech platform. Based on these discussions and the size of the Kreider 2 Project, we anticipate
that when designs are finalized, the Kreider 2 Project will be re-certified for a far larger number of credits (management’s current
estimates are between 2-4 million (or more) nutrient reduction credits for treatment of the waste stream from Kreider’s poultry
pursuant to the Company’s subsequent amended application pursuant to the amended EPA Chesapeake Bay model and agreements between
the EPA and PA. Note that this Project, if it is constructed, may be expanded in the future to treat wastes from other local and regional
CAFOs (poultry and/or dairy---including the Kreider Dairy) and/or additional Kreider poultry expansion (some of which may not qualify
for nutrient reduction credits). A review process to clarify certain issues related to credit calculation and verification commenced
during 2014 based on Bion’s 2G Tech but was been placed on hold. The Company anticipates if and when PA2 re-commences work on the
Kreider 2 Project, it will submit a new application based on our 3G Tech. Site specific design and engineering work for this facility
have not commenced, and the Company does not yet have financing in place for the Kreider 2 Project. This opportunity is being pursued
through PA2. If there are positive developments related to the market for nutrient reductions in Pennsylvania, of which there is no assurance,
the Company intends to pursue development, design and construction of the Kreider 2 Project with a goal of achieving operational status
for its initial modules during then following calendar year. The economics (potential revenues and profitability) of the Kreider 2 Project,
despite its proposed use of Bion’s 3G Tech for increased recovery of marketable by-products, are based in material part the long-term
sale of nutrient (nitrogen and/or phosphorus) reduction credits to meet the requirements of the Chesapeake Bay environmental clean-up.
However, liquidity in the Pennsylvania nutrient credit market has not yet developed significant breadth and depth, which lack of liquidity
has negatively impacted Bion’s business plans and will most likely delay PA2’s Kreider 2 Project and other proposed projects
in Pennsylvania.
Note that while Bion believes that the Kreider
2 Project and/or subsequent Bion Projects in PA and the Chesapeake Bay Watershed will eventually generate revenue from the sale of: a)
nutrient reductions (credits or in other form), b) renewable energy (and related credits), c) sales of fertilizer products, and/or d)
potentially, in time, credits for the reduction of greenhouse gas emissions, plus e) license fees related to a ‘sustainable brand’,
the Covid-19 pandemic has delayed legislative efforts needed to commence its development. We believe that the potential market is very
large, but it is not possible to predict the exact timing and/or magnitude of these potential markets at this time.
SUSTAINABLE/ORGANIC GRAIN-FINISHED BEEF JV OPPORTUNITY
Bion believes there is a potentially large opportunity to develop
JVs to produce sustainable/organic grain-finished beef in the Midwest and elsewhere and has actively engaged in discussions regarding
pursuit of this opportunity with multiple parties over the past two years. (See extended discussion at Item 1 above).
PUBLIC POLICY INITIATIVES
A substantial portion of our activities involve public
policy initiatives (by the Company and other stakeholders) to encourage the establishment of appropriate public policies and regulations
(at federal, regional, state and local levels) to facilitate cost effective environmental clean-up and, thereby, support our business
activities. Bion has been joined by National Milk Producers Federation, Land O’Lakes, JBS and other national livestock interests
to support changes to our nation’s clean water strategy that will allow states to acquire low-cost nutrient reductions through a
competitive procurement process, in a similar manner to how government entities now acquire many other goods and services on behalf
of the taxpayer. As developing markets for nutrient reductions become fully-established, Bion anticipates a robust business opportunity
to retrofit existing CAFOs and develop Projects, based primarily on the sale of nutrient credits that provide cost-effective alternatives
to today’s high-cost and failing clean water strategy.
To date the market for long-term nutrient reduction
credits in Pennsylvania (‘PA’) has been very slow to develop and the Company’s activities have been negatively affected
by such lack of development. However, Bion is confident that once these markets are established, the credits it produces will be competitive
in the credit trading markets, based on its cost to remove nitrogen from the livestock waste stream, compared to the cost to remove nitrogen
through various other treatment activities.
Several independent studies have calculated the average
cost to remove nitrogen through various sector practices. Reports prepared for the PA Senate (2008), Chesapeake Bay Commission (2012)
and PA legislature (2013; described below), as well as the Maryland Chesapeake Bay Financing Strategy Report (2015), demonstrate that
the cost to remove nitrogen (per pound on average) from agriculture is $44 to $54, municipal wastewater: $28 to $43, and storm water:
$386 to $633. Pursuant to the PA legislative Report, by replacing sector allocation (for all sectors) with competitive bidding, up to
80 percent savings could be achieved in PA’s Chesapeake Bay compliance costs ($1.5 billion annually) by 2025. If the legislative
study had focused on the cost differentials of competitive bidding compared only with storm water, the relative savings would be substantially
greater.
Since these studies were completed, most of the larger
(Tier 1) municipal wastewater treatment plants in PA have been upgraded, at a cost of approximately $2.5 billion (vs initial 2004 PA DEP
cost estimates of $376 million). US EPA is now focused on PA’s storm water allocation (3.5 million pounds (per last published data))
and has this sector on ‘backstop level actions’, the highest level of EPA-oversight and the final step before sanctions. In
the same 2004 PA DEP cost estimate that led to the more than a $2 billion underestimate/miscalculation in municipal wastewater plant upgrade
costs, the estimate for storm water cost was $5.6 billion. In April 2017, US EPA sent a Letter of Expectation to PA DEP, expressing the
agency’s support for the use of nutrient credit trading and competitive bidding to engage the private-sector to lower costs. The
letter specifically encouraged the use of credit trading to offset the state’s looming storm water obligations.
The Company believes that: i) the April 2015 release
of a report from the Pennsylvania Auditor General titled “Special Report on the Importance of Meeting Pennsylvania’s Chesapeake
Bay Nutrient Reduction Targets” which highlighted the economic consequences of EPA-imposed sanctions if the state fails to meet
the 2017 TMDL targets, as well as the need to support using low-cost solutions and technologies as alternatives to higher-cost public
infrastructure projects, where possible, and ii) Senate Bill 575 (introduced in April 2019 as successor to prior SB 799 (which was passed
by PA Senate during January 2018 but was not voted on in the House)) which, if adopted, will establish a program that will allow the Pennsylvania’s
tax- and rate-payers to meet significant portions of their EPA-mandated Chesapeake Bay pollution reductions at significantly lower cost
by purchasing verified reductions (by competitive bidding) from all sources, including those that Bion can produce through livestock waste
treatment, represent visible evidence of progress being made on these matters in Pennsylvania. SB 575 was passed by the PA Senate in 2019
and introduced in the PA House which is scheduled to be taken up the bill during its current session which is now underway. Such legislation
(which has bi-partisan support), if passed and signed into law (of which there is no assurance), will potentially enable Bion (and others)
to compete for public funding on an equal basis with subsidized agricultural ‘best management practices’ and public works
and storm water authorities. Note, however, that there is opposition to currently filed SB 475 and SB832 (as was the case for SB 575 and
its predecessors) from threatened stakeholders committed to the existing status quo approaches--- a significant portion of which was focused
on attacking (in often inaccurate and/or vilifying ways) Bion in/through social media and internet articles, blogs, press releases, twitter
posts and re-tweets, rather than engaging the substantive issues. Further note that the current COVID-19 crisis has shifted government,
legislative and budget focuses in PA in manners which may delay our efforts. If SB 475 and/or SB832 (or similar legislation) is passed
(on a stand-alone basis or as part of a larger piece of legislation) and implemented (in a form which maintains its core provisions),
Bion expects that the policies and strategies being developed in PA will not only benefit the Company’s existing and proposed PA
projects, but will also subsequently provide the basis for a larger Chesapeake Bay watershed strategy and, thereafter, a national clean
water strategy.
THE COVID-19 PANDEMIC HAS FURTHER INCREASED UNCERTAINTIES
RE SB 575 AND ALL POLICY INITIATIVES. SEE FURTHER DISCUSSION IN ITEM 1 ABOVE.
The Company believes that Pennsylvania is ‘ground
zero’ in the long-standing clean water battle between agriculture and the further regulation of agriculture relative to nutrient
impacts. The ability of Bion and other technology providers to achieve verified reductions from agricultural non-point sources can resolve
the current stalemate and enable implementation of constructive solutions that benefit all stakeholders, providing a mechanism that ensures
that taxpayer funds will be used to achieve the most beneficial result at the lowest cost, regardless of source. All sources, point and
non-point, rural and urban, will be able to compete for tax payer-funded nitrogen reductions in a fair and transparent process; and since
payment from the tax and rate payers would now be performance-based, these providers will be held financially accountable.
We believe that the overwhelming environmental, economic,
quality of life and public health benefits to all stakeholders in the watershed, both within and outside of Pennsylvania, make the case
for adoption of the strategies outlined in the Report less an issue of ‘if’, but of ‘when and how’. The adoption
of a competitive procurement program will have significant positive impact on technology providers that can deliver verified nitrogen
reductions such as Bion, by allocating existing tax- and rate-payer clean water funding to low-cost solutions based upon a voluntary and
transparent procurement process. The Company believes that implementation of a competitively-bid nutrient reduction program to achieve
the goals for the Chesapeake Bay watershed can also provide a working policy model and platform for other states to adopt that will enhance
their efforts to comply with both current and future requirements for local and federal estuarine watersheds, including the Mississippi
River/Gulf of Mexico, the Great Lakes Basin and other nutrient-impaired watersheds. (Note, however, that current COVID-19 crisis has
shifted government, legislative and budget focuses in manners which may delay the fruition of our efforts.)
The Company currently anticipates that a Sustainable/Organic
Grain-Fed Beef JV is likely to be its initial full-scale 3G Project (but the Kreider 2 poultry JV in PA remains a possibility). Now
that Bion has commenced development of its initial 3G Tech installation by leasing land and beginning the site-specific design and permitting
processes, we believe it will be possible to commence development of a full-scale 3G Project during late 2022 calendar year, but further
delays are possible. It is not possible at this time to firmly predict where the initial JVs and Projects will be developed or the order
in which Projects will be developed. All potential Projects are in very early discussion and pre-development stages and may never progress
to actual development or may be developed after other Projects not yet under active consideration.
Bion intends to carry out its business plan to move
forward on multiple JVs/Projects during the 2022-2026 period to create a pipeline of Projects. Management has a 5-year development target
(through calendar year 2026) of commencing approximately 3-8 or more JVs/Projects of various sizes (and potentially in multiple species)
pursuant to joint ventures (or similar agreements). Management hopes to have identified and begun development work related to 3 (or more)
Projects over the next 3 years. At the end of the 5-year period, Bion projects that 3-5 or more of these JVs/Projects will be in commercial
operation in 3 or more states, and the balance would be in various stages ranging from partial operation to early development stage. It
is possible that one or more Projects will be developed in joint ventures specifically targeted to meet the growing animal protein demand
outside of the United States (including without limitation Asia, Europe and/or the Middle East). No JVs/Projects (including Integrated
Projects) have been developed to date.
The Company’s audited financial statements
for the years ended June 30, 2021 and 2020 were prepared assuming the Company will continue as a going concern. The Company has incurred
net losses of approximately $3,451,000 and $4,553,000 during the years ended June 30, 2021 and 2020, respectively. The Report of the Independent
Registered Public Accounting Firm on the Company’s consolidated financial statements as of and for the year ended June 30, 2021
includes a “going concern” explanatory paragraph which means that there are factors that raise substantial doubt about the
Company’s ability to continue as a going concern. At June 30, 2021, the Company had a working capital deficit and a stockholders’
deficit of approximately $6,614,000 and $11,445,000, respectively. Management’s plans with respect to these matters are described
in this section and in our consolidated financial statements (and notes thereto), and this material does not include any adjustments that
might result from the outcome of this uncertainty. However, there is no guarantee that we will be able to raise sufficient funds or further
capital for the operations planned in the near future.
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, 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.
CRITICAL ACCOUNTING POLICIES
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 Accounting Standards Codification
(“ASC”) 606 “Revenue from Contracts with Customers”.
Stock-based compensation
The Company follows the provisions of ASC 718,
which generally requires that share-based compensation transactions be accounted and recognized in the statement of income based upon
their grant date fair values.
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.
Recent Accounting Pronouncements:
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.
YEAR ENDED JUNE 30, 2021 COMPARED TO THE
YEAR ENDED JUNE 30, 2020
Revenue
Total revenues were nil for both the years
ended June 30, 2021 and 2020, respectively.
General and Administrative
Total general and administrative expenses
were $2,078,000 and $3,090,000 for the years ended June 30, 2021 and 2020, respectively.
General and administrative expenses, excluding
stock-based compensation charges of $850,000 and $1,931,000, were $1,228,000 and $1,159,000 for the years ended June 30, 2021 and 2020,
respectively, representing a $69,000 increase. Salaries and related payroll tax expenses were $319,000 and $266,000 for the years ended
June 30, 2021 and 2020, respectively, representing a $53,000 increase due to a consultant being partially paid as an employee and a bonus
given to Smith for payroll taxes during the year ended June 30, 2021. Consulting costs were $391,000 and $458,000 for the years ended
June 30, 2021 and 2020, respectively. The decrease in consulting costs is partially due a consultant being paid as an employee and the
absence of political consulting to further the environmental mandates in Pennsylvania during the years ended June 30, 2021. Investor relations
expenses were $149,000 and $72,000 for the years ended June 30, 2021 and 2020, respectively, and the increase is due to a new contract
with an investor relations firm during the latter part of fiscal year 2021. Travel costs were $13,000 and $28,000 for the years ended
June 30, 2021 and 2020, respectively, with the decrease due to travel restrictions during the pandemic.
General and administrative stock-based employee
compensation for the years ended June 30, 2021 and 2020 consists of the following:
General and administrative:
Change in fair value from modification of option terms $ 9,000 $ 511,000
Change in fair value from modification of warrant terms 25,000 1,065,000
Stock-based compensation charges were $850,000 and
$1,931,000 for the years ended June 30, 2021 and 2020, respectively. The fair value of stock options expensed for the years ended June
30, 2021 and 2020 was $816,000 and $355,000, respectively. The Company granted 960,000 and 2,210,000 fully vested options during the years
ended June 30, 2021 and 2020, respectively. Compensation expense relating to the change in fair value from the modification of option
terms was $9,000 and $511,000 for the years ended June 30, 2021 and 2020, respectively, as the Company granted an extension of certain
option expiration dates and modified selected exercise prices for 50,000 and 7,121,600 options during the years ended June 30, 2021 and
2020, respectively. During the years ended June 30, 2021 and 2020, the Company extended expiration dates of warrants for certain employees
and consultants which resulted in the recognition of $25,000 and $1,065,000, respectively, in non-cash compensation.
Depreciation
Total depreciation expense was $827 and $1,248
for the years ended June 30, 2021 and 2020, respectively.
Research and Development
Total research and development expenses were $749,000
and $1,124,000 for the years ended June 30, 2021 and 2020, respectively.
Research and development expenses, excluding stock-based
compensation expenses of $202,000 and $646,000 were $547,000 and $478,000 for the years ended June 30, 2021 and 2020, respectively. Salaries
and related payroll tax expenses were $94,000 and $80,000 for the years ended June 30, 2021 and 2020, respectively. Consulting costs were
$214,000 and $218,000 for the years ended June 30, 2021 and 2020, respectively. The Company also incurred $144,000 and $112,000
for the years ended June 30, 2021 and 2020, respectively in the development of new components of the pilot program for its anaerobic digestate
process. The overall increase in research and development expenses were attributable, in part, to increased cash availability during the
latter part of fiscal year 2021.
Research and development stock-based employee compensation
for the years ended June 30, 2021 and 2020 consists of the following:
Research and development:
Change in fair value from modification of option terms $ — $ 115,000
Change in fair value from modification of warrant terms — 457,000
Stock-based compensation expenses were $202,000
and $646,000 for the years ended June 30, 2021 and 2020, respectively. The Company expensed $202,000 and $74,000 for the fair value of
stock options that vested during the years ended June 30, 2021 and 2020, respectively. The Company granted 960,000 and 2,210,000 fully
vested options during the years ended June 30, 2021 and 2020, respectively, a portion of which was allocated to research and development.
The compensation expense of nil and $115,000 for the years ended June 30, 2021 and 2020, respectively was for the change in fair value
from modification of options terms is due to a research and development employee and consultant having certain option exercise prices
reduced during the year ended June 30, 2020. During the year ended June 30, 2020, the Company extended expiration dates of warrants for
certain research and development employees and consultants which resulted in the recognition of $457,000 in non-cash compensation, while
no such modifications were made for the year ended June 30, 2021.
Loss from Operations
As a result of the factors described above, the
loss from operations was $2,828,000 and $4,215,000 for the years ended June 30, 2021 and 2020, respectively.
Other Expense
Other expense was $623,000 and $338,000 for the
years ended June 30, 2021 and 2020, respectively. Interest expense of $187,000 and $36,000 was recorded during the years ended June 30,
2021 and 2020, respectively, due to the modification of warrant expiry dates for warrants held by investors and brokers. Interest expense
related to convertible notes was $197,000 and $159,000 for the years ended June 30, 2021 and 2020, respectively and the increase is attributable
to higher convertible note balances. Offsetting higher interest expenses for the year ended June 30, 2021 was $35,000 on forgiveness of
debt due to the Company’s PPP loan being forgiven by the Small Business Administration. During the year ended June 30, 2020, the
Company recognized other income of $122,000 due to the extinguishment of liabilities due to the legal release of certain accounts payable
and $6,000 due to the grant of an Economic Impact Disaster Loan.
Net Loss Attributable to the Noncontrolling
Interest
The net loss attributable to the noncontrolling
interest was $3,000 and $8,000 for the years ended June 30, 2021 and 2020, respectively.
Net Loss Attributable to Bion’s Common
Stockholders
As a result of the factors described above, the
net loss attributable to Bion’s stockholders was $3,448,000 and $4,546,000 for the years ended June 30, 2021 and 2020, respectively,