ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
This Annual Report on Form 10-K (and the documents
incorporated herein by reference) contain forward-looking statements, within the meaning of Section 27A of the Securities Act and Section
21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), that involve substantial risks and uncertainties.
Forward-looking statements generally can be identified by the use of forward-looking terminology such as "may," "will,"
"expect," "intend," "estimate," "anticipate," "project," "predict," "plan,"
"believe," or "continue," or the negative thereof or variations thereon and/or references to “goals”,
“targets”, “projections” or similar terminology. The expectations reflected in forward-looking statements may
prove to be incorrect. The Company's actual results of operations, most of which are beyond the Company's control, could differ materially.
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 and limited ability to obtain financing, needed personnel (including entire
team related to project development and project operations in coming years) and equipment, unexpected costs, failure (or delay) to gain
product certifications and/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 (many 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: i) the possibility that markets for nutrient reduction credits (discussed below)
and/or other ways to monetize nutrient reductions and other environmental benefits will be slow to develop (or not develop at all), ii)
PA1’s dissolution and its effect on how the Company is viewed, (if any), iii) the possibility that competitors will develop more
comprehensive and/or less expensive environmental solutions, iv) delays in market awareness of Bion and our Systems, v) uncertainties
and costs increases related to research and development efforts to update and improve Bion’s technologies and applications thereof,
and/or vi) delays and/or costs exceeding expectations relating to Bion's development of the Initial Project, JVs and/or Projects and vii)
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
WHICH HAVE INCREASED ANTICIPATED PROJECT DEVELOPMENT COSTS, VI) DUE TO THE AGE AND HEALTH OF OUR CORE MANAGEMENT TEAM, MOST 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 AND PLAN
Bion Environmental Technologies, Inc.'s ("Bion," "Company,"
"We," "Us," or "Our") was incorporated in 1987 in the State of Colorado. Bion’s mission is to make
livestock production more sustainable, profitable and transparent. We intend to accomplish this by deploying our Gen3Tech platform/business
model (discussed below) in ventures focused on the ‘feeder’ space of the livestock production/value chain to provide the consumer
with verifiably sustainable premium meat products (together with environmentally friendly, sustainable and/or organic co-products from
the production process). Bion believes this approach can create extraordinary value for our shareholders and employees (all of whom
own securities in the Company) and for livestock/agriculture industry ‘partners’ who join us in our ventures. We anticipate
pursuing the opportunity created by our third generation technology (“Gen3Tech”) and business/technology platform in conjunction
with other industry practices (“Gen3Tech Platform” or “Platform”).
Our patented and proprietary technology provides advanced
waste treatment and resource recovery for large-scale livestock production facilities (also known as “Concentrated Animal Feeding
Operations” or “CAFOs"). Livestock production and its waste, particularly from CAFOs, has been identified as one of the
greatest soil, air, and water quality problems in the U.S. today. Application of our Gen3Tech can largely mitigate these environmental
problems, while simultaneously improving operational/ resource efficiencies by recovering high-value co-products from the CAFOs’
waste stream. These waste ‘assets’ – nutrients and methane – have traditionally been wasted or underutilized and
are the same ‘pollutants’ that today fuel harmful algae blooms, contaminate surface groundwater, and exacerbate climate change.
We anticipate this will result in substantial long-term
value for Bion. In the context of such JVs, we believe that the verifiable sustainable branding opportunities (conventional and organic)
in meat will represent one of the largest enhanced revenue contributors 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.
Bion’s Gen3Tech was designed to capture and
stabilize these assets and produce renewable energy, fertilizer products, and clean water as part of the process of raising verifiably
sustainable livestock. All steps and stages in the animal raising and waste treatment process will be third-party verified, providing
the basis for additional revenues, including carbon and/or renewable energy-related credits and, eventually, payment for a range of ecosystem
services, including nutrient credits as described below. The same verified data will be used to substantiate the claims of a USDA-certified
sustainable brand that will support premium pricing for the meat/ animal protein products that are produced in Bion facilities.
During the first half of 2022 Bion
began pre-marketing our sustainable beef to retailers, food service distributors and the meat industry in the U.S. In general, the
response has been favorable. During July 2022, Bion announced a letter of intent (“Ribbonwire LOI”) to develop a large-scale
commercial project - a 15,000-head sustainable beef cattle feeding operation together with the Ribbonwire Ranch, in Dalhart, Texas (with
a provision to expand to 60,000 head) (“Dalhart Project”). During January 2023 Bion announced a letter of intent (“Olson
LOI”) to develop a large-scale commercial project - a 15,000-head sustainable beef cattle feeding operation together with the Olson
Feeders and TD Angus, near North Platte, Nebraska (with a provision to expand to 45,000 head or more) (“Olson Project”). During
April 2023 Bion announced a letter of intent (“DVG LOI”) to develop a large-scale commercial project - a 15,000-head sustainable
beef cattle feeding operation together with Dakota Valley Growers near Bathgate, North Dakota (“DVG Project”). Based on our
experience to date, we believe we will not have difficulty in securing participation in our Projects from additional feeders/cattlemen.
The Olson, Dalhart and DVG Projects (and subsequent Projects) will be developed to produce blockchain-verified, sustainable beef in customized
covered barns (resulting in reduced stress on cattle caused by extreme weather and temperatures and resulting higher feed/weight gain
efficiency) with ongoing manure transfer (through slatted floors) to anaerobic digesters (AD) to capture nitrogen from the manure stream
before loss to the atmosphere and generate renewable natural gas (RNG) for sale while remediating the environmental/carbon impacts usually
associated with cattle feedlots and CAFOs. Bion’s patented Gen3Tech platform will refine the waste stream into valuable coproducts
that include clean water, RNG, photovoltaic solar electricity and fertilizer (‘climate smart’ and/or organic) products. We
anticipate converting these LOIs into definitive JV agreements and creating related distribution agreements with key retailers and food
service distributors during the current fiscal year.
Bion’s business model and technology platform can create
the opportunity for joint ventures (in various contractual forms)(“JVs”) between the Company and large livestock/food/fertilizer
industry participants based upon the supplemental cash flow generated by implementation of our Gen3Tech business model, which cash flows
will support the costs of technology implementation (including servicing related debt). We anticipate this will result in substantial
long-term value for Bion.. To accomplish Bion’s goals, we anticipate the we will ‘partner’ with other technology companies
who provide solutions for different links of the beef (and other livestock) value chain and with strategic partners up and down the supply
chain.In the context of such JVs, we believe that the verifiable sustainable branding opportunities (conventional and organic) in meat
will represent one of the single largest enhanced revenue contributor provided by Bion to the JVs (and, in some cases, 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.
During the next three to six months, the Company intends
to fully complete construction of the Initial Project’s phase 1 (including the crystalizer module) and continue the optimization
operations. Bion expects the Initial Project data will document the effectiveness of our Gen3Tech in a commercial-scale setting during
the current fiscal year and support development of the LOI Projects (and/or other Gen3Tech beef JV projects) commencing later this fiscal
year. We do not presently know the order in which these JV Projects will be developed as that decision will be made based on many
factors not yet in place. We believe the Initial Project data will also provide additional potential stakeholders (cattle producers, cattle
feeders, packers, food distributors and retailers and financial institutions) with the information they need to proceed with confidence
in collaborating with Bion on multiple new projects (see below).
Bion is now focused primarily on: i) completion of
development/construction and operation of the Initial Project, our initial commercial-scale Gen3Tech installation, and optimization of
its operational parameters, ii) pre-development planning of the LOI Projects (and/or other Gen3Tech beef JV projects) including steps
toward distribution agreements, iii) developing applications and markets for its low carbon ‘ClimateSmart’ and organic fertilizer
products (including listings/certifications of multiple liquid and solid products) and its sustainable (conventional and organic) animal
protein products, and iv) discussions regarding initiation and development of agreements and joint ventures (“JVs” as discussed
herein) (and related Projects) based on the augmented capabilities of our Gen3Tech business platform (in the sustainable beef and other
livestock segments), while (v) continuing to pursue business opportunities related to large retrofit projects (such as the Kreider poultry
project JV described below) and vi) ongoing R&D activities.
At present, there is essentially no traceable and
verifiable ‘sustainable beef’ available to the US market except for niche products. In response to consumer demand for transparency
and sustainability, Bion expects the meat industry in general, and beef specifically, to evolve towards using new technologies to deliver
these attributes in their products. While we anticipate a faster adoption of tracking, verification and sustainability technologies in
other perishable food categories like produce and dairy due to their shorter product cycles (and related harvest and production techniques),
meat industry leaders have also announced their willingness to move forward with initiatives in this area. Many companies have announced
‘sustainability’ initiatives but most appear to consist largely of ‘greenwashing’ marketing commitments rather
than substantive undertakings at this date. Note, however, that Tyson’s Brazen beef initiative (which was announced during March
2023) may develop into a substantive competitive factor in the sustainable beef marketplace. Bion predicts that within approximately five
years, consumers will be able to track and verify claims including sustainability on 25% (or more) of the products merchandised in the
meat department. Bion believes that the retail market share of verifiably sustainable beef in the US will approach 7-10 % within three
(3) years (end of 2026) and 25% in five (5) years (end of 2028) (approximately 6-7,000,000 cattle annually) (and more thereafter). If Bion
can successfully execute on its sustainable beef business plan (which is subject to many contingencies), we believe that JV facilities
utilizing Bion’s Gen3Tech platform will supply one-third (1/3) or more of that of the premium market segment (and a higher portion
of meat that is actually traceable and verifiably sustainable). Our goal is to have multiple sustainable beef projects under development
(within 3-5 distinct JVs) by the end of our 2025 fiscal year. Our first commercial project is likely to be one of our current LOI Projects
but we anticipate commencing development of additional sustainable beef projects during the current fiscal year as well. Our current target
is to have at least three (3) facility modules (15,000 head per module)(“Modules”) in development and/or under construction
during 2024 in three (3) different JVs with the initial barns being populated with livestock during 2025. Further expansion in the number
of distinct JVs is projected through 2026-7 aiming at 5-10 JVs in process --- each of which JVs will be pursuing development of multiple
Modules with targets of 12-15 populated Modules by the end of 2026 (approximately 2%-3% of the US beef market) and 30-45 Modules constructed
and being populated by 2029 (approximately 6%-8% of the US beef market) with further expansion thereafter. Bion’s current goal is
that its Gen3Tech platform will be utilized to produce 33% of the verifiable “sustainable beef” category at the end of the
period (which will equal approximately 2 million cattle annually)(45 Modules).
During this five (5) year period, the Company also
anticipates having additional Gen3Tech projects underway in the pork/dairy/egg sectors of the US animal protein market.
There is no assurance that the Company will reach
or approach the goals/targets set forth above. Reaching such goals/targets will require access to very large amounts of capital (equity
and debt) as each module is projected to cost in excess of $50 million (debt/equity/grants) to construct and require mobilization of substantial
personnel, technical resources and management skills. The Company does not possess either the financial or personnel resources required
internally and will need to source such resources from outside itself.
For additional information regarding our ‘HISTORY,
BACKGROUND AND CURRENT ACTIVITIES’,see discussion in Part I, Item 1 above and Notes to the Financial Statements (particularly
Notes 1, 3, 5 and 9) included in this report .
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 since the onset of the Covid-19 pandemic, which have delayed certain research and development testing
and have delayed and/or increased the cost of construction of the Company’s initial 3G Tech installation as equipment/services remain
difficult to acquire in a timely manner, vi) due to the age and health of our core management team, many of whom are age 70 or older and
have had one or more existing health issues (including brief periods of Covid-19 infection), 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.
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. As of March 31, 2023
and 2022, there are no derivative financial instruments.
Options:
The Company has issued options to employees and consultants
under its 2006 Plan to purchase common shares of the Company. Options are valued on the grant date using the Black-Scholes option-pricing
model. The expected volatility is 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.
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.
Lease Accounting:
The Company accounts for leases under ASC 842, Leases (“ASC
842”). Accordingly, the Company will determine whether an arrangement contains a lease at the inception of the arrangement. If a
lease is determined to exist, the term of such lease is assessed based on the date on which the underlying asset is made available for
the Company’s use by the lessor. The Company’s assessment of the lease term reflects the non-cancelable term of the lease,
inclusive of any rent-free periods and/or periods covered by early-termination options which the Company is reasonably certain of not
exercising, as well as periods covered by renewal options which the Company is reasonably certain of exercising. The Company also determines
lease classification as either operating or finance at lease commencement, which governs the pattern of expense recognition and the presentation
reflected in the consolidated statements of operations over the lease term.
For leases with a term exceeding 12 months,
a lease liability is recorded on the Company’s consolidated balance sheet at lease commencement reflecting the present value of
its fixed minimum payment obligations over the lease term. A corresponding right-of-use (“ROU”) asset equal to the initial
lease liability is also recorded, adjusted for any prepaid rent and/or initial direct costs incurred in connection with execution of
the lease and reduced by any lease incentives received. For purposes of measuring the present value of its fixed payment obligations
for a given lease, the Company uses its incremental borrowing rate, determined based on information available at lease commencement,
as rates implicit in its leasing arrangements are typically not readily determinable. The Company's incremental borrowing rate reflects
the rate it would pay to borrow on a secured basis and incorporates the term and economic environment of the associated lease.
YEAR ENDED JUNE 30, 2023 COMPARED TO THE
YEAR ENDED JUNE 30, 2022
Revenue
Total revenues were nil for both the years ended June 30, 2023 and 2022.
General and Administrative
Total general and administrative expenses
were $3,072,000 and $2,348,000 for the year ended June 30, 2023 and 2022, respectively.
Salaries and related payroll tax expenses were
$730,000 and $340,000 for the years ended June 30, 2023 and 2022, respectively, representing a $390,000 increase. The increase is largely
due to the addition of Bill O’Neill (and administrative initiatives he has commenced), pay increases, and lower percentage of total
salaries capitalized to the Initial Project. Consulting costs were $485,000 and $561,000 for the years ended June 30, 2023 and 2022, respectively.
The $76,000 decrease in consulting costs is due to the capitalization of a larger portion of Brightcap’s consulting expense to the
Initial Project in fiscal year 2023. Investor relations expenses were $697,000 and $395,000 for the years ended June 30, 2023 and 2022,
respectively, and the $302,000 increase is due to a new contract with an investor relations firm and increased activity during the year
ended June 30, 2023 due to the resumption of investor conferences and other matters. Legal costs were $83,000 and $291,000 for the years
ended June 30, 2023 and 2022, respectively, and the $208,000 decrease is due to less outside legal activities in the year 2023 compared
to the year 2022 in which legal fees surrounding the hack and theft of the Company’s domain name and the dissolution of PA-1 were
incurred.
Stock-based compensation for the years ended June
30, 2023 and 2022 were $442,000 and $269,000, respectively.
Depreciation
Total depreciation expense was $1,645 and $1,161
for the year ended June 30, 2023 and 2022, respectively.
Research and Development
Total research and development expenses were $83,000
and $201,000 for the years ended June 30, 2023 and 2022, respectively, representing a $118,000 decrease due to less legal and salary expense
allocated to research and development and greater allocation to the Initial Project.
Salaries and related payroll tax expenses were
$9,000 and $32,000 for the years ended June 30, 2023 and 2022, respectively, as more salary expense was allocated to administrative expense
than research and development expense for the year ended June 30, 2023. Consulting costs were $43,000 and $80,000 for the years ended
June 30, 2023 and 2022, respectively. The Company also incurred $14,000 and $55,000 for the years ended June 30, 2023 and 2022, respectively
in legal costs related to patent applications and renewals.
Stock-based compensation allocated to research
and development for the years ended June 30, 2023 and 2022 were $4,000 and $22,000, respectively.
Loss from Operations
As a result of the factors described above, the
loss from operations was $3,157,000 and $2,550,000 for the years ended June 30, 2023 and 2022 respectively.
Other Income/(Expense)
Other income/(expense) was $(33,000) and $10,841,000
for the years ended June 30, 2023 and 2022, respectively. The difference was due to the gains recognized in 2022 consisting of $10,200,000
on the dissolution of PA1 and $902,000 from the sale of a domain name.
Interest expense related to deferred compensation,
loan payable and convertible notes for the year ended June 30, 2023 was $218,000 prior to capitalization of $180,000. Interest expense
related to deferred compensation, loan payable and convertible notes for the year ended June 30, 2022 was $334,000 prior to capitalization
of $32,000. The decrease is due to more interest being capitalized to the 3G1 project.
Net Loss Attributable to the Noncontrolling
Interest
The net loss attributable to the noncontrolling
interest was nil and $1,500 for the years ended June 30, 2023 and 2022, respectively.
Net Income/(Loss) Attributable to Bion’s
Common Stockholders
As a result of the factors described above, the
net income/loss attributable to Bion’s stockholders was $(3,189,000) and $8,292,000 for the years ended June 30, 2023 and 2022, respectively,
and the net income/(loss) per basic common share was $(.07) and $.20 for the years ended June 30, 2023 and 2022, respectively.
LIQUIDITY AND CAPITAL RESOURCES
The Company's consolidated financial statements for
the year ended June 30, 2023 have been prepared on a going concern basis, which contemplates the realization of assets and the settlement
of liabilities and commitments in the normal course of business. The Report of our Independent Registered Public Accounting Firm on the
Company's consolidated financial statements as of and for the year ended June 30, 2023 includes a "going concern" explanatory
paragraph which means that the auditors stated that conditions exist that raise substantial doubt about the Company's ability to continue
as a going concern.
Operating Activities
As of June 30, 2023, the Company had cash of approximately
$626,000. During the year ended June 30, 2023, net cash used in operating activities was $2,929,000, primarily consisting of cash operating
expenses related to salaries and benefits, and other general and administrative costs such as insurance, legal, accounting, consulting
and investor relations expenses as well as the purchase of property and equipment. Cash expenditures were offset by proceeds from financing
activities, primarily the exercise of warrants and sale of common shares. As previously noted, the Company is currently not generating
significant revenue and accordingly has not generated cash flows from operations. The Company does not anticipate generating sufficient
revenues to offset operating and capital costs for a minimum of two to five years. While there are no assurances that the Company will
be successful in its efforts to develop and construct its Projects and market its Systems, it is certain that the Company will require
substantial funding from external sources. Given the unsettled state of the current credit and capital markets for companies such as Bion,
there is no assurance the Company will be able to raise the funds it needs on reasonable terms.
Investing Activities
During the year ended June 30, 2023, the Company
invested $3,557,000 in the purchase of property and equipment, primarily related to the Initial Project construction in process.
Financing Activities
During the year ended June 30, 2023, the Company
received gross cash proceeds of $131,335 from the exercise of 175,114 warrants into shares of the Company’s common stock.
During the year ended June 30, 2023, the Company entered into subscription
agreements to sell units for $1.00 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,
2024, and pursuant thereto, the Company issued 346,230 units for total proceeds of $346,230.
During the year ended June 30, 2023, the Company entered
into a subscription agreement to sell 2,000,000 shares of restricted common stock of which 1,800,000 shares were purchased
on January 10, 2023 (the other 200,000 shares were purchased on December 31, 2022) for total proceeds during year ending June 30, 2023
of $2,000,000.
During the year ended June 30, 2023, the Company entered
into subscription agreements to sell 575,000 units at a price of $1.60, with each unit consisting of one share of the Company’s
restricted common stock and one half warrant to purchase one share of the Company’s restricted common stock for $2.40 per share
with an expiry date of June 30, 2024, and, pursuant thereto, the Company issued 575,000 units for total proceeds of $920,000, in aggregate.
The Company paid commissions of $86,000 on the sale of units.
As of June 30, 2023, the Company has debt obligations
consisting of: a) deferred compensation of $865,000 and b) convertible notes payable – affiliates of $1,716,000.
Plan of Operations and Outlook
As of June 30, 2023, the Company had cash of approximately
$626,000.
The Company continues to explore sources of additional financing
to satisfy its current operating requirements as it is not currently generating any significant revenues.
During fiscal years 2023 and 2022, the Company faced less difficulty
in raising equity funding (but was subject to substantial equity dilution from the larger amounts of equity financing during the periods)
than was experienced in the prior 3 years. However, this positive trend did not continue during the last quarter of the 2023 fiscal
year and first quarter of the current fiscal year (to date). The Company raised only raised very limited equity funds during such periods
to meet its some of its immediate needs, therefore, the Company needs to raise additional funds in the upcoming periods. The Company currently
faces substantial increases in demand for capital and operating expenditures for the fiscal year 2024 to date (and we anticipate such
increased demands will continue during the remainder of the 2024 fiscal year and periods thereafter) as it moves toward commercial implementation
of its 3G Tech and development of JVs (including costs associated with additions of personnel to carry out the business activities of
the Company) and, therefore, is likely to continue to face, significant cash flow management issues due to limited capital resources and
working capital constraints which had only recently begun to be alleviated. As a result, the Company has faced, and continues to face,
significant cash flow management challenges due to material working capital constraints. To partially mitigate these working capital
constraints, the Company's core senior management and some key employees and consultants have been deferring most of their cash compensation
and/or are accepting compensation in the form of securities of the Company (Notes 5 and 7 to Financial Statements) and members of the
Company's senior management have from time to time made loans to the Company and may need to do so in future periods. Note that, to deal
with earlier capital constraints, 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. As set forth
in detail elsewhere herein, during the year ended June 30, 2023 senior management (and family members) who held convertible obligations
of the Company adjusted the terms of their outstanding notes and agreed to debt modifications that reduced of the Company’s debt
by $3,522,000 and increased shareholders equity by the same amount. The constraints on available resources have had, and continue 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 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/or 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 the Initial Project, JVs, Projects and CAFO
Retrofit waste remediation systems (potentially including the Kreider 2 facility. The Company anticipates that it will seek to raise from
$20,000,000 to $80,000,000 or more (debt and equity) during the next twelve months. However, as discussed above, there is no guarantee
that we will be able to raise sufficient funds or further capital for the operations planned in the near future.
The Company is not currently generating any significant
revenues. Further, the Company’s anticipated revenues, if any, from existing projects, JVs and proposed projects will not be sufficient
to meet the Company’s anticipated operational and capital expenditure needs for many years. During the year ended June 30, 2023
the Company raised gross proceeds of approximately $4,038,000 through the sale of its securities and paid commissions of approximately
$86,000. During the year ended June 30, 2022 the Company raised gross proceeds for approximately $1,737,000 and paid commissions of approximately
$19,000. The Company anticipates raising additional funds from such sales and transactions in the coming periods. 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.
Because the Company is not currently generating
significant revenues, the Company will need to obtain additional capital to fund its operations and technology development, to satisfy
existing creditors, to develop the Initial Project and subsequent Projects.
As indicated above, the Company anticipates that it
will seek to raise from $20,000,000 to $80,000,000 or more (from debt, equity, joint venture, strategic partnering, etc.) during the next
twelve months, some of which may be in the context of joint ventures for the development of one or more large scale projects. We reiterate
that there is no assurance, especially in the extremely unsettled capital markets that presently exist for companies such as Bion, that
the Company will be able to obtain the funds that it needs to stay in business, finance its Projects and other activities, continue its
technology development and/or to successfully develop its business.
See Item 2 below and Note 5 (“Pennvest Loan and Bion PA1 LLC (“PA1”)
Dissolution”) to the Financial Statements included in this report and the Company’s Forms 10-K for the year ended June
30, 2022 (and the years 2009-2021) for discussion and more details related to the dissolution of PA1, the Pennvest Loan and the
Kreider 1 project.
There is extremely limited likelihood that funds
required during the next twelve months or in the periods immediately thereafter will be generated from operations and there is no assurance
that those funds will be available from external sources such as debt or equity financings or other potential sources. The lack of 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 companies such as Bion.
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 since the onset of the Covid-19 pandemic, which have delayed certain research and development testing
and have delayed and/or increased the cost of construction of the Company’s initial 3G Tech installation as equipment/services remain
difficult to acquire in a timely manner, vi) due to the age and health of our core management team, many of whom are age 70 or older and
have had one or more existing health issues (including brief periods of Covid-19 infection), 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.
CONTRACTUAL OBLIGATIONS
We have the following material contractual obligations
(in addition to employment and consulting agreements with management and employees):
The Company entered into an agreement on September
23, 2021, to lease approximately four acres of land near Fair Oaks, Indiana, for the development site of its Initial Project.
The future minimum lease payment under noncancelable operating lease with
terms greater than one year as of June 30, 2023:
Less imputed interest (8,432 )
Less current portion (75,000 )
Long tern lease liability 29,068
The weighted average remaining lease term and discounted
rate related to the Company’s lease liability as of June 30, 2023 were 1.58 years and 10%, respectively. The Company’s lease
discount rate is generally based on the estimates of its incremental borrowing rate as the discount rates implicit in the Company’s
lease cannot be readily determined.
OFF-BALANCE SHEET ARRANGEMENTS
The Company does not have any off-balance sheet arrangements
(as that term is defined in Item 303 of Regulation S-K) that are reasonably likely to have a current or future material effect on our
financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
The consolidated financial statements are set forth on pages F-1 through
F-41 hereto.
Item 9A. Controls and Procedures.
Disclosure Controls and Procedures
As of June 30, 2023, 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 Office concluded that the Company’s disclosure controls and procedures were not effective as of June 30, 2023 as a result
of the material weakness in internal control over financial reporting discussed below.
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, 2022. 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 and a second condition is the a lack of timely
review and approval of capitalized internal costs and interest. 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. In December of 2021, there was a change made to a new
outside accounting and consulting firm. 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: Domain Sale/Resolved Litigation/Hacking/Theft
On March 23, 2022 the Company entered into an agreement
to sell domain name <biontech.com> and other related assets to BioNTech SE (“BNTX”) for the sum of $950,000 (before
expenses related to the transaction) which sale was closed/completed on April 2, 2022 with a one-time gain of $902,490. The Company has
been using www.bionenviro.com as its primary website (and domain) since July 2021 due to the events described below. The Company
has not been using biontech.com as its primary website since July 2021 so domain name <biontech.com> no longer represented
a core asset of the Company.
As previously reported, 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 was 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 November 19, 2021, the United States District Court
for the Eastern District of Virginia, Alexandria Division issued an order stating that “... ORDERED, ADJUDGED and Decreed that
plaintiff Bion Environmental Technologies, Inc. (‘plaintiff) Is the lawful owner of domain name <biontech.com> ....”
under the heading ‘Bion Environmental Technologies, Inc., Plaintiff, vs John Doe and <biontech.com>, Defendants’ (Case
No. 1:21-cv-01034). The Company has moved the domain name <biontech.com> to a new registrar and reactivated it for the Company’s
use (paired currently with its current bionenviro.com website).
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 were
subject disruption and expenses were incurred related to the matter including legal fees.
The Company created ‘work-arounds’ as
a result. These issues have been resolved and the Company 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)
is cscott@bionenviro.com and mas@biontech.com (no longer functional) is now mas@bionenviro.com.
Bank account
hacking
On June 23, 2023, an officer of the Company
with personal accounts with Signature Bank was hacked and $75,000 was transferred from the Company’s accounts at Signature Bank
to the officer’s personal accounts. The bank was notified and all Company accounts were placed on hold. Subsequently, the funds
were released and transferred back to the Company prior to June 30, 2023 the end of the fiscal year and there were no losses incurred.
The Company has reviewed the authorized individuals
on all accounts and further limited access to its bank accounts after the hacking incident.
ITEM 9B. OTHER INFORMATION
None.
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:
Jon Northrop 80 Secretary and Director
William O’Neill 64 Chief Executive Officer
Dominic Bassani 76 Chief Operating Officer
William Rupp 62 Director
Salvatore Zizza 77 Director
Edward T. Schafer 77 Director
Mark A. Smith (73) 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.
Jon Northrop (80) 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.
William O’Neill (64) has served
as Chief Executive officer since May 1, 2022 (he previously held the same position for the period from November 2010 through May 2011).
Mr. O’Neill currently also serves as a director of Wise Up Food, LLC, a privately-held company that provides a transparent supply
chain and real sustainability information for food retailers (including restaurants) enabling consumers to make informed purchase decisions.
He founded Wise Up Food during 2020 and served as its President until May 1, 2022 when his wife assumed that position. From February 2018
through May 2020 he was employed as Vice President Retail & Value-Added Business Teys, USA, as subsidiary of Teys, a large Australian
beef packer. From April 2015 through February 2018 Mr. O’Neill served as Vice President Retail of Colorado Premium Foods. From 1990
through 2015 he held marketing and executive positions with a varity of companies in the agriculture and food service businesses with
an emphasis on developing/marketing products in the meat industry. Mr. O’Neill graduated from Gettysburg College in 1981 with a
B.A. in economics.
Dominic Bassani (76) has served as Chief
Operating Officer of Bion Environmental Technologies, Inc. since May 1, 2022 and served as Chief Executive Officer from 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.
William
(Bill) Rupp (62) has served as a director of the company since ___, 2023.He is a ‘meat industry leader’ who served
as President of JBS Beef from 2010-2016 with responsilibity for the leadership of JBS’s North American Beef business. He was CEO
of Meyer Natural Foods from 2009-2010. Mr. Rupp served in various management roles for Cargill Beef from 1983 until 2009 where he was
President from 1998-2008 with responsibility for Cargill’s global beef business with operations in US, Canada, Argentina, and Australia.
He graduated from the University of South Dakota with a B.S. in Business Administration in 1983. Mr Rupp salso serves on the boards of
Sustainable Beef, DecisionNext, Superior Lamb and Lumachain.
Salvatore J. Zizza(77) Salvatore Zizza
has served as a director of Bion since 2023. He is presently President of Zizza & Associates
Corp. a private holding company which invests in various industries and retired Chairman of BAM (Bethlehem Advanced Materials), which
designs and manufactures high-temperature furnaces for sale and for its own use in the processing of specialty carbon, graphite and ceramic
materials for semiconductor and aerospace applications, and Chairman of Bergen Cove Realty Inc., with substantial holdings in residential
real estate. Mr. Zizza serves as Director & Chairman of Trans-Lux Corporation, a full service provider of integrated multimedia systems
for today’s communications environments (since 2018) and served on board since 2009. Mr. Zizza bought NICO Construction Company,
Inc., in 1978 and was President and CFO until 1985 when NICO merged with The LVI Group Inc., a (NYSE), listed company. Prior to joining
The LVI Group Inc., Mr. Zizza was an independent financial consultant and had been a lending officer of Chemical Bank. Mr. Zizza is also
an investor in numerous private companies and real estate holdings. Mr. Zizza currently holds directorship positions at nineteen
(19) Gabelli/GAMCO funds and trusts. He has been associated with this family of investment funds for over thirty (30) years. He received
a Baccalaureate/Political Science, St. John’s University (1967) and a Master of Business Administration, St. John’s University
(1972). In 2007 Mr. Zizza received a Doctor of Commercial Sciences (Honorary) from St. John’s
University.
Edward T. Schafer (77) 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 had 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. In addition he has served
on the Board of Governors of Amity Technology LLP since 2009. 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 is an adjunct professor 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.
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