U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _________
Commission File No.
(Name of registrant in its charter)
| (State or other jurisdiction of incorporation or formation) | (I.R.S. employer identification number) |
(Address of principal executive offices)
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Securities Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| OTCQB |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
☒
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was
required to submit such files). ☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ | ||||
| Smaller reporting company |
|||||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐
Yes ☒
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Not applicable.
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
On February 1, 2025, there were 57,286,478 Common Shares issued and Common Shares outstanding.
BION ENVIRONMENTAL TECHNOLOGIES, INC.
FORM 10-Q
TABLE OF CONTENTS
| PART I. FINANCIAL INFORMATION | Page | ||
| Item 1. | Condensed Consolidated Financial Statements | 2 | |
| Balance sheets | 2 | ||
| Statements of operations | 3 | ||
| Statement of changes in equity (deficit) | 4 | ||
| Statements of cash flows | 5 | ||
| Notes to unaudited condensed consolidated financial statements | 6 | ||
| Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 21 | |
| Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 31 | |
| Item 4. | Controls and Procedures | 31 | |
| PART II. OTHER INFORMATION | |||
| Item 1. | Legal Proceedings | 32 | |
| Item 1A. | Risk Factors | 32 | |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 32 | |
| Item 3. | Defaults Upon Senior Securities | 32 | |
| Item 4. | Mine Safety Disclosures | 32 | |
| Item 5. | Other Information | 32 | |
| Item 6. | Exhibits | 33 | |
| Signatures | 34 | ||
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains 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 or similar terminology. The expectations reflected in forward-looking statements may prove to be incorrect.
BION ENVIRONMENTAL TECHNOLOGIES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
| December 31, | June 30, | |||||||
| 2024 | 2024 | |||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Deposits and other assets | ||||||||
| Total current assets | ||||||||
| Operating lease right-of-use asset | ||||||||
| Property and equipment, net (Note 3) | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND EQUITY (DEFICIT) | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Deferred compensation (Note 4) | ||||||||
| Convertible notes payable - affiliates (Note 5) | ||||||||
| Convertible bridge note payable (Note 5) | ||||||||
| Note payable (Note 5) | ||||||||
| Operating lease liability, current (Note 8) | ||||||||
| Total current liabilities | ||||||||
| Convertible notes payable (Note 5) | ||||||||
| Total liabilities | ||||||||
| Equity (deficit): | ||||||||
| Bion's stockholders' equity (deficit): | ||||||||
| Series A Preferred stock, $ par value, shares authorized, shares issued and outstanding | ||||||||
| Series C Convertible Preferred stock, $ par value, shares authorized; shares issued and outstanding | ||||||||
| Common stock, par value, shares authorized, and shares issued, respectively; and shares outstanding, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Subscription receivable - affiliates (Note 7) | ( | ) | ( | ) | ||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Bion's stockholders’ equity (deficit) | ( | ) | ( | ) | ||||
| Noncontrolling interest | ||||||||
| Total equity (deficit) | ( | ) | ( | ) | ||||
| Total liabilities and (deficit) | $ | $ | ||||||
See notes to condensed consolidated financial statements
| 2 |
BION ENVIRONMENTAL TECHNOLOGIES, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE AND SIX MONTHS ENDED DECEMBER 31, 2024
(UNAUDITED)
| Three months ended December 31 | Six months ended December 31 | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||
| Operating expenses: | ||||||||||||||||
| General and administrative (including stock-based compensation) | ||||||||||||||||
| Depreciation | ||||||||||||||||
| Research and development (including stock-based compensation) | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other (income) expense: | ||||||||||||||||
| Interest income | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Interest expense | ||||||||||||||||
| — | — | — | — | |||||||||||||
| Total other expense | ||||||||||||||||
| Net (loss) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net (loss) attributable to the noncontrolling interest | ||||||||||||||||
| Net (loss) applicable to Bion's common stockholders | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net (loss) applicable to Bion's common stockholders per basic and diluted common share | ||||||||||||||||
| $ | ) | $ | ) | $ | ) | $ | ) | |||||||||
| Weighted-average number of common shares outstanding: | ||||||||||||||||
| Basic and diluted | ||||||||||||||||
See notes to condensed consolidated financial statements
| 3 |
BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
THREE AND SIX MONTHS ENDED DECEMBER 31, 2024 AND 2023
(UNAUDITED)
| Three months ended December 31, 2024 and 2023 | |||||||||||||||||||||||||||||||||||||||||||
| Bion's Stockholders' | |||||||||||||||||||||||||||||||||||||||||||
| Series A Preferred Stock | Series C Preferred Stock | Common Stock | Additional paid-in | Subscription Receivables | Accumulated | Noncontrolling | Total | ||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | capital | for Shares | deficit | interest | equity/(deficit) | |||||||||||||||||||||||||||||||||
| Balances, October 1, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ |
|||||||||||||||||||||||||||||||
| Sale of units | — | — | |||||||||||||||||||||||||||||||||||||||||
| Warrants exercised under cashless exercise | — | — | |||||||||||||||||||||||||||||||||||||||||
| Issuance of units for services | — | — | |||||||||||||||||||||||||||||||||||||||||
| Issuance of warrants for services | — | — | — | ||||||||||||||||||||||||||||||||||||||||
| Vesting of options for employees and services | — | — | — | ||||||||||||||||||||||||||||||||||||||||
| Vesting of warrants for employees and services | — | — | — | ||||||||||||||||||||||||||||||||||||||||
| Debt modification | — | — | — | ( | ) | ( |
) | ||||||||||||||||||||||||||||||||||||
| Conversion of debt and liabilites | — | — | |||||||||||||||||||||||||||||||||||||||||
| Modification of warrants | — | — | — | ||||||||||||||||||||||||||||||||||||||||
| Commission on the sales of units | — | — | — | ( | ) | ( |
) | ||||||||||||||||||||||||||||||||||||
| Net Loss | — | — | — | ( | ) | ( |
) | ||||||||||||||||||||||||||||||||||||
| Balances, December 31, 2023 | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||
| Balances, October 1, 2024 | $ | $ | $ | $ | $ | ( | ) | ( | ) | $ | $( |
) | |||||||||||||||||||||||||||||||
| Net loss | — | — | — | ( | ) | ( |
) | ||||||||||||||||||||||||||||||||||||
| Balances, December 31, 2024 | ( | ) | ( | ) | ( |
||||||||||||||||||||||||||||||||||||||
| Six months ended December 31, 2024 and 2023 | |||||||||||||||||||||||||||||||||||||||||||
| Bion's Stockholders' | |||||||||||||||||||||||||||||||||||||||||||
| Series A Preferred Stock | Series C Preferred Stock | Common Stock | Additional paid-in | Subscription Receivables | Accumulated | Noncontrolling | Total | ||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | capital | for Shares | deficit | interest | equity/(deficit) | |||||||||||||||||||||||||||||||||
| Balances, July 1, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||||||||||||||||||||||||||
| Sale of units | — | — | |||||||||||||||||||||||||||||||||||||||||
| Warrants exercised for common shares | — | — | |||||||||||||||||||||||||||||||||||||||||
| Warrants exercised under cashless exercise | — | — | |||||||||||||||||||||||||||||||||||||||||
| Issuance of units for services | — | — | |||||||||||||||||||||||||||||||||||||||||
| Issuance of warrants for services | — | — | — | ||||||||||||||||||||||||||||||||||||||||
| Vesting of options for employees and services | — | — | — | ||||||||||||||||||||||||||||||||||||||||
| Vesting of warrants for employees and services | — | — | — | ||||||||||||||||||||||||||||||||||||||||
| Debt modification | — | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Conversion of debt and liabilities | — | — | |||||||||||||||||||||||||||||||||||||||||
| Modification of warrants | — | — | — | ||||||||||||||||||||||||||||||||||||||||
| Commission sale of units | — | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Balances, December 31, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||||||||||||||
| Balances, July 1, 2024 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||||||||||||||
| Issuance of units for services | — | — | |||||||||||||||||||||||||||||||||||||||||
| Modification of warrants | — | — | — | ||||||||||||||||||||||||||||||||||||||||
| Modification of options | — | — | — | ||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Balances, December 31, 2024 | $ | $ | $ | $ | $ | ( | ) | ( | ) | $ | $ | ( | ) | ||||||||||||||||||||||||||||||
See notes to condensed consolidated financial statements
| 4 |
BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED CASH FLOWS
THREE AND SIX MONTHS ENDED DECEMBER 31, 2024 AND 2023
(UNAUDITED)
| 2024 | 2023 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net (loss) | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation expense | ||||||||
| Accrued interest on loans payable, deferred compensation and other | ||||||||
| Stock- based compensation | ||||||||
| Stock-based compensation for services | ||||||||
| Decrease in prepaid expenses | ||||||||
| Increase in accounts payable and accrued expenses | ||||||||
| (Increase) in operating lease assets and liabilities | ( | ) | ( | ) | ||||
| Increase in deferred compensation | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Purchase of property and equipment | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds from sale of units | ||||||||
| Commision on the sale of units | ( | ) | ||||||
| Proceeds from notes payable | ||||||||
| Proceeds from exercise of warrants | ||||||||
| Net cash provided by financing activities | ||||||||
| Net decrease in cash | ( | ) | ( | ) | ||||
| Cash at beginning of year | ||||||||
| Cash at end of year | $ | $ | ||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Non-cash investing and financing transactions: | ||||||||
| Conversion of debt and liabilities into common units | $ | $ | ||||||
| Conversion of deferred compensation to notes payable | $ | $ | ||||||
| Conversion of notes payable into shares | $ | $ | ||||||
| Purchase of property and equipment for accounts payable | $ | $ | ||||||
See notes to condensed consolidated financial statements
| 5 |
BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED DECEMBER 31, 2024 AND 2023
1. BUSINESS AND ORGANIZATION:
Nature of Operations
Bion Environmental Technologies, Inc.'s ("Bion," "Company," "We," "Us," or "Our") was incorporated in 1987 in the State of Colorado.
Our patented and proprietary technology was developed to provide advanced waste treatment and resource recovery for large-scale livestock production facilities (also known as “Concentrated Animal Feeding Operations” or “CAFOs"). Our Gen3Tech can largely mitigate the environmental problems of CAFOs, while simultaneously improving operational/ resource efficiencies by recovering high-value co-products from the waste stream, including renewable energy and nutrients. Bion is focused on the ‘feeder’ space of the livestock production/value chain, primarily in the beef industry because we believe it faces the most challenges of all the livestock sectors and can benefit the most from the application of Bion’s technology and business strategy.
We believe that the best opportunity for the Company to prove its sustainable beef concept at this time is with the Stovall Ranch JV in Montana. In June 2024, Bion formed a strategic relationship with Turk Stovall and Stovall Ranching Companies. Bion and Stovall have agreed to establish a JV, to be led by Mr. Stovall, with the goal of developing a 16,000-head sustainable beef project at Stovall’s Yellowstone Cattle Feeders (‘YCF’) location in Shepherd, Montana. We anticipate establishing the Stovall-Bion JV and creating related distribution agreements with key value chain partners during the current calendar year, with the intent to begin construction in the first quarter of 2025. Advancing the Stovall-Bion JV project is our primary focus, although we have begun to expend resources by evaluating our ARS as a standalone ammonia control solution and we intend to increase that activity.
On January 2, 2024, Bion received a new (continuation) patent that broadened the claims related to its Ammonia Recovery System (ARS) to include industrial and municipal wastewater sources, in addition to animal waste streams that were previously covered. Since that time, Bion has directed part of its limited resources to understanding and evaluating opportunities to apply its ARS as a ‘standalone’ ammonia control solution in these sectors. In such cases, the ARS would be deployed as a bolt-on ammonia solution (vs integrated into a Bion Gen3Tech livestock platform) for facilities (both new and existing) that produce biogas from organic waste streams, such as food, food processing, and livestock packing/slaughter. These facilities are subject to EPA-mandated discharge limits that require ammonia control or face other limitations on ammonia/nitrogen in the effluent from biogas production. We believe at this time there is potentially a robust opportunity to provide ammonia control solutions to others and we intend to devote more resources to developing this opportunity in the coming year.
Going Concern
The Company’s condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern.
The Company is not currently generating any significant revenues. Further, the Company’s anticipated revenues, if any, from existing JVs and proposed projects will not be sufficient to offset operating and capital costs (for Projects) for a minimum of two to five years. Further, there are no assurances that the Company will ultimately be successful in its efforts to develop and construct its Projects and market its Systems; but, 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. The aggregate effect of these factors raises substantial doubt about the Company’s ability to continue as a going concern.
Year to date ended December 31, 2024 the Company had
a loss of $
During the year ended June 30, 2024, a one-time, non-recurring,
non-cash charge of $
| 6 |
The constraints on available resources have had, and
continue to have, negative effects on the pace and scope of the Company’s efforts to operate and 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, and to develop Projects. The Company anticipates that it will seek to raise from $
The accompanying condensed consolidated financial statements do not include any adjustments relating to the recoverability or classification of assets or the amounts and classification of liabilities that may result should the Company be unable to continue as a going concern. The following paragraphs describe management’s plans with regard to these conditions.
Management’s Plan
The Company continues to explore sources of financing to satisfy its current operating requirements and future growth needs. The Company has faced substantial demand for capital and operating expenditures for the fiscal year 2024 that we anticipate will increase during the 2025 fiscal year and periods thereafter as we move toward commercial implementation of our 3G Tech and development of JVs (including costs associated with additions of personnel to carry out the business activities of the Company). 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 and members of the Company's senior management have from time-to-time made loans to the Company in the past and may do so in future periods.
To help alleviate short-term cash needs for continued
operations, in August, three affiliates of the Company (Greg Schoener, Interim COO & Director; Turk Stovall, Director; Bob Weerts,
Director) and two shareholders (one of whom is the brother of Greg Schoener) began advancing money to Bion to cover critical payables.
They subsequently formed a loan group, BION BLG, LLC (“BLG”), and have continued to provide short-term funding for Bion in
a secured promissory note of up to $
In November, the Company launched a secured promissory note offering to previous investors/shareholders (and certain others) with similar terms to the BLG note. Based on feedback from shareholders and registered representatives with which the Company has long standing relationships, management believes that sufficient capital can be raised with this group to 1) continue to cover critical payables to maintain operations that will allow the Company to finish the engineering report and technology demonstration at Fair Oaks, 2) move forward with pre-development work on the Stovall project, 3) continue discussions with potential strategic partners, and 4) position ourselves for the larger offering/funding that will be required, as described above. However, there can be no assurance the Company will be successful in its efforts to obtain such financing.
To date, the Company has primarily raised funds through private placements with accredited investors, often conducted through FINRA-registered broker/dealers. However, the Company anticipates moving forward, it will need to raise capital using a combination of financial instruments and sources, that could also include strategic and/or institutional investors, including family offices and private equity, brokered equity or debt offerings with both public and private investors, and banks and other ag lending institutions, among others, although there can be no assurance it will be successful. Many of these financing options may involve dilution, potentially substantial, for current shareholders. Management intends to augment its access to capital by adding one or more staff members (or consultants) with experience in the capital markets, as well as utilizing its current contacts and relationships in the capital markets.
| 7 |
Bion is currently in discussions with several potential strategic partners in engineering, renewable energy (biogas/RNG) and clean fuels, organic fertilizer distribution, and others involved in reducing the carbon footprint of livestock production, especially beef. With today’s U.S, and global emphasis on decarbonizing energy and the food supply chain, the sectors have become closely intertwined, they are evolving quickly, and integrated solutions have become increasingly desired, but complex. Bion is now evaluating both European and U.S. renewable energy/clean fuels developers, operators, and investors to determine the best fit for moving forward with AD/RNG development for its own beef project(s), access to clean fuels value chains for its low-carbon fertilizers, animal waste treatment for others, both here and in the EU, as well as a development partner in industrial and municipal opportunities. Further, with the recent OMRI Listing for its commercial fertilizer, the Company has initiated discussions with several large U.S. fertilizer manufacturers and distributors that have expressed interest in the product. Bion believes that such relationships could entail a direct investment in Bion, licensing fee, or some other ‘up front’ financial benefit to Bion, although there is no assurance that they will. The Company recently finished data acquisition at Fair Oaks needed to complete an independent engineering report that is critical to demonstrating the technology performance and economics of its ammonia recovery technology to potential strategic partners.
THERE IS NO ASSURANCE THAT THE COMPANY WILL REACH OR APPROACH THE GOALS/TARGETS SET FORTH ABOVE. REACHING SUCH GOALS/TARGETS WILL REQUIRE RESOLUTION OF THE COMPANY’S EXISTING FINANCIAL DIFFICULTIES AND ACCESS TO VERY LARGE AMOUNTS OF CAPITAL (EQUITY AND DEBT) AS EACH BEEF PROJECT ARS MODULE IS PROJECTED TO COST IN EXCESS OF $15 MILLION (DEBT/EQUITY/GRANTS) TO CONSTRUCT AND WILL REQUIRE MOBILIZATION OF SUBSTANTIAL PERSONNEL, TECHNICAL RESOURCES AND MANAGEMENT SKILLS. THE COMPANY DOES NOT POSSESS EITHER THE FINANCIAL OR PERSONNEL RESOURCES INTERNALLY AND WILL NEED TO SOURCE SUCH RESOURCES FROM OUTSIDE.
2. SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation:
The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Bion Integrated Projects Group, Inc., Bion Technologies, Inc., BionSoil, Inc., Bion Services, Bion PA2 LLC and Bion 3G-1 LLC (“3G1”); and its 58.9% owned subsidiary, Centerpoint Corporation (“Centerpoint”). All significant intercompany accounts and transactions have been eliminated in consolidation.
The accompanying condensed consolidated financial statements have been prepared without audit pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The condensed consolidated financial statements reflect all adjustments (consisting of only normal recurring entries) that, in the opinion of management, are necessary to present fairly the financial position at December 31, 2024, the results of operations and cash flows of the Company for the three and six months ended December 31, 2024 and 2023. Operating results for the three and six months ended December 31, 2024 are not necessarily indicative of the results that may be expected for the year ending June 30, 2025.
Cash and cash equivalents:
The Company considers all highly liquid investments
purchased with an original maturity of three months or less to be cash and cash equivalents. As of December 31, 2024 and June 30, 2024
there are
Property and equipment:
Property and equipment are stated at cost and are depreciated, when placed into service, using the straight-line method over the estimated useful lives of the related assets, generally three to twenty years. The Company capitalizes all direct costs and all indirect incrementally identifiable costs related to the design and construction of its Integrated Projects such as consulting fees, internal salaries and benefits and interest. The Company reviews its property and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss would be recognized based on the amount by which the carrying value of the assets or asset group exceeds its estimated fair value and is recognized as a loss from operations.
Patents:
The Company has elected to expense all costs and filing fees related to obtaining patents (resulting in no related asset being recognized in the Company’s consolidated balance sheets) because the Company believes such costs and fees are immaterial (in the context of the Company’s total costs/expenses) and have no direct relationship to the value of the Company’s patents.
The Company follows the provisions of Accounting Standards Codification (“ASC”) 718, which generally requires that share-based compensation transactions be accounted and recognized in the statement of operations based upon their grant date fair values.
| 8 |
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.
Options:
The Company has issued options to employees and consultants under the 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.
Concentrations of credit risk:
The Company's financial instruments that are exposed to concentrations of credit risk consist of cash. The Company's cash is in demand deposit accounts placed with federally insured financial institutions and selected brokerage accounts. Such deposit accounts at times may exceed federally insured limits. The Company has not experienced any losses on such accounts.
Noncontrolling interests:
In accordance with ASC 810, “Consolidation”, the Company separately classifies noncontrolling interests within the equity section of the consolidated balance sheets and separately reports the amounts attributable to controlling and noncontrolling interests in the consolidated statements of operations. In addition, the noncontrolling interest continues to be attributed its share of losses even if that attribution results in a deficit noncontrolling interest balance.
Fair value measurements:
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or most advantageous market. The Company uses a fair value hierarchy that has three levels of inputs, both observable and unobservable, with use of the lowest possible level of input to determine fair value.
Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2 – observable inputs other than Level 1, quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, and model-derived prices whose inputs are observable or whose significant value drivers are observable; and
Level 3 – assets and liabilities whose significant value drivers are unobservable.
| 9 |
Observable inputs are based on market data obtained from independent sources, while unobservable inputs are based on the Company’s market assumptions. Unobservable inputs require significant management judgment or estimation. In some cases, the inputs used to measure an asset or liability may fall into different levels of the fair value hierarchy. In those instances, the fair value measurement is required to be classified using the lowest level of input that is significant to the fair value measurement. Such determination requires significant management judgment.
The fair value of cash and accounts payable approximates their carrying amounts due to their short-term maturities. The fair value of the loan payable is indeterminable at this time due to the nature of the arrangement with a state agency and the fact that it is in default. The fair value of the redeemable preferred stock approximates its carrying value due to the dividends accrued on the preferred stock which are reflected as part of the redemption value. The fair value of the deferred compensation and convertible notes payable - affiliates are not practicable to estimate due to the related party nature of the underlying transactions.
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 condensed and 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 condensed and 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.
Revenue Recognition:
The Company currently does not generate revenue and if and when the Company begins to generate revenue the Company will comply with the provisions of ASC 606 “Revenue from Contracts with Customers”.
Basic income (loss) per share amounts are calculated using the weighted average number of shares of common stock outstanding during the period. Diluted income (loss) per share assumes the conversion, exercise, or issuance of all potential common stock instruments, such as options or warrants, unless the effect is to reduce the income (loss) per share or increase the earnings per share. During the three and six months ended December 31, 2024 and 2023, the basic and diluted income (loss) per share was the same, as the impact of potential dilutive common shares was anti-dilutive.
The following table represents the warrants and options (as if exercised) and convertible securities (as if converted) that have been excluded from the calculation of basic income (loss) per share:
| December 31, 2024 | December 31, 2023 | |||||||
| Warrants | ||||||||
| Options | ||||||||
| Convertible debt | ||||||||
| 10 |
The following is a reconciliation of the denominators of the basic and diluted income (loss) per share computations for the three and six months ended December 31, 2024 and 2023.
Three months ended December 31, 2024 | Three months ended December 31, 2023 | Six months ended December 31, 2024 | Six months ended December 31, 2023 | |||||||||||||
| Shares issued – beginning of period | ||||||||||||||||
| Shares held by subsidiaries (Note 7) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Shares outstanding – beginning of period | ||||||||||||||||
| Weighted average shares issued during the period | ||||||||||||||||
| Diluted weighted average shares – end of period | ||||||||||||||||
Use of estimates:
In preparing the Company’s condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Recent Accounting Pronouncements:
The Company continually assesses any new accounting pronouncements to determine their applicability. When it is determined that a new accounting pronouncement affects the Company’s financial reporting, the Company undertakes a study to determine the consequences of the change to its condensed consolidated financial statements and assures that there are proper controls in place to ascertain that the Company’s condensed consolidated financial statements properly reflect the change.
3. PROPERTY AND EQUIPMENT:
Property and equipment consist of the following:
| December 31, 2024 | June 30, 2024 | |||||||
| Computers and office equipment | ||||||||
| Property and equipment, gross | ||||||||
| Less accumulated depreciation | ( | ) | ( | ) | ||||
| Property and equipment, net | $ | $ | ||||||
Depreciation expense was $
The Company owes deferred compensation to various
employees, former employees and consultants totaling $
The sums owed to Bassani and Smith are owed pursuant
to extension agreements effective January 1, 2015, whereby unpaid compensation earned after January 1, 2015, accrues interest at
O’Neill is owed a balance of $
| 11 |
The Company owes deferred compensation to Craig Scott
of $
The Company also owes various consultants and employees,
pursuant to various agreements, for deferred compensation of $
Bassani and Smith have each been granted the right
to convert up to $
The Company recorded interest expense of $
5. NOTES PAYABLE:
Adjusted 2020 Convertible Obligations and Adjusted September 2015 Convertible Notes
Effective February 1, 2023, three (3) directors/officers of the Company agreed to adjust the provisions of long term convertible obligations (including most of the 2020 Convertible Obligations and September 2015 Convertible Notes --- see below) owed to them by the Company in a manner which reduced the indebtedness of the Company by 80% (approximately $3.47 million, in aggregate while equitably maintaining existing conversion rights). The debt modification was treated as an equity transaction because the modifications were with affiliates that are related parties.
Mark A. Smith (the Company’s recently retired
President)(“Smith”), Dominic Bassani (the Company’s Chief Operating Officer) (“Bassani”) (NOTE: Dominic
Bassani passed away on November 11, 2023.) and Ed Schafer (Director)(“Schafer”), adjusted/reduced the principal owed to them
by $
As of December 31, 2024, the Adjusted 2020
Convertible Obligation balances, including accrued interest, owed Bassani (and his donees), Smith and Edward Schafer were $
As of December 31, 2024 the Adjusted September 2015
Convertible Notes balances, including accrued interest, owed Bassani Family Trusts and Schafer were $
| 12 |
2020 Convertible Obligations
The 2020 Convertible Obligations (which combined/replaced
prior convertible instruments dating to 2017 (or earlier), which accrue interest at either
As of December 31, 2024, the remaining unadjusted
portion of the 2020 Convertible Obligation balances, including accrued interest, owed Bassani Family Trusts (and his donees) and Smith,
were $
The Company recorded interest expense of $
Mark A. Smith (the Company’s recently retired President) (“Smith”), Dominic Bassani (the Company’s Chief Operating Officer) (“Bassani”) (NOTE: Dominic Bassani passed away on November 11, 2023. See Note 8) and Ed Schafer (Director) (“Schafer”), adjusted/reduced the principal owed to them by $1,109,649, $1,939,670 and $424,873, respectively. Subsequent to the adjustment, the adjusted portion of the 2020 Convertible Obligations were renamed Adjusted 2020 Convertible Obligations (see above).
September 2015 Convertible Notes
During the year ended June 30, 2016, the Company entered into September 2015 Convertible Notes with Bassani, Schafer and a Shareholder which replaced previously issued promissory notes. The September 2015 Convertible Notes bear interest at 4% per annum, had maturity dates of July 1, 2024, and may be converted at the sole election of the noteholders into restricted common shares of the Company at a conversion price of $0.60 per share. As the conversion price of $0.60 approximated the fair value of the common shares at the date of the September 2015 Convertible Notes, no beneficial conversion feature exists. The maturity date of the notes has been extended to January 15, 2025 for Bassani and Schafer and July 1, 2025 for the other note holders.
The balances of the September 2015 Convertible Notes
as of December 31, 2024, including accrued interest owed Bassani, Schafer and Shareholder, are $
The Company recorded interest expense of $
| 13 |
Convertible Bridge Loan/Default
On September 28, 2023, the Company entered into an
agreement for a $
During early November 2023 the Lender informed the Company verbally that it did not intend to fulfill its obligations pursuant to the Bridge Loan Agreements and since such time the Lender has been in default (“Default”). Titan Partners informed the Company that it would be unable to complete an offering to their customers (or their syndicate member’s customers) without a strategic investor anchor. Further, the Company had very limited success raising money with its own shareholders for the same reason. The Default (which is continuing) has created substantial problems for and materially damaged the Company and rendered the Company unable to meet its current creditor obligations on a timely basis. The Company is currently evaluating its rights regarding the Default by the Lender. This situation has contributed to the substantial increase in the Company’s ‘Current Liabilities’ including ‘accounts payable’, over recent periods. See Condensed Consolidated Financial Statements and ‘Management’s Discussion and Analysis’. The Company has engaged in discussion/negotiation with its larger creditors (including its largest creditor--- the primary contractor on the Initial Project) but has been unable to reach agreements regarding payments due to the uncertainty as to if, when and how much funding the Company will be able to raise in future periods. As a result, the Company’s largest creditor---the primary contractor for the Initial Project --- has filed a mechanics lien in Indiana (and its largest sub-contractor has sent notices related to its intention to file a mechanics lien) and other creditors are threatening to commence litigation and/or repossess/remove leased equipment). Further, as of October 1, 2024, the Company is in default of the terms of the note.
On May 10, 2024 the Company received $150,000 from affiliates of the Bridge Loan Lender on terms not yet finalized and included in an agreement. These funds were received in the context of negotiations/discussions regarding a potential larger investment by affiliates and/or associates of the Lender but no further funds were received and the larger transaction was never completed. The funds were used primarily to re-initiate operations at the Initial Project. The Company is currently involved in discussions with representatives of SEB in an effort to achieve a mutually satisfactory resolution.
The Company recorded interest expense of $
May 2024 Convertible Notes
During the year ended June 30, 2024, the Company entered
into May 2024 Convertible Notes with five individuals. The May 2024 Convertible Notes bear interest at 6% per annum, have maturity
dates of
The balances of the May 2024 Convertible Notes including
accrued interest owed is $
The Company recorded interest expense of $
| 14 |
2024 Secured Convertible Note
On October 22, 2024, Bion's Board of Directors ratified
an agreement with the Bion BLG, LLC, loan group, effective October 15, 2024, to purchase a Convertible Promissory Note in the principal
amount of up to $
Three Bion Directors (Schoener, Turk and Weets) are members of the loan group and together comprise 60% ownership of the loan group (each member owns 20%). The Note is secured by the Company's Intellectual Property (IP)/patents. The Note will convert into securities in the Company at the terms of a later capital raise (or other source of funding) in excess of $3.0 million, which must be completed within six (6) months.
The balances of the 2024 Convertible Note Advances as of December 31, 2024,
including accrued interest owed is $
The Company recorded interest expense of $
November 2024 Convertible Notes
During the six months ended December 31, 2024, the
Company entered into November 2024 Convertible Notes with two individuals. The November 2024 Convertible Notes bear interest at
The balances of the November 2024 Convertible Notes
including accrued interest owed is $
The Company recorded interest expense of $
6. STOCKHOLDERS’ EQUITY:
Write down of carry value of Initial Project
Effective June 30, 2024, at the same time the Initial
Project was deemed placed in service, the Board of Directors determined that the capitalized carrying value of the Initial Project on
the Company balance sheet as of that date be reduced to $
“Give-back” Agreements to Additional Paid in Capital
Effective April 1, 2024 the Company entered into two material definitive agreements regarding voluntary surrender for cancellation of securities of the Company (and related matters) by: a) members of the family of Dominic Bassani, recently deceased former Chief Executive Officer and (with his family) the Company’s largest shareholder (collectively “Bassani Family”)(see Exhibit 10.1)(“Bassani Family Agreement”), and b) Mark A. Smith, recently retired President of the Company and a director (see Exhibit 10.2)(“MAS Agreement”). The Bassani Family and Smith entered into these agreements with the intention of mitigating dilution to shareholders as new, successor management is added to the Company’s management team. The “giveback” agreements were treated as equity transactions because the forfeitures were with affiliates that are related parties.
The Bassani Family has agreed to surrender not less
than approximately 20% of its Company holdings (as of December 2023), which surrender will increase to approximately 30% based on certain
financing performances. The Bassani Family elected to surrender deferred compensation of $
MAS has agreed to surrender approximately 30% of his
Company holdings (as of December 2023). Immediately upon the effectiveness of the MAS Agreement, he cancelled all Company options held
by him (, in aggregate) and waived $
Subsequently, and effective June 27, 2024, the Board of Directors of the Company agreed to amend the terms of the agreements dated April 1, 2024. The amendments solely extend any dates of certain required conversions and/or exercises (and related promissory note maturity dates and warrant expiration dates), if any, that were earlier than January 15, 2025, to said date. No changes were made regarding any ‘givebacks’ of securities of the Company.
| 15 |
Series B Preferred stock:
Since July 1, 2014, the Company had shares
of Series B redeemable convertible Preferred stock outstanding with a par value of $ per share, convertible at the option of
the holder at $ per share, with dividends accrued and payable at 2.5% per quarter. The Series B Preferred stock is mandatorily
redeemable at $ per share by the Company three years after issuance and accordingly was classified as a liability. The 200 shares
had reached their redemption date and the Company approved the redemption of the Series B preferred stock during the year ended June 30,
2022. The 200 shares of Series B redeemable convertible Preferred stock were redeemed for $
During the six months ended December 31, 2024
and the year ended June 30, 2024, the Company declared dividends of nil
and nil respectively. The dividends are classified as a component of operations as the Series B Preferred stock is presented as a
liability in these condensed consolidated financial statements. There is
Common stock:
Holders of common stock are entitled to one vote per share on all matters to be voted on by common stockholders. In the event of liquidation, dissolution or winding up of the Company, the holders of common stock are entitled to share in all assets remaining after liabilities have been paid in full or set aside and the rights of any outstanding preferred stock have been satisfied. Common stock has no preemptive, redemption or conversion rights. The rights of holders of common stock are subject to, and may be adversely affected by, the rights of the holders of any outstanding series of preferred stock or any series of preferred stock the Company may designate in the future.
Centerpoint holds 704,309 shares of the Company’s common stock. These shares of the Company’s common stock held by Centerpoint are for the benefit of its shareholders without any beneficial interest.
During the six months ended December 31, 2024,
shares of restricted common stock were issued for consulting services valued at $
Warrants:
As of December 31, 2024, the Company had approximately
17.1 million warrants outstanding, with exercise prices from $
The weighted-average exercise price for the outstanding warrants is $, and the weighted-average remaining contractual life as of December 31 2024 is years.
On July 15, 2024 the Company modified
Stock options:
On April 7, 2022 the Company’s shareholders approved the Bion Environmental Technologies, Inc. 2021 Equity Incentive Award Plan (the “Equity Plan”). The Equity Plan provides for the issuance of options (and/or other securities) to purchase up to shares of the Company’s common stock. The Equity Plan was adopted and ratified by Board of Directors on April 8, 2022. Terms of exercise and expiration of options/securities granted under the Equity Plan may be established at the discretion of the Board of Directors, but no option may be exercisable for more than ten years. No grants have been made pursuant to the Equity Plan as of the date of this report.
The Company’s 2006 Consolidated Incentive Plan, as amended during the year ended June 30, 2021 (the “2006 Plan”), provides for the issuance of options (and/or other securities) to purchase up to shares of the Company’s common stock. Terms of exercise and expiration of options/securities granted under the 2006 Plan may be established at the discretion of the Board of Directors, but no option may be exercisable for more than ten years. The 2006 Plan will be maintained to service grants already made thereunder (together with new grants, if any, to employees and consultants who already has received grants pursuant to its terms).
The Company recorded compensation expense related to employee stock options of $ and $ for the six months December 31, 2024 and 2023, respectively. The Company granted nil and nil options for the six months ended December 31, 2024 and 2023, respectively.
On July 15, 2024 the Company modified
| 16 |
A summary of option activity under the 2006 Plan for six months ended December 31, 2024 is as follows:
| Options | Weighted- Average Exercise Price | Weighted- Average Remaining Contractual Life | Aggregate Intrinsic Value | |||||||||||||||
| Outstanding at July 1, 2024 | $ | $ | ||||||||||||||||
| Granted | ||||||||||||||||||
| Exercised | ||||||||||||||||||
| Forfeited | ||||||||||||||||||
| Expired | ||||||||||||||||||
| Outstanding at December 31, 2024 | $ | $ | ||||||||||||||||
The total fair value of stock options that vested during the six months ended December 31, 2024 and 2023 was nil and nil respectively. As of December 31, 2024, the Company had no unrecognized compensation cost related to stock options.
7. SUBSCRIPTION RECEIVABLE - AFFILIATES:
As of December 31, 2024, the Company has three interest
bearing, secured promissory notes with an aggregate principal amount of $
As of December 31, 2024, the Company has an interest
bearing, secured promissory note for $
As of December 31, 2024, the Company has an interest
bearing, secured promissory note for $
As of December 31, 2024, the Company has one interest
bearing, secured promissory note with an aggregate principal amount of $
These secured promissory notes are recorded as “Subscription receivable—affiliates” on the Company’s balance sheet pending payment.
| 17 |
8. COMMITMENTS AND CONTINGENCIES:
A: Employment/Consulting (and related) agreements:
Stephen Craig Scott (“Scott”) was
appointed interim CEO effective June 1, 2024. Scott had previously been working with the Company as an employee/consultant since
1993 in various positions including Director of Communications, SVP- Capital Markets and Head of Business Development. On October
25, 2023, Scott entered into an agreement with the Company which included provisions for a monthly salary of $
William O’Neill (“O’Neill”)
was hired as the Company’s Chief Executive Officer (“CEO”) effective May 1, 2022 and he elected not to complete his
contractual term and ended his service with the Company effective May 31, 2024. O’Neill had previously been working with the
Company as a consultant and had been employed by the Company as its CEO during 2010-2011. (Upon the hiring of O’Neill, Bassani,
CEO of the Company from 2011, assumed the position of COO while retaining existing operational management responsibilities and working
with O’Neill on ‘commercialization’ of the Company’s technology and work related to JVs (and other transactions)
based on the Company’s Gen3 Technology and related matters until his recent death. Bassani’s compensation arrangements with
the Company were not altered in the context of the change of positions.) The Company and O’Neill entered into a thirty-seven (37)
month employment agreement with compensation of $
Until his retirement on July 31, 2024, Smith
held the positions of Director, President, Interim Chief Financial Officer and General Counsel of Company (and its subsidiaries)
under various agreements (and extensions) and terms since March 2003. On October 10, 2016, the Company approved a month-to-month
contract extension with Smith which included provisions for i) a monthly salary of $
From no later than March 31, 2005, the Company
had various agreements with Dominic Bassani (and/or Brightcap which provided his services during some of the years) (NOTE: Dominic
Bassani passed away on November 11, 2023.) who was serving as the Company’s Chief Operating Officer (‘COO’) at the
time of his passing and formerly served as the Company’s Chief Executive Officer (‘CEO’) for the prior decade (any
reference to Brightcap or Bassani for all purposes are referring to the same individual). The Board appointed Bassani as the
Company's CEO effective May 13, 2011. On February 10, 2015, the Company executed an Extension Agreement with Bassani pursuant to
which Bassani extended the term of his service to the Company to December 31, 2017 (with the Company having an option to extend the
term an additional six months.) Pursuant to the Extension Agreement, Bassani continued to defer his cash compensation ($
| 18 |
Effective April 1, 2024 the Company entered into two material definitive agreements regarding voluntary surrender for cancellation of securities of the Company (and related matters) by: a) members of the family of Dominic Bassani, recently deceased former Chief Executive Officer and (with his family) the Company’s largest shareholder (collectively “Bassani Family”)(“Bassani Family Agreement”), and b) Mark A. Smith, recently retired President of the Company and a director (“MAS”) (“MAS Agreement”), as described in multiple places herein.
B: Initial Project:
On January 28, 2022 Bion Environmental Technologies,
Inc. (‘Bion’), on behalf of Bion 3G1 LLC (‘3G1’), a wholly-owned subsidiary, entered into a Purchase Order Agreement
with Buflovak and Hebeler Process Solutions (collectively ‘Buflovak’) in the amount of $
Buflovak (a division of Hebeler Process Solutions)
has worked with the Company on design and testing of its 3G Tech over several years. The basic design for the Initial Project’s
ARS System, fabrication and delivery of equipment from Buflovak, and assembly/construction were completed in July 2023, followed by system
startup. Steady-state operations were achieved in September 2023, after which time we began optimization of the ARS in preparation
for providing final design for full-scale systems, as well as demonstrating its performance and economics for an independent engineering
report. Due to delays and interruptions in our ability to operate the system (as below), those efforts have continued to date. We worked
in concert with Integrated Engineering Services, the primary site engineering firm for the facility, on the integration of all project
components/modules at the Initial Project site during assembly/construction. Additional agreements were entered into with various professional
services providers (engineers, surveyors, utilities, etc.) for work related to the Initial Project. The Company has incurred costs of
$
Management previously believed that the Initial Project
had reached the point where it could be appropriately deemed ‘placed in service’ at January 1, 2024. However, discussions
with the key technical and engineering personnel involved at the Initial Project during the recently concluded quarter convinced management
that such a characterization was premature as some key modules had not yet been completed and/or fully tested. Additionally, due to some
recent equipment break-downs, the Initial Project was in maintenance mode at that time (and not conducting operations), while the Company
awaited required replacement parts and subsequent repairs. This process was slowed by the Company’s ongoing difficulties in raising
needed funds for its activities. The Company’s Board of Directors re-evaluated the classification/status of the Initial Project
as part of the Company’s annual review process and determined that the Initial Project had been ‘placed in service’
at the June 30, 2024, fiscal year end. Further, after extensive discussion, it was determined that the ‘carrying value’ of
the Initial Project on the Company balance sheet as of that date be reduced to $0 in order to conform to accepted accounting practices,
because the Initial Project was recently reclassified as largely a research & development facility and is located on land subject
to a short term lease (as described below in Item 2, Management’s Discussion and Analysis). As a result, a large ‘one time/non-recurring’
‘non-cash’ charge of $
C: Lease:
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 original lease ended on December 31, 2024 and the Company is in discussions on a lease extension.
| 19 |
The Company has not made consistent lease payments
since October 16, 2023 and has made no payments since October 31, 2024. The Company owes $
D: Litigation (and related matters):
The Company currently is not involved in any other material litigation or similar events.
9. SUBSEQUENT EVENTS:
The Company has evaluated events that occurred subsequent to December 31, 2024 for recognition and disclosure in the financial statements and notes to the financial statements.
On January 9, 2024, the Company agreed to amend the terms of the agreements dated April 1, 2024 regarding voluntary surrender for cancellation of securities of the Company (and related matters) by: a) members of the family of Dominic Bassani, recently deceased former Chief Executive Officer and (with his family) the Company’s largest shareholder (collectively “Bassani Family”)(see Form 8-K dated April 3, 2024, Exhibit 10.1)(“Bassani Family Agreement”), and b) Mark A. Smith, President of the Company and a director (“MAS”)(see Form 8-K dated April 3, 2024, Exhibit 10.2)(“MAS Agreement”). The Bassani Family and MAS entered into these agreements with the intention of mitigating dilution to shareholders as new, successor management is added to the Company’s management team. The amendments solely extend any dates of certain required conversions and/or exercises (and related promissory note maturity dates and warrant expiration dates), if any, that were dated January 15, 2025, to April 15, 2025. No changes were made regarding any ‘give backs’ of securities of the Company.
On January 14, we issued shares
of stock for services valued at $
Effective January 9, 2025, the Board of Directors amended the terms of the 2020 Adjusted Convertible Note owned by Ed Schafer, who retired from the Company’s Board of Directors on December 31, 2024. The maturity date of the 2020 Adjusted Convertible Note has been extended to April 15, 2025.
Effective January 16, 2025, Mr. Schafer
voluntarily surrendered shares of common stock that would have been issued as the result of the conversion of his $
On January 18, 2025, under the Bassani Family Agreement
described above, Bion cancelled
As of February 12, 2025, the Company had subscription
agreements on the November 2024 Notes for $
| 20 |
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Statements made in this Form 10-Q 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 statement represents 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 potential conflicts of interest related to the BLG loan group, its control by three of Bion’s Directors and key management, and its security position in the Company’s IP (see below, Item K), adverse economic conditions, entry of new and stronger competitors, inadequate capital and limited ability to obtain financing, needed personnel 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 and failure to obtain 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 eco-friendly/sustainable beef, organic and low-carbon fertilizer products, and clean fuels will be slow to develop (or not develop at all), ii) the possibility that competitors will develop more comprehensive and/or less expensive environmental solutions, iii) delays in market awareness of Bion and our Systems, iv) uncertainties and costs increases related to research and development efforts to update and improve Bion’s technologies and applications thereof, and/or v) delays and/or costs exceeding expectations relating to Bion's development of the Initial Project, JVs and/or Projects and vi) 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.
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
The Company has been under substantial financial and management stress over the past twenty-four (24) months. Covid-related delays during technology pilot development at Buflovak in New York, followed by post-Covid supply chain disruptions during construction of our demonstration facility at Fair Oaks, have led to extreme difficulties in raising needed funds. These delays prevented us from meeting our project development and related capital timelines, and were further compounded by the death (following extended illness) of Dominic Bassani, who most recently served as our COO from May 2022 after serving as our CEO for the prior decade, the subsequent resignation of Bill O’Neill, Dominic’s replacement at the CEO position, effective May 31, 2024, followed by the retirement of Mark A. Smith, the Company’s recently retired President, General Counsel and Chief Financial Officer, effective July 31, 2024.
Since the end of May 2024, a new core leadership team has been installed (see H and I, below) and a short-term funding facility was implemented (see K, below). Bion is currently conducting a small shareholder offering with similar terms, while longer term capital solutions are being evaluated. Our new leadership team believes the financial and management difficulties Bion has faced are outweighed by the success of our technology demonstration and optimization initiatives at our Fair Oaks facility and the early responses we have had from potential fertilizer distribution partners. This success coincides with clear and growing trends in both sustainable agriculture and clean fuels technology, and related policy issues, that could favor Bion’s technology and business opportunities. Bion leadership believes this confluence of events positions the Company, assuming it aligns with appropriate strategic partners and obtains sufficient financing, to exploit a unique opportunity to participate in transformational change at the intersection of agriculture, renewable energy and clean fuels, clean air and water, and evolving consumer demand.
| 21 |
PLEASE NOTE:
A: 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. Current liabilities were approximately $6.3 million at December 31, 2024 which represents an increase of approximately $579,000 from June 30, 2024 (largely due to new debt as well as increased deferred compensation). Similarly, the Company’s cash on hand decreased from approximately $52,000 to approximately $32,000 over the same period. The Company has faced extreme difficulty obtaining needed funding during the entire 2024 fiscal year, which has continued throughout the first six months of the current fiscal year to date.
B: Previous management believed that the Initial Project had reached the point where it could be appropriately deemed ‘placed in service’ at January 1, 2024. However, discussions with the key technical and engineering personnel involved at the Initial Project during the recently concluded fiscal year convinced management that such a characterization was premature as some key modules had not yet been completed and/or fully tested at that date. Additionally, due to some equipment break-downs, the Initial Project was in maintenance mode rather than conducting operations, while the Company awaited required replacement parts and subsequent repairs. This process was slowed by the Company’s ongoing difficulties in raising the funds needed for its activities. The Company’s Board of Directors re-evaluated the classification/status of the Initial Project as part of the Company’s annual review process and determined that the Initial Project should have been ‘placed in service’ at the June 30, 2024, fiscal year end.
Further, after extensive discussion between previous management and the Board, it was determined that the ‘carrying value’ of the Initial Project, as of that date, be reduced to $0 on the Company balance sheet, in order to conform with accepted accounting practices. Bion’s technology demonstration system was always planned as a small scale integrated Gen3Tech beef project. Due to covid-related delays and increased capital constraints, it was decided to move quickly to initially construct Phase 1, which was the standalone ARS at Fair Oaks. As matters progressed, including cost overruns, management and financial crises, etc., Bion was unable to proceed further at Fair Oaks. It was anticipated that the ARS would be relocated to another site (potential locations included Ribbonwire Ranch or University of Nebraska-Lincoln) after providing the final design data, where it would be integrated with a small scale Gen3Tech beef facility as originally planned. We recently learned it would not be economically feasible to decommission and disassemble the ARS, then transport, reassemble, and recommission it at another location. Therefore, since the Initial Project is now: i) largely a research & development facility and ii) is located on land subject to a short-term lease, it no longer has commercial value and was written down to $0. As a result, a large ‘one time/non-recurring’ ‘non-cash’ charge of $9,460,425 has been taken by the Company, at that date, which charge reduced the Company shareholders’ equity to ($5,808,501) and resulted in a loss of $11,691,115 for the 2024 fiscal year.
C: On September 28, 2023, the Company entered into an agreement for a $1,500,000 bridge loan and executed documents including a convertible promissory note (“Note”) and a binding subscription agreement (“Subscription”) (collectively the Note and the Subscription are the “Bridge Loan Agreements”) with SEB LLC, a non-affiliated party (“Lender”). SEB and the note represented a strategic investment that would ‘anchor’ a larger capital raise. In addition to SEB, it was to include an offering to Bion shareholders, alongside new retail and institutional investors introduced by Titan Partners, the NY investment banking firm Bion engaged to underwrite the offering. The Bridge Loan Agreements required the Lender to loan the Company $1,500,000 in six monthly tranches of $250,000 commencing October 2023. All sums advanced under the Bridge Loan Agreements (and accrued interest thereon) would be due and payable (with interest accrued at 9% per annum) on October 1, 2024 if not previously converted into securities of the Company. The Note is convertible at $1.00 per unit, at the sole election of the Lender, into units consisting of one share of the Company’s common stock and a warrant to purchase one half share. The initial $250,000 tranche was received by the Company on October 5, 2023. However, no further funds were received by the Company from the Lender.
During early November 2023 the Lender informed the Company verbally that it did not intend to fulfill its obligations pursuant to the Bridge Loan Agreements and since such time the Lender has been in default (“Default”). Titan Partners informed the Company that it would be unable to complete an offering to their customers (or their syndicate member’s customers) without a strategic investor anchor. Further, the Company had very limited success raising money with its own shareholders for the same reason. The Default (which is continuing) has created substantial problems for and materially damaged the Company and rendered the Company unable to meet its current creditor obligations on a timely basis. The Company is currently evaluating its rights regarding the Default by the Lender. This situation has contributed to the substantial increase in the Company’s ‘Current Liabilities’, including ‘accounts payable’, over recent periods. See Condensed Consolidated Financial Statements and ‘Management’s Discussion and Analysis’. The Company has engaged in discussion/negotiation with its larger creditors (including its largest creditor--- the primary contractor on the Initial Project) but has been unable to reach agreements regarding payments due to the uncertainty as to if, when and how much funding the Company will be able to raise in future periods. As a result, the Company’s largest creditor---the primary contractor for the Initial Project --- has filed a mechanics lien in Indiana (and its largest sub-contractor has sent notices related to its intention to file a mechanics lien) and other creditors are threatening to commence litigation and/or repossess/remove leased equipment). Further, as of October 1, 2024, the Company is in default of the terms of the note.
On May 10, 2024 the Company received $150,000 from affiliates of the Bridge Loan Lender on terms not yet finalized and included in an agreement. These funds were received in the context of negotiations/discussions regarding a potential larger investment by affiliates and/or associates of the Lender but no further funds were received and the larger transaction was never completed. The funds were used primarily to re-initiate operations at the Initial Project. The Company is currently involved in discussions with representatives of SEB in an effort to achieve a mutually satisfactory resolution.
| 22 |
D: At the end of December 2023, Bion achieved key objectives in the optimization of the Ammonia Recovery System at our commercial-scale demonstration facility in Fair Oaks, Indiana. Though delayed by supply chain issues, the demonstration at Fair Oaks confirmed the system's state-of-the-art capabilities and economics. In managements’ opinion, the wide applicability of the ARS and its environmental benefits cannot be overstated, as livestock-related and other nutrient issues continue to grow, both in the U.S. and globally.
E: On January 2, 2024, Bion received a new (continuation) patent that broadened the claims related to its Ammonia Recovery System (ARS) to include industrial and municipal wastewater sources, in addition to animal waste streams that were previously covered. Since that time, Bion has and will continue to direct part of its limited resources to understanding and evaluating opportunities to apply its ARS as a ‘standalone’ or ‘bolt-on’ ammonia control solution in these sectors. In such cases, the ARS would be deployed as a standalone ammonia control solution (vs integrated into a Bion Gen3Tech platform) for facilities (both new and existing) that produce biogas from organic waste streams, such as food, food processing, and livestock packing/slaughter. These facilities are subject to EPA-mandated discharge limits that require ammonia control or face other limitations on ammonia/nitrogen in the effluent from biogas production. We believe at this time there is potentially a robust opportunity to provide bolt-on ammonia control solutions to others, both in the industrial and animal waste sectors. We intend to pursue the bolt-on opportunity in the coming year and have already begun to shift some of our limited resources in that direction.
F: Effective April 1, 2024, the Company entered into two material definitive agreements regarding voluntary surrender for cancellation of securities of the Company (and related matters) by: a) members of the family of Dominic Bassani, recently deceased former Chief Executive Officer and (with his family) the Company’s largest shareholder (collectively “Bassani Family”), and b) Mark A. Smith, recently retired President of the Company and a director (“MAS”). The Bassani Family and MAS entered into these agreements with the intention of mitigating dilution to shareholders as new, successor management is added to the Company’s management team. The Bassani Family has agreed to surrender not less than approximately 20% of its Company holdings (as of December 2023) which surrender will increase to approximately 30% based on certain financing performances (see Form 8-K dated April 3, 2024, Exhibit 10.1). The Bassani Family will elect exactly which Company securities it will surrender for cancellation on or before June 30, 2024, the Company’s fiscal year end. The Bassani Family Agreement also sets forth requirements regarding conversion of convertible notes held by members of the Bassani Family after the security surrender. See Exhibit 10.1 for the material terms of the contemplated transactions. MAS has agreed to surrender approximately 30% of his Company holdings (as of December 2023). Immediately upon the effectiveness of the MAS Agreement, he cancelled all Company options held by him (2,425,000, in aggregate) and waived $56,250 of accrued deferred compensation (convertible into 75,000 shares of the Company’s common stock). The MAS Agreement also sets forth requirements regarding conversion of convertible notes held by MAS after the security surrender and references the planned retirement of MAS on or before May 15, 2024. See Exhibit 10.2 for the material terms of the contemplated transactions. Subsequently, and effective June 27, 2024, the Board of Directors of the Company agreed to amend the terms of the agreements dated April 1, 2024. The amendments solely extend any dates of certain required conversions and/or exercises (and related promissory note maturity dates and warrant expiration dates), if any, that were earlier than January 15, 2025, to said date. No changes were made regarding any ‘givebacks’ of securities of the Company. On June 30, 2024, the Bassani Family provided the Company with their list regarding surrender of 20% of its Company holdings (as of December 2023) (See Exhibit 10.1). As previously reported, MAS has previously completed 100% of his ‘give backs’.
G: On May 13, 2024, the Board of Directors commenced a Board-led review of potential strategic alternatives to ensure the Company’s survival and to enhance Bion’s potential growth and maximize shareholder value. The review will include assessing approaches to optimize the Company’s multiple business opportunities through alternative capital return strategies, potential strategic or financial transactions, and developing strategic initiatives best applicable to each opportunity created by our technology in order to consider all possible paths towards maximizing value creation. No timetable has been established for the conclusion of this review and no decisions related to any further actions or potential strategic alternatives have been made at this time. There can be no assurance that the review will result in any transaction or other strategic change or outcome.
H: Effective May 31, 2024, Bion accepted the resignation of Bill O’Neill, both as CEO and Director. Mr. O’Neill had previously informed the Board that he believed he was not being adequately compensated or incentivized and the job was too difficult. On May 21, 204, Bion received a letter from Mr. O’Neill that expressed his dissatisfaction with the Board’s refusal to address his demands and stated he was resigning to pursue other opportunities, despite the fact he had not yet completed the last year of a three-year agreement. Bion chose to accept his resignation in the belief the Company needed a change in leadership and approach.
I: On June 1, 2024, Craig Scott joined the Company's Board of Directors. Mr. Scott has served Bion in several senior positions, dating back to 1996. Mr. Scott also agreed to assume a broader management role for Bion and subsequently accepted the role of interim Chief Executive Officer. Also in June, Greg Schoener assumed the role of Chief Operating Officer on an interim basis. He also joined Bion's Board of Directors. Mr. Schoener is a successful business owner and operator, serving the construction industry in Houston, Texas. He brings broad business management experience, with an emphasis on mission-focused execution and accountability. He has been a Bion shareholder since late-2020. Bob Weerts, another Bion shareholder and a successful serial entrepreneur from Winnebago, Minnesota, also accepted a position on Bion’s Board of Directors.
| 23 |
J: On June 18, 2024, Bion formed a strategic relationship with Turk Stovall and Stovall Ranching Companies with the goal of developing a 16,000-head sustainable beef project at Stovall’s Yellowstone Cattle Feeders (YCF) location in Shepherd, Montana. The YCF feedyard is a traditional outdoor dirt feedlot that today is permitted to feed up to 25,000 head. Mr. Stovall also agreed to join Bion's Board of Directors and lead a joint venture between Stovall Ranching Companies and Bion to develop the project. The facility is envisioned to produce premium quality Montana beef that we believe will be the 'cleanest', most eco-friendly finished beef in the marketplace.
K: To help alleviate short-term cash needs for continued operations, in August, three affiliates of the Company (Greg Schoener, Interim COO & Director; Turk Stovall, Director; Bob Weerts, Director) and two shareholders (one of whom is the brother of Greg Schoener) began advancing money to Bion to cover critical payables. They subsequently formed a loan group, BION BLG, LLC (“BLG”), and have continued to provide short-term funding for Bion in a secured promissory note of up to $500,000. Schoener, Weerts, and the two non-affiliate members were also large Bion shareholders, prior to the formation of BLG. As a group, Schoener, Stovall, and Weerts own 60% of BLG, which has a security interest in the Company’s Intellectual Property. The BLG note will bear interest at a rate of 7.5% per annum and the maturity date is April 15, 2025. As of the filing date, BLG has advanced $399,763. The BLG note will convert into Units (shares and/or warrants) in the Company at the terms of a later capital raise, in which Bion crosses the threshold of $3 (three) million in aggregate capital raised (or other source of funding, and other terms as defined in the note). If the Company is unable to complete such funding within six (6) months, it will be in default of the BLG note, which is secured by the Company’s Intellectual Property (“IP” “Collateral”). BLG will share the Collateral on a pro rata basis with investors in a Note with similar terms being offered to previous Bion investors. The BLG note and security agreements contain other terms set forth therein and are included as exhibits to this filing.
L: In November, the Company launched a secured promissory note offering to previous investors/shareholders (and certain others) with similar terms to the BLG note. Based on feedback from shareholders and registered representatives with which the Company has long standing relationships, management believes that sufficient capital can be raised with this group to 1) continue to cover critical payables to maintain operations that will allow the Company to finish the engineering report and technology demonstration at Fair Oaks, 2) move forward with pre-development work on the Stovall project, 3) continue discussions with potential strategic partners, and 4) position ourselves for the larger offering/ funding that will be required. However, there can be no assurance the Company will be successful in its efforts to obtain such financing.
M: In mid-December, Bion completed the ARS data acquisition at Fair Oaks needed to support an independent engineering report being prepared by Buflovac/ Hebeler Process Solutions, which is expected to be completed in the current quarter. Further, during the week ended January 4, 2025, Bion successfully produced samples of its OMRI Listed 10-0-0 liquid nitrogen fertilizer. These samples were quality tested and subsequently sent to several major U.S. fertilizer manufacturers/ distributors that Bion is in discussions with and that had requested them in order to conduct in-house analysis. A 7-0-0 solution was also produced that was sent to a large West Coast fertilizer distributor that Bion is in discussions with. A sample of the 7-0-0 will accompany an application for registration under the California Department of Food and Agriculture (CDFA) that is being prepared.
____________________________________
Change in Approach
Through the end of calendar 2022, Bion’s strategy to exploit the beef opportunity was focused on developing an initial sustainable beef project as ‘proof of concept’. At the beginning of 2023, under the guidance of our last CEO, Bion’s strategy shifted to executing multiple letters of intent and agreements for sustainable beef JV projects and moving forward with development of those projects in quick succession. During our 2023 fiscal year, Bion entered into three (3) letters of intent (“LOIs”): a) July 2022 letter of intent to develop a large-scale commercial project - a 15,000-head sustainable beef cattle feeding operation together with the Ribbonwire Ranch (“Ribbonwire LOI”), in Dalhart, Texas (with a provision to expand to 60,000 head) (“Dalhart Project”), b) January 2023 letter of intent to develop a large-scale commercial project - a 15,000-head sustainable beef cattle feeding operation together with the Olson Feeders and TD Angus (“Olson LOI”), near North Platte, Nebraska (with a provision to expand to 45,000 head or more) (“Olson Project”), c) April 2023 letter of intent to develop a large-scale commercial project - a 15,000-head sustainable beef cattle feeding operation together with Dakota Valley Growers (“DVG LOI”) near Bathgate, North Dakota (“DVG Project”). Based on our experience, we believe it will not be difficult to secure participation in our Projects from additional feeders/cattlemen, especially once project financing and offtake agreements for both protein and co-products, are in place.
Bion’s new leadership team has returned the company to its earlier approach, focusing on building a ‘flagship’ first project to prove concept feasibility and to provide a development and finance model for future projects. Leadership made this decision after determining that a) a large addressable market for sustainable beef does exist and consumers have demonstrated a ‘willingness to pay’ a premium for sustainable food products; however, since such products cannot be supplied today at scale, it is not a ‘ready’ market and will take time to develop), b) an entrenched industry is never eager for change and it will only occur through enlightened/ proven self-interest, and c) investment capital of the magnitude needed for large scale conversion to sustainable production will first require proof of concept.
Leadership believes for several reasons that the best opportunity for the Company to prove its sustainable beef concept at this time is with the Stovall Ranch JV in Montana. In June 2024, Bion formed a strategic relationship with Turk Stovall and Stovall Ranching Companies. Turk Stovall is a fifth-generation Montana cattleman, with an extensive graduate-level education in cattle husbandry and an MBA in agribusiness, and he is the largest custom cattle feeder in Montana. He also has broad experience and relationships with both the U.S. and Montana’s beef industry and important state leaders, resources, and agencies. Bion and Stovall have agreed to establish a JV, to be led by Mr. Stovall, with the goal of developing a 16,000-head sustainable beef project at Stovall’s Yellowstone Cattle Feeders (‘YCF’) location in Shepherd, Montana. We anticipate establishing the Stovall-Bion JV and creating related distribution agreements with key value chain partners during the current calendar year, with the intent to begin construction in the first half of the current calendar year.
We plan to devote increasingly more resources to the bolt-on business opportunity: using the ARS as a standalone ammonia control solution for others’ biogas production facilities. We are currently focused on existing large-scale livestock facilities with digesters in place, since they have waste streams for which the ARS has been optimized. However, we are also adding resources to pursue opportunities we believe we have in the larger industrial and municipal wastewater sectors, where regulatory drivers already exist, and we believe the ARS and its byproducts may give us a competitive advantage over existing solutions. We have no intention of abandoning our opportunities to develop integrated sustainable livestock projects. However, we believe the bolt-on business opportunity has the advantage of requiring substantially less project development capital and could represent a much shorter path to fertilizer production and revenues.
____________________________________
| 24 |
The Company’s on-going difficulties raising needed funds over the past two years have rendered the Company unable to meet its current creditor obligations on a timely basis. The Company has engaged in discussion/negotiation with its larger creditors (including its largest creditor--- the primary contractor on the Initial Project) but has been unable to reach agreements regarding payments due to the uncertainty as to if, when, and how much funding the Company will be able to raise in future periods. As a result, the primary contractor has filed a mechanics in Indiana (and its largest sub-contractor has sent notices related to its intention to file a mechanics lien) and other creditors are threatening to commence litigation and/or repossess/remove leased equipment. The Company is behind on its lease payments related to the site of the Initial Project. On September 5, 2024, three members of the LLC met with representatives of two of the largest creditors: the primary contractor and the property lessor. We have resumed payments to certain creditors, whose services the Company requires to continue operations at Fair Oaks, including lease payments to the property lessor (and ongoing supplier of digestate). Discussions and ultimate resolution are ongoing and subject to Bion’s ability to raise capital in a timely manner. We have implemented extreme cost savings measures: maintaining only mission-critical operations and funding, on a weekly basis, funding only those expenses needed to maintain operations. These measures will continue until we can execute a larger financing or obtain other sources of capital, such as a potential strategic investor/partner or license agreement.
Bion is currently in discussions with several potential strategic partners in engineering, renewable energy (biogas/RNG and solar) and clean fuels, organic fertilizer distribution, and others involved in reducing the carbon footprint of livestock production, especially beef. With today’s U.S, and global emphasis on decarbonizing energy and the food supply chain, the sectors have become closely intertwined, they are evolving quickly, and integrated solutions have become increasingly desired, but complex. Bion is now evaluating both European and U.S. renewable energy/clean fuels developers, operators, and investors to determine the best fit for moving forward with AD/RNG development for its own beef project(s), access to clean fuels value chains for its low-carbon fertilizers, animal waste treatment for others, both here and in the EU, as well as a development partner in industrial and municipal opportunities. Further, with the recent OMRI Listing for its commercial fertilizer, the Company has initiated discussions with several large U.S. fertilizer manufacturers and distributors that have expressed interest in the product. Bion believes that such relationships could entail a direct investment in Bion, licensing fee, or some other ‘up front’ financial benefit to Bion, although there is no assurance that they will. The Company recently finished data acquisition at Fair Oaks needed to complete an independent engineering report that is critical to demonstrating the technology performance and economics of its ammonia recovery technology to potential strategic partners.
Bion’s new leadership team is strongly committed to Bion’s continuation, its future success, and its shareholders. We have returned the company to its earlier approach of focusing on building a ‘flagship’ first project to prove the concept and markets and provide a development and finance model for future projects, instead of attempting to move forward on multiple projects simultaneously or in rapid succession. We believe this will put us on a more achievable path. Further, this strategy will substantially reduce our need for capital, and we believe that a more reasonable and credible objective will make it easier to raise that capital. We also believe that the recent changes in leadership, including the addition of Turk Stovall to that leadership team, will lend validation and credibility to Bion and its business plan, making it easier to execute needed strategic alliances and raise capital from potential strategic, institutional, and retail investors. For several reasons, we think that the best opportunity to finance a project, and to prove the sustainable beef concept, is with the Stovall Ranch JV in Montana and we are exploring a wide range of alternatives related to funding both the JV and Bion. We are also seeking to identify an initial bolt-on opportunity as described above.
THERE IS NO ASSURANCE THAT THE COMPANY WILL REACH OR APPROACH THE GOALS/TARGETS SET FORTH ABOVE. REACHING SUCH GOALS/TARGETS WILL REQUIRE RESOLUTION OF THE COMPANY’S EXISTING FINANCIAL DIFFICULTIES AND ACCESS TO VERY LARGE AMOUNTS OF CAPITAL (EQUITY AND DEBT) AS EACH BEEF PROJECT ARS MODULE IS PROJECTED TO COST IN EXCESS OF $15 MILLION (DEBT/EQUITY/GRANTS) TO CONSTRUCT AND WILL REQUIRE MOBILIZATION OF SUBSTANTIAL PERSONNEL, TECHNICAL RESOURCES AND MANAGEMENT SKILLS. THE COMPANY DOES NOT POSSESS EITHER THE FINANCIAL OR PERSONNEL RESOURCES INTERNALLY AND WILL NEED TO SOURCE SUCH RESOURCES FROM OUTSIDE ITSELF.
For expanded information regarding our ‘HISTORY, BACKGROUND AND CURRENT ACTIVITIES’, see discussion within the Notes (particularly Notes 1, 4, 5, and 8) included in this report, in Forms 8-K filed earlier this year and Item 1 (and other sections) in our Annual Reports on Form 10-K filed in previous fiscal years.
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 December 31, 2024 and 2023, there are no derivative financial instruments.
| 25 |
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 condensed and 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 condensed and 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.
THREE MONTHS ENDED DECEMBER 31, 2024 COMPARED TO THE THREE MONTHS ENDED DECEMBER 31, 2023
Revenue
Total revenues were nil for both the three months ended December 31, 2024 and 2023.
General and Administrative
Total general and administrative expenses were $336,000 and $636,000 for the three months ended December 31, 2024 and 2023, respectively.
Salaries and related payroll tax expenses were $89,000 and $161,000 for the three months ended December 31, 2024 and 2023, respectively. Consulting costs were $45,000 and $168,000 for the three months ended December 31, 2024 and 2023, respectively. The $72,000 decrease in salary costs is due to Bill O’Neill resigning, Dominic Bassani passing away and the Company not replacing the position and the retirement of Mark Smith. Investor relations expenses were $64,000 and $76,000 for the three months ended December 31, 2024 and 2023, respectively. Legal costs were $1,000 and $7,000 for the three months ended December 31, 2024 and 2023, respectively.
| 26 |
Stock-based compensation for the three months ended December 31, 2024 and 2023 were nil and $67,000, respectively.
Depreciation
Total depreciation expense was $205 and $460 for the three months ended December 31, 2024 and 2023, respectively.
Research and Development
Total research and development expenses were $7,000 and $7,000 for the three months ended December 31, 2024 and 2023, respectively.
Salaries and related payroll tax expenses were $1,000 and $1,000 for the three months ended December 31, 2024 and 2023, respectively. Consulting costs were nil and $1,000 for the three months ended December 31, 2024 and 2023, respectively.
Loss from Operations
As a result of the factors described above, the loss from operations was $344,000 and $644,000 for the three months ended December 31, 2024 and 2023 respectively.
Other (Income)/Expense
Other expense was $31,000 and $75,000 for the three months ended December 31, 2024 and 2023, respectively.
Interest expense related to deferred compensation, loan payable and convertible notes prior to capitalization was $55,000 and $91,000 for the six months ended December 31, 2024 and 2023, respectively. Interest expense related to warrant modifications was $181,000 and $135,000 for the six months ended December 31, 2024 and 2023, respectively.
Net Loss Attributable to the Noncontrolling Interest
The net loss attributable to the noncontrolling interest was nil and nil for the three months ended December 31, 2024 and 2023, 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 $374,000 and $719,000 for the three months ended December 31, 2024 and 2023, respectively, and the net loss per basic common share was $.01 and $.01 for the three months ended December 31, 2024 and 2023, respectively.
SIX MONTHS ENDED DECEMBER 31, 2024 COMPARED TO THE SIX MONTHS ENDED DECEMBER 31, 2023
Revenue
Total revenues were nil for both the six months ended December 31, 2024 and 2023.
General and Administrative
Total general and administrative expenses were $1,296,000 and $1,302,000 for the six months ended December 31, 2024 and 2023, respectively.
Salaries and related payroll tax expenses were $184,000 and $327,000 for the six months ended December 31, 2024 and 2023, respectively. Consulting costs were $90,000 and $354,000 for the six months ended December 31, 2024 and 2023, respectively. The $143,000 decrease in salary costs is due to Bill O’Neill resigning, Dominic Bassani passing away and the Company not replacing the position and the retirement of Mark Smith. The $264,000 decrease in consulting costs were the result of the company’s efforts to conserve cash. Investor relations expenses were $6,000 and $122,000 for the six months ended December 31, 2024 and 2023, respectively, and the $116,000 decrease was due to less investor-related activity during the fiscal year in order to conserve cash and a vendor issuing a credit due to the result of an overcharge for services. Legal costs were $1,000 and $15,000 for the six months ended December 31, 2024 and 2023, respectively.
Stock-based compensation for the six months ended December 31, 2024 and 2023 were $659,000 and $129,000 respectively. The $530,000 increase was due to the recording of stock option and warrant extensions in the first quarter of the current fiscal year.
Depreciation
Total depreciation expense was $490 and $921 for the six months ended December 31, 2024 and 2023, respectively.
Research and Development
Total research and development expenses were $14,000 and $16,000 for the six months ended December 31, 2024 and 2023, respectively.
Salaries and related payroll tax expenses were $3,000 and $3,000 for the six months ended December 31, 2024 and 2023, respectively. Consulting costs were nil and $4,000 for the six months ended December 31, 2024 and 2023, respectively.
Loss from Operations
As a result of the factors described above, the loss from operations was $1,310,000 and $1,319,000 for the six months ended December 31, 2024 and 2023 respectively.
Other (Income)/Expense
Other expense was $236,000 and $145,000 for the six months ended December 31, 2024 and 2023, respectively.
Interest expense related to deferred compensation, loan payable and convertible notes prior to capitalization was $55,000 and $145,000 for the six months ended December 31, 2024 and 2023, respectively. Interest expense related to warrant modifications was $181,000 and $135,000 for the six months ended December 31, 2024 and 2023, respectively.
Net Loss Attributable to the Noncontrolling Interest
The net loss attributable to the noncontrolling interest was nil and nil for the six months ended December 31, 2024 and 2023, 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 $1,546,000 and $1,464,000 for the six months ended December 31, 2024 and 2023, respectively, and the net loss per basic common share was $.03 and $.03 for the six months ended December 31, 2024 and 2023, respectively.
| 27 |
LIQUIDITY AND CAPITAL RESOURCES
The Company's condensed consolidated financial statements for the six months ended December 31, 2024 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, 2024 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 December 31, 2024, the Company had cash of approximately $32,000. During the six months ended December 31, 2024, net cash used in operating activities was $465,000, 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. Cash expenditures were offset in part by proceeds from financing activities, a total of $445,000 in debt funding. During the six months ended December 31, 2023, net cash used in operating activities was $451,000, 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. As stated in multiple places in this report, over the last 3 months the Company has had only very limited success in raising needed funds which lack of success has had material negative effects on the Company and its business. 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 six months ended December 31, 2024 and 2023, the Company invested nil and $484,000 in the purchase of property and equipment, respectively. The decrease was due to the Company’s effort to conserve cash in the six months ended December 31, 2024.
Financing Activities
During the six months ended December 31, 2024, the Company received gross cash proceeds of $445,000 from notes payable.
As of December 31, 2024, the Company has debt obligations consisting of: a) deferred compensation of $1,031,000, b) convertible notes payable – affiliates of $1,728,000, c) converitble note payable including accrued interest of $437,000 and d) notes payable including accrued interest of $407,000. As of December 31, 2023, the Company had debt obligations of a) deferred compensation of $1,225,000, and b) convertible notes payable – affiliates of $1,740,000 and c) current note payable including accrued interest of $255,000.
Plan of Operations and Outlook
As of December 31, 2024, the Company had cash of approximately $32,000.
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 year 2023 and 2022 (as a whole), 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 the entirety of fiscal year 2024 (and the first and second quarters of 2025 through the date of this report). The Company raised very limited equity funds during such periods to meet some of its immediate needs, and therefore, the Company needs to raise substantial additional funds in the upcoming periods. The Company faced substantial demand for capital and operating expenditures for the fiscal year 2024 that we anticipate will continue (or increase) during the 2025 fiscal year and periods thereafter as it moves toward commercial implementation of its ARS, 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 begun to be alleviated during 2022 and 2023. 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 and members of the Company's senior management have from time-to-time made loans to the Company in the past and may do so in future periods.
| 28 |
The Company continues to explore sources of additional financing (including potential agreements with strategic partners – both financial and ag-industry) to satisfy its current and future operating and capital expenditure requirements as it is not currently generating any significant revenues. Bion’s leadership team’s new approach, developing a single proof-of-concept project vs multiple projects developed simultaneously, will substantially reduce the company’s need to raise capital. Further, leadership believes this approach represents a more achievable goal, which coupled with the addition of new leadership, including Turk Stovall to lead Bion’s beef efforts, will reinspire confidence in our own shareholders, as well as assure potential new strategic and institutional investors, and make it easier to raise funds.
Going Concern and Management’s Plans:
The Company’s condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern.
The Company is not currently generating any significant revenues. Further, the Company’s anticipated revenues, if any, from existing JVs and proposed projects will not be sufficient to offset operating and capital costs (for Projects) for a minimum of two to five years. Further, there are no assurances that the Company will ultimately be successful in its efforts to develop and construct its Projects and market its Systems; but, 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. The aggregate effect of these factors raises substantial doubt about the Company’s ability to continue as a going concern.
Year to date ended December 31, 2024 the Company had a loss of $1,546,000 including $659,000 non-cash compensation expenses related to extension of warrants and options.
During the year ended June 30, 2024, a one-time, non-recurring, non-cash charge of $9,460,425 was incurred by the Company in connection with a write-down of the capitalized carrying value of the Initial Project (at Fair Oaks, Indiana) because the Initial Project was recently reclassified as largely a research & development facility and is located on land subject to a short term lease (as described below in Item 2, Management’s Discussion and Analysis). This charge reduced the Company shareholders’ equity to ($5,808,501) and resulted in a loss of $11,691,115 for the 2024 fiscal year.
The constraints on available resources have had, and continue to have, negative effects on the pace and scope of the Company’s efforts to operate and 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, and to develop Projects. The Company anticipates that it will seek to raise from $3,000,000 to $10,000,000 or more debt and/or equity through sale of its equity securities (common, preferred and/or hybrid) and/or debt (including convertible) securities, and/or through use of ‘rights’ and/or warrants (new and/or existing) and/or license payments and/or through other means during the next twelve months. Further, Bion will be required to raise $15 million (or more) to fund the ARS for the Stovall JV beef project, in a combination of debt financing and equity investment. However, as discussed above, there is no assurance, especially in light of the difficulties the Company has experienced in many recent years and the extremely unsettled capital markets that presently exist for small pre-revenue companies like us, that the Company will be able to obtain the funds that it needs to stay in business, complete its technology development or to successfully develop its business and Projects. Ultimately, in the event the Company cannot secure additional financial resources, or complete a strategic transaction in the longer term, the Company may need to curtail or suspend its operational plans or current initiatives, or potentially liquidate its business interests, and investors may lose all or part of their investment.
The accompanying condensed consolidated financial statements do not include any adjustments relating to the recoverability or classification of assets or the amounts and classification of liabilities that may result should the Company be unable to continue as a going concern. The following paragraphs describe management’s plans with regard to these conditions.
| 29 |
Management’s Plan
The Company continues to explore sources of financing to satisfy its current operating requirements and future growth needs. The Company has faced substantial demand for capital and operating expenditures for the fiscal year 2024 that we anticipate will increase during the 2025 fiscal year and periods thereafter as we move toward commercial implementation of our 3G Tech and development of JVs (including costs associated with additions of personnel to carry out the business activities of the Company). As a result, the Company has faced, and continues to face, significant cash flow 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 and members of the Company's senior management have from time-to-time made loans to the Company in the past and may do so in future periods.
To help alleviate short-term cash needs for continued operations, in August, three affiliates of the Company (Greg Schoener, Interim COO & Director; Turk Stovall, Director; Bob Weerts, Director) and two shareholders (one of whom is the brother of Greg Schoener) began advancing money to Bion to cover critical payables. They subsequently formed a loan group, BION BLG, LLC (“BLG”), and provided short-term funding for Bion in a secured promissory note of up to $500,000. Schoener, Weerts, and the two non-affiliate members were also large Bion shareholders, prior to the formation of BLG. As a group, Schoener, Stovall, and Weerts own 60% of BLG, which has a security interest in the Company’s Intellectual Property. The BLG note will bear interest at a rate of 7.5% per annum and the maturity date is April 15, 2025. As of the filing date, BLG has advanced $399,763. The BLG note will convert into Units (shares and/or warrants) in the Company at the terms of a later capital raise, in which Bion crosses the threshold of $3 (three) million in aggregate capital raised (or other source of funding, and other terms as defined in the note). If the Company is unable to complete such funding within six (6) months, it will be in default of the BLG note, which is secured by the Company’s Intellectual Property (“IP” “Collateral”). BLG will share the Collateral on a pro rata basis with investors in a secured promissory note with similar terms being offered to previous Bion investors. The BLG note and security agreements contain other terms set forth therein and are included as exhibits to this filing.
In November, the Company launched a secured promissory note offering to previous investors/shareholders (and certain others) with similar terms to the BLG note. Based on feedback from shareholders and registered representatives with which the Company has long standing relationships, management believes that sufficient capital can be raised with this group to 1) continue to cover critical payables to maintain operations that will allow the Company to finish the engineering report and technology demonstration at Fair Oaks, 2) move forward with pre-development work on the Stovall project, 3) continue discussions with potential strategic partners, and 4) position ourselves for the larger offering/funding that will be required, as described above. However, there can be no assurance the Company will be successful in its efforts to obtain such financing.
To date, the Company has primarily raised funds through private placements with accredited investors, often conducted through FINRA-registered broker/dealers. However, the Company anticipates moving forward, it will need to raise capital using a combination of financial instruments and sources, that could also include strategic and/or institutional investors, including family offices and private equity, brokered equity or debt offerings with both public and private investors, and banks and other ag lending institutions, among others, although there can be no assurance it will be successful. Many of these financing options may involve dilution, potentially substantial, for current shareholders. Management intends to augment its access to capital by adding one or more staff members (or consultants) with experience in the capital markets, as well as utilizing its current contacts and relationships in the capital markets.
Bion is currently in discussions with several potential strategic partners in renewable energy (biogas/RNG and solar) and clean fuels, organic fertilizer distribution, and others involved in reducing the carbon footprint of livestock production, especially beef. With today’s U.S, and global emphasis on decarbonizing energy and the food supply chain, the sectors have become closely intertwined, they are evolving quickly, and integrated solutions have become increasingly desired, but complex. Bion is now evaluating both European and U.S. renewable energy/clean fuels developers, operators, and investors to determine the best fit for moving forward with AD/RNG development for its own beef project(s), access to clean fuels value chains for its low-carbon fertilizers, animal waste treatment for others, both here and in the EU, as well as a development partner in industrial and municipal opportunities. Further, with the recent OMRI Listing for its commercial fertilizer, the Company has initiated discussions with several large U.S. fertilizer manufacturers and distributors that have expressed interest in the product. Bion believes that such relationships could entail a direct investment in Bion, licensing fee, or some other ‘up front’ financial benefit to Bion, although there is no assurance that they will. The Company recently finished data acquisition at Fair Oaks needed to complete an independent engineering report that is critical to demonstrating the technology performance and economics of its ammonia recovery technology to potential strategic partners.
CONTRACTUAL OBLIGATIONS
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 original lease ended on December 31, 2024 and the Company is in discussions on a lease extension.
| 30 |
The Company has not made consistent lease payments since October 16, 2023 and has made no payments since October 31, 2024. The Company owes $75,000 in lease payments at December 31, 2024.
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 3. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable.
Item 4. Controls and Procedures.
(a) Evaluation of Disclosure Controls and Procedures.
The term "disclosure controls and procedures" is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). This term refers to the controls and procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files under the Exchange Act is recorded, processed, summarized, and reported within the required time periods. Our Chief Executive Officer and Principal Financial Officer has evaluated the effectiveness of the design and operations of our disclosure controls and procedures as of the end of the period covered by this quarterly report, and has concluded that, as of that date, our disclosure controls and procedures were not effective at ensuring that required information will be disclosed on a timely basis in our reports filed under the Exchange Act, as a result of the material weakness in internal control over financial reporting discussed in Item 9(A) of our Form 10-K for the year ended June 30, 2024.
(b) Changes in Internal Control over Financial Reporting.
No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
| 31 |
PART II – OTHER INFORMATION
Item 1. Legal Proceedings.
The Company is not currently involved (and has not been involved in recent periods) in any litigation matters. However, the Company is currently in discussions/negotiations with its creditors, as described in Management’s Discussion and Analysis, Note C. These negotiations could escalate to litigation if a mutually satisfactory resolution is not achieved.
As is described in the Company’s Financial Statements included herein and discussed above in Management’s Discussion and Analysis, Note C, the Company’s on-going difficulties raising needed funds for its operations/activities over the past 2 years has rendered the Company unable to meet its current creditor obligations on a timely basis. The Company has engaged in discussion/negotiation with its larger creditors (including its largest creditor--- the primary contractor on the Initial Project) but has been unable to reach agreements regarding payments due to the uncertainty as to if, when and how much funding the Company will be able to raise in future periods. As a result, the primary contractor has filed a mechanics lien in Indiana (and its largest sub-contractor has sent notices related to its intention to file a mechanics lien) and other creditors are threatening to commence litigation and/or repossess/remove leased equipment. However, to date they have not escalated to litigation. On September 5, 2024, three members of BION BLG, LLC, met with representatives of two of the largest creditors: the primary contractor and the property lessor. Bion has not reached an agreement with the primary contractor, but is still in discussions with them, and has resumed payments to certain creditors, whose services the Company requires to continue operations at Fair Oaks, including lease payments to the property lessor (and ongoing supplier of digestate used in testing the ARS).
The Company currently is not involved in any other material litigation or similar events.
Item 1A. Risk Factors.
Risk Factors now include the potential conflicts of interest related to the BLG loan group, its control by three of Bion’s Directors and key management, and its security position in the Company’s IP. See above, Item 2, Management’s Discussion and Analysis.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
During the six months ended December 31, 2024, 9,231 shares of restricted common stock were issued for consulting services valued at $6,000.
Item 3. Defaults Upon Senior Securities.
Not applicable.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
During the six months ended December 31, 2024,
no director or officer of the Company
| 32 |
Item 6. Exhibits.
| (a) | Exhibits required by Item 601 of Regulation S-K. |
| Exhibit | Incorporated by Reference | Filed/Furnished | |||||||||
| No. | Description | Form | Exhibit | Filing Date | Herewith | ||||||
| 10.1 | Bion BLG LLC Promissory Note | 8-K | 10.1 | 10/24/2024 | |||||||
| 10.2 | Security Agreement | 8-K | 10.2 | 10/24/2024 | |||||||
| 31.1* | Certification of Principal Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act | Filed | |||||||||
| 32.1** | Certification of Principal Accounting Officer Pursuant to Section 906 of the Sarbanes-Oxley Act | Furnished | |||||||||
| 101.INS* | Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | Filed | |||||||||
| 101.SCH* | Inline XBRL Taxonomy Extension Schema Document | Filed | |||||||||
| 101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document | Filed | |||||||||
| 101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document | Filed | |||||||||
| 101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase Document | Filed | |||||||||
| 101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document | Filed | |||||||||
| 104* | Inline XBRL for the cover page of this Quarterly Report on Form 10-Q, included in the Exhibit 101 Inline XBRL Document Set. | Filed | |||||||||
| * | Filed herewith. |
| ** | Furnished herewith. |
| 33 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| BION ENVIRONMENTAL TECHNOLOGIES, INC. | ||
| Date: February 14, 2025 | By: | /s/ Stephen Craig Scott |
| Stephen Craig Scott, Chief Executive Officer | ||
| 34 |