U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~December 31, 2021~~September 30, 2022

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to _________

Commission File No. 000-19333

Bion Environmental Technologies, ~~Inc.~~Inc.

(Name of registrant in its charter)

Colorado		84-1176672
(State or other jurisdiction of incorporation or formation)		(I.R.S. employer identification number)

9 East Park Court

Old Bethpage, New York 11804

(Address of principal executive offices)

516-586-5643

(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
Common Stock	BNET	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.

x Yes o No

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). x Yes o No

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 o

Accelerated filer o

Non-accelerated filer o

Smaller reporting company x

Emerging growth company o

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). o Yes x No

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~~November 1, 2022, there were ~~43,733,820~~44,329,884 Common Shares issued and ~~43,209,511~~43,625,575 Common Shares outstanding.

BION ENVIRONMENTAL TECHNOLOGIES, INC.

FORM 10-Q

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION		Page

Item 1.	Consolidated Financial Statements	4
	Consolidated financial statements (unaudited):
	Balance sheets	4
	Statements of operations	5
	Statement of changes in equity (deficit)	6
	Statements of cash flows	7
	Notes to unaudited consolidated financial statements	~~8-27~~8-34

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2835

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	4643

Item 4.	Controls and Procedures	4643

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	4744

Item 1A.	Risk Factors	4846

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4846

Item 3.	Defaults Upon Senior Securities	4846

Item 4.	Mine Safety Disclosures	4846

Item 5.	Other Information	4846

Item 6.	Exhibits	4846

	Signatures	4947

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
CONSOLIDATED BALANCE SHEETS

September 30, June 30,
2022 2022
(unaudited)

ASSETS

Current assets:
Cash $ 1,897,981 $ 3,160,442
Prepaid expenses 134,253 157,550
Deposits and other assets 1,000 1,000

Total current assets 2,033,234 3,318,992

Operating lease right-of-use asset 132,881 145,787
Property and equipment, net (Note 3) 3,248,610 2,895,558

Total assets $ 5,414,725 $ 6,360,337

LIABILITIES AND EQUITY (DEFICIT)

Current liabilities:
Accounts payable and accrued expenses $ 549,425 $ 1,360,644
Series B Redeemable Convertible Preferred stock, $0.01 par value, 50,000 shares authorized; 0 and 200 shares issued and outstanding, liquidation preference of $0 and $40,000, respectively (Note 7) —   —
Deferred compensation (Note 4) 654,349 594,798
Loan payable and accrued interest (Note 5) —   —

Total current liabilities 1,203,774 1,955,442

Operating lease liability 132,113 128,864
Convertible notes payable - affiliates (Note 6) 5,212,286 5,170,610

Total liabilities 6,548,173 7,254,916

Deficit:
Bion's stockholders' equity (deficit):
Series A Preferred stock, $0.01 par value, 50,000 shares authorized, no shares issued and outstanding —   —
Series C Convertible Preferred stock, $0.01 par value, 60,000 shares authorized; no shares issued and outstanding —   —
Common stock, no par value, 250,000,000 shares authorized, 44,303,654 and 43,758,820 shares issued, respectively; 43,599,345 and 43,054,511 shares outstanding, respectively —   —
Additional paid-in capital 124,300,604 123,620,046
Subscription receivable - affiliates (Note 8) (504,650 ) (504,650 )
Accumulated deficit (124,966,975 ) (124,047,548 )

Total Bion's stockholders’ deficit (1,171,021 ) (932,152 )

Noncontrolling interest 37,573 37,573

Total deficit (1,133,448 ) (894,579 )

Total liabilities and deficit $ 5,414,725 $ 6,360,337
See notes to consolidated financial statements
BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021
(UNAUDITED)
~~CONSOLIDATED BALANCE SHEETS~~

December 31, June 30,
2021 2021
(unaudited)

ASSETS

Current assets:
Cash $ 4,948,282 $ 4,216,321
Prepaid expenses 46,723 124,049
Deposits 1,000 1,000

Total current assets 4,996,005 4,341,370

Operating lease use- of- asset 171,835 —
Property and equipment, net (Note 3) 146,895 541

Total assets $ 5,314,735 $ 4,341,911

LIABILITIES AND EQUITY (DEFICIT)

Current liabilities:
Accounts payable and accrued expenses $ 513,070 $ 570,050
Series B Redeemable Convertible Preferred stock, $0.01 par value,50,000 shares authorized; 0 and 200 shares issued and outstanding, liquidation preference of $0 and $40,000, respectively (Note 7) —   37,400
Deferred compensation (Note 4) 477,374 479,208
Loan payable and accrued interest (Note 5) —   9,868,495

Total current liabilities 990,444 10,955,153

Operating lease liability 122,605 —
Convertible notes payable - affiliates (Note 6) 5,075,586 4,793,097

Total liabilities 6,188,635 15,748,250

Deficit:
Bion's stockholders' equity (deficit):
Series A Preferred stock, $0.01 par value, 50,000 shares authorized,  0 shares issued and outstanding —   —
Series C Convertible Preferred stock, $0.01 par value, 60,000 shares authorized; 0 shares issued and outstanding —   —
Common stock, 0 par value, 100,000,000 shares authorized, 43,733,820 and 41,315,986 shares issued, respectively; 43,029,511 and 40,611,677 shares outstanding, respectively —   —
Additional paid-in capital 123,150,676 121,399,067
Subscription receivable - affiliates (Note 8) (504,650 ) (504,650 )
Accumulated deficit (123,558,048 ) (132,339,873 )

Total Bion's stockholders’ deficit (912,022 ) (11,445,456 )

Noncontrolling interest 38,122 39,117

Total deficit (873,900 ) (11,406,339 )

Total liabilities and deficit $ 5,314,735 $ 4,341,911

2022 2021

Revenue $ —   $ —

Operating expenses:
General and administrative (including stock-based compensation) 866,494 491,133
Depreciation 330 248
Research and development (including stock-based compensation) 28,443 61,809

Total operating expenses 895,267 553,190

Loss from operations (895,267 ) (553,190 )

Other (income) expense:
Interest income (1,935 ) (1,494 )
Interest expense 26,095 112,180

Total other expense 24,160 110,686

Net loss (919,427 ) (663,876 )

Net loss attributable to the noncontrolling interest —   506

Net loss applicable to Bion's common stockholders $ (919,427 ) $ (663,370 )

Net loss applicable to Bion's common stockholders per basic and diluted common share $ (0.02 ) $ (0.02 )

Weighted-average number of common shares outstanding:
Basic and diluted 43,451,846 40,719,692

See notes to consolidated financial statements
4
BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
THREE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021
(UNAUDITED)

~~BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES~~
~~CONSOLIDATED STATEMENTS OF OPERATIONS~~
THREE AND SIX MONTHS ENDED DECEMBER 31, 2021 AND 2020
(UNAUDITED)

Three months ended September 30, 2021 Bion's Stockholders'
Series A Preferred Stock Series C Preferred Stock Common Stock Additional paid-in Subscription Receivables for Accumulated Noncontrolling Total
Shares Amount Shares Amount Shares Amount capital Shares deficit interest equity/(deficit)

Balances, July 1, 2021 —   $ —   —   $ —   41,315,986 $ —   121,399,067 $ (504,650 ) $ (132,339,873 ) $ 39,117 $ (11,406,339 )
Warrants exercised for common shares —   —   —   —   139,334 —   104,500 —   —   —   104,500
Commissions on warrant exercises —   —   —   —   10,000 —   (1,000 ) —   —   —   (1,000 )
Conversion of debt and liabilities —   —   —   —   10,253 —   5,126 —   —   —   5,126
Net loss —   —   —   —   —   —   —   —   (663,370 ) (506 ) (663,876 )
Balances, September 30, 2021 —   $ —   —   $ —   41,475,573 $ —   $ 121,507,693 $ (504,650 ) $ (133,003,243 ) $ 38,611 $ (11,961,589 )

Three months ended
December 31, Six months ended
December 31,
2021 2020 2021 2020

Revenue $ —   $ —   $ —   $ —

Operating expenses:
General and administrative (including stock-based compensation (Note 7)) 617,963 291,682 1,109,096 594,559
Depreciation 332 207 580 414
Research and development (including stock-based compensation (Note 7)) 54,404 155,385 116,213 246,373

Total operating expenses 672,699 447,274 1,225,889 841,346

Loss from operations

(672,699 ) (447,274 ) (1,225,889 ) (841,346 )

Other (income) expense:
Interest income (1,269 ) (47 ) (2,763 ) (126 )
Interest expense 118,365 303,218 230,545 407,637
Gain on legal dissolution of subsidiary (10,234,501 ) —   (10,234,501 ) —

Total other expense (10,117,405 ) 303,171 (10,006,719 ) 407,511

Net income (loss) 9,444,706 (750,445 ) 8,780,830 (1,248,857 )

Net loss attributable to the noncontrolling interest 489 524 995 1,039

Net income (loss) applicable to Bion's common stockholders $ 9,445,195 $ (749,921 ) $ 8,781,825 $ (1,247,818 )

Net income (loss) applicable to Bion's common stockholders per basic and diluted common share $ 0.23 $ (0.02 ) $ 0.21 $ (0.04 )

Weighted-average number of common shares outstanding:
Basic and diluted 41,088,992 31,187,645 40,904,342 30,990,639

Three months ended September 30, 2022 Bion's Stockholders'
Series A Preferred Stock Series C Preferred Stock Common Stock Additional paid-in Subscription Receivables for Accumulated Noncontrolling Total
Shares Amount Shares Amount Shares Amount capital Shares deficit interest equity/(deficit)
Balances, July 1, 2022 —   $ —   —   $ —   43,758,820 $ —   $ 123,620,046 $ (504,650 ) $ (124,047,548 ) $ 37,573 $ (894,579 )
Sale of units —   —   —   —   320,000 —   320,000 —   —   —   320,000
Warrants exercised for common shares —   —   —   —   74,834 —   56,125 —   —   —   56,125
Issuance of units for services —   —   —   —   50,000 —   80,000 —   —   —   80,000
Issuance of warrants for services —   —   —   —   —   —   15,000 —   —   —   15,000
Conversion of debt and liabilities —   —   —   —   100,000 —   50,000 —   —   —   50,000
Modification of warrants —   —   —   —   —   —   159,433 —   —   —   159,433
Net loss —   —   —   —   —   —   —   —   (919,427 ) —   (919,427 )
Balances, September 30, 2022 —   $ —   —   $ —   44,303,654 $ —   $ 124,300,604 $ (504,650 ) $ (124,966,975 ) $ 37,573 $ (1,133,448 )

See notes to consolidated financial statements
5
BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021
(UNAUDITED)

2022 2021
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (919,427 ) $ (663,876 )
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense 330 248
Accrued interest on loans payable, deferred compensation and other 26,096 121,111
Stock-based compensation 154,933 —
Stock-based compensation for services 95,000 —
Decrease (increase) in prepaid expenses 23,297 33,753
Increase (decrease) in accounts payable and accrued expenses (787,276 ) 59,367
Decrease in operating lease assets and liabilities 16,155 —
Increase in deferred compensation 75,000 99,400

Net cash used in operating activities (1,315,892 ) (349,997 )

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (322,694 ) (7,490 )

Net cash used in investing activities (322,694 ) (7,490 )

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from exercise of warrants 56,125 104,500
Commissions on exercise of warrants —   (1,000 )
Proceeds from sale of units 320,000 —

Net cash provided by financing activities 376,125 103,500

Net decrease in cash (1,262,461 ) (253,987 )

Cash at beginning of year 3,160,442 4,216,321

Cash at end of year $ 1,897,981 $ 3,962,334

Supplemental disclosure of cash flow information:
Cash paid for interest $ —   $ —

Non-cash investing and financing transactions:
Conversion of debt and liabilities into notes payable $ 23,943 $ —
Conversion of deferred compensation to notes payable $ 20,000 $ —
Conversion of notes payable into shares $ 50,000 $ —
Capitalized interest in property and equipment $ 30,688 $ —
Shares issued for warrant exercise commissions $ —   $ 7,500
Shares issued for accounts payable $ —   $ 5,126
Purchase of property and equipment for accounts payable $ —   $ 54,800
See notes to consolidated financial statements
BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ~~OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)~~
~~SIX~~THREE MONTHS ENDED ~~DECEMBER 31,~~SEPTEMBER 30, 2022 AND 2021 ~~AND 2020~~
~~(UNAUDITED)~~
~~Six months ended December 31, 2021~~

Bion's Shareholders'
Series A Preferred Stock Series C Preferred Stock Common Stock Additional Subscription Receivables Accumulated Noncontrolling Total
Shares Amount Shares Amount Shares Amount paid-in capital for Shares deficit interest equity/(deficit)

Balance at July 1, 2020 —   $ —   —   $ —   31,409,005 $ —   114,266,683 $ (504,650 ) $ (128,891,893 ) $ 41,902 $ (15,087,958 )
Sale of units —   —   —   —   720,000 —   360,000 —   —   —   360,000
Commissions on sale of units —   —   —   —   —   —   (31,000 ) —   —   —   (31,000 )
Modification of options —   —   —   —   —   —   8,775 —   —   —   8,775
Modification of warrants —   —   —   —   —   —   188,890 —   —   —   188,890
Issuance of warrants —   —   —   —   —   —   2,500 —   —   —   2,500
Conversion of debt and liabilities —   —   —   —   141,589 —   70,794 —   —   —   70,794
Net loss —   —   —   —   —   —   —   —   (1,247,818 ) (1,039 ) (1,248,857 )
Balance at December 31, 2020 —   $ —   —   $ —   32,270,594 $ —   $ 114,866,642 $ (504,650 ) $ (130,139,711 ) $ 40,863 $ (15,736,856 )

~~Six months ended December 31, 2021~~
Bion's Shareholders'
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)
Balance at July 1, 2021 —   $ —   —   $ —   41,315,986 $ —   $ 121,399,067 $ (504,650 ) $ (132,339,873 ) $ 39,117 $ (11,406,339 )
Warrants exercised for common shares —   —   —   —   2,315,550 —   1,736,662 —   —   —   1,736,662
Commissions on warrant exercises —   —   —   —   66,860 —   (18,601 ) —   —   —   (18,601 )
Conversion of debt and liabilities —   —   —   —   35,424 —   17,711 —   —   —   17,711
Modification of warrants —   —   —   —   —   —   8,337 —   —   —   8,337
Issuance of warrants —   —   —   —   —   —   7,500 —   —   —   7,500
Net income (loss) —   —   —   —   —   —   —   —   8,781,825 (995 ) 8,780,830
Balance at December 31, 2021 —   $ —   —   $ —   43,733,820 $ —   $ 123,150,676 $ (504,650 ) $ (123,558,048 ) $ 38,122 $ (873,900 )

~~See notes to consolidated financial statements~~
6
~~BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES~~
~~CONSOLIDATED STATEMENTS OF CASH FLOWS~~
~~SIX MONTHS ENDED DECEMBER 31, 2021 AND 2020~~
~~(UNAUDITED)~~

2021 2020
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 8,780,830 $ (1,248,857 )
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Gain on legal dissolution of subsidiary (10,234,501 ) —
Depreciation expense 580 414
Accrued interest on loans payable, deferred compensation and other 248,409 425,499
Stock-based compensation 13,125 36,781
Decrease in prepaid expenses 77,326 3,615
Decrease in operating lease assets and liabilities (49,230 ) —
Increase in accounts payable and accrued expenses 130,628 8,162
Increase in deferred compensation 179,867 245,742

Net cash used in operating activities (852,966 ) (528,644 )

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (92,134 ) —

Net cash used in investing activities (92,134 ) —

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from exercise of warrants 1,736,662 —
Commissions on exercise of warrants (18,601 ) —
Redemption of Preferred Series B shares and interest (41,000 )
Proceeds from sale of units —   360,000
Commissions on sale of units —   (31,000 )

Net cash provided by financing activities 1,677,061 329,000

Net decrease in cash 731,961 (199,644 )

Cash at beginning of period 4,216,321 560,828

Cash at end of period $ 4,948,282 $ 361,184

Supplemental disclosure of cash flow information:
Cash paid for interest $ —   $ 28

Non-cash investing and financing transactions:
Conversion of debt and liabilities into common units $ 17,711 $ 70,794
Shares issued for warrant exercise commissions $ 50,145 $ —
Conversion of deferred compensation to note payable $ 190,000 $ —
Purchase of property and equipment for accounts payable $ 54,800 $ —
~~See notes to consolidated financial statements~~
7
~~BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES~~
~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS~~
~~SIX MONTHS ENDED DECEMBER 31, 2021 AND 2020~~
1.  ORGANIZATION, NATURE OF BUSINESS, GOING CONCERN AND MANAGEMENT’S PLANS:

Organization and nature of business:
Bion Environmental Technologies, Inc.'s ("Bion," "Company," "We," "Us," or "Our") was incorporated in 1987 in the State of Colorado. Bion’s mission is to create extraordinary value for our shareholders and employees (all of whom own securities in the Company) while delivering premium, sustainable products to our customers through ventures developing profitable, transparent, and sustainable solutions for livestock agriculture.
Our patented and proprietary technology provides ~~comprehensive environmental solutions to one of the greatest water air~~advanced waste treatment and ~~water quality problems in the U.S. today: pollution from~~resource recovery for large-scale livestock production facilities (also known as “Concentrated Animal Feeding Operations” or “CAFOs"). Livestock production and its waste, particularly from CAFOs, has been identified as one of the greatest soil, air, and water quality problems in the U.S. today. Application of our third-generation technology and business/technology platform (“Gen3Tech”) can ~~simultaneously remediate~~largely mitigate these environmental problems, ~~and improve~~while simultaneously improving operational/resource efficiencies by recovering ~~value~~ high-value co-products from the CAFOs’ waste stream. These waste stream ~~that~~‘assets’ – nutrients and methane – have traditionally been wasted or underutilized ~~including renewable energy, nutrients (including ammonia nitrogen)~~ and ~~water.~~are the same ‘pollutants’ that today fuel harmful algae blooms, contaminate groundwater, and exacerbate climate change.

~~From 2016 to 2021 fiscal years,~~Bion’s business model and technology platform can create the opportunity for joint ventures s (in various contractual forms) (“JVs”) between the Company ~~has focused a~~and large livestock/food/fertilizer industry participants based upon the supplemental cash flow generated by implementation of our Gen3Tech business model, which cash flows will support the costs of technology implementation (including servicing related debt). We anticipate this will result in substantial long-term value for Bion. In the context of such JVs, we believe that the verifiable sustainable branding opportunities (conventional and organic) in meat will represent the single largest enhanced revenue contributor provided by Bion to the JVs (and Bion licensees). The Company believes that the largest portion of its ~~activities~~business with be conducted through such JVs, but a material portion may involve licensing and or other approaches.
Bion’s Gen3 Tech was designed to capture and stabilize these assets and produce renewable energy, fertilizer products, and clean water as part of the process of raising verifiably sustainable livestock. All steps and stages in the treatment process will be third-party verified, providing the basis for additional revenues, including renewable energy-related credits and, eventually, payment for ecosystem services, such as nutrient credits as described below. The same verified data will be used to substantiate the claims of a USDA-certified sustainable brand that will support premium pricing for the meat/ animal protein products that are produced in Bion facilities.
During the first half of 2022 Bion began marketing our sustainable beef to retailers, food service distributors and the meat industry in the U.S. In general, the response has been favorable. During July 2023, Bion announced a letter of intent (“Ribbonwire LOI”) to develop its first large-scale commercial project, a 15,000-head sustainable beef cattle feeding operation together with the Ribbonwire Ranch, in Dalhart, Texas (with a provision to expand to 60,000 head) (“Dalhart Project”). The Dalhart Project will be developed to produce blockchain-verified, sustainable beef (with reduced the stress on ~~developing, testing~~cattle caused by extreme weather and ~~demonstrating~~temperatures and resulting higher feed/weight gain efficiency) while remediating the ~~3rd generation of its~~environmental impacts associated usually associated with cattle CAFOs. Bion’s patented technology ~~and technology platform (“3G Tech”) with emphasis on increasing the efficiency of production of valuable co-products from~~will refine the waste ~~treatment process, including ammonia nitrogen~~stream into valuable coproducts that include clean water, renewable natural gas (RNG), photovoltaic solar electricity and organic fertilizer products. We anticipate converting the Ribbonwire LOI into a definitive joint venture agreement with Ribbonwire Ranch and creating distribution agreements with key retailers and food service distributors during the next six months.
Our business plan is focused on executing multiple agreements and letters of intent related to additional sustainable beef joint venture projects over the next twelve months while moving forward with the Initial Project (see below) and the Dalhart Project (and/or other Gen3Tech beef joint venture projects) and pursuing other opportunities in the ~~form~~livestock industry enabled by our Gen3 Tech business model. The Ribbonwire LOI announcement has generated significant interest within the livestock industry (among ranchers, feedlot operators, farmers and other AG industry parties). We believe that this interest, combined with consumer interest in ‘sustainable products’ and growing enthusiasm among some livestock industry parties for environmental/sustainable/regenerative practices, may provide Bion (and its partners/venturers) with an opportunity to move forward with a truly sustainable solution in this industry segment.
During the next six months, the Company intends to construct and begin operations of ~~organic ammonium bicarbonate products. The Company’s initial ammonium bicarbonate liquid product completed its Organic Materials Review Institute (“OMRI”) application~~phase 1 of our Initial Project located near Fair Oaks, Indiana. Bion expects the Initial Project to provide data that illustrates the effectiveness of our Gen3Tech in a commercial setting by the end of the 2^nd quarter in 2023 and ~~review process~~supports development of the Dalhart Project (and/or other Gen3Tech beef joint venture projects) during 2023. We believe this data will also provide additional potential stakeholders (cattle producers, cattle feeders, packers, distributors, retailers and financial institutions) with ~~approval during May 2020. An application for our first solid ammonium bicarbonate product – AD Nitrogen – has been filed and is~~the information they need to proceed with confidence in ~~the review process (which is likely to require an extended period of time and~~collaborating with Bion on multiple ~~procedural steps due to the novel nature of Bion’s 3G Tech in the context of organic certifications) See “Organic Fertilizer Listing/Certification Process” below.~~new projects (see below).

Bion is now focused primarily on: i) development/construction of ~~its~~the Initial Project, our initial commercial-scale ~~3G Tech~~Gen3Tech installation, ~~(see below and Note 10, “Subsequent Events”)~~ii) development/construction of the Dalhart Project (and/or other Gen3Tech beef joint venture projects), ~~ii)~~iii) developing applications and markets for its low carbon organic fertilizer products and its sustainable (conventional and organic) animal protein products, and ~~iii)~~iv) discussions regarding initiation and development of agreements and joint ventures (“JVs” as discussed below) (and related projects) based on the augmented capabilities of our ~~3G Tech,~~Gen3Tech business platform (in the sustainable beef and other livestock segments), while ~~(iv)~~(v) continuing to pursue ~~development~~business opportunities related to large retrofit projects (such as the Kreider poultry project JV described below) and vi) ongoing R&D activities.
HISTORY, BACKGROUND AND CURRENT ACTIVITIES
Since the Company’s inception, Bion has designed and developed advanced waste treatment systems for livestock. The first and second generations of Bion’s technology platform were biological systems, primarily focused on nutrient control. Over 30 of these systems were deployed at New York dairies, Florida food processing facilities and dairies, North Carolina hog farms, a Texas dairy and a Pennsylvania dairy (“Kreider 1 Project”). The systems were highly effective at their intended purpose: capturing nitrogen and phosphorus. They produced BionSoil as a byproduct, which was a remarkably effective soil amendment/ fertilizer product, but whose value was not enough to support a viable business model. As such, these early technology iterations were entirely dependent on either implementation of new regulations requiring waste treatment, or subsidy/ incentive programs that would provide ‘payment for ecosystem services’. By the mid-2010’s, it became apparent that neither of these options were imminent or even assured, so the Company initiated the steps to reimagine and redesign its technology.
From 2016 to 2021 fiscal years, the Company focused most of its activities and resources on developing, testing and demonstrating the third generation of its technology and technology platform (“Gen3Tech”) that was developed with an emphasis producing more valuable co-products from the waste treatment process, including renewable natural gas and ammonium bicarbonate, a low-carbon, organic ’pure’ nitrogen fertilizer product while raising sustainable livestock.

The $175 billion U.S. livestock industry is under intense scrutiny for its environmental and public health impacts – its ‘environmental sustainability’-- at the same time it is struggling with declining revenues and margins (derived in part from clinging to its historic practices and resulting limitations and impacts) which threaten its ‘economic sustainability’. Its failure to adequately respond to consumer concerns ~~ranging~~ including food safety, environmental impacts, and ~~humane~~inhumane treatment of animals have provided impetus for plant-based alternatives such as Beyond Meat and Impossible Burger (and many others) being marketed as “sustainable” alternatives for this growing consumer segment of the market.

The Company believes that its ~~3G Tech,~~Gen3Tech, in addition to providing superior environmental remediation, creates opportunities for large scale production of i) verifiably sustainable-branded livestock products and ii) verifiably sustainable organic-branded livestock products, both of which will command premium pricing (in part due to ongoing monitoring and third-party verification of environmental performance which will provide meaningful assurances to both consumers and regulatory agencies). Each of these two distinct market segments (which the Company intends to pursue in parallel) presents a large production/marketing opportunity for Bion. Our ~~3G Tech~~Gen3Tech will also produce (as co-products) biogas, solar photovoltaic electricity in appropriate locations, and valuable low carbon organic fertilizer products, which can be utilized in the production of organic grains for use as feed for raising organic livestock (some of which may be utilized in the Company’s JV projects) and/or marketed to the growing organic fertilizer market.

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During July 2022, the Company entered into a letter of intent with Ribbonwire Ranch (Dalhart, Texas) (“Ribbonwire LOI”) setting forth the parties’ intention to negotiate a joint venture agreement and enter into a joint venture to develop and operate an initial 15,000 head integrated, sustainable beef facility on RWR property (“Dalhart Project”) including:
a) innovative cattle barns (with slatted floors to facilitate movement of manure to the anaerobic digester and potentially solar PV generation on the rooftops which barns will improve the living conditions of the animals while increasing feeding/weight gain efficiency,
b) ‘customized’ anaerobic digestion systems (including pretreatment to increase renewable natural gas (‘RNG’) production and an RNG cleaning system (which will include capture/recycling of the CO2) to allow pipeline sales and monetization of related environmental credits,
c) a Bion GEN3 Tech module (which will utilize the recycled CO2 to increase ammonium bicarbonate recovery) for the production of ammonium bicarbonate fertilizer for use in organic crop production (plus residual organic solids and clean water),
d) which will produce verifiably sustainable beef products with USDA certified branding.
The Dalhart Project will include expansion capability up to 60,000 head of cattle, in aggregate, located at/around/contiguous to the initial facilities on Ribbonwire property.
The opportunity presented by the Ribbonwire LOI to commercialize the Company’s Gen3Tech and business model matured more quickly than anticipated (reflecting strong industry and public momentum in favor of verifiably sustainable food ventures). As a result, we have shifted our plans to focus resources and make our initial 15,000 head operation in Dalhart, TX a reality as soon as possible.
To place the Ribbonwire LOI and the Dalhart Project in the context of Company’s business plan (and our prior public disclosure), if the contemplated venture moves forward on the timelines set forth in the Ribbonwire LOI, active development of the Dalhart Project will commence early in the second quarter of 2023.
Prior to such activity, the Company intends to construct and operate the initial phase of the previously announced Gen3 Tech demonstration project near Fair Oaks, Indiana (“Initial Project”): i) to validate our existing data and modeling at commercial scale and ii) to optimize the Bion 3G Tech module for finalization of design parameters and fabrication details of our planned 15,000 head commercial facilities (including the Dalhart Project). For the purposes of this initial phase, the Company, in order to accelerate the data acquisition phase, intends to utilize anaerobic digester effluent from the nearby/contiguous Fair Oaks dairy. Construction and related activities of this demonstration project have commenced with main module assembly on site targeted to commence during January 2023 (somewhat delayed due to supply chain constraints) followed by operations through the first half of 2023 to generate the required information. Thereafter, the Company will evaluate what, if any, additional facilities and testing will take place at that location.
The Company anticipates that it will negotiate additional letters of intent and enter into additional joint ventures related to the development of further commercial-scale sustainable beef projects over the next 6-18 months in addition to the Dalhart Project.
As previously disclosed, during late September 2021, Bion entered into a lease for the development site of ~~its~~the Initial Project, our initial commercial scale ~~3G Tech~~Gen3Tech project, ~~in September 2021(“Initial Project”),~~ which Initial Project will be located on approximately four (4) acres of leased land near Fair Oaks, Indiana, and a related agreement regarding disposal of certain manure effluent with the Curtis Creek Dairy unit of Fair Oaks Farms (“FOF”). Design and pre-development work commenced during August 2021 and preliminary surveying, site engineering and other work is now underway along with site-specific engineering and design work. The Initial Project ~~will~~was initially planned to be an environmentally sustainable beef cattle feeding facility, equipped with state-of-the-art housing and Bion’s 3G-Tech platform to provide waste treatment and resource recovery. Bion has designed the project to house and feed approximately 300 head of beef cattle. ~~The~~If all phases of the Initial Project are constructed, the facility will include Bion’s ~~3G Tech~~Gen3Tech platform including: i) covered barns (possibly including roof top solar photovoltaic generation), ii) anaerobic digestion for renewable energy recovery, iii) livestock waste treatment and resource recovery technology, iv) Bion’s ammonium bicarbonate recovery and crystallization technology and iv) data collection software to document system efficiencies and environmental benefits (with the Bion ~~3G Tech~~Gen3Tech facilities capable of treating the waste from approximately 1,500 head). The facility will be large enough to demonstrate engineering capabilities of Bion’s ~~3G Tech~~Gen3Tech at commercial scale, but small enough that it can be constructed and commissioned relatively ~~quickly, with~~quickly. Originally, construction and onsite assembly operations were targeted to commence sometime late in ~~2022.~~2022, however, supply chain backlogs have delayed likely delivery dates for core modules of the Bion system to the site until sometime during January 2023. 3G1 has been moving forward with the development process of the Initial Project. See Note 3 “Property and Equipment” and Note 10 “Subsequent Events” ~~for~~(for activities since the start of the ~~2022 calendar year.~~second quarter of the 2023 fiscal year).

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The Initial Project is not being developed at economic commercial scale or with an expectation of profitability due to its limited scale. However, successful installation, commissioning, and operations will demonstrate scalability, determine operating parameters at scale, and provide ongoing production and engineering capabilities, all being critical steps that must be accomplished before developing large projects with JV partners.

Specifically, the Initial Project is being developed to provide and/or accomplish the following:

i. Proof of ~~3G Tech~~Gen3Tech platform scalability

- Document system efficiency and environmental benefits and enable final engineering modifications to optimize each unit process within the Bion ~~3G technology~~Gen3technology platform.

- Environmental benefits will include (without limitation) renewable energy production (natural gas recovery from AD and solar electric from integrated roof top photovoltaic generation); nutrient recovery and conversion to stable organic fertilizer; pathogen destruction; water recovery and reuse; air emission reductions.

ii. Use Bion’s data collection system to support 3rd party verified system efficiency requirement to qualify for USDA Process-Verified-Program (PVP): certification of sustainable branded beef (and potentially pork) product metrics.

iii. Produce sufficient ammonium bicarbonate nitrogen fertilizer (“AD Nitrogen”) for commercial testing by potential joint venture partners and/or purchasers and for university growth trials.

iv. Produce sustainable beef products for initial test marketing efforts.

The Initial Project will be carried out in stages with phase one focused on portions of items i. and iii. set forth above.
Upon ~~achieving optimized and steady-state operations at~~completing the primary goals of phase 1 of the Initial Project, ~~(and especially of the core modules of our 3G Tech platform), coupled~~(coupled with obtaining organic certifications(s) ~~( OMRI listing and/or other organic listings/certifications)~~ for ~~its AD Nitrogen~~our for our solid ammonium bicarbonate fertilizer product line), Bion expects to be ready to move forward with its plans for development of much larger ~~facilities.~~facilities including the Dalhart Project. The Company anticipates that discussions and negotiations it has begun (together with additional opportunities that will be generated over the next 6-12 months) regarding potential JVs with strategic partners in the financial, livestock and food distribution industries to develop large scale projects will ~~commence~~continue during the development/construction of the Initial Project with ~~the~~a 2023 goal of establishing multiple JV’s for large scale projects that will produce sustainable and/or sustainable-organic corn-fed ~~beef during 2023.~~beef. These products will be supported by a USDA PVP-certified sustainable brand that will, initially, highlight reductions in carbon and nutrient footprint, as well as pathogen reductions associated with foodborne illness and antibiotic resistance, along with the organic designation where appropriate. Bion has successfully navigated the USDA PVP application process previously, having received conditional approval of its 2G Tech platform (pending resubmission and final site audits), and is confident it will be successful in qualifying its 3GGen3Tech platform.
After the basic technology start-up milestones of the Initial Project (primarily optimization and steady-state operations of the core modules of our Gen3Tech platform) have been met, the core modules may be re-located to a subsequent more permanent location to be determined at a later date. The Company is in discussion with the University of Nebraska-Lincoln to jointly develop an integrated beef facility based on Bion’s Gen3 Tech ~~platform.~~and business model at its Klosterman Feedyard Innovation Center (“KFIC”) including innovative barns, an anaerobic digester and a Bion Gen3Tech system to conduct ongoing research and development related thereto and the KFIC is a possible site for the long term re-location of the core modules. This venture, if it moves forward, is anticipated to include joint preparation of applications for grants and other funding from the USDA (‘climate smart’ program, rural development, etc.) and other sources. The Company is also considering re-locating the core modules of the Initial Project to Dalhart, Texas, where they may be integrated into the first phases of the Dalhart Project.
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The Company’s initial ammonium bicarbonate liquid product completed its Organic Materials Review Institute (“OMRI”) application and review process with approval during May 2020. Applications for our first solid ammonium bicarbonate product line have been filed with OMRI, the California Department of Food & Agriculture (“CDFA”) and the Iowa Organic Program (“IOP”) and are in the review processes (which are likely to require an extended period of time and multiple procedural steps, in part due to the novel nature of our Gen3Tech in the context of organic certifications). See “Organic Fertilizer Listing/Certification Process” below.

Additionally, the Company believes there will also be opportunities to proceed with selected ‘retrofit projects’ of existing facilities (see ‘~~3G Tech~~Gen3Tech Kreider 2 Poultry Project’ below as an example). in the swine, dairy and poultry industries utilizing our Gen3 Tech.

Bion believes that substantial unmet demand currently exists– potentially very large – for ‘real’ meat/ dairy/ egg products that offer the verifiable/believable sustainability consumers seek, but with the taste and texture they have come to expect from American beef and pork, dairy and poultry. Numerous studies demonstrate the U.S. consumers’ preferences for sustainability. For example, 2019 NYU Stern’s Center for Sustainable Business study found that ‘products marketed as sustainable grew 5.6 times faster than those that were not…’ and that ‘…in more than 90 percent of consumer-packaged-goods (CPG) categories, sustainability-marketed products grew faster than their conventional counterparts.’ Sales growth of plant-based alternatives, including both dairy and more recently ground meat (Beyond Meat, Impossible Foods, etc.) have shown that a certain segment of consumers are choosing seemingly sustainable offering, and are also willing to pay a premium for it. Numerous studies also support the consumers’ ‘willingness-to-pay’ (WTP) for sustainable choices, including a recent meta-analysis of 80 worldwide studies with results that calculate the overall WTP premium for sustainability is 29.5 percent on average.

As one of the largest contributors to some of the greatest air and water quality problems in America, it is clear that livestock waste cleanup, at scale, represents one of the greatest opportunities we have to reduce negative environmental impacts of the food supply chain on air and water quality. Bion’s ~~3G Tech~~Gen3Tech platform, along with its business model, enables the cleanup of the ‘dirtiest’ part of the food supply chain: animal protein production and creates the opportunity to produce and market verifiably sustainable organic and conventional ‘real meat’ products that can participate in the growth and premium pricing that appears to be readily available for the ‘right’ products.

Bion believes that at least a premium segment of the U.S. beef industry (and potentially other livestock industry groups) is at the doorstep of a transformative opportunity to address the growing demand for sustainable food product offerings, while pushing back against today’s anti-meat messaging. At $66 billion/year (2021 ~~retail~~wholesale/farmgate value), the beef industry is a fragmented, commodity industry whose practices date back decades. In 1935 inflation-adjusted terms, beef is 63% more expensive today, while pork and chicken, which are now primarily raised in covered barns, at CAFOs with highly integrated supply chains, are 12% and 62% cheaper, respectively. In recent years, the beef industry has come under increasing fire from advocacy groups, regulatory agencies, institutional investors, and ultimately, their own consumers, over concerns that include climate change, water pollution, food safety, and the treatment of animals and workers.
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Advocacy groups targeting livestock and the beef industry have recently been joined by competitors that produce animal protein alternatives in seeking to exploit the industry’s environmental and economic weaknesses. Their global anti-meat messaging has had a substantial chilling effect on the relationships the beef industry has with its institutional investors; retail distributors, such as fast-food restaurants; and mostly, its consumers. Led by the United Nations Food and Agriculture Organization, a coordinated anti-meat messaging campaign has targeted consumers worldwide, primarily focused on the industry’s impacts on climate change. Meat alternatives, especially plant-based protein producers like Beyond Meat and Impossible Foods, are being heavily promoted by themselves and the media, and have enjoyed steady sales growth. A 2018 NielsenIQ Homescan survey last year found that 39% of Americans are actively trying to eat more plant-based foods. Some of the recent growth in plant-based proteins results from increasing lactose intolerance and other health concerns; however, most of that growth is attributed to consumers’ growing concerns for the environmental impacts of real meat and dairy. Several large US companies that have traditionally focused on livestock production, including Cargill, ADM, Perdue Foods, and Tyson, have recently entered the plant protein space. In terms of changing customer preferences, ‘saving the planet’ has proven to be a more compelling argument than the traditional animal activism/ welfare pitch. To date, the only ‘industry response’ to this has been grass-fed beef, which is regarded as a generally more sustainable offering than grain-fed (largely without empirical evidence). However grass-fed beef has had only limited acceptance in U.S. markets, because it is less flavorful and tougher than the traditional corn-fed beef consumers have grown to enjoy.

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It should be noted that these plant-based protein producers are primarily expected to be able to serve the ground/ processed meat market, which represents ~~approximately~~only about 10 percent of the overall animal protein market. Further, there has recently been pushback to these plant-based products, focusing on their highly processed nature and unproven health benefits, scalability/ pricing, and their uncertain carbon footprint. There have also been several companies recently enter the cellular and 3D-printed meat arena. While facing myriad challenges and further out on the development timeline, some people believe cellular agriculture (aka cultured, clean, lab-grown, cultivated) meat may have the potential to service a much larger percentage of the market than plant-based protein, including cuts like steaks, chops and roasts, but the likely cost remains very uncertain at this point.

Each of these items supports Bion’s belief that there is a potentially very large opportunity to supply premium sustainable beef products that satisfy these concerns. We believe that the real meat/beef products that can be cost-effectively produced today using our ~~3G Tech~~Gen3Tech platform, both sustainable and/or organic, can provide an affordable product that satisfies the consumer’s desire for sustainability, but with the superior taste and texture those consumers have grown to prefer.

Sustainable Beef

Bion’s goal is to be first to market with meaningfully verified sustainable ~~and verified,~~ beef products that can be produced at sufficient scale to service national market demand. The cattle produced at a Bion facility will ~~enjoy~~have a substantially lower carbon footprint, dramatically reduced nutrient impacts to water, and an almost total pathogen kill in the waste stream. Further, the economics of producing these cattle (including the cost of the facility/technology upgrade) will be greatly enhanced by the revenue realized from the recovery of valuable resources, including renewable energy, high-value fertilizer products, and clean water.
A Bion sustainable beef facility will be comprised of covered barns with slotted floors ~~which allow~~(allowing the waste to pass ~~through and be collected quickly and frequently to~~through) which will reduce ammonia volatilization and loss, as well as ~~odors.~~odors, thereby improving animal health and human working conditions while preventing air/soil pollution. The manure will be collected and moved directly to anaerobic digestion facilities which will produce renewable natural gas (and re-cycle CO2 from the gas cleaning process). Covered barns will reduce weather impacts on the livestock and have been demonstrated to promote improved general health and weight gain in the cattle housed in them. The ~~barns represent a~~barns’ very large roof surface area ~~which~~ will be utilized in(in appropriate geographical ~~locations~~locations) for the installation of photovoltaic solar generation systems to produce electricity for the facility, as well as export to the grid. The barn roofs will also be configured to capture rainwater, which, coupled with the water recovered from the treatment process, will reduce the projects’ reliance on current water supplies.
Waste treatment and resource recovery will be provided by Bion’s advanced ~~3G Tech~~Gen3Tech platform, which Bion believes offers the most comprehensive solution for livestock waste available today. In addition to direct environmental benefits, every pound of nitrogen that is captured, upcycled, and returned to the agricultural nitrogen cycle as high-quality fertilizer (vs lost to contaminate downstream waters), is also a pound of nitrogen that will not have to be produced as synthetic urea or anhydrous ammonia, with their tremendous carbon cost. System performance and environmental benefits will be monitored and verified through third parties, with USDA PVP certification of the sustainable brand that Bion also believes will be the most comprehensive available in the market.

Recently there have been efforts to establish sustainable brands (including USDA PVP certification) for a number of ~~small scale~~small-scale livestock producers (largely in the ~~grass fed~~grass-fed beef category). ~~The~~To date, the reach and extent of such efforts is limited ~~to date~~ and it is difficult to determine their effectiveness. Additionally, there have been public announcements of initiatives related to beef sustainability (largely focused on the ~~’cow-calf’~~‘cow-calf’ segment of the livestock chain) in procurement by major beef processing companies, but a closer look finds that most consist largely of ‘green washing’ public proclamations in the wake of environmental and social criticism that re-package prior initiatives and lack any significant new substance.

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Sustainable Organic Beef

Bion believes it has a unique opportunity to produce, at scale, affordable corn-fed organic beef that is also certified as sustainable. In addition to the sustainable practices described above, organic-sourced beef cows would be finished on organic corn, which would be produced using the ammonium bicarbonate fertilizer captured by the ~~3G Tech~~Gen3Tech platform. Bion believes its meat products will meet consumer demands with respect to sustainability and safety (organic) and provide the tenderness and taste American consumers have come to expect from premium conventional American beef. Such products are largely unavailable in the market today. We believe Bion’s unique ability to produce the fertilizer needed to grow a supply of relatively low-cost organic corn, and the resulting opportunity to produce organic beef, will dramatically differentiate us from potential competitors. This organic opportunity is dependent on successfully establishing Bion’s fertilizer products as acceptable for use in organic grain production.
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Today, organic beef demand is limited and mostly supplied with grass-fed cattle. While organic ground/ chopped meat has enjoyed success in U.S. markets, grass-fed steaks have seen limited acceptance, mostly resulting from consumer issues with taste and texture. ~~Stated directly,~~In other words, it’s tough. Regardless, such steaks sell for a significant premium over conventional beef. A grain-finished organic beef product is largely unavailable in the marketplace today due to the higher costs of producing organic corn and grain. The exception is offerings that are very expensive from small ‘boutique’ beef producers. Like all plants, corn requires nitrogen to grow. Corn is especially sensitive to a late-season application of readily available nitrogen – the key to maximizing yields. With non-organic field corn, this nitrogen is supplied by an application of a low-cost synthetic fertilizer, such as urea or anhydrous ammonia. However, the cost for suitable nitrogen fertilizer that can be applied late-season in organic corn production is so high that the late-season application becomes uneconomical, resulting in substantially lower yields – a widely recognized phenomena known as the ‘yield gap’ in organic production. The yield gap results in higher costs for organic corn that, in turn, make it uneconomical to feed that corn to livestock. As is the case for sustainable but not organic beef, Bion believes there is a potentially large unmet demand for affordable beef products that are both sustainable AND organic, but with the taste and texture consumers have come to expect from American beef. Bion’s ability to produce the low-cost nitrogen fertilizer that can close the organic yield (and affordability) gap ~~will put~~puts the Company in a unique, if not exclusive at this time, position to participate in JV’s that will benefit from this opportunity starting next year.

The demonstrated willingness of consumers to purchase sustainable products (along with numerous research and marketing studies confirming consumers are seeking, and are willing to pay a premium for, sustainable products)---in combination with the threat to the livestock industry market (primarily beef and pork) posed by plant-based alternatives (heightened by pandemic conditions)--- has succeeded in focusing the large scale livestock industry on how to meet the plant-based market challenge by addressing the consumer sustainability issues. The consumer demand for sustainability appears to be a real and lasting trend, but consumers remain skeptical of generalized claims of ‘sustainability’. To date, a large portion of the industry responses to this trend have been at a superficial level or consist of ‘green washing’, a deceptive marketing practice where companies promote non-substantive initiatives. Real sustainability for the livestock industry will require implementation of advanced waste treatment technology at or near the CAFOs – where most of the negative environmental impacts take place.

Organic Fertilizer Listing/Certification Process

The Company has focused a large portion of its activities on developing, testing and demonstrating the 3rd generation of its technology and technology platform (“~~3G Tech”~~Gen3Tech”) with emphasis on increasing the efficiency of production of valuable co-products from the waste treatment process, including ammonia nitrogen in the form of organically listed ammonium bicarbonate products. The Company’s initial ammonium bicarbonate liquid product completed its Organic Materials Review Institute (“OMRI”) application and review process with approval during May 2020. The Company has focused a large portion of its activities on developing, testing and demonstrating the 3rd generation of its technology and technology platform (“Gen3Tech”) with emphasis on increasing the efficiency of production of valuable co-products from the waste treatment process, including ammonia nitrogen in the form of low carbon and/or organically certified soluble nitrogen fertilizer products.

~~An application~~
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Applications for our first solid ~~ammonium bicarbonate~~form of concentrated ammonia, soluble nitrogen fertilizer product ~~– AD Nitrogen – was~~ line have been filed with OMRI (filed during May 2021), the Iowa Organic Program (“IOP”)(filed during March 2022) and the California Department of Food & Agriculture (“CDFA”)(filed during May ~~2021~~2022) and ~~is currently actively proceeding through OMRI’s multi-stage~~are each in the review ~~process ---which process has taken~~process. The review processes are likely to require an extended period of time and multiple procedural steps with each entity in part due to the novel nature of Bion’s 3GGen3 Tech and our solid ammonium bicarbonate product in the context of organic ~~listings/~~certifications. ~~OMRI’s Review Panel ‘…. voted to temporarily assign it to “Unresolved” status. This means that~~The OMRI ~~does not currently have the clarity necessary to decide whether the product meets OMRI standards which are based on the USDA National Organic Program regulations (NOP).’ Subsequently the~~ application has ~~gone~~proceeded through ~~‘Rebuttal’ (OMRI Review Panel)~~multiple stages of review and ‘Appeal’ (Appeals Review Committee) stages which affirmed the “Unresolved” status. The Company has been informed that ‘…the product will remain Unresolved until July 22, 2022 or until resolution is reached by OMRI though consultation with the OMRI Advisory Council.’ The application is now beginning review by OMRI’s Advisory Council.rebuttal/appeal without receiving a positive result to date. The Company’s has recently filed responses to the CDFA’s initial set of questions and comments regarding our solid ammonium bicarbonate product line. The Company’s product line is novel in part due to the fact that ~~OMRI does~~there is not ~~have~~ a formal listing category for a solid form of concentrated ~~and~~ammonia, soluble nitrogen fertilizers and there is no clear guidance at present from ~~OMRI~~ internal policy manuals on how to categorize this product and the process that produced it. There is also no clear guidance at present from either the NOP or the National Organic Standards Board (“NOSB”) (which is currently involved in a related review and recommendations process regarding ‘high nitrogen liquid fertilizers’ derived from ammonia from manure). The Company and its representatives, along with a number of other stakeholders, are involved in discussions regarding resolution of these matters at all three levels. The Company anticipates positive resolution of this ~~manner~~matter with one or more listings/certifications of this product line well prior to operational dates for the Company’s initial large scale JV 3GGen3 Tech projects.

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3Gen3 Tech Kreider 2 Poultry Project

Bion has done extensive pre-development work related to a waste treatment/renewable energy production facility to treat the waste from KF’s approximately 6+ million chickens (planned to expand to approximately 9-10 million) (and potentially other poultry operations and/or other waste streams) ('Kreider Renewable Energy Facility' or ‘Kreider 2 Project’). On May 5, 2016, the Company executed a stand-alone joint venture agreement (“JVA”) with Kreider Farms covering all matters related to development and operation of Kreider 2 system to treat the waste streams from Kreider’s poultry facilities in Bion PA2 LLC (“PA2”). During May 2011 the PADEP certified a smaller version of the Kreider 2 Project (utilizing our ~~3G Tech) for 559,457 nutrient credits~~2nd generation technology) under the old EPA’s Chesapeake Bay model. The Company has been in ongoing discussions with the PADEP regarding the appropriate credit calculation methodology for large-scale technology-based nutrient reduction installations such as the KF2 Project utilizing our 3G Tech platform. Based on these discussions and the size of the Kreider 2 Project, we anticipateanticipates that if and when new designs are finalized ~~the~~utilizing our Gen3 Tech, a larger Kreider 2 Project will be re-certified for a far larger number of credits (management’s current estimates are between 2-4 million (or more) nutrient reduction credits for treatment of the waste stream from Kreider’s poultry pursuant to the amended EPA Chesapeake Bay model and agreements between the EPA and PAPA).. Note that this Project may also be expanded in the future to treat wastes from other local and regional CAFOs (poultry and/or dairy---including the Kreider Dairy) and/or additional Kreider poultry expansion (some of which may not qualify for nutrient reduction credits). ~~A review process~~The Company has commenced discussions with Kreider Farms regarding updating the JVA to ~~clarify certain issues related to credit calculation~~reflect the capabilities of our Gen3 Tech platform and ~~verification commenced~~anticipates executing an amended (or new) JVA during ~~2014 based on Bion’s 2G Tech but was been placed on hold.~~the current fiscal year. The Company anticipates if and when PA2 re-commences work on the Kreider 2 Project, it will submit a new application based on our ~~3G Tech.~~Gen3Tech. Site specific design and engineering work for this facility have not commenced, and the Company does not yet have financing in place for the Kreider 2 Project. This opportunity is being pursued through PA2. If there are positive developments related to the market for nutrient reductions in Pennsylvania, of which there is no assurance, the Company intends to pursue development, design and construction of the Kreider 2 Project with a goal of achieving operational status for its initial modules during the following calendar year. The economics (potential revenues and profitability) of the Kreider 2 Project, despite its proposed use of Bion’s ~~3G Tech~~Gen3Tech for increased recovery of marketable by-products and sustainable branding, are based in material part the long-term sale of nutrient (nitrogen and/or phosphorus) reduction credits to meet the requirements of the Chesapeake Bay environmental clean-up. However, liquidity in the Pennsylvania nutrient credit market has not yet developed significant breadth and depth, which lack of liquidity has negatively impacted Bion’s business plans and will most likely delay PA2’s Kreider 2 Project and other proposed projects in Pennsylvania.

Note that while Bion believes that the Kreider 2 Project and/or subsequent Bion Projects in PA and the Chesapeake Bay Watershed will eventually generate revenue from the sale of: a) nutrient reductions (credits or in other form), b) renewable energy (and related credits), c) sales of fertilizer products, and/or d) potentially, in time, credits for the reduction of greenhouse gas emissions, plus e) license ~~fees~~fees/premiums related to a ‘sustainable brand’, the Covid-19 pandemic has delayed legislative efforts needed to commence its development. However, the Company is currently engaged in dialogue with the regional EPA office and the Chesapeake Bay Program Office regarding the potential of the Company’s Gen3 Tech Kreider2 Project (and other potential projects) to enable Pennsylvania to move forward toward meeting its Chesapeake Bay clean-up goals. We believe that the potential market is very large, but it is not possible to predict the exact timing and/or magnitude of these potential markets at this time.

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Technology Deployment: Bion ~~3G Tech~~Gen3Tech

Widespread deployment of waste treatment technology, and the sustainability it enables, is largely dependent upon generating sufficient additional revenues to offset the capital and operating costs associated with technology adoption. Bion’s ~~3G Tech~~Gen3Tech business platform has been developed to create opportunities for such augmented revenue streams, while providing third party verification of sustainability claims. The ~~3G Tech~~Gen3Tech platform has been designed to maximize the value of co-products produced during the waste treatment/recovery processes, including pipeline-quality renewable natural gas (biogas) and commercial fertilizer products approved for organic production. All processes will be verifiable by third parties (including regulatory authorities and certifying boards) to comply with environmental regulations and trading programs and meet the requirements for: a) renewable energy and carbon credits, b) organic certification of the fertilizer coproducts ~~(see below and Note 10, “Subsequent Events”).~~ and c) USDA PVP certification of an ‘Environmentally Sustainable’ brand (see discussion below), and d) payment for verified ecosystem services. The Company’s first patent on its ~~3G Tech~~Gen3Tech was issued during 2018. In August 2020, the Company received a Notice of Allowance on its third patent which significantly expands the breadth and depth of the Company’s ~~3G Tech~~Gen3Tech coverage, and the Company has additional applications pending and/or planned.

Bion’s business model and technology platform can create the opportunity for ~~JVs~~joint ventures (in various contractual forms)(“JVs”) between the Company and large livestock/food/fertilizer industry participants based upon the supplemental cash flow generated by implementation of our ~~3G Tech~~Gen3Tech business model, which cash flows will support the costs of technology implementation (including servicing related debt). We anticipate this will result in substantial long term value for Bion. In the context of such JVs, we believe that the verifiable sustainable branding opportunities (conventional and organic) ~~may expand to~~in meat will represent the single largest enhanced revenue contributor provided by Bion to the JVs (and Bion licensees). The Company believes that the largest portion of its business with be conducted through such JVs, but a material portion may involve licensing and or other approaches.
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In parallel with technology development, Bion has worked (which work continues) to implement market-driven strategies designed to stimulate private-sector participation in the overall U.S. nutrient and carbon reduction strategy. These market-driven strategies can generate “payment for ecosystem services”, in which farmers or landowners are rewarded for managing their land and operations to provide environmental benefits that will generate additional revenues. Existing renewable energy credits for the production and use of biogas are an example of payment for ecosystem services. Another such strategy is nutrient trading (or water quality trading), which will potentially create markets (in Pennsylvania and other states) that will utilize taxpayer funding for the purchase of verified pollution reductions from agriculture (“nutrient credits”) by the state (or others) through competitively-bid procurement programs. Such credits can then be used as a ‘qualified offset’ by an individual state (or municipality) to meet its federal clean water mandates at significantly lower cost to the taxpayer. Market-driven strategies, including competitive procurement of verified credits, is supported by U.S. EPA, the Chesapeake Bay Commission, national livestock interests, and other key stakeholders. Legislation in Pennsylvania to establish the first such state competitive procurement program passed the Pennsylvania Senate by a bi-partisan majority during March ~~2019. However,~~2019 but has not yet crossed the hurdles required for actual adoption. The Covid-19 pandemic and related financial/budgetary crises have slowed progress for this and other policy initiatives and, as a result, it is not currently possible to project the timeline for completion (or meaningful progress) of this and other similar initiatives (see discussion below).

The livestock industry and its markets are already ~~changing; with a~~changing. With our commercial-ready technology and business model, Bion believes it has a ‘first-mover advantage’ over others that will seek to exploit the opportunities that will arise from the industry’s inevitable transformation. Bion anticipates moving forward with the development process of its initial commercial installations utilizing its ~~3G Tech,~~Gen3Tech, during the current 2023 fiscal year. We believe that Bion’s ~~3G Tech~~Gen3Tech platform and business model can provide a pathway to true economic and environmental sustainability with ‘win-win’ benefits for at least a premium sector of the livestock industry, the environment, and the consumer, an opportunity which the Company intends to pursue.

The Livestock Problem

The livestock industry is under tremendous pressure from regulatory agencies, a wide range of advocacy groups, institutional investors and the industry’s own consumers, to adopt sustainable practices. Environmental cleanup is inevitable and has already begun - and policies have already begun to change, as well. Bion’s ~~3G Tech~~Gen3Tech was developed for implementation on large scale livestock production facilities, where scale drives both lower treatment costs and efficient co-products production, as well as dramatic environmental improvements. We believe that scale, coupled with Bion’s verifiable treatment technology platform, will create a transformational opportunity to integrate clean production practices at (or close to) the point of production—the primary source of the industry’s environmental impacts. Bion intends to assist the forward-looking segment of the livestock industry to bring animal protein production in line with 21st Century consumer demands for meaningful sustainability.

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In the U.S. (according to the USDA’s 2017 agricultural census) there are over 9 million dairy cows, 90 million beef cattle, 60 million swine and more than 2 billion poultry which provides an indication of both the scope of the problem addressed by Bion’s technology, as well as the size of Bion’s opportunity. Environmental impacts from livestock production include surface and groundwater pollution, greenhouse gas emissions, ammonia, and other air pollution, excess water use, and pathogens related to foodborne illnesses and antibiotic resistance. While the most visible and immediate problems are related to nutrient runoff and its effects on water quality, the industry has recently been targeted by various stakeholder groups for its impacts on climate change.

Estimates of total annual U.S. livestock manure waste vary widely, but start around a billion tons, between 100 and 130 times greater than human waste. However, while human waste is generally treated by septic or municipal wastewater plants, livestock waste – raw manure – is spread on our nation’s croplands for its fertilizer value. Large portions of U.S. feed crop production (and most organic crop production) are fertilized, in part, in this manner. Under current manure management practices, 80% or more of total nitrogen from manure, much of it in the form of ammonia, escapes during storage, transportation, and during and after soil application, representing both substantial lost value and environmental costs.

More than half of the nitrogen impacts from livestock waste come from airborne ammonia emissions, which are extremely volatile, reactive and mobile. Airborne ammonia nitrogen eventually settles back to the ground through atmospheric deposition - it ‘rains’ everywhere. While some of this nitrogen is captured and used by plants, most of it runs off and enters surface waters or percolates down to groundwater. It is now well-established that most of the voluntary conservation practices, such as vegetated buffers that ‘filter’ runoff (often referred to as “BMPs” or “Best Management Practices” that have traditionally been implemented to attempt to mitigate nutrient runoff), are considerably less effective than was previously believed to be the case. This is especially true with regard to addressing the volatile and mobile nitrogen from ammonia emissions, because BMPs are primarily focused on surface water runoff, directly from farm fields in current production, versus the re-deposition that takes place everywhere or groundwater flow.
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Runoff from livestock waste has been identified in most of our major watersheds as a primary source of excess nutrients that fuel algae blooms in both fresh and saltwater. Over the last several years, algae blooms have become increasingly toxic to both humans and animals, such as the Red Tides on the Florida and California coasts, and the Lake Erie algae bloom that cut off the water supply to Toledo, Ohio, residents in 2014. When the nutrient runoff subsides, it leaves the algae blooms with no more ‘food’ and the blooms die. The algae’s decomposition takes oxygen from the water, leading to ‘dead zones’ in local ponds, lakes, and ultimately, the Great Lakes, as well as the Chesapeake Bay, Gulf of Mexico, and other estuary waters. Both the toxic algae blooms and the low/no-oxygen dead zones devastate marine life, from shrimp and fish to higher mammals, including dolphins and manatees. U.S. EPA already considers excess nutrients “one of America’s most widespread, costly and challenging environmental problems”. Nutrient runoff is expected to worsen dramatically in the coming decades due to rising temperatures and increasing rainstorm intensity as a result of climate change.

Nitrate-contaminated groundwater is of growing concern in agricultural regions nationwide, where it has been directly correlated with nutrient runoff from upstream agricultural operations using raw manure as fertilizer. Pennsylvania, Wisconsin, California and Washington, and others, now have regions where groundwater nitrate levels exceed EPA standards for safe drinking water. High levels of nitrate can cause blue baby syndrome (methemoglobinemia) in infants and affect women who are or may become pregnant, and it has been linked to thyroid disease and colon cancer. EPA has set an enforceable standard called a maximum contaminant level (MCL) in water for nitrates at 10 parts per million (ppm) (10 mg/L) and for nitrites at 1 ppm (1 mg/L). Federal regulations require expensive pretreatment for community water sources that exceed the MCL; however, private drinking water wells are not regulated, and it is the owners’ responsibility to test and treat their wells. Additionally, groundwater flows also transport this volatile nitrogen downstream where, along its way, it intermixes with surface water, further exacerbating the runoff problem. Like atmospheric deposition, the current conservation practices we rely on to reduce agricultural runoff are largely bypassed by this subsurface flow.

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Additionally, in arid climates, such as California, airborne ammonia emissions from livestock manure contribute to air pollution as a precursor to PM2.5 formation, small inhalable particulate matter that is a regulated air pollutant with significant public health risks. Whether airborne or dissolved in water, ammonia can only be cost-effectively controlled and treated at the source-- before it has a chance to escape into the environment where it becomes extremely expensive to ‘chase’, capture, and treat.

High phosphorus concentrations in soils fertilized with raw manure are another growing problem. The ratio of nitrogen to phosphorus in livestock waste is fixed, and because manure application rates are calculated based on nitrogen requirements, often phosphorus is overapplied as an unintended consequence. Phosphorus accumulation in agricultural soils reduces its productivity, increases the risk of phosphorus runoff, and represents a waste of a finite resource. Decoupling the nitrogen from the phosphorus would allow them to be precision-applied, independently of each other, when and where needed.

The livestock industry has recently come under heavy fire for its impacts on climate change, which has become a rallying cry for the anti-meat campaign discussed above. Estimates of the magnitude of those impacts vary widely, but the general consensus is that globally, livestock account for 14.5 percent of greenhouse emissions. In the U.S. however, that number drops to 4.2 percent, due to the increased efficiencies of American beef production. The greatest impacts come from direct emissions of methane from enteric fermentation (belches), methane and nitrous oxide emissions from the manure, with arguably the largest being the massive carbon footprint of the synthetic nitrogen fertilizers used to grow the grains to feed the livestock.

For decades the livestock industry has overlooked and/or socialized its environmental problems and costs. Today, the impacts of livestock production on public health and the environment can no longer be ignored and are coming under increasing scrutiny from environmental groups and health organizations, regulatory agencies and the courts, the media, consumers, and activist institutional investors. The result has been a significant and alarming loss of market share to plant-based protein and other alternative products. Bion’s ~~3G Tech~~Gen3Tech platform was designed to resolve these environmental issues and bring the industry in line with twenty-first century consumer expectations.

Going concern and management’s plans:

The consolidated financial statements have been prepared assuming the Company will continue as a going concern. The Company has not generated significant revenues and has incurred net losses ~~(including significant non-cash expenses)~~ of approximately $3,451,000 ~~and $4,553,000~~during the ~~years~~year ended June 30, 2021 and ~~2020, respectively, and~~ a net income of ~~approximately~~ $~~8,781,000~~8,292,000 ~~during~~for the ~~six months~~year ended ~~December 31, 2021.~~June 30, 2022. The net income for the ~~six months is~~year ended June 30, 2022 was largely due to a one-time, non-cash event of the dissolution of PA-1 ~~and~~resulting in a gain of approximately $10,235,000~~. There was an operating~~ as well as a one-time gain of $902,490 from the sale of the Company’s ‘biontech.com’ domain pursuant to a purchase agreement during the period. The Company incurred a net loss of ~~approximately~~ $~~1,226,000~~919,000 and $663,000 for the ~~six~~three months ended ~~December 31, 2021.~~September 30, 2022 and 2021, respectively. At ~~December 31, 2021,~~September 30, 2022, the Company has working capital and a stockholders’ deficit of approximately $~~4,006,000~~1,171,000 and $829,000, ~~912,022~~1,171,021 ~~$912,000,~~ respectively. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments relating to the recoverability or classification of assets or the amounts and classification of liabilities that may result should the Company be unable to continue as a going concern. The following paragraphs describe management’s plans with regard to these conditions.

The Company continues to explore sources of additional financing (including potential agreements with strategic partners – both financial and ag-industry) to satisfy its current and future operating and capital expenditure requirements as it is not currently generating any significant revenues.

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During the years ended June 30, ~~2021~~2022 and ~~2020,~~2021, the Company received gross proceeds of approximately $~~5,209,000~~1,737,000 and $~~1,584,000~~5,209,000, respectively, from the sale of its debt and equity securities.

During the ~~six~~three months ended ~~December 31, 2021,~~September 30, 2022, the Company received total proceeds of approximately $~~1,737,000~~376,000 from the sale of its equity ~~securities and paid approximately $18,600~~ ~~in cash commissions.~~securities.

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During fiscal years ~~2021~~2022 and ~~2020,~~2021, the Company has faced ~~progressively~~ less difficulty in raising equity funding (but substantial equity dilution has gone along with the larger amounts of equity financing during the periods) than was experienced in the prior 3 ~~years. Note, however,~~years except that during the first ~~six~~three months of the current fiscal year, the Company has raised equity funds at a rate ~~less~~materially lower than the average rate during fiscal ~~year 2021.~~years 2021 and 2022. The Company anticipates substantial increases in demands for capital and operating expenditures as it moves toward commercial implementation of its 3G Tech and development of JVs (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 challenges due to limited capital resources and working capital constraints which have only recently begun to be alleviated. To partially mitigate these working capital constraints, the Company’s core senior management and several key employees and consultants have been deferring (and continue to defer) ~~part~~portions of their cash compensation and/or are accepting compensation in part in the form of securities of the Company and/or converting portions of their compensation and deferred compensation to securities of the Company (Notes 5 and 7) and members of the Company’s senior management have made loans to the Company from time to time. During the year ended June 30, 2018, senior management and certain core employees and consultants agreed to a one-time extinguishment of liabilities owed by the Company which in aggregate totaled $2,404,000. Additionally, the Company made reductions in its personnel during the years ended June 30, 2014 and 2015 and again during the year ended June 30, 2018. The constraint on available resources has had, and continues to have, negative effects on the pace and scope of the Company’s efforts to develop its business. The Company has had to delay payment of trade obligations and has had to economize in many ways that have potentially negative consequences. If the Company is able to continue its recent relative success in its efforts to raise needed funds during the remainder of the current fiscal year (and subsequent periods), of which there is no assurance, management will not need to consider deeper cuts (including additional personnel cuts) and curtailment of ongoing activities including research and development activities.

The Company will need to obtain additional capital to fund its operations and technology development, to satisfy existing creditors, to develop Projects (including the Initial Project, JV Projects (including the Dalhart Project), Integrated Projects and the Kreider 2 facility) and CAFO Retrofit waste remediation systems. The Company anticipates that it will seek to raise from $~~10,000,000~~ 20,000,000to $~~50,000,000~~80,000,000 or more debt and/or equity through joint ventures, strategic partnerships and/or sale of its equity securities (common, preferred and/or hybrid) and/or debt (including convertible) securities, and/or through use of ‘rights’ and/or warrants (new and/or existing) and or through other means during the next twelve months. However, as discussed above, there is no assurance, especially in light of the difficulties the Company has experienced in many recent years and the extremely unsettled capital markets that presently exist for small companies like ~~us),~~us, that the Company will be able to obtain the funds that it needs to stay in business, complete its technology development or to successfully develop its business and Projects.

There is no realistic likelihood that funds required during the next twelve months (or in the periods immediately thereafter) for the Company’s basic operations, the Initial Project and/or proposed JVs and/or Projects will be generated from operations. Therefore, the Company will need to raise sufficient funds from external sources such as debt or equity financings or other potential sources. The lack of sufficient additional capital resulting from the inability to generate cash flow from operations and/or to raise capital from external sources would force the Company to substantially curtail or cease operations and would, therefore, have a material adverse effect on its business. Further, there can be no assurance that any such required funds, if available, will be available on attractive terms or that they will not have a significantly dilutive effect on the Company’s existing shareholders. All of these factors have been exacerbated by the extremely limited and unsettled credit and capital markets presently existing for small companies like Bion.

Covid-19 pandemic related matters:
The Company faces risks and uncertainties and factors beyond our control that are magnified during the current Covid-19 pandemic and the unique economic, financial, governmental and health-related conditions in which the Company, the country and the entire world now reside. To date the Company has experienced direct impacts in various areas including but without limitation: i) government ordered shutdowns which have slowed the Company’s research and development projects and other initiatives, ii) shifted focus of state and federal governments which is likely to negatively impact the Company’s legislative initiatives in Pennsylvania and Washington D. C., iii) strains and uncertainties in both the equity and debt markets which have made discussion and planning of funding of the Company and its initiatives and projects with investment bankers, banks and potential strategic partners more tenuous, iv) strains and uncertainties in the agricultural sector and markets have made discussion and planning more difficult as future industry conditions are now more difficult to assess and predict, v) constraints due to problems experienced in the global industrial supply chain since the onset of the Covid-19 pandemic, which have delayed certain research and development testing and ~~are likely to delay~~have delayed and/or ~~increase~~increased the cost of construction of the Company’s initial 3G Tech installation ~~if equipment remains~~as equipment/services remain difficult to acquire in a timely manner, vi) due to the age and health of our core management team, ~~all~~many of whom are age 70 or older and have had one or more existing health issues (including brief periods of Covid-19 infection), the Covid-19 pandemic places the Company at greater risk than was previously the case (to a higher degree than would be the case if the Company had a larger, deeper and/or younger core management team), and vii) there almost certainly will be other unanticipated consequences for the Company as a result of the current pandemic emergency and its aftermath.

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2.       SIGNIFICANT ACCOUNTING POLICIES

Principles of consolidation:

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Bion Integrated Projects Group, Inc. ~~(“Projects Group”)~~, Bion Technologies, Inc., BionSoil, Inc., Bion Services, Bion PA2 LLC and Bion 3G-1 ~~LLC;~~LLC (“3G1”); and its 58.9% owned subsidiary, Centerpoint Corporation (“Centerpoint”). All significant intercompany accounts and transactions have been eliminated in consolidation.

Bion PA1 LLC was dissolved on December 29, 2021 (See Note 5). ~~The~~Its operating ~~loss~~losses are included in the consolidation through December 29, 2021.

The accompanying consolidated financial statements have been prepared without audit pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The 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, 2021,~~September 30, 2022, and the results of operations ~~of the Company for the three~~ and ~~six months ended December 31, 2021 and 2020 and the~~ cash flows of the Company for the ~~six~~three months ended ~~December 31, 2021~~September 30, 2022 and ~~2020.~~2021. Operating results for the three ~~and six~~ months ended ~~December 31, 2021~~September 30, 2022 are not necessarily indicative of the results that may be expected for the year ending June 30, ~~2022.~~2023.

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 September 30, 2022 and June 30, 2022 there are no cash equivalents.

Property and equipment:

Property and equipment are stated at cost and are depreciated, when placed into service, using the straight-line method over the estimated useful lives of the related assets, generally three to twenty years. The Company capitalizes all direct costs and all indirect incrementally identifiable costs related to the design and construction of its Integrated ~~Projects.~~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.

Stock-based compensation:

The Company follows the provisions of Accounting Standards Codification (“ASC”) 718, which generally requires that share-based compensation transactions be accounted and recognized in the statement of operations based upon their grant date fair values.

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.

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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.
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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.

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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 consolidated statements of operations over the lease term.
For leases with a term exceeding 12 months, a lease liability is recorded on the Company’s consolidated balance sheet at lease commencement reflecting the present value of its fixed minimum payment obligations over the lease term. A corresponding right-of-use (“ROU”) asset equal to the initial lease liability is also recorded, adjusted for any prepaid rent and/or initial direct costs incurred in connection with execution of the lease and reduced by any lease incentives received. For purposes of measuring the present value of its fixed payment obligations for a given lease, the Company uses its incremental borrowing rate, determined based on information available at lease commencement, as rates implicit in its leasing arrangements are typically not readily determinable. The Company's incremental borrowing rate reflects the rate it would pay to borrow on a secured basis and incorporates the term and economic environment of the associated lease.

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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”.

~~Loss~~Income (Loss) per share:

Basic ~~loss~~income (loss) per share amounts are calculated using the weighted average number of shares of common stock outstanding during the period. Diluted ~~loss~~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 ~~loss~~income (loss) per share or increase the earnings per share. During the three ~~and six~~ months ended ~~December 31,~~September 30, 2022 and 2021, ~~and 2020,~~ the basic and diluted ~~loss~~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 ~~loss~~income (loss) per share:

Schedule of anti dilutive securities
December 31,
2021 December 31,
2020 September 30,
2022 September 30,
2021
Warrants 19,726,777 21,270,102 19,873,801 21,802,822
Options 10,471,600 9,511,600 11,201,600 10,471,600
Convertible debt 10,673,722 11,215,175 10,793,421 10,462,498
Convertible preferred stock —   19,500 —   20,250

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The following is a reconciliation of the denominators of the basic and diluted ~~loss~~income (loss) per share computations for the three ~~and six~~ months ended ~~December 31, 2021~~September 30, 2022 and ~~2020:~~2021:

Schedule of earnings per share, basic and diluted
Three months
ended
December 31,
2021 Three months
ended
December 31,
2020 Six months
ended
December 31,
2021 Six months
ended
December 31,
2020
Shares issued – beginning of period 41,475,573 31,575,656 41,315,986 31,409,005
Shares held by subsidiaries (Note 7) (704,309 ) (704,309 ) (704,309 ) (704,309 )
Shares outstanding – beginning of period 40,771,264 30,871,347 40,611,677 30,704,696
Weighted average shares issued
    during the period 317,728 316,298 292,665 285,943
Diluted weighted average shares –
    end of period 41,088,992 31,187,645 40,904,342 30,990,639
Schedule of earnings per share, basic and diluted
Three months
ended
September 30,
2022 Three months
Ended
September 30,
2021
Shares issued – beginning of period 43,758,820 41,315,986
Shares held by subsidiaries (Note 7) (704,309 ) (704,309 )
Shares outstanding – beginning of period 43,054,511 40,611,677
Weighted average shares issued
    during the period 397,335 108,015
Diluted weighted average shares –
    end of period 43,451,846 40,719,692

Use of estimates:

In preparing the Company’s consolidated financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Recent Accounting Pronouncements:

The Company continually assesses any new accounting pronouncements to determine their applicability. When it is determined that a new accounting pronouncement affects the Company’s financial reporting, the Company undertakes a study to determine the consequences of the change to its consolidated financial statements and assures that there are proper controls in place to ascertain that the Company’s consolidated financial statements properly reflect the ~~change.~~
change
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3. PROPERTY AND EQUIPMENT:

Property and equipment consist of the following:

Schedule of property and equipment
December 31,
2021 June 30,
2021 September 30,
2022 June 30,
2022
Machinery and equipment $ —   $ 2,222,670 $ —   $ —
Buildings and structures —   401,470 —   —
Computers and office equipment 11,137 171,485 13,598 13,598
3G project construction in process 145,439 —   3,245,604 2,892,222
Property and equipment, gross 156,576 2,795,625 3,259,202 2,905,820
Less accumulated depreciation (9,681 ) (2,795,084 ) (10,592 ) (10,262 ))
Property and equipment, net $ 146,895 $ 541 $ 3,248,610 $ 2,895,558
The 3G project began in July of 2021, with a lease signed on land October 1, 2021 (Note 9). Once the lease commenced the Company moved into construction phase. The balance for 3G construction in process includes $62,688 for capitalized interest and $135,648 in non-cash compensation as of September 30, 2022.

Management has reviewed the remaining property and equipment for impairment as of ~~December 31, 2021~~September 30, 2022 and believes that 0no impairment exists.

Depreciation expense was $~~332~~330 and $~~207~~248 for the three months ended ~~December 31,~~September 30, 2022 and 2021, ~~and 2020, respectively, and $580~~ ~~and $414~~ ~~for the six months ended December 31, 2021 and 2020,~~ respectively.

On December 29, 2021 Bion PA1 LLC was dissolved which removed all items which were listed under ‘Machinery and equipment’ and Buildings and structures’ plus almost all of the items which were listed under ‘Computers and office equipment’ at June 30, 2021 resulting in the elimination of almost the entire balance of ‘accumulated depreciation’. See Note 5, “LOANS PAYABLE: Pennvest Loan and Bion PA1 LLC (“PA1”) Dissolution” below.
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4.       DEFERRED COMPENSATION:
The Company owes deferred compensation to various employees, former employees and consultants totaling $~~477,374~~654,349 and $~~998,474~~528,640 as of ~~December 31,~~September 30, 2022 and 2021, ~~and 2020,~~ respectively. Included in the deferred compensation balances as of ~~December 31, 2021,~~September 30, 2022, are $~~374,015~~459,627 and ~~nil~~$5,000 owed Dominic Bassani (“Bassani”), the Company’s Chief Operating Officer (who was Chief Executive Officer until through April 30, 2022), and Mark A. Smith (“Smith”), the Company’s President,, respectively, pursuant to extension agreements effective January 1, 2015, whereby unpaid compensation earned after January 1, 2015, accrues interest at 4% per annum and can be converted into shares of the Company’s common stock at the election of the employee during the first five calendar days of any month. The conversion price shall be the average closing price of the Company’s common stock for the last 10 trading days of the immediately preceding month. The deferred compensation owed Bassani and Smith as of ~~December 31, 2020~~September 30, 2021 was $~~307,260~~436,920 and $~~71,699~~0, nil, respectively. The Company also owes various consultants and an employee, pursuant to various agreements, for deferred compensation of $~~30,859~~117,222 and $~~512,432~~19,220 as of ~~December 31,~~September 30, 2022 and 2021, ~~and 2020,~~ respectively, with similar conversion terms as those described above for Bassani and Smith, with the exception that the interest accrues at 0% to 3% per annum. The Company also owes a former employee $~~72,500~~,$72,500, which is not convertible and is non-interest bearing.
Bassani and Smith have each been granted the right to convert up to $300,000 of deferred compensation balances at a price of $0.75 per share until ~~December 31, 2022~~June 30, 2024 into common shares (to be issued pursuant to the 2006 Plan). Smith also has the right to convert all or part of his deferred compensation balance into the Company’s securities (to be issued pursuant to the 2006 Plan) “at market” and/or on the same terms as the Company is selling or has sold its securities in its then current (or most recent if there is no current) private placement. Smith also received the right to transfer future deferred compensation to his 2020 Convertible Obligation at his election.
During the three months ended September 30, 2022, Smith elected to convert $20,000 of deferred compensation into the 2020 Convertible Note.
The Company recorded interest expense of $~~4,268~~4,551 ($~~4,095~~4,119 with related parties) and $~~6,693~~4,032 ($~~2,950~~3,949 with related parties) for the three months ended ~~December 31,~~September 30, 2022 and 2021, ~~and 2020,~~ respectively, ~~and $8,300~~ ($~~8,044~~ ~~with~~ related ~~parties) and $12,476~~ ($~~5,159~~ ~~with related parties) for the six months ended December 31, 2021 and 2020, respectively.~~to deferred compensation.
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5.       LOANS PAYABLE:

Pennvest Loan and Bion PA1 LLC (“PA1”) Dissolution

PA1, the Company’s wholly-owned subsidiary, was dissolved on December 29, 2021 on which date it owed approximately $~~10,009,802~~10,010,000 under the terms of the Pennvest Loan related to the construction of the Kreider 1 System including accrued interest and late charges totaling $2,255,802 as of that date. Through the date of the dissolution, PA1 was a wholly-owned subsidiary of the Company and its assets and liabilities were included on the Company’s consolidated balance sheet. At September 30, 2021, PA1’s total assets were $297 and its total liabilities were $10,154,334 (including the Pennvest Loan in the aggregate amount of $9,939,148, accounts payable of $214,235 and accrued liabilities of $950) which sums were included in the Company’s consolidated balance sheet in its Form 10-Q for the quarter ended September 30, 2021. Subsequent to the dissolution of PA1, its assets and liabilities are no longer consolidated and included in the Company’s balance sheet. As of December 29, 2021, PA1’s total assets were nil 0 and its total liabilities were $10,234,501 (including the Pennvest Loan in the aggregate amount of $10,009,802, accounts payable of $212,263 and accrued liabilities of $12,436. The net amount of $10,234,501 was recognized as a gain on the legal dissolution of a subsidiary in other (income) expense.
24
As background, the terms of the Pennvest Loan provided for funding of up to $7,754,000 which was to be repaid by interest-only payments for three years, followed by an additional ten-year amortization of principal. The Pennvest Loan accrued interest at 2.547% per annum for years 1 through 5 and 3.184% per annum for years 6 through maturity. The Pennvest Loan required minimum annual principal payments of approximately $5,886,000 in fiscal years 2013 through 2021, and $846,000 in fiscal year 2022, $873,000 in fiscal year 2023 and $149,000 in fiscal year 2024. The Pennvest Loan iswas collateralized by PA1’s Kreider 1 System and by a pledge of all revenues generated from Kreider 1 including, but not limited to, revenues generated from nutrient reduction credit sales and by-product sales. In addition, in consideration for the excess credit risk associated with the project, Pennvest was entitled to participate in the profits from Kreider 1 calculated on a net cash flow basis, as defined. The Company has incurred interest expense related to the Pennvest Loan of $123,444 and $~~61,722~~246,887 for ~~both~~ the ~~three months~~years ended ~~December 31,~~June 30, 2022 and 2021, ~~and 2020, respectively, and $123,444~~ ~~for both the six months ended December 31, 2021 and 2020,~~ respectively. Based on the limited development of the depth and breadth of the Pennsylvania nutrient reduction credit market, PA1 commenced discussions and negotiations with Pennvest related to forbearance and/or re-structuring the obligations under the Pennvest Loan during 2013. In the context of such negotiations, PA1 elected not to make interest payments to Pennvest on the Pennvest Loan since January 2013. Additionally, the PA1 ~~has~~did not ~~made~~make any principal payments, which were to begin in fiscal 2013, and, therefore, the Company classified the Pennvest Loan as a current liability through the dissolution of PA1 on December 29, 2021.

During August 2012, the Company provided Pennvest (and the PADEP) with data demonstrating that the Kreider 1 system met the ‘technology guaranty’ standards which were incorporated in the Pennvest financing documents and, as a result, the Pennvest Loan has been solely an obligation of PA1 since that date. Note, however, the Company’s consolidated balance sheet as of June 30, 2021 reflects the Pennvest Loan as a liability of $9,868,495 despite the fact that the obligation (if any) was solely an obligation of PA1.

On September 25, 2014, the Pennsylvania Infrastructure Investment Authority (“Pennvest”) exercised its right to declare the PA1’s Pennvest Loan in default, accelerated the Pennvest Loan and demanded that PA1 pay $8,137,117 (principal, interest plus late charges) on or before October 24, 2014. PA1 did not make the payment and did/does not have the resources to make the payments demanded by Pennvest. PA1 commenced discussions and negotiations with Pennvest concerning this matter but Pennvest rejected PA1’s proposal made during the fall of 2014. PA1 made a final proposal to Pennvest during September 2021 which proposal was also rejected by Pennvest. PA1 provided Pennvest with its financial statements (which include a description of system status) annually. During the 2021 fiscal year, Pennvest’s auditors requested a ‘corrective action plan’ and PA1 informed Pennvest that “… there is no viable corrective action plan for the Pennvest Loan (‘Loan’). The facility funded by the Loan has been shut down for many years (which has been disclosed in the annual financial reports to Pennvest and in public filings by the parent of Bion PA 1, LLC) and the technology utilized in the facility is now obsolete. The facility has not been commercially operated for approximately six years and has generated zero income. We recommend that Pennvest take appropriate steps to remove and sell the equipment.” Pennvest responded favorably to the approach of selling the equipment.

On December 29, 2021, the Company approved and executed a ‘Consent of the Sole Member of Bion PA 1’ (the “Consent to Dissolution”) that authorized the complete liquidation and dissolution of PA1. A Statement of Dissolution was filed by PA1 with the Colorado Secretary of State on December 29, ~~2021. The Company is of the understanding that the~~2021.The liquidation value of Bion PA 1’s property is substantially below the current amount outstanding under the Funding Agreement dated October 27, 2010 by and between PA1 and Pennvest, the only known secured creditor of PA1. Post-dissolution, PA1’s activities will be limited entirely to activities required to properly distribute its net assets to creditors and wind down its business. ~~PA 1 is prepared~~
PA1 and Pennvest agreed to ~~transfer to Pennvest all of PA1’s right, title and interest in its property (by~~have the equipment sold by a ~~bill of sale or other acceptable agreement) or alternatively, with Pennvest’s approval and direction, arrange~~third party auctioneer who arranged for the sale of its property and ~~deliver~~delivery of all proceeds (net of commissions and customary costs of sale) to Pennvest. ~~PA1 and Pennvest have entered into communication/exchanges to determine how Pennvest would like PA1 to proceed with this process.~~The auction took place during the period of May 13-18, 2022. The Company’s personnel ~~will assist~~assisted PA1 with this process as needed at no cost to PA1. The net sum of $104,725 was realized from the asset sale, which sum was delivered to Pennvest on June 15, 2022. Pursuant to agreement with Pennvest and Kreider Farms, the remaining unsold assets have been transferred to Kreider Farms in order to complete the winding up of the Kreider 1 project.

Upon the complete distribution of all assets of PA1, whether by transfer or sale and distribution of net proceeds as provided above, PA1 will use commercially reasonable efforts to cause the cessation of all activities. No distributions of PA1’s assets will be made to the Company or its affiliates. The Consent to Dissolution authorized Mark A. Smith, the Company’s President and the sole manager of PA1, to cause to be delivered for filing the Statement of Dissolution, to give notice of the dissolution, and to take any other act necessary to wind up and liquidate the business.

~~PA 1~~PA1 has made no payments to vendors or other creditors in connection with the ~~dissolution.~~dissolution other than the payment to Pennvest described above. No distributions or payments of any kind have ever been made to the Company, the sole member of PA1 since inception and no payment will be made to the Company or any affiliate in connection with the dissolution.

For more information regarding the history and background of the Pennvest Loan and PA1, please review our Form’s 10-K for the years from 2008 through 2021 including the Notes to the Financial Statements included therein.
20
25

Through the date of the dissolution, PA1 was a wholly-owned subsidiary of the Company and its assets and liabilities were included on the Company’s consolidated balance sheet. At September 30, 2021, PA1’s total assets were $~~297~~ ~~and its total liabilities were $10,154,334~~ ~~(including the Pennvest Loan in the aggregate amount of $9,939,148, accounts payable of $214,235~~ ~~and accrued liabilities of $950~~) which sums were included in the Company’s consolidated balance sheet in its Form 10-Q for the quarter ended September 30, 2021. Subsequent to the dissolution of PA1, its assets and liabilities will no longer be consolidated and included in the Company’s balance sheet. As of December 29, 2021, PA1’s total assets were nil and its total liabilities were $~~10,234,501~~ ~~(including the Pennvest Loan in the aggregate amount of $10,009,802, accounts payable of $212,263~~ ~~and accrued liabilities of $12,436. The net amount of $10,234,501~~ ~~was recognized as a gain on the legal dissolution of a subsidiary in other (income) expense.~~

6.       CONVERTIBLE NOTES PAYABLE - AFFILIATES:

2020 Convertible Obligations

The 2020 Convertible Obligations, which accrue interest at either 4% per annum or 4% compounded quarterly and effective January 1, 2020 are due and payable on July 1, 2024. The 2020 Convertible Obligations (including accrued interest, plus all future deferred compensation added subsequently), are convertible, at the sole election of the holder, into Units consisting of one share of the Company’s common stock and one half to one warrant to purchase a share of the Company’s common stock, at a price of $0.50 per Unit until July 1, 2024. The ~~warrant contained in the Unit was originally exercisable at $1.00~~ ~~per unit but was modified to $0.75~~ during the year ended June 30, 2020 and is exercisable until a date three years after the date of the conversion. During the year ended June 30, 2021, the Company approved the increase of warrants by one-third to be received by the noteholder if a conversion takes place. The original conversion price of ~~$0.50~~$0.50 per Unit approximated the fair value of the Units at the date of the agreements; therefore, no beneficial conversion feature exists. Management evaluated the terms and conditions of the embedded conversion features based on the guidance of ASC 815-15 “Embedded Derivatives” to determine if there was an embedded derivative requiring bifurcation. An embedded derivative instrument (such as a conversion option embedded in the deferred compensation) must be bifurcated from its host instruments and accounted for separately as a derivative instrument only if the “risks and rewards” of the embedded derivative instrument are not “clearly and closely related” to the risks and rewards of the host instrument in which it is embedded. Management concluded that the embedded conversion feature of the deferred compensation was not required to be bifurcated because the conversion feature is clearly and closely related to the host instrument, and because of the Company’s limited trading volume that indicates the feature is not readily convertible to cash in accordance with ASC 815-10, “Derivatives and Hedging”.

As of ~~December 31,~~September 30, 2022, the 2020 Convertible Obligation balances, including accrued interest, owed Bassani Family Trusts (and his donees), Smith and Edward Schafer (“Schafer”), a director of the Company, were $2,620,941, $1,335,199 and $503,813, respectively. As of September 30, 2021, the 2020 Convertible Obligation balances, including accrued interest, owed Bassani ~~(and his donees), Smith and Edward Schafer (“Schafer”), the Company’s Vice Chairman, were $2,550,104, $1,302,049~~ ~~and $490,197, respectively. As of December 31, 2020, the 2020 Convertible Obligation balances, including accrued interest, owed Bassani,~~Family Trusts, Smith and Schafer were $~~2,455,656~~2,526,492, $~~1,163,862~~1,253,335 and $~~472,041~~485,658, respectively.

During the ~~six~~three months ended ~~December 31, 2021,~~September 30, 2022, Smith elected to add $~~90,000~~20,000 of his salary to his 2020 Convertible Obligations.

During the three months ended September 30, 2022, Smith elected to convert $30,000 in principal of the 2020 Convertible Obligation to 60,000 units (60,000 common shares and 60,000 warrants) and $20,000 of accrued interest of the 2020 Convertible Obligation to 40,000 units (40,000 common shares and 40,000 warrants).
The Company recorded interest expense of $~~40,864~~41,367 and $~~65,468~~40,560 for the three months ended ~~December 31,~~September 30, 2022 and 2021, ~~and 2020,~~ respectively. The Company ~~recorded interest expense of~~capitalized $~~81,424~~30,688 and $nil ~~96,428~~0 related to the 3G project for the ~~six~~three months ended ~~December 31,~~September 30, 2022 and 2021, ~~and 2020,~~ respectively.

September 2015 Convertible Notes

During the year ended June 30, 2016, the Company entered into September 2015 Convertible Notes with Bassani (now owned by Bassani Family Trusts), Schafer and a Shareholder which replaced previously issued promissory notes. The September 2015 Convertible Notes bear interest at 4% per annum, have 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 balances of the September 2015 Convertible Notes as of ~~December 31, 2021,~~September 30, 2022, including accrued interest owed Bassani Family Trusts, Schafer and Shareholder, are $~~274,521~~281,789, $~~20,517~~21,009 and $~~438,198~~449,535, respectively. The balances of the September 2015 Convertible Notes as of ~~December 31, 2020,~~September 30, 2021, including accrued interest, were $~~168,498~~172,765, $~~19,862~~20,354 and $~~423,081~~434,419, respectively.
~~During the six months ended December 31, 2021, Bassani elected to transfer $100,000~~ ~~from deferred compensation to his 2015 convertible note.~~

The Company recorded interest expense of $~~5,698~~6,366 and $~~5,365~~5,366 for the ~~three months~~years ended ~~December 31,~~September 30, 2022 and 2021, ~~and 2020, respectively. The Company recorded interest expense of $11,064~~ ~~and $10,731~~ ~~for both~~respectively, on the ~~six months ended December 31, 2021 and 2020, respectively.~~September 2015 Convertible Notes.

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26

7.       STOCKHOLDERS' EQUITY:

Series B Preferred stock:

Since July 1, 2014, the Company had 200 shares of Series B redeemable convertible Preferred stock outstanding with a par value of $0.01 per share, convertible at the option of the holder at $2.00 per share, with dividends accrued and payable at 2.5% per quarter. The Series B Preferred stock is mandatorily redeemable at $100 per share by the Company three years after issuance and accordingly was classified as a liability. The 200 shares ~~have~~had reached their ~~maturity~~redemption date and the Company approved the redemption of the Series B preferred stock during the ~~quarter~~year ended ~~December 31, 2021.~~June 30, 2022. 200 shares of Series B redeemable convertible Preferred stock were redeemed for $41,000, which included the $21,000 in accrued dividend payable.

During the years ended June 30, ~~2021,~~2022, and ~~2020,~~2021, the Company declared dividends of $~~2,000~~1,000 and $2,000 respectively. The dividends are classified as a component of operations as the Series B Preferred stock is presented as a liability in these financial ~~statement.~~statements. There is no liability at September 30, 2022.

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~~three months ended ~~December 31, 2021,~~September 30, 2022, Smith elected to convert ~~accounts payable (based on his unreimbursed expenses) of~~ $~~17,711~~30,000 ~~into~~ in principal and $~~35,424~~20,000 in accrued interest from the 2020 Convertible Obligation to 100,000 units at $~~0.50~~.50 per unit, with each unit consisting of one share of the Company’s restricted common stock and one warrant to purchase one share of the Company’s restricted common stock for $0.75 per share until December 31, 2024.
During the ~~six~~three months ended ~~December 31, 2021,~~September 30, 2022, ~~2,315,550~~74,834 warrants were exercised to purchase ~~2,315,550~~74,834 shares of the Company’s common stock at $0.75 per share for total proceeds of $~~1,736,662~~56,125.
During the ~~six~~three months ended ~~December 31, 2021,~~September 30, 2022, the Company issued ~~66,860~~50,000 shares of the Company’s common stock to a consultant for services. The shares were issued at $1.60 per share for a total value of $80,000.
During the three ~~FINRA brokers as commissions~~months ended September 30, 2022, the Company entered into subscription agreements to sell units for $1.00 per unit, with each unit consisting of one share of the Company’s restricted common stock and one warrant ~~exercises. As~~to purchase one share of the ~~issuance was both a reduction~~Company’s restricted common stock for $0.75 per share with an expiry date of December 31, 2024, and ~~addition to additional paid in capital there was no impact to~~pursuant thereto, the ~~financial statements. The~~ Company ~~also paid a FINRA broker~~issued 320,000 units for total proceeds of $~~18,601~~320,000 ~~in commissions for the warrant exercises.~~.

Warrants:

As of ~~December 31, 2021,~~September 30, 2022, the Company had approximately ~~19.7~~20.6 million warrants outstanding, with exercise prices from $0.60 to $~~1.50~~1.60 and expiring on various dates through ~~June 30, 2025.~~November 9, 2026.

The weighted-average exercise price for the outstanding warrants is $~~0.73~~0.76, and the weighted-average remaining contractual life as of ~~December 31, 2021~~September 30, 2022 is ~~2.7~~2.2 years.

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During the ~~six~~three months ended ~~December 31, 2021,~~September 30, 2022, Smith elected to convert ~~accounts payable of~~ $~~17,711~~30,000 ~~into~~ in principal and $~~35,424~~20,000 in accrued interest from the 2020 Convertible Obligation to 100,000 units at $~~0.50~~.50 per unit, with each unit consisting of one share of the Company’s restricted common stock and one warrant to purchase one share of the Company’s restricted common stock for $0.75 per share until ~~December 31, 2024.~~three years after the date of conversion.

During the ~~six~~three months ended ~~December 31, 2021,~~September 30, 2022, the Company approved the issuance of ~~75,000~~150,000 warrants, in aggregate, to three new members of its Advisory Group for ~~two consultants for~~advisory and/or consulting services of $~~7,500~~15,000., in aggregate. The warrants are exercisable at $1.50 to $1.60and expire in ~~November 2026.~~August 2025.
During the ~~six~~three months ended ~~December 31, 2020,~~September 30, 2022, the Company approved the modification of existing warrants held by one former ~~consultants~~consultant and four investors, which extended certain expiration dates. The modifications resulted in incremental non-cash compensation of $~~5,625~~154,933 and interest expenses of $~~2,712~~4,500.
During the ~~six~~three months ended ~~December 31, 2021,~~September 30, 2022, ~~2,315,550~~74,834 warrants were exercised to purchase ~~2,315,550~~74,834 shares of the Company’s common stock at $0.75 per share for total proceeds of $~~1,736,662~~56,126.
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~~During the 2021 calendar year,~~Effective May 1, 2022, an entity affiliated with William O’Neill (“O’Neill”) was issued ~~6,431,538~~1,000,000 ~~warrants scheduled to expire on December 31, 2021, in aggregate, were exercised by their holders~~Incentive Warrants exercisable at ~~an exercise price of~~ $~~.75~~1.00 per share until April 30, 2026 of which up to ~~2,176,216~~700,000 Incentive Warrants may be cancelled if O’Neill is not renewed at 13 months and/or fails to serve the entire contract term thereafter. These warrants ~~were exercised during~~each have a 75% exercise bonus if the ~~quarter ended December 31, 2021.~~terms set forth therein are met.
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 ~~Company issued, in aggregate,~~Equity Plan provides for the issuance of options (and/or other securities) to purchase up to ~~6,431,538~~ ~~share of its restricted and legended common stock in connection with these warrant exercises, of which~~ ~~2,226,216~~ ~~shares were issued during the quarter ended December 31, 2021. The Company received, in aggregate, $4,823,651~~ ~~of gross processed from such warrant exercises, of which $1,632,162~~ ~~was received in the quarter ended December 31, 2021 (these sums do not reflect expenses and commissions related to these warrant exercises). In aggregate,~~ ~~648,142~~ ~~warrants expired unexercised on December 31. 2021.~~
~~During the six months ended December 31, 2021, the Company issued~~ ~~66,860~~30,000,000 shares of the Company’s common ~~stock to three FINRA brokers as commissions~~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 ~~the warrant exercises. As the issuance was both a reduction and addition to additional paid in capital there was no impact~~more than ten years. No grants have been made pursuant to the ~~financial statements. The Company also paid a FINRA broker $18,601~~ ~~in commissions for~~Equity Plan as of the ~~warrant exercises.~~
~~Stock options:~~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 36,000,000 shares of the Company’s common stock. Terms of exercise and expiration of options/securities granted under the 2006 Plan may be established at the discretion of the Board of Directors, but no option may be exercisable for more than ten years. 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,
On February 11, 2022, the Company granted 1010,000 ~~years.~~options under the 2006 Plan to one consultant.
On April 29, 2022, the Company granted an aggregate of 720,000 options under the 2006 Plan to seven employees/consultants/directors including: i) 50,000 options each to Schafer and Northrop for service as directors, ii) 200,000 options to Bassani (now COO of the Company and formerly CEO) and iii) 200,000 options to Smith, the Company’s President, which new option grants are included in the presentation below.

The Company recorded compensation expense related to employee stock options of nil 0 and nil 0 for ~~both~~ the three ~~and six~~ months ended ~~December 31,~~2022 and 2021, ~~and 2020,~~ respectively. The Company granted nil 0 options during ~~both~~ the three ~~and six~~ months ended ~~December 31,~~September 30, 2022 and 2021, ~~and 2020,~~ respectively.

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A summary of option activity under the 2006 Plan for the ~~six~~three months ended ~~December 31, 2021~~September 30, 2022 is as follows:
Schedule of option activity
Options Weighted-
Average
Exercise
Price Weighted-
Average
Remaining
Contractual
Life Aggregate
Intrinsic
Value
Outstanding at July 1, 2021 10,471,600 $ 0.77 3.7 $ 6,064,335
  Granted —   —
  Exercised —   —
  Forfeited —   —
  Expired —   —
Outstanding at December 31, 2021 10,471,600 $ 0.77 3.2 $ 9,624,679
Exercisable at December 31, 2021 10,471,600 $ 0.77 3.2 $ 9,624,679
~~The following table presents information relating to nonvested stock options as of December 31, 2021:~~
~~Schedule of non vested stock options~~
~~Options~~ Weighted Average
Grant-Date Fair
Value
~~Nonvested at July 1, 2021~~ — $ —
~~Granted~~ — —
~~Vested~~ — —
~~Nonvested at December 31, 2021~~ — $ —
Schedule of option activity
Options Weighted-
Average
Exercise
Price Weighted-
Average
Remaining
Contractual
Life Aggregate
Intrinsic
Value
Outstanding at July 1, 2022 11,201,600 $ 0.80 2.7 $ 4,429,263
  Granted —   —
  Exercised —   —
  Forfeited —   —
  Expired —   —
Outstanding at September 30, 2022 11,201,600 $ 0.80 2.48 $ 5,757,755

The total fair value of stock options that vested during ~~both~~ the three ~~and six~~ months ended ~~December 31,~~September 30, 2022 and 2021 ~~and 2020~~ was0 nil. As of ~~December 31, 2021,~~September 30, 2022, the Company had no unrecognized compensation cost related to stock options.

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~~Stock-based employee compensation charges in operating expenses in the Company’s financial statements for the three and six months ended December 31, 2021 and 2020 are as follows:~~
Condensed Financial Statement
Three
months
ended
December 31,
2021 Three
months
ended
December 31,
2020 Six months
ended
December 31,
2021 Six months
ended
December 31,
2020
General and administrative:
  Change in fair value from modification of
    option terms $ —   $ 8,775 $ —   $ 8,775
Change in fair value from modification of
    warrant terms 5,625 25,506 5,625 25,506
  Fair value of stock options expensed —   —   —   —
     Total $ 5,625 $ 34,281 $ 5,625 $ 34,281

Research and development:
  Fair value of stock options expensed $ —   $ —   $ —   $ —
     Total $ —   $ —   $ —   $ —
8.       SUBSCRIPTION RECEIVABLE - AFFILIATES:

As of ~~December 31, 2021,~~September 30, 2022, the Company has three interest bearing, secured promissory notes with an aggregate principal amount of $428,250 ($~~491,975~~504,741, including interest) from Bassani which were received as consideration for purchases of warrants to purchase 5,565,000 shares, in aggregate, of the Company’s restricted common stock, which warrants have an exercise price of $0.75 and have expiry dates ranging from December 31, 2024 to December 31, 2025. The promissory notes bear interest at 4% per annum and are secured by portions of ~~Bassani’s~~Bassani Family Trust’s 2020 Convertible Obligation and ~~Bassani’s~~Bassani Family Trust’s September 2015 Convertible Notes. The secured promissory notes are payable July 1, 2024.

As of ~~December 31, 2021,~~September 30, 2022, the Company has an interest bearing, secured promissory note for $30,000 ($~~34,093~~34,987 including interest) from Smith as consideration to purchase warrants to purchase 300,000 shares of the Company’s restricted common stock, which warrants are exercisable at $0.60 and have expiry dates of December 31, 2024. The warrants have a 75% exercise bonus and the promissory note bears interest at 4% per annum, and is secured by $30,000 ($~~34,093~~35,361, including interest) of Smith’s 2020 Convertible Obligations. The secured promissory note is payable on July 1, 2024.
As of ~~December 31, 2021,~~September 30, 2022 the Company has two interest bearing, secured promissory notes with an aggregate principal amount of $46,400 ($~~54,088~~55,472 including interest) from two former employees as consideration to purchase warrants to purchase 928,000 shares of the Company’s restricted common stock, which warrants are exercisable at $0.75 and have expiry dates of December 31, 2024. These warrants have a 90%90% exercise bonus. The promissory notes bear interest at 4% per annum, are secured by a perfected security interest in the warrants, and are payable on July 1, 2024.
These secured promissory notes are recorded as “Subscription receivable—affiliates” on the Company’s balance sheet pending payment.
9.       COMMITMENTS AND CONTINGENCIES:

Employment and consulting agreements:

Smith has held the positions of Director, Executive Chairman, President and General Counsel of Company and its subsidiaries under various agreements (and extensions) and terms since March 2003. On October 10, 2016, the Company approved a month to month contract extension with Smith which includes provisions for i) a monthly salary of $18,000 until the Board of Directors re-instates cash payments to all employees and consultants who are deferring compensation, ii) the right to convert up to $300,000 of his deferred compensation, at his sole election, at $0.75 per share, until December 31, ~~2022),~~2022, and iii) the right to convert his deferred compensation in whole or in part, at his sole election, at any time in any amount at “market” or into securities sold in the Company’s current/most recent private offering at the price of such offering to third parties. Smith agreed effective July 29, 2018 to continue to serve the Company under the same basic terms on a month-to-month basis. On May 1, 2022 Smith’s compensation was increased to $25,000 per month of which $5,000 a month is deferred. For the three months ended September 30, 2022 and 2021, Smith was paid $60,000 and $54,000, respectively, of cash compensation.

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Since March 31, 2005, the Company has had various agreements with Bassani (and/or Brightcap ~~and/or Bassani, through~~ which provided his services during some of the ~~services of Bassani are provided~~initial years), now the Company’s Chief Operating Officer (‘COO’) and formerly the Company’s Chief Executive Officer (‘CEO’), (any reference to Brightcap or Bassani for all purposes are the same individual). The Board appointed Bassani as the Company's CEO effective May 13, 2011. On February 10, 2015, the Company executed an Extension Agreement with Bassani pursuant to which Bassani extended the term of his service to the Company to December 31, 2017, (with the Company having an option to extend the term an additional six months.) Pursuant to the Extension Agreement, Bassani continued to defer his cash compensation ($31,000 per month) until the Board of Directors re-instates cash payments to all employees and consultants who are deferring their compensation. During October 2016 Bassani was granted the right to convert up to $125,000 of his deferred compensation, at his sole election, at $0.75 per share, until March 15, 2018 (which was expanded on April 27, 2017 to the right to convert up to $300,000 of his deferred compensation, at his sole election, at $0.75 per share, ~~and subsequently extended~~ until ~~December 31, 2022)~~June 30, 2024 (including extensions). During February 2018, the Company agreed to the material terms for a binding two-year extension agreement for Bassani’s services as CEO. Bassani’s salary remained $31,000 per month, which ~~sum would~~will continue to be accrued in part until ~~the Company~~ there is adequate cash ~~available at which point re-instatement of a least a partial cash payment would be instituted.~~available. Additionally, the Company has agreed to pay him $2,000 per month to be applied to life insurance premiums (which sums have been accrued as liabilities). On August 1, 2018, in the context of extending his agreement to provide services to the Company on a full-time basis through December 31, 2022) plus 2 years after that on a part-time basis, the Company received an interest bearing secured promissory note for $300,000 from Bassani as consideration to purchase warrants to purchase 3,000,000 shares of the Company’s restricted common stock, which warrants are exercisable at $0.60 and have expiry dates of June 30, ~~2025~~.2025. The promissory note is secured by a portion of Bassani’s 2020 Convertible Obligations and as of ~~December 31, 2021,~~September 30, 2022, the principal and accrued interest was $~~340,093~~351,812. For the ~~six~~three months ended ~~December 31,~~September 30, 2022 and 2021, ~~and 2020,~~ Brightcap was paid $~~120,000~~75,000 and $~~55,000~~60,000, respectively, of cash compensation.
William O’Neill (“O’Neill”) was hired as the Company’s Chief Executive Officer (“CEO”) effective May 1, 2022. 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. Bassani, CEO of the Company since 2011, has 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. Bassani’s compensation ~~earned~~arrangements with the Company have not been altered in the context of the change of positions. The Company and O’Neill have entered into a thirty-seven (37) month employment agreement (subject to Board renewal for the final two (2) years during the ~~period.~~13th month) with compensation of $25,000 cash and $10,000 deferred compensation per month. An entity affiliated with O’Neill was issued 1,000,000 Incentive Warrants exercisable at $1.00 per share until April 30, 2026 of which up to 700,000 Incentive Warrants may be cancelled if O’Neill is not renewed at 13 months and/or fails to serve the entire contract term thereafter. These warrants each have a 75% exercise bonus if the terms set forth therein are met.  For the ~~last 2 years, portions~~three months ended September 30, 2022 and 2021, O’Neill was paid $45,500 and 0 nil, respectively, of ~~Bassani’s compensation (determined by the Company’s President and the Board of Directors from time to time) has been paid in~~ cash ~~with the balance of his compensation accrued.~~compensation.

Execution/exercise bonuses:

As part of agreements the Company entered into with Bassani and Smith effective May 15, 2013, they were each granted the following: a) a 50% execution/exercise bonus which shall be applied upon the effective date of the notice of intent to exercise (for options and warrants) or issuance event, as applicable, of any currently outstanding and/or subsequently acquired options, warrants and/or contingent stock bonuses owned by each (and/or their donees) as follows: i) in the case of exercise by payment of cash, the bonus shall take the form of reduction of the exercise price; ii) in the case of cashless exercise, the bonus shall be applied to reduce the exercise price prior to the cashless exercise calculations; and iii) with regard to contingent stock bonuses, issuance shall be triggered upon the Company’s common stock reaching a closing price equal to 50% of currently specified price; and b) the right to extend the exercise period of all or part of the applicable options and warrants for up to five years (one year at a time) by annual payments of $.05 per option or warrant to the Company on or before a date during the three months prior to expiration of the exercise period at least three business days before the end of the expiration period. Effective January 1, 2016 such annual payments to extend warrant exercise periods have been reduced to $.01 per option or warrant. These exercise bonuses were subsequently increased to 75%.

During the year ended June 30, 2021, the Company added a 75% execution/exercise bonus to the terms of 3,000,000 warrants held by a trust owned by Bassani.

As of ~~December 31, 2021,~~September 30, 2022, the execution/exercise bonuses ranging from 50-90% were applicable to ~~10,326,600~~10,966,600 of the Company’s outstanding options and ~~16,778,213~~17,612,151 of the Company’s outstanding warrants.

Effective May 1, 2022, an entity affiliated with O’Neill was issued 1,000,000 Incentive Warrants exercisable at $1.00 per share until April 30, 2026 of which up to 700,000 Incentive Warrants may be cancelled if O’Neill is not renewed at 13 months and/or fails to serve the entire contract term thereafter. These warrants each have a 75% exercise bonus if the terms set forth therein are met.
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Purchase Order Agreement:
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 $2,665,500 (and made the initial 25% payment ($666,375)) for the core of the ‘Bion System’ portion (without the crystallization modules which will be ordered and fabricated pursuant to subsequent agreements) of the previously announced 3G Tech Initial Project. This Purchase Order encompasses the core of Bion’s 3G Technology. On March 21, 2022 the Company received progress notice re: completion of certain work in process and an invoice from Buflovak for the next 25% payment ($666,375).  On June 6, 2022 the Company received progress notice re: completion of certain work in process and an invoice from Buflovak for the next 25% payment ($666,375) which was paid on July 5, 2022 bringing the aggregate payments to $1,999,125 as of the date of this report. No invoices were received in the quarter ended September 30, 2022. Buflovak has worked with the Company on design and testing of its 3G Tech over several years. The basic design for the Initial Project’s Bion System is complete and procurement/fabrication has now been initiated. 3G1 is working 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. Additional agreements have been entered into various professional services providers (engineers, surveyors, etc.) for work related to the Initial Project.
Litigation:

A: ~~Website~~Website: Domain Sale/Resolved Litigation/Hacking/Theft
On March 23, 2022 the Company entered into an agreement to sell domain name <biontech.com> and other related assets to BioNTech SE (“BNTX”) for the sum of $950,000 (before expenses related to the transaction) which sale was closed/completed on April 2, 2022 with a one-time gain of $902,490. The Company has been using www.bionenviro.com as its primary website (and domain) since July 2021 due to the events described below. The Company has not been using biontech.com as its primary website since July 2021 so domain name <biontech.com> no longer represented a core asset of the Company.

As previously reported, on Saturday morning, July 17, 2021, our historical website domain – biontech.com – and email services were compromised and disabled. Research indicated that an unknown party had ‘hijacked’ the domain in a theft attempt. On September 10, 2021, the Company filed a federal lawsuit ‘in rem’ to recover the <biontech.com> domain and the unknown ‘John Doe’ who hacked and attempted to steal the website. The litigation was filed in the United States District Court for the Eastern District of Virginia, Alexandria Division under the heading ‘Bion Environmental Technologies, Inc., Plaintiff, vs John Doe and <biontech.com>, Defendants’ (Case No. 1:21-cv-01034), seeking recovery of the domain name and other relief as set forth therein.

On November 19, 2021, the United States District Court for the Eastern District of Virginia, Alexandria Division issued an order stating that “… ORDERED, ADJUDGED and Decreed that plaintiff Bion Environmental Technologies, Inc. (‘plaintiff) Is the lawful owner of domain name <biontech.com> ….” under the heading ‘Bion Environmental Technologies, Inc., Plaintiff, vs John Doe and <biontech.com>, Defendants’ (Case No. 1:21-cv-01034). The Company has moved the domain name <biontech.com> to a new registrar and reactivated it for the Company’s use (paired currently with its current bionenviro.com website).

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No shareholder, sensitive or confidential information was available to be breached which has limited damages from the hack/theft to date. However, the Company’s email operations werebeen subject disruption and expenses were incurred related to the matter including legal fees.

The Company created ‘work-arounds’ as a result. These issues have been resolved and the Company has moved our website (and email) to a new domain: bionenviro.com. Website access is now www.bionenviro.com. To send emails to Bion personnel, one uses the same name identifier previously used, but in the address, substitute ‘bionenviro.com’ for “biontech.com’: For example cscott@biontech.com (no longer functional) is cscott@bionenviro.com and mas@biontech.com (no longer functional) is now mas@bionenviro.com.
B: Pennvest Loan and Dissolution of Bion PA1, LLC (“PA1”)
PA1, the Company’s wholly-owned subsidiary, was dissolved on December 29, 2021 on which date it owed approximately $10,010,000 under the terms of the Pennvest Loan related to the construction of the Kreider 1 System including accrued interest and late charges totaling $2,255,802 as of that date. Through the date of the dissolution, PA1 was a wholly-owned subsidiary of the Company and its assets and liabilities were included on the Company’s consolidated balance sheet. At September 30, 2021, PA1’s total assets were $297 and its total liabilities were $10,154,334 (including the Pennvest Loan in the aggregate amount of $9,939,148, accounts payable of $214,235 and accrued liabilities of $950) which sums were included in the Company’s consolidated balance sheet in its Form 10-Q for the quarter ended September 30, 2021. Subsequent to the dissolution of PA1, its assets and liabilities are no longer consolidated and included in the Company’s consolidated balance sheet. As of December 29, 2021, PA1’s total assets were nil 0 and its total liabilities were $10,234,501 (including the Pennvest Loan in the aggregate amount of $10,009,802, accounts payable of $212,263 and accrued liabilities of $12,436. The net amount of $10,234,501 was recognized as a gain on the legal dissolution of a subsidiary in other (income) expense.
As background, the terms of the Pennvest Loan provided for funding of up to $7,754,000 which was to be repaid by interest-only payments for three years, followed by an additional ten-year amortization of principal. The Pennvest Loan accrued interest at 2.547% per annum for years 1 through 5 and 3.184% per annum for years 6 through maturity. The Pennvest Loan required minimum annual principal payments of approximately $5,886,000 in fiscal years 2013 through 2021, and $846,000 in fiscal year 2022, $873,000 in fiscal year 2023 and $149,000 in fiscal year 2024. The Pennvest Loan was collateralized by PA1’s Kreider 1 System and by a pledge of all revenues generated from Kreider 1 including, but not limited to, revenues generated from nutrient reduction credit sales and by-product sales. In addition, in consideration for the excess credit risk associated with the project, Pennvest was entitled to participate in the profits from Kreider 1 calculated on a net cash flow basis, as defined. The Company has incurred interest expense related to the Pennvest Loan of $123,444 and $246,887 for the years ended June 30, 2022 and 2021, respectively. Based on the limited development of the depth and breadth of the Pennsylvania nutrient reduction credit market, PA1 commenced discussions and negotiations with Pennvest related to forbearance and/or re-structuring the obligations under the Pennvest Loan during 2013. In the context of such negotiations, PA1 elected not to make interest payments to Pennvest on the Pennvest Loan since January 2013. Additionally, the PA1 did not make any principal payments, which were to begin in fiscal 2013, and, therefore, the Company classified the Pennvest Loan as a current liability through the dissolution of PA1 on December 29, 2021.
During August 2012, the Company provided Pennvest (and the PADEP) with data demonstrating that the Kreider 1 system met the ‘technology guaranty’ standards which were incorporated in the Pennvest financing documents and, as a result, the Pennvest Loan has been solely an obligation of PA1 since that date. Note, however, the Company’s consolidated balance sheet as of June 30, 2021 reflects the Pennvest Loan as a liability of $9,868,495 despite the fact that the obligation (if any) was solely an obligation of PA1.

On September 25, 2014, the Pennsylvania Infrastructure Investment Authority (“Pennvest”) exercised its right to declare the PA1’s Pennvest Loan in default, accelerated the Pennvest Loan and demanded that PA1 pay $8,137,117 (principal, interest plus late charges) on or before October 24, 2014. PA1 did not make the payment and did/does not have the resources to make the payments demanded by Pennvest. PA1 commenced discussions and negotiations with Pennvest concerning this matter but Pennvest rejected PA1’s proposal made during the fall of 2014. PA1 made a final proposal to Pennvest during September 2021 which proposal was also rejected by Pennvest. PA1 provided Pennvest with its financial statements (which include a description of system status) annually. During the 2021 fiscal year, Pennvest’s auditors requested a ‘corrective action plan’ and PA1 informed Pennvest that “… there is no viable corrective action plan for the Pennvest Loan (‘Loan’). The facility funded by the Loan has been shut down for many years (which has been disclosed in the annual financial reports to Pennvest and in public filings by the parent of Bion PA 1, LLC) and the technology utilized in the facility is now obsolete. The facility has not been commercially operated for approximately six years and has generated zero income. We recommend that Pennvest take appropriate steps to remove and sell the equipment.” Pennvest responded favorably to the approach of selling the equipment.

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On December 29, 2021, the Company approved and executed a ~~Consent~~‘Consent of the Sole Member of Bion PA 11’ (the “Consent to Dissolution”) that authorized the complete liquidation and dissolution of PA1. A Statement of Dissolution was filed by PA1 with the Colorado Secretary of State on December 29, ~~2021. The Company is of the understanding that the~~2021.The liquidation value of Bion PA 1’s property is substantially below the current amount outstanding under the Funding Agreement dated October 27, 2010 by and between PA1 and Pennvest, the only known secured creditor of PA1. Post-dissolution, PA1’s activities will be limited entirely to activities required to properly distribute its net assets to creditors and wind down its business. ~~PA 1 is prepared~~
PA1 and Pennvest agreed to ~~transfer to Pennvest all of PA1’s right, title and interest in its property (by~~have the equipment sold by a ~~bill of sale or other acceptable agreement) or alternatively, with Pennvest’s approval and direction, arrange~~third party auctioneer who arranged for the sale of its property and ~~deliver~~delivery of all proceeds (net of commissions and customary costs of sale) to Pennvest. ~~PA1 and Pennvest have entered into communication/exchanges to determine how Pennvest would like PA1 to proceed with this process.~~The auction took place during the period of May 13-18, 2022. The Company’s personnel ~~will assist~~assisted PA1 with this process as needed at no cost to PA1. The net sum of $104,725 was realized from the asset sale, which sum was delivered to Pennvest on June 15, 2022. Pursuant to agreement with Pennvest and Kreider Farms, the remaining unsold assets have been transferred to Kreider Farms in order to complete the winding up of the Kreider 1 project.

Upon the complete distribution of all assets of PA1, whether by transfer or sale and distribution of net proceeds as provided above, PA1 will use commercially reasonable efforts to cause the cessation of all activities. No distributions of PA1’s assets will be made to the Company or its affiliates. The Consent to Dissolution authorized Mark A. Smith, the Company’s President and the sole manager of PA1, to cause to be delivered for filing the Statement of Dissolution, to give notice of the dissolution, and to take any other act necessary to wind up and liquidate the business.

~~PA 1~~PA1 has made no payments to vendors or other creditors in connection with the ~~dissolution.~~dissolution other than the payment to Pennvest set forth above. No distributions or payments of any kind have ever been made to the Company, the sole member of PA1 since inception, and no payment will be made to the Company or any affiliate in connection with the dissolution.

~~Through~~For more information regarding the ~~date~~history and background of the dissolution, PA1 was a wholly-owned subsidiary of the Company and its assets and liabilities were included on the Company’s consolidated balance sheet. At September 30, 2021, PA1’s total assets were $~~297~~ ~~and its total liabilities were $10,154,334~~ ~~(including~~ the Pennvest Loan ~~in the aggregate amount of $9,939,148, accounts payable of $214,235~~and ~~accrued liabilities of $950) which sums were included in the Company’s consolidated balance sheet in its Form 10-Q~~PA1, please review our Form’s 10-K for the ~~quarter ended September 30, 2021. Subsequent~~years from 2008 through 2021 including the Notes to the ~~dissolution of PA1, its assets and liabilities will no longer be consolidated and~~Financial Statements included ~~in the Company’s balance sheet. As of December 29, 2021, PA1’s total assets where nil and its total liabilities were $10,234,501~~ ~~(including the Pennvest Loan in the aggregate amount of $10,009,802, accounts payable of $212,263~~ ~~and accrued liabilities of $12,436. The net amount of $10,234,501~~ ~~was recognized as a gain on the legal dissolution of a subsidiary in other (income) expense.~~therein.

The Company currently is not involved in any other material litigation or similar events.

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 ~~following table summarized the supplemental cash flow information for the six months ended December 31, 2021:~~
Schedule Of Cash Flow Supplemental Disclosure
December 31, 2021
Cash paid for noncancelable operating lease included in the operating cash flows $ 60,000
Right of use assets obtained in exchange for operating lease liabilities $ 180,586
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~~The~~ future minimum lease payment under noncancelable operating lease with terms greater than one year as of ~~December 31,~~September 30, 2022:

~~Schedule Of Future Minimum Lease Payment~~
~~From January 2022 to December 2022~~ $ —
~~From January 2023 to December 2023~~ ~~75,000~~
~~From January 2024 to December 2024~~ ~~75,000~~
~~Undiscounted cash flow~~ ~~150,000~~
   ~~Less imputed interest~~ ~~(27,395~~ )
~~Total~~ $ ~~122,605~~
Schedule of future minimum lease payments
Year ended June 30, 2023 $ 43,750
Year ended June 30, 2024 75,000
Year ended June 30, 2025 31,250
Undiscounted cash flow 150,000
Less imputed interest (17,888 )
Total $ 132,112

The weighted average remaining lease term and discounted rate related to the Company’s lease liability as of ~~December 31,~~September 30, 2022 were 32.33 years and ~~10%~~10%, ~~respectively~~.respectively. The Company’s lease discount rate is generally based on the estimates of its incremental borrowing rate as the discount rates implicit in the Company’s lease cannot be readily determined.

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10.        SUBSEQUENT EVENTS:

The Company has evaluated events that occurred subsequent to ~~December 31, 2021~~September 30, 2022 for recognition and disclosure in the financial statements and notes to the financial statements.

On January 26, 2022 OMRI’s Appeals Review Committee affirmed the prior “unresolved’ determination by OMRI’s Review Panel. The OMRI process has now moved to OMRI’s Advisory Council. See Note 1 subsection “Organic Fertilizer Listing/Certification Process” above for related disclosure.
~~On January~~October 28, 2022 ~~Bion Environmental Technologies, Inc. (‘Bion’), on behalf of Bion 3G1 LLC (‘3G1’), a wholly-owned subsidiary,~~the Company entered into a ~~Purchase Order Agreement~~subscription agreement to sell 26,230 units for $1.00 per unit, with ~~Buflovak~~each unit consisting of one share of the Company’s restricted common stock and ~~Hebeler Process Solutions (collectively ‘Buflovak’) in~~one warrant to purchase one share of the ~~amount~~Company’s restricted common stock for $0.75 per share with an expiry date of December 31, 2024 for total proceeds of $~~2,665,500~~26,230 ~~(and made the initial~~ 25~~% payment ($665,375~~)) for the core of the ‘Bion System’ portion (without the crystallization modules which will be ordered and fabricated pursuant to subsequent agreements) of the previously announced 3G Tech Initial Project. This Purchase Order encompasses the core of Bion’s 3G Technology. Buflovak has worked with the Company on design and testing of its 3G Tech over several years. The basic design for the Initial Project’s Bion System is complete and procurement/fabrication has now been initiated. 3G1 is working 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. Additional agreements have been entered into various professional services providers (engineers, surveyors, etc.) for work related to the Initial Project..
The Initial Project is designed to be installed primarily in two targeted primary phases which approach has been adopted to enable more rapid deployment of our 3G technology given pandemic-induced supply chain constraints. The first phase includes procurement and deployment of Bion’s core 3G technology. The modules in this phase include evaporation, distillation, absorption and crystallization modules, along with supporting mechanical/electrical equipment, controls, instrumentation, and facilities, many of which include components with ‘long lead times’ for manufacture and delivery. These items have now been ordered and procurement/manufacturing, as applicable, is underway. This phase also includes installing a process building to house the system components, full utility installation (electrical, water, internet, natural gas, etc.), tankage to hold process and waste product liquids, facility access, and other items. The second phase, which will require additional permitting, planning and logistics, will consist primarily of design and construction of a 300 head beef cattle feed barn and an anaerobic digester, which items have shorter construction and fabrication/installation lead times than many of the components of the first phase. The barn will include an innovative slatted floor livestock and an automated manure collection system. Support structures will include manure collection basins, pumping stations, and automated controls integrated with the 3G system control system. The design and installation for both phases will include adaptive spaces that allow the integration of Initial Project expansions and the refinement of equipment operations that enhance system productivity and reduce energy demand.
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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 statements represent management's best judgment as to what may occur in the future. However, forward looking statements are subject to risks, uncertainties and important factors beyond our control that could cause actual results and events to differ materially from historical results of operations and events and those presently anticipated or projected.

These factors include adverse economic conditions, entry of new and stronger competitors, inadequate capital and limited ability to obtain financing, 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 ~~(all~~(many of whom are age 70 or older) and failure to capitalize upon access to new markets. Additional risks and uncertainties that may affect forward looking statements about Bion's business and prospects include: i) delays and/or costs exceeding expectations relating to Bion's development of the Initial Project, JVs and/or Projects, ii) the possibility that markets for nutrient reduction credits (discussed below) and/or other ways to monetize nutrient reductions and other environmental benefits will be slow to develop (or not develop at all), ~~ii)~~iii) PA1’s dissolution and its effect on how the Company is viewed, (if any), ~~iii)~~iv) the possibility that competitors will develop more comprehensive and/or less expensive environmental ~~solution, iv)~~solutions, v) delays in market awareness of Bion and our Systems, v)vi) uncertainties and costs increases related to research and development efforts to update and improve Bion’s technologies and applications thereof, and/or ~~vi) delays and/or costs exceeding expectations relating to Bion's development of the Initial Project, JVs and/or Projects and~~ vii) failure of marketing strategies, each of which could have both immediate and long term material adverse effects by placing us behind our competitors and requiring expenditures of our limited resources.

THESE RISKS, UNCERTAINTIES AND FACTORS BEYOND OUR CONTROL ARE MAGNIFIED DURING THE CURRENT UNCERTAIN PERIOD RELATED TO THE COVID-19 PANDEMIC AND THE UNIQUE ECONOMIC, FINANCIAL, GOVERNMENTAL AND HEALTH-RELATED CONDITIONS IN WHICH THE COMPANY, THE ENTIRE COUNTRY AND THE ENTIRE WORLD NOW RESIDE. TO DATE THE COMPANY HAS EXPERIENCED DIRECT IMPACTS IN VARIOUS AREAS INCLUDING WITHOUT LIMITATION: I) GOVERNMENT-ORDERED SHUTDOWNS WHICH HAVE SLOWED THE COMPANY’S RESEARCH AND DEVELOPMENT PROJECTS AND OTHER INITIATIVES, II) SHIFTED FOCUS OF STATE AND FEDERAL GOVERNMENT WHICH IS LIKELY TO NEGATIVELY IMPACT THE COMPANY’S LEGISLATIVE INITIATIVES IN PENNSYLVANIA AND WASHINGTON DC, III) STRAINS AND UNCERTAINTIES IN BOTH THE EQUITY AND DEBT MARKETS HAVE MADE DISCUSSION AND PLANNING OF FUNDING OF THE COMPANY AND ITS INITIATIVES AND PROJECTS WITH INVESTMENT BANKERS, BANKS AND POTENTIAL STRATEGIC PARTNERS MORE TENUOUS, IV) STRAINS AND UNCERTAINTIES IN THE AGRICULTURAL SECTOR AND MARKETS HAVE MADE DISCUSSION AND PLANNING OF FUNDING OF THE COMPANY AND ITS INITIATIVES AND PROJECTS MORE DIFFICULT AS FUTURE INDUSTRY CONDITIONS ARE NOW MORE DIFFICULT TO ASSESS/PREDICT, V) CONSTRAINTS DUE TO PROBLEMS EXPERIENCED IN THE GLOBAL INDUSTRIAL SUPPLY CHAIN WHICH HAVE INCREASED ANTICIPATED PROJECT DEVELOPMENT COSTS, VI) DUE TO THE AGE AND HEALTH OF OUR CORE MANAGEMENT TEAM, ~~ALL~~MOST OF WHOM ARE AGE 70 OR OLDER AND HAVE HAD ONE OR MORE EXISTING HEALTH ISSUES, THE COVID-19 PANDEMIC PLACES THE COMPANY AT GREATER RISK THAN WAS PREVIOUSLY THE CASE (TO A HIGHER DEGREE THAN WOULD BE THE CASE IF THE COMPANY HAD A LARGER, DEEPER AND/OR YOUNGER CORE MANAGEMENT TEAM), AND VII) THERE ALMOST CERTAINLY WILL BE OTHER UNANTICIPATED CONSEQUENCES FOR THE COMPANY AS A RESULT OF THE CURRENT PANDEMIC EMERGENCY AND ITS AFTERMATH.

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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.

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BUSINESS OVERVIEW AND PLAN

~~BUSINESS OVERVIEW~~Bion Environmental Technologies, Inc.'s ("Bion," "Company," "We," "Us," or "Our") was incorporated in 1987 in the State of Colorado. Bion’s mission is to create extraordinary value for our shareholders and employees (all of whom own securities in the Company) while delivering premium, sustainable products to our customers through ventures developing profitable, transparent, and sustainable solutions for livestock agriculture.

Our patented and proprietary technology provides ~~economically sustainable comprehensive environmental solutions to one of the greatest water air~~advanced waste treatment and ~~water quality problems in the U.S. today: pollution from~~resource recovery for large-scale livestock production facilities (also known as “Concentrated Animal Feeding Operations” or ~~“CAFOs”~~“CAFOs"). Livestock production and its waste, particularly from CAFOs, has been identified as one of the greatest soil, air, and water quality problems in the U.S. today. Application of our third generation technology and business/technology platform (“Gen3Tech”) can ~~simultaneously~~largely mitigate these environmental problems, ~~and improve~~while simultaneously improving operational/resource efficiencies by recovering high-value co-products from the CAFOs’ waste stream. These waste stream ~~that~~‘assets’ – nutrients and methane – have traditionally been wasted or underutilized ~~including renewable energy, nutrients (including ammonia nitrogen~~ and ~~phosphorus) and water.~~
From 2016 to 2021 fiscal years, the Company has focused a large portion of its activities on developing, testing and demonstrating the 3rd generation of its technology and technology platform (“3G Tech”) with emphasis on increasing the efficiency of production of valuable co-products from the waste treatment process, including ammonia nitrogen in the form of organic ammonium bicarbonate products. The Company’s initial ammonium bicarbonate liquid product completed its Organic Materials Review Institute (“OMRI”) application and review process with approval during May 2020. An application for our first solid ammonium bicarbonate product – AD Nitrogen – has been filed and is in the review process (which is likely to require an extended period of time and multiple procedural steps due to the novel nature of Bion’s 3G Tech in the context of organic certifications). See discussion of “Organic Fertilizer Products” below.
Bion is now focused primarily on: i) development/construction of its initial commercial-scale 3G Tech installation (see below and Financial Statement Note 10 “Subsequent Events”), ii) developing applications and markets for its organic fertilizer products and its sustainable (conventional and organic) animal protein products, and iii) initiation and development of joint ventures (“JVs”) (and related projects) based on the augmented capabilities of our 3G Tech, while (iv) continuing to pursue development opportunities related to large retrofit projects (such as the Kreider poultry project JV) and ongoing R&D activities. These matters are ~~discussed in more detail in Item 1 of our Form 10-K for the year ended June 30, 2021 and in the Notes to the Financial Statements included herein.~~
~~The $175 billion U.S. livestock industry is under intense scrutiny for its environmental and public health impacts – its ‘environmental sustainability’-- at~~ the same ~~time it is struggling with declining revenues~~‘pollutants’ that today fuel harmful algae blooms, contaminate groundwater, and margins (derived in part from clinging to its historic practices and resulting limitations and impacts) which threaten its ‘economic sustainability’. Its failure to adequately respond to consumer concerns ranging including food safety, environmental impacts, and humane treatment of animals have provided impetus for plant-based alternatives such as Beyond Meat and Impossible Burger (and many others) being marketed as “sustainable” alternatives for this growing consumer segment of the market.
The Company believes that its 3G Tech, in addition to providing superior environmental remediation, creates opportunities for large scale production of i) verifiably sustainable-branded livestock products and ii) verifiably sustainable organic-branded livestock products, both of which will command premium pricing (in part due to ongoing monitoring and third-party verification of environmental performance which will provide meaningful assurances to both consumers and regulatory agencies). Each of these two distinct market segments (which the Company intends to pursue in parallel) presents a large production/marketing opportunity for Bion. Our 3G Tech will also produce (as co-products) biogas and valuable organic fertilizer products, which can be utilized in the production of organic grains for use as feed for raising organic livestock (some of which may be utilized in the Company’s JV projects) and/or marketed to the growing organic fertilizer market.
During the 2021 fiscal year, Bion completed a series of core optimization trials of its 3G Tech platform that were required to move forward with its initial commercial scale 3G Tech project (“Initial Project”). During late September 2021, Bion entered into a lease for the Initial Project will be located on approximately four (4) acres of leased land near Fair Oaks, Indiana and executed an additional related agreement regarding disposal of certain manure effluent have been agreed upon with the Curtis Creek Dairy unit of Fair Oaks Farms (“FOF”). Design and pre-development work commenced during August 2021 and preliminary surveying, site engineering and other work is now underway along with site-specific engineering and design work. The Initial Project will be an environmentally sustainable beef cattle feeding facility, equipped with state-of-the-art housing and Bion’s 3G-Tech platform to provide waste treatment and resource recovery. Bion has designed the project to house and feed approximately 300 head of beef cattle. The facility will include Bion’s 3G Tech platform including: i) covered barns (possibly including solar photovoltaic generation, ii) anaerobic digestion for renewable energy recovery; iii) livestock waste treatment and resource recovery technology; iv) Bion’s ammonium bicarbonate recovery and crystallization technology and iv) data collection software to document system efficiencies and environmental benefits (with the Bion 3G Tech facilities capable of treating the waste from approximately 1,500 head). The facility will be large enough to demonstrate engineering capabilities of Bion’s 3G Tech at commercial scale, but small enough that it can be permitted, constructed and commissioned relatively quickly, with operations targeted to commence sometime during late2022. See Note 10 “Subsequent Events” for activities since the start of the 2022 calendar year.
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The Initial Project is not being developed at economic commercial scale or with an expectation of profitability due to its limited scale. However, successful installation, commissioning, and operations will demonstrate scalability, determine operating parameters at scale, and provide ongoing production and engineering capabilities, all being critical steps that must be accomplished before developing large projects with JV partners. Specifically, the Initial Project is being developed to provide and/or accomplish the following:
i. ~~Proof of 3G Tech platform scalability~~
- ~~Document system efficiency and environmental benefits and enable final engineering modifications to optimize each unit process within the Bion 3G technology platform.~~
- Environmental benefits will include (without limitation) renewable energy production (natural gas recovery from AD and solar electric from integrated roof top photovoltaic generation); nutrient recovery and conversion to stable organic fertilizer; pathogen destruction; water recovery and reuse; air emission reductions.
~~ii.~~ Use Bion’s data collection system to support 3rd party verified system efficiency requirement to qualify for USDA Process-Verified-Program (PVP): certification of sustainable branded beef (and potentially pork) product metrics.
~~iii.~~ ~~Produce sufficient ammonium bicarbonate nitrogen fertilizer (“AD Nitrogen”) for commercial testing by potential joint venture partners and/or purchasers and for university growth trials.~~
~~iv.~~ ~~Produce sustainable beef products for initial test marketing efforts.~~
Upon achieving optimized and steady-state operations at the Initial Project, coupled with obtaining organic certification(s) (OMRI listing and/or other organic certifications/listings) for its AD Nitrogen product, Bion expects to be ready to move forward with its plans for development of much larger facilities. The Company anticipates that discussions and negotiations regarding potential JVs with strategic partners in the financial and livestock industries to develop large scale projects will commence during the construction of the Initial Project with the goal of establishing JV’s for large scale projects that will produce both sustainable and sustainable-organic corn-fed beef during 2023.
~~Additionally, the Company believes there will also be opportunities to proceed with selected ‘retrofit projects’ of existing facilities (see ‘~~~~3G TECH KREIDER 2 POULTRY PROJECT~~~~’ below as an example).~~
We believe that Bion’s 3G Tech platform, coupled with common-sense policy changes to U.S. clean water strategy that are already underway, will combine to provide a pathway to true economic and environmental sustainability with ‘win-win’ benefits for at least a premium sector of the livestock industry, the environment, and the consumer.exacerbate climate change.

Bion’s business model and technology platform can ~~open up~~create the opportunity for ~~JVs~~joint ventures s (in various contractual forms)(“JVs”) between the Company and large livestock/food/fertilizer industry participants based upon the supplemental cash flow generated by implementation of our ~~3G Tech~~Gen3Tech business model, ~~(described and discussed below)~~ which cash flows will support the costs of technology implementation (including servicing related debt). We anticipate this will result in substantial long term value for Bion. ~~Long term, Bion anticipates~~In the context of such JVs, we believe that the verifiable sustainable branding ~~opportunity may expand to~~opportunities (conventional and organic) in meat will represent the single largest enhanced revenue contributor provided by Bion to the ~~economic opportunity provided by Bion.~~JVs (and Bion licensees). The Company believes that the largest portion of its business with be conducted through such JVs, but a material portion may involve licensing and or other approaches.
Bion’s Gen3 Tech was designed to capture and stabilize these assets and produce renewable energy, fertilizer products, and clean water as part of the process of raising verifiably sustainable livestock. All steps and stages in the treatment process will be third-party verified, providing the basis for additional revenues, including renewable energy-related credits and, eventually, payment for ecosystem services, such as nutrient credits as described below. The same verified data will be used to substantiate the claims of a USDA-certified sustainable brand that will support premium pricing for the meat/ animal protein products that are produced in Bion facilities.

During ~~2018~~ the ~~Company had~~first half of 2022 Bion began marketing our sustainable beef to retailers, food service distributors and the meat industry in the U.S. In general, the response has been favorable. During July 2022, Bion announced a letter of intent (“Ribbonwire LOI”) to develop its first ~~patent issued on its 3G Tech and has continued its work~~large-scale commercial project, a 15,000-head sustainable beef cattle feeding operation together with the Ribbonwire Ranch, in Dalhart, Texas (with a provision to expand ~~its patent coverage for our 3G Tech. During October 2020,~~to 60,000 head) (“Dalhart Project”). The Dalhart Project (and/or other Gen3Tech beef joint venture projects) will be developed to produce blockchain-verified, sustainable beef (with reduced the ~~Company~~stress on cattle caused by extreme weather and temperatures and resulting higher feed/weight gain efficiency) while remediating the ~~Company’s third 3G patent, which patent significantly expands~~environmental impacts associated usually associated with cattle CAFOs. Bion’s patented technology will refine the ~~breadth~~waste stream into valuable coproducts that include clean water, renewable natural gas (RNG), photovoltaic solar electricity and ~~depth of~~organic fertilizer products. We anticipate converting the ~~Company’s 3G Tech coverage. The Company has filed~~Ribbonwire LOI into a definitive joint venture agreement with Ribbonwire Ranch and ~~anticipates filing additional patent applications (and/or continuations of existing patents) related to its technology developments~~creating distribution agreements with key retailers and food service distributors during the next 12six months. The 3G Tech platform has been designed to maximize the value of co-products produced during the waste treatment/recovery processes, including pipeline-quality renewable natural gas and organic commercial fertilizer products. All processes will be verifiable by third-parties (including regulatory authorities, certifying boards and consumers) to comply with environmental regulations and trading programs and meet the requirements for: a) renewable energy credits, b) organic certification of the fertilizer coproducts and c) the USDA PVP ‘Environmentally Sustainable’ branding program Bion anticipates moving forward with the development process of its initial large scale commercial installations of its 3G technology during the 2023 calendar year.
In parallel, Bion has worked (which work continues) to advance public policy initiatives that will potentially create markets (in Pennsylvania and other states) that will utilize taxpayer funding for the purchase of verified pollution reductions from agriculture (“credits”) by the state (or others) through competitively-bid procurement programs. Such credits can then be used as a ‘qualified offset’ by an individual state (or municipality) to meet its federal clean water mandates at significantly lower cost to the taxpayer. Competitive procurement of verified credits is now supported by US EPA, the Chesapeake Bay Commission, national livestock interests, and other key stakeholders. Legislation in Pennsylvania to establish the first such state competitive procurement program passed the Pennsylvania Senate by a bi-partisan majority during March 2019. However, the Covid-19 pandemic and related financial/budgetary crises have subsequently slowed progress for this and other policy initiatives and, as a result, it is not currently possible to project the timeline for this and other similar initiatives (see discussion at Item 1 above and below herein).

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The livestock industry is under tremendous pressure (from regulatory agencies, a wide range of advocacy groups, institutional investors and the industry’s own consumers) to adopt sustainable practices. Environmental cleanup is inevitable - policies are already changing. Bion’s 3G technology was developed for implementation on large scale livestock production facilities, where scale drives lower treatment costs and efficient production of co-products. We believe that scale, coupled with Bion’s verifiable treatment technology platform, will create a transformational opportunity to integrate clean production practices at (or close to) the point of production—the source from which most of the industry’s environmental impacts are initiated. Bion intends to assist the forward-looking segment of the livestock industry in actually bringing animal protein production in line with Twenty-first Century consumer demands for sustainability.
~~Bion’s 3G Tech~~business model and technology platform ~~are designed to capture four revenue streams under one umbrella and provide~~can create the ~~basis~~opportunity for joint ventures (in various contractual forms)(“JVs”) between the Company and ~~larger livestock producers seeking to produce environmental/~~large livestock/food/fertilizer industry participants based upon the supplemental cash flow generated by implementation of our Gen3Tech business model, which cash flows will support the costs of technology implementation (including servicing related debt). We anticipate this will result in substantial long-term value for Bion. In the context of such JVs, we believe that the verifiable sustainable ~~product lines. The~~branding opportunities (conventional and organic) in meat will represent the single largest enhanced revenue streams are: a) renewable energy and associated greenhouse gas credits (including US Renewable Fuel Standard (RFS) and/or Low Carbon Fuel Standard (LCFS) credits)(the value and availability of which will vary based on livestock type, geographical locations, and state regulatory programs), b) verified nutrient reductions (primarily nitrogen and phosphorus) that can be used as qualified offsetscontributor provided by Bion to the federal Chesapeake Bay mandate and US EPA TMDL (‘total maximum daily limit’) requirements (the value of which will vary based on livestock type, geographical locations, and state regulatory programs), c) co-products consisting of high value fertilizer for useJVs (and, in organic food production for human consumption and/or to grow feed for use by livestock in Projects, and d) an environmentally sustainable USDA certification that will be incorporated into a “brand” that can address the consumer concerns regarding food safety and sustainability (based on incorporation of all of the third party verified data for greenhouse gas reductions, nutrient reductions and fertilizer products into a digital register)some cases, Bion licensees). The Company believes that the ~~“branding” opportunity will offer large scale livestock producer / processor / distributors~~largest portion of ~~livestock products~~its business with be conducted through such JVs, but a material portion may involve licensing and or other approaches.
Bion’s Gen3Tech was designed to capture and stabilize the opportunity to differentiate and identify their products in the marketplace and, thereby creating the opportunity to achieve “premium pricing” by addressing consumer concerns related to safety and sustainability in a manner similar to the premiums achieved by organic producers.
Operational results from the initial commercial system (Kreider 1 utilizing our 2G Tech) confirmed the ability of Bion’s technologies to meet nutrient reduction goals at commercial scale for an extended period of operation. Bion’s 3G Tech platform (and the new variations under development) center on its patented and proprietary processes that separate and aggregate the various assets in the CAFO waste stream so they become benign, stable and/or transportable. Bion systems can: a) remove up to 95% of the nutrients (primarily nitrogen and phosphorus) in the effluent, b) reduce greenhouse gases by 90% (or more) including elimination of virtually all ammonia emissions, c) while materially reducing pathogens, antibiotics and hormonescontained in the livestock waste ~~stream. Our core technology~~stream and ~~its primary CAFO applications were proven~~produce renewable energy, fertilizer products, and clean water as part of the process of raising verifiably sustainable livestock. All steps and stages in the ~~Kreider 1 commercial operations. It has been accepted by~~treatment process will be third-party verified, providing the ~~Environmental Protection Agency (“EPA”)~~basis for additional revenues, including renewable energy-related credits and, ~~other regulatory agencies and it is protected by Bion’s portfolio of U.S. and international patents (both issued and applied for).~~
~~BION’S 3G TECH PLATFORM PROVIDES THE BASIS FOR A JV BUSINESS MODEL WITH FOUR DISTINCT REVENUE STREAMS~~~~: 1) pipeline quality renewable natural gas and related carbon and other environmental credits, 2) premium organic fertilizer products, 3)~~eventually, payment for ecosystem services, such as nutrient credits and 4) premium pricing from USDA PVP-certified ‘Environmentally Sustainable’ branding at the retail level. Carbon and nutrient credit revenues will be supported by third-party verification of the waste treatment processes that simultaneously capture methane and nutrients, while producing renewable energy and fertilizer products from them with relatively limited incremental cost to Bion.as described below. The same verified data will ~~also provide~~be used to substantiate the ~~backbone~~claims of a USDA-certified sustainable brand that will support premium pricing for the ~~USDA PVP-certified~~meat/ animal protein products that are produced in Bion facilities.
Our business plan is focused on executing multiple agreements and letters of intent related to the “Bion Beef Opportunity” and commencing development of multiple sustainable ~~brand, again~~beef joint venture projects over the next twelve-eighteen (12-18) months while moving forward with ~~limited incremental cost.~~the Initial Project (see below) and the Dalhart Project (and/or other Gen3Tech beef joint venture projects). Bion also intends to pursue other opportunities in the livestock industry enabled by our Gen3Tech business model. The Ribbonwire LOI announcement has generated significant interest within the livestock industry (among ranchers, feedlot operators, farmers and other AG industry parties). We believe that this interest, combined with consumer interest in ‘sustainable products’ and the growing enthusiasm among some livestock industry parties for environmental/sustainable/regenerative practices, provides Bion (and its partners/venturers) with an opportunity to move forward with a truly sustainable solution in this industry segment.

1) ~~Renewable energy- and carbon-related credits:~~
At present, there is essentially no traceable and verifiable ‘sustainable beef’ available to the US market except for niche products. In response to consumer demand for transparency and sustainability, Bion expects the meat industry in general, and beef specifically, to evolve towards using new technologies to deliver these attributes in their products. While we anticipate a faster adoption of tracking, verification and sustainability technologies in other perishable food categories like produce and dairy due to their harvest and production techniques, meat industry leaders have also announced their willingness to move forward with initiatives in this area. Bion predicts that within approximately five years, consumers will be able to track and verify claims including sustainability on 25% (or more) of the products merchandised in the meat department. Bion believes that the retail market share of verifiably sustainable beef in the US will approach 7-10 % within three (3) years (end of 2025) and 25% in five (5) years (end of 2027) (approximately 2,000,000 cattle annually) (and more thereafter). If Bion can successfully execute on its sustainable beef business plan, facilities utilizing Bion’s Gen3Tech platform will provide one-third (1/3) or more of that premium market segment (and a higher portion of meat that is actually traceable and verifiably sustainable). Our goal is to have multiple sustainable beef projects under development (within 3-5 distinct JVs) by the end of 2023. Our first commercial project is likely to be the Dalhart Project but we anticipate commencing additional sustainable beef projects during 2023 as well. Our current target is to have at least three (3) facility modules (15,000 head per module)(“Modules”) in development/under construction during 2023 in three (3) different JVs with the initial barns being populated with livestock by fall/winter 2024-25. Further expansion in the number of distinct JVs is projected through 2025 aiming at 5-10 JVs in process --- each of which JVs will be pursuing development of multiple Modules with targets of 12-15 populated Modules by the end of 2025 (approximately 2%-3% of the US beef market) and 30-45 Modules constructed and populated by 2027-28 (approximately 6%-8% of the US beef market) with further expansion thereafter. Bion’s current goal is that its Gen3Tech platform will be utilized to produce 33% of the verifiable “sustainable beef” category at the end of the period (which will equal approximately 2 million cattle annually)(45 Modules).

~~Bion’s 3G Tech platform utilizes customized anaerobic digestion (“AD”) to recover biogas (methane) from~~During this five (5) year period, the ~~waste stream. At sufficient scale, methane produced from AD can be cost-effectively conditioned, compressed and injected into a pipeline. The~~Company also anticipates having additional Gen3Tech projects underway in the pork/dairy/egg sectors of the US Renewable Fuel Standard (“RFS”) program and state programs in California and elsewhere provide ongoing renewable energy credits for the production of biogas and its subsequent use as a renewable transportation fuel. Additional renewable energy-related credit programs are being developed that Bion believes will impact these revenues, including a Carbon Intensity (CI) score that measures the amount of carbon produced per unit of energy produced.animal protein market.

2) ~~Organic Fertilizer products:~~
The Company’s initial ammonium bicarbonate liquid product of our 3G Tech completed its Organic Materials Review Institute (“OMRI”) application and review process with approval during May 2020 when it was deemed non-synthetic (as discussed below). The 3G Tech platform has been designed to produce multiple fertilizer products, including: i) ammonium bicarbonate liquid, ii) ammonium bicarbonate in solid crystal form – AD Nitrogen – and iii) soil amendment products that will contain the remaining nitrogen, phosphorus and other micronutrients captured from the livestock waste stream. Bion believes each product will qualify for organic certification/listing.

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During the next six months, the Company intends to construct and begin operations of phase 1 of our Initial Project located near Fair Oaks, Indiana. Bion ~~has developed solid ammonium bicarbonate products containing 14-28 percent nitrogen~~expects the Initial Project to provide data that illustrates the effectiveness of our Gen3Tech in a crystalline form that is easily transported, is water soluble and provides a readily available nitrogen source for crops. The products will contain virtually none of the other salt, iron and mineral constituents of the livestock waste stream that often accompany other organic fertilizers. Ammonium bicarbonate (manufactured using chemical processes) has a long history of use as a fertilizer. This product (produced without the use of synthetic processes and/or additives), is being developed to fertilizer industry standards so that it that can be precision-applied to crops using existing equipment. Bion believes that this product will potentially have broad applications in the production of organic grains for livestock feed, row crops, horticulture, greenhouse and hydroponic production, and potentially retail lawn and garden products.
An application for our first solid ammonium bicarbonate product – AD Nitrogen – was filed during May 2021 and is currently actively proceeding through OMRI’s multi-stage review process ---which process has taken an extended period of time and multiple procedural steps due to the novel nature of Bion’s 3G Tech in the context of organic listings/certifications. OMRI’s Review Panel ‘…. voted to temporarily assign it to “Unresolved” status. This means that OMRI does not currently have the clarity necessary to decide whether the product meets OMRI standards which are based on the USDA National Organic Program regulations (NOP).’ Subsequently the application has gone through ‘Rebuttal’ (OMRI Review Panel) and ‘Appeal’ (Appeals Review Committee) stages which affirmed the “Unresolved” status. The Company has been informed that ‘…the product will remain Unresolved until July 22, 2022 or until resolution is reached by OMRI though consultation with the OMRI Advisory Council.’ The application is now beginning review by OMRI’s Advisory Council. The Company’s product is novel in part due to the fact that OMRI does not have a listing category for a solid form of concentrated and soluble nitrogen fertilizers and there is no clear guidance at present from OMRI internal policy on how to categorize this product and the process that produced it. There is also no clear guidance at present from either the NOP or the National Organic Standards Board (“NOSB”) (which is currently involved in a related review and recommendations process regarding ‘high nitrogen liquid fertilizers’ derived from ammonia from manure). The Company and its representatives are involved in discussions regarding resolution of these matters at all three levels. The Company anticipates positive resolution of this manner well prior to operational dates for the Company’s initial large scale JV 3G projects.
In addition to the OMRI applications discussed above, the Company has engaged in discussions with (and research related to) other state/regional listing/certifying groups and anticipates filing additional applications in subsequent periods with one or more such entities related to its fertilizer products.
The AD Nitrogen and other ammonium bicarbonate products produced by Bion’s 3G Tech platform will enjoy a dramatically lower carbon footprint than synthetic fertilizers. The reactive nitrogen captured and upcycled into AD Nitrogen was going to be lost through volatilization and runoff, and that loss would generally need to be offset with a synthetic nitrogen, such as anhydrous ammonia or urea. These synthetic nitrogen products are produced through the Haber-Bosch (and other) synthetic processes, which converts hydrogen and atmospheric nitrogen to ammonia, with methane as the energy source. It is an extremely energy-intensive process with a carbon footprint that, while not yet fully understood, is widely accepted to by very large. While a complete Life Cycle Analysis (LCA) of carbon impacts from synthetic fertilizer production is not available, according to the Institute for Industrial Productivity, its production alone is responsible for approximately 1 percent of total global CO2 emissions. To the extent that Bion can capture and repurpose the nitrogen traditionally lost from livestock waste, that carbon cost will no longer need to be paid
To provide a first level degree of clarity regarding organic approvals and the processes/procedures involved, Bion believes that the initial OMRI approval is of importance, because subsequent organic products that are produced by using the very same technology platform (our 3G Tech) can now piggyback on the initial approval to a significant degree. Note that there are different layers to the U.S. organic program (see discussion above) and that fertilizers do not get ‘certified’ as organic, per se. Rather, they are evaluated to determine if they are acceptable for ‘use in organic production’.
The National Organic Program (“NOP”) was established by Congress in 2001 under the USDA’s Agricultural Marketing Service. The NOP develops and enforces uniform national standards for organically-produced agricultural ~~end products~~ – meat/dairy/milk, fruits, vegetables – sold in the United States. Operating as a public-private partnership, NOP accredits private companies and helps train their inspectors (USDA-accredited Certifiers) to certify that farms and businesses meet the national organic standards. For example, in a potential Midwest organic beef project (discussed below), each element in the supply chain must provide their certifying agent’s certification that the specific product, such as organic corn, has been produced in accordance with their organic plan. The end product - the beef - would be USDA-certified as organic by an accredited Certifier after a review of ALL the farming practices and inputs (which would include Bion’s ammonium bicarbonate fertilizer).
~~OMRI is a nonprofit organization that provides an independent review of products, such as fertilizers, pest controls, livestock health care products, and numerous other~~ ~~inputs~~ that are intended for use in certified organic production and processing. OMRI reviews these products against the organic standards established by the NOP to determine if they are suitable for use in organic production. Acceptable products are then OMRI Listed®.
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OMRI enables a national listing through one application in contrast to state/regional programs (including programs based in California, Oregon, Washington, Iowa, Pennsylvania (some of which have agreements with other states in their regions) and others) and the alternative of using certifiers to secure listings in individual states. To those who wish to sell organic fertilizers into national distribution channels, an OMRI listing provides nearly uniform acceptance in the U.S. The OMRI listing Bion received in May was for our initial commercial product, a low-concentration liquid ammonia. It is valid ONLY for that particular product. For future Bion product offerings using the same technology platform, Bion will either need to file for specific state approval, or file with OMRI for a national listing, or a combination of the two. Bion may elect to use an individual state listing initially to be followed by an OMRI application if and when the need for a regional or national listing arises.
The overarching standard of organic production, per NOP guidelines, is that a “product shall have been produced and handled without the use of synthetic chemicals…” That is rule Number One. At NOP, the term "synthetic" means “a substance that is formulated or manufactured by a chemical process or by a process that chemically changes a substance extracted from naturally occurring plant, animal, or mineral sources, except that such term shall not apply to substances created by naturally occurring biological processes.” In evaluating and approving Bion’s liquid ammonia for OMRI listing, Bion’s patented ammonia recovery system was deemed not synthetic. That is an important distinction for future Bion product filings based upon the same patented process.
The Company believes that organic approvals for its products will: a) provide access to substantially higher value markets compared to synthetic nitrogen products, and/or b) allow its products to be utilized in growing of organic feed grains to be consumed by livestock raised in JVs which will be sold as organic. Based on preliminary market surveys to date, we believe that existing competing organic fertilizer products in both liquid and granular form are being sold presently at price points significantly greater than Bion’s projected cost and projected pricing. We also believe that livestock products from animals raised with feed grains grown using Bion organic ammonium bicarbonate fertilizer products (and that otherwise qualify) will receive organic approvals. It is anticipated that the Company will continue to seek approvals for such products during the balance of the current fiscal year and will commence initial production and test marketing of such products during the 2023 fiscal year if such approvals have been received.
3) ~~Nutrient credits:~~
Bion believes that nutrient reduction (and other similar) credits and/or other methods of monetizing environmental benefits from the capture and re-purposing of the nutrients (largely nitrogen and phosphorus) from the livestock waste stream, will become available in multiple states over the next several years. The passage in the Pennsylvania (“PA”) Senate of key legislation – SB 575 – in June 2019 that would have established a competitively-bid market for nutrient credits in PA, is indicative of the trends. Despite the fact that the bill was not considered in the House, due to the Covid-19 pandemic (a re-introduced bill will have to be considered again in the current and/or future sessions (currently SB 475 and SB 832 have been introduced and are pending), Bion anticipates that after passage of a similar bill in the future, PA will establish a competitively-bid market for nutrient credits within twelve months after legislative passage and being signed into law by the Governor. See below for discussion of the history and status of matters in PA.
Note, however, that the current Covid-19 pandemic and resultant social and economic crises and budgetary constraints have delayed policy initiatives related to these matters at both the state and federal levels. As a result, it is not currently possible to reasonably project a timetable for adoption of the policy changes discussed herein.
4) ~~Sustainable Branding:~~
~~Consumers have demonstrated a willingness to pay a premium for their safe and sustainable food choices. Based on Bion’s recognition of the potential opportunities created by such willingness,~~ beginning in 2015, Bion has worked with the USDA’s Process Verified Program (“PVP”) – the gold standard in food verification and branding – to establish a USDA PVP-certified sustainable brand. Bion received conditional approval from the PVP related to its Kreider 1 project (utilizing 2G Tech). It is our intention to submit an application for the 3G Tech platform when the initial 3G Tech Project is operational later this fiscal year and seek an approval for certification based on third-party-verified reductions in nutrient impacts, greenhouse gases and pathogens in the waste stream (and other attributes), based on our 3G Tech. PVP certification incorporated as part of a recognizable brand will provide consumers with products and brands that can be trusted. Bion believes that such a brand and livestock product line will command a pricing premium for Bion’s livestock JVs and their customers.
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Food safety and sustainability are issues of growing importance in the U.S. and worldwide. Bion’s branding initiative reflects trends already underway in the livestock industry. Driven by growing consumer demand, large food retailers (such as Walmart and Costco) and restaurant chains (including Chipotle and McDonalds) are increasingly demanding greater responsibility and improved sustainability in food production practices from their suppliers. The Global Roundtable for Sustainable Beef (“Roundtable”) was created to advance a sustainable global beef value chain that is “environmentally sound, socially responsible and economically viable”. The Roundtable represents members from across the supply chain, including U.S., Canadian and Australian cattlemen’s associations, Cargill, JBS, Elanco, McDonalds and A&W.
Large institutional investors have begun to pressure the livestock industry. Ceres and several other large activist institutional investors have already expressed concerns about carbon footprint, water quality, antibiotic usage and animal welfare in letters to management of their investment holdings in the food production industry. The Collier Farm Animal Investment Risk & Return (“FAIRR”) Initiative was recently launched to highlight the environmental, social, and governance (“ESG”) risks associated with large-scale livestock production.
In past years, the UN FAO has issued several highly critical reports of the livestock industry, more recently focused on its impacts on climate change. While some of their early reports were based on incomplete data and faulty methodologies and have since been somewhat quietly ‘retracted’, a wide array of activist groups, including climate, animal rights, and anti-factory farming advocates, have seized on them to create a global “anti-meat” messaging campaign. Their messaging is predicated on the (incorrect) notion that agriculture, and the livestock sector specifically, is the largest contributor to climate change, greater than the energy and transportation sectors. While this fact has been publicly ‘debunked’, the anti-meat campaign has been joined and amplified by various other stakeholders, governments, and more recently, competitors in the alternative protein space, such as plant-based and cellular meats.
Over the last few years, most large meat and dairy product retailers have announced ‘sustainability’ initiatives, although the definition of sustainability is often unclear. Based on recent statements from the industry regarding sustainability policy, many that identify goals that are 10 to 30 years in the future, Bion believes that sustainability on the production side will look a lot like what the Company’s 3G Tech platform can provide today. The 3G Tech platform can deliver verifiable metrics that demonstrate meaningful improvements in sustainability for livestock production that are unmatched in the industry today, including a dramatically reduced carbon and nutrient footprint; lower negative impacts to water, soil and air; increased pathogen destruction; and other environmental and public health impacts. The Covid-19 pandemic has further heightened consumer awareness and concerns related to a) environmental sustainability, b) food safety, c) sourcing and traceability and d) humane treatment of both animals and workers.
Recently there have been efforts to establish sustainable brands (including USDA PVP certification) for a number of small-scale livestock producers (largely in the grass fed beef category) The extent and reach of such efforts is limited to date and it is difficult to determine its effectiveness. Additionally, there have been public announcements of initiatives related to beef sustainability (largely focused on the ’cow-calf’ segment of the livestock chain) by major beef processing companies, but a closer look finds that most consist largely of ‘green washing’ public proclamations in the wake of environmental and social criticism and re-packaging of prior initiatives lacking any new substance.
The more the livestock industry’s supply chain practices become transparent and known by consumers, the more consumers are seeking alternatives. Bion’s ‘Sustainable’ branding program is designed to address a wide array of consumer concerns ranging from: a) ‘where does your food come from?’ (animal heritage information); b) environmental impacts; c) antibiotic use/ standards; d) animal welfare/ humane treatment; e) laborer welfare/ working conditions. These issues can be addressed with the consumer through general advertising and/or at the point of sale with a QR code on the packaging that links back to product-specific data. The verification processes that will be employed by Bion’s 3G Tech platform support block chain traceability, providing accountability throughout that part of the supply chain addressed by Bion’s platform and enabling any quality issues to be quickly identified by lot and location, minimizing risk to its consumers. In essence, Bion’s comprehensive technology platform will enable its livestock JVs and other adopters to be not only the provider of the product the consumer wants, but also the businesses that shares their consumers’ values.
34
~~KREIDER 1 (HISTORY AND STATUS)/DISSOLUTION OF BION PA 1 LLC (‘PA1”)~~
During 2008 the Company commenced actively pursuing the opportunity presented by environmental retrofit and remediation of the waste streams of existing CAFOs which effort has met with very limited success to date. The first commercial activity in this area is represented by our agreement with Kreider Farms (“KF”), pursuant to which the Kreider 1 system to treat KF's dairy waste streams to reduce nutrient releases to the environment while generating marketable nutrient credits and renewable energy was designed, constructed and entered full-scale operation during 2011. On January 26, 2009 the Board of the Pennsylvania Infrastructure Investment Authority (“Pennvest”) approved a $7.75 million loan to Bion PA 1, LLC (“PA1”), a wholly-owned subsidiary of the Company, for the initial Kreider Farms project (“Kreider 1 System”). The terms of the Pennvest Loan provided for funding of up to $7,754,000 which was to be repaid by interest-only payments for three years, followed by an additional ten-year amortization of principal. The Pennvest Loan accrued interest at 2.547% per annum for years 1 through 5 and 3.184% per annum for years 6 through maturity. The Pennvest Loan required minimum annual principal payments of approximately $5,886,000 in fiscal years 2013 through 2021, and $846,000 in fiscal year 2022, $873,000 in fiscal year 2023 and $149,000 in fiscal year 2024. The Pennvest Loan is collateralized by PA1’s Kreider 1 System and by a pledge of all revenues generated from Kreider 1 including, but not limited to, revenues generated from nutrient reduction credit sales and by-product sales. In addition, in consideration for the excess credit risk associated with the project, Pennvest was entitled to participate in the profits from Kreider 1 calculated on a net cash flow basis, as defined.
After substantial unanticipated delays, on August 12, 2010 PA1 received a permit for construction of the Kreider 1 System based our 2G Tech (which the Company is no longer implementing). Construction activities commenced during November 2010. The closing/settlement of the Pennvest Loan took place on November 3, 2010. PA1 finished the construction of the Kreider 1 System and entered a period of system ‘operational shakedown’ during May 2011. The Kreider 1 System reached full, stabilized operationsetting by the end of the 2012 fiscal year. During 2011 the PADEP re-certified the nutrient credits for this project. The PADEP issued final permits for the Kreider 1 System (including the credit verification plan) on August 1, 2012 on which date the Company deemed that the Kreider 1 System was ‘placed2^nd quarter in ~~service’. As a result, PA1 commenced generating nutrient reduction credits for potential sale while continuing to utilize the Kreider 1 System to test improvements~~2023 and add-ons. However, liquidity in the Pennsylvania nutrient credit market failed to develop significant breadth and depth, which limited liquidity/depth has negatively impacted Bion’s business plans and has resulted in insurmountable challenges to monetizing the nutrient reductions created by PA1’s existing Kreider 1 project (and Bion’s other proposed projects in the state). These difficulties prevented PA1 from generating any material revenues from the Kreider 1 project. PA1 had sporadic discussions/negotiations with Pennvest related to forbearance and/or re-structuring its obligations pursuant to the Pennvest Loan for more than 7 years. In the context of such discussions/negotiations, PA1 elected not to make interest payments to Pennvest on the Pennvest Loan since January 2013. Additionally, the Company has not made any principal payments, which were to begin in fiscal 2013, and, therefore, the Company has classified the Pennvest Loan as a current liability as of December 31, 2021. Due to the failuresupports development of the ~~Pennsylvania nutrient reduction credit market to develop, the Company determined that the carrying amount of the property~~Dalhart Project (and/or other Gen3Tech beef joint venture projects) during 2023. We believe this data will also provide additional potential stakeholders (cattle producers, cattle feeders, packers, distributors, retailers and equipment related to the Kreider 1 project exceeded its estimated future undiscounted cash flows based on certain assumptions regarding timing, level and probability of revenues from sales of nutrient reduction credits and, therefore, PA1 and the Company recorded impairments related to the value of the Kreider 1 assets of $1,750,000 and $2,000,000 at June 30, 2015 and June 30, 2014, respectively. During the 2016 fiscal year, PA1 and the Company recorded an impairment of $1,684,562 to the value of the Kreider 1 assets which reduced the value on the Company’s books to zero. This impairment reflects management’s judgment that the salvage value of the Kreider 1 assets roughly equaled PA1’s contractual obligations related to the Kreider 1 System, including expenses related to decommissioning of the Kreider 1 System.
During August 2012, the Company provided Pennvest (and the PADEP) with data demonstrating that the Kreider 1 System met the ‘technology guaranty’ standards which were incorporated in the Pennvest financing documents.
The economics (potential revenues, profitability and continued operation) of the Kreider 1 System were based almost entirely on the long-term sale of nutrient (nitrogen and/or phosphorus) reduction credits to meet the requirements of the Chesapeake Bay environmental clean-up. See below for further discussion.
On September 25, 2014, Pennvest exercised its right to declare the PA1’s Pennvest Loan in default, accelerated the Pennvest Loan and demanded that PA1 pay $8,137,117 (principal, interest plus late charges) on or before October 24, 2014. PA1 did not make the payment and did/does not have the resources to make the payments demanded by Pennvest. PA1 commenced discussions and negotiations with Pennvest concerning this matter but Pennvest rejected PA1’s proposal made during the fall of 2014. PA1 made a final proposal to Pennvest during September 2021 which proposal was also rejected by Pennvest. PA1 provided Pennvest with its financial statements (which include a description of system status) annually. During the 2021 fiscal year, Pennvest’s auditors requested a ‘corrective action plan’ and PA1 informed Pennvest that “… there is no viable corrective action plan for the Pennvest Loan (‘Loan’). The facility funded by the Loan has been shut down for many years (which has been disclosed in the annual financial reports to Pennvest and in public filings by the parent of Bion PA 1, LLC) and the technology utilized in the facility is now obsolete. The facility has not been commercially operated for approximately six years and has generated zero income. We recommend that Pennvest take appropriate steps to remove and sell the equipment.” Pennvest responded favorably to the approach of selling the equipment.
35
On December 29, 2021, the Company approved and executed a Consent of the Sole Member of Bion PA 1 (the “Consent to Dissolution”) that authorized the complete liquidation and dissolution of PA1. A Statement of Dissolution was filed by PA1institutions) with the Colorado Secretary of State on December 29, 2021. The Company is of the understanding that the liquidation value of Bion PA 1’s property is substantially below the current amount outstanding under the Funding Agreement dated October 27, 2010 by and between PA1 and Pennvest, the only known secured creditor of PA1. Post-dissolution, PA1’s activities will be limited entirely to activities required to properly distribute its net assets to creditors and wind down its business. PA 1 is prepared to transfer to Pennvest all of PA1’s right, title and interest in its property (by a bill of sale or other acceptable agreement) or alternatively, with Pennvest’s approval and direction, arrange for the sale of its property and deliver all proceeds (net of commissions and customary costs of sale) to Pennvest. PA1 and Pennvest have entered into communication/exchanges to determine how Pennvest would like PA1information they need to proceed with ~~this process. The Company’s personnel will assist PA1~~confidence in collaborating with ~~this process as needed at no cost to PA1.~~Bion on multiple new projects (see below).

~~Upon~~Bion is now focused primarily on: i) development/construction of the ~~complete distribution~~Initial Project, our initial commercial-scale Gen3Tech installation, ii) development/construction of ~~all assets~~the Dalhart Project (and/or other Gen3Tech beef joint venture projects), iii) developing applications and markets for its low carbon organic fertilizer products and its sustainable (conventional and organic) animal protein products, and iv) discussions regarding initiation and development of ~~PA1, whether by transfer or sale~~agreements and joint ventures (“JVs” as ~~provided above, PA1 will use commercially reasonable efforts~~discussed below) (and related projects) based on the augmented capabilities of our Gen3Tech business platform (in the sustainable beef and other livestock segments), while (v) continuing to ~~cause~~pursue business opportunities related to large retrofit projects (such as the ~~cessation of all~~Kreider poultry project JV described below) and vi) ongoing R&D activities. ~~No distributions of PA1’s assets will be made to~~
There is no assurance that the Company will reach or ~~its affiliates. The Consent~~approach the goals/targets set forth above. Reaching such goals/targets will require access to ~~Dissolution authorized Mark A. Smith, the Company’s President~~very large amounts of capital (equity and ~~the sole manager~~debt) as each module is projected to cost in excess of ~~PA1,~~$50 million to ~~cause to be delivered for filing the Statement~~construct and require mobilization of ~~Dissolution, to give notice of the dissolution,~~substantial personnel, technical resources and ~~to take any other act necessary to wind up and liquidate the business.~~
PA 1 has made no payments to vendors or other creditors in connection with the dissolution. No distributions or payments of any kind have ever been made to the Company, the sole member of PA1 since inception and no payment will be made to the Company or any affiliate in connection with the dissolution.
Through the date of the dissolution, PA1 was a wholly-owned subsidiary of the Company and its assets and liabilities were included on the Company’s consolidated balance sheet. At September 30, 2021, PA1’s total assets were $297 and its total liabilities were $10,154,334 (including the Pennvest Loan in the aggregate amount of $9,939,148, accounts payable of $214,235 and accrued liabilities of $950) which sums were included in the Company’s consolidated balance sheet in its Form 10-Q for the quarter ended September 30, 2021. Subsequent to the dissolution of PA1, its assets and liabilities will no longer be consolidated and included in the Company’s balance sheet. As of December 29, 2021, PA1’s total assets were nil and its total liabilities were $10,234,501 (including the Pennvest Loan in the aggregate amount of $10,009,802, accounts payable of $212,263 and accrued liabilities of $12,436. The net amount of $10,234,502 was recognized as a gain on the legal dissolution of a subsidiary in other (income) expense.
management skills. The Company ~~has incurred interest expense related~~does not possess either the financial or personnel resources required internally and will need to ~~the Pennvest Loan of $61,722 for both the three months ended December 31, 2021 and 2020, respectively, and $123,444 for both the six months ended December 31, 2021 and 2020, respectively.~~source such resources from outside itself.

~~SUSTAINABLE/ORGANIC GRAIN-FINISHED BEEF JV OPPORTUNITY~~

The Company believes that its 3G Tech, in addition to providing superior environmental remediation, creates opportunities for large scale production of: i) verifiably sustainable-branded livestock products and ii) verifiably sustainable organic-branded livestock products that will command premium pricing (in part due to ongoing monitoring and third-party verification of environmental performance which will provide meaningful assurances to both consumers and regulatory agencies). Each of these two distinct market segments (which the Company intends to pursue in parallel) presents a large production/marketing opportunity for Bion. Our 3G Tech platform will also produce revenues from co-products: i) pipeline quality biogas (and related environmental credits) and ii) valuable organic fertilizer products, which can be utilized in the production of organic grains for use as feed for raising organic livestock (some of which may be utilized in the Company’s JV projects) and/or marketed to the growing organic fertilizer market. These matters are discussed in more detail in Item 1 ofFor additional information regarding our ~~Form 10-K for the year ended June 30, 2021 and~~‘HISTORY, BACKGROUND AND CURRENT ACTIVITIES’,see discussion in ~~the~~ Notes to the Financial Statements (particularly Notes 1,3,5,and 9) included ~~herein.~~

~~3G TECH KREIDER 2 POULTRY PROJECT~~in this report and Item 1 in our annual report on Form 10-K.

Bion has done extensive pre-development work related to a waste treatment/renewable energy production facility to treat the waste from KF’s approximately 6+ million chickens (planned to expand to approximately 9-10 million) (and potentially other poultry operations and/or other waste streams) ('Kreider Renewable Energy Facility' or ‘Kreider 2 Project’). On May 5, 2016, the Company executed a stand-alone joint venture agreement with Kreider Farms covering all matters related to development and operation of Kreider 2 system to treat the waste streams from Kreider’s poultry facilities in Bion PA2 LLC (“PA2”). During May 2011 the PADEP certified a smaller version of the Kreider 2 Project (utilizing our 3G Tech) for 559,457 nutrient credits under the old EPA’s Chesapeake Bay model. The Company has been in ongoing discussions with the PADEP regarding the appropriate credit calculation methodology for large-scale technology-based nutrient reduction installations such as the KF2 Project utilizing our 3G Tech platform. Based on these discussions and the size of the Kreider 2 Project, we anticipate that when designs are finalized, the Kreider 2 Project will be re-certified for a far larger number of credits (management’s current estimates are between 2-4 million (or more) nutrient reduction credits for treatment of the waste stream from Kreider’s poultry pursuant to the Company’s subsequent amended application during the current fiscal year pursuant to the amended EPA Chesapeake Bay model and agreements between the EPA and PA. Note that this Project may be expanded in the future to treat wastes from other local and regional CAFOs (poultry and/or dairy---including the Kreider Dairy) and/or additional Kreider poultry expansion (some of which may not qualify for nutrient reduction credits). A review process to clarify certain issues related to credit calculation and verification commenced during 2014 based on Bion’s 2G Tech but was been placed on hold. The Company anticipates if and when PA2 re-commences work on the Kreider 2 Project, it will submit an amended or new application based on our 3G Tech. Site specific design and engineering work for this facility have not commenced, and the Company does not yet have financing in place for the Kreider 2 Project. This opportunity is being pursued through PA2. If there are positive developments related to the market for nutrient reductions in Pennsylvania, of which there is no assurance, the Company intends to pursue development, design and construction of the Kreider 2 Project with a goal of achieving operational status for its initial modules during then following calendar year. The economics (potential revenues and profitability) of the Kreider 2 Project, despite its proposed use of Bion’s 3G Tech for increased recovery of marketable by-products, are based in material part the long-term sale of nutrient (nitrogen and/or phosphorus) reduction credits to meet the requirements of the Chesapeake Bay environmental clean-up. However, liquidity in the Pennsylvania nutrient credit market has not yet developed significant breadth and depth, which lack of liquidity has negatively impacted Bion’s business plans and will most likely delay PA2’s Kreider 2 Project and other proposed projects in Pennsylvania.

Note that while Bion believes that the Kreider 2 Project and/or subsequent Bion Projects in PA and the Chesapeake Bay Watershed will eventually generate revenue from the sale of: a) nutrient reductions (credits or in other form), b) renewable energy (and related credits), c) sales of fertilizer products, and/or d) potentially, in time, credits for the reduction of greenhouse gas emissions, plus e) license fees related to a ‘sustainable brand’ the Covid-19 pandemic has delayed legislative efforts needed to commence its development. We believe that the potential market is very large, but it is not possible to predict the exact timing and/or magnitude of these potential markets at this time.

~~PUBLIC POLICY INITIATIVES~~

A substantial portion of our activities involve public policy initiatives (by the Company and other stakeholders) to encourage the establishment of appropriate public policies and regulations (at federal, regional, state and local levels) to facilitate cost effective environmental clean-up and, thereby, support our business activities. Bion has been joined by National Milk Producers Federation, Land O’Lakes, JBS and other national livestock interests to support changes to our nation’s clean water strategy that will allow states to acquire low-cost nutrient reductions through a competitive procurement process, in a similar manner to how government entities now acquire many other goods and services on behalf of the taxpayer. As developing markets for nutrient reductions become fully-established, Bion anticipates a robust business opportunity to retrofit existing CAFOs and develop Projects, based primarily on the sale of nutrient credits that provide cost-effective alternatives to today’s high-cost and failing clean water strategy.

To date the market for long-term nutrient reduction credits in Pennsylvania (‘PA’) has been very slow to develop and the Company’s activities have been negatively affected by such lack of development. However, Bion is confident that once these markets are established, the credits it produces will be competitive in the credit trading markets, based on its cost to remove nitrogen from the livestock waste stream, compared to the cost to remove nitrogen through various other treatment activities.

Several independent studies have calculated the average cost to remove nitrogen through various sector practices. Reports prepared for the PA Senate (2008), Chesapeake Bay Commission (2012) and PA legislature (2013; described below), as well as the Maryland Chesapeake Bay Financing Strategy Report (2015), demonstrate that the cost to remove nitrogen (per pound on average) from agriculture is $44 to $54, municipal wastewater: $28 to $43, and storm water: $386 to $633. Pursuant to the PA legislative Report, by replacing sector allocation (for all sectors) with competitive bidding, up to 80 percent savings could be achieved in PA’s Chesapeake Bay compliance costs ($1.5 billion annually) by 2025. If the legislative study had focused on the cost differentials of competitive bidding compared only with storm water, the relative savings would be substantially greater.

Since these studies were completed, most of the larger (Tier 1) municipal wastewater treatment plants in PA have been upgraded, at a cost of approximately $2.5 billion (vs initial 2004 PA DEP cost estimates of $376 million). US EPA is now focused on PA’s storm water allocation (3.5 million pounds (per last published data)) and has this sector on ‘backstop level actions’, the highest level of EPA-oversight and the final step before sanctions. In the same 2004 PA DEP cost estimate that led to the more than a $2 billion underestimate/miscalculation in municipal wastewater plant upgrade costs, the estimate for storm water cost was $5.6 billion. In April 2017, US EPA sent a Letter of Expectation to PA DEP, expressing the agency’s support for the use of nutrient credit trading and competitive bidding to engage the private-sector to lower costs. The letter specifically encouraged the use of credit trading to offset the state’s looming storm water obligations.

The Company believes that: i) the April 2015 release of a report from the Pennsylvania Auditor General titled “Special Report on the Importance of Meeting Pennsylvania’s Chesapeake Bay Nutrient Reduction Targets” which highlighted the economic consequences of EPA-imposed sanctions if the state fails to meet the 2017 TMDL targets, as well as the need to support using low-cost solutions and technologies as alternatives to higher-cost public infrastructure projects, where possible, and ii) Senate Bill 575 (introduced in April 2019 as successor to prior SB 799 (which was passed by PA Senate during January 2018 but was not voted on in the House)) which, if adopted, will establish a program that will allow the Pennsylvania’s tax- and rate-payers to meet significant portions of their EPA-mandated Chesapeake Bay pollution reductions at significantly lower cost by purchasing verified reductions (by competitive bidding) from all sources, including those that Bion can produce through livestock waste treatment, represent visible evidence of progress being made on these matters in Pennsylvania. SB 575 was passed by the PA Senate in 2019 and introduced in the PA House which is scheduled to be taken up the bill during its current session which is now underway. Such legislation (which has bi-partisan support), if passed and signed into law (of which there is no assurance), will potentially enable Bion (and others) to compete for public funding on an equal basis with subsidized agricultural ‘best management practices’ and public works and storm water authorities. Note, however, that there is opposition to currently filed SB 475 and SB832 (as was the case for SB 575 and its predecessors) from threatened stakeholders committed to the existing status quo approaches--- a significant portion of which was focused on attacking (in often inaccurate and/or vilifying ways) Bion in/through social media and internet articles, blogs, press releases, twitter posts and re-tweets, rather than engaging the substantive issues. Further note that the current COVID-19 crisis has shifted government, legislative and budget focuses in PA in manners which may delay our efforts. If SB 475 and/or SB832 (or similar legislation) is passed (on a stand-alone basis or as part of a larger piece of legislation) and implemented (in a form which maintains its core provisions), Bion expects that the policies and strategies being developed in PA will not only benefit the Company’s existing and proposed PA projects, but will also subsequently provide the basis for a larger Chesapeake Bay watershed strategy and, thereafter, a national clean water strategy.

~~THE COVID-19 PANDEMIC HAS FURTHER INCREASED UNCERTAINTIES RE SB 575 AND ALL POLICY INITIATIVES. SEE FURTHER DISCUSSION HEREIN.~~

The Company believes that Pennsylvania may be ‘ground zero’ in the long-standing clean water battle between agriculture and the further regulation of agriculture relative to nutrient impacts. The ability of Bion and other technology providers to achieve verified reductions from agricultural non-point sources can resolve the current stalemate and enable implementation of constructive solutions that benefit all stakeholders, providing a mechanism that ensures that taxpayer funds will be used to achieve the most beneficial result at the lowest cost, regardless of source. All sources, point and non-point, rural and urban, will be able to compete for tax payer-funded nitrogen reductions in a fair and transparent process; and since payment from the tax and rate payers would now be performance-based, these providers will be held financially accountable.

We believe that the overwhelming environmental, economic, quality of life and public health benefits to all stakeholders in the watershed, both within and outside of Pennsylvania, make the case for adoption of the strategies outlined in the Report less an issue of ‘if’, but of ‘when and how’. The adoption of a competitive procurement program will have significant positive impact on technology providers that can deliver verified nitrogen reductions such as Bion, by allocating existing tax- and rate-payer clean water funding to low-cost solutions based upon a voluntary and transparent procurement process. The Company believes that implementation of a competitively-bid nutrient reduction program to achieve the goals for the Chesapeake Bay watershed can also provide a working policy model and platform for other states to adopt that will enhance their efforts to comply with both current and future requirements for local and federal estuarine watersheds, including the Mississippi River/Gulf of Mexico, the Great Lakes Basin and other nutrient-impaired watersheds. ~~(Note, however, that current COVID-19 crisis has shifted government, legislative and budget focuses in manners which may delay the fruition of our efforts.)~~

The Company currently anticipates that a Sustainable/Sustainable Organic Grain-Fed Beef JV is likely to be its initial full-scale 3G Project (but the Kreider 2 poultry JV in PA remains a possibility). Now that Bion has commenced development of its initial project 3G Tech by leasing land, beginning the site-specific design and permitting processes and commenced procurement of project modules, we believe it will be possible to commence development of a full-scale 3G Project during the 2023 calendar year, but further delays are possible. It is not possible at this time to firmly predict where the initial JVs and Project will be developed or the order in which Projects will be developed. All potential Projects are in very early discussion and pre-development stages and may never progress to actual development or may be developed after other Projects not yet under active consideration.

Bion also hopes to be able to move forward on multiple JVs/Projects through 2023-2027 to create a pipeline of Projects. Management has a 5-year development target (through calendar year 2027) of approximately commencing 3-8 or more JVs/Projects pursuant to joint ventures (or similar agreements). Management hopes to have identified and begun development work related to 3 (or more) JV Projects over the next 3 years. At the end of the 5-year period, Bion projects that 3-5 or more of these JVs/Projects will be in commercial operation in 3 or more states, and the balance would be in various stages ranging from partial operation to early development stage. It is possible that one or more Projects will be developed in joint ventures specifically targeted to meet the growing animal protein demand outside of the United States (including without limitation Asia, Europe and/or the Middle East). ~~No such large scale JVs/Projects (including Integrated Projects) have been developed to date.~~

The Company’s audited financial statements for the years ended June 30, 2021 and 2020 were prepared assuming the Company will continue as a going concern. The Company has incurred net losses of approximately $3,451,000 and $4,553,000 during the years ended June 30, 2021 and 2020, respectively. The Report of the Independent Registered Public Accounting Firm on the Company’s consolidated financial statements as of and for the year ended June 30, 2021 includes a “going concern” explanatory paragraph which means that there are factors that raise substantial doubt about the Company’s ability to continue as a going concern. The Company has incurred net losses from operations of approximately $673,000 and $447,000 for the three months ended December 31, 2021 and 2020, respectively. At December 31, 2021, the Company has working capital and a stockholders’ deficit of approximately $4,006,000 and $912,000, respectively. Management’s plans with respect to these matters are described in this section and in our consolidated financial statements (and notes thereto), and this material does not include any adjustments that might result from the outcome of this uncertainty. However, there is no guarantee that we will be able to raise sufficient funds or further capital for the operations planned in the near future.

COVID-19 PANDEMIC RELATED MATTERS:

The Company faces risks and uncertainties and factors beyond our control that are magnified during the current Covid-19 pandemic and the unique economic, financial, governmental and health-related conditions in which the Company, the country and the entire world now reside. To date the Company has experienced direct impacts in various areas including but without limitation: i) government ordered shutdowns which have slowed the Company’s research and development projects and other initiatives, ii) shifted focus of state and federal governments which is likely to negatively impact the Company’s legislative initiatives in Pennsylvania and Washington D. C., iii) strains and uncertainties in both the equity and debt markets which have made discussion and planning of funding of the Company and its initiatives and projects with investment bankers, banks and potential strategic partners more tenuous, iv) strains and uncertainties in the agricultural sector and markets have made discussion and planning more difficult as future industry conditions are now more difficult to assess and predict, v) constraints due to problems experienced in the global industrial supply chain since the onset of the Covid-19 pandemic, which have delayed certain research and development testing and ~~are likely to delay~~have delayed and/or ~~increase~~increased the cost of construction of the Company’s initial 3G Tech installation as ~~equipment remains~~equipment/services remain difficult to ~~acquire/fabricate~~acquire in a timely manner, ~~and labor shortages slow the production processes,~~ vi) due to the age and health of our core management team, ~~all~~many of whom are age 70 or older and have had one or more existing health issues (including brief periods of Covid-19 infection), the Covid-19 pandemic places the Company at greater risk than was previously the case (to a higher degree than would be the case if the Company had a larger, deeper and/or younger core management team), and vii) there almost certainly will be other unanticipated consequences for the Company as a result of the current pandemic emergency and its aftermath.

CRITICAL ACCOUNTING POLICIES

Revenue Recognition

The Company currently does not generate revenue and if and when the Company begins to generate revenue the Company will comply with the provisions of Accounting Standards Codification (“ASC”) 606 “Revenue from Contracts with Customers”.

Stock-based compensation

The Company follows the provisions of ASC 718, which generally requires that share-based compensation transactions be accounted and recognized in the statement of income based upon their grant date fair values.

~~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. As of September 30, 2022 and 2021, there are no derivative financial instruments.

Options:

The Company has issued options to employees and consultants under its 2006 Plan to purchase common shares of the Company. Options are valued on the grant date using the Black-Scholes option-pricing model. The expected volatility is based on the historical price volatility of the Company’s common stock. The dividend yield represents the Company’s anticipated cash dividend on common stock over the expected term of the stock options. The U.S. Treasury bill rate for the expected term of the stock options was utilized to determine the risk-free interest rate. The expected term of stock options represents the period of time the stock options granted are expected to be outstanding based upon management’s estimates.

Warrants:

The Company has issued warrants to purchase common shares of the Company. Warrants are valued using a fair value based method, whereby the fair value of the warrant is determined at the warrant issue date using a market-based option valuation model based on factors including an evaluation of the Company’s value as of the date of the issuance, consideration of the Company’s limited liquid resources and business prospects, the market price of the Company’s stock in its mostly inactive public market and the historical valuations and purchases of the Company’s warrants. When warrants are issued in combination with debt or equity securities, the warrants are valued and accounted for based on the relative fair value of the warrants in relation to the total value assigned to the debt or equity securities and warrants combined.

Lease Accounting:

The Company accounts for leases under ASC 842, Leases (“ASC 842”). Accordingly, the Company will determine whether an arrangement contains a lease at the inception of the arrangement. If a lease is determined to exist, the term of such lease is assessed based on the date on which the underlying asset is made available for the Company’s use by the lessor. The Company’s assessment of the lease term reflects the non-cancelable term of the lease, inclusive of any rent-free periods and/or periods covered by early-termination options which the Company is reasonably certain of not exercising, as well as periods covered by renewal options which the Company is reasonably certain of exercising. The Company also determines lease classification as either operating or finance at lease commencement, which governs the pattern of expense recognition and the presentation reflected in the consolidated statements of operations over the lease term.

For leases with a term exceeding 12 months, a lease liability is recorded on the Company’s consolidated balance sheet at lease commencement reflecting the present value of its fixed minimum payment obligations over the lease term. A corresponding right-of-use (“ROU”) asset equal to the initial lease liability is also recorded, adjusted for any prepaid rent and/or initial direct costs incurred in connection with execution of the lease and reduced by any lease incentives received. For purposes of measuring the present value of its fixed payment obligations for a given lease, the Company uses its incremental borrowing rate, determined based on information available at lease commencement, as rates implicit in its leasing arrangements are typically not readily determinable. The Company's incremental borrowing rate reflects the rate it would pay to borrow on a secured basis and incorporates the term and economic environment of the associated lease.

THREE MONTHS ENDED ~~DECEMBER 31, 2021~~SEPTEMBER 30, 2022 COMPARED TO THE THREE MONTHS ENDED ~~DECEMBER 31, 2020~~SEPTEMBER 30, 2021

Revenue

Total revenues were nil for both the three months ended ~~December 31, 2021~~September 30, 2022 and ~~2020, respectively.~~2021.

General and Administrative

Total general and administrative expenses were ~~$618,000~~$866,000 and ~~$292,000~~$491,000 for the three months ended ~~December 31,~~September 30, 2022 and 2021, ~~and 2020,~~ respectively.

General and administrative expenses, excluding stock-based compensation charges of $13,000 and $34,000, were $605,000 and $258,000 for the three months ended December 31, 2021 and 2020, respectively, representing a $347,000 increase. Salaries and related payroll tax expenses were ~~$110,000~~$171,000 and ~~$75,000~~$97,000, for the three months ended ~~December 31,~~September 30, 2022 and 2021, ~~and 2020,~~ respectively, representing a ~~$35,000 increase due to a consultant being partially paid as an employee and a pay increase for employees during the three months ended December 31, 2021.~~$74,000 increase. Consulting costs were ~~$188,000~~$118,000 and ~~$95,000~~$152,000 for the three months ended ~~December 31,~~September 30, 2022 and 2021, ~~and 2020,~~ respectively. The ~~$93,000 increase~~$34,000 decrease in consulting costs is due to the ~~result~~capitalization of ~~hiring a branding and marketing consultant for~~Brightcap’s consulting expense to the ~~Company.~~3G Project. Investor relations expenses were ~~$89,000~~$249,000 and ~~$9,000~~$86,000 for the three months ended ~~December 31,~~September 30, 2022 and 2021, ~~and 2020,~~ respectively, and the $163,000 increase is due to a new contract with an investor relations firm and increased activity during the three months ended ~~December 31, 2021~~September 30, 2022 due to the resumption of investor ~~conferences.~~conferences and other matters. Legal costs were ~~$121,000~~$8,000 and ~~nil~~$25,000 for the three months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively due to ~~the hiring of a law firm to represent the Company in a lawsuit for the hack and attempt to steal the Company’s domain, engaging a law firm on the dissolution of PA-1,~~less outside legal ~~work in relation to corporate structure matters and preparation for the 2022 shareholder meeting and other matters.~~

~~General and administrative stock-based employee compensation for the three months ended December 31, 2021 and 2020 consists of the following:~~

Three months
ended
December 31,
2021 Three months
ended
December 31,
2020
General and administrative:
  Change in fair value from modification of option terms $ —   $ 9,000
  Change in fair value from modification of warrant terms 6,000 25,000
  Fair value of stock options expensed under ASC 718 —   —
      Total $ 6,000 $ 34,000
Stock-based compensation charges were $13,000 and $34,000 for the three months ended December 31, 2021 and 2020, respectively. The fair value of stock options expensed for the three months ended December 31, 2021 and 2020 was nil for both periods, respectively. The Company granted no options during the three months ended December 31, 2021 and 2020. Compensation expense relating to the change in fair value from the modification of option terms was nil and $9,000 the three months ended December 31, 2021 and 2020, respectively, as the Company granted an extension of certain option expiration dates for two consultants during the three months ended December 31, 2020. During the three months ended December 31, 2021 and 2020, respectively, the Company extended expiration dates of warrants for certain consultants and issued additional warrants to certain consultants which resultedactivities in the ~~recognition of $13,000 and $25,000 in non-cash compensation.~~quarter.
Depreciation
Total depreciation expense was ~~$332~~$330 and ~~$207~~$248 for the three months ended ~~December 31,~~September 30, 2022 and 2021, ~~and 2020,~~ respectively.
Research and Development
Total research and development expenses were ~~$54,000~~$28,000 and ~~$155,000~~$62,000 for the three months ended ~~December 31,~~September 30, 2022 and 2021, respectively, representing a $34,000 decrease due to less legal and ~~2020, respectively.~~consulting costs allocated to research and development.
Salaries and related payroll tax expenses were ~~nil~~$3,000 and ~~$22,000~~$7,000 for the three months ended ~~December 31,~~September 30, 2022 and 2021, ~~and 2020,~~ respectively, as more salary expense was allocated to administrative expense for the three months ended ~~December 31, 2021.~~September 30, 2022. Consulting costs were ~~$35,000~~$17,000 and ~~$54,000~~$32,000 for the three months ended ~~December 31,~~September 30, 2022 and 2021, ~~and 2020,~~ respectively. The decrease in consulting is due to capitalizing costs on the 3G project. The Company also incurred ~~$19,000~~$3,000 and ~~nil~~$21,000 for the three months ended ~~December 31,~~September 30, 2022 and 2021, ~~and 2020,~~ respectively in legal costs related to patent applications and renewals. ~~The Company incurred nil and $67,000 for the three months ended December 31, 2021 and 2020, respectively in the development of new technologies for its anaerobic digestate process.~~
Loss from Operations
As a result of the factors described above, the loss from operations was ~~$673,000~~$895,000 and ~~$447,000~~$553,000 for the three months ended ~~December 31,~~September 30, 2022 and 2021, ~~and 2020,~~ respectively.
Other (Income) Expense
Other ~~(income)~~ expense was ~~$(10,117,000)~~$24,000 and ~~$303,000~~$111,000 for the three months ended ~~December 31,~~September 30, 2022 and 2021, respectively and ~~2020, respectively.~~was all attributed to interest expense for both periods. The ~~Company recognized a gain on~~decrease in interest expense is largely due to there being no interest expense related to the ~~legal dissolution of PA-1 of $10,235,000. Interest expense of $3,000 and $163,000 was recorded~~Pennvest loan during the three months ended ~~December 31, 2021~~September 30, 2022 and ~~2020, respectively, for~~capitalizing interest of $31,000 to the ~~modification of warrant expiry dates for 108,500 and 3,244,110 warrants held by investors.~~ 3G project.
Interest expense related to deferred compensation, loan payable and convertible notes prior to capitalization was ~~$51,000~~$52,000 and ~~$78,000~~$112,000 for the three months ended ~~December 31,~~September 30, 2022 and 2021, respectively. Interest expense related to investor warrant modifications was $4,500 and ~~2020.~~nil for the three months ended September 30, 2022 and 2021.
Net Loss Attributable to the Noncontrolling Interest
The net loss attributable to the noncontrolling interest was ~~$489~~nil and ~~$524~~$506 for the three months ended ~~December 31,~~September 30, 2022 and 2021, ~~and 2020, respectively.~~
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~~Net Loss Attributable to Bion’s Common Stockholders~~
As a result of the factors described above, the net (income) loss attributable to Bion’s stockholders was $(9,444,000) and $750,000 for the three months ended December 31, 2021 and 2020, respectively, and the net (income) loss per basic common share was $(.23) and $0.02 for the three months ended December 31, 2021 and 2020, respectively.
~~SIX MONTHS ENDED DECEMBER 31, 2021 COMPARED TO THE SIX MONTHS ENDED DECEMBER 31, 2020~~
~~Revenue~~
~~Total revenues were nil for both the six months ended December 31, 2021 and 2020, respectively.~~
~~General and Administrative~~
~~Total general and administrative expenses were $1,109,000 and $595,000 for the six months ended December 31, 2021 and 2020, respectively.~~
General and administrative expenses, excluding stock-based compensation charges of $13,000 and $34,000, were $1,042,000 and $561,000 for the six months ended December 31, 2021 and 2020, respectively, representing a $481,000 increase. Salaries and related payroll tax expenses were $207,000 and $144,000 for the six months ended December 31, 2021 and 2020, respectively, representing a $63,000 increase due to a consultant being partially paid as an employee during the six months ended December 31, 2020. Consulting costs were $340,000 and $191,000 for the six months ended December 31, 2021 and 2020, respectively. The increase in consulting costs is partially due to work related to preparation for and development of our initial 3G Tech project. Investor relations expenses were $175,000 and $35,000 for the six months ended December 31, 2021 and 2020, respectively, and the increase is due to a new contract with an investor relations firm and increased activity during the three months ended December 31, 2021 due to the resumption of investor conferences. Legal costs were $146,000 and $1,000 for the six months ended December 31, 2021 and 2020, respectively, with increase due to the hiring of a law firm to represent the Company in a lawsuit for the hack and attempt to steal the Company’s domain, engaging a law firm on the dissolution of PA-1, legal work in relation to corporate structure matters and preparation for the 2022 shareholder meeting and other matters.
~~General and administrative stock-based employee compensation for the six months ended December 31, 2021 and 2020 consists of the following:~~
Six months
ended
December 31,
2021 Six months
ended
December 31,
2020
General and administrative: ��
  Change in fair value from modification of option terms $ —   $ 9,000
  Change in fair value from modification of warrant terms 6,000 25,000
  Fair value of stock options expensed under ASC 718 —   —
      Total $ 6,000 $ 34,000
Stock-based compensation charges were $13,000 and $34,000 for the six months ended December 31, 2021 and 2020, respectively. The fair value of stock options expensed for the six months ended December 31, 2021 and 2020 was nil for both periods. No options were granted during the six months ended December 31, 2021 and 2020. Compensation expense relating to the change in fair value from the modification of option terms was nil and $9,000 for the six months ended December 31, 2021 and 2020, respectively, as the Company granted an extension of certain option expiration dates for two consultants during the six months ended December 31, 2020. During the six months ended December 31, 2021 and 2020, respectively, the Company extended expiration dates of warrants for certain consultants and issued additional warrants to certain consultants which resulted in the recognition of $13,000 and $25,000 in non-cash compensation.
~~Depreciation~~
~~Total depreciation expense was $580 and $414 for the six months ended December 31, 2021 and 2020, respectively.~~
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~~Research and Development~~
~~Total research and development expenses were $116,000 and $246,000 for the six months ended December 31, 2021 and 2020, respectively.~~
Research and development expenses, excluding stock-based compensation expenses of nil and nil were $116,000 and $246,000 for the six months ended December 31, 2021 and 2020, respectively. Salaries and related payroll tax expenses were $7,000 and $44,000 for the six months ended December 31, 2021 and 2020, respectively. Consulting costs were $66,000 and $104,000 for the six months ended December 31, 2021 and 2020, respectively. The Company also incurred nil and $73,000 for the six months ended December 31, 2021 and 2020, respectively in the development of new components of the pilot program for its anaerobic digestate process.
~~Research and development stock-based employee compensation for the six months ended December 31, 2021 and 2020 consists of the following:~~
~~Six Months ended~~
~~December 31, 2021~~
~~Six Months ended~~
~~December 31, 2020~~
~~Research and development:~~
  ~~Fair value of stock options expensed under ASC 718~~ $ —   $ —
      ~~Total~~ $ —   $ —
Stock-based compensation expenses were nil for both the six months ended December 31, 2021 and 2020, respectively. The Company expensed nil and nil for the fair value of stock options that vested during the six months ended December 31, 2021 and 2020.
~~Loss from Operations~~
~~As a result of the factors described above, the loss from operations was $1,226,000 and $841,000 for the six months ended December 31, 2021 and 2020, respectively.~~
~~Other Expense~~
Other (income) expense was $(10,007,000) and $408,000 for the six months ended December 31, 2021 and 2020, respectively. The Company recognized a gain on the legal dissolution of PA-1 of $10,235,000. Interest expense of $3,000 and $163,000 was recorded during the six months ended December 31, 2021 and 2020, respectively, due to the modification of warrant expiry dates for warrants held by investors. Interest expense related to convertible notes was $92,000 and $107,000 for the six months ended December 31, 2021 and 2020.
~~Net Loss Attributable to the Noncontrolling Interest~~
~~The net loss attributable to the noncontrolling interest was $1,000 for both the six months ended December 31, 2021 and 2020,~~ respectively.
Net Loss Attributable to Bion’s Common Stockholders
As a result of the factors described above, the net ~~(income)~~ loss attributable to Bion’s stockholders was ~~($8,782,000)~~$919,000 and ~~$1,248,000~~$663,000 for the ~~six~~three months ended ~~December 31,~~September 30, 2022 and 2021, ~~and 2020,~~ respectively, and the net ~~(income)~~ loss per basic common share was ~~$(.21)~~$.02 and ~~0.04~~$.02 for ~~both~~ the ~~six~~three months ended ~~December 31,~~September 30, 2022 and 2021, ~~and 2020,~~ respectively.

40
LIQUIDITY AND CAPITAL RESOURCES

The Company's consolidated financial statements for the ~~six~~three months ended ~~December 31, 2021~~September 30, 2022 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, ~~2021~~2022 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.

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Operating Activities

As of ~~December 31, 2021,~~September 30,2022, the Company had cash of approximately ~~$4,948,000.~~$1,898,000. During the ~~six~~three months ended ~~December 31, 2021,~~September 30, 2022, net cash used in operating activities was ~~$853,000,~~$1,316,000, 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.~~expenses as well as the purchase of property and equipment. Cash expenditures were offset by proceeds from financing activities, primarily the exercise of warrants. As previously noted, the Company is currently not generating significant revenue and accordingly has not generated cash flows from operations. The Company does not anticipate generating sufficient revenues to offset operating and capital costs for a minimum of two to five years. While there are no assurances that the Company will be successful in its efforts to develop and construct its Projects and market its Systems, it is certain that the Company will require substantial funding from external sources. Given the unsettled state of the current credit and capital markets for companies such as Bion, there is no assurance the Company will be able to raise the funds it needs on reasonable terms.

Investing Activities

During the ~~six~~three months ended ~~December 31, 2021,~~September 30, 2022, the Company invested ~~$92,000~~$323,000 in the purchase of property and equipment, primarily related to project construction in process.

Financing Activities
During the ~~six~~three months ended ~~December 31, 2021,~~September 30, 2022, the Company received gross cash proceeds of ~~$1,737,000~~$56,125 from the exercise of ~~2,315,550~~74,834 warrants into shares of the Company’s common stock.
During the three months ended September 30, 2022, the Company entered into subscription agreements to sell units for $1.00 per unit, with each unit consisting of one share of the Company’s restricted common stock and ~~paid approximately $19,000 in cash commissions related~~one warrant to purchase one share of the ~~exercise~~Company’s restricted common stock for $0.75 per share with an expiry date of ~~warrants.~~December 31, 2024, and pursuant thereto, the Company issued 320,000 units for total proceeds of $320,000.
As of ~~December 31, 2021,~~September 30, 2022, the Company has debt obligations consisting of: a) deferred compensation of ~~$477,000~~$654,000 and b) convertible notes payable – affiliates of ~~$5,076,000.~~$5,212,000.

Plan of Operations and Outlook

As of ~~December 31, 2021,~~September 30, 2022, the Company had cash of approximately ~~$4,948,000.~~$1,898,000.

The Company continues to explore sources of additional financing to satisfy its current operating requirements as it is not currently generating any significant revenues. During fiscal years ~~2021~~2022 and ~~2020,~~2021, the Company has faced progressively less difficulty in raising equity funding (but substantial equity dilution has resulted from the larger amounts of equity financing during the periods). However, the Company anticipates substantial increases in demands for capital and operating expenditures as it moves toward commercial implementation of its 3G Tech and development of JVs and, therefore, is likely to continue to face, significant cash flow management challenges due to limited capital resources and working capital constraints which have only recently begun to be alleviated. 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 all or part of their cash compensation and/or are accepting compensation in the form of securities of the Company (Notes 5 and 7 to Financial Statements) and members of the Company's senior management have from time to time made loans to the Company. During the year ended June 30, 2018 senior management and certain core employees and consultants agreed to a one-time extinguishment of liabilities owed by the Company which in aggregate totaled $2,404,000. As of ~~December 31, 2021,~~June 30 2022, such deferrals/loans totaled approximately ~~$5,076,000~~$5,765,000 (including accrued interest and deferred compensation converted into convertible obligations and convertible promissory notes but excluding conversions of deferred compensation into the Company's common stock by officers, employees and consultants that have already been completed). The extended constraints on available resources have had, and continue to have, negative effects on the pace and scope of the Company's effort to develop its business. The Company made reductions in its personnel during the years ended June 30, 2014 and 2015 and again in 2018. The constraint on available resources has had, and continues to have, negative effects on the pace and scope of the Company’s efforts to develop its business. The Company has had to delay payment of trade obligations and has had to economize in many ways that have potentially negative consequences. If the Company is able to continue its recent increased success in its efforts to raise needed funds during the remainder of the current fiscal year (and subsequent periods), of which there is no assurance, management will not need to consider deeper cuts (including additional personnel cuts) and curtailment of ongoing activities including research and development activities.

41
The Company will need to obtain additional capital to fund its operations and technology development, to satisfy existing creditors, to develop the Initial Project, JVs, Projects (including Integrated Projects) and CAFO Retrofit waste remediation systems ~~(including~~(potentially including the Kreider 2 ~~facility) and to continue to maintain equipment at the Kreider 1 facility (subject to agreements being reached with Pennvest as discussed above).~~facility. The Company anticipates that it will seek to raise from ~~$10,000,000~~$20,000,000 to ~~$50,000,000~~$80,000,000 or more (debt and equity) during the next twelve months. However, as discussed above, there is no guarantee that we will be able to raise sufficient funds or further capital for the operations planned in the near future.
44

The Company is not currently generating any significant revenues. Further, the Company’s anticipated revenues, if any, from existing projects, JVs and proposed projects will not be sufficient to meet the Company’s anticipated operational and capital expenditure needs for many years. During the year ended June 30, 2021 the Company raised gross proceeds of approximately $5,209,000 through the sale of its securities and paid commissions of approximately $165,000, and anticipates raising additional funds from such sales and transactions. During the ~~six month~~year ended ~~December 31, 2021,~~June 30, 2022 the Company raised gross proceeds for approximately $1,737,000 and paid ~~cash~~ commissions of approximately $18,600. However, there is no guarantee that we will be able to raise sufficient funds or further capital for the operations planned in the near future.

Because the Company is not currently generating significant revenues, the Company will need to obtain additional capital to fund its operations and technology development, to satisfy existing creditors, to develop the Initial Project and subsequent Projects.

As indicated above, the Company anticipates that it will seek to raise from ~~$10,000,000~~$20,000,000 to ~~$50,000,000~~$80,000,000 or more (from debt, equity, joint venture, strategic partnering, etc.) during the next twelve months, some of which may be in the context of joint ventures for the development of one or more large scale projects. We reiterate that there is no assurance, especially in the extremely unsettled capital markets that presently exist for companies such as Bion, that the Company will be able to obtain the funds that it needs to stay in business, finance its Projects and other activities, continue its technology development and/or to successfully develop its business.

~~For more details regarding~~See Item 2 below and Note 5 (“Pennvest Loan and Bion PA1 LLC (“PA1”) Dissolution”) to the Financial Statements included in this report and the Company’s first commercial activity in the Retrofit segment which was represented by our agreement with Kreider Farms ("KF"), pursuant to which the Kreider 1 system to treat KF's dairy waste streams to reduce nutrient releases to the environment while generating marketable nutrient credits and renewable energy was designed, constructed and entered full-scale operation during 2011, see “~~KREIDER 1 (HISTORY AND STATUS)/DISSOLUTION OF BION PA 1 LLC (‘PA1”)” above and~~ ~~the Company’s Form~~Forms 10-K for the year ended June 30, ~~2021.~~2022 (and
~~See~~ ~~KREIDER 1 (HISTORY AND STATUS)/DISSOLUTION OF BION PA 1 LLC (‘PA1”)~~ ~~above~~the years 2009-2021) for discussion ofand more details related to the dissolution of PA1, the Pennvest Loan and the
Kreider 1 project.

As indicated above, the Company anticipates that it will seek to raise from ~~$10,000,000~~$20,000,000 to ~~$50,000,000~~$80,000,000 or more (from debt, equity, joint venture, strategic partnering, etc.) during the next twelve months, some of which may be in the context of joint ventures for the development of one or more large scale projects. We reiterate that there is no assurance, especially in the extremely unsettled capital markets that presently exist for companies such as Bion, that the Company will be able to obtain the funds that it needs to stay in business, finance its Projects, JVs and other activities, continue its technology development and/or to successfully develop its business.

42
There is extremely limited likelihood that funds required during the next twelve months or in the periods immediately thereafter will be generated from operations and there is no assurance that those funds will be available from external sources such as debt or equity financings or other potential sources. The lack of additional capital resulting from the inability to generate cash flow from operations and/or to raise capital from external sources would force the Company to substantially curtail or cease operations and would, therefore, have a material adverse effect on its business. Further, there can be no assurance that any such required funds, if available, will be available on attractive terms or that they will not have a significantly dilutive effect on the Company's existing shareholders. All of these factors have been exacerbated by the extremely limited and unsettled credit and capital markets presently existing for companies such as Bion.
Covid-19 pandemic related matters:

The Company faces risks and uncertainties and factors beyond our control that are magnified during the current Covid-19 pandemic and the unique economic, financial, governmental and health-related conditions in which the Company, the country and the entire world now reside. To date the Company has experienced direct impacts in various areas including but without limitation: i) government ordered shutdowns which have slowed the Company’s research and development projects and other initiatives, ii) shifted focus of state and federal governments which is likely to negatively impact the Company’s legislative initiatives in Pennsylvania and Washington D. C., iii) strains and uncertainties in both the equity and debt markets which have made discussion and planning of funding of the Company and its initiatives and projects with investment bankers, banks and potential strategic partners more tenuous, iv) strains and uncertainties in the agricultural sector and markets have made discussion and planning more difficult as future industry conditions are now more difficult to assess and predict, v) constraints due to problems experienced in the global industrial supply chain since the onset of the Covid-19 pandemic, which have delayed certain research and development testing and have delayed and/or increased the cost of construction of the Company’s initial 3G Tech installation as equipment/services remain difficult to acquire in a timely manner, vi) due to the age and health of our core management team, ~~all~~many of whom are age 70 or older and have had one or more existing health issues (including brief periods of Covid-19 infection), the Covid-19 pandemic places the Company at greater risk than was previously the case (to a higher degree than would be the case if the Company had a larger, deeper and/or younger core management team), and vii) there almost certainly will be other unanticipated consequences for the Company as a result of the current pandemic emergency and its aftermath.

45
CONTRACTUAL OBLIGATIONS

We have the following material contractual obligations (in addition to employment and consulting agreements with management and employees):

The Company entered into an agreement on September 23, 2021, to lease approximately four acres of land near Fair Oaks, Indiana, for the development site of its Initial Project.

The ~~following table summarized the supplemental cash flow information for the six months ended December 31, 2021:~~
December 31, 2021
Cash paid for noncancelable operating lease included in the operating cash flows $ 60,000
Right of use assets obtained in exchange for operating lease liabilities $ 180,586
~~The~~ future minimum lease payment under noncancelable operating lease with terms greater than one year as of ~~December 31,~~September 30, 2022:

From January 2022 to December 2022 —
From January 2023 to December 2023 75,000
From January 2024 to December 2024 75,000
Undiscounted cash flow 150,000
   Less imputed interest (27,395 )
Total $ 122,605
Year ended June 30, 2023 $ 43,750
Year ended June 30, 2024 75,000
Year ended June 30, 2025 31,250
Undiscounted cash flow 150,000
Less imputed interest (17,888 )
Total $ 132,112

The weighted average remaining lease term and discounted rate related to the Company’s lease liability as of ~~December 31,~~September 30, 2022 were 32.33 years and 10%, respectively. The Company’s lease discount rate is generally based on the estimates of its incremental borrowing rate as the discount rates implicit in the Company’s lease cannot be readily determined.

Through 3G1 the Company is in the process of developing the Initial Project. See discussion above and in the Notes to our Financial Statements.

OFF-BALANCE SHEET ARRANGEMENTS

~~We do~~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, ~~2021.~~2022.
(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.
46
43

PART II – OTHER INFORMATION
Item 1. Legal Proceedings.
The Company is currently involved in no litigation matters except:

A:Website: Domain Sale/Resolved Litigation/Hacking/Theft
~~A: Website~~
On March 23, 2022 the Company entered into an agreement to sell domain name <biontech.com> and other related assets to BioNTech SE (“BNTX”) for the sum of $950,000 (before expenses related to the transaction) which sale was closed/completed on April 2, 2022 with a one-time gain of $902,490. The Company has been using www.bionenviro.com as its primary website (and domain) since July 2021 due to the events described below. The Company has not been using biontech.com as its primary website since July 2021 so domain name <biontech.com> no longer represented a core asset of the Company.

As previously reported, on Saturday morning, July 17, 2021, our historical website domain – biontech.com – and email services were compromised and disabled. Research indicated that an unknown party had ‘hijacked’ the domain in a theft attempt. On September 10, 2021, the Company filed a federal lawsuit ‘in rem’ to recover the <biontech.com> domain and the unknown ‘John Doe’ who hacked and attempted to steal the website. The litigation was filed in the United States District Court for the Eastern District of Virginia, Alexandria Division under the heading ‘Bion Environmental Technologies, Inc., Plaintiff, vs John Doe and <biontech.com>, Defendants’ (Case No. 1:21-cv-01034), seeking recovery of the domain name and other relief as set forth therein.

On November 19, 2021, the United States District Court for the Eastern District of Virginia, Alexandria Division issued an order stating that “… ORDERED, ADJUDGED and Decreed that plaintiff Bion Environmental Technologies, Inc. (‘plaintiff) Is the lawful owner of domain name <biontech.com> ….” under the heading ‘Bion Environmental Technologies, Inc., Plaintiff, vs John Doe and <biontech.com>, Defendants’ (Case No. 1:21-cv-01034). The Company has moved the domain name <biontech.com> to a new registrar and reactivated it for the Company’s use (paired currently with its current bionenviro.com website).
No shareholder, sensitive or confidential information was available to be breached which has limited damages from the hack/theft to date. However, the Company’s email operations werebeen subject disruption and expenses were incurred related to the matter including legal fees.

The Company created ‘work-arounds’ as a result. These issues have been resolved and the Company has moved our website (and email) to a new domain: bionenviro.com. Website access is now www.bionenviro.com. To send emails to Bion personnel, one uses the same name identifier previously used, but in the address, substitute ‘bionenviro.com’ for “biontech.com’: For example cscott@biontech.com (no longer functional) is cscott@bionenviro.com and mas@biontech.com (no longer functional) is now mas@bionenviro.com.
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B: Dissolution of Bion PA1, LLC (“PA1”)
PA1, the Company’s wholly-owned subsidiary, was dissolved on December 29, 2021 on which date it owed approximately $10,010,000 under the terms of the Pennvest Loan related to the construction of the Kreider 1 System including accrued interest and late charges totaling $2,255,802 as of that date. Through the date of the dissolution, PA1 was a wholly-owned subsidiary of the Company and its assets and liabilities were included on the Company’s consolidated balance sheet. At September 30, 2021, PA1’s total assets were $297 and its total liabilities were $10,154,334 (including the Pennvest Loan in the aggregate amount of $9,939,148, accounts payable of $214,235 and accrued liabilities of $950) which sums were included in the Company’s consolidated balance sheet in its Form 10-Q for the quarter ended September 30, 2021. Subsequent to the dissolution of PA1, its assets and liabilities are no longer consolidated and included in the Company’s balance sheet. As of December 29, 2021, PA1’s total assets were nil and its total liabilities were $10,234,501 (including the Pennvest Loan in the aggregate amount of $10,009,802, accounts payable of $212,263 and accrued liabilities of $12,436. The net amount of $10,234,501 was recognized as a gain on the legal dissolution of a subsidiary in other (income) expense.
As background, the terms of the Pennvest Loan provided for funding of up to $7,754,000 which was to be repaid by interest-only payments for three years, followed by an additional ten-year amortization of principal. The Pennvest Loan accrued interest at 2.547% per annum for years 1 through 5 and 3.184% per annum for years 6 through maturity. The Pennvest Loan required minimum annual principal payments of approximately $5,886,000 in fiscal years 2013 through 2021, and $846,000 in fiscal year 2022, $873,000 in fiscal year 2023 and $149,000 in fiscal year 2024. The Pennvest Loan was collateralized by PA1’s Kreider 1 System and by a pledge of all revenues generated from Kreider 1 including, but not limited to, revenues generated from nutrient reduction credit sales and by-product sales. In addition, in consideration for the excess credit risk associated with the project, Pennvest was entitled to participate in the profits from Kreider 1 calculated on a net cash flow basis, as defined. The Company has incurred interest expense related to the Pennvest Loan of $123,444 and $246,887 for the years ended June 30, 2022 and 2021, respectively. Based on the limited development of the depth and breadth of the Pennsylvania nutrient reduction credit market, PA1 commenced discussions and negotiations with Pennvest related to forbearance and/or re-structuring the obligations under the Pennvest Loan during 2013. In the context of such negotiations, PA1 elected not to make interest payments to Pennvest on the Pennvest Loan since January 2013. Additionally, the PA1 did not make any principal payments, which were to begin in fiscal 2013, and, therefore, the Company classified the Pennvest Loan as a current liability through the dissolution of PA1 on December 29, 2021.
During August 2012, the Company provided Pennvest (and the PADEP) with data demonstrating that the Kreider 1 system met the ‘technology guaranty’ standards which were incorporated in the Pennvest financing documents and, as a result, the Pennvest Loan has been solely an obligation of PA1 since that date. Note, however, the Company’s consolidated balance sheet as of June 30, 2021 reflects the Pennvest Loan as a liability of $9,868,495 despite the fact that the obligation (if any) was solely an obligation of PA1.

On September 25, 2014, the Pennsylvania Infrastructure Investment Authority (“Pennvest”) exercised its right to declare the PA1’s Pennvest Loan in default, accelerated the Pennvest Loan and demanded that PA1 pay $8,137,117 (principal, interest plus late charges) on or before October 24, 2014. PA1 did not make the payment and did/does not have the resources to make the payments demanded by Pennvest. PA1 commenced discussions and negotiations with Pennvest concerning this matter but Pennvest rejected PA1’s proposal made during the fall of 2014. PA1 made a final proposal to Pennvest during September 2021 which proposal was also rejected by Pennvest. PA1 provided Pennvest with its financial statements (which include a description of system status) annually. During the 2021 fiscal year, Pennvest’s auditors requested a ‘corrective action plan’ and PA1 informed Pennvest that “… there is no viable corrective action plan for the Pennvest Loan (‘Loan’). The facility funded by the Loan has been shut down for many years (which has been disclosed in the annual financial reports to Pennvest and in public filings by the parent of Bion PA 1, LLC) and the technology utilized in the facility is now obsolete. The facility has not been commercially operated for approximately six years and has generated zero income. We recommend that Pennvest take appropriate steps to remove and sell the equipment.” Pennvest responded favorably to the approach of selling the equipment.

On December 29, 2021, the Company approved and executed a ~~Consent~~‘Consent of the Sole Member of Bion PA 11’ (the “Consent to Dissolution”) that authorized the complete liquidation and dissolution of PA1. A Statement of Dissolution was filed by PA1 with the Colorado Secretary of State on December 29, ~~2021. The Company is of the understanding that the~~2021.The liquidation value of Bion PA 1’s property is substantially below the current amount outstanding under the Funding Agreement dated October 27, 2010 by and between PA1 and Pennvest, the only known secured creditor of PA1. Post-dissolution, PA1’s activities will be limited entirely to activities required to properly distribute its net assets to creditors and wind down its business. ~~PA 1 is prepared~~
45
PA1 and Pennvest agreed to ~~transfer to Pennvest all of PA1’s right, title and interest in its property (by~~have the equipment sold by a ~~bill of sale or other acceptable agreement) or alternatively, with Pennvest’s approval and direction, arrange~~third party auctioneer who arranged for the sale of its property and ~~deliver~~delivery of all proceeds (net of commissions and customary costs of sale) to Pennvest. ~~PA1 and Pennvest have entered into communication/exchanges to determine how Pennvest would like PA1 to proceed with this process.~~The auction took place during the period of May 13-18, 2022. The Company’s personnel ~~will assist~~assisted PA1 with this process as needed at no cost to PA1. The net sum of $104,725 was realized from the asset sale, which sum was delivered to Pennvest on June 15, 2022. Pursuant to agreement with Pennvest and Kreider Farms, the remaining unsold assets have been transferred to Kreider Farms in order to complete the winding up of the Kreider 1 project.

Upon the complete distribution of all assets of PA1, whether by transfer or sale and distribution of net proceeds as provided above, PA1 will use commercially reasonable efforts to cause the cessation of all activities. No distributions of PA1’s assets will be made to the Company or its affiliates. The Consent to Dissolution authorized Mark A. Smith, the Company’s President and the sole manager of PA1, to cause to be delivered for filing the Statement of Dissolution, to give notice of the dissolution, and to take any other act necessary to wind up and liquidate the business.

~~PA 1~~PA1 has made no payments to vendors or other creditors in connection with the ~~dissolution.~~dissolution other than the payment to Pennvest described above. No distributions or payments of any kind have ever been made to the Company, the sole member of PA1, since inception and no payment will be made to the Company or any affiliate in connection with the dissolution.

47
~~Through~~For more information regarding the ~~date~~history and background of the dissolution, PA1 was a wholly-owned subsidiary of the Company and its assets and liabilities were included on the Company’s consolidated balance sheet. At September 30, 2021, PA1’s total assets were $297 and its total liabilities were $10,154,334 (including the Pennvest Loan ~~in the aggregate amount of $9,939,148, accounts payable of $214,235~~ and ~~accrued liabilities of $950) which sums were included in the Company’s consolidated balance sheet in its Form 10-Q~~PA1, please review our Form’s 10-K for the ~~quarter ended September 30, 2021. Subsequent~~years from 2008 through 2021 including the Notes to the ~~dissolution of PA1, its assets and liabilities are not and will no longer be consolidated and~~Financial Statements included in the Company’s balance sheet. As of December 29, 2021, PA1’s total assets where nil and its total liabilities were $10,234,501 (including the Pennvest Loan in the aggregate amount of $10,009,802, accounts payable of $212,263 and accrued liabilities of $12,436. The net amount of $10,234,501 was recognized as a gain on the legal dissolution of a subsidiary in other (income) expense. See Item 1, “Financial Statements” above.therein.
Item 1A.  Risk Factors.
Not applicable.
Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds.
During the quarter ended ~~December 31, 2021,~~September 30, 2022, the Company sold the following restricted securities: a) ~~25,171~~100,000 shares of common stock issued pursuant to our 2006 Consolidated Incentive Plan (“Plan”) upon the conversion of debt, ~~and~~ b) ~~2,176,216~~50,000 shares issued to entities for services valued at $80,000 c) 74,834 shares of common stock issued pursuant to exercise of ~~2,176,216 @~~78,834 warrants at $0.75/warrant and the Company received gross proceeds of ~~$1,632,162.~~$56,126 and d) the Company sold 320,000 units at $1.00 per unit consisting of one share of the Company’s restricted common stock and one warrant to purchase one share of the Company’s restricted common stock at $1.25 until December 31, 2023 and received gross proceeds of $320,000. All of these transactions the Company relied on the exemptions in Section 4(2) of the Securities Act of 1933, as amended, and/or under Rule 506 of Regulation D under the Securities Act of 1933, as amended. See Notes to Financial Statements (included herein) for additional details.
The proceeds were utilized for general corporate purposes.
Item 3.  Defaults Upon Senior Securities.
Not applicable.
Item 4.  Mine Safety Disclosures.
Not applicable.
Item 5.  Other Information.
Not applicable.
Item 6.  Exhibits.
(a) Exhibits required by Item 601 of Regulation S-K.
Exhibit
~~Description~~
Incorporated by Reference Filed/Furnished
~~31.1~~No. Description Form Exhibit Filing Date Herewith
31.1* Certification of ~~CEO~~Principal Executive Officer pursuant to ~~Rule 13a-14(a) or Rule 15d-14(a) - Filed herewith electronically~~Section 302 of the Sarbanes-Oxley Act
X
~~31.2~~31.2* Certification of ~~Executive Chairman, President and CFO~~Principal Accounting Officer pursuant to ~~Rule 13a-14(a) or Rule 15d-14(a) - Filed herewith electronically~~Section 302 of the Sarbanes-Oxley Act
X
~~32.1~~32.1** Certification of ~~CEO pursuant~~Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act ~~of 2002 - Filed herewith electronically~~
X
~~32.2~~32.2** Certification of ~~Executive Chairman, President and CFO pursuant~~Principal Accounting Officer Pursuant to Section 906 of the Sarbanes-Oxley Act X
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. X
101.SCH* Inline XBRL Taxonomy Extension Schema Document X
101.CAL* Inline XBRL Taxonomy Extension Calculation Linkbase Document X
101.DEF* Inline XBRL Taxonomy Extension Definition Linkbase Document X
101.LAB* Inline XBRL Taxonomy Extension Label Linkbase Document X
101.PRE* Inline XBRL Taxonomy Extension Presentation Linkbase Document X
104* Inline XBRL for the cover page of ~~2002 -~~ this Quarterly Report on Form 10-Q, included in the Exhibit 101 Inline XBRL Document Set. X
* Filed ~~herewith electronically~~herewith.

~~101~~** Inline interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Unaudited Balance Sheets, (ii) the Unaudited Statements of Operations, (iii) the Unaudited Consolidated Statements of Changes in Stockholder’s Equity (Deficit), (iv) Unaudited of Cash Flows and (v) the Notes to Financial Statements. Furnished herewith.

48
46

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~~November 14, 2022 By: /s/ Mark A. Smith
Mark A. Smith, President and Chief Financial Officer (Principal Financial and Accounting Officer)

Date:  ~~February~~November 14, 2022 By: /s/ ~~Dominic Bassani~~William O’Neill
~~Dominic Bassani,~~William O’Neill, Chief Executive Officer

49


	September 30,			June 30,
	2022			2022
		(unaudited)

ASSETS

Current assets:
Cash	$	1,897,981		$	3,160,442
Prepaid expenses		134,253			157,550
Deposits and other assets		1,000			1,000

Total current assets		2,033,234			3,318,992

Operating lease right-of-use asset		132,881			145,787
Property and equipment, net (Note 3)		3,248,610			2,895,558

Total assets	$	5,414,725		$	6,360,337

LIABILITIES AND EQUITY (DEFICIT)

Current liabilities:
Accounts payable and accrued expenses	$	549,425		$	1,360,644
Series B Redeemable Convertible Preferred stock, $0.01 par value, 50,000 shares authorized; 0 and 200 shares issued and outstanding, liquidation preference of $0 and $40,000, respectively (Note 7)		—			—
Deferred compensation (Note 4)		654,349			594,798
Loan payable and accrued interest (Note 5)		—			—

Total current liabilities		1,203,774			1,955,442

Operating lease liability		132,113			128,864
Convertible notes payable - affiliates (Note 6)		5,212,286			5,170,610

Total liabilities		6,548,173			7,254,916


Deficit:
Bion's stockholders' equity (deficit):
Series A Preferred stock, $0.01 par value, 50,000 shares authorized, no shares issued and outstanding		—			—
Series C Convertible Preferred stock, $0.01 par value, 60,000 shares authorized; no shares issued and outstanding		—			—
Common stock, no par value, 250,000,000 shares authorized, 44,303,654 and 43,758,820 shares issued, respectively; 43,599,345 and 43,054,511 shares outstanding, respectively		—			—
Additional paid-in capital		124,300,604			123,620,046
Subscription receivable - affiliates (Note 8)		(504,650	)		(504,650	)
Accumulated deficit		(124,966,975	)		(124,047,548	)

Total Bion's stockholders’ deficit		(1,171,021	)		(932,152	)

Noncontrolling interest		37,573			37,573

Total deficit		(1,133,448	)		(894,579	)

Total liabilities and deficit	$	5,414,725		$	6,360,337


	December 31,			June 30,
	2021			2021
		(unaudited)

ASSETS

Current assets:
Cash	$	4,948,282		$	4,216,321
Prepaid expenses		46,723			124,049
Deposits		1,000			1,000

Total current assets		4,996,005			4,341,370

Operating lease use- of- asset		171,835			—
Property and equipment, net (Note 3)		146,895			541

Total assets	$	5,314,735		$	4,341,911

LIABILITIES AND EQUITY (DEFICIT)

Current liabilities:
Accounts payable and accrued expenses	$	513,070		$	570,050
Series B Redeemable Convertible Preferred stock, $0.01 par value,50,000 shares authorized; 0 and 200 shares issued and outstanding, liquidation preference of $0 and $40,000, respectively (Note 7)		—			37,400
Deferred compensation (Note 4)		477,374			479,208
Loan payable and accrued interest (Note 5)		—			9,868,495

Total current liabilities		990,444			10,955,153

Operating lease liability		122,605			—
Convertible notes payable - affiliates (Note 6)		5,075,586			4,793,097

Total liabilities		6,188,635			15,748,250

Deficit:
Bion's stockholders' equity (deficit):
Series A Preferred stock, $0.01 par value, 50,000 shares authorized, 0 shares issued and outstanding		—			—
Series C Convertible Preferred stock, $0.01 par value, 60,000 shares authorized; 0 shares issued and outstanding		—			—
Common stock, 0 par value, 100,000,000 shares authorized, 43,733,820 and 41,315,986 shares issued, respectively; 43,029,511 and 40,611,677 shares outstanding, respectively		—			—
Additional paid-in capital		123,150,676			121,399,067
Subscription receivable - affiliates (Note 8)		(504,650	)		(504,650	)
Accumulated deficit		(123,558,048	)		(132,339,873	)

Total Bion's stockholders’ deficit		(912,022	)		(11,445,456	)

Noncontrolling interest		38,122			39,117

Total deficit		(873,900	)		(11,406,339	)

Total liabilities and deficit	$	5,314,735		$	4,341,911


	2022			2021

Revenue	$	—		$	—

Operating expenses:
General and administrative (including stock-based compensation)		866,494			491,133
Depreciation		330			248
Research and development (including stock-based compensation)		28,443			61,809

Total operating expenses		895,267			553,190

Loss from operations		(895,267	)		(553,190	)

Other (income) expense:
Interest income		(1,935	)		(1,494	)
Interest expense		26,095			112,180

Total other expense		24,160			110,686

Net loss		(919,427	)		(663,876	)

Net loss attributable to the noncontrolling interest		—			506

Net loss applicable to Bion's common stockholders	$	(919,427	)	$	(663,370	)

Net loss applicable to Bion's common stockholders per basic and diluted common share	$	(0.02	)	$	(0.02	)

Weighted-average number of common shares outstanding:
Basic and diluted		43,451,846			40,719,692


Three months ended September 30, 2021	Bion's Stockholders'
	Series A Preferred Stock				Series C Preferred Stock				Common Stock				Additional paid-in			Subscription Receivables for			Accumulated			Noncontrolling			Total
	Shares		Amount		Shares		Amount		Shares		Amount		capital			Shares			deficit			interest			equity/(deficit)

Balances, July 1, 2021		—	$	—		—	$	—		41,315,986	$	—		121,399,067		$	(504,650	)	$	(132,339,873	)	$	39,117		$	(11,406,339	)
Warrants exercised for common shares		—		—		—		—		139,334		—		104,500			—			—			—			104,500
Commissions on warrant exercises		—		—		—		—		10,000		—		(1,000	)		—			—			—			(1,000	)
Conversion of debt and liabilities		—		—		—		—		10,253		—		5,126			—			—			—			5,126
Net loss		—		—		—		—		—		—		—			—			(663,370	)		(506	)		(663,876	)
Balances, September 30, 2021		—	$	—		—	$	—		41,475,573	$	—	$	121,507,693		$	(504,650	)	$	(133,003,243	)	$	38,611		$	(11,961,589	)


	Three months ended December 31,						Six months ended December 31,
	2021			2020			2021			2020

Revenue	$	—		$	—		$	—		$	—

Operating expenses:
General and administrative (including stock-based compensation (Note 7))		617,963			291,682			1,109,096			594,559
Depreciation		332			207			580			414
Research and development (including stock-based compensation (Note 7))		54,404			155,385			116,213			246,373

Total operating expenses		672,699			447,274			1,225,889			841,346

Loss from operations		(672,699	)		(447,274	)		(1,225,889	)		(841,346	)

Other (income) expense:
Interest income		(1,269	)		(47	)		(2,763	)		(126	)
Interest expense		118,365			303,218			230,545			407,637
Gain on legal dissolution of subsidiary		(10,234,501	)		—			(10,234,501	)		—

Total other expense		(10,117,405	)		303,171			(10,006,719	)		407,511

Net income (loss)		9,444,706			(750,445	)		8,780,830			(1,248,857	)

Net loss attributable to the noncontrolling interest		489			524			995			1,039

Net income (loss) applicable to Bion's common stockholders	$	9,445,195		$	(749,921	)	$	8,781,825		$	(1,247,818	)

Net income (loss) applicable to Bion's common stockholders per basic and diluted common share	$	0.23		$	(0.02	)	$	0.21		$	(0.04	)

Weighted-average number of common shares outstanding:
Basic and diluted		41,088,992			31,187,645			40,904,342			30,990,639


Three months ended September 30, 2022	Bion's Stockholders'
	Series A Preferred Stock				Series C Preferred Stock				Common Stock				Additional paid-in		Subscription Receivables for			Accumulated			Noncontrolling		Total
	Shares		Amount		Shares		Amount		Shares		Amount		capital		Shares			deficit			interest		equity/(deficit)
Balances, July 1, 2022		—	$	—		—	$	—		43,758,820	$	—	$	123,620,046	$	(504,650	)	$	(124,047,548	)	$	37,573	$	(894,579	)
Sale of units		—		—		—		—		320,000		—		320,000		—			—			—		320,000
Warrants exercised for common shares		—		—		—		—		74,834		—		56,125		—			—			—		56,125
Issuance of units for services		—		—		—		—		50,000		—		80,000		—			—			—		80,000
Issuance of warrants for services		—		—		—		—		—		—		15,000		—			—			—		15,000
Conversion of debt and liabilities		—		—		—		—		100,000		—		50,000		—			—			—		50,000
Modification of warrants		—		—		—		—		—		—		159,433		—			—			—		159,433
Net loss		—		—		—		—		—		—		—		—			(919,427	)		—		(919,427	)
Balances, September 30, 2022		—	$	—		—	$	—		44,303,654	$	—	$	124,300,604	$	(504,650	)	$	(124,966,975	)	$	37,573	$	(1,133,448	)


CONSOLIDATED STATEMENTS OF CASH FLOWS

THREE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021

(UNAUDITED)


	2022			2021
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(919,427	)	$	(663,876	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense		330			248
Accrued interest on loans payable, deferred compensation and other		26,096			121,111
Stock-based compensation		154,933			—
Stock-based compensation for services		95,000			—
Decrease (increase) in prepaid expenses		23,297			33,753
Increase (decrease) in accounts payable and accrued expenses		(787,276	)		59,367
Decrease in operating lease assets and liabilities		16,155			—
Increase in deferred compensation		75,000			99,400

Net cash used in operating activities		(1,315,892	)		(349,997	)

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment		(322,694	)		(7,490	)

Net cash used in investing activities		(322,694	)		(7,490	)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from exercise of warrants		56,125			104,500
Commissions on exercise of warrants		—			(1,000	)
Proceeds from sale of units		320,000			—

Net cash provided by financing activities		376,125			103,500

Net decrease in cash		(1,262,461	)		(253,987	)

Cash at beginning of year		3,160,442			4,216,321

Cash at end of year	$	1,897,981		$	3,962,334

Supplemental disclosure of cash flow information:
Cash paid for interest	$	—		$	—

Non-cash investing and financing transactions:
Conversion of debt and liabilities into notes payable	$	23,943		$	—
Conversion of deferred compensation to notes payable	$	20,000		$	—
Conversion of notes payable into shares	$	50,000		$	—
Capitalized interest in property and equipment	$	30,688		$	—
Shares issued for warrant exercise commissions	$	—		$	7,500
Shares issued for accounts payable	$	—		$	5,126
Purchase of property and equipment for accounts payable	$	—		$	54,800


	Bion's Shareholders'
	Series A Preferred Stock				Series C Preferred Stock				Common Stock				Additional			Subscription Receivables			Accumulated			Noncontrolling			Total
	Shares		Amount		Shares		Amount		Shares		Amount		paid-in capital			for Shares			deficit			interest			equity/(deficit)

Balance at July 1, 2020		—	$	—		—	$	—		31,409,005	$	—		114,266,683		$	(504,650	)	$	(128,891,893	)	$	41,902		$	(15,087,958	)
Sale of units		—		—		—		—		720,000		—		360,000			—			—			—			360,000
Commissions on sale of units		—		—		—		—		—		—		(31,000	)		—			—			—			(31,000	)
Modification of options		—		—		—		—		—		—		8,775			—			—			—			8,775
Modification of warrants		—		—		—		—		—		—		188,890			—			—			—			188,890
Issuance of warrants		—		—		—		—		—		—		2,500			—			—			—			2,500
Conversion of debt and liabilities		—		—		—		—		141,589		—		70,794			—			—			—			70,794
Net loss		—		—		—		—		—		—		—			—			(1,247,818	)		(1,039	)		(1,248,857	)
Balance at December 31, 2020		—	$	—		—	$	—		32,270,594	$	—	$	114,866,642		$	(504,650	)	$	(130,139,711	)	$	40,863		$	(15,736,856	)

Schedule of anti dilutive securities
	December 31, 2021		December 31, 2020		September 30, 2022		September 30, 2021
Warrants		19,726,777		21,270,102		19,873,801		21,802,822
Options		10,471,600		9,511,600		11,201,600		10,471,600
Convertible debt		10,673,722		11,215,175		10,793,421		10,462,498
Convertible preferred stock		—		19,500		—		20,250

Schedule of earnings per share, basic and diluted
	Three months ended December 31, 2021			Three months ended December 31, 2020			Six months ended December 31, 2021			Six months ended December 31, 2020
Shares issued – beginning of period		41,475,573			31,575,656			41,315,986			31,409,005
Shares held by subsidiaries (Note 7)		(704,309	)		(704,309	)		(704,309	)		(704,309	)
Shares outstanding – beginning of period		40,771,264			30,871,347			40,611,677			30,704,696
Weighted average shares issued during the period		317,728			316,298			292,665			285,943
Diluted weighted average shares – end of period		41,088,992			31,187,645			40,904,342			30,990,639

Schedule of earnings per share, basic and diluted
	Three months ended September 30, 2022			Three months Ended September 30, 2021
Shares issued – beginning of period		43,758,820			41,315,986
Shares held by subsidiaries (Note 7)		(704,309	)		(704,309	)
Shares outstanding – beginning of period		43,054,511			40,611,677
Weighted average shares issued during the period		397,335			108,015
Diluted weighted average shares – end of period		43,451,846			40,719,692

Schedule of property and equipment
	December 31, 2021			June 30, 2021			September 30, 2022			June 30, 2022
Machinery and equipment	$	—		$	2,222,670		$	—		$	—
Buildings and structures		—			401,470			—			—
Computers and office equipment		11,137			171,485			13,598			13,598
3G project construction in process		145,439			—			3,245,604			2,892,222
Property and equipment, gross		156,576			2,795,625			3,259,202			2,905,820
Less accumulated depreciation		(9,681	)		(2,795,084	)		(10,592	)		(10,262	))
Property and equipment, net	$	146,895		$	541		$	3,248,610		$	2,895,558

Schedule of option activity
	Options		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life		Aggregate Intrinsic Value
Outstanding at July 1, 2021		10,471,600	$	0.77		3.7	$	6,064,335
Granted		—		—
Exercised		—		—
Forfeited		—		—
Expired		—		—
Outstanding at December 31, 2021		10,471,600	$	0.77		3.2	$	9,624,679
Exercisable at December 31, 2021		10,471,600	$	0.77		3.2	$	9,624,679

~~Schedule of non vested stock options~~
	~~Options~~		Weighted Average Grant-Date Fair Value
~~Nonvested at July 1, 2021~~		—	$	—
~~Granted~~		—		—
~~Vested~~		—		—
~~Nonvested at December 31, 2021~~		—	$	—

Schedule of option activity
		Options		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life		Aggregate Intrinsic Value
	Outstanding at July 1, 2022		11,201,600	$	0.80		2.7	$	4,429,263
	Granted		—		—
	Exercised		—		—
	Forfeited		—		—
	Expired		—		—
	Outstanding at September 30, 2022		11,201,600	$	0.80		2.48	$	5,757,755

Condensed Financial Statement
	Three months ended December 31, 2021		Three months ended December 31, 2020		Six months ended December 31, 2021		Six months ended December 31, 2020
General and administrative:
Change in fair value from modification of option terms	$	—	$	8,775	$	—	$	8,775
Change in fair value from modification of warrant terms		5,625		25,506		5,625		25,506
Fair value of stock options expensed		—		—		—		—
Total	$	5,625	$	34,281	$	5,625	$	34,281

Research and development:
Fair value of stock options expensed	$	—	$	—	$	—	$	—
Total	$	—	$	—	$	—	$	—

Schedule Of Cash Flow Supplemental Disclosure
	December 31, 2021
Cash paid for noncancelable operating lease included in the operating cash flows	$	60,000
Right of use assets obtained in exchange for operating lease liabilities	$	180,586

~~Schedule Of Future Minimum Lease Payment~~
~~From January 2022 to December 2022~~	$	—
~~From January 2023 to December 2023~~		~~75,000~~
~~From January 2024 to December 2024~~		~~75,000~~
~~Undiscounted cash flow~~		~~150,000~~
~~Less imputed interest~~		~~(27,395~~	)
~~Total~~	$	~~122,605~~

Schedule of future minimum lease payments
Year ended June 30, 2023	$	43,750
Year ended June 30, 2024		75,000
Year ended June 30, 2025		31,250
Undiscounted cash flow		150,000
Less imputed interest		(17,888	)
Total	$	132,112

		~~Six Months ended~~ ~~December 31, 2021~~		~~Six Months ended~~ ~~December 31, 2020~~
~~Research and development:~~
~~Fair value of stock options expensed under ASC 718~~	$	—	$	—
~~Total~~	$	—	$	—

From January 2022 to December 2022		—
From January 2023 to December 2023		75,000
From January 2024 to December 2024		75,000
Undiscounted cash flow		150,000
Less imputed interest		(27,395	)
Total	$	122,605

Exhibit	~~Description~~
		Incorporated by Reference					Filed/Furnished
~~31.1~~No.	Description		Form	Exhibit		Filing Date		Herewith
31.1*	Certification of ~~CEO~~Principal Executive Officer pursuant to ~~Rule 13a-14(a) or Rule 15d-14(a) - Filed herewith electronically~~Section 302 of the Sarbanes-Oxley Act
					X
~~31.2~~31.2*	Certification of ~~Executive Chairman, President and CFO~~Principal Accounting Officer pursuant to ~~Rule 13a-14(a) or Rule 15d-14(a) - Filed herewith electronically~~Section 302 of the Sarbanes-Oxley Act
					X
~~32.1~~32.1**	Certification of ~~CEO pursuant~~Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act ~~of 2002 - Filed herewith electronically~~
					X
~~32.2~~32.2**	Certification of ~~Executive Chairman, President and CFO pursuant~~Principal Accounting Officer Pursuant to Section 906 of the Sarbanes-Oxley Act							X
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.							X
101.SCH*	Inline XBRL Taxonomy Extension Schema Document							X
101.CAL*	Inline XBRL Taxonomy Extension Calculation Linkbase Document							X
101.DEF*	Inline XBRL Taxonomy Extension Definition Linkbase Document							X
101.LAB*	Inline XBRL Taxonomy Extension Label Linkbase Document							X
101.PRE*	Inline XBRL Taxonomy Extension Presentation Linkbase Document							X
104*	Inline XBRL for the cover page of ~~2002 -~~ this Quarterly Report on Form 10-Q, included in the Exhibit 101 Inline XBRL Document Set.							X

*	Filed ~~herewith electronically~~herewith.

~~101~~**		Inline interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Unaudited Balance Sheets, (ii) the Unaudited Statements of Operations, (iii) the Unaudited Consolidated Statements of Changes in Stockholder’s Equity (Deficit), (iv) Unaudited of Cash Flows and (v) the Notes to Financial Statements. Furnished herewith.

		BION ENVIRONMENTAL TECHNOLOGIES, INC.


Date: ~~February~~November 14, 2022	By:	*/s/ Mark A. Smith*
		Mark A. Smith, President and Chief Financial Officer (Principal Financial and Accounting Officer)



Date: ~~February~~November 14, 2022	By:	*/s/ ~~Dominic Bassani~~William O’Neill*
		~~Dominic Bassani,~~William O’Neill, Chief Executive Officer