SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 OR THE TRANSITION PERIOD FROM _______ TO _______
Commission file number 0-19333
Bion Environmental Technologies, Inc.
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(Exact name of registrant as specified in its charter)
Colorado 84-1176672
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
18 East 50th Street 10th Floor N.Y., N.Y. 10022
-----------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(212) 758-6622
----------------------------------------------------
(Registrant's telephone number, including area code)
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. Yes X No___
As of February 13, 2003 the issuer had outstanding 5,304,521 shares of common
stock. This includes 1,900,000 shares held by a majority-owned subsidiary of
the registrant.
Transitional Small Business Disclosure Format (Check one): Yes ___ No X
BION ENVIRONMENTAL TECHNOLOGIES, INC.
QUARTERLY REPORT ON FORM 10-QSB
TABLE OF CONTENTS
PART I .................................................................. 3
Item 1. Financial Statements .................................... 3
Unaudited consolidated balance sheet as of
December 31, 2002 ..................................... 4
Unaudited consolidated statements of operations
for the three and six months ended
December 31, 2002 and 2001 ............................ 5
Unaudited consolidated statements of cash flows
for the six months ended
December 31, 2002 and 2001 ............................ 6
Notes to unaudited consolidated financial statements .... 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations .................... 15
Item 3. Controls and Procedures ................................. 21
PART II ................................................................. 22
Item 1. Legal Proceedings ....................................... 22
Item 2. Changes in Securities ................................... 22
Item 5. Other Information ....................................... 22
Item 6. Exhibits and Reports on Form 8-K ........................ 23
Signatures ....................................................... 24
Certifications ................................................... 25
2
PART I
Item 1. Financial Statements
3
BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES
Unaudited Consolidated Balance Sheet
As of December 31, 2002
ASSETS
Current assets:
Cash and cash equivalents $ 122,198
Accounts receivable, net of allowance for doubtful accounts of $2,000 20,431
Inventory 211,842
Prepaid expenses and other current assets 111,358
-----------
Total current assets 465,829
Property and equipment, net 223,479
Claims receivable 1,339,154
Other assets 212,638
-----------
Total assets $ 2,241,100
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 681,572
Accrued expenses 177,101
Capital lease obligation 2,115
-----------
Total current liabilities 860,788
Deferred compensation 494,272
-----------
Total liabilities 1,355,060
Minority interest 445,083
Commitments and contingencies
Stockholders' Equity:
Preferred Stock, $.01 par value, 10,000 shares authorized,
-0- shares issued and outstanding
Common stock, no par value, 100,000,000 shares authorized,
4,208,791 shares issued and 4,117,352 outstanding
(this does not include 1,095,730 shares held by Centerpoint
which will be distributed to Bion and subsequently cancelled)
Additional paid in capital 59,220,602
Accumulated deficit (57,959,168)
Treasury stock, at cost, 91,439 shares of common stock (820,477)
-----------
Total stockholders' equity 440,957
-----------
Total liabilities and stockholders' equity $ 2,241,100
===========
See notes to consolidated financial statements
4
BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES
Unaudited Consolidated Statements of Operations
Three Months Ended Six Months Ended
December 31, December 31,
-------------------------- --------------------------
2002 2001 2002 2001
----------- ----------- ----------- -----------
Revenue:
Soil sales $ 62,626 $ 15,610 $ 109,264 $ 28,612
----------- ----------- ----------- -----------
Cost of soil 191,398 123,586 387,116 242,676
----------- ----------- ----------- -----------
Gross loss (128,772) (107,976) (277,852) (214,064)
----------- ----------- ----------- -----------
Expenses:
General and administrative (excluding non-
cash charges for services and compensation
of $55,176 and $276,700 for the three months
ended December 31, 2002 and 2001,
respectively and $(7,923) and $500,629 for the
six months ended December 31, 2002 and 2001,
respectively) 727,002 590,796 1,364,195 1,212,876
Research and development 185,332 183,698 335,194 397,167
Non-cash charges for services and compensation 55,176 276,700 (7,923) 500,629
----------- ----------- ----------- -----------
967,510 1,051,194 1,691,466 2,110,672
----------- ----------- ----------- -----------
Operating loss (1,096,282) (1,159,170) (1,969,318) (2,324,736)
----------- ----------- ----------- -----------
Other income and expense:
Interest expense (including non-cash interest
charges of $2,250 and $1,421,048 for the three
months ended December 31, 2002 and 2001,
respectively and $2,250 and $2,539,766 for the
six months ended December 31, 2002 and 2001,
respectively) (2,362) (1,421,347) (2,437) (2,540,559)
Interest income 2,161 1,494 7,790 10,693
Other (expense) income, net (3,914) 27,252 (20,613) 68,610
----------- ----------- ----------- -----------
(4,115) (1,392,601) (15,260) (2,461,256)
----------- ----------- ----------- -----------
Net loss before minority interest (1,100,397) (2,551,771) (1,984,578) (4,785,992)
----------- ----------- ----------- -----------
Minority interest (39,041) - (3,989) -
----------- ----------- ----------- -----------
Net loss and comprehensive loss $(1,139,438) $(2,551,771) $(1,988,567) $(4,785,992)
=========== =========== =========== ===========
Basic and diluted loss per common share:
Net loss per common share $ (0.28) $ (1.92) $ (0.48) $ (3.63)
=========== =========== =========== ===========
Weighted-average number of common shares
outstanding, basic and diluted loss 4,117,352 1,329,805 4,117,352 1,318,322
=========== =========== =========== ===========
See notes to consolidated financial statements
5
BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES
Unaudited Consolidated Statements of Cash Flows
Six Months Ended
December 31,
--------------------------
2002 2001
----------- -----------
Cash flows from operating activities:
Net loss $(1,988,567) $(4,785,992)
Adjustments to reconcile net loss to net cash
used in operating activities:
Minority interest in net loss of subsidiary 3,989 -
Depreciation and amortization 41,274 37,569
Beneficial conversion feature amortized to interest expense - 297,000
Loss on disposal of asset 7,443 -
Amortization of debt discount - 1,554,425
Accretion of notes payable for interest expense 2,250 688,341
Reduction of note receivable for consulting services - 41,100
Compensation charge from variable options - (3,469)
Non-cash charges for equity instruments issued for compensation
and services (7,923) 462,998
Changes in:
Accounts receivable (3,137) 10,350
Note receivable (1,987) (121,441)
Inventory (144,202) -
Prepaid expenses and other current assets 36,641 114
Deposits and other 548 -
Accounts payable 357,635 96,051
Accrued expenses 121,949 16,406
----------- -----------
Net cash used in operating activities (1,574,087) (1,706,548)
----------- -----------
Cash flows from investing activities:
Purchases of property and equipment (116,152) (12,575)
----------- -----------
Net cash used in investing activities (116,152) (12,575)
----------- -----------
Cash flows from financing activities:
Payments of capital lease obligations (1,134) (9,011)
Proceeds from the exercise of stock options - 120,000
Issuance of notes payable, related parties - 355,000
----------- -----------
Net cash (used in) provided by financing activities (1,134) 465,989
----------- -----------
Net decrease in cash and cash equivalents (1,691,373) (1,253,134)
Cash and cash equivalents, beginning of period 1,813,571 1,300,398
----------- -----------
Cash and cash equivalents, end of period $ 122,198 $ 47,264
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid for interest during the period $ 299 $ 793
=========== ===========
Supplemental disclosure of non-cash financing activities:
Issuance of stock for convertible bridge note $ - $ 112,740
See notes to consolidated financial statements
6
BION ENVIRONMENTAL TECHNOLOGIES, INC., AND SUBSIDIARIES
Notes to unaudited consolidated financial statements
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Bion
Environmental Technologies, Inc. (the "Company", "Bion", "we", "us" or "our")
have been prepared in accordance with accounting principles generally
accepted in the United States of America ("GAAP") for interim financial
information. In the opinion of management, such statements include all
adjustments (consisting only of normal recurring adjustments) necessary for
the fair presentation of the Company's financial position, results of
operations and cash flows at the dates and for the periods indicated.
Pursuant to the requirements of the Securities and Exchange Commission
applicable to Quarterly Reports on Form 10-QSB, the accompanying financial
statements do not include all the disclosures required by GAAP for annual
financial statements. While the Company believes that the disclosures
presented are adequate to make the information not misleading, these interim
consolidated financial statements should be read in conjunction with the
audited financial statements and related notes included in the Company's
Annual Report on Form 10-KSB/A for the year ended June 30, 2002. Operating
results for the periods indicated are not necessarily indicative of the
results that may be expected for the fiscal year ending June 30, 2003.
Certain fiscal year 2002 items have been reclassified to conform to their
fiscal year 2003 presentation.
2. ORGANIZATION AND NATURE OF BUSINESS
Bion Environmental Technologies, Inc. ("Bion" or the "Company") was
incorporated in 1987 in the State of Colorado.
Bion is an environmental service company focused on the needs of confined
animal feeding operations (CAFOs). Bion is engaged in two main areas of
activity: waste stream remediation and organic soil and fertilizer production.
Bion's waste remediation service business provides CAFOs (primarily in the
swine and dairy industries) with treatment for the animal waste outputs. In
this regard, Bion treats their entire waste stream in a manner which cleans
and reduces the waste stream thereby mitigating pollution of the air, water
(both ground and surface) and soil, while creating value-added organic soil
and fertilizer products. Bion's soil and fertilizer products are being used
for a variety of applications including school athletic fields, golf courses
and home and garden applications.
The Company's Nutrient Management System (NMS) is a patented biological and
engineering process that treats water, nutrient and air pollution associated
with animal waste. The system also provides a use for the waste materials and
solids by biologically converting them into environmentally friendly,
time-release organic-based solids that are the basis of Bion's organic soil
and fertilizer business segment. Bion's BionSoil(R) and Bion Fertilizer
product lines contain a unique mix of organic nutrients, bacteria and other
microbes that extensive testing has shown produces superior plant growth with
reduced leaching of nutrients when compared to traditional chemical
fertilizers.
7
BION ENVIRONMENTAL TECHNOLOGIES, INC., AND SUBSIDIARIES
Notes to unaudited consolidated financial statements
2. ORGANIZATION AND NATURE OF BUSINESS (CONTINUED)
The unaudited consolidated financial statements have been prepared assuming
the Company will continue as a going concern. The Company incurred losses
totaling $1,988,567 during the six months ended December 31, 2002 and has a
history of losses which has resulted in an accumulated deficit of $57,959,168
at December 31, 2002.
During the year ended June 30, 2002, through the Company's transactions with
Centerpoint Corporation and OAM S.p.A., the Company obtained $4,800,000 in
cash. The Company is currently engaged in seeking additional financing to
satisfy its current operating requirements.
There can be no assurance that sufficient funds required during the next
twelve months or thereafter will be generated from operations or that 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 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.
We have a stockholders' equity of $440,957, an accumulated deficit of
$57,959,168, limited current revenues, substantial current operating losses
and negative working capital. Our operations are not currently profitable;
therefore, readers are further cautioned that our continued existence is
uncertain if we are not successful in obtaining outside funding in an amount
sufficient for us to meet our operating expenses at our current level.
Management is currently engaged in seeking additional capital to fund
operations until Bion system and BionSoil(R) sales are sufficient to fund
operations.
There is 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 asset carrying
amounts or the amounts and classification of liabilities that may result
should the Company be unable to continue as a going concern.
In connection with their report on our Consolidated Financial Statements as of
and for the year ended June 30, 2002, BDO Seidman, LLP, our independent
certified public accountants, expressed substantial doubt about our ability to
continue as a going concern because of recurring net losses and negative cash
flow from operations.
3. SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation:
The consolidated financial statements include the accounts of the Company and
its wholly- and majority-owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated in consolidation.
8
BION ENVIRONMENTAL TECHNOLOGIES, INC., AND SUBSIDIARIES
Notes to unaudited consolidated financial statements
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Loss per share of common stock:
Basic earnings per share includes no dilution and is computed by dividing
income or loss available to common shareholders by the weighted average number
of common shares outstanding for the period. Diluted earnings per share
reflect the potential dilution of securities that could share in the earnings
of an entity, similar to fully diluted earnings per share. In loss periods,
dilutive common equivalent shares are excluded, as the effect would be
anti-dilutive. Therefore, basic and diluted earnings per share are the same
for all periods presented[lrd1]. For the periods ended December 31, 2002,
199,027 stock options and 1,393,303 warrants having a weighted-average
exercise price of $12.64 and $7.66, respectively, were excluded in the net
loss per share calculation since the effect of inclusion would be
anti-dilutive and for the periods ended December 31, 2001, 172,391 stock
options and 933,147 warrants having a weighted-average exercise price of
$20.10 and $15.00, respectively, were excluded in the net loss per share
calculation since the effect of inclusion would be anti-dilutive.
Patents:
Patents are recorded at costs of $54,946 less accumulated amortization of
$26,425 for a net amount of $28,521, which is included in other assets.
Amortization is calculated on a straight-line basis over a period of the
estimated economic life or legal life of 17 years. Amortization expense for
the six and three month periods ended December 31, 2002 and 2001 was $1,616
and $808, respectively.
Recently issued accounting pronouncements:
In November 2002, the FASB issued Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others." Interpretation No. 45 requires a
guarantor to include disclosure of certain obligations, and if applicable, at
the inception of the guarantee, recognize a liability for the fair value of
other certain obligations undertaken in issuing a guarantee. The recognition
requirement is effective for guarantees issued or modified after December 31,
2002 and is not expected to have a material impact on the Company.
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure." SFAS No. 148 amends certain
provisions of SFAS No. 123 and is effective for financial statements for
fiscal years ending after December 15, 2002. The Company is currently
assessing the impact of adoption of SFAS No. 148.
4. DEFERRED COMPENSATION
On June 30, 2001, Bion and D2CO, LLC ("D2") agreed that the payments owed to
D2 under an existing management agreement be paid to a Rabbi Trust for the
benefit of D2. On July 31, 2001, Bion and Sam Spitz (the "Trustee") entered
into the Trust Under Deferred Compensation Plan for D2Co, LLC (the "Trust").
9
BION ENVIRONMENTAL TECHNOLOGIES, INC., AND SUBSIDIARIES
Notes to unaudited consolidated financial statements
4. DEFERRED COMPENSATION (CONTINUED)
Under the Trust agreement, the Company shall contribute assets to the Trust.
Such assets are subject to claims of the Company's creditors in the event of
the Company's insolvency, at such times as specified in the management
agreement with D2. D2 shall have no preferred claim on, or any beneficial
ownership interest in, any assets of the Trust. Any rights created under the
management agreement with D2 and the Trust shall be unsecured contractual
rights of D2 against the Company. Payments of all amounts in the Trust are to
be made to D2 on January 2, 2011, as stated in the Trust agreement.
The Company accounts for the Trust under the provisions of Emerging Issues
Task Force ("EITF") 97-14 "Accounting for Deferred Compensation Arrangement
Where Amounts are Earned and Held in a Rabbi Trust and Invested" which
requires the Company to consolidate into its financial statements the net
assets of the Trust. The value of the Company's common stock held by the
Trust is classified in shareholders' equity and is accounted for in a manner
similar to treasury stock. The deferred compensation obligation has been
classified as a liability and is adjusted, with the corresponding charge or
credit to compensation expense, to reflect changes in fair value of the common
stock held by the Trust.
5. STOCKHOLDERS' EQUITY
Reverse stock split:
Effective July 8, 2002, the Company completed a one-for-ten reverse stock
split of its outstanding shares of common stock. The accompanying unaudited
consolidated financial statements have been retroactively adjusted to reflect
the reverse stock split.
6. COMMITMENTS AND CONTINGENCIES
Claims contingency:
On July 22, 2002, Thomas Keith Barefoot ("Barefoot"), doing business as Quin
Deca Farm ("Quin Deca"), an unaffiliated party, filed a complaint against the
Company in the Superior Court of the County of Harnett in the State of North
Carolina regarding the Company's first generation Bion NMS System on Quin Deca
Farm and the harvesting of BionSoil(R). The complaint includes breach of
contract claims asserting that the Company abandoned the NMS system on Quin
Deca Farm and the failure of the Company to harvest BionSoil(R). The second
claim is for fraud regarding misrepresentation of the state of the technology
of the first generation NMS. The third claim is for unfair and deceptive trade
practices for misrepresentation of the state of the technology of the NMS
System. The fourth claim is for negligent misrepresentation made by Bion in
connection with the work it performed and its suitability for the intended
purpose. The fifth claim is for equity/specific performance in that Bion left
Quin Deca with an economically and technically deficient waste management
system that cannot continue to be used without adequate and alternative
methods of waste removal. Quin Deca is seeking $830,000 in damages plus
punitive damages and to have its damages trebled, reasonable attorney fees and
principles of equity requiring Bion to install its second generation Bion NMS
system. The Company does not believe that the claim has merit and that the
ultimate resolution of this litigation will have a material adverse effect on
the Company, its operations or its financial condition.
10
BION ENVIRONMENTAL TECHNOLOGIES, INC., AND SUBSIDIARIES
Notes to unaudited consolidated financial statements
7. RELATED PARTY TRANSACTIONS
The Company issued to D2 15,322 and 23,421 shares of common stock for
management fees during the three and six months ended December 31, 2001,
respectively. The management fees were valued at $125,000 and $250,000 during
the three and six months ended December 31, 2001, respectively.
The Company and D2 orally agreed during January 2002, that in the event the
average price per common share is below $7.50 for any quarter in which
consulting fees are to be paid to the Trust, Bion will issue a convertible
note in lieu of the stock payment. The agreement is to remain in place during
the "Adjustment Period" noted in the Centerpoint and OAM Agreements. The
convertible note is recorded as deferred compensation upon consolidation of
the Trust.
On July 1, 2002, D2 returned to the Company 2,874 shares of the Company's
common stock that was issued as part of the consulting fee to D2 paid to the
Trust Under Deferred Compensation Plan for D2Co, LLC (the "Trust") for the
Benefit of D2. The shares were subsequently cancelled.
On September 30, 2002, the Company issued a convertible note for the D2
management fee to be paid to the Trust for the three months ended September
30, 2002. The convertible note was issued for the amount of the management
fee of $150,000 and pays interest at 6% per annum, payable in cash or in
shares of the Company's common stock. The convertible note is convertible
into shares of common stock in whole or in part at the time of the Company's
next equity financing, at the price of the next equity financing. The
convertible note is recorded as deferred compensation upon consolidation of
the Trust.
On December 31, 2002, the Company issued a convertible note for the D2
management fee to be paid to the Trust for the three months ended December 31,
2002. The convertible note was issued for the amount of the management fee of
$150,000 and pays interest at 6% per annum, payable in cash or in shares of
the Company's common stock. The convertible note is convertible into shares
of common stock in whole or in part at the time of the Company's next equity
financing, at the price of the next equity financing. The convertible note is
recorded as deferred compensation upon consolidation of the Trust.
8. BUSINESS SEGMENT INFORMATION
The Company operates in three business segments as follows:
Systems: The Company designs, markets, installs and manages waste, wastewater
and storm water systems, primarily in the agricultural and food processing
industries.
Soil: The Company produces and markets BionSoil(R) products such as organic
fertilizers, potting soils and soil amendments which are produced from the
nutrient rich Bion Solids harvested from agricultural systems installed on
large dairy and hog farms.
11
BION ENVIRONMENTAL TECHNOLOGIES, INC., AND SUBSIDIARIES
Notes to unaudited consolidated financial statements
8. BUSINESS SEGMENT INFORMATION (CONTINUED)
Other: Contains the operating results of Centerpoint of which the Company's
owns 57.6%. Centerpoint currently does not have any business operations other
than general and administrative.
The Company's reportable operating segments have been determined in accordance
with the Company's internal management structure, which is organized based on
operating activities. The accounting policies of the operating segments are
the same as those described in the summary of accounting policies. The Company
evaluates performance based upon several factors, of which the primary
financial measure is segment operating income. The following table summarizes
information about operations and long-lived assets as of and for the six
months ended December 31, 2002 and 2001:
Systems Soil Other Total
------- ---- ----- -----
Six Months Ended - December 31, 2002
Revenues $ - $ 109,264 $ - $ 109,264
=========== =========== ========= ===========
Operating loss $(1,064,227) $ (787,112) $(117,979) $(1,969,318)
Other income/(expense), net $ (68) $ (8,504) $ (6,688) $ (15,260)
Minority interest $ - $ - $ (3,989) $ (3,989)
----------- ----------- --------- -----------
Net Loss $(1,064,295) $ (795,616) $(128,656) $(1,988,567)
=========== =========== ========= ===========
Supplemental segment information:
Amortization and depreciation $ 18,474 $ 22,800 $ - $ 41,274
As of December 31, 2002
Property and Equipment, net $ 52,789 $ 170,690 $ - $ 223,479
Total Assets $ 900,513 $ 1,254,809 $ 85,778 $ 2,241,100
Six Months Ended - December 31, 2001
Revenues $ - $ 28,612 $ - $ 28,612
=========== =========== ========= ===========
Operating loss $(1,415,723) $ (909,013) $ - $(2,324,736)
Other income/(expense), net $(1,223,053) $(1,238,203) $ - $(2,461,256)
----------- ----------- --------- -----------
Net Loss $(2,638,776) $(2,147,216) $ - $(4,785,992)
=========== =========== ========= ===========
Supplemental segment information:
Amortization and depreciation $ 15,767 $ 21,802 $ - $ 37,569
As of December 31, 2001
Property and Equipment, net $ 83,833 $ 75,639 $ - $ 159,472
Total Assets $ 249,408 $ 225,002 $ - $ 474,410
12
BION ENVIRONMENTAL TECHNOLOGIES, INC., AND SUBSIDIARIES
Notes to unaudited consolidated financial statements
8. BUSINESS SEGMENT INFORMATION (CONTINUED)
The following table summarizes information about operations and long-lived
assets as of and for the three months ended December 31, 2002 and 2001:
Systems Soil Other Total
------- ---- ----- -----
Three Months Ended - December 31, 2002
Revenues $ - $ 62,626 $ - $ 62,626
=========== =========== ========= ===========
Operating loss $ (579,118) $ (413,315) $(103,849) $(1,096,282)
Other income/(expense), net $ 104 $ 216 $ (4,435) $ (4,115)
Minority interest $ - $ - $ (39,041) $ (39,041)
----------- ----------- --------- -----------
Net Loss $ (579,014) $ (413,099) $(147,325) $(1,139,438)
=========== =========== ========= ===========
Supplemental segment information:
Amortization and depreciation $ 9,331 $ 11,400 $ - $ 20,731
As of December 31, 2002
Property and Equipment, net $ 52,789 $ 170,690 $ - $ 223,479
Total Assets $ 900,513 $ 1,254,809 $ 85,778 $ 2,241,100
Three Months Ended - December 31, 2001
Revenues $ - $ 15,610 $ - $ 15,610
=========== =========== ========= ===========
Operating loss $ (695,876) $ (463,294) $ - $(1,159,170)
Other income/(expense), net $ (691,800) $ (700,801) $ - $(1,392,601)
Minority interest $ - $ - $ - $ -
----------- ----------- --------- -----------
Net Loss $(1,387,676) $(1,164,095) $ - $(2,551,771)
=========== =========== ========= ===========
Supplemental segment information:
Amortization and depreciation $ 8,137 $ 9,792 $ - $ 17,929
As of December 31, 2001
Property and Equipment, net $ 83,833 $ 75,639 $ - $ 159,472
Total Assets $ 249,408 $ 225,002 $ - $ 474,410
13
BION ENVIRONMENTAL TECHNOLOGIES, INC., AND SUBSIDIARIES
Notes to unaudited consolidated financial statements
9. SUBSEQUENT EVENTS
During the period January 10, 2003 through February 13, 2003, D2 advanced the
Company $245,000.
In February 2003, the Company reduced personnel resulting in future reductions
of approximately $50,000 a month in salaries and benefits, not including other
residual expense reductions. The Company intends to substantially reduce
costs in the upcoming quarter.
Effective February 12, 2003, in order to eliminate an impediment to a possible
future financing, the Company entered into an agreement with Centerpoint to
immediately cancel Section 2.4 "Post-Closing Adjustment" and Section 1.2(b)
"Failure to Register or Lapse of Effectiveness" from the Subscription
Agreement by and between Bion Environmental Technologies, Inc. and Centerpoint
Corporation dated January 2002. Management believes that it is in the best
interests of the Company's shareholders that these obstacles to a possible
future financing be removed.
As consideration to Centerpoint for canceling the sections noted above, the
Company forgave all amounts due from Centerpoint, totaling approximately
$500,000. In addition, the Company returned to Centerpoint for cancellation,
warrants to purchase one million shares of Centerpoint.
14
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Statements made in this Form 10-QSB that are not historical or current
facts are "forward-looking statements" within the meaning of section 27A of
the Securities Act of 1933, as amended (the "Securities Act") and section 21E
of the Securities Exchange Act of 1934, as amended. 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.
Bion intends that such forward-looking statements be subject to the safe
harbors for such statements. We wish to caution readers not to place undue
reliance on any such forward-looking statements, which speak only as of the
date made. Any forward-looking statements represent management's best
judgment as to what may occur in the future. However, forward-looking
statements are subject to risks, uncertainties and important factors beyond
our control that could cause actual results and events to differ materially
from historical results of operations and events and those presently
anticipated or projected.
These factors include adverse economic conditions, entry of new and
stronger competitors, inadequate capital, unexpected costs, failure to gain
product approval in the United States or foreign countries and failure to
capitalize upon access to new markets. Additional risks and uncertainties
that may affect forward-looking statements about Bion's business and prospects
include the possibility that a competitor will develop a more comprehensive or
less expensive environmental solution, delays in market awareness of Bion and
our systems and soil, or possible delays in Bion's marketing strategies, each
of which could have an immediate and material adverse effect by placing us
behind our competitors. 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 should be read in conjunction with our
consolidated financial statements and accompanying notes.
Lack of Review by Independent Certified Public Accountants
This Form 10-QSB has not been reviewed by BDO Seidman, LLP, our
independent certified public accountants, as required by Item 310(b) of
Regulation S-B. BDO Seidman, LLP has not performed the review because they
have not yet reviewed the impact on the Company's accounts and operations of
the various items disclosed in our Report on Form 8-K dated February 7, 2003.
We are not aware of any dispute with BDO Seidman, LLP as to any accounting
matters.
Overview
Bion Environmental Technologies, Inc. provides waste management solutions
to the agricultural industry, focusing on livestock waste from confined animal
feeding operations ("CAFOs"), such as large dairy and hog farms. We are
currently engaged in two main areas of activity:
* waste stream remediation and reduction of atmospheric emissions and
* organic soil and fertilizer production.
15
Our waste remediation and reduction of atmospheric emissions service
business provides CAFOs (primarily in the swine and dairy industries) with
treatment for the animal waste outputs. In this regard, we microbiologically
treat their entire waste stream, reducing air emissions and nutrient
discharges, while creating value-added organic soil and fertilizer products.
Bion's soil and fertilizer products are being used for a variety of
topdressing applications including school athletic fields, golf courses and
home and garden applications.
Our Nutrient Management System (NMS) is a patented biological and
engineering process that treats water, nutrient and air pollution associated
with animal waste. The system also provides a use for the waste materials and
solids by biologically converting them into environmentally friendly,
time-release organic-based solids that are the basis of our organic soil and
fertilizer business segment. Our BionSoil(R) and Bion Fertilizer product
lines contain a unique mix of organic nutrients, bacteria and other microbes
that extensive testing has shown produces superior plant growth with reduced
leaching of nutrients when compared to traditional chemical fertilizers.
We have been conducting business since 1989. Our original systems were
wastewater treatment systems for dairy farms and food processing plants. The
basic design was modified in late 1994 to create a NMS that produces organic
soil products as a by-product of remediation of the waste stream when
installed on large dairies or swine farms. Through June 2000, we sold and
subsequently installed, in the aggregate, 32 of these first generation systems
in 7 states, of which 19 are still in operation through December 2002. Of
theses 19 systems, 12 are first generation Bion NMS soil production system
installations and 7 are waste only systems. Since June 30, 2000 we have not
installed any new NMS systems since our concentration has been on research and
the development of our second generation system.
We also have an ongoing research program related to our BionSoil(R) and
Bion Fertilizer product lines. This research and development includes work
related to harvest and processing, blending of specialty product mixes for
specific market segments and tests of the effectiveness of BionSoil(R) and
Bion Fertilizer blends in a number of plants in a variety of growing
environments.
As the development program described above moved forward during the 2001
and 2002 fiscal years, our focus shifted from sales of first generation
systems to pre-marketing the system capabilities and the economics of our
second generation NMS. We have recently initiated marketing Bion's second
generation system. We anticipate that we will begin leasing our first second
generation system in the summer of 2003 and receive approximately $22,000 a
month in lease revenue.
The nutrient management capabilities of this new generation of systems
will help break one of the major barriers facing those portions of the dairy
and protein growing businesses in the U.S. which desire to expand. Our second
generation system will allow businesses in these markets to meet ever stricter
environmental standards for larger farms and raise more animals on less land
while meeting or exceeding all requirements to protect the environment.
16
Critical Accounting Policies and Significant Use of Estimates in Financial
Statements
The Securities and Exchange Commission ("SEC") recently issued disclosure
guidance for "critical accounting policies." The SEC defines "critical
accounting policies" as those that require application of management's most
difficult, subjective or complex judgments, often as a result of the need to
make estimates about the effect of matters that are inherently uncertain and
may change in subsequent periods.
The following list of critical accounting policies is not intended to be a
comprehensive list of all of our accounting policies. Our significant
accounting policies are more fully described in Note 3 to the consolidated
financial statements included in this Quarterly Report on Form 10-QSB and in
Note 2 to the consolidated financial statements included in our Annual Report
on Form 10-KSB/A. In many cases, the accounting treatment of a particular
transaction is specifically dictated by generally accepted accounting
principles with no need for management's judgment in their application. There
are also areas in which management's judgment in selecting any available
alternative would not produce a materially different result. We have
identified the following to be critical accounting policies of the Company:
Revenue recognition: BionSoil(R) sales are recognized upon delivery of
soil to customer and all risks and rewards of ownership pass to the customer.
Stock-based compensation: The Company accounts for its stock-based
compensation arrangements with its employees in accordance with the provisions
of Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" and complies with the disclosure provisions of SFAS 123,
"Accounting for Stock-Based Compensation." SFAS 123 established a
fair-value-based method of accounting for stock-based compensation plans.
Stock-based awards to non-employees are accounted for at fair value in
accordance with the provisions of SFAS 123.
Income taxes: Deferred income taxes are determined by applying enacted
statutory rates in effect at the balance sheet date to the differences between
the tax bases of assets and liabilities and their reported amounts in the
consolidated financial statements. A valuation allowance is provided based on
the weight of available evidence, if it is considered more likely than not
that some portion, or all, of the deferred tax assets will not be realized.
Claims receivable: Claims receivable are valued through an internal
allocation made by Bion management based on its own evaluation of the relevant
facts and circumstances and its review of a fairness opinion that was provided
by an investment banking firm with regard to the transaction as a whole. The
rights to 65% of these claims were ultimately assigned to OAM. The rights to
35% of the claims remained with Centerpoint and are included in the
consolidated financial statements of the Company. This analysis requires the
Company to make significant estimates, and changes in facts and circumstances
could result in material changes in the valuation of the claims receivable.
Contingencies: Management is unable to make a reasonable estimate of the
liabilities that may result from the final resolution of certain litigation
matters disclosed. Further assessments of the potential liability will be
made as additional information becomes available. Management currently does
not believe that these proceedings will have a material adverse affect on the
Company's consolidated financial position. It is possible, however, that
results of operations could be materially affected by changes in management's
assumptions relating to these proceedings or the actual final resolution of
these proceedings.
17
Results of Operations - Comparison of Six Months Ended December 31, 2002
with Six Months Ended December 31, 2001
We recorded $109,000 of soil sales during the six months ended December
31, 2002 (the "2003 Six Months"). This compares to soil sales of $29,000 for
the six months ended December 31, 2001 (the "2002 Six Months"). In the 2003
Six Months we began harvesting the solids from three of our first generation
nutrient management systems. We did not harvest any solids from these systems
in the 2002 Six Months as we were focusing our efforts on the development of
our second generation system. The increase in solids allowed us to sell more
soil during the 2003 Six Months compared to the 2002 Six Months. Cost of soil
was $387,000 for the 2003 Six Months and $243,000 for the 2002 Six Months.
The increase in cost of goods sold was principally due to an increase in
sales. The decrease in the gross loss as a percentage of sales is principally
the result of economies of scale.
General and administrative expenses increased to $1,364,000 for the 2003
Six Months from $1,213,000 for the 2002 Six Months. The increase is primarily
attributable to an increase in legal fees of $131,000 due to increased legal
costs associated with structuring a future private placement and the
preparation of agreements with California State University, Fresno, DeVries
Dairy and Dairy Properties, LLC, an increase in tax and accounting fees of
$97,000 primarily due to expenses incurred to complete outstanding tax returns
for Centerpoint and an increase in licensing fees of $50,000 for the
BioBalance patent. These increases were offset by a decrease in salaries of
$99,000.
Research and development costs decreased to $335,000 for the 2003 Six
Months from $397,000 for the 2002 Six Months. This decrease is primarily the
result of the construction during the 2002 Six Months of the second generation
prototype system built at Dreammaker Dairy. We did not incur construction
costs on the prototype during the 2003 Six Months.
Non-cash expenses for services and compensation decreased to income of
$8,000 for the 2003 Six Months from an expense of $501,000 for the 2002 Six
Months. During the 2003 Six Months, non-cash charges for services and
compensation consisted of $300,000 in convertible notes issued as management
fees to the Trust Under Deferred Compensation Plan for D2Co, LLC (the "Trust")
and amortization for the value of options issued of $19,000. These expenses
were offset by income in the amount of $327,000 from the reduction in the
value of the Company's common stock previously issued to the Trust. During
the 2002 Six Months, non-cash charges for services and compensation consisted
of amortization expense for the value of options previously issued to various
individuals of $136,000, management fees to D2 of $250,000, common stock
issued to individuals with a value of $77,000 and the reduction of a note
receivable for services of $41,000. These amounts were offset by the reversal
of a charge previously taken for variable options of $3,500.
Interest expense decreased to $2,400 for the 2003 Six Months from
$2,541,000 for the 2002 Year. The decrease is primarily the result of the
conversion of all outstanding debt to common shares of the Company on January
15, 2002.
Results of Operations - Comparison of Three Months Ended December 31, 2002
with Three Months Ended December 31, 2001
We recorded $63,000 of soil sales during the three months ended December
31, 2002 (the "2003 Quarter"). This compares to soil sales of $16,000 for the
three months ended December 31, 2001 (the "2002 Quarter"). In the 2003
Quarter we began harvesting the solids from three of our first generation
nutrient management systems. We did not harvest any solids from these systems
18
in the 2002 Quarter as we were focusing our efforts on the development of our
second generation system. The increase in solids allowed us to sell more soil
during the 2003 Quarter compared to the 2002 Quarter. Cost of soil was
$191,000 for the 2003 Quarter and $124,000 for the 2002 Quarter. The increase
in cost of goods sold was principally due to an increase in sales. The
decrease in the gross loss as a percentage of sales is principally the result
of economies of scale.
General and administrative expenses increased to $727,000 for the 2003
Quarter from $591,000 for the 2002 Quarter. The increase is primarily
attributable to an increase in legal fees of $81,000 due to our efforts to
register shares of common stock and obtain additional financing, an increase
in accounting fees of $91,000 primarily due to expenses incurred to complete
outstanding tax returns for Centerpoint and an increase in licensing fees of
$25,000. These increases were offset by a decrease in salaries of $14,000, a
decrease in rents of $17,000 and a decrease in travel of $29,000.
Research and development costs remained approximately the same for the
2003 Quarter and the 2002 Quarter.
Non-cash expenses for services and compensation decreased to $55,000 for
the 2003 Quarter from $277,000 for the 2002 Quarter. During the 2003 Quarter,
non-cash charges for services and compensation consisted of $150,000 in
convertible notes issued as management fees to the Trust and $10,000 for
amortization of the value of options previously issued. These amounts were
offset by income in the amount of $105,000 from the reduction in the value of
the Company's common stock previously issued to the Trust. During the 2002
Quarter, non-cash charges for services and compensation consisted of
amortization expense for the value of options previously issued to various
individuals of $59,000, management fees to D2 of $125,000, common stock issued
to individuals with a value of $68,000 and the reduction of a note receivable
for services of $25,000.
Interest expense decreased to $2,400 for the 2003 Quarter from $1,421,000
for the 2002 Quarter. The decrease is primarily the result of the conversion
of all outstanding debt to common shares of the Company on January 15, 2002.
Seasonality
Bion's installation capability is restricted in cold weather climates to
approximately eight months per year. However, when weather conditions limit
construction activity in southern market areas, projects in northern markets
can proceed, and when northern area weather is inappropriate, southern
projects can proceed. BionSoil(R) harvests on the existing installed base is
semi-annual and is timed for spring and fall, with harvested soils being
available for sale shortly after harvesting. BionSoil(R) and Bion Fertilizer
product sales are expected to exhibit a somewhat seasonal sales pattern with
emphasis on spring, summer and fall sales.
Liquidity and Capital Resources
Our principal sources of liquidity, which consist of cash and cash
equivalents, are $122,000 as of December 31, 2002. We believe we will not
generate sufficient operating cash flow to meet our needs and we are currently
seeking external financing. There can be no assurances that any financing
will be available or that the terms will be acceptable to us, or that any
financing will be consummated. Any failure on our part to do so will have a
material adverse impact on us and may cause us to cease operations.
19
We were successful during the year ended June 30, 2001 in raising working
capital through the sale of warrants and convertible debt. During the year
ended June 30, 2001 we raised $2,527,000 in a private placement in the form of
convertible bridge notes. In addition, Southview, Inc., a related party, had
advanced the Company funds totaling $518,000 as of June 30, 2001. During the
year ended June 30, 2002 we raised net working capital of $4,800,000.
All outstanding convertible debt of the Company was converted into shares
of the Company's common stock on January 15, 2002 due to the Centerpoint
transaction based upon agreed terms. These notes totaling $14,256,779 were
converted at $7.50 per share, which was the same price per share of the shares
purchased by Centerpoint. The total shares issued for the conversion of these
notes were 1,900,911.
During the period January 10, 2003 through February 13, 2003, D2 advanced
the Company $245,000.
At approximately the close of business on February 11, 2003, we were
informed by potential investors that they would not proceed with a planned
financing because of current market conditions. As a result, we were unable
to proceed with a pending bridge financing because the bridge financing was
intended to be repaid from funds that were to be provided from the expected
financing that was terminated by the potential investors. Due to liquidity
issues, we have informed all of our employees that we do not currently have
enough cash on hand to pay our employees after February 15, 2003.
Although we are currently seeking other sources of capital, as of this
date we have not been able to secure financing that is necessary for our
current and future operations and there can be no assurance that sufficient
funds will be available from external sources. 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
our existing shareholders. Since we do not yet have the ability to generate
cash flow from operations, we will be forced to substantially curtail or cease
our current business activities if we are not able to immediately raise
capital from outside sources. This would have a material adverse effect on
our business and our shareholders.
The level of funding required to accomplish our objectives is ultimately
dependent on the success of our research and development efforts, which at
this time is unknown. Currently, we estimate that no less than approximately
$650,000 will be required for continued research and development efforts which
includes construction of the system at Devries Dairy and the engineering for
the system at the California Agricultural Technology Institute at California
State University, Fresno. In addition, we would need additional funds for
continued general and administrative expenses and funds to satisfy our
existing creditors.
Going Concern
In connection with their report on our Consolidated Financial Statements
as of and for the year ended June 30, 2002, BDO Seidman, LLP, our independent
certified public accountants, expressed substantial doubt about our ability to
continue as a going concern because of recurring net losses and negative cash
flow from operations.
20
We have stockholders' equity of $441,000, a cumulative deficit of
$57,959,000, limited current revenues and substantial current operating
losses. Our operations are not currently profitable; therefore, readers are
further cautioned that our continued existence is uncertain if we are not
successful in obtaining outside funding in an amount sufficient for us to meet
our operating expenses at our current level. Management is currently engaged
in seeking additional capital to fund operations until Bion system and
BionSoil(R) sales are sufficient to fund operations.
Consolidated Working Capital
Consolidated working capital is a negative $395,000 at December 31, 2002
compared to a positive $1,665,000 at June 30, 2002. This change is primarily
the result of operating cash outflows of $1,574,000 and purchases of property
and equipment of $116,000 during the 2003 Six Months.
Analysis of Cash Flows
Cash used in operating activities decreased to $1,574,000 in the 2003 Six
Months from $1,707,000 in the 2002 Six Months. The decrease is primarily the
result of an increase in accounts payable and accrued expenses of $480,000 and
an increase in inventory of $144,000.
Cash used in investing activities increased to $116,000 in the 2003 Six
Months compared to $13,000 cash used in investing activities in the 2002 Six
Months. The increase is the result of property and equipment purchases
relating to soil processing made in the 2003 Six Months.
Cash used in financing activities decreased to $1,000 in the 2003 Six
Months compared to $466,000 of cash provided by financing activities in the
2002 Six Months. The decrease is primarily the result of the pay down of the
principal balance of capital leases. In addition, the 2002 Six Months
included proceeds of $120,000 from the exercise of stock options and proceeds
of $355,000 from the issuance of notes payable to related parties.
We currently have no commitments for material capital expenditures.
Item 3. Controls and Procedures
Under the supervision and with the participation of our management,
including our principal executive officer and principal financial officer, we
have evaluated the effectiveness of the design and operation of our disclosure
controls and procedures within 90 days of the filing date of this quarterly
report, and, based on their evaluation, our principal executive officer and
principal financial officer have concluded that these controls and procedures
are effective. There were no significant changes in our internal controls or
in other factors that could significantly affect these controls subsequent to
the date of their evaluation.
Disclosure controls and procedures are our controls and other procedures
that are designed to ensure that information required to be disclosed by us in
the reports that we file or submit under the Exchange Act is recorded,
processed, summarized and reported, within the time periods specified in the
Securities and Exchange Commission's rules and forms. Disclosure controls and
procedures include, without limitation, controls and procedures designed to
ensure that information required to be disclosed by us in the reports that we
file under the Exchange Act is accumulated and communicated to our management,
including our principal executive officer and principal financial officer, as
appropriate to allow timely decisions regarding required disclosure.
21
PART II
Item 1. Legal Proceedings
On July 22, 2002, Thomas Keith Barefoot ("Barefoot"), doing business as
Quin Deca Farm ("Quin Deca"), an unaffiliated party, filed a complaint against
the Company in the Superior Court of the County of Harnett in the State of
North Carolina regarding the Company's first generation Bion NMS System on
Quin Deca Farm and the harvesting of BionSoil(R). The complaint includes
breach of contract claims asserting that the Company abandoned the NMS system
on Quin Deca Farm and the failure of the Company to harvest BionSoil(R). The
second claim is for fraud regarding misrepresentation of the state of the
technology of the first generation NMS. The third claim is for unfair and
deceptive trade practices for misrepresentation of the state of the technology
of the NMS System. The fourth claim is for negligent misrepresentation made
by Bion in connection with the work it performed and its suitability for the
intended purpose. The fifth claim is for equity/specific performance in that
Bion left Quin Deca with an economically and technically deficient waste
management system that cannot continue to be used without adequate and
alternative methods of waste removal. Quin Deca is seeking $830,000 in
damages plus punitive damages and to have its damages trebled, reasonable
attorney fees and principles of equity requiring Bion to install its second
generation Bion NMS system. The Company does not believe that the claim has
merit and that the ultimate resolution of this litigation will have a material
adverse effect on the Company, its operations or its financial condition.
Item 2. Changes in Securities
On December 31, 2002, the Company issued a convertible note for the D2
management fee to be paid to the Trust Under Deferred Compensation Plan for
D2CO, LLC ("Trust") for the three months ended December 31, 2002. The
convertible note was issued having an principal amount of $150,000 and pays
interest at 6% per annum, payable in shares of the Company's common stock.
The convertible note is convertible into shares of common stock in whole or in
part at the time of the Company's next equity financing, at the price of the
next equity financing. The securities described in this section were issued
by Bion in a transaction not involving a public offering. The Trust is a
sophisticated investor associated with a Director of the Company and had
access to complete information concerning the Company. The Trust made
representations that it was an "accredited" investor who was receiving the
securities with investment intent and not with the intent to distribute the
securities. The issuance of the securities was exempt from registration under
Section 4(2) of the Securities Act of 1933, as amended.
Item 5. Other Information
We had the following changes to our management:
Effective February 10, 2003, Mr. Salvatore Zizza resigned as our
President and Chief Operating Officer citing he was not able to devote the
time necessary to perform such duties.
On February 7, 2003, as a result of cost-cutting measures, Mr. David
Fuller has been terminated as our Principal Accounting Officer. The duties of
the Principal Accounting Officer will now be performed by Mr. Lawrence
Danziger, our Chief Financial Officer.
On February 14, 2002, Howard E. Chase and Andrew Gould resigned as
Directors. We are not aware of any disputes with either of these persons.
Copies of their resignation letters are attached as Exhibits 99.3 and 99.4.
22
Effective February 12, 2003, in order to eliminate an impediment to a
possible future financing, the Company entered into an agreement with
Centerpoint to immediately cancel Section 2.4 "Post-Closing Adjustment" and
Section 1.2(b) "Failure to Register or Lapse of Effectiveness" from the
Subscription Agreement by and between Bion Environmental Technologies, Inc.
and Centerpoint Corporation dated January 2002. Management believes that it
is in the best interests of the Company's shareholders that these obstacles to
a possible future financing be removed.
As consideration to Centerpoint for canceling the sections noted above,
the Company forgave all amounts due from Centerpoint, totaling approximately
$500,000. In addition, the Company returned to Centerpoint for cancellation,
warrants to purchase one million shares of Centerpoint.
Item 6. Exhibits and Reports on Form 8-K
The following documents are filed as exhibits to this Form 10-QSB,
including those exhibits incorporated in this Form 10-QSB by reference to a
prior filing of Bion under the Securities Act or the Exchange Act as indicated
in parenthesis:
Exhibit No. Description
10.1 Employment Agreement between Bion Environmental
Technologies, Inc. and Lawrence Danziger.
10.2 Letter of Intent between Bion Environmental Technologies,
Inc. and DeVries Dairy.
10.3 Agreement between the Agricultural Foundation of California
State University, Fresno and Bion Environmental
Technologies, Inc.
99.1 Certification by David J. Mitchell pursuant to Section 1350,
Chapter 63 of Title 18, United States Code, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.2 Certification by Lawrence R. Danziger pursuant to Section
1350, Chapter 63 of Title 18, United States Code, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.3 Resignation Letter from Howard Chase.
99.4 Resignation Letter from Andrew Gould.
Reports on Form 8-K
None.
23
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
Date: February 19, 2003 BION ENVIRONMENTAL TECHNOLOGIES, INC.
by: /s/ David J. Mitchell
-----------------------------------
David J. Mitchell
Chief Executive Officer
by: /s/ Lawrence R. Danzinger
-----------------------------------
Lawrence R. Danziger
Chief Financial Officer
24
CERTIFICATIONS PURSUANT TO RULE 13a-14 UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
I, David J. Mitchell, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Bion
Environmental Technologies, Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified
for the registrant's auditors any material weaknesses in internal
controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
/s/ David J. Mitchell
Date: February 19, 2003 ---------------------------------------
Name: David J. Mitchell
Title: Principal Executive Officer
25
CERTIFICATIONS PURSUANT TO RULE 13a-14 UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
I, Lawrence R. Danziger, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Bion
Environmental Technologies, Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified
for the registrant's auditors any material weaknesses in internal
controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
/s/ Lawrence Danzinger
Date: February 19, 2003 ----------------------------------------
Name: Lawrence Danziger
Title: Principal Financial Officer
26