-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Hi4u6LxrOE7Rx5NvdowURFviQ0dxUSGrPHWxm1bKRZVbyhk4rF1Wm/ucV1d/wYPA /3dwhuIVCTJ414r9/amg/Q== /in/edgar/work/0000948830-00-000490/0000948830-00-000490.txt : 20001025 0000948830-00-000490.hdr.sgml : 20001025 ACCESSION NUMBER: 0000948830-00-000490 CONFORMED SUBMISSION TYPE: 10QSB/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 20001024 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BION ENVIRONMENTAL TECHNOLOGIES INC CENTRAL INDEX KEY: 0000875729 STANDARD INDUSTRIAL CLASSIFICATION: [3590 ] IRS NUMBER: 841176672 STATE OF INCORPORATION: CO FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10QSB/A SEC ACT: SEC FILE NUMBER: 000-19333 FILM NUMBER: 744467 BUSINESS ADDRESS: STREET 1: 7921 SOUTHPARK PLACE SUITE 200 CITY: LITTLETON STATE: CO ZIP: 80120 BUSINESS PHONE: 3032940750 MAIL ADDRESS: STREET 1: 7921 SOUTHPARK PLACE SUITE 200 CITY: LITTLETON STATE: CO ZIP: 80120 FORMER COMPANY: FORMER CONFORMED NAME: RSTS CORP DATE OF NAME CHANGE: 19930328 10QSB/A 1 0001.txt SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-QSB/A Amendment No. 1 (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED September 30, 1999 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. ------------------------------------------------------ (Exact name of registrant as specified in its charter) Colorado 84-1176672 ------------------------------- -------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 555 17th Street, Suite 3310, Denver, Colorado 80202 --------------------------------------------- ---------- (Address of principal executive offices) (Zip Code) (303) 294-0750 ---------------------------------------------------- (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 ___ The number of shares outstanding of registrant's classes of common stock, as of November 10, 1999: Common Stock, No Par Value, 10,302,381 Transitional Small Business Disclosure Format (Check one): Yes ___ No X TABLE OF CONTENTS PART I FINANCIAL INFORMATION PAGE NO. ITEM 1 FINANCIAL STATEMENTS Consolidated Balance Sheets: June 30, 1999 (Audited) and September 30, 1999 (Unaudited) 3 Unaudited Consolidated Statements of Operations and Comprehensive Loss: For the Three Month Periods Ended September 30, 1998 and September 30, 1999 4 Unaudited Consolidated Statement of Changes in Stockholders' Deficit for the Period June 30, 1999 through September 30, 1999 5 Unaudited Consolidated Statements of Cash Flows: For the Three Month Periods Ended September 30, 1998 and September 30, 1999 6-7 Notes to Unaudited Consolidated Financial Statements 8-14 ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 15-19 PART II OTHER INFORMATION ITEMS 1-6 19-21 2 PART I Financial Information ITEM 1. Financial Statements BION ENVIRONMENTAL TECHNOLOGIES, INC. Consolidated Balance Sheet
September 30, 1999 June 30, 1999 (Unaudited) (Audited) ------------------ ------------- Assets Current assets Cash and cash equivalents $ 21,563 $ 55,583 Accounts receivable (Net of allowance of $2,000) 60,932 60,452 Contract receivables (net of allowance of $10,000) 11,310 33,310 Mortgage Receivables held for sale -- 260,000 Prepaid consulting service, current portion 240,000 240,000 ------------ ------------ Total current assets 333,805 649,345 ------------ ------------ Property and equipment Computers and equipment 316,967 316,967 Accumulated depreciation (160,260) (146,207) ------------ ------------ 156,707 170,760 ------------ ------------ Other assets Prepaid consulting service, long-term portion 300,000 360,000 Other prepaid assets 193,235 86,735 Patents, net 39,026 39,834 Deposits and other 11,072 10,557 ------------ ------------ Total other assets 543,333 497,126 ------------ ------------ Total assets $ 1,033,845 $ 1,317,231 ============ ============ Liabilities and Stockholders' Deficit Current liabilities Accounts payable $ 347,704 $ 340,202 Accounts payable - related party 7,499 17,924 Convertible related party notes payable and accrued interest 216,596 210,589 Capital lease obligations 48,340 55,688 Accrued expenses 26,098 31,740 Accrued payroll 386,628 319,461 ------------ ------------ Total current liabilities 1,032,865 975,604 Long-term liabilities Convertible Related party notes payable and accrued interest, net of unamortized discount of $314,542 and $0 3,463,795 3,113,219 Capital lease obligations 31,695 37,196 ------------ ------------ Total liabilities 4,528,355 4,126,019 ------------ ------------ Commitments and contingencies Stockholders' deficit Common stock, no par value, 100,000,000 shares 12,798,231 12,060,705 authorized, 1,231,631 shares issued and outstanding Common stock subscribed -- 60,000 Accumulated deficit (16,292,741) (14,929,493) ------------ ------------ Total stockholders' deficit (3,494,510) (2,808,788) ------------ ------------ Total liabilities and stockholders' deficit $ 1,033,845 $ 1,317,231 ============ =============
See notes to unaudited consolidated financial statements. 3 BION ENVIRONMENTAL TECHNOLOGIES, INC. Unaudited Consolidated Statements of Operations Three Months Ended September 30, --------------------------- 1999 1998 ------------ ----------- Soil sales $ 43,948 $ 28,372 System contract revenues -- 35,500 ------------ ----------- Total revenues 43,948 63,872 Contract costs 99,463 122,841 ------------ ----------- Gross (loss) (55,515) (58,969) General and administrative expenses 1,023,859 382,475 Research and development 88,816 66,999 ------------ ----------- Loss from operations (1,168,190) (508,443) Other income (expense) Interest income 3,474 17 Interest expense (146,040) (15,148) Other income/expense, net 4,758 (2,659) Loss of Sale of Mortgage Receivable (57,250) -- ------------ ----------- Net loss and comprehensive loss $ (1,363,248) $( 526,233) ============ =========== Basic and diluted loss per common share $ (0.13) $ (0.06) ============ =========== Weighted common shares outstanding 10,200,378 8,833,960 ============ =========== See notes to unaudited consolidated financial statements. 4 BION ENVIRONMENTAL TECHNOLOGIES, INC. Unaudited Consolidated Statement of Changes in Stockholders' Deficit
Non- Recourse Common Deferred Unearned Promissory Stock Consulting Compen- Accumulated Shareholders' Shares Amount Note Subscribed Expense sation Deficit Deficit - --------------------------------------------------------------------------------------------------------------------------------- Balance, June 30, 1999 10,092,795 $12,060,705 - $ 60,000 - - $(14,929,493) $(2,808,788) Conversion of common stock subscriptions to note payable - - - $ (60,000) - - - (60,000) Issuance of warrants to note holders - 349,492 - - - - - 349,492 Warrants issued for consulting services - 144,133 - - - - - 144,133 Issuance of common stock for cash 66,667 100,000 - - - - - 100,000 Issuance of common stock for services 72,169 143,901 - - - - - 143,901 Net (loss) for the period ended September 30, 1999 - - - - - - (1,363,248) (1,363,248) - --------------------------------------------------------------------------------------------------------------------------------- Balances at September 30, 10,231,631 $12,798,231 - $ - - - $(16,292,741) $(3,494,510) =================================================================================================================================
See notes to unaudited consolidated financial statements. 5 BION ENVIRONMENTAL TECHNOLOGIES, INC. Unaudited Consolidated Statements of Cash Flows
Three Months Ended September 30, ------------------------- 1999 1998 ----------- ---------- Cash flows from operating activities Net loss $(1,363,248) $(526,233) Adjustments to reconcile net loss to net cash used in operating activities - Depreciation and amortization 14,053 14,044 Amortization of debt discount 34,950 - Issuance of warrants for consulting services 144,133 - Issuance of stock for services, compensation and interest 143,901 10,725 Issuance of subscribed stock for services (60,000) 11,500 Issuance of note payable for consulting services 60,000 - Loss on sale of mortgage receivables 57,250 - Changes in assets and liabilities - - - Receivables 21,520 (863) Prepaid expenses and other (107,015) 29 Accounts payable (2,923) 34,832 Accrued liabilities 61,525 51,493 ----------- --------- Net cash used in operating activities (995,854) (404,473) ----------- --------- Cash flows from investing activities Purchases of equipment - (2,969) Investment in patents 808 - ----------- --------- Net cash (used in) provided by investing activities 808 (2,969) ----------- --------- Cash flows from financing activities Proceeds from sale of mortgages 202,750 - Proceeds from notes payable 671,125 175,000 Proceeds from stock and stock subscription issuances 100,000 161,674 Proceeds from exercise of options and warrants - 82,500 Payments on capital lease obligations (12,849) (17,006) ----------- --------- Net cash provided by financing activities 961,026 402,168 ----------- --------- Net decrease in cash and cash equivalents (34,020) (5,274) Cash and cash equivalents at beginning of period 55,583 19,104 ----------- --------- Cash and cash equivalents at end of period $ 21,563 $ 13,830 ========== =========
Continued on following page. See notes to unaudited consolidated financial statements. 6 BION ENVIRONMENTAL TECHNOLOGIES, INC. Unaudited Consolidated Statements of Cash Flows Continued from previous page. Supplemental disclosure of cash flow information Cash paid during the quarter for interest was $3,129 (1999) and $4,437 (1998). Supplemental disclosures of non-cash financing activities for the quarter ended September 30, 1998- Converted $1,500 of common stock subscribed into 300 shares of common stock. Supplemental disclosure of non-cash financing activities for the quarter ended September 30, 1999. Issued warrants with a value of $349,924 in connection with convertible related party notes payable. See notes to unaudited consolidated financial statements. 7 BION ENVIRONMENTAL TECHNOLOGIES, INC. Notes to Unaudited Consolidated Financial Statements Note 1 - Restatement - -------------------- In connection with the audit of the Company's Financial Statements for the fiscal year ended June 30, 2000, management determined that the Company should make certain non-cash adjustments to its accounting throughout the fiscal year. The cumulative effects of these adjustments were reflected in the financial statements contained in the Company's Annual Report for the 2000 fiscal year. The Company has made certain non-cash adjustments in its accounting for the first quarter to reflect the value of warrants issued in connection with related party notes payable as a warrant discount on the debt by recording a warrant discount during the first quarter on the related party notes payable of $349,492 (valued in accordance with the Black-Scholes model) to be amortized to interest expense over the term of the debt ($34,950 for the three months ended September 30, 1999), and by reflecting consulting expense of $144,133 during July 1999 related to the value of warrants issued for consulting services (valued in accordance with the Black-Scholes model) to an entity affiliated with a shareholder. As a result of the above, the Company has restated the financial statements contained in the Form 10-QSB for the three months ended September 30, 1999. For the three months ended September 30, 1999, the Company increased general and administrative expenses from $879,726 to $1,023,859 and increased interest expense from $111,089 to $146,040, resulting in an increase in the net loss and comprehensive loss from $1,184,165 to $1,363,248 and an increase in the basic and diluted loss per common share from $0.12 per share to $0.13 per share. As of September 30, 1999, related party notes payable and accrued interest decreased from $3,778,337 to $3,463,795 due to the unamortized warrant discount of $314,542. The Company increased the accumulated deficit from $16,113,658 to $16,292,741 and decreased the total stockholders' deficit from $3,809,052 to $3,494,510. Note 2 - Summary of Accounting Policies - --------------------------------------- The summary of the significant accounting policies of Bion Environmental Technologies, Inc. ("Company") is incorporated by reference to the Company's annual report on Form 10-KSB/A at June 30, 1999. The accompanying unaudited financial statements and disclosures reflect all adjustments (all of which are normal recurring accruals) in the ordinary course of business which in the opinion of management are necessary for a fair presentation of the results of operations, financial positions, and cash flow of the Company. The results of operations for the periods indicated are not necessarily indicative of the results for a full year. Note 3 - Continued Operations - ----------------------------- The accompanying financial statements have been prepared on a going concern basis which contemplates the realization of assets and liquidation of liabilities in the ordinary course of business. The Company has not yet begun earning significant revenue from its planned principal operations. Consequently, as of September 30, 1999, the Company has incurred accumulated 8 BION ENVIRONMENTAL TECHNOLOGIES, INC. Notes to Unaudited Consolidated Financial Statements Note 3 - Continued Operations (Continued) - ----------------------------------------- losses totaling $16,292,741, resulting in an accumulated stockholders' deficit of $3,494,510. Cash flows from current operations are not sufficient to meet the obligations of the Company. Management plans include continuing efforts to obtain additional capital to fund operations until contract sales along with sales of BionSoil(TM) are sufficient to fund operations. There can be no assurance that the Company will be able to successfully attain profitable operations or raise sufficient capital. Note 4 - Capital Structure - -------------------------- Because the Company has a relatively complex capital structure the following capital structure details are set forth: Common Stock - ------------ As of November 10, 1999 the Company had 10,302,381 shares of Common Stock issued and outstanding. Options - ------- Vesting Date Expires ------------ ------- Directors $ 1.55 11,112 Vested 08/19/02 $ 2.04 11,112 Vested 08/19/02 $ 2.91 11,112 Vested 11/17/03 $ 1.61 10,000 Vested 08/04/04 ------- Total Directors 43,336 Employees (Vested) $ 2.50 40,000 Vested 12/31/01 $ 2.70 27,778 Vested 12/31/02 $ 3.04 1,112 Vested 01/28/01 $ 3.60 3,334 Vested 03/03/00 $ 3.60 1,019 Vested 03/18/00 $ 3.60 2,693 Vested 05/17/00 $ 3.60 7,750 Vested 06/30/00 $ 3.60 19,445 Vested 08/01/00 $ 3.60 9,935 Vested 12/31/01 $ 3.60 19,525 Vested 12/31/02 $ 3.72 1,112 Vested 08/31/00 $ 4.05 1,112 Vested 11/30/00 $ 5.40 1,600 Vested 03/03/00 $ 5.40 1,226 Vested 05/17/00 $ 5.40 4,276 Vested 06/30/00 $ 5.40 15,485 Vested 12/31/01 $ 5.63 1,112 Vested 05/31/00 $ 7.20 37,753 Vested 12/31/01 $ 9.00 11,112 Vested 12/31/01 Total Vested 207,379 9 BION ENVIRONMENTAL TECHNOLOGIES, INC. Notes to Unaudited Consolidated Financial Statements Note 4 - Capital Structure (Continued) - -------------------------------------- Employees (Non-vested) $ 3.60 26,251 04/30/00 12/31/02 $ 3.60 26,251 04/30/01 12/31/02 $ 3.60 26,251 04/30/02 12/31/02 $ 3.60 10,000 08/01/00 12/31/02 $ 3.60 10,000 08/16/99 12/31/02 $ 5.40 10,613 11/19/99 12/31/02 $ 5.40 1,556 03/04/00 12/31/02 $ 5.40 1,038 03/16/00 12/31/02 $ 5.40 1,464 04/01/00 12/31/02 $ 5.40 1,038 06/01/00 12/31/02 $ 5.40 10,000 08/01/00 12/31/02 $ 5.40 1,038 09/01/00 12/31/02 $ 7.20 770 12/16/99 12/31/01 $ 7.20 1,334 02/03/00 12/31/01 $ 7.20 1,464 04/01/00 12/31/02 $ 7.20 18,381 04/30/00 12/31/02 $ 7.20 1,926 08/04/00 12/31/02 $ 7.20 1,482 08/11/00 12/31/02 $ 7.20 10,613 11/19/00 12/31/02 $ 7.20 1,556 03/04/01 12/31/02 $ 7.20 1,038 03/16/01 12/31/02 $ 7.20 18,381 04/30/01 12/31/02 $ 7.20 1,038 06/01/01 12/31/02 $ 7.20 10,000 08/16/01 12/31/02 $ 7.20 1,038 09/01/01 12/31/02 $ 7.20 18,381 04/30/02 12/31/02 $ 7.20 10,000 08/16/02 12/31/02 $13.50 28,898 04/30/00 12/31/02 $13.50 28,898 04/30/01 12/31/02 $13.50 28,898 04/30/02 12/31/02 Total Non-vested 309,596 Total Employees and Directors 560,311 10 BION ENVIRONMENTAL TECHNOLOGIES, INC. Notes to Unaudited Consolidated Financial Statements Note 4 - Capital Structure (Continued) - -------------------------------------- Warrants - -------- As of November 10, 1999, the Company has the following warrants outstanding: Warrant Shares Expiration Date Exercise Price Class G-5.1 1,115 (1) 2.70 Class G-5.2 919 (2) 2.70 Class G-6 3,148 (3) 5.40 Class G-8 27,779 (4) 5.40 Class H-1 11,112 (5) 4.50 Class H-2 16,112 (6) 2.70 Class H-9 11,112 (7) 9.00 Class H-9.1 11,112 (8) 11.25 Class H-9.2 11,112 (9) 7.20 Class H-9.3 11,112 (10) 13.50 Class H-9.4 11,112 (11) 5.40 Class H-10 18,519 (12) 3.60 Class H-11 18,519 (13) 3.60 Class H-12 27,778 (14) 2.70 Class H-14 18,519 (15) 3.60 Class H-15.1 26,251 (16) 3.60 Class H-15.2 26,251 (17) 3.60 Class H-15.3 26,251 (18) 3.60 Class H-15.4 18,381 (19) 7.20 Class H-15.5 18,381 (20) 7.20 Class H-15.6 18,381 (21) 7.20 Class H-15.7 28,898 (22) 13.50 Class H-15.8 28,898 (23) 13.50 Class H-15.9 28,898 (24) 13.50 Class H-16 412,000 (25) 2.25 Class H-17 18,519 (26) 7.20 Class I-1 4,167 (27) 5.40 Class K-1 55,556 (28) 5.40 Class X 4,428,969 (29) 8.00 Class Z 3,588,224 (30) 13.50 Class AA.01 15,000 (31) 5.40 --------- ----------- 8,942,105 $2.25-13.50 ========= =========== (1) Class G-5.1 Warrants may be exercised to purchase 1,115 shares of common stock for a 60 month period beginning January 22, 1996 and ending January 21, 2001. (2) Class G-5.2 Warrants may be exercised to purchase 919 shares of common stock for a 60 month period beginning September 13, 1996 and ending September 12, 2001. (3) Class G-6 Warrants may be exercised to purchase 3,148 shares of common stock for a 60 month period beginning April 21, 1997 and ending April 20, 2002. 11 BION ENVIRONMENTAL TECHNOLOGIES, INC. Notes to Unaudited Consolidated Financial Statements Note 4 - Capital Structure (Continued) - -------------------------------------- Warrants - -------- (4) Class G-8 Warrants may be exercised to purchase 27,779 shares of common stock for a 37 month period beginning June 5, 1997 and ending June 30, 2000. (5) Class H-1 Warrants may be exercised to purchase 11,112 shares of common stock for a 60 month period beginning August 21, 1996 and ending August 20, 2001. (6) Class H-2 Warrants may be exercised to purchase 16,112 shares of common stock for a 60 month period beginning August 21, 1996 and ending August 20, 2001. (7) Class H-9 Warrants may be exercised to purchase 11,112 shares of common stock for a 47 month period beginning February 1, 1997 and ending December 31, 2001. (8) Class H-9.1 Warrants may be exercised to purchase 11,112 shares of common stock for a 47 month period beginning February 1, 1997 and ending December 31, 2001. (9) Class H-9.2 Warrants may be exercised to purchase 11,112 shares of common stock for a 47 month period beginning February 1, 1997 and ending December 31, 2001. (10) Class H-9.3 Warrants may be exercised to purchase 11,112 shares of common stock for a 47 month period beginning February 1, 1997 and ending December 31, 2001. (11) Class H-9.4 Warrants may be exercised to purchase 11,112 shares of common stock for a 47 month period beginning February 1, 1997 and ending December 31, 2001. (12) Class H-10 Warrants may be exercised to purchase 18,519 shares of common stock for a 50 month period beginning November 2, 1998 and ending December 31, 2002. (13) Class H-11 Warrants may be exercised to purchase 18,519 shares of common stock for a 49 month period beginning December 1, 1998 and ending December 31, 2002. (14) Class H-12 Warrants may be exercised to purchase 27,778 shares of common stock for 34 month period beginning March 1, 1999 and ending December 31, 2002. (15) Class H-14 Warrants may be exercised to purchase 18,519 shares of common stock for a 25 month period beginning December 1, 1999 and ending December 31, 2002. 12 BION ENVIRONMENTAL TECHNOLOGIES, INC. Notes to Unaudited Consolidated Financial Statements Note 4 - Capital Structure (Continued) - -------------------------------------- Warrants - -------- (16) Class H-15.1 Warrants may be exercised to purchase 26,251 shares of common stock for a 32 month period beginning April 30, 2000 and ending December 31, 2002. (17) Class H-15.2 Warrants may be exercised to purchase 26,251 shares of common stock for a 20 month period beginning April 30, 2001 and ending December 31, 2002. (18) Class H-15.3 Warrants may be exercised to purchase 26,251 shares of common stock for a 8 month period beginning April 30, 2002 and ending December 31, 2002. (19) Class H-15.4 Warrants may be exercised to purchase 18,381 shares of common stock for a 32 month period beginning April 30, 2000 and ending December 31, 2002. (20) Class H-15.5 Warrants may be exercised to purchase 18,381 shares of common stock for a 20 month period beginning April 30, 2001 and ending December 31, 2002. (21) Class H-15.6 Warrants may be exercised to purchase 18,381 shares of common stock for a 8 month period beginning April 30, 2002 and ending December 31, 2002. (22) Class H-15.7 Warrants may be exercised to purchase 28,898 shares of common stock for a 32 month period beginning April 30, 2000 and ending December 31, 2002. (23) Class H-15.8 Warrants may be exercised to purchase 28,898 shares of common stock for a 26 month period beginning April 30, 2001 and ending December 31, 2002. (24) Class H-15.9 Warrants may be exercised to purchase 28,898 shares of common stock for a 8 month period beginning April 30, 2002 and ending December 31, 2002. (25) Class H-16 Warrants may be exercised to purchase 412,000 shares of common stock for a 24 month period beginning January 1, 2000 and ending December 31, 2001. (26) Class H-17 Warrants may be exercised to purchase 18,519 shares of common stock for a 25 month period beginning December 1, 2000 and ending December 31, 2002. (27) Class I-1 Warrants may be exercised to purchase 4,167 shares of common stock for approximately a 42 month period beginning June 9, 1998 and ending December 31, 2001. 13 BION ENVIRONMENTAL TECHNOLOGIES, INC. Notes to Unaudited Consolidated Financial Statements Note 4 - Capital Structure (Continued) - -------------------------------------- Warrants - -------- (28) Class K-1 Warrants may be exercised to purchase 55,556 shares of common stock for a 19 month period beginning March 1, 1998 and ending October 1, 1999. (29) Class X Warrants may be exercised to purchase 4,428,969 shares of common stock for a 24 month period beginning January 1, 2000 and ending December 31, 2001. (30) Class Z Warrants may be exercised to purchase 3,588,224 shares of common stock for a 24 month period beginning January 1, 2000 and ending December 31, 2001. (31) Class AA.01 Warrants may be exercised to purchase 15,000 shares of common stock for approximately a 28-month period beginning August 12, 1999 and ending December 31, 2001. At November 10, 1999, there were warrants exercisable to purchase 255,284 shares of common stock. Note 5 - Subsequent Events - -------------------------- During the month of October 1999 we issued 70,750 shares of free trading stock under our Fiscal Year 1994 Incentive Plan to six employees. For the period October 1, 1999 through November 10, 1999, we received $171,827 of additional money from a shareholder. The shareholder received 171,827 Class X warrants and the total principal and interest can be converted into restricted stock at $1.80 per share. 14 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS The discussion below contains forward-looking statements (denoted with asterisk (*) at the end of each such statement) made in reliance upon the provisions of Rule 175 promulgated under the Securities Act of 1933 and should be read in conjunction with the Company's consolidated financial statements and the Notes thereto. This discussion is qualified in its entirety by the risk factors discussed herein. Management's Discussion of Financial Condition and Results of Operations - ------------------------------------------------------------------------ Financial Condition and Results of Operations --------------------------------------------- The financial statements contained in this 10-QSB show more than $12,300,000 being invested in Bion as of September 30, 1999. We have a negative net worth of $3,494,510, accumulated deficit of $16,292,741, limited current revenues, and substantial current operating losses. (Note that the negative net worth is approximately equal to the outstanding long-term debt to management and major shareholders, the largest part of which is convertible into Bion's restricted and legended common stock.) 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 plans to continue raising additional capital to fund operations until Bion system and BionSoil sales are sufficient to fund operations. Bion NMS system and BionSoil sales require additional expenditures. Our system sales require additional personnel and significant capital expenditures, which will generally increase our overhead. BionSoil product sales and marketing requires wholesaler and retailer distribution networks (which may require permitting in some locations) and additional expenditures for personnel and equipment to harvest, process, package, sell, and deliver our products. We are continually negotiating with independent third parties and related parties to obtain the necessary additional funding for us. Although management believes that there is a reasonable basis to remain optimistic, no assumption can be made that we will be able to successfully attain profitable operations and/or raise sufficient capital to sustain operations. Liquidity and Capital Resources ------------------------------- Our Consolidated Balance Sheet shows Current assets of $333,805 and Total assets of $1,033,845. Our current and total liabilities as of September 30, 1999 are $1,032,865 and $4,528,355, respectively. Total assets decreased by $283,386 from June 30, 1999. This change is primarily attributable to the sale of the mortgage receivables (see our 10-KSB/A dated June 30, 1999). Cash and cash equivalents decreased $34,020 from June 30, 1999. Our current ratio (current assets / current liabilities) is 0.32 as of September 30, 1999 as compared to 0.67 as of June 30, 1999. 15 Total liabilities increased $402,336 in the three month period ended September 30, 1999. Accrued salaries and notes payable increased by $67,167 and $350,576, respectively. The notes payable increase were to related parties or employees. During the three months ended September 30, 2000, we recorded a discount of $349,492 related to warrants issued in connection with the related party notes payable. Interest expense of $34,950 was recorded during the three months ended September 30, 1999 in connection with amortization of the discount. Our Stockholders' Equity account reflects a total of 138,836 shares of common stock issued in the quarter ended September 30, 1999. We issued 66,667 shares of common stock for cash ($100,000), 72,169 shares of common stock for services ($143,901) recorded at the value of services provided and warrants for consulting expenses $(144,133) valued in accordance with the Black-Scholes model. Of these shares, we issued a total of 74,502 shares of legended and restricted common stock and 64,334 shares of unrestricted stock. The Company issued a note to an employee and as part of the note reclassified $60,000 of subscribed stock into the note payable. Results of Operations --------------------- Comparison of the Three Months Ended September, 30 1999 with the Three Months Ended September 30, 1998 ------------------------------------------------------- Revenue in the three months ended September 30, 1999 was $43,948 compared to $63,872 for the corresponding three month period in 1998, a decrease of $19,924. Contract costs were lower in the 1999 three month period by $23,378 due to decreased expenses associated with system design and New York BionSoil processing. The above resulted in a gross loss for the period ended September 30, 1999 of $55,515 as compared to a gross loss of $58,969 for the same three month period in 1998. No system sales occurred in the quarter ended September 30, 1999, due to hog industry and regulatory changes (see explanation below). General and administrative expenses were higher by $641,384 due to an increase in employee compensation ($107,000), professional expenses ($167,000), consulting expenses for warrants issued ($144,000), and investor relation expenses ($193,000) and other individually insignificant increases. The warrants issued for consulting services were valued in accordance with the Black-Scholes model. The Company recorded $146,040 in interest expense on its notes payable and $88,816 in research and development costs. Of the total interest expense, $34,950 represented amortization of debt discount recorded in connection with the issuance of warrants associated with related party notes payable. The Company also recorded a loss of $57,250 on the sale of the mortgage receivables in the quarter. As a result of the above, the Company recorded a net loss of $1,363,248 in the three month period ended September 30, 1999, compared to a net loss of $526,233 for the three month period ended September 30, 1998. The Company will need to increase sales significantly to obtain profitability. 16 Trends, Events and Uncertainties -------------------------------- Liquidity --------- We continue to have difficulty raising finances for operations. Funding for operations occurs primarily through equity financing. The following identifies cash sources from financing transactions over the past two fiscal years. Convertible Debt/Notes Stock Options Total LTLK $1,503,750 $ 282,750 -- $1,786,500 Other $300,000 $1,039,826 $889,938 $2,229,764 Total $1,803,750 $1,322,576 $889,938 $4,016,264 LoTayLingKyur, Inc. ("LTLK") has been the primary funding agent for Bion over the past year. LTLK is a major shareholder that continues to finance our operations. Without this funding the company would not be able to continue as a going concern. The Hog Market Impact --------------------- Our system sales growth was negatively impacted as a result of the recent extended deep depression in hog prices, which started in 1998. Prices reached a low of $9.00 per hundred weight in December 1998, down from $43.00 per hundred weight in December 1997. While these prices have trended up from the December 1998 low point, they still remain well below historic levels for the industry. These depressed prices are below the break-even point for many hog growers. The price drop and resulting hog industry losses have caused hog producers to reduce general and capital expenditures and curtail their expansion plans. This industry change has had a significant negative impact on our plans to sign additional contracts within the hog industry and has caused some growers to put systems covered by existing contracts on temporary hold. Management believes that over the next several quarters, if the strengthening in hog prices continues, it will result in more contracts being signed and work resuming (or commencing) on some existing contracts that have been slowed or put on hold.* As a result of the problems facing the hog industry, we have increased our focus on expanding Bion's presence in the dairy farm system markets to offset the reduction in hog system sales. To support this shift, as well as to gain access to the large western United States market, we have recently added sales personnel in California and the Pacific Northwest. Management believes that this recent expansion in conjunction with increasing hog prices may assist us in accelerating our system sales pace.* 17 Regulatory Environment ---------------------- We have experienced an adverse impact in selected regions due to changes and uncertainties in regulatory positions. For example, Colorado voters passed an amendment in November 1998 (Amendment 14) that places significant constraints on large hog farms in the state. The extended election campaign and subsequent rule making process completely stopped our progress on system contracts for 350,000 hogs on farms in Eastern Colorado. It is not likely that work will resume on this contract, nor for us to acquire significant additional contracts in Colorado, until this situation is completely resolved and a consistent regulatory practice is established.* We face a similar slow down of new contract activity in North Carolina as the result of a state wide moratorium on construction of new or expanded hog farms (retrofits of waste handling systems on existing farms are proceeding) which may be extended. Numerous other states, including without limitation, Georgia, Minnesota, Florida, California, and New York have adopted or are considering new regulations on large animal raising facilities. Additionally, litigation is in process in a number of states. The short term impact on our business has been negative but management believes the trend to stricter regulations will help our business in the long run.* There is growing activity at the state and federal levels to protect the environment from pollution caused by animal raising facilities. Although future regulations may benefit us in obtaining system contracts, the current ambiguity in the regulatory environment is causing farmers to delay implementation of waste treatment technologies.* For example, on March 9, 1999, Vice President Gore announced a federal strategy to decrease non-point source pollution of lakes, rivers, and streams caused by large livestock facilities. A joint effort by the Environmental Protection Agency and the Department of Agriculture developed the UNSAFO (Unified National Strategy for Animal Feeding Operations). UNSAFO will require large animal facilities to obtain Clean Water Act discharge permits and to develop nutrient management plans for animal feeding operations. UNSAFO will also require integrators, large livestock companies that contract with smaller operators to raise their animals, to share responsibility for meeting regulatory requirements. This strategy is not a new regulation nor is it a substitute for existing Federal regulations; however, it does give an indication of the potential regulatory environment. In addition, President Clinton and the EPA have indicated that they are planning on enforcing a provision of the Clean Water Act that requires states to assess the health of every body of water within their borders, determine the maximum allowable levels of pollutants for each one and then parcel out the responsibility for meeting these goals to individual polluters. This includes point and non-point source polluters. This increasing federal environmental activity along with similar changes at the state and local levels create an unpredictable regulatory environment. How these changes affect our business can not be identified with any precision at this time; however, we believe that more stringent requirements on the animal raising industry will improve our sales outlook.* 18 Year 2000 Issue --------------- We are aware of the issues associated with the programming code in existing computer systems as the millennium (year 2000) approaches. The year 2000 problem is pervasive and complex as virtually every computer operation will be affected in some way by the rollover of the two-digit year value to 00. The issue is whether computer systems will properly recognize date-sensitive information when the year changes to 2000. Systems that do not properly recognize such information could generate erroneous data or cause a system to fail. After a review of our computer systems and associated software, management does not believe year 2000 will have a material effect on our operations or financial condition. We can not predict the impact that year 2000 will have on our customers and vendors. Seasonality ----------- Our system sales and installation business is not seasonal in nature, except to the extent that weather conditions at certain times of the year in certain geographic areas may temporarily affect construction and installation of our systems. However, our projects and markets are geographically spread so that 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 and BionSoil product sales are expected to exhibit a somewhat seasonal sales pattern with emphasis on spring, summer, and fall sales. PART II Other Information ITEM 1. Legal Proceedings The Company knows of no material pending legal proceedings to which the Company (or the Subsidiary) is a party or to which any of its systems is the subject and no such proceedings are known to the Company. ITEM 2. Changes in Securities and Use of Proceeds The following securities were sold in the three month period ended September 30, 1999 without registration under the Securities Act of 1933, as amended: Warrants -------- - We issued a Class X Warrant to purchase 440,456 shares of restricted and legended common stock at $8.00 per share. The warrant is exercisable from January 1, 2000 to December 31, 2001. Bion received cash advances in consideration for this warrant for use in operations. See Note 4 of our 10-KSB/A dated June 30, 1999. - We issued a Class AA.01 Warrant to purchase 15,000 shares of restricted and legended common stock at $5.40 per share. The warrant is exercisable from August 12, 1999 to December 31, 2001. Bion received consulting services as consideration for this warrant. 19 - We issued a Class H.16 Warrant to purchase 56,000 shares of restricted and legended common stock at $8.00 per share. The warrant is exercisable from January 1, 2000 to December 31, 2001. Bion received employment services in consideration for this warrant. Common Stock ------------ - 66,667 shares of restricted and legended common stock to one private investor in a privately negotiated transaction for an aggregate amount of $100,000. - 7,835 shares of restricted and legended common stock to two consultants in lieu of cash for services rendered valued at, in aggregate, $12,835. Convertible Notes ----------------- - We added $504,230.18 of principal and interest to the convertible notes listed in Note 4 of notes to Consolidated Financial Statements in our 10-KSB/A dated June 30, 1999, and recorded a discount of $349,492. The shares of the Company's Common Stock which were issued pursuant to the transactions set forth above were issued in reliance upon the exemptions from registration afforded by Sections 3(b), 4(2), and/or other provisions of the Securities Act of 1933, as amended. Each of the persons to whom such securities were issued made an informed investment decision based upon negotiation with the Company and was provided with appropriate offering documents and access to material information regarding the Company. The Company believes that such persons had knowledge and experience in financial and business matters such that they were capable of evaluating the merits and risks of the acquisition of the Company's Common Stock in connection with these transactions. All certificates representing such common shares bear an appropriate legend restricting the transfer of such securities, except in accordance with the Securities Act of 1933, as amended, and stop transfer instructions have been provided to the Company's transfer agent in accordance therewith. ITEM 3. Defaults Upon Senior Securities. None ITEM 4. Submission of Matters to a Vote of Security Holders. None ITEM 5. Other Information. None 20 ITEM 6. Exhibits and Reports on Form 8-K. Index to Exhibits - ----------------- (2) Plan of acquisition, reorganization, arrangement, liquidation, or succession. None. (4) Instruments defining the rights of holders, incl. Indentures. None. (10) Material contracts. None. (11) Statement re: computation of per share earnings. None. (15) Letter on unaudited interim financial information. None. (18) Letter on change in accounting principles. None. (19) Reports furnished to security holders. None. (22) Published report regarding matters submitted to vote. None. (20) Other documents or statements to security holders. None. (23) Consents of experts and counsel. None. (24) Power of attorney. None. (27) Financial Data Schedule. See below. (99) Additional exhibits. None. Reports on Form 8-K - ------------------- The following current reports on Form 8-K were filed during the quarter following our 10-KSB/A dated June 30, 1999. Form 8-K dated August 1, 1999: Items 5 & 7 Form 8-K dated July 23, 1999: Items 5 & 7 Form 8-K dated May 22, 1999: Items 5 & 7 21 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunder duly authorized. Bion Environmental Technologies, Inc. /s/Jon Northrop Jon Northrop, Chief Executive Officer Dated: October 20, 2000 22 EX-27 2 0002.txt
5 This schedule contains summary financial information extracted from the balance sheets and statements of operations found on pages 3 and 4 of the Company's Form 10-QSB for the year to date, and is qualified in its entirety by reference to such financial statements. 3-MOS JUN-30-2000 SEP-30-1999 21,563 0 84,242 12,000 0 333,805 316,967 (160,260) 1,033,845 1,032,865 0 12,798,231 0 0 (16,292,741) 1,033,845 0 43,948 0 99,463 1,112,675 0 146,040 (1,363,248) 0 (1,363,248) 0 0 0 (1,363,248) (0.13) (0.13)
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