10-Q

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2014

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

SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to _________

Commission File No. 000-19333

Bion Environmental Technologies, Inc.

(Name of registrant in its charter)

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

Box 566 / 1774 Summitview Way

Crestone, Colorado  81131

(Address of principal executive offices)

  (212) 758-6622

(Registrant’s telephone number, including area code) 

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

 x  Yes   ¨  No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).       x  Yes  ¨  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  ¨	Accelerated filer  ¨
Non-accelerated filer    ¨ (Do not check if a smaller reporting company)	Smaller reporting company  x

SEC 1296 (03-10) Potential persons who are to respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OMB control number.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

¨  Yes   x  No

Page 1

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.   Not applicable.

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.  On February 10, 2015, there were 21,906,641 Common Shares issued and 21,202,332 Common Shares outstanding.

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BION ENVIRONMENTAL TECHNOLOGIES, INC.

FORM 10-Q

TABLE OF CONTENTS

PART I.  FINANCIAL INFORMATION		Page
Item 1.	Financial Statements	5
	Consolidated financial statements (unaudited):
	Balance sheets	5
	Statements of operations	6
	Statement of changes in equity (deficit)	7
	Statements of cash flows	8
	Notes to unaudited consolidated financial statements	9-27
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	44
Item 4.	Controls and Procedures	44
PART II.  OTHER INFORMATION
Item 1.	Legal Proceedings	45
Item 1A.	Risk Factors	45
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	45
Item 3.	Defaults Upon Senior Securities	45
Item 4.	Mine Safety Disclosures	45
Item 5.	Other Information	46
Item 6.	Exhibits	46
	Signatures	47

Page 3

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements, within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), that involve substantial risks and uncertainties.  Forward-looking statements generally can be identified by the use of forward-looking terminology such as "may," "will," "expect," "intend," "estimate," "anticipate," "project," "predict," "plan," "believe" or "continue" or the negative thereof or variations thereon or similar terminology.  The expectations reflected in forward-looking statements may prove to be incorrect.

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PART I – FINANCIAL INFORMATION

BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

					December 31,		June 30,
					2014		2014
ASSETS					(Unaudited)
Current assets:
	Cash			$	14,971		186,148
	Prepaid expenses				11,665		17,006
	Subscription receivable (Note 8)				-		30,000
	Deposits and other receivables				7,108		7,108
		Total current assets			33,744		240,262
Property and equipment, net (Note 3)					4,039,110		4,351,153
		Total assets		$	4,072,854	$	4,591,415
LIABILITIES AND EQUITY (DEFICIT)
Current liabilities:
	Accounts payable and accrued expenses			$	1,761,067	$	1,434,381
	Loans payable - affiliates (Note 4)				396,895		382,458
	Deferred compensation (Note 5)				796,984		716,734
	Convertible notes payable – affiliates (Note 7)				2,042,481		1,736,502
	Loan payable (Note 6)				7,754,000		7,754,000
		Total current liabilities			12,751,427		12,024,075
		Total liabilities			12,751,427		12,024,075
Series B Redeemable Convertible Preferred stock, $0.01 par value,
	50,000 shares authorized; 200 shares issued and outstanding,
	liquidation preference of $27,000 and $26,000, respectively				24,400		23,400
Deficit:
	Bion's stockholders' equity (deficit):
	Series A Preferred stock, $0.01 par value, 10,000 shares authorized,
	no shares issued and outstanding				-		-
	Series C Convertible Preferred stock, $0.01 par value,
	60,000 shares authorized; no shares issued and outstanding				-		-
	Common stock, no par value, 100,000,000 shares authorized, 19,927,655
	and 19,576,619 shares issued, respectively; 19,223,346 and
	18,872,310 shares outstanding, respectively				-		-
	Additional paid-in capital				98,660,825		98,537,032
	Accumulated deficit				(107,436,476)		(106,067,869)
		Total Bion’s stockholders’ deficit			(8,775,651)		(7,530,837)
	Noncontrolling interest				72,678		74,777
		Total deficit			(8,702,973)		(7,456,060)
		Total liabilities and deficit	$		4,072,854	$	4,591,415

See notes to consolidated financial statements.

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BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE AND SIX MONTHS ENDED DECEMBER 31, 2014 AND 2013
(UNAUDITED)
	Three Months Ended December 31,				Six Months Ended December 31,
	2014		2013		2014		2013
Revenue	$	-	$	-	$	-	$	-
Operating expenses:
General and administrative (including stock-     based compensation (Note 8))		333,196		526,558		690,537		1,631,562
Depreciation		127,159		244,307		312,043		490,303
Research and development (including stock-     based compensation (Note 8))		104,237		(120,003)		170,823		(53,445)
Total operating expenses		564,592		650,862		1,173,403		2,068,420
Loss from operations		(564,592)		(650,862)		(1,173,403)		(2,068,420)
Other expense (income):
Interest expense		100,356		88,606		197,303		174,717
Other expense		-		-		-		1,918
		100,356		88,606		197,303		176,635
Net loss		(664,948)		(739,468)		(1,370,706)		(2,245,055)
Net loss attributable to the noncontrolling   Interest		1,028		1,444		2,099		2,738
Net loss attributable to Bion		(663,920)		(738,024)		(1,368,607)		(2,242,317)
Dividends on preferred stock		(500)		(500)		(1,000)		(1,000)
Net loss applicable to Bion's common   stockholders	$	(664,420)	$	(738,524)	$	(1,369,607)	$	(2,243,317)
Net loss applicable to Bion's common   stockholders per basic and  diluted common   share	$	(0.03)	$	(0.04)	$	(0.07)	$	(0.12)
Weighted-average number of common shares   outstanding:
Basic and diluted		19,965,459		18,405,229		19,891,267		18,230,127

See notes to consolidated financial statements.

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BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (DEFICIT)

SIX MONTHS DECEMBER 31, 2014

(UNAUDITED)

		Bion's Shareholders'											Non-
		Series C Preferred Stock			Common Stock			Additional		Accumulated			controlling	Total
		Shares	Amount		Shares	Amount		paid-in capital		deficit			interest	equity/(deficit)
Balances, July 1, 2014		-	$	-	19,576,619	$	-	$	98,537,032	$	(106,067,869)	$	74,777	$	(7,456,060)
	Issuance of common stock for services	-		-	10,083		-		7,524		-		-		7,524
	Vesting of options for services	-		-	-		-		4,000		-		-		4,000
	Modification of options	-		-	-		-		11,783		-		-		11,783
	Issuance of warrants for interest	-		-	-		-		6,750		-		-		6,750
	Modification of warrants	-		-	-		-		986		-		-		986
	Sale of common stock	-		-	75,000		-		26,250		-		-		26,250
	Sale of units	-		-	135,000		-		67,500		-		-		67,500
	Dividend on Series B preferred stock	-		-	-		-		(1,000)		-		-		(1,000)
	Conversion of debt	-		-	130,953		-		-		-		-		-
	Net loss	-	-		-	-		-		(1,368,607)		(2,099)		(1,370,706)
Balances, December 31, 2014		-	$	-	19,927,655	$	-	$	98,660,825	$	(107,436,476)	$	72,678	$	(8,702,973)

See notes to consolidated financial statements.

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BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS SIX MONTHS ENDED DECEMBER 31, 2014 AND 2013 (UNAUDITED)
		2014		2013
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(1,370,706)	$	(2,245,055)
Adjustments to reconcile net loss to net cash used in operating    activities:
Loss on disposal of property and equipment		-		1,919
Depreciation expense		312,043		490,303
Accrued interest on deferred compensation and other		189,573		174,767
Stock-based compensation		31,043		322,025
Decrease in prepaid expenses		5,341		31,534
Increase in accounts payable and accrued expenses		225,779		186,642
Increase in deferred compensation and convertible notes		312,000		415,416
Decrease in deferred rent		-		(10,929)
Net cash used in operating activities		(294,927)		(633,378)
CASH FLOWS FROM INVESTING ACTIVITIES
Release of restricted cash		-		57,315
Increase in restricted cash		-		(52,500)
Increase in deposits for property and equipment		-		(23,410)
Net cash used in investing activities		-		(18,595)
CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in subscription receivable		30,000		25,000
Proceeds from sale of common stock		26,250		500,000
Proceeds from sale of units		67,500		-
Proceeds from subscribed stock		-		52,500
Proceeds from loans payable - affiliates		-		105,149
Payment of loans payable – affiliates		-		(71,098)
Net cash provided by financing activities		123,750		611,551
Net decrease in cash		(171,177)		(40,422)
Cash at beginning of period		186,148		44,666
Cash at end of period	$	14,971	$	4,244
Supplemental disclosure of cash flow information:
Cash paid for interest	$	-	$	1,098
Non-cash investing and financing transactions:
Series B preferred  stock dividends accrued	$	1,000	$	1,000
Issuance of common stock to satisfy deferred compensation	$	-	$	18,416
Issuance of common stock to satisfy accounts payable	$	-	$	19,940

See notes to consolidated financial statements.

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BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SIX MONTHS ENDED DECEMBER 31, 2014

1.

ORGANIZATION, NATURE OF BUSINESS, GOING CONCERN AND MANAGEMENT’S PLANS:

Organization and nature of business:

Bion Environmental Technologies, Inc. (“Bion” or “We” or the "Company") was incorporated in 1987 in the State of Colorado and has developed and continues to develop patented and proprietary technology and business models that provide comprehensive environmental solutions to a significant source of pollution in United States agriculture, large scale livestock facilities known as Confined Animal Feeding Operations ("CAFO's"). Bion's technologies (and applications related thereto) produce substantial reductions of nutrient releases (primarily nitrogen and phosphorus) to both water and air (including ammonia, which is subsequently re-deposited to the ground) from livestock waste streams based upon our operations and research to date (and third party peer review thereof). Because Bion's technologies (and related applications) reduce the harmful releases and emissions from a CAFO on which it is utilized, the CAFO can potentially increase its herd concentration (thereby utilizing less land per animal) while lowering or maintaining its level of nutrient releases and atmospheric emissions.  Bion provides comprehensive and cost-effective treatment of livestock waste onsite, while it is still concentrated and before it contaminates air, soil, groundwater aquifers and/or downstream waters, and, in certain configurations, recovers nutrients for potential use as fertilizer and feed additives.

From 2003 through early 2008, the Company primarily focused on completing re-development of its technology platform and business model. As such, during that period Bion elected not to pursue near-term business opportunities such as retrofitting existing CAFO's with waste management solutions, because management believed such efforts would have diverted scarce management and financial resources and negatively impacted Bion’s ability to complete: 1) re-development of technologies for environmentally sound treatment of CAFO waste streams and 2) development of an integrated technology platform in support of large-scale sustainable Integrated Projects (defined below) including renewable energy production.  During the 2014 fiscal year the Company increased its research and development activities with focus on creating variations of its technology platform that create additional flexibility, increase recovery of nutrient by-products and to review potential “add-ons” and applications for use in different regulatory environments.  These research and development activities will continue through the current 2015 fiscal year.

Bion is now actively pursuing business opportunities in three broad areas 1) installation of Bion systems to retrofit and environmentally remediate existing CAFO’s to reduce nutrient (primarily nitrogen and phosphorus) releases, gaseous emissions (ammonia, greenhouse gases, volatile organic compounds, etc.), and pathogens, hormones and other compounds in order to clean the air and water in the surrounding areas (as described below) to ensure compliance with existing (and future) regulations and to permit herd expansion; 2) development of Integrated Projects opportunities within the United States and internationally; and 3) licensing and/or joint venturing of Bion’s technology and applications outside North America. The opportunities described at 1) and 2) above (and below) each require substantial political (federal, state and local) efforts on the part of the Company and a substantial part of Bion’s efforts are focused on such political matters.

Management believes that Bion's technology platform (including utilization of various third party technologies to supplement the Company’s proprietary technologies), in addition to utilization for remediation of the waste streams of existing CAFOs, allows the integration of large-scale CAFO's and their end-product users, renewable energy production from the CAFO waste stream, on site utilization of the renewable energy generated and biofuel/ethanol production in an environmentally and economically sustainable manner while reducing the aggregate capital expense and operating costs for the  entire  integrated  complex  ("Integrated  Projects"  or  "Projects").  In  the  context  of Integrated

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BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SIX MONTHS ENDED DECEMBER 31, 2014

Projects, Bion's waste treatment process, in addition to mitigating polluting releases, enables generation of renewable energy from cellulosic portions of the CAFO waste stream, which renewable energy can be utilized by integrated facilities including ethanol plants, CAFO end-product processors (including cheese, ice cream and/or bottling plants in the case of dairy CAFO’s and/or slaughter and/or processing facilities in the context of beef CAFO’s) and/or other users as a fossil fuel replacement. The nutrients (primarily nitrogen and phosphorus) can be harvested from the solids and liquid streams recovered from the livestock waste stream and can be utilized as either high value fertilizer and/or the basis for high protein animal feed and the nutrient rich effluent can potentially be utilized in integrated hydroponic agriculture and/or field applied as fertilizer.  Bion believes that its Integrated Projects will produce high quality, traceable animal protein at a lower cost than current industry practices while also maintaining  a far lower net environmental footprint per unit of protein produced due to water recycling (possible due to the removal of nutrients, etc. from the water by Bion’s technology applications), production of renewable energy from the waste stream (reducing the use of fossil fuels), and multiple levels of economies of scale, co-location and integration savings in transportation and other logistics. Some projects may involve only partial integration which will limit the benefits described herein.

Bion has been involved for several years in the very early development and pre-development activities related to an initial Integrated Project in Pennsylvania.  The Company is also involved in pre-development evaluations and discussions regarding opportunities for Integrated Projects in the Northeast, Midwest, and the North Central United States (dairy and/or beef). All such discussions are still in preliminary stages.  The Company has also engaged in early stage discussions regarding development of Integrated Projects to meet specific needs of certain international markets (and regarding licensing our technology for use in overseas locations).

Additionally, Bion has commenced discussions that may lead to installation of Bion systems on existing and/or new dairies, beef facilities and swine farms in the Midwest and/or North Central states.  

On September 27, 2008, the Company executed an agreement with Kreider Farms (and its affiliated entities) (collectively "Kreider") to design, construct and operate (through its wholly-owned subsidiaries, Bion Services Group, Inc. (“Bion Services”) and Bion PA-1 LLC (“PA-1”) a Bion system to treat the waste of 1,200 milking dairy cows (milkers, dry cows and heifers) at the Kreider Dairy, located in Manheim, Pennsylvania. In addition, the agreement (as amended and supplemented) provides for a second phase which will treat the wastes from the rest of Kreider’s herd and includes renewable energy production from the cellulosic solid wastes from the Phase 1 system (referred to as “Kreider 1”) together with the waste stream from Kreider’s poultry facilities for use at the facilities and/or for market sales. The Kreider projects are owned and operated by Bion through subsidiaries, in which Kreider has the option to purchase a noncontrolling interest. To complete these projects, substantial capital (equity and/or debt) has been and will continue to be expended.  Additional funds will be required for continuing operations of Kreider 1 until sufficient revenues can be generated, of which there is no assurance. The Company anticipates that it will earn revenue primarily from the sale of nutrient reduction (and/or other) environmental credits related to Kreider  1  and the Kreider Phase 2 poultry waste treatment system (not yet constructed), and secondarily through  sales of renewable energy generated by the Kreider Phase 2 system. To date the market for long-term nutrient reduction credits in Pennsylvania has been very slow to develop and the Company’s activities have been negatively affected by the lack of such development.  A significant portion of Bion’s research and development activities is currently taking place at the Kreider 1 facility.

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BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SIX MONTHS ENDED DECEMBER 31, 2014

The Company’s subsidiary PA-1 financed Kreider 1 through a $7.8 million loan (“Pennvest Loan”) from Pennsylvania Infrastructure Investment Authority (“Pennvest”) secured by Kreider 1 (and its revenue streams, if any) plus advances from the Company.  Initial construction-related activities of Kreider 1 commenced in October 2010 and construction was completed and a period of system ‘operation shakedown’ commenced in May 2011.  Kreider 1 reached full, stabilized operation by the end of the 2012 fiscal year.  During 2011 the Pennsylvania Department of Environmental Protection (“PADEP”) re-certified the nutrient credits for this project.  The economics (potential revenues and profitability) of Kreider 1 are based largely on the long-term sale of nutrient reduction credits (nitrogen and/or phosphorus) to meet the requirements of the Chesapeake Bay environmental clean-up. The PADEP issued final permits for Kreider 1 (including the credit verification plan) on August 1, 2012 on which date the Company deemed that Kreider 1 was ‘placed in service’. As a result, PA-1 has commenced generating nutrient reduction credits for potential sale while continuing to utilize the system to test improvements and add-ons. Operating results at Kreider 1 have documented the efficacy of Bion’s nutrient reduction technology and vetted potential ‘add-ons’ and modifications for use in future installations. During August 2012 the Company provided Pennvest (and the PADEP) with data demonstrating that Kreider 1 met the ‘technology guarantee’ standards which were incorporated in the Pennvest financing documents and, as a result, the Pennvest Loan is now solely an obligation of PA-1.  To date liquidity in the Pennsylvania nutrient credit market has been slow to develop significant breadth and depth  and limited liquidity has negatively impacted Bion’s business plans and has prevented Bion from monetizing the nutrient reduction credits created by PA-1’s existing Kreider 1 project and Bion’s other proposed projects. These challenges and difficulties have prevented PA-1 from generating any material revenues from the Kreider 1 project to date (operating expenses have been funded by loans from Bion) and raise significant questions as to when PA-1 will be able to generate such revenues from the Kreider 1 system.  PA-1 has engaged in on-and-off negotiations with Pennvest related to forbearance, re-structuring and other matters related to the Kreider 1 project and its obligations pursuant to the Pennvest Loan. In the context of such negotiations, PA-1 elected not to make interest payments to Pennvest on the Pennvest Loan since January 2013.  Additionally, the Company has not made any principal payments, which were to begin in fiscal 2013, and, therefore, the Company has classified the Pennvest Loan as a current liability as of December 31, 2014.  Due to the slow development of the nutrient reduction credit market, the Company determined that the carrying amount of the property and equipment related to the Kreider 1 project exceeded its estimated future undiscounted cash flows based on certain assumptions regarding timing, level and probability of revenues from sales of nutrient reduction credits and, therefore, recorded a $2,000,000 impairment of the Kreider 1 assets which reduced the value of the Kreider 1 System to $4,349,482 as of June 30, 2014.  Additional impairments may result if the nutrient credit market does not develop in the near term.  

On September 25, 2014, Pennvest exercised its right to declare the Pennvest Loan in default and has accelerated the Pennvest Loan and has demanded that PA-1 pay $8,137,117 (principal, interest plus late charges) on or before October 24, 2014. PA-1 did not make the payment and does not have the resources to make the payment demanded by Pennvest.  PA-1 has commenced discussions and negotiations with Pennvest concerning this matter but has not yet received any responses from Pennvest to solutions it has proposed.  It is not possible at this date to predict the outcome of such negotiations, but the Company believes that an interim, short-term agreement may be reached that will allow PA-1 and Pennvest a further period of time for further negotiations and evaluation of possible long-term resolutions. Subject to the results of the negotiations with Pennvest and pending development of a more robust market for nutrient reductions in Pennsylvania, PA-1 and Bion anticipate that it will be necessary for the Company to evaluate various options with regard to Kreider 1 over the next 30-180 days.

During August 2012, the Company provided Pennvest (and the PADEP) with data demonstrating that the Kreider 1 system met the ‘technology guaranty’ standards which were incorporated in the Pennvest financing documents and, as a result, the Pennvest Loan is now solely an obligation of PA-1.

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BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SIX MONTHS ENDED DECEMBER 31, 2014

Development work and technology evaluation, including amended credit certification and negotiations with potential joint venture partners, continues related to the details of the second phase of the Kreider project which primarily relates to treatment of the wastes from Kreider’s poultry operations. Assuming there are positive developments related to the market for nutrient reduction in Pennsylvania, the Company intends to pursue development, design and construction of the Kreider 2 poultry waste/renewable energy project with a goal of achieving operational status during 2015. However, as discussed above, this project faces challenges related to the current limits of the existing nutrient reduction market and funding of technology-based, verifiable agricultural nutrient reductions.

The limited development of the nutrient reduction market in Pennsylvania has led Bion to redeploy some of its limited resources from its efforts in Pennsylvania to its initiatives in the Great Lakes and Midwest states.

A significant portion of Bion’s activities concern efforts with private and public stakeholders (at local and state level) in Pennsylvania (and other Chesapeake Bay states) and in Wisconsin and at the federal level (the Environmental Protection Agency (“EPA”) (and other executive departments) and Congress) to establish appropriate public policies which will create regulations and funding mechanisms that foster installation of the low cost environmental solutions that Bion (and others) can provide through clean-up of agricultural waste streams.  The Company anticipates that such efforts will continue throughout the next 12 months.  

Going concern and management’s plans:

The consolidated financial statements have been prepared assuming the Company will continue as a going concern. The Company has not generated significant revenues and has incurred net losses (including significant non-cash expenses) of approximately $5,762,000 and $8,250,000 during the years ended June 30, 2014 and 2013, respectively, and a net loss of approximately $1,371,000 for the six months ended December 31, 2014.  At December 31, 2014, the Company has a working capital deficit and a stockholders’ deficit of approximately $12,718,000 and $8,776,000, respectively.  These factors raise substantial doubt about the Company's ability to continue as a going concern.  The accompanying consolidated financial statements do not include any adjustments relating to the recoverability or classification of assets or the amounts and classification of liabilities that may result should the Company be unable to continue as a going concern.  The following paragraphs describe management’s plans with regard to these conditions.  

The Company continues to explore sources of additional financing to satisfy its current operating requirements as it is not currently generating any significant revenues.

During the years ended June 30, 2014 and 2013, the Company received total proceeds of $944,400 and $1,330,499, respectively, from the sale of its equity securities. Proceeds during the 2014 and 2013 fiscal years have been lower than in previous years, which has negatively impacted the Company’s business development efforts.  The Company’s difficulty in raising sufficient funds has continued through the six months ended December 31, 2014.

During the six months ended December 31, 2014, the Company sold 35,000 shares of the Company’s common stock at $0.75 per share for proceeds of $26,250.  The Company also issued 40,000 shares of the Company’s common stock upon receipt of its subscription receivable of $30,000.  

The Company also sold units of the Company’s restricted securities for $0.50 each, with each unit consisting of one share of the Company’s restricted common stock and one warrant to purchase one half of a share of the Company’s restricted common stock for $0.75 per share until December 31, 2016.  During the six months ended December 31, 2014, the Company had issued a total of 135,000 units for total proceeds of $67,500.  

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BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SIX MONTHS ENDED DECEMBER 31, 2014

During the year ended June 30, 2014 the Company entered into promissory note agreements with two affiliates of the Company whereby the affiliates have agreed to lend up to $75,000 each for working capital needs.  As of December 31, 2014, the Company has borrowed $135,000 under these notes.  

During fiscal years 2014 and 2013 and through the six months ended December 31, 2014, the Company experienced greater difficulty in raising equity funding than in the prior years.  As a result, the Company faced, and continues to face, significant cash flow management challenges due to working capital constraints. To partially mitigate these working capital constraints, the Company’s core senior management and several key employees and consultants have been deferring (and continue to defer) all or part of their cash compensation and/or are accepting compensation in the form of securities of the Company (Notes 5 and 7) and members of the Company’s senior management have made loans to the Company (Note 4).  Additionally, the Company made reductions in its personnel during the year ended June 30, 2014.  The constraint on available resources has had, and continues to have, negative effects on the pace and scope of the Company’s efforts to develop its business. The Company has had to delay payment of trade obligations and has had to economize in many ways that have potentially negative consequences. The Company’s accounts payable have increased materially in fiscal years 2013 and 2014 and for the six months ended December 31, 2014.  If the Company does not have greater success in its efforts to raise needed funds during the balance of fiscal 2015 (and subsequent periods), management will need to consider deeper cuts (including additional personnel cuts) and curtailment of operations (including possibly Kreider 1 operations).

The Company will need to obtain additional capital to fund its operations and technology development, to satisfy existing creditors, to develop Integrated Projects and CAFO waste remediation systems (including the Kreider 2 facility) and to continue to operate the Kreider 1 facility. The Company anticipates that it will seek to raise from $2,500,000 to $50,000,000 or more (debt and equity) during the next twelve months.  However, as discussed above, there is no assurance, especially in light of the difficulties the Company has experienced in recent periods and the extremely unsettled capital markets that presently exist (especially for small companies), that the Company will be able to obtain the funds that it needs to stay in business, complete its technology development or to successfully develop its business and projects.

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

2.

SIGNIFICANT ACCOUNTING POLICIES

Principles of consolidation:

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Bion Integrated Projects Group, Inc. (“Projects Group”), Bion Technologies, Inc., BionSoil, Inc., Bion Services,  PA-1, and Bion PA 2 LLC; and its 58.9% owned subsidiary, Centerpoint Corporation (“Centerpoint”).  All significant intercompany accounts and transactions have been eliminated in consolidation.

Page 13

BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SIX MONTHS ENDED DECEMBER 31, 2014

The accompanying consolidated financial statements have been prepared without audit pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”).  The consolidated financial statements reflect all adjustments (consisting of only normal recurring entries) that, in the opinion of management, are necessary to present fairly the financial position at December 31, 2014, and the results of operations and cash flows of the Company for the three and six months ended December 31, 2014 and 2013.  Operating results for the three and six months ended December 31, 2014 are not necessarily indicative of the results that may be expected for the year ending June 30, 2015.

Property and equipment:

Property and equipment are stated at cost and are depreciated, when placed into service, using the straight-line method over the estimated useful lives of the related assets, generally three to twenty years.  The Company capitalizes all direct costs and all indirect incrementally identifiable costs related to the design and construction of its Integrated Projects.  The Company reviews its property and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  An impairment loss would be recognized based on the amount by which the carrying value of the assets or asset group exceeds its estimated fair value, and is recognized as a loss from operations.

Fair value measurements:

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or most advantageous market.  The Company uses a fair value hierarchy that has three levels of inputs, both observable and unobservable, with use of the lowest possible level of input to determine fair value.

Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2 – observable inputs other than Level 1, quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, and model-derived prices whose inputs are observable or whose significant value drivers are observable; and

Level 3 – assets and liabilities whose significant value drivers are unobservable.

Observable inputs are based on market data obtained from independent sources, while unobservable inputs are based on the Company’s market assumptions.  Unobservable inputs require significant management judgment or estimation.  In some cases, the inputs used to measure an asset or liability may fall into different levels of the fair value hierarchy.  In those instances, the fair value measurement is required to be classified using the lowest level of input that is significant to the fair value measurement.  Such determination requires significant management judgment.  

The fair value of cash and accounts payable approximates their carrying amounts due to their short-term maturities.  The fair value of the loan payable approximates its carrying amount as it bears interest at rates commensurate with market rates.  The fair value of the redeemable preferred stock approximates its carrying value due to the dividends accrued on the preferred stock which are reflected as part of the redemption value.  The fair value of deferred compensation and loans payable – affiliates are not practicable to estimate due to the related party nature of the underlying transactions.

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BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SIX MONTHS ENDED DECEMBER 31, 2014

Revenue Recognition:

Revenues are generated from the sale of nutrient reduction credits.  The Company recognizes revenue from the sale of nutrient credits when there is persuasive evidence that an arrangement exists, when title has passed, the price is fixed or determinable, and collection is reasonably assured.

The Company expects that technology license fees will be generated from the licensing of Bion’s integrated system.  The Company anticipates that it will charge its customers a non-refundable up-front technology license fee, which will be recognized over the estimated life of the customer relationship.  In addition, any on-going technology license fees will be recognized as earned based upon the performance requirements of the agreement.  Annual waste treatment fees will be recognized upon receipt.  Revenues, if any, from the Company’s interest in Integrated Projects will be recognized when the entity in which the Integrated Project has been developed recognizes such revenue.

Loss per share:

Basic loss per share amounts are calculated using the weighted average number of shares of common stock outstanding during the period.  Diluted loss per share assumes the conversion, exercise or issuance of all potential common stock instruments, such as options or warrants, unless the effect is to reduce the loss per share.  During the six months ended December 31, 2014 and 2013, the basic and diluted loss per share was the same, as the impact of potential dilutive common shares was anti-dilutive.

The following table represents the warrants, options and convertible securities excluded from the calculation of diluted loss per share:

	December 31, 2014	December 31, 2013
Warrants	7,757,653	7,161,700
Options	3,911,370	5,128,870
Convertible debt	5,583,740	2,399,280
Convertible preferred stock	13,500	12,500

The following is a reconciliation of the denominators of the basic loss per share computations for the three and six months ended December 31, 2014 and 2013:

	Three months ended December 31, 2014	Three months ended December 31, 2013	Six months ended December 31, 2014	Six months ended December 31, 2013
Shares issued – beginning of period	19,787,068	18,212,104	19,576,619	17,673,983
Shares held by subsidiaries (Note 8)	(704,309)	(704,309)	(704,309)	(704,309)
Shares outstanding – beginning of period	19,082,759	17,507,795	18,872,310	16,969,674
Weighted average shares for fully     vested  stock bonuses (Note 9)	840,000	840,000	840,000	840,000
Weighted average shares issued     during the  period	42,700	57,434	178,957	420,453
Basic weighted average shares –     end of   period	19,965,459	18,405,229	19,891,267	18,230,127

Page 15

BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SIX MONTHS ENDED DECEMBER 31, 2014

Recent Accounting Pronouncements:

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

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09 “Revenue from Contracts from Customers,”  which supersedes the revenue recognition requirements in “Revenue Recognition (Topic 605),” and requires entities to recognize revenue in a way that depicts the transfer of potential goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to the exchange for those goods or services.  ASU 2014-09 is effective for fiscal years, and interim periods within those years, beginning December 15, 2016 and early adoption is not permitted.  The Company is currently evaluating the new standard and assessing the potential impact on its operations and financial statements.  

In August 2014, the FASB issued ASU No. 2014-15, “Presentation of Financial Statements – Going Concern: Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern.”  The new standard requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year of the date the financial statements are issued.  An entity must provide certain disclosures if conditions or events raise substantial doubt about the entity’s ability to continue as a going concern.  The guidance is effective for annual periods ending after December 15, 2016, and interim periods thereafter, early application is permitted.  The Company is currently assessing the impact of the adoption of ASU No. 2014-15 on its financial position, results of operation and financial statement disclosures.

3.

PROPERTY AND EQUIPMENT:

Property and equipment consists of the following:

	December 31, 2014	June 30, 2014
Machinery and equipment	$4,111,001	$4,111,001
Buildings and structures	1,947,701	1,947,701
Computers and office equipment	183,809	183,809
	6,242,511	6,242,511
Less accumulated depreciation	(2,203,401)	(1,891,358)
	$4,039,110	$4,351,153

Management reviewed property and equipment for impairment as of June 30, 2014 and determined that the carrying amount of property and equipment related to the Kreider 1 project exceeded its estimated future undiscounted cash flows.  Management estimated the fair value of the property and equipment based on the discounted cash flow method, and determined that $2,000,000 of the property and equipment was impaired as of June 30, 2014.  As of December 31, 2014, management believes no additional impairment has occurred.

Depreciation expense was $127,159 and $244,307 for the three months ended December 31, 2014 and 2013, respectively, and $312,043 and $490,303 for the six months ended December 31, 2014 and 2013, respectively.

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BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SIX MONTHS ENDED DECEMBER 31, 2014

4.

LOANS PAYABLE - AFFILIATES:

As of December 31, 2014, Dominic Bassani (“Bassani”), the Company’s Chief Executive Officer (“CEO”), has loaned the Company $200,000 for fiscal year 2013 working capital needs (“FY 2013 Loan”).  The FY 2013 Loan bears interest at 8% per annum and was payable on August 31, 2013.  The due date of the FY 2013 Loan plus accrued interest was extended to September 30, 2013.  Subsequent to September 30, 2013, the FY 2013 Loan was extended to January 1, 2014 and then further extended to April 30, 2014 and then to July 1, 2014. During September 2014, the maturity date of the FY 2013 Loan was extended to January 1, 2015.  During January 2015, the FY 2013 Loan was extended to April 15, 2015. Conversion terms substantially identical to those described in Note 7 have been added to the terms of the FY 2013 Loan.  Interest expense related to the FY 2013 Loan was $4,113 and $4,113 for the three months ended December 31, 2014 and 2013, respectively, and $8,226 and $8,226 for the six months ended December 31, 2014 and 2013, respectively.

During the year ended June 30, 2014, Bassani loaned the Company $19,000 (“November Note”).  The November Note bears interest at 8% per annum and was payable on February 28, 2014, but was extended to April 30, 2014, and then further extended to July 1, 2014.  During September 2014, the maturity date of the November Note was extended to January 1, 2015.  During January 2015, the November Note was extended to April 15, 2015.  Interest expense related to the November Note was $383 and $150 for the three months ended December 31, 2014 and 2013, respectively, and $766 and $150 for the six months ended December 31, 2014 and 2013, respectively.

During the year ended June 30, 2014, the Company entered into promissory note agreements (“December Notes”) with Bassani and a major shareholder (“Shareholder”) whereby Bassani and Shareholder agreed to lend the Company up to $75,000 each for working capital needs.  The December Notes bear interest at 8% per annum and were payable on March 31, 2014.  However, since the Company did not have sufficient funds for working capital needs to allow repayment of the December Notes on March 31, 2014, the maturity date of the December Notes was extended for three months; which process may be repeated up to three additional times with the maturity date extended to a date as late as December 31, 2014.  In consideration for the December Notes, the Company issued warrants to purchase up to 18,750 shares of the Company’s common stock at $0.85 per share until December 31, 2018 (proportionately reduced if the December Notes are funded for less than the $75,000 maximum).  Additional warrants (in the same amount and terms) will be issued upon each extension of the maturity date of the December Notes.  The warrants will vest immediately upon issuance.  As of December 31, 2014, Bassani and Shareholder had loaned the Company $60,000 and $75,000, respectively, under the terms of the December Notes.  Interest expense related to the December Notes was $2,722 and $286 for the three months ended December 31, 2014 and 2013, respectively, and $5,444 and $286 for the six months ended December 31, 2014 and 2013, respectively.  The maturity date of the December Notes has been extended to April 15, 2015.  During the six months ended December 31, 2014, the Company issued 67,500 warrants to purchase 67,500 shares of the Company’s common stock at $0.85 per share and has recorded interest expense of $3,375 and $6,750 for the three and six months ended December 31, 2014, respectively.

5.

DEFERRED COMPENSATION:

The Company owes Edward Schafer (“Schafer”), the Company’s Executive Vice Chairman, two employees and two former employees, aggregate deferred compensation of $557,734 as of December 31, 2014 (subject to the outcome of pending litigation – see Note 9).  The majority of the balance is payable dependent upon the cash reserves of the Company and $984 was paid by the issuance of 2,140 shares of the Company’s common shares in January 2015.

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BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SIX MONTHS ENDED DECEMBER 31, 2014

As of December 31, 2014, the Company owed Bassani deferred compensation of $239,250 including interest of $74,250, which was due and payable on July 1, 2014 but has been extended until April 15, 2015.  The deferred compensation accrues interest at 10% per annum and is convertible into the Company’s restricted common stock at $1.50 per share.  

6.

LOAN PAYABLE:

As of December 31, 2014, PA-1, the Company’s wholly-owned subsidiary, owes $7,754,000 under the terms of the Pennvest Loan related to the construction of the Kreider 1 System.  The terms of the Pennvest Loan provide for funding of up to $7,754,000 which is to be repaid by interest-only payments for three years, followed by an additional ten-year amortization of principal.  The Pennvest Loan accrues interest at 2.547% for years 1 through 5 and 3.184% for years 6 through maturity.  The Pennvest Loan requires minimum annual principal payments of approximately $574,000 in fiscal year 2013, $704,000 in fiscal year 2014, $723,000 in fiscal year 2015, $741,000 in fiscal year 2016, $760,000 in fiscal year 2017 and $4,252,000 thereafter.  The Pennvest Loan is collateralized by the Kreider 1 System and by a pledge of all revenues generated from Kreider 1 including, but not limited to, revenues generated from nutrient reduction credit sales and by-product sales. In addition, in consideration for the excess credit risk associated with the project, Pennvest is entitled to participate in the profits from Kreider 1 calculated on a net cash flow basis, as defined.  The Company has incurred interest expense related to the Pennvest Loan of $49,373 and $49,374 for the three months ended December 31, 2014 and 2013, respectively.  For the six months ended December 31, 2014 and 2013, the Company has incurred interest expense related to the Pennvest Loan of $98,747 and $98,748, respectively.  Based on the limited development of the depth and breadth of the Pennsylvania nutrient reduction credit market to date, PA-1 has commenced negotiations with Pennvest related to forbearance and/or re-structuring the obligations under the Pennvest Loan. In the context of such negotiations, PA-1 has elected not to make interest payments to Pennvest on the Pennvest Loan since January 2013.  Additionally, the Company has not made any principal payments, which were to begin in fiscal 2013, and, therefore, the Company has classified the Pennvest Loan as a current liability as of December 31, 2014.  

On September 25, 2014, Pennvest exercised its right to declare the Pennvest Loan in default and has accelerated the Pennvest Loan and has demanded that PA-1 pay $8,137,117 (principal, interest plus late charges) on or before October 24, 2014. PA-1 did not make the payment and does not have the resources to make the payment demanded by Pennvest.  PA-1 has commenced discussions and negotiations with Pennvest concerning this matter but has not yet received any responses from Pennvest to solutions it has proposed.  It is not possible at this date to predict the outcome of such negotiations, but the Company believes that an interim, short-term agreement may be reached that will allow PA-1 and Pennvest a further period of time for further negotiations and evaluation of possible long-term resolutions. Subject to the results of the negotiations with Pennvest and pending development of a more robust market for nutrient reductions in Pennsylvania, PA-1 and Bion anticipate that it will be necessary for the Company to evaluate various options with regard to Kreider 1 over the next 30-180 days.

During August 2012, the Company provided Pennvest (and the PADEP) with data demonstrating that the Kreider 1 system met the ‘technology guaranty’ standards which were incorporated in the Pennvest financing documents and, as a result, the Pennvest Loan is now solely an obligation of PA-1.

Page 18

BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SIX MONTHS ENDED DECEMBER 31, 2014

In connection with the Pennvest Loan financing documents, the Company provided a ‘technology guaranty’ regarding nutrient reduction performance of Kreider 1 which was structured to expire when Kreider 1’s nutrient reduction performance had been demonstrated. On August 1, 2012 the Company provided Pennvest (and the PADEP) with data demonstrating that the Kreider 1 System had surpassed the requisite performance criteria and that the Company’s ‘technology guaranty’ was met.  As a result, the Pennvest Loan is solely an obligation of PA-1.

7.

CONVERTIBLE NOTES PAYABLE - AFFILIATES:

Effective May 15, 2013, the Board of Directors approved agreements with Bassani and Smith, under which, Bassani and Smith have agreed to continue to defer their cash compensation up to April 30, 2014 (unless the Board of Directors elects to re-commence cash payment on an earlier date) and to extend the due date of their deferred cash compensation until January 15, 2015.  The agreements have been evidenced in the form of convertible promissory notes (“Convertible Notes”).  During the year ended June 30, 2014, Bassani and Smith have agreed to continue to defer their cash compensation up to July 1, 2014.  During September 2014, Bassani and Smith have agreed to continue to defer their cash compensation up to January 1, 2015.  During January 2015, Bassani and Smith have agreed to continue to defer their cash compensation until April 15, 2015.

The Convertible Notes accrue interest at 8% per annum and are due and payable (as extended) on April 15, 2015.  The Convertible Notes (including accrued interest) of $854,316 and $1,188,165 at December 31, 2014 owed to Smith and Bassani, respectively, plus all future deferred compensation or other sums subsequently added to the principal of the Convertible Notes, may be converted, at the sole election of Smith and Bassani, into Units consisting of one share of the Company’s common stock and one warrant to purchase a share of the Company’s common stock, at a price of $1.25 per Unit until January 15, 2015.  Subsequent to December 31, 2014, the Company entered into new convertible notes with effective dates of January 1, 2015 which extended the maturity of the new notes to December 31, 2017 and revised the terms (Note 10).  The warrant contained in the Unit shall be exercisable at $2.50 per share until December 31, 2018.  The original conversion price of $1.25 per Unit approximated the fair value of the Units at the date of the agreements; therefore no beneficial conversion feature exists.  Pursuant to the deferral agreements, the conversion price of the Convertible Notes plus accrued interest is the lower of the $1.25 per Unit price or the lowest price at which the Company sells its common stock on or before January 15, 2015 (see Note 10 for terms of new convertible notes).  As of December 31, 2014, the lowest price at which the Company had sold its common stock during the relevant period is $0.45 per share.  Management evaluated the terms and conditions of the embedded conversion features based on the guidance of ASC 815-15 “Embedded Derivatives” to determine if there was an embedded derivative requiring bifurcation. An embedded derivative instrument (such as a conversion option embedded in the deferred compensation) must be bifurcated from its host instruments and accounted for separately as a derivative instrument only if the “risks and rewards” of the embedded derivative instrument are not “clearly and closely related” to the risks and rewards of the host instrument in which it is embedded.  Management concluded that the embedded conversion feature of the deferred compensation was not required to be bifurcated because the conversion feature is clearly and closely related to the host instrument, and because of the Company’s limited trading volume that indicates the feature is not readily convertible to cash in accordance with ASC 815-10, “Derivatives and Hedging”. As of December 31, 2014, the Company owes Smith, $854,316 under the terms of his Convertible Note.  The Convertible Note is comprised of deferred compensation of $755,468 and accrued interest of $98,848.  During the year ended June 30, 2014, Bassani elected to convert $110,000 of his Convertible Note, at a conversion price of $0.84, into 130,953 Units consisting of 130,953 shares of the Company’s common stock which were issued during the six months ended December 31, 2014 and 130,953 warrants (which were issued during the year ended June 30, 2014).  As of December 31, 2014, the Company owes Bassani, $1,188,165, comprised of deferred compensation of $1,034,000 and accrued interest of $154,165, under the terms of his Convertible Note.

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BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SIX MONTHS ENDED DECEMBER 31, 2014

As part of the agreements, Bassani and Smith have also forgiven any possible obligations that Bion may have owed each of them in relation to unused vacation time for periods (over 10 years) prior to the year ended June 30, 2012.  In consideration of these agreements, Bassani and Smith: a) have been granted 50% ‘execution/exercise’ bonuses to be effective upon future exercise of outstanding (or subsequently acquired) options and warrants owned by Bassani and Smith (and their respective donees) and in relation to contingent stock bonuses (see Note 9 for further details); b) warrants and options, if due to expire prior to December 31, 2018, have been extended to that date (with possible further extensions) and c) other modifications have been made to existing agreements.

8.

STOCKHOLDERS' EQUITY:

Series B Preferred stock:

At July 1, 2014, the Company had 200 shares of Series B redeemable convertible Preferred stock outstanding with a par value of $0.01 per share, convertible at the option of the holder at $2.00 per share, with dividends accrued and payable at 2.5% per quarter.  The Series B Preferred stock is mandatorily redeemable at $2.00 per share by the Company three years after issuance and accordingly was classified outside of shareholders’ equity.

During the years ended June 30, 2014 and 2013, the Company declared dividends of $2,000 and $2,417 respectively.  During the six months ended December 31, 2014, the Company declared dividends of $1,000.  At December 31, 2014, accrued dividends payable are $7,000.

Common stock:

Holders of common stock are entitled to one vote per share on all matters to be voted on by common stockholders.  In the event of liquidation, dissolution or winding up of the Company, the holders of common stock are entitled to share in all assets remaining after liabilities have been paid in full or set aside and the rights of any outstanding preferred stock have been satisfied. Common stock has no preemptive, redemption or conversion rights.  The rights of holders of common stock are subject to, and may be adversely affected by, the rights of the holders of any outstanding series of preferred stock or any series of preferred stock the Company may designate in the future.  

Centerpoint holds 704,309 shares of the Company’s common stock.  These shares of the Company’s common stock held by Centerpoint are for the benefit of its shareholders without any beneficial interest.  The Company accounts for these shares similar to treasury stock.

During the six months ended December 31, 2014, the Company issued 10,083 shares of the Company’s common stock at prices ranging from $0.43 to $1.22 per share for services valued at $7,524, in the aggregate, to a consultant and an employee.  

During the six months ended December 31, 2014, the Company issued 130,953 shares of the Company’s common stock upon Bassani’s fiscal year 2014 election to convert $110,000, of his convertible notes payable – affiliate into Units at a conversion price of $0.84 per Unit (Note 7).

During the six months ended December 31, 2014, the Company sold 35,000 shares of the Company’s restricted common stock at $0.75 per share for total proceeds of $26,250.

During the six months ended December 31, 2014, the Company entered into subscription agreements to sell units for $0.50 each, with each unit consisting of one share of the Company’s restricted common stock and one warrant to purchase one half of a share of the Company’s restricted common stock for $0.75 per share until December 31, 2016.  During the six months ended December 31, 2014, the Company issued 135,000 units for total proceeds of $67,500.  The Company allocated the proceeds from the shares and the warrants based upon their relative fair values, using the share price on the day each of the subscription agreements were entered into and the fair value of the warrants, which was determined to be $0.05 per warrant.  As a result, $3,592 was allocated to the warrants and $63,908 was allocated to the shares, and both were recorded as additional paid in capital.  

Page 20

BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SIX MONTHS ENDED DECEMBER 31, 2014

The Company also issued 40,000 shares of the Company’s restricted common stock upon receipt of its subscription receivable of $30,000 during the six months ended December 31, 2014.

Warrants:

As of December 31, 2014, the Company had approximately 7.8 million warrants outstanding, with exercise prices from $0.75 to $4.25 and expiring on various dates through January 15, 2019.

The weighted-average exercise price for the outstanding warrants is $2.15, and the weighted-average remaining contractual life as of December 31, 2014 is 3.26 years.

During the six months ended December 31, 2014, warrants to purchase 67,500 shares of the Company’s common stock at $0.85 per share were issued pursuant the promissory notes entered into by Bassani and Shareholder (Note 4). The warrants were determined to have a fair value of $0.10 per warrant and expire on December 31, 2018.  The Company recorded interest expense of $6,750 related to the warrant issuances.  

During the six months ended December 31, 2014, the Company issued warrants to purchase 67,500 shares of the Company’s restricted common stock for $0.75 per share until December 31, 2016 in connection with the sale of 135,000 units.

During the six months ended December 31, 2014, the Company agreed to extend the expiration date of 985,833 warrants owned by various individuals which were scheduled to expire on December 31, 2014. The Company recorded expense related to the modification of the warrants of $986 for the six months ended December 31, 2013.

As of December 31, 2014, 5,790,277 of the warrants of the Company are subject to execution/exercise bonuses under agreements with Bassani and Smith (Note 9).  

Stock options:

The Company’s 2006 Consolidated Incentive Plan (the “2006 Plan”), as amended effective February 1, 2015, provides for the issuance of options (and/or other securities) to purchase up to 22,000,000 shares of the Company’s common stock. Terms of exercise and expiration of options granted under the 2006 Plan may be established at the discretion of the Board of Directors, but no option may be exercisable for more than ten years.

In November 2014, the Company entered into an agreement with a board member which entitled the board member to modifications of existing stock options resulting in the extension of certain expiration dates and resulting in incremental non-cash compensation expense of $11,783 for the six months ended December 31, 2014.  

The Company recorded compensation expense related to employee stock options of $4,000 and $(309,315) for the three months ended December 31, 2014 and 2013, respectively and $4,000 and $(223,457) for the six months ended December 31, 2014 and 2013, respectively.  The Company granted 50,000 and 67,725 options during the six months ended December 31, 2014 and 2013, respectively.  During the six months ended December 31, 2014, 397,500 options expired, while during the six months ended December 30, 2013, 200,000 options were forfeited.  

Page 21

BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SIX MONTHS ENDED DECEMBER 31, 2014

The fair value of the options granted during the six months ended December 31, 2014 and 2013 were estimated on the grant date using the Black-Scholes option-pricing model with the following assumptions:

	Weighted Average, December 31, 2014	Range, December 31, 2014	Weighted Average, December 31, 2013	Range, December 31, 2013
Volatility	80%	80%	49%	49%-50%
Dividend yield	-	-	-	-
Risk-free interest rate	0.51%	0.51%	0.62%	0.59%-0.68%
Expected term (years)	2	2	2.68	2.63-2.71

The expected volatility was based on the historical price volatility of the Company’s common stock. The dividend yield represents the Company’s anticipated cash dividend on common stock over the expected term of the stock options.  The U.S. Treasury bill rate for the expected term of the stock options was utilized to determine the risk-free interest rate.  The expected term of stock options represents the period of time the stock options granted are expected to be outstanding based upon management’s estimates.

A summary of option activity under the 2006 Plan for the six months ended December 31, 2014 is as follows:

	Options	Weighted- Average Exercise Price	Weighted- Average Remaining Contractual Life	Aggregate Intrinsic Value
Outstanding at July 1, 2014	4,258,870	2.81	3.2	-
Granted	50,000	1.00
Exercised	-	-
Forfeited	-	-
Expired	(397,500)	3.06
Outstanding at December 31, 2014	3,911,370	$2.76	3.1	$   -
Exercisable at December 31, 2014	3,911,370	$2.76	3.1	$   -

The total fair value of stock options that vested during the six months ended December 31, 2014 and 2013 was $4,000 and $34,822, respectively.  As of December 31, 2014, the Company had no unrecognized compensation cost related to stock options.

Stock-based employee compensation charges in operating expenses in the Company’s financial statements for the three and six months ended December 31, 2014 and 2013 are as follows:  

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BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SIX MONTHS ENDED DECEMBER 31, 2014

	Three months ended December 31, 2014	Three months ended December 31, 2013	Six months ended December 31, 2014	Six months ended December 31, 2013
General and administrative:
Fair value of stock issued to an employee	$             -	24,999	$           -	94,998
Change in fair value from modification of     option terms	11,783	-	11,783	307,638
Fair value of stock options expensed/(credited)	4,000	(155,728)	4,000	(87,517)
Total	$   15,783	$(130,729)	$ 15,783	$315,119
Research and development:
Fair value of stock options credited	$             -	$(153,587)	$           -	$(135,939)
Total	$             -	$(153,587)	$           -	$(135,939)

9.

COMMITMENTS AND CONTINGENCIES:

Employment and consulting agreements:

Smith has held the positions of Director, President and General Counsel of Company and its subsidiaries under various agreements and terms since March 2003.  During July 2011, the Company entered into an extension agreement pursuant to which Smith continued to hold his current position in the Company through a date no later than December 31, 2012.  Commencing January 1, 2012, Smith’s monthly salary was $20,000, which has been accrued and deferred.  In addition, 90,000 shares of the Company’s common stock would be issued to Smith in two tranches of 45,000 shares on each of January 15, 2013 (issued) and 2014 (issued), respectively.  The Company recorded expense of $240,300 for the year ended June 30, 2012, related to the future stock issuances as the bonus was fully vested at the grant date.  As part of the extension agreement, Smith was also granted 200,000 options, which vested immediately, to purchase common shares of the Company at a price of $3.00 per share and which options expire on December 31, 2019.  The Company recorded expense of $334,000 during the year ended June 30, 2012 as the options were fully vested at the grant date. Effective July 15, 2012, the Company entered into an extension agreement pursuant to which Smith will continue to hold his current positions in the Company through a date no later than June 30, 2014.  Effective September 2012, Smith’s monthly salary became $21,000, until March 2014, at which time Smith agreed to a temporary reduction in monthly salary to $14,000 (which is currently being deferred).  In addition, the extension provides that Smith will be issued 150,000 shares of the Company’s common stock in two tranches of 75,000 shares on each of January 15, 2014 (issued) and 2015 (issued), which shares vested immediately.  The Company recorded expense of $292,500 for the year ended June 30, 2013, related to the future stock issuances as the bonus was fully vested at the grant date.  As part of the extension agreement, Smith was also granted a bonus of $25,000 paid in warrants, which vested immediately, to purchase 250,000 shares of the Company’s common stock at a price of $2.10 per share and which warrants expire on December 31, 2018 and a contingent stock bonus of 100,000 shares payable on the date on which the Company’s stock price first reaches $10.00 per share (regardless of whether Smith is still providing services to the Company on such date). During September 2014, Smith agreed to continue his employment agreement through April 15, 2015 and also agreed to continue to defer his temporarily reduced salary of $14,000 per month until such date.  

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BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SIX MONTHS ENDED DECEMBER 31, 2014

Since March 31, 2005, the Company has had various agreements with Brightcap and/or Bassani, through which the services of Bassani are provided.  On September 30, 2009 the Company entered into an extension agreement with Brightcap pursuant to which Bassani provided services to the Company through September 30, 2012 for $312,000 annually (currently deferred).  The Board appointed Bassani as the Company's CEO effective May 13, 2011.  On July 15, 2011, Bassani, Brightcap and the Company agreed to an extension/amendment of the existing agreement with Brightcap which provided that  Bassani would continue to provide the services of CEO through June 30, 2013 and will continue to provide full-time services to the Company in other capacities through June 30, 2014 at a salary of $26,000 per month.  In addition Bassani will be issued 300,000 shares of the Company’s common stock issuable in three tranches of 100,000 shares on each of January 15, 2015, 2016 and 2017, respectively.  During the year ended June 30, 2012 the Company recorded expense of $795,000 related to the future stock issuances as the bonus was fully vested at the grant date.  Bassani was also granted 725,000 options, which vested immediately, to purchase shares of the Company’s common stock at $3.00 per share which options expire on December 31, 2019.  The Company recorded expense of $1,203,500 during the year ended June 30, 2012 as the options were fully vested at the grant date.  Effective July 15, 2012, Bassani, Brightcap and the Company agreed to a further extension/amendment of the existing agreement with Brightcap which provides that Bassani will continue to provide the services of CEO through June 30, 2014.  The extension provided that Bassani will continue to provide full-time services to the Company at a cash salary of $26,000 per month (which is currently being deferred) and Bassani will be issued 300,000 shares of the Company’s common stock issuable in two tranches of 150,000 shares on each of January 15, 2015 and 2016, respectively, which were immediately vested.  The Company recorded expense of $585,000 for the year ended June 30, 2013, related to the future stock issuances as the bonus was fully vested at the grant date.  As part of the extension agreement, Bassani was also granted a bonus of $5,000 paid in warrants, which vested immediately, to purchase 50,000 shares of the Company’s common stock at a price of $2.10 per share and which warrants expire on December 31, 2018.  During September 2014, Bassani agreed to extend his employment agreement until April 15, 2015 and that previously issued and expensed share grants of 100,000 and 150,000 shares, that were to be issued on January 15, 2015, would be deferred until January 15, 2016.

On May 5, 2013, the Board of Directors approved agreements with Bassani and Smith, with effective dates of May 15, 2013, in which Bassani and Smith have agreed to continue to defer their respective cash compensation through April 30, 2014 (unless the Board of Directors elects to re-commence cash payment on an earlier date) and to extend the due date of their respective deferred cash compensation until January 15, 2015 on the terms set forth in Note 7.  Subsequent to December 31, 2014, the Company entered into extension agreements, effective January 1, 2015 which extended the terms of Bassani and Smith’s services to the Company (Note 10).  In May 2014, Bassani and Smith have agreed to continue to defer their respective cash compensation through July 1, 2014.  The Company has provided Bassani and Smith with convertible promissory notes which reflect all the terms of these agreements to which future accruals will be added as additional principal.  As part of the agreements, Bassani and Smith have also forgiven any possible obligations that Bion may have owed each of them in relation to unused vacation time for periods (over 10 years) prior to June 30, 2012.  In consideration of these agreements, Bassani and Smith:  a) have been granted 50% ‘execution/ exercise’ bonuses to be effective upon future exercise of outstanding (or subsequently acquired) options and warrants owned by Bassani and Smith (and their respective donees) and in relation to contingent stock bonuses; b) their warrants and options, if due to expire prior to December 31, 2018, have been extended to that date (with possible further extensions); and c) other modifications have been made.

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BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SIX MONTHS ENDED DECEMBER 31, 2014

During January 2012, the Company approved an employment agreement contract extension effective January 1, 2012 with Craig Scott pursuant to which he continued to act as Vice President of Capital Markets and Shareholder Relations through December 31, 2012, at an annual salary of $144,000. In consideration for his extension agreement, Mr. Scott was granted 75,000 options to purchase shares of the Company’s common shares at $2.75 per share with an expiration date of December 31, 2016, 12,500 contingent stock options that will be issued if the Company’s stock price exceeds $10.00 and $20.00 per share, respectively, and an extension of the expiration dates all his existing warrants and options as of January 1, 2012 until December 31, 2016. Mr. Scott currently works for the Company on a month-to-month basis and beginning August 1, 2013 is receiving his compensation in common stock of the Company and/or debt of the Company which may only be repaid by conversion into common stock of the Company.

Contingent stock bonuses:

In May 2005 the Company declared contingent deferred stock bonuses to its key employees and consultants.  The stock bonuses are contingent upon the Company’s stock price exceeding $10.00 and $20.00 per share, respectively, and the grantees still being employed by or providing services to the Company at the time the target prices are reached.  As of December 31, 2014, 227,500 and 65,000 of these contingent bonus shares, respectively, remain outstanding, to be issued when and if the Company’s stock price exceeds $10.00 and $20.00 per share, respectively.  The Company has also granted 12,500 contingent stock options that will be issued if the Company’s stock price exceeds $10.00 and $20.00 per share, respectively, to one if its employees in consideration for an employment agreement extension effective January 1, 2012.

Effective January 1, 2011 the Company declared a contingent stock bonus of 50,000 shares to Smith and effective July 15, 2012 the Company declared contingent stock bonuses of 100,000 and 25,000 shares to Smith and Schafer, respectively. The stock bonuses are contingent upon the Company’s stock price exceeding $10.00 and do not require that Smith or Schafer remain employed by the Company.  

Execution/exercise bonuses:

As part of the agreements the Company entered into with  Bassani and  Smith (Note 7) effective May 15, 2013, whereby they agreed to continue to defer their cash compensation up to April 30, 2014, they were each granted the following: a) a 50% execution/exercise bonus which shall be applied upon the effective date of the notice of intent to exercise (for options and warrants) or issuance event, as applicable, of any currently outstanding and/or subsequently acquired  options, warrants and/or  contingent stock bonuses owned by each as follows: i) in the case of exercise by payment of cash, the bonus shall take the form of reduction of the exercise price; ii) in the case of cashless exercise, the bonus shall be applied to reduce the exercise price prior to the cashless exercise calculations; and iii) with regard to contingent stock bonuses, issuance shall be triggered upon the Company’s common stock reaching a closing price equal to 50% of currently specified price; and b) the right to extend the exercise period of all or part of the applicable options and warrants for up to five years (one year at a time) by annual payments of $.05 per option or warrant to the Company on or before a date during the three months prior to expiration of the exercise period at least three business days before the end of the expiration period.  

During the year ended June 30, 2014, the Company extended execution/exercise bonuses with the same terms as described above to Schafer and to one of the Company’s board members.

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BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SIX MONTHS ENDED DECEMBER 31, 2014

Litigation:

In May 2014 Mr. Morris, the Company’s former Chief Technology Officer, initiated litigation against the Company (Morris v Bion Environmental Technologies, Inc., 14-cv-02732-ADS-GRB, United States District Court, Eastern District of New York) related to his termination effective November 30, 2013.  Mr. Morris seeks payment of severance pay (up to $90,000) plus certain previously accrued obligations totaling approximately $87,000 plus accrued interest (which sums have been accrued as of September 30, 2014, despite the fact that the Company is disputing the obligations) and attorney’s fees.  The Company disputes each such claim by Mr. Morris in the litigation and is defending the lawsuit which is in the discovery stage.  The Company is incurring attorney’s fees (and related costs) in the context of its defense.  The Company does not believe that this litigation will have a material adverse effect on the Company.

On September 25, 2014, Pennvest exercised its right to declare the Pennvest Loan in default and has accelerated the Pennvest Loan and has demanded that PA-1 pay $8,137,117 (principal, interest plus late charges) on or before October 24, 2014.  PA-1 did not make the payment and does not have the resources to make the payment demanded by Pennvest.  During August 2012, the Company provided Pennvest (and the PADEP) with data demonstrating that the Kreider 1 system met the ‘technology guaranty’ standards which were incorporated in the Pennvest financing documents and, as a result, the Pennvest Loan is now solely an obligation of PA-1.  No litigation has commenced related to this matter but such litigation is likely if negotiations do not produce a resolution (Note 1 and Note 6).

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

10.

SUBSEQUENT EVENTS:

The Company has evaluated events that occurred subsequent to December 31, 2014 for recognition and disclosure in the financial statements and notes to the financial statements.

From January 1, 2015 through February 9, 2015 the Company has issued 79,210 shares of the Company’s common shares to employees valued at approximately $37,000.

From January 1, 2015 through February 9, 2015, the Company has sold 1,665,001 units of the Company’s restricted securities for $0.50 each, with each unit consisting of one share of the Company’s restricted common stock and one warrant to purchase one half of a share of the Company’s restricted common stock for $0.75 per share until December 31, 2016.  The proceeds from the sale of the units totaled approximately $832,500 before brokerage commisions and offering expenses (and issuance of 123,044 warrants to certain of the brokers pursuant to the terms of the offering).

From January 1, 2015 through February 9, 2015, the Company granted 257,500 options to purchase the Company’s common stock at an exercise price of $0.60 to various employees and consultants other than Smith, Bassani and Schafer.  The options expire 5 years from grant date and 100,000 options vest over two years, while 157,500 of the options vest upon grant date.

From January 1, 2015 through February 9, 2015, Smith has elected to convert approximately $106,000 of his convertible note payable into 235,775 shares of the Company’s common stock and 235,775 warrants to purchase the Company’s common stock.

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BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SIX MONTHS ENDED DECEMBER 31, 2014

On February 10, 2015, the Company executed an Extension Agreement with Smith pursuant to which Smith extended his employment with the Company to December 31, 2015 (with the Company having an option to extend his employment an additional six months).  As part of the Extension Agreement, the balance of Smith’s existing convertible note payable (Note 7) of $854,316 as of December 31, 2014, adjusted for conversions subsequent to that date, was replaced with a new convertible note with an initial principal amount of $760,519 with terms that i) materially reduce the interest rate by 50% (from 8% to 4%), ii) increases the conversion price by 11% (from $0.45 to $0.50), iii) sets the conversion price at a fixed price so there can be no further reductions, iv) reduces the number of warrants received on conversion by 75% (from 1 warrant per unit to ¼ per unit) and v) extends the maturity date to December 31, 2017 (“New Smith Note”).  Additionally, pursuant to the Extension Agreement, Smith: i) will continue to defer his cash compensation until the Board of Directors re-instates cash payments to all employees and consultants who are deferring their compensation,  ii) cancelled  200,000 contingent stock bonuses previously granted to him by the Company, iii) has been granted 150,000 new options which vested immediately and iv) exercise period of outstanding options and warrants owned by Smith (and his donees) have been extended and certain of the outstanding options and warrants had the exercise prices reduced to $1.50.

On February 10, 2015, the Company executed an Extension Agreement with Bassani pursuant to which Bassani extended the term of his service to the Company to December 31, 2017, (with the Company having an option to extend the term an additional six months.)  As part of the agreement, the Company’s existing loan payable, deferred compensation and convertible note payable to Bassani (Notes 4, 5 and 7), were restructured into two promissory notes as follows: a) The of sum of the cash loaned by Bassani to the Company of $279,000 together with $116,277 of unreimbursed expenses through December 31, 2014 were placed into a new promissory note with initial principal of $395,277 which is due and payable on December 31, 2015 (“Cash Note”).  In connection with these sums and the Cash Note, Bassani was issued warrants to purchase 592,916 shares of the Company’s common stock at a price of $1.00 until December 31, 2020; and b) the remaining balances of the Company’s accrued obligations to Bassani ($1,464,545) were replaced with a new convertible promissory note with terms that compared with the largest prior convertible note obligation to Bassani:  i) materially reduce the interest rate by 50% (from 8% to 4%), ii) increase the conversion price by 11% (from $0.45 to $0.50), iii) sets the conversion price at a fixed price so there can be no further reductions, iv) reduces the number of warrants received on conversion by 75% (from 1 warrant per unit to 1/4 per unit) and v) extends the maturity date to December 31, 2017 (“New Bassani Note”).  Additionally,  pursuant to the Extension Agreement, Bassani i) will continue to defer his cash compensation until the Board of Directors re-instates cash payments to all employees and consultants who are deferring their compensation, ii) cancelled 250,000 contingent stock bonuses previously granted to him by the Company, iii) has been granted 450,000 new options which vested immediately and iv) exercise period of outstanding options and warrants owned by Bassani (and his donees) have been extended and certain of the outstanding options and warrants had the exercise prices reduced to $1.50.

On February 10, 2015, the Company entered into an agreement with Schafer pursuant to which Schafer will continue to provide services to the Company through December 31, 2015.  As part of the agreement, unreimbursed expenses of $15,956 due to Schafer at December 31, 2014 were replaced with a new promissory note with initial principal of $15,956 which is due and payable on December 31, 2015 and Schafer was issued warrants to purchase 7,978 shares of the Company’s common stock at a price of $1.00 until December 31, 2020. Schaefer’s deferred compensation for 2014 (and prior years) in the amount of $394,246 (including a sum of $120,000 for calendar year 2014) was placed in a convertible promissory note with identical terms as the New Smith Note and the New Bassani Note. Additionally, pursuant to the  agreement,  i) the exercise period of outstanding options and warrants owned by Schafer have been extended, ii) certain of Schafer’s outstanding options and warrants had the exercise prices reduced to $1.50, and iii) 25,000 contingent stock bonuses previously granted to Schafer have been cancelled by the Company.

Page 27

PART I – FINANCIAL INFORMATION

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

Statements made in this Form 10-Q that are not historical or current facts, which represent the Company's expectations or beliefs including, but not limited to, statements concerning the Company's operations, performance, financial condition, business strategies, and other information, involve substantial risks and uncertainties.  The Company's actual results of operations, most of which are beyond the Company's control, could differ materially.  These statements often can be identified by the use of terms such as "may," "will," "expect," "believe," anticipate," "estimate," or "continue" or the negative thereof.  We wish to caution readers not to place undue reliance on any such forward looking statements, which speak only as of the date made.  Any forward looking statements represent management's best judgment as to what may occur in the future.  However, forward looking statements are subject to risks, uncertainties and important factors beyond our control that could cause actual results and events to differ materially from historical results of operations and events and those presently anticipated or projected.

These factors include adverse economic conditions, entry of new and stronger competitors, inadequate capital, unexpected costs, failure (or delay)  to gain product or regulatory approvals in the United States (or particular 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 markets for nutrient reduction credits (discussed below) and/or other ways to monetize nutrient reductions will be slow to develop (or not develop at all), existing default by a subsidiary on loan obligations, 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/or possible delays in Bion's development of Projects and failure of marketing strategies, each of which could have an immediate and/or long term material adverse effects 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. See our Form 10-K (period ended June 30, 2014) for more details regarding these risk factors.

The following discussion and analysis should be read in conjunction with the unaudited Consolidated Financial Statements and Notes to Consolidated Financial Statements filed herein with the Company’s Form 10-K for the year ended June 30, 2014.

BUSINESS OVERVIEW

During the 2004-2008 calendar years, the Company focused on completion of the development of the second generation of its technology which provides comprehensive environmental solutions to a significant source of pollution in U.S. agriculture, large scale livestock facilities known as Confined Animal Feeding Operations ("CAFO"). The re-development process was substantially completed several years ago and the initial commercial system, based on our updated technology, has been constructed and placed in full commercial operation. Bion continues to focus on refining, testing and/or developing technologies which can supplement our technologies and or be utilized with our technology platform. During the 2014 fiscal year the Company increased its research and development activities with focus on creating variations of its technology platform that create additional flexibility, increase recovery of nutrient by-products, to review potential “add-ons” and applications for use in different regulatory environments.  These research and development activities will continue through the current 2015 fiscal year, and most likely, into the 2016 fiscal year.

Operational results from this initial commercial system have confirmed the ability of Bion’s technologies to meet its nutrient reduction goals at commercial scale for an extended period of operation. Bion’s current generation technology platform centers on its patented biological-based processes that separate and aggregate  the  various  assets  in  the  CAFO  waste  stream  so  they  become  benign, stable and/or

Page 28

transportable. Bion systems can: a) remove up to 95% of the nutrients (primarily nitrogen and phosphorus) in the effluent, b) reduce greenhouse gases by 90% (or more) including elimination of virtually all ammonia emissions, c) while materially reducing pathogens, antibiotics and hormones in the livestock waste stream. In addition to capturing valuable nutrients for reuse, Bion’s technology platform also recovers cellulosic biomass which can be used to generate renewable energy from the waste stream in a process more efficient than other technologies that seek to exploit this CAFO waste stream. Our core technology and its primary CAFO applications are now proven in commercial operations. It has been accepted by the Environmental Protection Agency (“EPA”) and other regulatory agencies and it is protected by Bion’s portfolio of U.S. and international patents (both issued and applied for). Research and development activities are underway to improve, update and move toward the next generation of Bion systems to meet the needs of CAFOs in various geographic and climate areas with nutrient release constraints.

Currently, Bion is focused on using applications of its patented and proprietary waste management technologies and technology platform to pursue three main business opportunities: 1) installation of Bion systems to retrofit and environmentally remediate existing CAFOs in selected markets where: a) government policy supports such efforts (such as the Chesapeake Bay watershed, Wisconsin and other Great Lakes Basin states,  and/or other states and watersheds facing EPA ‘total maximum daily load’ (“TMDL’) issues, and/or b) where CAFO’s need our technology to obtain permits to expand or develop without negative environmental consequences; 2) development of Integrated Projects which will include large CAFOs, such as large dairies, beef cattle feed lots and hog farms, with Bion waste treatment system modules processing the aggregate CAFO waste stream from the equivalent of 40,000 or more beef and/or dairy cows (or the waste stream equivalent of other species) while recovering cellulosic biomass (to be utilized for renewable energy production) and nutrient rich solids (that can potentially to be marketed as feed and/or fertilizer), integrated with an ethanol plant capable of producing 40 million gallons (or more) of ethanol per year and/or with CAFO end product processors, and 3) licensing and/or joint venturing of Bion’s technology and applications outside North America. The opportunities described at 1) and 2) above each require substantial political (federal, state and local) efforts on the part of the Company and a substantial part of Bion’s efforts are focused on such political matters. Bion is currently pursuing the international opportunities primarily through the use of consultants with existing relationships in target countries.

During 2008 the Company commenced actively pursuing the opportunity presented by environmental retrofit and remediation of the waste streams of existing CAFOs. The first commercial activity in this area is represented by our agreements with Kreider Farms ("KF") in Pennsylvania pursuant to which a Bion system to treat KF's dairy and poultry waste streams to reduce nutrient releases to the environment while generating marketable nutrient credits and renewable energy was designed, constructed and has been in full-scale operation since 2011. (No other Bion system has been contracted for and/or constructed to date.) On January 26, 2009 the Board of the Pennsylvania Infrastructure Investment Authority (“Pennvest”) approved a $7.75 million loan to Bion PA 1, LLC (“PA-1”), a wholly-owned subsidiary of the Company, for the initial stage of Bion's Kreider Farms project (“Phase 1 Kreider System”). After substantial unanticipated delays, on August 12, 2010 the PA-1 received a permit for construction of the Phase 1 Kreider system.  Construction activities commenced during November 2010.  The closing/settlement of the Pennvest Loan took place on November 3, 2010.  PA-1 finished the construction of the Phase 1 Kreider System and entered a period of system ‘operational shakedown’ during May 2011.  The Phase 1 Kreider System reached full, stabilized operation by the end of the 2012 fiscal year.  During 2011 the Pennsylvania Department of Environmental Protection (“PADEP”) re-certified the nutrient credits for this project.  The economics (potential revenues and profitability) of the Phase 1 Kreider System are based largely on the long term sale of nutrient (nitrogen and/or phosphorus) reduction credits to meet the requirements of the Chesapeake Bay environmental clean-up, which sales have not yet materialized.  The PADEP issued final permits for the Kreider System (including the credit verification plan) on August 1, 2012 on which date the Company deemed that the Kreider System was ‘placed in service’.  As a result, PA-1 has commenced generating and verifying

Page 29

nutrient reduction credits for potential sale while continuing to utilize the system to test improvements and add-ons. Operating results of the Phase 1 Kreider System have documented the efficacy of Bion’s nutrient reduction technology and vetted potential ‘add-ons’ for future installations. During August 2012 the Company provided Pennvest (and the PADEP) with data demonstrating that the Kreider 1 system met the ‘technology guaranty’ standards which were incorporated in the Pennvest financing documents and, as a result, the Pennvest Loan is now solely an obligation of PA-1.  As a result of this extended period of operations, Bion is confident that future systems can be constructed with even higher operational efficiencies at lower capital expense and with lower operational costs. To date liquidity in the Pennsylvania nutrient credit market has been slow to develop significant breadth and depth  which limited liquidity has negatively impacted Bion’s business plans and has prevented Bion from monetizing the nutrient reductions created by PA-1’s existing Kreider 1 project and Bion’s other proposed projects. These challenges and difficulties (which continue to this date) have prevented PA-1 from generating any material revenues from the Kreider 1 project to date (PA-1’s Kreider 1 operating expenses have been funded by loans from Bion) and raise significant questions as to when, if ever, PA-1 will be able to generate such material revenues from the Kreider 1 system.  PA-1 has been engaged in on-and-off negotiations with Pennvest related to forbearance and/or re-structuring its obligations pursuant to the Pennvest Loan for over 30 months. In the context of such negotiations, PA-1 has elected not to make interest payments to Pennvest on the Pennvest Loan since January 2013.  Additionally, the Company has not made any principal payments, which were to begin in fiscal 2013, and, therefore, the Company has classified the Pennvest Loan as a current liability as of December 31, 2014.  Due to the slow development of the nutrient reduction credit market, the Company determined that the carrying amount of the property and equipment related to the Kreider 1 project exceeded its estimated future undiscounted cash flows based on certain assumptions regarding timing, level and probability of revenues from sales of nutrient reduction credits and, therefore, recorded a $2,000,000 impairment of the Kreider 1 during the year ended of June 30, 2014.  Additional impairments may result if the nutrient credit market does not develop in the near term.  

On September 25, 2014, Pennvest exercised its right to declare the Pennvest Loan in default and has accelerated the Pennvest Loan and has demanded that PA-1 pay $8,137,117 (principal, interest plus late charges) on or before October 24, 2014. PA-1 did not make the payment and does not have the resources to make the payment demanded by Pennvest. PA-1 has commenced discussions and negotiations with Pennvest concerning this matter but has not yet received any responses from Pennvest to solutions it has proposed.  It is not possible at this date to predict the outcome of such negotiations, but the Company believes that an interim, short-term agreement may be reached that will allow PA-1 and Pennvest a further period of time for further negotiations and evaluation of possible long-term resolutions. Subject to the results of the negotiations with Pennvest and pending development of a more robust market for nutrient reductions in Pennsylvania, PA-1 and Bion anticipate that it will be necessary for the Company to evaluate various options with regard to Kreider 1 over the coming months.

During August 2012, the Company provided Pennvest (and the PADEP) with data demonstrating that the Kreider 1 system met the ‘technology guaranty’ standards which were incorporated in the Pennvest financing documents and, as a result, the Pennvest Loan is now solely an obligation of PA-1.  

The Company is currently conducting research and development activities at the Kreider 1 system while continuing commercial operations.

The Company continues its development work related to the second phase of the Kreider project (‘Phase 2 Kreider Project’) which involves production of renewable energy from the waste of KF’s poultry operations and the cellulosic solids recovered by the Kreider 1 system. During May 2011 the PADEP certified the Phase 2 Kreider Project for 559,457 nutrient credits under the old EPA’s Chesapeake Bay model.  The Company anticipates that this project will be certified for between 1.5-2 million nutrient reduction credits pursuant to the amended EPA Chesapeake Bay model which was published subsequent

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to the original certification. Recent announcements related to negotiations between the EPA and PADEP regarding Pennsylvania’s Chesapeake Bay nutrient reduction non-compliance suggest that a resolution of certain matters is likely during the balance of this calendar year which may allow this project to move forward with re-certification and proceed toward design, permitting , construction and eventual operation during the 2015 calendar year. Assuming there are also positive developments related to the market for nutrient reductions in Pennsylvania, the Company intends to pursue development, design and construction of the Kreider poultry waste/renewable energy project with a goal of achieving operational status during fiscal 2016. The economics (potential revenues and profitability) of the Phase 2 Kreider Project are based largely on the long term sale of nutrient (nitrogen and/or phosphorus) reduction credits to meet the requirements of the Chesapeake Bay environmental clean-up.  However, liquidity in the Pennsylvania nutrient credit market has been slow to develop significant breadth and depth which lack of liquidity to date has negatively impacted Bion’s business plans and has resulted in challenges to monetizing the nutrient reduction credits created by PA-1’s existing Kreider 1 project and will delay the Company’s Phase 2 Kreider Project and other proposed projects in Pennsylvania.

A significant portion of Bion’s current activities concern efforts with private and public stakeholders (at local and state level) in Pennsylvania, other Chesapeake Bay states and at the federal level (EPA and other executive departments and Congress) to establish appropriate public policies which will create regulations and funding mechanisms that foster installation of the low cost, technology-based  environmental solutions that Bion (and others) can provide through clean-up of agricultural waste streams. In January 2013, the Pennsylvania Legislative Budget and Finance Committee issued a report stating that targeting upstream livestock would save Pennsylvania’s taxpayers up to 80% of previously estimated costs (potential savings for Pennsylvania in excess of a billion dollars per year over the next 20 years) which would be available for other needs (notably aging drinking water and sewer infrastructure) while creating large local benefits of an upstream treatment strategy including reduced freshwater compliance costs, future cost avoidance of treating drinking water from contaminated local aquifers and increased economic activity for agriculture, tourism and recreation.  The Coalition for an Affordable Bay Solution (“Coalition”) was formed to support the creation of a competitively-bid nitrogen trading program in Pennsylvania that will enable Pennsylvania to capture the economic benefits outlined in the legislative study. The Coalition supports legislation to establish a competitively-bid RFP program for nitrogen reductions, where bids will also be ‘scored’ to reflect the value of the benefits to Pennsylvania’s interior waterways and communities.  Founding members of the Coalition represent both Chesapeake Bay and national industry participants, and include Bion, JBS, SA, Kreider Farms, and Fair Oaks Farms. The head of the Coalition is Ed Schafer, Bion’s Executive Vice Chairman. Legislation was filed in the Pennsylvania Senate during the spring of 2013 that, if re-introduced, passed and signed into law, will potentially enable Bion (and others) to compete for public funding on an equal basis with public works and storm water authorities. Activity related to such legislation has recently re-commenced with increased stakeholder support and Bion believes such legislation is likely to be passed (in some version) by the Pennsylvania Legislature during 2015 but cannot predict the exact final content of such legislation or guarantee such passage. If such a program is passed and implemented, Bion expects that the policies and strategies being developed in Pennsylvania will not only benefit the Company’s existing and proposed Pennsylvania projects, but will also subsequently provide the basis for a larger Chesapeake Bay watershed strategy and, thereafter, a national clean water strategy.  Legislation in Wisconsin, which became effective during April 2014, represents a significant step forward towards opening business opportunities in that state.

The Company believes that Pennsylvania (and the entire Chesapeake Bay watershed) and Wisconsin (and other Great Lakes Basin states) represent ‘ground zero’ in the long-standing clean water battle between agriculture and the further regulation of agriculture relative to nutrient impacts. The ability of Bion and other technology providers to achieve verified reductions from agricultural non-point sources can resolve the current stalemate and enable implementation of constructive solutions that benefit all stakeholders, providing a mechanism that ensures that taxpayer funds will be used to achieve the most beneficial result

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at the lowest cost, regardless of source. All sources, point and non-point, rural and urban, will be able to compete for tax payer-funded nitrogen reductions in a fair and transparent process; and since payment from the tax and rate payers will now be performance-based, these providers will be held financially accountable.

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

Additionally, we believe that Bion's technology platform (including utilization of various third party technologies to supplement the Company’s proprietary technologies) will allow the integration of large-scale CAFOs and their end-product users, renewable energy production from the CAFO waste stream, and on site utilization of the renewable energy generated and biofuel/ethanol production in an environmentally and economically sustainable manner while reducing the aggregate capital expense and operating costs and increasing revenue and profitability for the entire integrated complex ("Integrated Projects" or "Projects"). In the context of Integrated Projects, Bion's waste treatment process, in addition to mitigating polluting releases, will generate renewable energy from cellulosic portions of the CAFO waste stream which renewable energy can be utilized by integrated facilities including ethanol plants, CAFO end-product processors (including cheese, ice cream and/or bottling plants in the case of dairy CAFOs, and/or slaughter and/or processing facilities in the context of beef CAFOs) and/or other users as a  replacement for fossil fuel usage. In addition an integrated ethanol plant's main by-product, called distillers grain, can be added to the feed of the animals in wet form, thereby lowering the capital expenditures, operating, marketing and shipping costs and energy usage of the ethanol production process. In such cases, the ethanol plant would act as a feed mill for the integrated CAFO, thereby reducing the CAFO's feeding costs as well as generating revenue to the ethanol plant, and would also provide a market for the renewable energy that Bion's System produces from the CAFO waste stream. And, in some cases the nutrient rich liquid effluent from the Bion system modules may be directly utilized for greenhouse and/or hydroponic agriculture. Accordingly, such Bion Integrated Projects can be denominated "closed loop". Bion anticipates that many projects may initially include only partial integration.  Based on the degree of integration in a Project, greater or lesser amounts of benefits will be realized.  Bion, as developer of, and participant in, Integrated Projects, anticipates that it will share in the cost savings and the revenues generated from these activities.

Bion is currently working with local, state and federal officials with regard to regulatory and legislative initiatives, and with such parties and potential industry participants to evaluate sites in multiple states. The Company believes that its initial Integrated Project will most likely be located and developed (probably in stages) in Pennsylvania.  Note that locations in other states are also under review and the initial Integrated Project could be developed elsewhere. It is possible that the Company will develop one or more Integrated Projects as joint ventures specifically targeted to meet the growing animal protein demand outside of the United States (including without limitation Asia, Europe and/or the Middle East).  Bion intends to choose sites for additional Projects during the calendar years 2016-2018 to create a pipeline of Projects. Management has a 5-year development target (through calendar year 2021) of approximately 10-24 Integrated Projects.  At the end of that period, Bion projects that 5 or more of these Integrated Projects will be in full operation in 3-5 states (or other locations), and the balance would be in various stages ranging from partial operation to early permitting stage. No Integrated Project has been developed to date.

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The Company’s audited financial statements for the years ended June 30, 2014 and 2013 have been prepared assuming the Company will continue as a going concern.  The Company has incurred net losses of approximately $5,762,000 and $8,250,000 during the years ended June 30, 2014 and 2013, respectively. The Report of the Independent Registered Public Accounting Firm on the Company's consolidated financial statements as of and for the year ended June 30, 2014 includes a "going concern" explanatory paragraph which means that the accounting firm has expressed substantial doubt about the Company's ability to continue as a going concern.  The Company has incurred a net loss of approximately $1,371,000 for the six months ended December 31, 2014.   At December 31, 2014, the Company had a working capital deficit and a stockholders’ deficit of approximately $12,718,000 and $8,776,000, respectively. Management's plans with respect to these matters are described in this section and in our consolidated financial statements (and notes thereto), and this material does not include any adjustments that might result from the outcome of this uncertainty.  However, there is no guarantee that we will be able to raise sufficient funds or further capital for the operations planned in the near future.  

CRITICAL ACCOUNTING POLICIES

Management has identified the following policies below as critical to our business and results of operations.  Our reported results are impacted by the application of the following accounting policies, certain of which require management to make subjective or complex judgments.  These judgments involve making estimates about the effect of matters that are inherently uncertain and may significantly impact quarterly or annual results of operations.  For all of these policies, management cautions that future events rarely develop exactly as expected, and the best estimates routinely require adjustment.  Specific risks associated with these critical accounting policies are described in the paragraphs below.

Revenue Recognition

While the Company has not recognized any significant operating revenues for the past two fiscal years, the Company has commenced generation of revenues during the year ended June 30, 2013.  Revenues are generated from the sale of nutrient reduction credits, product sales, technology license fees, annual waste treatment fees and/or direct ownership interests in Integrated Projects.  The Company recognizes revenue from the sale of nutrient credits and products when there is persuasive evidence that an arrangement exists, when title has passed, the price is fixed or determinable, and collection is reasonably assured.  The Company expects that technology license fees will be generated from the licensing of Bion's systems.  The Company anticipates that it will charge its customers a non-refundable up-front technology license fee, which will be recognized over the estimated life of the customer relationship.  In addition, any on-going technology license fees will be recognized as earned based upon the performance requirements of the agreement. Annual waste treatment fees will be recognized upon receipt. Revenues, if any, from the Company's interest in Projects will be recognized when the entity in which the Project has been developed recognizes such revenue.

Stock-based compensation

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

Derivative Financial Instruments:

Pursuant to ASC Topic 815 “Derivatives and Hedging” (“Topic 815”), the Company reviews all financial instruments for the existence of features which may require  fair value accounting and a related mark-to-market adjustment at each reporting period end. Once determined, the Company assesses these instruments as derivative liabilities.  The fair value of these instruments is adjusted to reflect the fair value at each reporting period end, with any increase or decrease in the fair value being recorded in results of operations as an adjustment to fair value of derivatives.  

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Warrants:

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

Property and equipment:

Property and equipment are stated at cost and are depreciated, when placed into service, using the straight-line method over the estimated useful lives of the related assets, generally three to twenty years.  The Company capitalizes all direct costs and all indirect incrementally identifiable costs related to the design and construction of its Integrated Projects.  The Company reviews its property and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  An impairment loss would be recognized based on the amount by which the carrying value of the assets or asset group exceeds its estimated fair value, and is recognized as a loss from operations.

Recent Accounting Pronouncements:

In May 2014, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers, which supersedes the revenue recognition in Revenue Recognition (Topic 605), and requires entities to recognize revenue in a way that depicts the transfer of potential goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services.  ASU 2014-09 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016, and is to be applied retrospectively, with early adoption not permitted.  The Company is currently evaluation this new standard and the potential impact this standard may have upon adoption.

In August 2014, the FASB issued ASU No. 2014-15, “Presentation of Financial Statements – Going Concern: Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern.”  The new standard requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year of the date the financial statements are issued.  An entity must provide certain disclosures if conditions or events raise substantial doubt about the entity’s ability to continue as a going concern.  The guidance is effective for annual periods ending after December 15, 2016, and interim periods thereafter, early application is permitted.  The Company is currently assessing the impact of the adoption of ASU No. 2014-15 on its financial position, results of operation and financial statement disclosures.

THREE MONTHS ENDED DECEMBER 31, 2014 COMPARED TO THE THREE MONTHS ENDED DECEMBER 31, 2013

Revenue

Total revenues were nil for both the three months ended December 31, 2014 and 2013, respectively.

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General and Administrative

Total general and administrative expenses were $333,000 and $527,000 for the three months ended December 31, 2014 and 2013, respectively.

General and administrative expenses, excluding stock-based compensation charges/(credits) of $16,000 and $(131,000), were $317,000 and $658,000 for the three months ended December 31, 2014 and 2013, respectively, representing a $341,000 decrease.  Salaries and related payroll tax expenses decreased to $102,000 for the three months ended December 31, 2014 from $355,000 for the three months ended December 31, 2013, primarily due to the fact that during the three months ended December 31, 2014 there were three less employees due to fiscal year 2014 terminations which reduced recurring salary and payroll tax costs, in addition to a one time accrual for termination benefits during the three months ended December 31, 2013.  Consulting costs were $107,000 and $158,000 for the three months ended December 31, 2014 and 2013, respectively, representing a $51,000 decrease primarily due to the decreased utilization of a strategic affairs consultant during the period and a shift of consulting time into research and development efforts.  

General and administrative stock-based employee compensation for the three months ended December 31, 2014 and 2013 consists of the following:

	Three months ended December 31, 2014	Three months ended December 31, 2013
General and administrative:
Fair value of stock issued to an employee	$             -	$    25,000
Change in fair value from modification of option terms	12,000	-
Fair value of stock options expensed under ASC 718	4,000	(156,000)
Total	$   16,000	$(131,000)

Stock-based compensation charges/(credits) were $16,000 and $(131,000) for the three months ended December 31, 2014 and 2013, respectively.  Compensation expense relating to stock issued to an employee decreased from $25,000 to nil during the three months ended December 31, 2013 compared to 2014, respectively, due to the termination of an employee during the three months ended December 31, 2013 who received a portion of his salary in shares. Compensation expense relating to the change in fair value from the modification of option terms was $12,000 and nil for the three months ended December 31, 2014 and 2013, respectively, as the Company granted an extension of option expiration dates for a director during the three months ended December 31, 2014.  Compensation expense/(credit) relating to stock options were $4,000 and $(156,000) for the three months ended December 31, 2014 and 2013, respectively.  The credit for the three months ended December 31, 2013 resulted from the forfeiture of previously expensed unvested stock options of two employees terminated during the three months ended December 31, 2013.

Depreciation

Total depreciation expense was $127,000 and $244,000 for the three months ended December 31, 2014 and 2013, respectively.  Depreciation expense is lower for the three months ended December 31, 2014 due to the fiscal year 2014 $2,000,000 impairment of the Kreider 1 assets which reduced the depreciation base.

Research and Development

Total research and development expenses were $104,000 and $(120,000) for the three months ended December 31, 2014 and 2013, respectively.

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Research and development expenses, excluding stock-based compensation credits of nil and $(154,000) were $104,000 and $34,000 for the three months ended December 31, 2014 and 2013, respectively.  The primary reason for the increase is due to consulting costs and expenses related to the pilot program testing to enhance the Company’s technology.  

Research and development stock-based employee compensation for the three months ended December 31, 2014 and 2013 consists of the following:

	Three months ended December 31, 2014	Three months ended December 31, 2013
Research and development:
Fair value of stock options credited under ASC 718	$       -	$ (154,000)
Total	$       -	$ (154,000)

Stock-based compensation credits decreased from $(154,000) for the three months ended December 31, 2013 to nil for the three months ended December 31, 2014 due to the forfeiture of previously expensed unvested stock options of a research and development employee terminated during the three months ended December 31, 2013.

Loss from Operations

As a result of the factors described above, the loss from operations was $565,000 and $651,000 for the three months ended December 31, 2014 and 2013, respectively.

Other Expense

Other expense consisting of interest expense was $100,000 and $89,000 for the three months ended December 31, 2014 and 2013, respectively.  The interest related to deferred compensation balances owed to Brightcap and Mark Smith and another employee increased from $35,000 for the three months ended December 31, 2013 to $38,000 for the three months ended December 31, 2014.  Loan payable – affiliate interest expense and related warrant interest was $11,000 and $5,000 for the three months ended December 31, 2014 and 2013, respectively.  

Net Loss Attributable to the Noncontrolling Interest

The net loss attributable to the noncontrolling interest was $1,000 for both of the three months ended December 31, 2014 and 2013, respectively.  

Net Loss Attributable to Bion’s Common Stockholders

As a result of the factors described above, the net loss attributable to Bion’s stockholders was $664,000 and $739,000 for the three months ended December 31, 2014 and 2013, respectively, and the net loss per basic and diluted common share was $0.03 and $0.04, respectively.  

SIX MONTHS ENDED DECEMBER 31, 2014 COMPARED TO THE SIX MONTHS ENDED DECEMBER 31, 2013

General and Administrative

Total general and administrative expenses were $691,000 and $1,632,000 for the six months ended December 31, 2014 and 2013, respectively.

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General and administrative expenses, excluding stock-based compensation charges of $16,000 and $315,000, were $675,000 and $1,317,000 for the six months ended December 31, 2014 and 2013, respectively, representing a $642,000 decrease.  Salaries and related payroll tax expenses decreased from $605,000 for the six months ended December 31, 2013 to $195,000 for the six months ended December 31, 2014, primarily due to the fact that during the six months ended December 30, 2013 four employees were terminated which reduced recurring salary cost but was partially offset by a one-time accrual for termination benefits.  Consulting costs were $221,000 and $363,000 for the six months ended December 31, 2014 and 2013, respectively, representing a $142,000 decrease primarily due to the decreased utilization of strategic affairs consultants during the fiscal 2015 period.  Business insurance expenses and travel expenses decreased to $15,000 and $12,000, respectively when comparing the six months ended December 31, 2014 to the six months ended December 31, 2013 due to fewer employees and the effort to reduce costs of the Company.  

General and administrative stock-based employee compensation for the six months ended December 31, 2014 and 2013 consists of the following:

	Six months ended December 31, 2014	Six months ended December 31, 2013
General and administrative:
Fair value of stock issued to an employee	$         -	$    95,000
Change in fair value from modification of     option terms	12,000	308,000
Fair value of stock options expensed/(credited)     under ASC 718	4,000	(88,000)
Total	$16,000	$  315,000

Stock-based compensation charges were $16,000 and $315,000 for the six months ended December 31, 2014 and 2013, respectively.  The fair value of stock issued to an employee decreased from $95,000 for the six months ended December 31, 2013 to nil for the six months ended December 31, 2014.  The decrease is due to Ed Schafer no longer being an employee during the fiscal 2015 year and he was partially compensated in stock.  Compensation expense relating to the change in fair value from the modification of option terms was $12,000 and $308,000 for the six months ended December 31, 2014 and 2013, respectively as the Company granted an extension of option expiration dates for a terminated employee and also granted exercise bonuses to a key employee and board member during the six months ended December 31, 2013, while during the six months ended December 31, 2014 only one board member received extensions on his existing options.

Compensation expense/(credits) relating to stock options was $4,000 and $(88,000) during the six months ended December 31, 2014 and 2013, respectively, and the credit resulted from the forfeiture of previously expensed unvested stock options of two employees terminated during the six months ended December 31, 2013.

Depreciation

Total depreciation expense was $312,000 and $490,000 for the six months ended December 31, 2014 and 2013, respectively.  Depreciation expense is lower for the six months ended December 31, 2014 due to the fiscal year 2014 $2,000,000 impairment of the Kreider 1 assets which reduced the depreciation base.

Research and Development

Total research and development expenses/(credits) were $171,000 and $(53,000) for the six months ended December 31, 2014 and 2013, respectively.

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Research and development expenses, excluding stock-based compensation credits of nil and $(136,000) were $171,000 and $83,000 for the six months ended December 31, 2014 and 2013, respectively.  The primary reason for the increase for the six months ended December 31, 2014, is due to consulting costs and expenses related to the pilot program testing to enhance the Company’s technology.  

Research and development stock-based employee compensation for the six months ended December 31, 2014 and 2013 consists of the following:

	Six months ended December 31, 2014	Six months ended December 31, 2013
Research and development:
Fair value of stock options credited     ASC 718	$  -	$(136,000)
Total	$  -	$(136,000)

Stock-based compensation credits decreased from $(136,000) for the six months ended December 31, 2013 to nil for the six months ended December 31, 2014.  The decrease resulted from the forfeiture of previously expensed unvested stock options of one employee terminated during the six months ended December 31, 2013.

Loss from Operations

As a result of the factors described above, the loss from operations was $1,173,000 and $2,068,000 for the six months ended December 31, 2014 and 2013, respectively.

Other Expense

Other expense was $197,000 and $177,000 for the six months ended December 31, 2014 and 2013, respectively.  Interest expense increased to $197,000 for the six months ended December 31, 2014 from $175,000 for the six months ended December 31, 2013.  The interest related to deferred compensation balances owed to Brightcap and Mark Smith and another employee increased from $67,000 for the six months ended December 31, 2013 to $74,000 for the six months ended December 31, 2014.  Loan payable – affiliate interest expense and related warrant interest was $21,000 and $9,000 for the six months ended December 31, 2014 and 2013, respectively.  

Net Loss Attributable to the Noncontrolling Interest

The net loss attributable to the noncontrolling interest was $2,100 and $2,700 for the six months ended December 31, 2014 and 2013, respectively.  

Net Loss Attributable to Bion’s Stockholders

As a result of the factors described above, the net loss attributable to Bion’s stockholders was $1,370,000 and $2,243,000 for the six months ended December 31, 2014 and 2013, respectively, representing a $0.05 decrease in the net loss per basic and diluted common share from $0.12 to $0.07.  

LIQUIDITY AND CAPITAL RESOURCES

The Company's consolidated financial statements for the six months ended December 31, 2014 have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business.  The Report of our Independent Registered Public Accounting Firm on the Company's consolidated financial statements as of and for the year ended June 30, 2014 includes a "going concern" explanatory paragraph which means that the auditors stated that conditions exist that raise substantial doubt about the Company's ability to continue as a going concern.

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Operating Activities

As of December 31, 2014, the Company had cash of approximately $15,000. During the six months ended December 31, 2014, net cash used in operating activities was $295,000, primarily consisting of cash operating expenses related to salaries and benefits, and other general and administrative costs such as insurance and legal and accounting expenses. As previously noted, the Company is currently not generating significant revenue and accordingly has not generated cash flows from operations.  The Company does not anticipate generating sufficient revenues to offset operating and capital costs for a minimum of two to five years.  While there are no assurances that the Company will be successful in its efforts to develop and construct its Projects and market its Systems, it is certain that the Company will require substantial funding from external sources. Given the unsettled state of the current credit and capital markets for companies such as Bion, there is no assurance the Company will be able to raise the funds it needs on reasonable terms.

Financing Activities

During the six months ended December 31, 2014, the Company received cash proceeds of $26,000 related to the sale of the Company’s restricted common shares and $30,000 due to the receipt of a subscription receivable.  The Company also received proceeds of $67,500 from the sale of 135,000 units which consists of one share of the Company’s restricted common stock and one warrant to purchase one half of a share of the Company’s restricted common stock for $0.75 per share until December 31, 2016.

As of December 31, 2014 the Company has debt obligations consisting of: a) loans payable – affiliates of $397,000, b) deferred compensation of $797,000, c) convertible notes payable – affiliates of $2,042,000, and, d) a loan payable of $7,754,000 (owed by PA-1) (plus accrued interest of $411,000).  

Plan of Operations and Outlook

As of December 31, 2014, the Company had cash of approximately $15,000.  

The Company continues to explore sources of additional financing to satisfy its current operating requirements as it is not currently generating any significant revenues. During fiscal years 2013 and 2014 and through the six months ended December 31, 2014, the Company experienced greater difficulty in raising equity and debt funding than in the prior years. During the year ended June 30, 2014 and during the six months ended December 31, 2014, the Company had the greatest difficulty raising funds to date. As a result, the Company faced, and continues to face, significant cash flow management challenges due to material working capital constraints. To partially mitigate these working capital constraints, the Company’s core senior management and some key employees and consultants have been deferring all or part of their cash compensation and/or are accepting compensation in the form of securities of the Company (Notes 5 and 7 to Financial Statements) and members of the Company’s senior management have made loans to the Company totaling approximately $397,000 including interest as of December 31, 2014.  As of December 31, 2014 such deferrals totaled approximately $2,839,000 (including accrued interest and deferred compensation converted into promissory notes). The extended constraints on available resources have had, and continue to have, negative effects on the pace and scope of the Company’s effort to develop its business. The Company made reductions in its personnel during the year ended June 30, 2014.  The Company has had to delay payments of trade obligations and economize in many ways that have potentially negative consequences. The Company’s accounts payable have increased materially over this period. If the Company does not have greater success in its efforts to raise needed funds during the current year (and subsequent periods), we will need to consider deeper cuts (including additional personnel cuts) and curtailments of operations (including possibly Kreider 1 operations). The Company will need to obtain additional capital to fund its operations and technology development, to satisfy existing creditors, to develop Integrated Projects and CAFO waste remediation systems (including the Kreider 2 facility) and to continue to operate the Kreider 1 facility (subject to agreements being reached with Pennvest as discussed above). The Company anticipates that it will seek to raise from $2,500,000 to $50,000,000 or more (debt and equity) during the next twelve months.  However, as discussed above, there is no guarantee that we will be able to raise sufficient funds or further capital for the operations planned in the near future.

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The Company is not currently generating any significant revenues. Further, the Company’s anticipated revenues, if any, from existing projects and proposed projects will not be sufficient to meet the Company’s anticipated operational and capital expenditure needs for many years.  During the six months ended December 31, 2014 the Company raised proceeds of $93,500 through the sale of its securities (Note 8 to Financial Statements) and anticipates raising additional funds from such sales.  However, there is no guarantee that we will be able to raise sufficient funds or further capital for the operations planned in the near future.  

Because the Company is not currently generating significant revenues, the Company will need to obtain additional capital to fund its operations and technology development, to satisfy existing creditors, to develop Projects and to sustain operations at the KF 1 facility.

On January 26, 2009 the Board of the Pennsylvania Infrastructure Investment Authority (“Pennvest”) approved a $7.75 million loan to Bion PA 1, LLC (“PA-1”), a wholly-owned subsidiary of the Company, for the initial stage of Bion's Kreider Farms project (“Phase 1 Kreider System”). After substantial unanticipated delays, on August 12, 2010 the PA-1 received a permit for construction of the Phase 1 Kreider system.  Construction activities commenced during November 2010.  The closing/settlement of the Pennvest Loan took place on November 3, 2010.  PA-1 finished the construction of the Phase 1 Kreider System and entered a period of system ‘operational shakedown’ during May 2011.  The Phase 1 Kreider System reached full, stabilized operation by the end of the 2012 fiscal year.  During 2011 the Pennsylvania Department of Environmental Protection (“PADEP”) re-certified the nutrient credits for this project.  The economics (potential revenues and profitability) of the Kreider 1 System are based largely on the long term sale of nutrient (nitrogen and/or phosphorus) reduction credits to meet the requirements of the Chesapeake Bay environmental clean-up.  The PADEP issued final permits for the Kreider System (including the credit verification plan) on August 1, 2012 on which date the Company deemed that the Kreider System was ‘placed in service’. As a result, PA-1 has commenced generating nutrient reduction credits for potential sale while continuing to utilize the system to test improvements and add-ons. Operating results of the Phase 1 Kreider system have documented the efficacy of Bion’s nutrient reduction technology and vetted potential ‘add-ons’ for future installations. During August 2012 the Company provided Pennvest (and the PADEP) with data demonstrating that the Kreider 1 system met the ‘technology guaranty’ standards which were incorporated in the Pennvest financing documents and, as a result, the Pennvest Loan is now solely an obligation of PA-1.  As a result of this extended period of operations, Bion is confident that future systems can be constructed with even higher operational efficiencies at lower capital expense and with lower operational costs. To date liquidity in the Pennsylvania nutrient credit market has been slow to develop significant breadth and depth  which limited liquidity has negatively impacted Bion’s business plans and has prevented Bion from monetizing the nutrient reductions created by PA-1’s existing Kreider 1 project and Bion’s other proposed projects. These challenges and difficulties (which continue to this date) have prevented PA-1 from generating any material revenues from the Kreider 1 project to date (PA-1’s Kreider 1 operating expenses have been funded by loans from Bion) and raise significant questions as to when, if ever, PA-1 will be able to generate material revenues from the Kreider 1 system.  Additionally, the Company has not made any interest or principal payments, which were to begin in fiscal 2013, and, therefore, the Company has classified the Pennvest Loan as a current liability as of December 31, 2014.  Due to the slow development of the nutrient reduction credit market, the Company determined that the carrying amount of the property and equipment related to the Kreider 1 project exceeded its estimated future undiscounted cash flows based on certain assumptions regarding timing, level and probability of revenues from sales of nutrient reduction credits and, therefore, recorded a $2,000,000 impairment of the Kreider 1 assets during the year ended June 30, 2014.  Additional impairments may result if the nutrient credit market does not develop in the near term.  

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On September 25, 2014, Pennvest exercised its right to declare the Pennvest Loan in default and has accelerated the Pennvest Loan and has demanded that PA-1 pay $8,137,117 (principal, interest plus late charges) on or before October 24, 2014. PA-1 did not make the payment and does not have the resources to make the payment demanded by Pennvest. PA-1 has commenced discussions and negotiations with Pennvest concerning this matter but has not yet received any responses from Pennvest to solutions it has proposed.  It is not possible at this date to predict the outcome of such negotiations, but the Company believes that an interim, short-term agreement may be reached that will allow PA-1 and Pennvest a further period of time for further negotiations and evaluation of possible long-term resolutions. Subject to the results of the negotiations with Pennvest and pending development of a more robust market for nutrient reductions in Pennsylvania, PA-1 and Bion anticipate that it will be necessary for the Company to evaluate various options with regard to Kreider 1 over the coming months.

During August 2012, the Company provided Pennvest (and the PADEP) with data demonstrating that the Kreider 1 system met the ‘technology guaranty’ standards which were incorporated in the Pennvest financing documents and, as a result, the Pennvest Loan is now solely an obligation of PA-1.  

The Company is currently conducting research and development activities at Kreider 1 while continuing commercial operations.

As indicated above, the Company anticipates that it will seek to raise from $2,500,000 to $50,000,000 or more (debt and equity) during the next twelve months, some of which may be in the context of joint ventures for the development of one or more Integrated Projects.  We reiterate that there is no assurance, especially in the extremely unsettled capital markets that presently exist for companies such as Bion, that the Company will be able to obtain the funds that it needs to stay in business, finance its Projects and other activities, continue its technology development and/or to successfully develop its business.

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

Currently, Bion is focused on using applications of its patented waste management technology and its technology platform to pursue three main business opportunities: 1) development of Integrated Projects which will include large CAFOs, such as large dairies, beef cattle feed lots and hog farms, with Bion waste treatment System modules processing the aggregate CAFO waste stream from the equivalent of 40,000 or more beef and/or dairy cows (or the waste stream equivalent of other species) while producing solids to be utilized for renewable energy production (and potentially to be marketed as feed and/or fertilizer), integrated with an ethanol plant capable of producing 40 million gallons (or more) of ethanol per year, and/or integrated with CAFO end product processors,  2) installation of Bion systems to retrofit and environmentally remediate existing CAFOs in selected markets where: a) government policy supports such efforts (such as the Chesapeake Bay watershed and Wisconsin or, potentially, other areas seeking to meet EPA TMDL requirements) and/or b) where CAFO’s need our technology to obtain permits to expand or develop without negative environmental consequences, and 3) licensing and/or joint venturing its technology for use outside of North America.

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The Company has commenced activities related to marketing and potential use of its technology in relation to expansion and/or development of CAFO’s in the Northeast and Midwest (and elsewhere).  Bion considers this to be a large potential market for the Company’s growth over the next 18-36 months (and thereafter). Assuming that the Company can be successful in raising necessary funding and the development of a more robust market for nutrient reductions in Pennsylvania (and elsewhere), neither of which are assured at this date, it is anticipated at such activities will accelerate based on the operating results achieved by the Kreider 1 system.

The Company continues its development work related to the second phase of the Kreider project (‘Phase 2 Kreider Project’) which involves production of renewable energy from the waste of KF’s poultry operations and the cellulosic solids recovered by the Kreider 1 system. During May 2011 the PADEP certified the Phase 2 Kreider Project for 559,457 nutrient credits under the old EPA’s Chesapeake Bay model.  The Company anticipates that this project will be certified for between 1.5-2 million nutrient reduction credits pursuant to the amended EPA Chesapeake Bay model which was published subsequent to the original certification. Recent announcements related to negotiations between the EPA and PADEP regarding Pennsylvania’s Chesapeake Bay nutrient reduction non-compliance suggest that a resolution of certain matters is likely during the balance of this calendar year which may allow this project to move forward with re-certification and proceed toward design, permitting , construction and eventual operation during the 2015 calendar year.  Assuming there are also positive developments related to the market for nutrient reductions in Pennsylvania (of which there is no assurance), the Company intends to pursue development, design and construction of the Phase 2 Kreider Project with a goal of achieving operational status during 2016. The economics (potential revenues and profitability) of the Phase 2 Kreider Project are based largely on the long term sale of nutrient (nitrogen and/or phosphorus) reduction credits to meet the requirements of the Chesapeake Bay environmental clean-up.  However,  liquidity in the Pennsylvania nutrient credit market has been slow to develop significant breadth and depth which to date has negatively impacted Bion’s business plans and has resulted in challenges to monetizing the nutrient reduction credits created by PA-1’s existing Kreider 1 project and will delay the Company’s Phase 2 Kreider Project and other proposed projects in Pennsylvania.

Bion is currently working with local, state and federal officials with regard to regulatory and legislative initiatives, and with such parties and potential industry participants to evaluate sites in multiple states. The Company believes that its initial Integrated Project will most likely be located and developed (possibly in stages) in Pennsylvania.  Note that locations in other states are also under review and the initial Integrated Project could be developed elsewhere. It is possible that the Company will develop one or more Integrated Projects as joint ventures specifically targeted to meet the growing animal protein demand outside of the United States (including without limitation Asia, Europe and/or the Middle East).  Bion intends to choose sites for additional Projects during the calendar years 2016-2018 to create a pipeline of Projects. Management has a 5-year development target (through calendar year 2021) of approximately 10-24 Integrated Projects.  At the end of that period, Bion projects that 5 or more of these Integrated Projects will be in full operation in 3-5 states (or other locations), and the balance would be in various stages ranging from partial operation to early permitting stage. No Integrated Project has been developed to date.

CONTRACTUAL OBLIGATIONS

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

On September 27, 2008, the Company executed an agreement with Kreider Farms (and its affiliated entities) (collectively "Kreider") to design, construct and operate, through its wholly-owned subsidiary PA-1, a Bion system to treat the waste of the dairy cows (milkers, dry cows and heifers) at the Kreider Dairy, located in Mannheim, Pennsylvania. In addition, this agreement (as amended and extended) provides for a second phase which will include treatment of the cellulosic solid wastes from the Kreider 1 together with the waste stream from Kreider's poultry facilities to produce renewable energy for Bion's waste treatment facility and/or for market sales. The Kreider 1 system is owned and operated by PA-1, in which Kreider

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has the option to purchase a minority interest. Funds were expended over the last year to complete the construction of the Kreider 1 System and substantial capital and operating funds (equity and/or debt) has been and will continue to be expended.  The Company anticipates that PA-1 will receive revenue from the sale of nutrient (and other) environmental credits related to the Kreider 1 system, and through sales of renewable energy generated in connection with the second phase (largely poultry manure) of the Kreider project. The $7.75 million loan from the Pennsylvania Infrastructure Investment Authority to PA-1 (“Pennvest Loan”), together with funds provided by the Company, has provided the funds for construction of the Kreider 1 system. The Pennvest loan is to be repaid by interest only payments for the first three years, followed by an additional ten-year amortization of principal, and matures in November 2023.  The Kreider 1 system reached full, stabilized operation by the end of the 2012 fiscal year and received final permits during August 2012.  The Pennsylvania Department of Environmental Protection re-certified the nutrient credits for this project. As a result, PA-1 can now commence generating and verifying nutrient reduction credits for sale while continuing to utilize the system to test improvements and add-ons. Operating results of the Phase 1 Kreider system have documented the efficacy of Bion’s nutrient reduction technology and vetted potential ‘add-ons’ for future installations. As a result of this extended period of operations, Bion is confident that future systems can be constructed with even higher operational efficiencies at lower capital expense and with lower operational costs. To date liquidity in the Pennsylvania nutrient credit market has been slow to develop significant breadth and depth  which limited liquidity has negatively impacted Bion’s business plans and has prevented Bion from monetizing the nutrient reductions created by PA-1’s existing Kreider 1 project and Bion’s other proposed projects. These challenges and difficulties (which continue to this date) have prevented PA-1 from generating any material revenues from the Kreider 1 project to date (PA-1’s Kreider 1 operating expenses have been funded by loans from Bion) and raise significant questions as to when, if ever, PA-1 will be able to generate material revenues from the Kreider 1 system.  PA-1 has been engaged in on-and-off negotiations with Pennvest related to forbearance and/or re-structuring its obligations pursuant to the Pennvest Loan for over 30 months. In the context of such negotiations, PA-1 has elected not to make interest payments to Pennvest on the Pennvest Loan since January 2013.  Additionally, the Company has not made any principal payments, which were to begin in fiscal 2013, and, therefore, the Company has classified the Pennvest Loan as a current liability as of December 31, 2014.  Due to the slow development of the nutrient reduction credit market, the Company determined that the carrying amount of the property and equipment related to the Kreider 1 project exceeded its estimated future undiscounted cash flows based on certain assumptions regarding timing, level and probability of revenues from sales of nutrient reduction credits and, therefore, recorded a $2,000,000 impairment of the Kreider 1 assets which reduced the value of the Kreider 1 System during the year ended June 30, 2014.  Additional impairments may result if the nutrient credit market does not develop in the near term.  

On September 25, 2014, Pennvest exercised its right to declare the Pennvest Loan in default and has accelerated the Pennvest Loan and has demanded that PA-1 pay $8,137,117 (principal, interest plus late charges) on or before October 24, 2014. PA-1 did not make the payment and does not have the resources to make the payment demanded by Pennvest. PA-1 has commenced discussions and negotiations with Pennvest concerning this matter but has not yet received any responses from Pennvest to solutions it has proposed.  It is not possible at this date to predict the outcome of such negotiations, but the Company believes that an interim, short-term agreement may be reached that will allow PA-1 and Pennvest a further period of time for further negotiations and evaluation of possible long-term resolutions. Subject to the results of the negotiations with Pennvest and pending development of a more robust market for nutrient reductions in Pennsylvania, PA-1 and Bion anticipate that it will be necessary for the Company to evaluate various options with regard to Kreider 1 over the coming months.

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During August 2012, the Company provided Pennvest (and the PADEP) with data demonstrating that the Kreider 1 system met the ‘technology guaranty’ standards which were incorporated in the Pennvest financing documents and, as a result, the Pennvest Loan is now solely an obligation of PA-1.  

The Company is currently conducting research and development activities at Kreider 1 while continuing commercial operations.

OFF-BALANCE SHEET ARRANGEMENTS

We do not have any off-balance sheet arrangements (as that term is defined in Item 303 of Regulation S-K) that are reasonably likely to have a current or future material effect on our financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk.

Not applicable.

Item 4.  Controls and Procedures.

(a)  Evaluation of Disclosure Controls and Procedures.

The term "disclosure controls and procedures" is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). This term refers to the controls and procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files under the Exchange Act is recorded, processed, summarized, and reported within the required time periods. Our Chief Executive Officer and Principal Financial Officer has evaluated the effectiveness of the design and operations of our disclosure controls and procedures as of the end of the period covered by this quarterly report, and has concluded that, as of that date, our disclosure controls and procedures were not effective at ensuring that required information will be disclosed on a timely basis in our reports filed under the Exchange Act, as a result of the material weakness in internal control over financial reporting discussed in Item 9(A) of our Form 10-K for the year ended June 30, 2014.

(b)  Changes in Internal Control over Financial Reporting.

No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION

Item 1.  Legal Proceedings.

The Company is currently involved in one litigation matter:

On May 1, 2014 Mr. James Morris, the Company’s former Chief Technology Officer, initiated litigation against the Company ( Morris v Bion Environmental Technologies, Inc., 14-cv-02732-ADS-GRB, United States District Court, Eastern District of New York) related to his termination effective November 30, 2013.  Mr. Morris seeks payment of severance pay (up to $90,000) plus certain previously accrued obligations totaling $87,216 plus interest (which sums have been accrued in the Company’s financial statements despite the fact that the Company is disputing the obligations) plus attorney’s fees. The Company disputes each such claim by Mr. Morris in the litigation and is defending the lawsuit which is in the discovery stage.  The Company is incurring attorney’s fees (and related costs) in the context of its defense.  The Company does not believe that this litigation will have a material adverse effect on the Company.

On September 25, 2014, Pennvest exercised its right to declare the Pennvest Loan in default and has accelerated the Pennvest Loan and has demanded that our wholly-owned subsidiary Bion PA-1 LLC (‘PA-1’) pay $8,137,117 (principal, interest plus late charges) on or before October 24, 2014. The Company anticipates that discussions and negotiations will take place between PA-1 and Pennvest concerning this matter over the next 90 days.  PA-1 has made proposals ro resolve this matter but has not received a response from Pennvest as of the date of this report.  It is not possible at this date to predict the outcome of such negotiations, but the Company believes that an interim, short-term agreement will be reached that will allow PA-1 and Pennvest a further period of time for further negotiations and evaluation of possible long-term resolutions. Subject to the results of the negotiations with Pennvest and pending development of a more robust market for nutrient reductions in Pennsylvania, PA-1 and Bion anticipate that it will be necessary for the Company to evaluate various options with regard to Kreider 1 over the coming months.  Litigation has not commenced in this matter but has been threatened by Pennvest.

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

Item 1A.  Risk Factors.

Not applicable.

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

During the quarter ended December 31, 2014 the Company sold the following restricted securities: a) 5,587 shares issued pursuant to our 2006 Consolidated Incentive Plan (‘Plan’), valued at $2,952, in aggregate, to an employee for services, and b) 135,000 units at $0.50 per unit, and received proceeds of $67,500 (each unit consisted of one share of the Company’s restricted common stock and one warrant to purchase half of a share of the Company’s restricted common stock at $0.75 per share until December 31, 2016. These securities were issued in reliance on the exemptions provided by Regulation D of the Securities Act of 1933 and/or Section 4(2) of the Securities Act of 1933. See Notes to Financial Statements (included herein) for additional details

The proceeds were utilized for general corporate purposes.

Item 3.  Defaults Upon Senior Securities.

Not applicable.

Item 4.  Mine Safety Disclosures.

Not applicable.

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Item 5.  Other Information.

Not applicable.

Item 6.  Exhibits.

(a)  Exhibits required by Item 601 of Regulation S-K.

Exhibit	Description
10.1	Extension Agreement with Mark A. Smith (w/o exhibits) (February 10, 2015)
10.2	Extension Agreement with Dominic Bassani (w/o exhibits) (February 10, 2015)
10.3	Agreement with Edward Schafer (w/o exhibits) (February 10, 2015)
31.1	Certification of CEO pursuant to Rule 13a-14(a) or Rule 15d-14(a) - Filed herewith electronically
31.2	Certification of Executive Chairman, President and CFO pursuant to Rule 13a-14(a) or Rule 15d-14(a) - Filed herewith electronically
32.1	Certification of CEO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 - Filed herewith electronically
32.2	Certification of Executive Chairman, President and CFO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 - Filed herewith electronically
10.1	Interactive Data File

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		BION ENVIRONMENTAL TECHNOLOGIES, INC.
Date:  February 11, 2015	By:	/s/ Mark A. Smith
		Mark A. Smith, President and Chief Financial Officer (Principal Financial and Accounting Officer)
Date:  February 11, 2015	By:	/s/ Dominic Bassani
		Dominic Bassani, Chief Executive Officer

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EX-10

EXHIBIT 10.1

EXTENSION AGREEMENT

THIS EXTENSION AGREEMENT (Extension Agreement’ or ‘Agreement’) is made effective February 3, 2015 (with compensation treatment and promissory balance note transfers effective January 1, 2015), by, between and among Bion Environmental Technologies, Inc. (‘Bion’) (collectively Bion, together with the other subsidiaries of Bion, are sometimes referred to as the ‘Bion Companies’) and Mark A. Smith (‘MAS’).

WHEREAS MAS has provided the services to the Bion Companies continually since 2003 (and for most periods since 1992) and most recently pursuant to the agreement of July 1, 2012 which has been informally extend by emails and other means since its expiration (collectively, ‘Existing Agreement’);

WHEREAS Bion has been unable to pay MAS’ cash compensation set forth in the Existing Agreements for multiple years and has deferred/accrued, with MAS’ consent, such sums in a convertible promissory note with an adjustable conversion price (currently $.45 per Unit) into Units (each consisting of 1 share of Bion’s common stock and 1 warrant to purchase of Bion’s common stock) (‘Existing Note’);

WHEREAS Bion’s the prices at which Bion’s common stock trades and the price at which Bion has been able to raise funds has by sale of its equity have both dropped during subject period resulting in a large decrease in the conversion price of the Existing Note;

WHEREAS Bion  wishes to end the downward spiral related to the conversion price (and the ever increasing amount of its equity securities to be received upon conversion) of the Existing Note and MAS is willing to replace the Existing Note with a new convertible promissory note with terms that  i) materially reduce the interest rate by 50% (from 8% to 4%), ii) increase the conversion price by 11% (from $.45 to $.50), iii) fix the conversion price so there can be no further reductions, iv) reduce the number of warrants received on conversion by 75% (from 1 warrant per unit to ¼ per unit)and vi) extend the maturity date for 3 years (‘New Note’) (form of New Note attached as Exhibit 1 hereto)  ;  

WHEREAS Bion wishes to have MAS continue to provide services to the Bion Companies and MAS is willing to continue to provide such services upon the terms and conditions set forth in this Agreement:

NOW THEREFORE, in consideration of the mutual covenants and conditions and performances  hereinafter set forth, the Bion Companies and MAS do hereby agree as set forth below upon the terms and conditions set forth in the following paragraphs:

1)

Pursuant to the terms of the Existing Agreement and this Extension Agreement, MAS shall continue to hold the positions of Director, Executive Chairman, President and General Counsel of Bion and each of its subsidiaries through a date no later than December 31, 2015 (‘Term’), with the proviso that Bion will seek to hire personnel to replace MAS on or before September 30, 2015  with MAS then becoming a consultant to the Bion Companies following a transition period after such hiring(s) for the balance of the Term; Bion has the option to extend MAS’s services for up to 6 months by written notice prior to 9/31/2015 with MAS’s compensation to be pro-rata for extended period.

2)

Bion shall compensate MAS as follows:

a)

Monthly cash compensation of $18,000 per month commencing January 2015 shall be paid to MAS in cash, which cash compensation shall continue to be deferred until the  the Board of Directors of Bion elects to resume cash payments to all employees and consultants who are deferring cash compensation;

b)

MAS shall be reimbursed on a monthly basis for his expenses;   

c)

Until Bion resumes cash payment of MAS's compensation, such sums shall be, accrued and treated as set forth at Attachment A hereto;

d)

Bion hereby issues/grants to MAS options to purchase 150,000 shares of Bion's common stock at a price of $1.00 per share until December 31, 2020 pursuant to the Plan ('Options')'

e)

Bion hereby takes the following actions with regard to options previously granted to MAS ('Existing Options') and all warrants previously acquired by MAS, whether from Bion or others (including warrants held by donees of MAS)('Existing Warrants')

i) extends the term to December 31, 2020;

ii) reduces any exercise price in excess of $1.50 to $1.50;

iii) acknowledges that all of the Warrants, Existing Warrants, Options and Existing Options are subject to the ‘exercise bonus’ provisions of the Existing Agreement; and

iv) waives any provisions of the Options, Existing Options and/or Plan that would short end the term of the Options or Existing Options upon termination of   MAS’ employment by Bion;

f)

Bion hereby cancels (with consent of MAS) all outstanding Contingent Stock Bonuses (200,000 previously granted to MAS pursuant to the Plan' and

g)

Bion shall periodically (but not less than annually evaluate MAS' performance for bonus purposes with a goal of declaring cash bonuses of 1/3 (or more) plus other items

3)

New Note

a)

Effective January 2, 2015, the outstanding balance (principal plus accrued interest) of the Existing Note at December 31, 2014 (adjusted for conversions, etc.) is transferred to the New Note and the Existing Note is cancelled;

b)

New Note shall be convertible pursuant to its terms into Units (consisting of 1 share of Bion's common stock and 1/4 warrant to purchase a share of Bion's common stock at a price of $1.00 per share for a five year period at $1.00 per share (subject to existing 'exercise bonus' provisions);

c)

Bion acknowledges that the New Note (principal and interest, initially and going forward) represents compensation to MAS and, therefore, the common stock of Bion to be issued upon conversion (and upon exercise of the warrants received upon such conversion) of the New Note shall be registered and delivered pursuant to the Plan.

4)

The terms of this Extension Agreement control all matters covered hereby; provided, however, Bion acknowledges that any terms of the Existing Agreement not inconsistent with the items set forth matters set forth herein shall inure to the benefit of MAS and remain in full force and effect as if repeated in full herein. However,

5)

Miscellaneous:

a)

This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns and any person acquiring, whether by Merger, consolidation, liquidation, purchase of assets or otherwise, all or substantially all of a party's equity or assets and business.  

b)

It is the intention of the parties hereto that this Agreement and the performance hereunder and all suits and special proceeding connected herewith be construed in accordance with and pursuant to the laws of the State of Colorado and that in any action, special proceeding or other proceeding that may be brought arising out of, in connection with, or by reason of this Agreement, the laws of the State of Colorado shall be applicable and shall govern to the exclusion of the law of any other forum, without regard to the jurisdiction in which any action or special proceeding may be instituted.

c)

Any claim or controversy, which arises out of or relates to this Agreement, or breach of it, shall be settled by arbitration.

d)

Should any party hereto waive breach of any provision of this Agreement, that waiver shall not operate or be construed as a waiver of any further breach of this Agreement.

e)

In the event that any one or more of the provisions of this Agreement or any portions there under is determined to be invalid, illegal, or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby.

f)

This Agreement shall constitute the entire agreement between the parties hereto oral modifications of the Agreement shall have no effect.  This Agreement may be altered only by a written agreement signed by the party against whom enforcement of any waiver, change, modification, extension or discharge is sought.

Bion Environmental Technologies, Inc.

By: /s/ Dominic Bassani

       Dominic Bassani, CEO

/s/ Mark A. Smith

Mark A. Smith, Individually

ATTACHMENT “A”

TERMS OF COMPENSATION

1- MAS’s monthly compensation of $18000.00 (‘Monthly Comp’) shall accrue and be treated as set forth below.

2-To the extent that an accrued/deferred balance of Monthly Comp exists which  has not been converted or paid as set forth below (‘Deferred Comp’),  interest will accrue at a simple rate of 4%.

3-MAS shall have the right  to convert Monthly Comp and/or Deferred Comp into the common stock of Bion ( issued under and pursuant to the terms of Bion’s 2006 Consolidated Incentive Plan, as amended (‘Plan’) and Bion’s currently effective Form S-8 registration statement (‘Registration Statement’)) at one time a sum no greater than  Monthly Comp plus, subject to written approval and/or waiver of the volume limitation by Bion,  the higherer of:  i) 30% of Deferred Comp or ii) three  times Monthly Comp, on the following terms and conditions:

a)

Notification of election to convert shall be delivered to Bion by MAS during the first five calendar days of month to convert Monthly Comp for the  proceeding month plus any additional amount elected by MAS (subject to the limitations set forth above);

b)

Conversion formula: the price of conversion shall be the average closing price for Bion’s common stock for the last 10 trading days of the immediately preceeding month (in the event that there was no trade on a given day, the closing bid price shall be treated as the closing price on that day);

c)

Conversion may only be made on a date when Bion has made all of its    required periodic reports to the US Securities & Exchange Commision (‘SEC Reports’) and the Registration Statement is effective; but further provided, that if the Registration Statement has not been effective for a period of time, no conversion may be made without Bion’s written consent until the Registration Statement has been effective for at least 60 calendar days.

4-Bion cash payment option:

a)

Bion may at any time elect to pay all or part of the Monthly Comp and/or Deferred Comp by notification to MAS by e-mail of its intent to pay in cash within 30 days;

b)

Upon receipt of such notification, MAS’ right to elect conversion terminates as to the sum set forth in the notification from Bion.

EX-10

EXHIBIT 10.2

EXTENSION AGREEMENT

THIS EXTENSION AGREEMENT (Extension Agreement’ or ‘Agreement’) is made effective February 3, 2015 (with compensation treatment and promissory note adjustments effective January 1, 2015), by, between and among Bion Environmental Technologies, Inc. (‘Bion’) (collectively Bion, together with the other subsidiaries of Bion, are sometimes referred to as the ‘Bion Companies’) and Dominic Bassani (‘DB’).

WHEREAS DB has provided the services to the Bion Companies continually since 2000  on a consulting basis -- most recently as Bion’s Chief Executive Officer (‘CEO’) -- pursuant to an agreement of July 2011 which has been informally extend by emails and other means since its expiration (collectively, ‘Existing Agreement’);

WHEREAS Bion has been unable to pay DB’s cash compensation set forth in the Existing Agreements for multiple years and has deferred/accrued, with DB’s consent, most such deferred sums in a convertible promissory note with an adjustable conversion price (currently $.45 per Unit) into Units (each consisting of 1 share of Bion’s common stock and 1 warrant to purchase of Bion’s common stock) (‘Existing Note’);

WHEREAS DB has made cash advances and loans to Bion over the past five years which sums remain unpaid and a represented by multiple other promissory notes (‘Other Notes’);

WHEREAS DB has substantial unreimbursed expenses related to his services to Bion of approximately $116,000 at December 31, 2014 (‘Unpaid Expenses’);

WHEREAS prices at which Bion’s common stock has traded and the price at which Bion has been able to raise funds by sale of its equity have both dropped during subject period resulting in a large decrease in the conversion price of the Existing Note;

WHEREAS Bion wishes to end the downward spiral related to the conversion price (and the ever increasing amount of its equity securities to be received upon conversion) of the Existing Note and DB is willing to replace the Existing Note and Bion’s other obligations to him with a combination of a) new convertible promissory note with terms that  i) materially reduce the interest rate by 50% (from 8% to 4%), ii) increase the conversion price by 11% (from $.45 to $.50), iii) fix the conversion price so there can be no further reductions, iv) reduce the number of warrants received on conversion by 75% (from 1 warrant per unit to ¼ per unit)and vi) extend the maturity date for 3 years (‘New Note’) (form of New Note attached as Exhibit 1 hereto), and b) a term note due on December 31, 2015 representing the actual out-of –pocket sums advanced by DB to Bion that have not been repaid and unreimbursed out-of-pocket expenses (‘Cash Note’)(form attached as Exhibit 2 hereto) on the terms and conditions set forth herein;

WHEREAS Bion and DB wish to place all the sums owed by Bion to DB in just these two promissory notes and clarify how DB will be compensated from January 1, 2015 forward;  

WHEREAS Bion wishes to have DB continue to provide services to the Bion Companies and DB is willing to continue to provide such services upon the terms and conditions set forth in this Agreement:

NOW THEREFORE, in consideration of the mutual covenants and conditions and performances  hereinafter set forth, the Bion Companies and DB do hereby agree as set forth below upon the terms and conditions set forth in the following paragraphs:

1)

Pursuant to the terms of the Existing Agreement and this Extension Agreement, DB shall continue to hold the position of CEO of Bion and its subsidiaries through a date no later than December 31, 2017 (‘Term’);   Bion has the option to extend DB’s services for up to 6 months by notice at least 3 months prior to the end of the Term with DB’s compensation to be pro-rata for the extended period.

2)

Bion shall compensate DB as follows:

a)

Monthly cash fees of $31,000 per month commencing January 2015 shall be paid to DB in cash (if available); Bion and DB each acknowledge that  such cash compensation shall continue to be deferred initially  until the  the Board of Directors of Bion elects to resume cash payments to all employees and consultants who are currently  deferring cash  compensation;

b)

DB's cash compensation shall be reviewed by Bion's Board of Directors (‘Board’) when Bion transitions to a revenue generating operating company;

c)

Bion's Board shall periodically (but not less than annually) evaluate DB's performance for bonus purposes, with a target of cash bonuses of not less than 1/3 of DB's annual compensation together with any other performance bonuses that the Board deems appropriate;

d)

Until Bion resumes cash payment of DB's compensation, such sums shall be accrued and treated as set forth herein and DB shall be reimbursed on a monthly basis for his expenses;

e)

Bion hereby grants to DB options to purchase 450,000 shares of Bion’s common stock at a price of $.75 per share until December 31, 2020 (‘Options’) pursuant to Bion’s 2006 Consolidated Incentive Plan, as amended, (‘Plan’), which Options shall be immediately vested;

f)

Bion hereby takes the following actions with regard to options previously granted to DB (‘Existing Options’) and all warrants previously acquired by DB, whether from Bion or others (including warrants held by donees of DB)(‘Existing Warrants’):

i) extends the term to Dec 31, 2020;

ii) reduces any exercise price in excess of $1.50 to $1.50;

iii) acknowledges that all of the Warrants, Existing Warrants,Options and Existing Options are subject to the ‘exercise bonus’ provisions of the Existing Agreement; and

iv) waives any provisions of the Options, Existing Options and/or Plan that would shortend the term of the Options or Existing Options upon termination of DB’s sevices to and engagement with Bion; Bion hereby cancels (with consent of DB) all outstanding Contingent Stock Bonuses previously granted to DB (250,000) pursuant to the Plan; and

3)

New Note and Cash Note

a)

Effective January 1, 2015, the aggregate outstanding balance of $1,464,546 (principal plus accrued interest) of the Existing Note at December 31, 2014 (adjusted for conversions, etc.) including accruals for interest, etc. to the Other Notes at December 31, 2014 are hereby transferred to the New Note;

b)

New Note shall be convertible pursuant to its terms into Units (consisting of 1 share of Bion’s common stock and ¼ warrant to purchase a share of Bion’s common stock at a price of $1.00 per share for a five year period at $1.00 per share (subject to ‘exercise bonus’ provisions));

c)

Bion acknowledges that the  New Note (principal and interest now and going forward) represents compensation to DB and, therefore, the common stock of Bion to be issued upon conversion (and upon exercise of the warrants received upon such conversion) of the New Note shall be registered and delivered pursuant to the Plan.

d)

DB’s Unpaid Expenses  and the cash principal of the Other Notes in the aggregate amount of $395,277 (collectively ‘Initial Principal’) shall be, and hereby are,  transferred to a new promissory note (‘Cash Note’) (in the form attached hereto as Exhibit 2) which  Cash Note shall i) be due and payable on December 31, 2015; ii) accrue interest at a 4% simple annual rate; and iii) DB shall be issued warrants to purchase 1.5 shares of Bion’s common stock for each dollar of Initial Principal of the Cash Note at a price of $1.00 per share through December 31, 2020 (‘Coverage Warrants’); iv)  with such Coverage Warrants valued at $.10 per Warrant (15% of the Initial Principal, in aggregate); and, therefore, v) the Cash Note will be issued at 85% of the Initial Principal (the full amount of which shall be due at maturity of the Cash Note);

e)

Upon transfer of all the balances at December 31, 2014 of the Existing Note, Other Notes and Unpaid Expenses to the New Note and the Cash Note, Bion’s obligations to DB pursuant to Existing Note, Other Notes and Unpaid Expenses shall be cancelled.

4)

The terms of this Extension Agreement control all matters covered hereby; provided, however, Bion acknowledges that any terms of the Existing Agreements not inconsistent with the items set forth matters set forth herein shall inure to the benefit of DB and remain in full force and effect as if repeated in full herein.

5)

Miscellaneous:

a)

This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns and any person acquiring, whether by Merger, consolidation, liquidation, purchase of assets or otherwise, all or substantially all of a party’s equity or assets and business.

b)

It is the intention of the parties hereto that this Agreement and the performance hereunder and all suits and special proceedings connected herewith be construed in accordance with and pursuant to the laws of the State of New York and that in any action, special proceeding or other proceeding that may be brought arising out of, in connection with, or by reason of this Agreement, the laws of the State of New York shall be applicable and shall govern to the exclusion of the law of any other  forum, without regard to the jurisdiction in which any action or special proceeding may be instituted.

c)

Any claim or controversy, which arises out of or relates to this Agreement, or breach of it, shall be settled by arbitration.

d)

Should any party hereto waive breach of any provision of this Agreement, that waiver shall not operate or be construed as a waiver of any further breach of this Agreement.

e)

In the event that any one or more of the provisions of this Agreement or any portions there under is determined to be invalid, illegal, or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby.

f)

This Agreement shall constitute the entire agreement between the parties hereto oral modifications of the Agreement shall have no effect.  This Agreement may be altered only by a written agreement signed by the party against whom enforcement of any waiver, change, modification, extension or discharge is sought.

Bion Environmental Technologies, Inc.

By: /s/ Mark A. Smith

       Mark A. Smith, President

/s/ Dominic Bassani

Dominic Bassani, Individually

ATTACHMENT “A”

TERMS OF COMPENSATION

1- DB’s monthly compensation of $31,000.00 (‘Monthly Comp’) shall accrue and be treated as set forth below.

2-To the extent that an accrued/deferred balance of Monthly Comp exists which  has not been converted or paid as set forth below (‘Deferred Comp’),  interest will accrue at a simple rate of  4%.

3-DB shall have the right  to convert Monthly Comp and/or Deferred Comp into the common stock of Bion ( issued under and pursuant to the terms of Bion’s 2006 Consolidated Incentive Plan, as amended (‘Plan’) and Bion’s currently effective Form S-8 registration statement (‘Registration Statement’)) at one time a sum no greater than  Monthly Comp plus, subject to written approval and/or waiver of the volume limitation by Bion,  the higherer of:  i) 30% of Deferred Comp or ii) three  times Monthly Comp, on the following terms and conditions:

a)

Notification of election to convert shall be delivered to Bion by DB during the first five calendar days of month to convert Monthly Comp for the  proceeding month plus any additional amount elected by DB (subject to the limitations set forth above);

b)

Conversion formula: the price of conversion shall be the average closing price for Bion’s common stock for the last 10 trading days of the immediately preceeding month (in the event that there was no trade on a given day, the closing bid price shall be treated as the closing price on that day);

c)

Conversion may only be made on a date when Bion has made all of its required periodic reports to the US Securities & Exchange Commision (‘SEC Reports’) and the Registration Statement is effective; but further provided, that if the Registration Statement has not been effective for a period of time, no conversion may be made without Bion’s written consent until the Registration Statement has been effective for at least 60 calendar days.

4-Bion cash payment option:

a) 

Bion may at any time elect to pay all or part of the Monthly Comp and/or Deferred Comp by notification to DB by e-mail of its intent to pay in cash within 30 days;

b)

Upon receipt of such notification, DB’ right to elect conversion terminates as to the sum set forth in the notification from Bion.

EX-10

EXHIBIT 10.3

EXTENSION AGREEMENT

THIS EXTENSION AGREEMENT (Extension Agreement’ or ‘Agreement’) is made effective February 3, 2015 (with compensation treatment and promissory note adjustments effective January 1, 2015), by, between and among Bion Environmental Technologies, Inc. (‘Bion’) (collectively Bion, together with the other subsidiaries of Bion, are sometimes referred to as the ‘Bion Companies’) and Edward Schafer (‘ES’).

WHEREAS ES has provided the services to the Bion Companies on a consulting basis and has served as Vice Chairman and Director of Bion;

WHEREAS Bion has been unable to pay ES’s cash compensation for multiple years and has deferred/accrued, with ES’s consent such compensation for periods through December 31, 2014 (‘Deferred Comp’);

WHEREAS ES has unreimbursed expenses related to his services to Bion of $15,956 at December 31, 2014 (‘Unpaid Expenses’);

WHEREAS Bion and ES wish to place all the sums owed by Bion to ES in 2 promissory notes -- the ‘New Note’ and the ‘Cash Note’ as defined below -- and clarify how ES will be compensated from January 1, 2015 forward;  

WHEREAS Bion wishes to have ES continue to provide services to the Bion Companies and ES is willing to continue to provide such services upon the terms and conditions set forth in this Agreement:

NOW THEREFORE, in consideration of the mutual covenants and conditions and performances  hereinafter set forth, the Bion Companies and ES do hereby agree as set forth below upon the terms and conditions set forth in the following paragraphs:

1)

ES shall continue to serve as a director of Bion and as its Vice Chairman through December 31, 2015 (‘Term’);   Bion has the option to extend ES’s services for up to 6 months by notice at least 3 months prior to the end of the Term with ES’s compensation to be pro-rata for the extended  period.

2)

Bion shall compensate ES as follows:

a)

Monthly cash fees of $15,000 per month commencing January 2015 shall be paid to ES in cash (if available); Bion and ES each acknowledge that  such cash compensation shall continue to be deferred initially  until the  the Board of Directors of Bion elects to resume cash payments to all employees and consultants who are currently  deferring cash  compensation;

b)

ES's cash compensation shall be reviewed by Bion's Board of Directors (‘Board’) when  Bion transitions to a revenue generating operating company;

c)

Bion's Board shall periodically (but not less than annually) evaluate ES's performance for bonus purposes, with a target of cash bonuses of not less than 1/3 of ES's annual compensation together with any other performance bonuses that the Board deems appropriate;

d)

Until Bion resumes cash payment of ES's compensation, such sums shall be accrued and treated as set forth herein and ES shall be reimbursed on a monthly basis for his expenses;

e)

Bion hereby grants to ES an accrued deferred sum of $120,000 for previously uncompensated services through December 31, 2014 which sum shall be part of the Deferred Comp;

f)

Bion hereby takes the following actions with regard to options previously granted to ES (‘Existing Options’) and all warrants previously acquired by ES, whether from Bion or others (‘Existing Warrants’):

i) extends the term to Dec 31, 2020;

ii) reduces any exercise price in excess of $1.50 to $1.50;

iii) acknowledges that all of the Warrants, Existing Warrants,Options and Existing Options are subject to the ‘exercise bonus’ provisions of the Existing Agreement; and

iv) waives any provisions of the Options, Existing Options and/or Plan that would shortend the term of the Options or Existing Options upon termination of ES’s sevices to and engagement with Bion;

g)

Bion hereby cancels (with consent of ES) all outstanding Contingent Stock Bonuses previously granted to ES (25,000) pursuant to the Plan; and

3)

New Note and Cash Note

a)

Effective January 1, 2015, the aggregate outstanding balance of $378,290 of Deferred Comp for all periods though December 31, 2014 is hereby transferred to the New Note (form attached hereto as Exhibit 1);

b)

New Note shall be convertible pursuant to its terms into Units (consisting of 1 share of Bion’s common stock and 1/4 warrant to purchase a share of Bion’s common stock at a price of $1.00 per share for a five year period at $1.00 per share (subject to ‘exercise bonus’ provisions));

c)

Bion and ES acknowledge that the  New Note (principal and interest now and going forward) represents compensation to ES and, therefore, the common stock of Bion to be issued upon conversion (and upon exercise of the warrants received upon such conversion) of the New Note shall be registered and delivered pursuant to the Plan.

d)

ES’s Deferred Comp in the aggregate amount of $15,956 (collectively ‘Initial Principal’) shall be, and hereby is,  transferred to a new promissory note (‘Cash Note’) (in the form attached hereto as Exhibit 2) which Cash Note shall i) be  due and payable on December 31, 2015; ii) accrue interest at a 4% simple annual rate; and iii) ES shall be issued  warrants to purchase 1.5 shares of Bion’s common stock for each dollar of Initial Principal of the Cash Note at a price of $1.00 per share through December 31, 2020 (‘Coverage Warrants’); iv) with such Coverage Warrants valued at $.10 per Warrant (15% of the Initial Principal, in aggregate); and, therefore, v) the Cash Note will be issued at 85% of the Initial Principal (the full amount of which shall be due at maturity of the Cash Note).

4)

The terms of this Extension Agreement control all matters covered hereby; provided, however, Bion acknowledges that any terms of the Existing Agreements not inconsistent with the items set forth matters set forth herein shall inure to the benefit of ES and remain in full force and effect as if repeated in full herein.

5)

Miscellaneous:

a)

This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns and any person acquiring, whether by merger, consolidation, liquidation, purchase of assets or otherwise, all or substantially all of a party’s equity or assets and business.

b)

It is the intention of the parties hereto that this Agreement and the performance hereunder and all suits and special proceedings connected herewith be construed in accordance with and pursuant to the laws of the State of Colorado and that in any action, special proceeding or other proceeding that may be brought arising out of, in connection with, or by reason of this Agreement, the laws of the State of Colorado shall be applicable and shall govern to the exclusion of the law of any other  forum, without regard to the jurisdiction in which any action or special proceeding may be instituted.

c)

Any claim or controversy, which arises out of or relates to this Agreement, or breach of it, shall be settled by arbitration.

d)

Should any party hereto waive breach of any provision of this Agreement, that waiver shall not operate or be construed as a waiver of any further breach of this Agreement.

e)

In the event that any one or more of the provisions of this Agreement or any portions there under is determined to be invalid, illegal, or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby.

f)

This Agreement shall constitute the entire agreement between the parties hereto oral modifications of the Agreement shall have no effect.  This Agreement may be altered only by a written agreement signed by the party against whom enforcement of any waiver, change, modification, extension or discharge is sought.

Bion Environmental Technologies, Inc.

By: /s/ Mark A. Smith

       Mark A. Smith, President

/s/ Edward Schafer

Edward Schafer, Individually

ATTACHMENT “A”

TERMS OF COMPENSATION

1- ES’s monthly compensation of $15,000.00 (‘Monthly Comp’) shall accrue and be treated as set forth below.

2-To the extent that an accrued/deferred balance of Monthly Comp exists which  has not been converted or paid as set forth below (‘Deferred Comp’),  interest will accrue at a simple rate of  4%.

3-ES shall have the right  to convert Monthly Comp and/or Deferred Comp into the common stock of Bion ( issued under and pursuant to the terms of Bion’s 2006 Consolidated Incentive Plan, as amended (‘Plan’) and Bion’s currently effective Form S-8 registration statement (‘Registration Statement’)) at one time a sum no greater than  Monthly Comp plus, subject to written approval and/or waiver of the volume limitation by Bion,  the higherer of:  i) 30% of Deferred Comp or ii) three  times Monthly Comp, on the following terms and conditions:

a)

Notification of election to convert shall be delivered to Bion by ES during the first five calendar days of month to convert Monthly Comp for the  proceeding month plus any additional amount elected by ES (subject to the limitations set forth above);

b)

Conversion formula: the price of conversion shall be the average closing price for Bion’s common stock for the last 10 trading days of the immediately preceeding month (in the event that there was no trade on a given day, the closing bid price shall be treated as the closing price on that day);

c)

Conversion may only be made on a date when Bion has made all of its    required periodic reports to the US Securities & Exchange Commision (‘SEC Reports’) and the Registration Statement is effective; but further provided, that if the Registration Statement has not been effective for a period of time, no conversion may be made without Bion’s written consent until the Registration Statement has been effective for at least 60 calendar days.

4-Bion cash payment option:

a)

Bion may at any time elect to pay all or part of the Monthly Comp and/or Deferred Comp by notification to ES by e-mail of its intent to pay in cash within 30 days;

b)

Upon receipt of such notification, ES’ right to elect conversion terminates as to the sum set forth in the notification from Bion.

EX-31

Exhibit 31.1

SECTION 302 CERTIFICATION

I, Dominic Bassani, certify that:

1.   I have reviewed this quarterly report on Form 10-Q of Bion Environmental Technologies, Inc.;

2.   Based on my knowledge, this 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 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 of the registrant as of, and for, the periods presented in this report;

4.   The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)  Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared;

(b)  Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)  Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)  Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.   The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a)  All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b)  Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:  February 11, 2015

/s/ Dominic Bassani

Dominic Bassani

Chief Executive Officer

EX-31

Exhibit 31.2

SECTION 302 CERTIFICATION

I, Mark A. Smith, certify that:

1.   I have reviewed this quarterly report on Form 10-Q of Bion Environmental Technologies, Inc.;

2.   Based on my knowledge, this 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 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 of the registrant as of, and for, the periods presented in this report;

4.   The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)  Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared;

(b)  Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)  Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)  Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.   The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a)  All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b)  Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:  February 11, 2015

/s/ Mark A. Smith

Mark A. Smith

Executive Chairman, President and

Interim Chief Financial Officer

EX-32

Exhibit 32.1

CERTIFICATION OF CEO PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Form 10-Q of Bion Environmental Technologies, Inc., a company duly formed under the laws of Colorado (the "Company"), for the period ended December 31, 2014, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), Dominic Bassani, Chief Executive Officer of the Company, hereby certifies, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of his knowledge, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

February 11, 2015

/s/ Dominic Bassani

Dominic Bassani

Chief Executive Officer

This certification accompanies this Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

A signed original of this written statement required by Section 906 has been provided to Bion Environmental Technologies, Inc. and will be retained by Bion Environmental Technologies, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32

Exhibit 32.2

CERTIFICATION OF CFO PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Form 10-Q of Bion Environmental Technologies, Inc., a company duly formed under the laws of Colorado (the "Company"), for the period ended December 31, 2014, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), Mark A. Smith, President (Executive Chairman) and Interim Chief Financial Officer (Principal Financial and  Accounting Officer) of the Company, hereby certifies, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of his knowledge, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

February 11, 2015

/s/ Mark A. Smith

Mark A. Smith

President, Executive Chairman and

Interim Chief Financial Officer

(Principal Financial Officer)

This certification accompanies this Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

A signed original of this written statement required by Section 906 has been provided to Bion Environmental Technologies, Inc. and will be retained by Bion Environmental Technologies, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Note 8 - Stockholders' Equity (Details) - Stock Options Activity (USD $)	6 Months Ended	12 Months Ended
	Dec. 31, 2014	Jun. 30, 2014
Stock Options Activity [Abstract]
Outstanding		4,258,870
Outstanding		$ 2.81
Outstanding	3 years 36 days	3 years 73 days
Exercisable at December 31, 2014	3,911,370
Exercisable at December 31, 2014	$ 2.76
Exercisable at December 31, 2014	3 years 36 days
Granted	50,000
Granted	$ 1.00
Exercised	0
Exercised	$ 0
Expired	(397,500)
Expired	$ 3.06
Outstanding	3,911,370
Outstanding	$ 2.76
Outstanding	3 years 36 days	3 years 73 days

XML

Note 3 - Property and Equipment (Details) (USD $)	3 Months Ended		6 Months Ended		12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2014	Dec. 31, 2013	Jun. 30, 2014
Property, Plant and Equipment [Abstract]
Impairment of Long-Lived Assets Held-for-use					$ 2,000,000
Depreciation	$ 127,159	$ 244,307	$ 312,043	$ 490,303

XML

Note 3 - Property and Equipment

6 Months Ended

Dec. 31, 2014

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment Disclosure [Text Block]

3.     PROPERTY AND EQUIPMENT:

Property and equipment consists of the following:

	December 31, 2014			June 30, 2014
Machinery and equipment	$	4,111,001		$	4,111,001
Buildings and structures		1,947,701			1,947,701
Computers and office equipment		183,809			183,809
		6,242,511			6,242,511
Less accumulated depreciation		(2,203,401	)		(1,891,358	)
	$	4,039,110		$	4,351,153

Management reviewed property and equipment for impairment as of June 30, 2014 and determined that the carrying amount of property and equipment related to the Kreider 1 project exceeded its estimated future undiscounted cash flows. Management estimated the fair value of the property and equipment based on the discounted cash flow method, and determined that $2,000,000 of the property and equipment was impaired as of June 30, 2014. As of December 31, 2014, management believes no additional impairment has occurred.

Depreciation expense was $127,159 and $244,307 for the three months ended December 31, 2014 and 2013, respectively, and $312,043 and $490,303 for the six months ended December 31, 2014 and 2013, respectively.

XML

Note 6 - Loan Payable (Details) (USD $)	6 Months Ended	3 Months Ended		6 Months Ended	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2013	Jun. 30, 2013	Sep. 25, 2014
Note 6 - Loan Payable (Details) [Line Items]
Construction Loan	7,800,000	$ 7,800,000
Subsequent Event [Member] | PA-1 [Member]
Note 6 - Loan Payable (Details) [Line Items]
Debt Instrument, Debt Default, Amount						8,137,117
Interest Only Payments, Number of Years [Member] | Pennvest Loan [Member]
Note 6 - Loan Payable (Details) [Line Items]
Term Loan Payment Term	3 years
Years 1 through 5 [Member] | Pennvest Loan [Member]
Note 6 - Loan Payable (Details) [Line Items]
Debt Instrument, Interest Rate During Period	2.547%
Years 6 through Maturity [Member] | Pennvest Loan [Member]
Note 6 - Loan Payable (Details) [Line Items]
Debt Instrument, Interest Rate During Period	3.184%
Pennvest Loan [Member]
Note 6 - Loan Payable (Details) [Line Items]
Construction Loan	7,754,000	7,754,000
Line of Credit Facility, Maximum Borrowing Capacity	7,754,000	7,754,000
Repayments of Long-term Debt					574,000
Long-term Debt, Maturities, Repayments of Principal in Next Twelve Months	704,000	704,000
Long-term Debt, Maturities, Repayments of Principal in Year Two	723,000	723,000
Long-term Debt, Maturities, Repayments of Principal in Year Three	741,000	741,000
Long-term Debt, Maturities, Repayments of Principal in Year Four	760,000	760,000
Long-term Debt, Maturities, Repayments of Principal after Year Four	4,252,000	4,252,000
Interest Expense, Debt	98,747	49,373	49,374	98,748
PA-1 [Member]
Note 6 - Loan Payable (Details) [Line Items]
Debt Instrument, Debt Default, Amount						$ 8,137,117

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Note 5 - Deferred Compensation: (Details) (USD $)	1 Months Ended
	Jan. 31, 2015	Dec. 31, 2014	Jun. 30, 2014
Note 5 - Deferred Compensation: (Details) [Line Items]
Deferred Compensation Liability, Current		$ 796,984	$ 716,734
Subsequent Event [Member] | Executive Vice Chairman and Four Other Key Employees [Member]
Note 5 - Deferred Compensation: (Details) [Line Items]
Deferred Compensation Arrangement with Individual, Fair Value of Shares Issued	984
Deferred Compensation Arrangement with Individual, Shares Issued (in Shares)	2,140
Executive Vice Chairman and Four Other Key Employees [Member]
Note 5 - Deferred Compensation: (Details) [Line Items]
Deferred Compensation Liability, Current		557,734
Chief Executive Officer [Member]
Note 5 - Deferred Compensation: (Details) [Line Items]
Deferred Compensation Arrangement with Individual, Recorded Liability		239,250
Accrued Interest on Deferred Compensation		$ 74,250
Interest Rate on Deferred Compensation		10.00%
Debt Instrument, Convertible, Conversion Price (in Dollars per share)		$ 1.50

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Note 7 - Convertible Notes Payable - Affiliates (Details) (USD $)	6 Months Ended	12 Months Ended
	Dec. 31, 2014	Jun. 30, 2014
Note 7 - Convertible Notes Payable - Affiliates (Details) [Line Items]
Convertible Notes Payable, Current	$ 2,042,481	$ 1,736,502
Number of Warrants Per Unit	1
Debt Instrument, Convertible, Beneficial Conversion Feature	0
President [Member] | Deferred Compensation [Member]
Note 7 - Convertible Notes Payable - Affiliates (Details) [Line Items]
Convertible Notes Payable, Current	755,468
President [Member] | Accrued Interest [Member]
Note 7 - Convertible Notes Payable - Affiliates (Details) [Line Items]
Convertible Notes Payable, Current	98,848
President [Member]
Note 7 - Convertible Notes Payable - Affiliates (Details) [Line Items]
Convertible Notes Payable, Current	854,316
Chief Executive Officer [Member] | Deferred Compensation [Member]
Note 7 - Convertible Notes Payable - Affiliates (Details) [Line Items]
Convertible Notes Payable, Current	1,034,000
Chief Executive Officer [Member] | Accrued Interest [Member]
Note 7 - Convertible Notes Payable - Affiliates (Details) [Line Items]
Convertible Notes Payable, Current	154,165
Chief Executive Officer [Member]
Note 7 - Convertible Notes Payable - Affiliates (Details) [Line Items]
Convertible Notes Payable, Current	$ 1,188,165
Debt Instrument, Convertible, Conversion Price (in Dollars per share)	$ 0.84	$ 0.84
Debt Conversion, Converted Instrument, Units Issued (in Shares)		130,953
Debt Conversion, Converted Instrument, Shares Issued (in Shares)		130,953
Debt Conversion, Converted Instrument, Warrants or Options Issued (in Shares)	130,953
CEO and President [Member] | Exercise Bonus [Member]
Note 7 - Convertible Notes Payable - Affiliates (Details) [Line Items]
Execution Bonus as a Percentage of Exercised Options and Warrants	50.00%	50.00%
CEO and President [Member] | Convertible Notes Payable [Member] | Maximum [Member]
Note 7 - Convertible Notes Payable - Affiliates (Details) [Line Items]
Debt Instrument, Convertible, Conversion Price (in Dollars per share)	$ 1.25
CEO and President [Member] | Convertible Notes Payable [Member]
Note 7 - Convertible Notes Payable - Affiliates (Details) [Line Items]
Class of Warrant or Right, Exercise Price of Warrants or Rights (in Dollars per share)	$ 2.50
CEO and President [Member] | Minimum [Member]
Note 7 - Convertible Notes Payable - Affiliates (Details) [Line Items]
Unused Vacation Time	10 years	10 years
CEO and President [Member]
Note 7 - Convertible Notes Payable - Affiliates (Details) [Line Items]
Number of Warrants Per Unit	1
Convertible Notes Payable [Member]
Note 7 - Convertible Notes Payable - Affiliates (Details) [Line Items]
Debt Instrument, Interest Rate, Effective Percentage	8.00%
Maximum [Member]
Note 7 - Convertible Notes Payable - Affiliates (Details) [Line Items]
Class of Warrant or Right, Exercise Price of Warrants or Rights (in Dollars per share)	$ 4.25
Minimum [Member]
Note 7 - Convertible Notes Payable - Affiliates (Details) [Line Items]
Class of Warrant or Right, Exercise Price of Warrants or Rights (in Dollars per share)	$ 0.75
Sale of Stock, Price Per Share (in Dollars per share)	$ 0.45

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Note 8 - Stockholders' Equity (Details) (USD $)	6 Months Ended		12 Months Ended	0 Months Ended	12 Months Ended	3 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Jun. 30, 2014	Jul. 01, 2012	Jun. 30, 2013	Dec. 31, 2014	Dec. 31, 2013	Jul. 01, 2014
Note 8 - Stockholders' Equity (Details) [Line Items]
Common Stock Voting Rights Votes Per Share	1
Treasury Stock, Number of Shares Held (in Shares)	704,309					704,309
Share Price (in Dollars per share)	$ 0.75					$ 0.75
Stock Issued During Period, Value, Issued for Services	$ 7,524
Stock Issued During Period, Shares, New Issues (in Shares)	35,000
Proceeds from Issuance of Common Stock	26,250	500,000
Sale of Units Price Per Unit Issued (in Dollars per Share)	$ 0.50					$ 0.50
Number of Warrants Per Unit	1					1
Sale of Units Number of Units Issued (in Shares)	135,000
Sale of Units, Value	67,500
Stock Issued During Period, Value, New Issues	26,250
Class of Warrant or Right, Outstanding (in Shares)	7,800,000					7,800,000
Weighted Average Exercise Price for Outstanding Warrants (in Dollars per share)	$ 2.15
Weighted Average Remaining Contractual Life for Outstanding Warrants	3 years 94 days
Extension of Expiration Date, Number of Warrants (in Shares)	985,833
Modification Of Warrants	986
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross (in Shares)	50,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Expirations in Period (in Shares)	397,500
Share-based Compensation Arrangement by Share-based Payment Award, Options, Forfeitures in Period (in Shares)		200,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested in Period, Fair Value	4,000	34,822
Employee Service Share-based Compensation, Nonvested Awards, Compensation Not yet Recognized, Stock Options	0					0
Subscriptions Receivable [Member] | Restricted Stock [Member]
Note 8 - Stockholders' Equity (Details) [Line Items]
Stock Issued During Period, Shares, New Issues (in Shares)	40,000
Stock Issued During Period, Value, New Issues	30,000
President [Member]
Note 8 - Stockholders' Equity (Details) [Line Items]
Stock Issued During Period, Shares, Conversion of Convertible Securities (in Shares)	130,953
Chief Executive Officer [Member]
Note 8 - Stockholders' Equity (Details) [Line Items]
Debt Conversion, Original Debt, Amount	110,000
Debt Instrument, Convertible, Conversion Price (in Dollars per share)	$ 0.84		$ 0.84			$ 0.84
CEO and President [Member] | Exercise Bonus [Member]
Note 8 - Stockholders' Equity (Details) [Line Items]
Class of Warrant or Right, Outstanding (in Shares)	5,790,277					5,790,277
CEO and President [Member]
Note 8 - Stockholders' Equity (Details) [Line Items]
Number of Warrants Per Unit	1					1
Former Employee [Member] | Employee Stock Option [Member]
Note 8 - Stockholders' Equity (Details) [Line Items]
Allocated Share-based Compensation Expense			11,783
Series B Preferred Stock [Member]
Note 8 - Stockholders' Equity (Details) [Line Items]
Preferred Stock, Shares Outstanding (in Shares)	200		200			200		200
Preferred Stock, Par or Stated Value Per Share (in Dollars per share)	$ 0.01		$ 0.01			$ 0.01
Preferred Stock, Redemption Price Per Share (in Dollars per share)	$ 2.00					$ 2.00
Preferred Stock, Dividend Rate, Percentage				2.50%
Convertible Preferred Stock, Redemption, Period				3 years
Dividends, Preferred Stock	1,000		2,000		2,417
Dividends Payable	7,000					7,000
Subscription Agreement [Member] | Restricted Common Stock [Member]
Note 8 - Stockholders' Equity (Details) [Line Items]
Adjustments to Additional Paid in Capital, Other	63,908
Subscription Agreement [Member]
Note 8 - Stockholders' Equity (Details) [Line Items]
Sale of Units Price Per Unit Issued (in Dollars per Share)	$ 0.50					$ 0.50
Number of Shares Per Unit	1					1
Number of Warrants Per Unit	1					1
Class of Warrant or Right, Exercise Price of Warrants or Rights (in Dollars per share)	$ 0.75					$ 0.75
Sale of Units Number of Units Issued (in Shares)	135,000
Sale of Units, Value	67,500
Warrant Fair Value Price Per Share (in Dollars per share)	$ 0.05					$ 0.05
Adjustments to Additional Paid in Capital, Warrant Issued	3,592
Class of Warrant or Right, Number of Securities Called by Warrants or Rights (in Shares)	67,500					67,500
Restricted Stock [Member] | Minimum [Member]
Note 8 - Stockholders' Equity (Details) [Line Items]
Share Price (in Dollars per share)	$ 0.43					$ 0.43
Restricted Stock [Member] | Maximum [Member]
Note 8 - Stockholders' Equity (Details) [Line Items]
Share Price (in Dollars per share)	$ 1.22					$ 1.22
Restricted Stock [Member]
Note 8 - Stockholders' Equity (Details) [Line Items]
Stock Issued During Period, Shares, Issued for Services (in Shares)	10,083
Share Price (in Dollars per share)	$ 0.75					$ 0.75
Stock Issued During Period, Value, Issued for Services	7,524
Stock Issued During Period, Shares, New Issues (in Shares)	35,000
Proceeds from Issuance of Common Stock	26,250
Sale of Units Price Per Unit Issued (in Dollars per Share)	$ 0.75					$ 0.75
Number of Shares Per Unit	1					1
Employee Stock Option [Member] | Maximum [Member]
Note 8 - Stockholders' Equity (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period	10 years
Employee Stock Option [Member]
Note 8 - Stockholders' Equity (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized (in Shares)	22,000,000					22,000,000
Allocated Share-based Compensation Expense	4,000	(223,457)				4,000	(309,315)
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross (in Shares)	50,000	67,725
Minimum [Member]
Note 8 - Stockholders' Equity (Details) [Line Items]
Class of Warrant or Right, Exercise Price of Warrants or Rights (in Dollars per share)	$ 0.75					$ 0.75
Maximum [Member]
Note 8 - Stockholders' Equity (Details) [Line Items]
Class of Warrant or Right, Exercise Price of Warrants or Rights (in Dollars per share)	$ 4.25					$ 4.25
Warrant Issuances [Member]
Note 8 - Stockholders' Equity (Details) [Line Items]
Interest Expense, Other	$ 6,750
CEO and Shareholder [Member]
Note 8 - Stockholders' Equity (Details) [Line Items]
Class of Warrant or Right, Exercise Price of Warrants or Rights (in Dollars per share)	$ 0.85					$ 0.85
Class of Warrant or Right, Number of Securities Called by Warrants or Rights (in Shares)	67,500					67,500
Fair Value per Share for Warrants (in Dollars per share)	$ 0.10					$ 0.10

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Note 2 - Significant Accounting Policies

6 Months Ended

Dec. 31, 2014

Accounting Policies [Abstract]

Significant Accounting Policies [Text Block]

2.     SIGNIFICANT ACCOUNTING POLICIES

Principles of consolidation:

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Bion Integrated Projects Group, Inc. (“Projects Group”), Bion Technologies, Inc., BionSoil, Inc., Bion Services, PA-1, and Bion PA 2 LLC; and its 58.9% owned subsidiary, Centerpoint Corporation (“Centerpoint”). All significant intercompany accounts and transactions have been eliminated in consolidation.

The accompanying consolidated financial statements have been prepared without audit pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The consolidated financial statements reflect all adjustments (consisting of only normal recurring entries) that, in the opinion of management, are necessary to present fairly the financial position at December 31, 2014, and the results of operations and cash flows of the Company for the three and six months ended December 31, 2014 and 2013. Operating results for the three and six months ended December 31, 2014 are not necessarily indicative of the results that may be expected for the year ending June 30, 2015.

Property and equipment:

Property and equipment are stated at cost and are depreciated, when placed into service, using the straight-line method over the estimated useful lives of the related assets, generally three to twenty years. The Company capitalizes all direct costs and all indirect incrementally identifiable costs related to the design and construction of its Integrated Projects. The Company reviews its property and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss would be recognized based on the amount by which the carrying value of the assets or asset group exceeds its estimated fair value, and is recognized as a loss from operations.

Fair value measurements:

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or most advantageous market. The Company uses a fair value hierarchy that has three levels of inputs, both observable and unobservable, with use of the lowest possible level of input to determine fair value.

Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2 – observable inputs other than Level 1, quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, and model-derived prices whose inputs are observable or whose significant value drivers are observable; and

Level 3 – assets and liabilities whose significant value drivers are unobservable.

Observable inputs are based on market data obtained from independent sources, while unobservable inputs are based on the Company’s market assumptions. Unobservable inputs require significant management judgment or estimation. In some cases, the inputs used to measure an asset or liability may fall into different levels of the fair value hierarchy. In those instances, the fair value measurement is required to be classified using the lowest level of input that is significant to the fair value measurement. Such determination requires significant management judgment.

The fair value of cash and accounts payable approximates their carrying amounts due to their short-term maturities. The fair value of the loan payable approximates its carrying amount as it bears interest at rates commensurate with market rates. The fair value of the redeemable preferred stock approximates its carrying value due to the dividends accrued on the preferred stock which are reflected as part of the redemption value. The fair value of deferred compensation and loans payable – affiliates are not practicable to estimate due to the related party nature of the underlying transactions.

Revenue Recognition:

Revenues are generated from the sale of nutrient reduction credits. The Company recognizes revenue from the sale of nutrient credits when there is persuasive evidence that an arrangement exists, when title has passed, the price is fixed or determinable, and collection is reasonably assured.

The Company expects that technology license fees will be generated from the licensing of Bion’s integrated system. The Company anticipates that it will charge its customers a non-refundable up-front technology license fee, which will be recognized over the estimated life of the customer relationship. In addition, any on-going technology license fees will be recognized as earned based upon the performance requirements of the agreement. Annual waste treatment fees will be recognized upon receipt. Revenues, if any, from the Company’s interest in Integrated Projects will be recognized when the entity in which the Integrated Project has been developed recognizes such revenue.

Loss per share:

Basic loss per share amounts are calculated using the weighted average number of shares of common stock outstanding during the period. Diluted loss per share assumes the conversion, exercise or issuance of all potential common stock instruments, such as options or warrants, unless the effect is to reduce the loss per share. During the six months ended December 31, 2014 and 2013, the basic and diluted loss per share was the same, as the impact of potential dilutive common shares was anti-dilutive.

The following table represents the warrants, options and convertible securities excluded from the calculation of diluted loss per share:

	December 31, 2014		December 31, 2013
Warrants		7,757,653		7,161,700
Options		3,911,370		5,128,870
Convertible debt		5,583,740		2,399,280
Convertible preferred stock		13,500		12,500

The following is a reconciliation of the denominators of the basic loss per share computations for the three and six months ended December 31, 2014 and 2013:

	Three months ended December 31, 2014			Three months ended December 31, 2013			Six months ended December 31, 2014			Six months ended December 31, 2013
Shares issued – beginning of period		19,787,068			18,212,104			19,576,619			17,673,983
Shares held by subsidiaries (Note 8)		(704,309	)		(704,309	)		(704,309	)		(704,309	)
Shares outstanding – beginning of period		19,082,759			17,507,795			18,872,310			16,969,674
Weighted average shares for fully vested stock bonuses (Note 9)		840,000			840,000			840,000			840,000
Weighted average shares issued during the period		42,700			57,434			178,957			420,453
Basic weighted average shares – end of period		19,965,459			18,405,229			19,891,267			18,230,127

Recent Accounting Pronouncements:

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

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09 “Revenue from Contracts from Customers,” which supersedes the revenue recognition requirements in “Revenue Recognition (Topic 605),” and requires entities to recognize revenue in a way that depicts the transfer of potential goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to the exchange for those goods or services. ASU 2014-09 is effective for fiscal years, and interim periods within those years, beginning December 15, 2016 and early adoption is not permitted. The Company is currently evaluating the new standard and assessing the potential impact on its operations and financial statements.

In August 2014, the FASB issued ASU No. 2014-15, “Presentation of Financial Statements – Going Concern: Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern.” The new standard requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year of the date the financial statements are issued. An entity must provide certain disclosures if conditions or events raise substantial doubt about the entity’s ability to continue as a going concern. The guidance is effective for annual periods ending after December 15, 2016, and interim periods thereafter, early application is permitted. The Company is currently assessing the impact of the adoption of ASU No. 2014-15 on its financial position, results of operation and financial statement disclosures.

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Note 8 - Stockholders' Equity (Details) - Stock Options - Valuation Assumptions	6 Months Ended		3 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Sep. 30, 2014
Note 8 - Stockholders' Equity (Details) - Stock Options - Valuation Assumptions [Line Items]
Volatility	80.00%	49.00%
Dividend yield	0.00%
Risk-free interest rate	0.51%	0.62%
Expected term (years)	2 years	2 years 248 days
Minimum [Member]
Note 8 - Stockholders' Equity (Details) - Stock Options - Valuation Assumptions [Line Items]
Volatility			49.00%
Risk-free interest rate			0.59%
Expected term (years)			2 years 229 days
Maximum [Member]
Note 8 - Stockholders' Equity (Details) - Stock Options - Valuation Assumptions [Line Items]
Volatility			50.00%
Risk-free interest rate			0.68%
Expected term (years)			2 years 259 days

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Consolidated Balance Sheets (Current Period Unaudited) (USD $)	Dec. 31, 2014	Jun. 30, 2014
Current assets:
Cash	$ 14,971	$ 186,148
Prepaid expenses	11,665	17,006
Subscription receivable (Note 8)		30,000
Deposits and other receivables	7,108	7,108
Total current assets	33,744	240,262
Property and equipment, net (Note 3)	4,039,110	4,351,153
Total assets	4,072,854	4,591,415
Current liabilities:
Accounts payable and accrued expenses	1,761,067	1,434,381
Loans payable - affiliates (Note 4)	396,895	382,458
Deferred compensation (Note 5)	796,984	716,734
Convertible notes payable - affiliates (Note 7)	2,042,481	1,736,502
Loan payable (Note 6)	7,754,000	7,754,000
Total current liabilities	12,751,427	12,024,075
Total liabilities	12,751,427	12,024,075
Total Bion’s stockholders’ deficit	(8,776,000)
Total deficit	(8,702,973)	(7,456,060)
Total liabilities and deficit	4,072,854	4,591,415
Series B Preferred Stock [Member]
Current liabilities:
Preferred stock	24,400	23,400
Series A Preferred Stock [Member]
Current liabilities:
Preferred stock	0	0
Common stock, no par value, 100,000,000 shares authorized, 19,927,655 and 19,576,619 shares issued, respectively; 19,223,346 and 18,872,310 shares outstanding, respectively	0	0
Additional paid-in capital	98,660,825	98,537,032
Accumulated deficit	(107,436,476)	(106,067,869)
Total Bion’s stockholders’ deficit	(8,775,651)	(7,530,837)
Noncontrolling interest	72,678	74,777
Series C Preferred Stock [Member]
Current liabilities:
Preferred stock	$ 0	$ 0

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Consolidated Statements of Cash Flows (Unaudited) (USD $)	6 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$ (1,370,706)	$ (2,245,055)
Adjustments to reconcile net loss to net cash used in operating activities:
Loss on disposal of property and equipment		1,919
Depreciation expense	312,043	490,303
Accrued interest on deferred compensation and other	189,573	174,767
Stock-based compensation	31,043	322,025
Decrease in prepaid expenses	5,341	31,534
Increase in accounts payable and accrued expenses	225,779	186,642
Increase in deferred compensation and convertible notes	312,000	415,416
Decrease in deferred rent		(10,929)
Net cash used in operating activities	(294,927)	(633,378)
CASH FLOWS FROM INVESTING ACTIVITIES
Release of restricted cash		57,315
Increase in restricted cash		(52,500)
Increase in deposits for property and equipment		(23,410)
Net cash used in investing activities		(18,595)
CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in subscription receivable	30,000	25,000
Proceeds from sale of common stock	26,250	500,000
Proceeds from sale of units	67,500
Proceeds from subscribed stock		52,500
Proceeds from loans payable - affiliates		105,149
Payment of loans payable - affiliates		(71,098)
Net cash provided by financing activities	123,750	611,551
Net decrease in cash	(171,177)	(40,422)
Cash at beginning of period	186,148	44,666
Cash at end of period	14,971	4,244
Supplemental disclosure of cash flow information:
Cash paid for interest		1,098
Non-cash investing and financing transactions:
Issuance of common stock to satisfy deferred compensation		18,416
Issuance of common stock to satisfy accounts payable		19,940
Series B Preferred Stock [Member]
Non-cash investing and financing transactions:
Series B preferred stock dividends accrued	$ 1,000	$ 1,000

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Note 9 - Commitments And Contingencies (Details) (USD $)	6 Months Ended	12 Months Ended	5 Months Ended	12 Months Ended		0 Months Ended	8 Months Ended	12 Months Ended	18 Months Ended	7 Months Ended	12 Months Ended	23 Months Ended	36 Months Ended	12 Months Ended
	Dec. 31, 2014	Jun. 30, 2014	Sep. 30, 2014	Jun. 30, 2012	Dec. 31, 2014	Sep. 25, 2014	Aug. 31, 2012	Jun. 30, 2013	Feb. 28, 2014	Sep. 30, 2014	Jul. 14, 2012	Jun. 30, 2014	Sep. 30, 2012	Dec. 31, 2012	Jul. 15, 2012	Jan. 01, 2011	May 31, 2005	Jan. 01, 2012
Note 9 - Commitments And Contingencies (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross	50,000
Share Price (in Dollars per share)	$ 0.75				0.75
CEO and President [Member] | Exercise Bonus [Member]
Note 9 - Commitments And Contingencies (Details) [Line Items]
Execution Bonus as a Percentage of Exercised Options and Warrants	50.00%	50.00%			50.00%							50.00%
CEO and President [Member] | Minimum [Member]
Note 9 - Commitments And Contingencies (Details) [Line Items]
Unused Vacation Time	10 years	10 years
Employment Termination Severance Pay [Member] | Morris Versus Bion [Member]
Note 9 - Commitments And Contingencies (Details) [Line Items]
Loss Contingency, Damages Sought, Value (in Dollars)			$ 90,000
Stock Bonus [Member] | Chief Executive Officer [Member] | Extension Agreement One [Member]
Note 9 - Commitments And Contingencies (Details) [Line Items]
Allocated Share-based Compensation Expense (in Dollars)				795,000
Exercise Bonus [Member] | Maximum [Member] | CEO and President [Member]
Note 9 - Commitments And Contingencies (Details) [Line Items]
Extension of Exercise Period					5 years
Exercise Bonus [Member] | CEO and President [Member]
Note 9 - Commitments And Contingencies (Details) [Line Items]
Execution Bonus as a Percentage of Exercised Options and Warrants	50.00%				50.00%
Contingent Stock Bonus, Percentage Threshold for Issuance	50.00%				50.00%
Subsequent Event [Member] | Deferral of Extension 1 Tranch 1 [Member] | Chief Executive Officer [Member] | Extension Agreement Three [Member]
Note 9 - Commitments And Contingencies (Details) [Line Items]
Common Stock, Capital Shares Reserved for Future Issuance			100,000							100,000
Subsequent Event [Member] | Deferral of Extension 2 Tranch 1 [Member] | Chief Executive Officer [Member] | Extension Agreement Three [Member]
Note 9 - Commitments And Contingencies (Details) [Line Items]
Common Stock, Capital Shares Reserved for Future Issuance			150,000							150,000
Stock Bonus Payable Upon Stock Price of $10.00 per Share [Member] | President [Member] | Extension Agreement 2 [Member]
Note 9 - Commitments And Contingencies (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant								100,000
Share Price (in Dollars per share)								$ 10.00
Stock Bonus Payable Upon Stock Price of $10.00 per Share [Member] | President [Member]
Note 9 - Commitments And Contingencies (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant															100,000	50,000
Stock Bonus Payable Upon Stock Price of $10.00 per Share [Member] | Vice President [Member]
Note 9 - Commitments And Contingencies (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant														12,500
Share Price (in Dollars per share)														$ 10.00
Stock Bonus Payable Upon Stock Price of $10.00 per Share [Member] | Key Employees [Member]
Note 9 - Commitments And Contingencies (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant	227,500				227,500
Share Price (in Dollars per share)																	$ 10.00
Stock Bonus Payable Upon Stock Price of $10.00 per Share [Member] | Executive Vice Chairman [Member]
Note 9 - Commitments And Contingencies (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant															25,000
Stock Bonus Payable Upon Stock Price of $10.00 per Share [Member]
Note 9 - Commitments And Contingencies (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant																		12,500
Stock Bonus Payable Upon Stock Price of $20.00 per Share [Member] | Vice President [Member]
Note 9 - Commitments And Contingencies (Details) [Line Items]
Share Price (in Dollars per share)														$ 20.00
Stock Bonus Payable Upon Stock Price of $20.00 per Share [Member] | Consultants [Member]
Note 9 - Commitments And Contingencies (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant	65,000				65,000
Share Price (in Dollars per share)																	$ 20.00
Stock Bonus Payable Upon Stock Price of $20.00 per Share [Member]
Note 9 - Commitments And Contingencies (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant																		12,500
Tranch 1 [Member] | President [Member] | Extension Agreement One [Member]
Note 9 - Commitments And Contingencies (Details) [Line Items]
Common Stock, Capital Shares Reserved for Future Issuance				45,000
Tranch 1 [Member] | President [Member] | Extension Agreement 2 [Member]
Note 9 - Commitments And Contingencies (Details) [Line Items]
Common Stock, Capital Shares Reserved for Future Issuance								75,000
Tranch 1 [Member] | Chief Executive Officer [Member] | Extension Agreement One [Member]
Note 9 - Commitments And Contingencies (Details) [Line Items]
Common Stock, Capital Shares Reserved for Future Issuance				100,000
Tranch 1 [Member] | Chief Executive Officer [Member] | Extension Agreement 2 [Member]
Note 9 - Commitments And Contingencies (Details) [Line Items]
Common Stock, Capital Shares Reserved for Future Issuance		150,000										150,000
Tranch 2 [Member] | President [Member] | Extension Agreement One [Member]
Note 9 - Commitments And Contingencies (Details) [Line Items]
Common Stock, Capital Shares Reserved for Future Issuance				45,000
Tranch 2 [Member] | President [Member] | Extension Agreement 2 [Member]
Note 9 - Commitments And Contingencies (Details) [Line Items]
Common Stock, Capital Shares Reserved for Future Issuance								75,000
Tranch 2 [Member] | Chief Executive Officer [Member] | Extension Agreement One [Member]
Note 9 - Commitments And Contingencies (Details) [Line Items]
Common Stock, Capital Shares Reserved for Future Issuance				100,000
Tranch 2 [Member] | Chief Executive Officer [Member] | Extension Agreement 2 [Member]
Note 9 - Commitments And Contingencies (Details) [Line Items]
Common Stock, Capital Shares Reserved for Future Issuance		150,000										150,000
Tranch 3 [Member] | Chief Executive Officer [Member] | Extension Agreement One [Member]
Note 9 - Commitments And Contingencies (Details) [Line Items]
Common Stock, Capital Shares Reserved for Future Issuance				100,000
Pennvest Loan [Member]
Note 9 - Commitments And Contingencies (Details) [Line Items]
Loss Contingency, Damages Sought, Value (in Dollars)						8,137,117
Initial Amounts [Member] | President [Member] | Extension Agreement One [Member]
Note 9 - Commitments And Contingencies (Details) [Line Items]
Allocated Share-based Compensation Expense (in Dollars)				240,300
President [Member] | Extension Agreement One [Member]
Note 9 - Commitments And Contingencies (Details) [Line Items]
Monthly Officers' Compensation (in Dollars)							20,000
Common Stock, Capital Shares Reserved for Future Issuance				90,000
Allocated Share-based Compensation Expense (in Dollars)				334,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross				200,000
Deferred Compensation Arrangement with Individual, Exercise Price (in Dollars per share)				$ 3.00
President [Member] | Extension Agreement 2 [Member]
Note 9 - Commitments And Contingencies (Details) [Line Items]
Monthly Officers' Compensation (in Dollars)									21,000
Common Stock, Capital Shares Reserved for Future Issuance								150,000
Allocated Share-based Compensation Expense (in Dollars)								292,500
Deferred Compensation Arrangement with Individual, Exercise Price (in Dollars per share)								$ 2.10
Stock and Warrants Issued During Period, Value, Preferred Stock and Warrants (in Dollars)								25,000
Stock Issued During Period, Shares, Conversion of Units								250,000
President [Member]
Note 9 - Commitments And Contingencies (Details) [Line Items]
Monthly Officers' Compensation (in Dollars)										14,000
Chief Executive Officer [Member] | Extension Agreement One [Member]
Note 9 - Commitments And Contingencies (Details) [Line Items]
Monthly Officers' Compensation (in Dollars)											26,000
Common Stock, Capital Shares Reserved for Future Issuance				300,000
Allocated Share-based Compensation Expense (in Dollars)				1,203,500
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross				725,000
Deferred Compensation Arrangement with Individual, Exercise Price (in Dollars per share)				$ 3.00
Chief Executive Officer [Member] | Extension Agreement 2 [Member]
Note 9 - Commitments And Contingencies (Details) [Line Items]
Monthly Officers' Compensation (in Dollars)												26,000
Common Stock, Capital Shares Reserved for Future Issuance		300,000										300,000
Allocated Share-based Compensation Expense (in Dollars)								585,000
Deferred Compensation Arrangement with Individual, Exercise Price (in Dollars per share)								$ 2.10
Stock and Warrants Issued During Period, Value, Preferred Stock and Warrants (in Dollars)								5,000
Class of Warrant or Right, Number of Securities Called by Warrants or Rights								50,000
Chief Executive Officer [Member]
Note 9 - Commitments And Contingencies (Details) [Line Items]
Annual Officers Compensation (in Dollars)													312,000
Vice President [Member]
Note 9 - Commitments And Contingencies (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross														75,000
Deferred Compensation Arrangement with Individual, Exercise Price (in Dollars per share)														$ 2.75
Annual Officers Compensation (in Dollars)														$ 144,000

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Note 2 - Significant Accounting Policies (Details)	6 Months Ended
	Dec. 31, 2014
Minimum [Member]
Note 2 - Significant Accounting Policies (Details) [Line Items]
Property, Plant and Equipment, Useful Life	3 years
Maximum [Member]
Note 2 - Significant Accounting Policies (Details) [Line Items]
Property, Plant and Equipment, Useful Life	20 years
Centerpoint [Member]
Note 2 - Significant Accounting Policies (Details) [Line Items]
Equity Method Investment, Ownership Percentage	58.90%

XML

Note 10 - Subsequent Events (Details) (USD $)	6 Months Ended		12 Months Ended		1 Months Ended	0 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Jun. 30, 2014	Jun. 30, 2013	Feb. 09, 2015	Feb. 10, 2015
Note 10 - Subsequent Events (Details) [Line Items]
Stock Issued During Period, Shares, New Issues	35,000
Stock Issued During Period, Value, Issued for Services (in Dollars)	$ 7,524
Number of Warrants Per Unit	1
Proceeds from Issuance or Sale of Equity (in Dollars)		52,500	944,400	1,330,499
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross	50,000
Share-based Compensation Arrangements by Share-based Payment Award, Options, Grants in Period, Weighted Average Exercise Price (in Dollars per share)	$ 1.00
Share-based Compensation Arrangement by Share-based Payment Award, Options, Forfeitures in Period		200,000
Due to Related Parties, Current (in Dollars)	396,895		382,458
Deferred Compensation Liability, Current (in Dollars)	796,984		716,734
President [Member] | Common Stock [Member] | Subsequent Event [Member]
Note 10 - Subsequent Events (Details) [Line Items]
Debt Conversion, Converted Instrument, Shares Issued					235,775
President [Member] | Subsequent Event [Member] | Convertible Debt [Member] | New Smith Note [Member]
Note 10 - Subsequent Events (Details) [Line Items]
Debt Instrument, Interest Rate Reduction, Percentage						50.00%
Debt Instrument, Interest Rate, Stated Percentage						4.00%
Debt Instrument, Convertible Conversion Price, Incease, Percentage						11.00%
Debt Instrument, Convertible, Conversion Price (in Dollars per share)						$ 0.50
Number of Warrants Per Unit, Reduction, Percentage						75.00%
President [Member] | Subsequent Event [Member] | Convertible Debt [Member]
Note 10 - Subsequent Events (Details) [Line Items]
Number of Warrants Per Unit	1
President [Member] | Subsequent Event [Member] | New Smith Note [Member]
Note 10 - Subsequent Events (Details) [Line Items]
Convertible Notes Payable (in Dollars)						760,519
President [Member] | Subsequent Event [Member]
Note 10 - Subsequent Events (Details) [Line Items]
Class of Warrant or Right, Exercise Price of Warrants or Rights (in Dollars per share)						$ 1.50
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross						150,000
Debt Conversion, Original Debt, Amount (in Dollars)					106,000
Debt Conversion, Converted Instrument, Warrants or Options Issued					235,775
Share-based Compensation Arrangement by Share-based Payment Award, Options, Forfeitures in Period						200,000
President [Member] | Convertible Debt [Member]
Note 10 - Subsequent Events (Details) [Line Items]
Debt Instrument, Interest Rate, Stated Percentage	8.00%
Debt Instrument, Convertible, Conversion Price (in Dollars per share)	$ 0.45
President [Member]
Note 10 - Subsequent Events (Details) [Line Items]
Convertible Notes Payable (in Dollars)	854,316
Chief Executive Officer [Member] | Subsequent Event [Member] | Convertible Debt [Member] | New Bassani Note [Member]
Note 10 - Subsequent Events (Details) [Line Items]
Debt Instrument, Interest Rate Reduction, Percentage						50.00%
Debt Instrument, Interest Rate, Stated Percentage						4.00%
Debt Instrument, Convertible Conversion Price, Incease, Percentage						11.00%
Debt Instrument, Convertible, Conversion Price (in Dollars per share)						$ 0.50
Number of Warrants Per Unit, Reduction, Percentage						75.00%
Chief Executive Officer [Member] | Subsequent Event [Member] | Cash Note [Member]
Note 10 - Subsequent Events (Details) [Line Items]
Class of Warrant or Right, Exercise Price of Warrants or Rights (in Dollars per share)						$ 1.00
Debt Instrument, Face Amount (in Dollars)						395,277
Class of Warrant or Right, Number of Securities Called by Warrants or Rights						592,916
Chief Executive Officer [Member] | Subsequent Event [Member]
Note 10 - Subsequent Events (Details) [Line Items]
Class of Warrant or Right, Exercise Price of Warrants or Rights (in Dollars per share)						$ 1.50
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross						450,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Forfeitures in Period						250,000
Chief Executive Officer [Member] | Convertible Debt [Member]
Note 10 - Subsequent Events (Details) [Line Items]
Number of Warrants Per Unit	1
Debt Instrument, Interest Rate, Stated Percentage	8.00%
Debt Instrument, Convertible, Conversion Price (in Dollars per share)	$ 0.45
Chief Executive Officer [Member]
Note 10 - Subsequent Events (Details) [Line Items]
Debt Conversion, Original Debt, Amount (in Dollars)	110,000
Debt Conversion, Converted Instrument, Shares Issued			130,953
Debt Conversion, Converted Instrument, Warrants or Options Issued	130,953
Debt Instrument, Convertible, Conversion Price (in Dollars per share)	$ 0.84		$ 0.84
Due to Related Parties, Current (in Dollars)	279,000
Unreimbursed Expense (in Dollars)	116,277
Executive Vice Chairman [Member] | Certain Outstanding Options and Warrants [Member] | Subsequent Event [Member]
Note 10 - Subsequent Events (Details) [Line Items]
Class of Warrant or Right, Exercise Price of Warrants or Rights (in Dollars per share)						$ 1.50
Executive Vice Chairman [Member] | Subsequent Event [Member] | New Promissory Note [Member]
Note 10 - Subsequent Events (Details) [Line Items]
Debt Instrument, Face Amount (in Dollars)						15,956
Executive Vice Chairman [Member] | Subsequent Event [Member]
Note 10 - Subsequent Events (Details) [Line Items]
Class of Warrant or Right, Exercise Price of Warrants or Rights (in Dollars per share)						$ 1.00
Share-based Compensation Arrangement by Share-based Payment Award, Options, Forfeitures in Period						25,000
Class of Warrant or Right, Number of Securities Called by Warrants or Rights						7,978
Executive Vice Chairman [Member]
Note 10 - Subsequent Events (Details) [Line Items]
Unreimbursed Expense (in Dollars)	15,956
Deferred Compensation Liability, Current and Noncurrent (in Dollars)	394,246
Deferred Compensation Liability, Current (in Dollars)	120,000
Vest Upon Grant Date [Member] | Subsequent Event [Member] | Share-based Compensation Award, Tranche One [Member] | Employees and Consultants [Member]
Note 10 - Subsequent Events (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested and Expected to Vest, Outstanding, Number					157,500
Common Stock [Member]
Note 10 - Subsequent Events (Details) [Line Items]
Stock Issued During Period, Shares, New Issues	75,000
Restricted Stock [Member] | Subsequent Event [Member]
Note 10 - Subsequent Events (Details) [Line Items]
Stock Issued During Period, Shares, New Issues					1,665,001
Stock Issued During Period, Price Per Share (in Dollars per share)					0.50
Proceeds from Issuance or Sale of Equity (in Dollars)					832,500
Restricted Stock [Member]
Note 10 - Subsequent Events (Details) [Line Items]
Stock Issued During Period, Shares, New Issues	35,000
Stock Issued During Period, Value, Issued for Services (in Dollars)	7,524
Number of Shares Per Unit	1
Restricted Common Stock [Member] | Subsequent Event [Member]
Note 10 - Subsequent Events (Details) [Line Items]
Number of Shares Per Unit					1
Employee Stock Option [Member] | Subsequent Event [Member] | Share-based Compensation Award, Tranche Two [Member] | Employees and Consultants [Member]
Note 10 - Subsequent Events (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross					100,000
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period					2 years
Employee Stock Option [Member] | Subsequent Event [Member] | Employees and Consultants [Member]
Note 10 - Subsequent Events (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period					5 years
Employee Stock Option [Member]
Note 10 - Subsequent Events (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross	50,000	67,725
Subsequent Event [Member] | New Bassani Note [Member]
Note 10 - Subsequent Events (Details) [Line Items]
Convertible Notes Payable (in Dollars)						1,464,545
Subsequent Event [Member] | Certain Brokers [Member]
Note 10 - Subsequent Events (Details) [Line Items]
Class of Warrant or Right, Issued During Period					123,044
Subsequent Event [Member] | Employees and Consultants [Member]
Note 10 - Subsequent Events (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross					257,500
Share-based Compensation Arrangements by Share-based Payment Award, Options, Grants in Period, Weighted Average Exercise Price (in Dollars per share)					0.60
Subsequent Event [Member]
Note 10 - Subsequent Events (Details) [Line Items]
Stock Issued During Period, Shares, New Issues					79,210
Stock Issued During Period, Value, Issued for Services (in Dollars)					37,000
Number of Warrants Per Unit					1
Class of Warrant or Right, Exercise Price of Warrants or Rights (in Dollars per share)					0.75

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Note 2 - Significant Accounting Policies (Details) - Earnings Per Share, Basic and Diluted	3 Months Ended		6 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2014	Dec. 31, 2013
Earnings Per Share, Basic and Diluted [Abstract]
Shares issued – beginning of period	19,787,068	18,212,104	19,576,619	17,673,983
Shares held by subsidiaries (Note 8)	(704,309)	(704,309)	(704,309)	(704,309)
Shares outstanding – beginning of period	19,082,759	17,507,795	18,872,310	16,969,674
Weighted average shares for fully vested stock bonuses (Note 9)	840,000	840,000	840,000	840,000
Weighted average shares issued during the period	42,700	57,434	178,957	420,453
Basic weighted average shares – end of period	19,965,459	18,405,229	19,891,267	18,230,127

XML

Note 1 - Organization, Nature of Business, Going Concern and Management's Plans

6 Months Ended

Dec. 31, 2014

Disclosure Text Block [Abstract]

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

1.     ORGANIZATION, NATURE OF BUSINESS, GOING CONCERN AND MANAGEMENT’S PLANS:

Organization and nature of business:

Bion Environmental Technologies, Inc. (“Bion” or “We” or the "Company") was incorporated in 1987 in the State of Colorado and has developed and continues to develop patented and proprietary technology and business models that provide comprehensive environmental solutions to a significant source of pollution in United States agriculture, large scale livestock facilities known as Confined Animal Feeding Operations ("CAFO's"). Bion's technologies (and applications related thereto) produce substantial reductions of nutrient releases (primarily nitrogen and phosphorus) to both water and air (including ammonia, which is subsequently re-deposited to the ground) from livestock waste streams based upon our operations and research to date (and third party peer review thereof). Because Bion's technologies (and related applications) reduce the harmful releases and emissions from a CAFO on which it is utilized, the CAFO can potentially increase its herd concentration (thereby utilizing less land per animal) while lowering or maintaining its level of nutrient releases and atmospheric emissions. Bion provides comprehensive and cost-effective treatment of livestock waste onsite, while it is still concentrated and before it contaminates air, soil, groundwater aquifers and/or downstream waters, and, in certain configurations, recovers nutrients for potential use as fertilizer and feed additives.

From 2003 through early 2008, the Company primarily focused on completing re-development of its technology platform and business model. As such, during that period Bion elected not to pursue near-term business opportunities such as retrofitting existing CAFO's with waste management solutions, because management believed such efforts would have diverted scarce management and financial resources and negatively impacted Bion’s ability to complete: 1) re-development of technologies for environmentally sound treatment of CAFO waste streams and 2) development of an integrated technology platform in support of large-scale sustainable Integrated Projects (defined below) including renewable energy production. During the 2014 fiscal year the Company increased its research and development activities with focus on creating variations of its technology platform that create additional flexibility, increase recovery of nutrient by-products and to review potential “add-ons” and applications for use in different regulatory environments. These research and development activities will continue through the current 2015 fiscal year.

Bion is now actively pursuing business opportunities in three broad areas 1) installation of Bion systems to retrofit and environmentally remediate existing CAFO’s to reduce nutrient (primarily nitrogen and phosphorus) releases, gaseous emissions (ammonia, greenhouse gases, volatile organic compounds, etc.), and pathogens, hormones and other compounds in order to clean the air and water in the surrounding areas (as described below) to ensure compliance with existing (and future) regulations and to permit herd expansion; 2) development of Integrated Projects opportunities within the United States and internationally; and 3) licensing and/or joint venturing of Bion’s technology and applications outside North America. The opportunities described at 1) and 2) above (and below) each require substantial political (federal, state and local) efforts on the part of the Company and a substantial part of Bion’s efforts are focused on such political matters.

Management believes that Bion's technology platform (including utilization of various third party technologies to supplement the Company’s proprietary technologies), in addition to utilization for remediation of the waste streams of existing CAFOs, allows the integration of large-scale CAFO's and their end-product users, renewable energy production from the CAFO waste stream, on site utilization of the renewable energy generated and biofuel/ethanol production in an environmentally and economically sustainable manner while reducing the aggregate capital expense and operating costs for the entire integrated complex ("Integrated Projects" or "Projects"). In the context of Integrated Projects, Bion's waste treatment process, in addition to mitigating polluting releases, enables generation of renewable energy from cellulosic portions of the CAFO waste stream, which renewable energy can be utilized by integrated facilities including ethanol plants, CAFO end-product processors (including cheese, ice cream and/or bottling plants in the case of dairy CAFO’s and/or slaughter and/or processing facilities in the context of beef CAFO’s) and/or other users as a fossil fuel replacement. The nutrients (primarily nitrogen and phosphorus) can be harvested from the solids and liquid streams recovered from the livestock waste stream and can be utilized as either high value fertilizer and/or the basis for high protein animal feed and the nutrient rich effluent can potentially be utilized in integrated hydroponic agriculture and/or field applied as fertilizer. Bion believes that its Integrated Projects will produce high quality, traceable animal protein at a lower cost than current industry practices while also maintaining a far lower net environmental footprint per unit of protein produced due to water recycling (possible due to the removal of nutrients, etc. from the water by Bion’s technology applications), production of renewable energy from the waste stream (reducing the use of fossil fuels), and multiple levels of economies of scale, co-location and integration savings in transportation and other logistics. Some projects may involve only partial integration which will limit the benefits described herein.

Bion has been involved for several years in the very early development and pre-development activities related to an initial Integrated Project in Pennsylvania. The Company is also involved in pre-development evaluations and discussions regarding opportunities for Integrated Projects in the Northeast, Midwest, and the North Central United States (dairy and/or beef). All such discussions are still in preliminary stages. The Company has also engaged in early stage discussions regarding development of Integrated Projects to meet specific needs of certain international markets (and regarding licensing our technology for use in overseas locations).

Additionally, Bion has commenced discussions that may lead to installation of Bion systems on existing and/or new dairies, beef facilities and swine farms in the Midwest and/or North Central states.

On September 27, 2008, the Company executed an agreement with Kreider Farms (and its affiliated entities) (collectively "Kreider") to design, construct and operate (through its wholly-owned subsidiaries, Bion Services Group, Inc. (“Bion Services”) and Bion PA-1 LLC (“PA-1”) a Bion system to treat the waste of 1,200 milking dairy cows (milkers, dry cows and heifers) at the Kreider Dairy, located in Manheim, Pennsylvania. In addition, the agreement (as amended and supplemented) provides for a second phase which will treat the wastes from the rest of Kreider’s herd and includes renewable energy production from the cellulosic solid wastes from the Phase 1 system (referred to as “Kreider 1”) together with the waste stream from Kreider’s poultry facilities for use at the facilities and/or for market sales. The Kreider projects are owned and operated by Bion through subsidiaries, in which Kreider has the option to purchase a noncontrolling interest. To complete these projects, substantial capital (equity and/or debt) has been and will continue to be expended. Additional funds will be required for continuing operations of Kreider 1 until sufficient revenues can be generated, of which there is no assurance. The Company anticipates that it will earn revenue primarily from the sale of nutrient reduction (and/or other) environmental credits related to Kreider 1 and the Kreider Phase 2 poultry waste treatment system (not yet constructed), and secondarily through sales of renewable energy generated by the Kreider Phase 2 system. To date the market for long-term nutrient reduction credits in Pennsylvania has been very slow to develop and the Company’s activities have been negatively affected by the lack of such development. A significant portion of Bion’s research and development activities is currently taking place at the Kreider 1 facility.

The Company’s subsidiary PA-1 financed Kreider 1 through a $7.8 million loan (“Pennvest Loan”) from Pennsylvania Infrastructure Investment Authority (“Pennvest”) secured by Kreider 1 (and its revenue streams, if any) plus advances from the Company. Initial construction-related activities of Kreider 1 commenced in October 2010 and construction was completed and a period of system ‘operation shakedown’ commenced in May 2011. Kreider 1 reached full, stabilized operation by the end of the 2012 fiscal year. During 2011 the Pennsylvania Department of Environmental Protection (“PADEP”) re-certified the nutrient credits for this project. The economics (potential revenues and profitability) of Kreider 1 are based largely on the long-term sale of nutrient reduction credits (nitrogen and/or phosphorus) to meet the requirements of the Chesapeake Bay environmental clean-up. The PADEP issued final permits for Kreider 1 (including the credit verification plan) on August 1, 2012 on which date the Company deemed that Kreider 1 was ‘placed in service’. As a result, PA-1 has commenced generating nutrient reduction credits for potential sale while continuing to utilize the system to test improvements and add-ons. Operating results at Kreider 1 have documented the efficacy of Bion’s nutrient reduction technology and vetted potential ‘add-ons’ and modifications for use in future installations. During August 2012 the Company provided Pennvest (and the PADEP) with data demonstrating that Kreider 1 met the ‘technology guarantee’ standards which were incorporated in the Pennvest financing documents and, as a result, the Pennvest Loan is now solely an obligation of PA-1. To date liquidity in the Pennsylvania nutrient credit market has been slow to develop significant breadth and depth and limited liquidity has negatively impacted Bion’s business plans and has prevented Bion from monetizing the nutrient reduction credits created by PA-1’s existing Kreider 1 project and Bion’s other proposed projects. These challenges and difficulties have prevented PA-1 from generating any material revenues from the Kreider 1 project to date (operating expenses have been funded by loans from Bion) and raise significant questions as to when PA-1 will be able to generate such revenues from the Kreider 1 system. PA-1 has engaged in on-and-off negotiations with Pennvest related to forbearance, re-structuring and other matters related to the Kreider 1 project and its obligations pursuant to the Pennvest Loan. In the context of such negotiations, PA-1 elected not to make interest payments to Pennvest on the Pennvest Loan since January 2013. Additionally, the Company has not made any principal payments, which were to begin in fiscal 2013, and, therefore, the Company has classified the Pennvest Loan as a current liability as of December 31, 2014. Due to the slow development of the nutrient reduction credit market, the Company determined that the carrying amount of the property and equipment related to the Kreider 1 project exceeded its estimated future undiscounted cash flows based on certain assumptions regarding timing, level and probability of revenues from sales of nutrient reduction credits and, therefore, recorded a $2,000,000 impairment of the Kreider 1 assets which reduced the value of the Kreider 1 System to $4,349,482 as of June 30, 2014. Additional impairments may result if the nutrient credit market does not develop in the near term.

On September 25, 2014, Pennvest exercised its right to declare the Pennvest Loan in default and has accelerated the Pennvest Loan and has demanded that PA-1 pay $8,137,117 (principal, interest plus late charges) on or before October 24, 2014. PA-1 did not make the payment and does not have the resources to make the payment demanded by Pennvest. PA-1 has commenced discussions and negotiations with Pennvest concerning this matter but has not yet received any responses from Pennvest to solutions it has proposed. It is not possible at this date to predict the outcome of such negotiations, but the Company believes that an interim, short-term agreement may be reached that will allow PA-1 and Pennvest a further period of time for further negotiations and evaluation of possible long-term resolutions. Subject to the results of the negotiations with Pennvest and pending development of a more robust market for nutrient reductions in Pennsylvania, PA-1 and Bion anticipate that it will be necessary for the Company to evaluate various options with regard to Kreider 1 over the next 30-180 days.

During August 2012, the Company provided Pennvest (and the PADEP) with data demonstrating that the Kreider 1 system met the ‘technology guaranty’ standards which were incorporated in the Pennvest financing documents and, as a result, the Pennvest Loan is now solely an obligation of PA-1.

Development work and technology evaluation, including amended credit certification and negotiations with potential joint venture partners, continues related to the details of the second phase of the Kreider project which primarily relates to treatment of the wastes from Kreider’s poultry operations. Assuming there are positive developments related to the market for nutrient reduction in Pennsylvania, the Company intends to pursue development, design and construction of the Kreider 2 poultry waste/renewable energy project with a goal of achieving operational status during 2015. However, as discussed above, this project faces challenges related to the current limits of the existing nutrient reduction market and funding of technology-based, verifiable agricultural nutrient reductions.

The limited development of the nutrient reduction market in Pennsylvania has led Bion to redeploy some of its limited resources from its efforts in Pennsylvania to its initiatives in the Great Lakes and Midwest states.

A significant portion of Bion’s activities concern efforts with private and public stakeholders (at local and state level) in Pennsylvania (and other Chesapeake Bay states) and in Wisconsin and at the federal level (the Environmental Protection Agency (“EPA”) (and other executive departments) and Congress) to establish appropriate public policies which will create regulations and funding mechanisms that foster installation of the low cost environmental solutions that Bion (and others) can provide through clean-up of agricultural waste streams. The Company anticipates that such efforts will continue throughout the next 12 months.

Going concern and management’s plans:

The consolidated financial statements have been prepared assuming the Company will continue as a going concern. The Company has not generated significant revenues and has incurred net losses (including significant non-cash expenses) of approximately $5,762,000 and $8,250,000 during the years ended June 30, 2014 and 2013, respectively, and a net loss of approximately $1,371,000 for the six months ended December 31, 2014. At December 31, 2014, the Company has a working capital deficit and a stockholders’ deficit of approximately $12,718,000 and $8,776,000, respectively. These factors raise substantial doubt about the Company's ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments relating to the recoverability or classification of assets or the amounts and classification of liabilities that may result should the Company be unable to continue as a going concern. The following paragraphs describe management’s plans with regard to these conditions.

The Company continues to explore sources of additional financing to satisfy its current operating requirements as it is not currently generating any significant revenues.

During the years ended June 30, 2014 and 2013, the Company received total proceeds of $944,400 and $1,330,499, respectively, from the sale of its equity securities. Proceeds during the 2014 and 2013 fiscal years have been lower than in previous years, which has negatively impacted the Company’s business development efforts. The Company’s difficulty in raising sufficient funds has continued through the six months ended December 31, 2014.

During the six months ended December 31, 2014, the Company sold 35,000 shares of the Company’s common stock at $0.75 per share for proceeds of $26,250. The Company also issued 40,000 shares of the Company’s common stock upon receipt of its subscription receivable of $30,000.

The Company also sold units of the Company’s restricted securities for $0.50 each, with each unit consisting of one share of the Company’s restricted common stock and one warrant to purchase one half of a share of the Company’s restricted common stock for $0.75 per share until December 31, 2016. During the six months ended December 31, 2014, the Company had issued a total of 135,000 units for total proceeds of $67,500.

During the year ended June 30, 2014 the Company entered into promissory note agreements with two affiliates of the Company whereby the affiliates have agreed to lend up to $75,000 each for working capital needs. As of December 31, 2014, the Company has borrowed $135,000 under these notes.

During fiscal years 2014 and 2013 and through the six months ended December 31, 2014, the Company experienced greater difficulty in raising equity funding than in the prior years. As a result, the Company faced, and continues to face, significant cash flow management challenges due to working capital constraints. To partially mitigate these working capital constraints, the Company’s core senior management and several key employees and consultants have been deferring (and continue to defer) all or part of their cash compensation and/or are accepting compensation in the form of securities of the Company (Notes 5 and 7) and members of the Company’s senior management have made loans to the Company (Note 4). Additionally, the Company made reductions in its personnel during the year ended June 30, 2014. The constraint on available resources has had, and continues to have, negative effects on the pace and scope of the Company’s efforts to develop its business. The Company has had to delay payment of trade obligations and has had to economize in many ways that have potentially negative consequences. The Company’s accounts payable have increased materially in fiscal years 2013 and 2014 and for the six months ended December 31, 2014. If the Company does not have greater success in its efforts to raise needed funds during the balance of fiscal 2015 (and subsequent periods), management will need to consider deeper cuts (including additional personnel cuts) and curtailment of operations (including possibly Kreider 1 operations).

The Company will need to obtain additional capital to fund its operations and technology development, to satisfy existing creditors, to develop Integrated Projects and CAFO waste remediation systems (including the Kreider 2 facility) and to continue to operate the Kreider 1 facility. The Company anticipates that it will seek to raise from $2,500,000 to $50,000,000 or more (debt and equity) during the next twelve months. However, as discussed above, there is no assurance, especially in light of the difficulties the Company has experienced in recent periods and the extremely unsettled capital markets that presently exist (especially for small companies), that the Company will be able to obtain the funds that it needs to stay in business, complete its technology development or to successfully develop its business and projects.

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

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Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) (USD $)	Jun. 30, 2014	Dec. 31, 2014
Common stock, shares issued	19,576,619
Common stock, shares outstanding	18,872,310
Series B Preferred Stock [Member]
Par value (in Dollars per share)	0.01	$ 0.01
Shares authorized	50,000	50,000
Shares issued	200	200
Shares outstanding	200	200
Liquidation preference (in Dollars per share)	26,000	$ 27,000
Series A Preferred Stock [Member]
Par value (in Dollars per share)	0.01	$ 0.01
Shares authorized	10,000	10,000
Shares issued	0	0
Shares outstanding	0	0
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares issued	19,576,619	19,927,655
Common stock, shares outstanding	18,872,310	19,223,346
Common stock, par value (in Dollars per share)	0	$ 0
Series C Preferred Stock [Member]
Par value (in Dollars per share)	0.01	$ 0.01
Shares authorized	60,000	60,000
Shares issued	0	0
Shares outstanding	0	0

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Accounting Policies, by Policy (Policies)

6 Months Ended

Dec. 31, 2014

Accounting Policies [Abstract]

Consolidation, Policy [Policy Text Block]

Principles of consolidation:

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Bion Integrated Projects Group, Inc. (“Projects Group”), Bion Technologies, Inc., BionSoil, Inc., Bion Services, PA-1, and Bion PA 2 LLC; and its 58.9% owned subsidiary, Centerpoint Corporation (“Centerpoint”). All significant intercompany accounts and transactions have been eliminated in consolidation.

The accompanying consolidated financial statements have been prepared without audit pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The consolidated financial statements reflect all adjustments (consisting of only normal recurring entries) that, in the opinion of management, are necessary to present fairly the financial position at December 31, 2014, and the results of operations and cash flows of the Company for the three and six months ended December 31, 2014 and 2013. Operating results for the three and six months ended December 31, 2014 are not necessarily indicative of the results that may be expected for the year ending June 30, 2015.

Property, Plant and Equipment, Policy [Policy Text Block]

Property and equipment:

Property and equipment are stated at cost and are depreciated, when placed into service, using the straight-line method over the estimated useful lives of the related assets, generally three to twenty years. The Company capitalizes all direct costs and all indirect incrementally identifiable costs related to the design and construction of its Integrated Projects. The Company reviews its property and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss would be recognized based on the amount by which the carrying value of the assets or asset group exceeds its estimated fair value, and is recognized as a loss from operations.

Fair Value Measurement, Policy [Policy Text Block]

Fair value measurements:

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or most advantageous market. The Company uses a fair value hierarchy that has three levels of inputs, both observable and unobservable, with use of the lowest possible level of input to determine fair value.

Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2 – observable inputs other than Level 1, quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, and model-derived prices whose inputs are observable or whose significant value drivers are observable; and

Level 3 – assets and liabilities whose significant value drivers are unobservable.

Observable inputs are based on market data obtained from independent sources, while unobservable inputs are based on the Company’s market assumptions. Unobservable inputs require significant management judgment or estimation. In some cases, the inputs used to measure an asset or liability may fall into different levels of the fair value hierarchy. In those instances, the fair value measurement is required to be classified using the lowest level of input that is significant to the fair value measurement. Such determination requires significant management judgment.

The fair value of cash and accounts payable approximates their carrying amounts due to their short-term maturities. The fair value of the loan payable approximates its carrying amount as it bears interest at rates commensurate with market rates. The fair value of the redeemable preferred stock approximates its carrying value due to the dividends accrued on the preferred stock which are reflected as part of the redemption value. The fair value of deferred compensation and loans payable – affiliates are not practicable to estimate due to the related party nature of the underlying transactions.

Revenue Recognition, Policy [Policy Text Block]

Revenue Recognition:

Revenues are generated from the sale of nutrient reduction credits. The Company recognizes revenue from the sale of nutrient credits when there is persuasive evidence that an arrangement exists, when title has passed, the price is fixed or determinable, and collection is reasonably assured.

The Company expects that technology license fees will be generated from the licensing of Bion’s integrated system. The Company anticipates that it will charge its customers a non-refundable up-front technology license fee, which will be recognized over the estimated life of the customer relationship. In addition, any on-going technology license fees will be recognized as earned based upon the performance requirements of the agreement. Annual waste treatment fees will be recognized upon receipt. Revenues, if any, from the Company’s interest in Integrated Projects will be recognized when the entity in which the Integrated Project has been developed recognizes such revenue.

Earnings Per Share, Policy [Policy Text Block]

Loss per share:

Basic loss per share amounts are calculated using the weighted average number of shares of common stock outstanding during the period. Diluted loss per share assumes the conversion, exercise or issuance of all potential common stock instruments, such as options or warrants, unless the effect is to reduce the loss per share. During the six months ended December 31, 2014 and 2013, the basic and diluted loss per share was the same, as the impact of potential dilutive common shares was anti-dilutive.

The following table represents the warrants, options and convertible securities excluded from the calculation of diluted loss per share:

	December 31, 2014		December 31, 2013
Warrants		7,757,653		7,161,700
Options		3,911,370		5,128,870
Convertible debt		5,583,740		2,399,280
Convertible preferred stock		13,500		12,500

The following is a reconciliation of the denominators of the basic loss per share computations for the three and six months ended December 31, 2014 and 2013:

	Three months ended December 31, 2014			Three months ended December 31, 2013			Six months ended December 31, 2014			Six months ended December 31, 2013
Shares issued – beginning of period		19,787,068			18,212,104			19,576,619			17,673,983
Shares held by subsidiaries (Note 8)		(704,309	)		(704,309	)		(704,309	)		(704,309	)
Shares outstanding – beginning of period		19,082,759			17,507,795			18,872,310			16,969,674
Weighted average shares for fully vested stock bonuses (Note 9)		840,000			840,000			840,000			840,000
Weighted average shares issued during the period		42,700			57,434			178,957			420,453
Basic weighted average shares – end of period		19,965,459			18,405,229			19,891,267			18,230,127

New Accounting Pronouncements, Policy [Policy Text Block]

Recent Accounting Pronouncements:

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

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09 “Revenue from Contracts from Customers,” which supersedes the revenue recognition requirements in “Revenue Recognition (Topic 605),” and requires entities to recognize revenue in a way that depicts the transfer of potential goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to the exchange for those goods or services. ASU 2014-09 is effective for fiscal years, and interim periods within those years, beginning December 15, 2016 and early adoption is not permitted. The Company is currently evaluating the new standard and assessing the potential impact on its operations and financial statements.

In August 2014, the FASB issued ASU No. 2014-15, “Presentation of Financial Statements – Going Concern: Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern.” The new standard requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year of the date the financial statements are issued. An entity must provide certain disclosures if conditions or events raise substantial doubt about the entity’s ability to continue as a going concern. The guidance is effective for annual periods ending after December 15, 2016, and interim periods thereafter, early application is permitted. The Company is currently assessing the impact of the adoption of ASU No. 2014-15 on its financial position, results of operation and financial statement disclosures.

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Document And Entity Information	6 Months Ended
	Dec. 31, 2014	Feb. 10, 2015
Document and Entity Information [Abstract]
Entity Registrant Name	BION ENVIRONMENTAL TECHNOLOGIES INC
Document Type	10-Q
Current Fiscal Year End Date	--06-30
Entity Common Stock, Shares Outstanding		21,906,641
Amendment Flag	false
Entity Central Index Key	0000875729
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Smaller Reporting Company
Entity Well-known Seasoned Issuer	No
Document Period End Date	Dec. 31, 2014
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q2

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Note 2 - Significant Accounting Policies (Tables)

6 Months Ended

Dec. 31, 2014

Accounting Policies [Abstract]

Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share [Table Text Block]

	December 31, 2014		December 31, 2013
Warrants		7,757,653		7,161,700
Options		3,911,370		5,128,870
Convertible debt		5,583,740		2,399,280
Convertible preferred stock		13,500		12,500

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

	Three months ended December 31, 2014			Three months ended December 31, 2013			Six months ended December 31, 2014			Six months ended December 31, 2013
Shares issued – beginning of period		19,787,068			18,212,104			19,576,619			17,673,983
Shares held by subsidiaries (Note 8)		(704,309	)		(704,309	)		(704,309	)		(704,309	)
Shares outstanding – beginning of period		19,082,759			17,507,795			18,872,310			16,969,674
Weighted average shares for fully vested stock bonuses (Note 9)		840,000			840,000			840,000			840,000
Weighted average shares issued during the period		42,700			57,434			178,957			420,453
Basic weighted average shares – end of period		19,965,459			18,405,229			19,891,267			18,230,127

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Consolidated Statements of Operations (Unaudited) (USD $) Share data in Millions, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2014	Dec. 31, 2013
Operating expenses:
General and administrative (including stock-based compensation (Note 8))	$ 333,196	$ 526,558	$ 690,537	$ 1,631,562
Depreciation	127,159	244,307	312,043	490,303
Research and development (including stock-based compensation (Note 8))	104,237	(120,003)	170,823	(53,445)
Total operating expenses	564,592	650,862	1,173,403	2,068,420
Loss from operations	(564,592)	(650,862)	(1,173,403)	(2,068,420)
Other expense:
Interest expense	100,356	88,606	197,303	174,717
Other expense				1,918
	100,356	88,606	197,303	176,635
Net loss	(664,948)	(739,468)	(1,370,706)	(2,245,055)
Net loss attributable to the noncontrolling interest	1,028	1,444	2,099	2,738
Net loss attributable to Bion	(663,920)	(738,024)	(1,368,607)	(2,242,317)
Dividends on preferred stock	(500)	(500)	(1,000)	(1,000)
Net loss applicable to Bion's common stockholders	$ (664,420)	$ (738,524)	$ (1,369,607)	$ (2,243,317)
Net loss applicable to Bion's common stockholders per basic and diluted common share (in Dollars per share)	$ (0.03)	$ (0.04)	$ (0.07)	$ (0.12)
Weighted-average number of common shares outstanding:
Basic and diluted (in Shares)	19,965,459	18,405,229	19,891,267	18,230,127

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Note 6 - Loan Payable

6 Months Ended

Dec. 31, 2014

Debt Disclosure [Abstract]

Debt Disclosure [Text Block]

6.     LOAN PAYABLE:

As of December 31, 2014, PA-1, the Company’s wholly-owned subsidiary, owes $7,754,000 under the terms of the Pennvest Loan related to the construction of the Kreider 1 System. The terms of the Pennvest Loan provide for funding of up to $7,754,000 which is to be repaid by interest-only payments for three years, followed by an additional ten-year amortization of principal. The Pennvest Loan accrues interest at 2.547% for years 1 through 5 and 3.184% for years 6 through maturity. The Pennvest Loan requires minimum annual principal payments of approximately $574,000 in fiscal year 2013, $704,000 in fiscal year 2014, $723,000 in fiscal year 2015, $741,000 in fiscal year 2016, $760,000 in fiscal year 2017 and $4,252,000 thereafter. The Pennvest Loan is collateralized by the Kreider 1 System and by a pledge of all revenues generated from Kreider 1 including, but not limited to, revenues generated from nutrient reduction credit sales and by-product sales. In addition, in consideration for the excess credit risk associated with the project, Pennvest is entitled to participate in the profits from Kreider 1 calculated on a net cash flow basis, as defined. The Company has incurred interest expense related to the Pennvest Loan of $49,373 and $49,374 for the three months ended December 31, 2014 and 2013, respectively. For the six months ended December 31, 2014 and 2013, the Company has incurred interest expense related to the Pennvest Loan of $98,747 and $98,748, respectively. Based on the limited development of the depth and breadth of the Pennsylvania nutrient reduction credit market to date, PA-1 has commenced negotiations with Pennvest related to forbearance and/or re-structuring the obligations under the Pennvest Loan. In the context of such negotiations, PA-1 has elected not to make interest payments to Pennvest on the Pennvest Loan since January 2013. Additionally, the Company has not made any principal payments, which were to begin in fiscal 2013, and, therefore, the Company has classified the Pennvest Loan as a current liability as of December 31, 2014.

On September 25, 2014, Pennvest exercised its right to declare the Pennvest Loan in default and has accelerated the Pennvest Loan and has demanded that PA-1 pay $8,137,117 (principal, interest plus late charges) on or before October 24, 2014. PA-1 did not make the payment and does not have the resources to make the payment demanded by Pennvest. PA-1 has commenced discussions and negotiations with Pennvest concerning this matter but has not yet received any responses from Pennvest to solutions it has proposed. It is not possible at this date to predict the outcome of such negotiations, but the Company believes that an interim, short-term agreement may be reached that will allow PA-1 and Pennvest a further period of time for further negotiations and evaluation of possible long-term resolutions. Subject to the results of the negotiations with Pennvest and pending development of a more robust market for nutrient reductions in Pennsylvania, PA-1 and Bion anticipate that it will be necessary for the Company to evaluate various options with regard to Kreider 1 over the next 30-180 days.

During August 2012, the Company provided Pennvest (and the PADEP) with data demonstrating that the Kreider 1 system met the ‘technology guaranty’ standards which were incorporated in the Pennvest financing documents and, as a result, the Pennvest Loan is now solely an obligation of PA-1.

In connection with the Pennvest Loan financing documents, the Company provided a ‘technology guaranty’ regarding nutrient reduction performance of Kreider 1 which was structured to expire when Kreider 1’s nutrient reduction performance had been demonstrated. On August 1, 2012 the Company provided Pennvest (and the PADEP) with data demonstrating that the Kreider 1 System had surpassed the requisite performance criteria and that the Company’s ‘technology guaranty’ was met. As a result, the Pennvest Loan is solely an obligation of PA-1.

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Note 5 - Deferred Compensation:

6 Months Ended

Dec. 31, 2014

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

5.     DEFERRED COMPENSATION:

The Company owes Edward Schafer (“Schafer”), the Company’s Executive Vice Chairman, two employees and two former employees, aggregate deferred compensation of $557,734 as of December 31, 2014 (subject to the outcome of pending litigation – see Note 9). The majority of the balance is payable dependent upon the cash reserves of the Company and $984 was paid by the issuance of 2,140 shares of the Company’s common shares in January 2015.

As of December 31, 2014, the Company owed Bassani deferred compensation of $239,250 including interest of $74,250, which was due and payable on July 1, 2014 but has been extended untilApril 15, 2015. The deferred compensation accrues interest at 10% per annum and is convertible into the Company’s restricted common stock at $1.50 per share.

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Note 2 - Significant Accounting Policies (Details) - Antidilutive Securities	6 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Warrant [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities	7,757,653	7,161,700
Equity Option [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities	3,911,370	5,128,870
Convertible Debt Securities [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities	5,583,740	2,399,280
Convertible Preferred Stock, Antidilutive Securities [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities	13,500	12,500

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Note 3 - Property and Equipment (Tables)

6 Months Ended

Dec. 31, 2014

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment [Table Text Block]

	December 31, 2014			June 30, 2014
Machinery and equipment	$	4,111,001		$	4,111,001
Buildings and structures		1,947,701			1,947,701
Computers and office equipment		183,809			183,809
		6,242,511			6,242,511
Less accumulated depreciation		(2,203,401	)		(1,891,358	)
	$	4,039,110		$	4,351,153

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Note 9 - Commitments And Contingencies

6 Months Ended

Dec. 31, 2014

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies Disclosure [Text Block]

9.     COMMITMENTS AND CONTINGENCIES:

Employment and consulting agreements: 

Smith has held the positions of Director, President and General Counsel of Company and its subsidiaries under various agreements and terms since March 2003. During July 2011, the Company entered into an extension agreement pursuant to which Smith continued to hold his current position in the Company through a date no later than December 31, 2012. Commencing January 1, 2012, Smith’s monthly salary was $20,000, which has been accrued and deferred. In addition, 90,000 shares of the Company’s common stock would be issued to Smith in two tranches of 45,000 shares on each of January 15, 2013 (issued) and 2014 (issued), respectively. The Company recorded expense of $240,300 for the year ended June 30, 2012, related to the future stock issuances as the bonus was fully vested at the grant date. As part of the extension agreement, Smith was also granted 200,000 options, which vested immediately, to purchase common shares of the Company at a price of $3.00 per share and which options expire on December 31, 2019. The Company recorded expense of $334,000 during the year ended June 30, 2012 as the options were fully vested at the grant date. Effective July 15, 2012, the Company entered into an extension agreement pursuant to which Smith will continue to hold his current positions in the Company through a date no later than June 30, 2014. Effective September 2012, Smith’s monthly salary became $21,000, until March 2014, at which time Smith agreed to a temporary reduction in monthly salary to $14,000 (which is currently being deferred). In addition, the extension provides that Smith will be issued 150,000 shares of the Company’s common stock in two tranches of 75,000 shares on each of January 15, 2014 (issued) and 2015 (issued), which shares vested immediately. The Company recorded expense of $292,500 for the year ended June 30, 2013, related to the future stock issuances as the bonus was fully vested at the grant date. As part of the extension agreement, Smith was also granted a bonus of $25,000 paid in warrants, which vested immediately, to purchase 250,000 shares of the Company’s common stock at a price of $2.10 per share and which warrants expire on December 31, 2018 and a contingent stock bonus of 100,000 shares payable on the date on which the Company’s stock price first reaches $10.00 per share (regardless of whether Smith is still providing services to the Company on such date). During September 2014, Smith agreed to continue his employment agreement through April 15, 2015 and also agreed to continue to defer his temporarily reduced salary of $14,000 per month until such date.

Since March 31, 2005, the Company has had various agreements with Brightcap and/or Bassani, through which the services of Bassani are provided. On September 30, 2009 the Company entered into an extension agreement with Brightcap pursuant to which Bassani provided services to the Company through September 30, 2012 for $312,000 annually (currently deferred). The Board appointed Bassani as the Company's CEO effective May 13, 2011. On July 15, 2011, Bassani, Brightcap and the Company agreed to an extension/amendment of the existing agreement with Brightcap which provided that Bassani would continue to provide the services of CEO through June 30, 2013 and will continue to provide full-time services to the Company in other capacities through June 30, 2014 at a salary of $26,000 per month. In addition Bassani will be issued 300,000 shares of the Company’s common stock issuable in three tranches of 100,000 shares on each of January 15, 2015, 2016 and 2017, respectively. During the year ended June 30, 2012 the Company recorded expense of $795,000 related to the future stock issuances as the bonus was fully vested at the grant date. Bassani was also granted 725,000 options, which vested immediately, to purchase shares of the Company’s common stock at $3.00 per share which options expire on December 31, 2019. The Company recorded expense of $1,203,500 during the year ended June 30, 2012 as the options were fully vested at the grant date. Effective July 15, 2012, Bassani, Brightcap and the Company agreed to a further extension/amendment of the existing agreement with Brightcap which provides that Bassani will continue to provide the services of CEO through June 30, 2014. The extension provided that Bassani will continue to provide full-time services to the Company at a cash salary of $26,000 per month (which is currently being deferred) and Bassani will be issued 300,000 shares of the Company’s common stock issuable in two tranches of 150,000 shares on each of January 15, 2015 and 2016, respectively, which were immediately vested. The Company recorded expense of $585,000 for the year ended June 30, 2013, related to the future stock issuances as the bonus was fully vested at the grant date. As part of the extension agreement, Bassani was also granted a bonus of $5,000 paid in warrants, which vested immediately, to purchase 50,000 shares of the Company’s common stock at a price of $2.10 per share and which warrants expire on December 31, 2018. During September 2014, Bassani agreed to extend his employment agreement until April 15, 2015 and that previously issued and expensed share grants of 100,000 and 150,000 shares, that were to be issued on January 15, 2015, would be deferred until January 15, 2016.

On May 5, 2013, the Board of Directors approved agreements with Bassani and Smith, with effective dates of May 15, 2013, in which Bassani and Smith have agreed to continue to defer their respective cash compensation through April 30, 2014 (unless the Board of Directors elects to re-commence cash payment on an earlier date) and to extend the due date of their respective deferred cash compensation until January 15, 2015 on the terms set forth in Note 7. Subsequent to December 31, 2014, the Company entered into extension agreements, effective January 1, 2015, which extended the terms of Bassani and Smith’s services to the Company (Note 10).  In May 2014, Bassani and Smith have agreed to continue to defer their respective cash compensation through July 1, 2014. The Company has provided Bassani and Smith with convertible promissory notes which reflect all the terms of these agreements to which future accruals will be added as additional principal. As part of the agreements, Bassani and Smith have also forgiven any possible obligations that Bion may have owed each of them in relation to unused vacation time for periods (over 10 years) prior to June 30, 2012. In consideration of these agreements, Bassani and Smith: a) have been granted 50% ‘execution/exercise’ bonuses to be effective upon future exercise of outstanding (or subsequently acquired) options and warrants owned by Bassani and Smith (and their respective donees) and in relation to contingent stock bonuses; b) their warrants and options, if due to expire prior to December 31, 2018, have been extended to that date (with possible further extensions); and c) other modifications have been made.

During January 2012, the Company approved an employment agreement contract extension effective January 1, 2012 with Craig Scott pursuant to which he continued to act as Vice President of Capital Markets and Shareholder Relations through December 31, 2012, at an annual salary of $144,000. In consideration for his extension agreement, Mr. Scott was granted 75,000 options to purchase shares of the Company’s common shares at $2.75 per share with an expiration date of December 31, 2016, 12,500 contingent stock options that will be issued if the Company’s stock price exceeds $10.00 and $20.00 per share, respectively, and an extension of the expiration dates all his existing warrants and options as of January 1, 2012 until December 31, 2016. Mr. Scott currently works for the Company on a month-to-month basis and beginning August 1, 2013 is receiving his compensation in common stock of the Company and/or debt of the Company which may only be repaid by conversion into common stock of the Company.

Contingent stock bonuses:

In May 2005 the Company declared contingent deferred stock bonuses to its key employees and consultants. The stock bonuses are contingent upon the Company’s stock price exceeding $10.00 and $20.00 per share, respectively, and the grantees still being employed by or providing services to the Company at the time the target prices are reached. As of December 31, 2014, 227,500 and 65,000 of these contingent bonus shares, respectively, remain outstanding, to be issued when and if the Company’s stock price exceeds $10.00 and $20.00 per share, respectively. The Company has also granted 12,500 contingent stock options that will be issued if the Company’s stock price exceeds $10.00 and $20.00 per share, respectively, to one if its employees in consideration for an employment agreement extension effective January 1, 2012.

Effective January 1, 2011 the Company declared a contingent stock bonus of 50,000 shares to Smith and effective July 15, 2012 the Company declared contingent stock bonuses of 100,000 and 25,000 shares to Smith and Schafer, respectively. The stock bonuses are contingent upon the Company’s stock price exceeding $10.00 and do not require that Smith or Schafer remain employed by the Company.

Execution/exercise bonuses:

As part of the agreements the Company entered into with Bassani and Smith (Note 7) effective May 15, 2013, whereby they agreed to continue to defer their cash compensation up to April 30, 2014, they were each granted the following: a) a 50% execution/exercise bonus which shall be applied upon the effective date of the notice of intent to exercise (for options and warrants) or issuance event, as applicable, of any currently outstanding and/or subsequently acquired  options, warrants and/or  contingent stock bonuses owned by each as follows: i) in the case of exercise by payment of cash, the bonus shall take the form of reduction of the exercise price; ii) in the case of cashless exercise, the bonus shall be applied to reduce the exercise price prior to the cashless exercise calculations; and iii) with regard to contingent stock bonuses, issuance shall be triggered upon the Company’s common stock reaching a closing price equal to 50% of currently specified price; and b) the right to extend the exercise period of all or part of the applicable options and warrants for up to five years (one year at a time) by annual payments of $.05 per option or warrant to the Company on or before a date during the three months prior to expiration of the exercise period at least three business days before the end of the expiration period.

During the year ended June 30, 2014, the Company extended execution/exercise bonuses with the same terms as described above to Schafer and to one of the Company’s board members.

Litigation:

In May 2014 Mr. Morris, the Company’s former Chief Technology Officer, initiated litigation against the Company (Morris v Bion Environmental Technologies, Inc., 14-cv-02732-ADS-GRB, United States District Court, Eastern District of New York) related to his termination effective November 30, 2013. Mr. Morris seeks payment of severance pay (up to $90,000) plus certain previously accrued obligations totaling approximately $87,000 plus accrued interest (which sums have been accrued as of September 30, 2014, despite the fact that the Company is disputing the obligations) and attorney’s fees. The Company disputes each such claim by Mr. Morris in the litigation and is defending the lawsuit which is in the discovery stage. The Company is incurring attorney’s fees (and related costs) in the context of its defense. The Company does not believe that this litigation will have a material adverse effect on the Company.

On September 25, 2014, Pennvest exercised its right to declare the Pennvest Loan in default and has accelerated the Pennvest Loan and has demanded that PA-1 pay $8,137,117 (principal, interest plus late charges) on or before October 24, 2014. PA-1 did not make the payment and does not have the resources to make the payment demanded by Pennvest. During August 2012, the Company provided Pennvest (and the PADEP) with data demonstrating that the Kreider 1 system met the ‘technology guaranty’ standards which were incorporated in the Pennvest financing documents and, as a result, the Pennvest Loan is now solely an obligation of PA-1. No litigation has commenced related to this matter but such litigation is likely if negotiations do not produce a resolution (Note 1 and Note 6).

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

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Note 7 - Convertible Notes Payable - Affiliates

6 Months Ended

Dec. 31, 2014

Convertible Debt [Abstract]

Convertible Debt [Text Block]

7.     CONVERTIBLE NOTES PAYABLE - AFFILIATES:

Effective May 15, 2013, the Board of Directors approved agreements with Bassani and Smith, under which, Bassani and Smith have agreed to continue to defer their cash compensation up to April 30, 2014 (unless the Board of Directors elects to re-commence cash payment on an earlier date) and to extend the due date of their deferred cash compensation until January 15, 2015. The agreements have been evidenced in the form of convertible promissory notes (“Convertible Notes”). During the year ended June 30, 2014, Bassani and Smith have agreed to continue to defer their cash compensation up to July 1, 2014. During September 2014, Bassani and Smith have agreed to continue to defer their cash compensation up to January 1, 2015. During January 2015, Bassani and Smith have agreed to continue to defer their cash compensation until April 15, 2015.

The Convertible Notes accrue interest at 8% per annum and are due and payable (as extended) on April 15, 2015. The Convertible Notes (including accrued interest) of $854,316 and $1,188,165 at December 31, 2014 owed to Smith and Bassani, respectively, plus all future deferred compensation or other sums subsequently added to the principal of the Convertible Notes, may be converted, at the sole election of Smith and Bassani, into Units consisting of one share of the Company’s common stock and one warrant to purchase a share of the Company’s common stock, at a price of $1.25 per Unit until January 15, 2015. Subsequent to December 31, 2014, the Company entered into new convertible notes with effective dates of January 1, 2015 which extended the maturity of the new notes to December 31, 2017 and revised the terms (Note 10). The warrant contained in the Unit shall be exercisable at $2.50 per share until December 31, 2018. The original conversion price of $1.25 per Unit approximated the fair value of the Units at the date of the agreements; therefore no beneficial conversion feature exists. Pursuant to the deferral agreements, the conversion price of the Convertible Notes plus accrued interest is the lower of the $1.25 per Unit price or the lowest price at which the Company sells its common stock on or before January 15, 2015 (see Note 10 for terms of new convertible notes). As of December 31, 2014, the lowest price at which the Company had sold its common stock during the relevant period is $0.45 per share. Management evaluated the terms and conditions of the embedded conversion features based on the guidance of ASC 815-15 “Embedded Derivatives” to determine if there was an embedded derivative requiring bifurcation. An embedded derivative instrument (such as a conversion option embedded in the deferred compensation) must be bifurcated from its host instruments and accounted for separately as a derivative instrument only if the “risks and rewards” of the embedded derivative instrument are not “clearly and closely related” to the risks and rewards of the host instrument in which it is embedded. Management concluded that the embedded conversion feature of the deferred compensation was not required to be bifurcated because the conversion feature is clearly and closely related to the host instrument, and because of the Company’s limited trading volume that indicates the feature is not readily convertible to cash in accordance with ASC 815-10, “Derivatives and Hedging”. As of December 31, 2014, the Company owes Smith, $854,316 under the terms of his Convertible Note. The Convertible Note is comprised of deferred compensation of $755,468 and accrued interest of $98,848. During the year ended June 30, 2014, Bassani elected to convert $110,000 of his Convertible Note, at a conversion price of $0.84, into 130,953 Units consisting of 130,953 shares of the Company’s common stock which were issued during the six months ended December 31, 2014 and 130,953 warrants (which were issued during the year ended June 30, 2014). As of December 31, 2014, the Company owes Bassani, $1,188,165, comprised of deferred compensation of $1,034,000 and accrued interest of $154,165, under the terms of his Convertible Note.

As part of the agreements, Bassani and Smith have also forgiven any possible obligations that Bion may have owed each of them in relation to unused vacation time for periods (over 10 years) prior to the year ended June 30, 2012. In consideration of these agreements, Bassani and Smith: a) have been granted 50% ‘execution/exercise’ bonuses to be effective upon future exercise of outstanding (or subsequently acquired) options and warrants owned by Bassani and Smith (and their respective donees) and in relation to contingent stock bonuses (see Note 9 for further details); b) warrants and options, if due to expire prior to December 31, 2018, have been extended to that date (with possible further extensions) and c) other modifications have been made to existing agreements.

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Note 8 - Stockholders' Equity

6 Months Ended

Dec. 31, 2014

Stockholders' Equity Note [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

8.     STOCKHOLDERS' EQUITY:

Series B Preferred stock:

At July 1, 2014, the Company had 200 shares of Series B redeemable convertible Preferred stock outstanding with a par value of $0.01 per share, convertible at the option of the holder at $2.00 per share, with dividends accrued and payable at 2.5% per quarter. The Series B Preferred stock is mandatorily redeemable at $2.00 per share by the Company three years after issuance and accordingly was classified outside of shareholders’ equity.

During the years ended June 30, 2014 and 2013, the Company declared dividends of $2,000 and $2,417 respectively. During the six months ended December 31, 2014, the Company declared dividends of $1,000. At December 31, 2014, accrued dividends payable are $7,000.

Common stock:

Holders of common stock are entitled to one vote per share on all matters to be voted on by common stockholders. In the event of liquidation, dissolution or winding up of the Company, the holders of common stock are entitled to share in all assets remaining after liabilities have been paid in full or set aside and the rights of any outstanding preferred stock have been satisfied. Common stock has no preemptive, redemption or conversion rights. The rights of holders of common stock are subject to, and may be adversely affected by, the rights of the holders of any outstanding series of preferred stock or any series of preferred stock the Company may designate in the future.

Centerpoint holds 704,309 shares of the Company’s common stock. These shares of the Company’s common stock held by Centerpoint are for the benefit of its shareholders without any beneficial interest. The Company accounts for these shares similar to treasury stock.

During the six months ended December 31, 2014, the Company issued 10,083 shares of the Company’s common stock at prices ranging from $0.43 to $1.22 per share for services valued at $7,524, in the aggregate, to a consultant and an employee.

During the six months ended December 31, 2014, the Company issued 130,953 shares of the Company’s common stock upon Bassani’s fiscal year 2014 election to convert $110,000, of his convertible notes payable – affiliate into Units at a conversion price of $0.84 per Unit (Note 7).

During the six months ended December 31, 2014, the Company sold 35,000 shares of the Company’s restricted common stock at $0.75 per share for total proceeds of $26,250.

During the six months ended December 31, 2014, the Company entered into subscription agreements to sell units for $0.50 each, with each unit consisting of one share of the Company’s restricted common stock and one warrant to purchase one half of a share of the Company’s restricted common stock for $0.75 per share until December 31, 2016. During the six months ended December 31, 2014, the Company issued 135,000 units for total proceeds of $67,500. The Company allocated the proceeds from the shares and the warrants based upon their relative fair values, using the share price on the day each of the subscription agreements were entered into and the fair value of the warrants, which was determined to be $0.05 per warrant. As a result, $3,592 was allocated to the warrants and $63,908 was allocated to the shares, and both were recorded as additional paid in capital.

The Company also issued 40,000 shares of the Company’s restricted common stock upon receipt of its subscription receivable of $30,000 during the six months ended December 31, 2014.

Warrants:

As of December 31, 2014, the Company had approximately 7.8 million warrants outstanding, with exercise prices from $0.75 to $4.25 and expiring on various dates through January 15, 2019.

The weighted-average exercise price for the outstanding warrants is $2.15, and the weighted-average remaining contractual life as of December 31, 2014 is 3.26 years.

During the six months ended December 31, 2014, warrants to purchase 67,500 shares of the Company’s common stock at $0.85 per share were issued pursuant the promissory notes entered into by Bassani and Shareholder (Note 4). The warrants were determined to have a fair value of $0.10 per warrant and expire on December 31, 2018. The Company recorded interest expense of $6,750 related to the warrant issuances.

During the six months ended December 31, 2014, the Company issued warrants to purchase 67,500 shares of the Company’s restricted common stock for $0.75 per share until December 31, 2016 in connection with the sale of 135,000 units.

During the six months ended December 31, 2014, the Company agreed to extend the expiration date of 985,833 warrants owned by various individuals which were scheduled to expire on December 31, 2014. The Company recorded expense related to the modification of the warrants of $986 for the six months ended December 31, 2013.

As of December 31, 2014, 5,790,277 of the warrants of the Company are subject to execution/exercise bonuses under agreements with Bassani and Smith (Note 9).

Stock options:

The Company’s 2006 Consolidated Incentive Plan (the “2006 Plan”), as amended effective February 1, 2015, provides for the issuance of options (and/or other securities) to purchase up to 22,000,000 shares of the Company’s common stock. Terms of exercise and expiration of options granted under the 2006 Plan may be established at the discretion of the Board of Directors, but no option may be exercisable for more than ten years.

In November 2014, the Company entered into an agreement with a board member which entitled the board member to modifications of existing stock options resulting in the extension of certain expiration dates and resulting in incremental non-cash compensation expense of $11,783 for the six months ended December 31, 2014.

The Company recorded compensation expense related to employee stock options of $4,000 and $(309,315) for the three months ended December 31, 2014 and 2013, respectively and $4,000 and $(223,457) for the six months ended December 31, 2014 and 2013, respectively. The Company granted 50,000 and 67,725 options during the six months ended December 31, 2014 and 2013, respectively. During the six months ended December 31, 2014, 397,500 options expired, while during the six months ended December 30, 2013, 200,000 options were forfeited.

The fair value of the options granted during the six months ended December 31, 2014 and 2013 were estimated on the grant date using the Black-Scholes option-pricing model with the following assumptions:

	Weighted Average, December 31, 2014		Range, December 31, 2014		Weighted Average, December 31, 2013		Range, December 31, 2013
Volatility		80%		80%		49%		49%-50%
Dividend yield		-		-		-		-
Risk-free interest rate		0.51%		0.51%		0.62%		0.59%-0.68%
Expected term (years)		2		2		2.68		2.63-2.71

The expected volatility was based on the historical price volatility of the Company’s common stock. The dividend yield represents the Company’s anticipated cash dividend on common stock over the expected term of the stock options. The U.S. Treasury bill rate for the expected term of the stock options was utilized to determine the risk-free interest rate. The expected term of stock options represents the period of time the stock options granted are expected to be outstanding based upon management’s estimates.

A summary of option activity under the 2006 Plan for the six months ended December 31, 2014 is as follows:

	Options			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life		Aggregate Intrinsic Value
Outstanding at July 1, 2014		4,258,870			2.81		3.2		-
Granted		50,000			1.00
Exercised		-			-
Forfeited		-			-
Expired		(397,500	)		3.06
Outstanding at December 31, 2014		3,911,370		$	2.76		3.1	$	-
Exercisable at December 31, 2014		3,911,370		$	2.76		3.1	$	-

The total fair value of stock options that vested during the six months ended December 31, 2014 and 2013 was $4,000 and $34,822, respectively. As of December 31, 2014, the Company had no unrecognized compensation cost related to stock options.

Stock-based employee compensation charges in operating expenses in the Company’s financial statements for the three and six months ended December 31, 2014 and 2013 are as follows:

	Three months ended December 31, 2014		Three months ended December 31, 2013			Six months ended December 31, 2014		Six months ended December 31, 2013
General and administrative:
Fair value of stock issued to an employee	$	-		24,999		$	-		94,998
Change in fair value from modification of option terms		11,783		-			11,783		307,638
Fair value of stock options expensed/(credited)		4,000		(155,728	)		4,000		(87,517	)
Total	$	15,783	$	(130,729	)	$	15,783	$	315,119
Research and development:
Fair value of stock options credited	$	-	$	(153,587	)	$	-	$	(135,939	)
Total	$	-	$	(153,587	)	$	-	$	(135,939	)

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Note 10 - Subsequent Events

6 Months Ended

Dec. 31, 2014

Subsequent Events [Abstract]

Subsequent Events [Text Block]

10. SUBSEQUENT EVENTS:

The Company has evaluated events that occurred subsequent to December 31, 2014 for recognition and disclosure in the financial statements and notes to the financial statements.

From January 1, 2015 through February 9, 2015 the Company has issued 79,210 shares of the Company’s common shares to employees valued at approximately $37,000.

From January 1, 2015 through February 9, 2015, the Company has sold 1,665,001 units of the Company’s restricted securities for $0.50 each, with each unit consisting of one share of the Company’s restricted common stock and one warrant to purchase one half of a share of the Company’s restricted common stock for $0.75 per share until December 31, 2016. The proceeds from the sale of the units totalled approximately $832,500 before brokerage commisions and offering expenses (and issuance of 123,044 warrants to certain of the brokers pursuant to the terms of the offering).

From January 1, 2015 through February 9, 2015, the Company granted 257,500 options to purchase the Company’s common stock at an exercise price of $0.60 to various employees and consultants other than Smith, Bassani and Schafer. The options expire 5 years from grant date and 100,000 options vest over two years, while 157,500 of the options vest upon grant date.

From January 1, 2015 through February 9, 2015, Smith has elected to convert approximately $106,000 of his convertible note payable into 235,775 shares of the Company’s common stock and 235,775 warrants to purchase the Company’s common stock.

On February 10, 2015, the Company executed an Extension Agreement with Smith pursuant to which Smith extended his employment with the Company to December 31, 2015 (with the Company having an option to extend his employment an additional six months). As part of the Extension Agreement, the balance of Smith’s existing convertible note payable (Note 7) of $854,316 as of December 31, 2014, adjusted for coversions subsequent to that date, was replaced with a new convertible note with an initial principal amount of $760,519 with terms that i) materially reduce the interest rate by 50% (from 8% to 4%), ii) increases the conversion price by 11% (from $0.45 to $0.50), iii) sets the conversion price at a fixed price so there can be no further reductions, iv) reduces the number of warrants received on conversion by 75% (from 1 warrant per unit to ¼ per unit) and v) extends the maturity date to December 31, 2017 (“New Smith Note”). Additionally, pursuant to the Extension Agreement, Smith: i) will continue to defer his cash compensation until the Board of Directors re-instates cash payments to all employees and consultants who are deferring their compensation, ii) cancelled 200,000 contingent stock bonuses previously granted to him by the Company, iii) has been granted 150,000 new options which vested immediately and iv) exercise prices of certain outstanding options and warrants owned by Smith (and his donees) have been extended and had the exercise prices reduced to $1.50.

On February 10, 2015, the Company executed an Extension Agreement with Bassani pursuant to which Bassani extended the term of his service to the Company to December 31, 2017, (with the Company having an option to extend the term an additional six months.) As part of the agreement, the Company’s existing loan payable, deferred compensation and convertible note payable to Bassani (Notes 4, 5 and 7), were restructured into two promissory notes as follows: a) The of sum of the cash loaned by Bassani to the Company of $279,000 together with $116,277 of unreimbursed expenses through December 31, 2014 were placed into a new promissory note with initial principal of $395,277 which is due and payable on December 31, 2015 (“Cash Note”). In connection with these sums and the Cash Note, Bassani was issued warrants to purchase 592,916 shares of the Company’s common stock at a price of $1.00 until December 31, 2020; and b) the remaining balances of the Company’s accrued obligations to Bassani ($1,464,545) were replaced with a new convertible promissory note with terms that compared with the largest prior convertible note obligation to Bassani: i) materially reduce the interest rate by 50% (from 8% to 4%), ii) increase the conversion price by 11% (from $0.45 to $0.50), iii) sets the conversion price at a fixed price so there can be no further reductions, iv) reduces the number of warrants received on conversion by 75% (from 1 warrant per unit to ¼ per unit) and v) extends the maturity date to December 31, 2017 (“New Bassani Note”). Additionally, pursuant to the Extension Agreement, Bassani i) will continue to defer his cash compensation until the Board of Directors re-instates cash payments to all employees and consultants who are deferring their compensation, ii) cancelled 250,000 contingent stock bonuses previously granted to him by the Company, iii) has been granted 450,000 new options which vested immediately and iv) exercise prices of certain outstanding options and warrants owned by Bassani (and his donees) have been extended and had the exercise prices reduced to $1.50.

On February 10, 2015, the Company entered into an agreement with Schafer pursuant to which Schafer will continue to provide services to the Company through December 31, 2015. As part of the agreement, unreimbursed expenses of $15,956 due to Schafer at December 31, 2014 were replaced with a new promissory note with initial principal of $15,956 which is due and payable on December 31, 2015 and Schafer was issued warrants to purchase 7,978 shares of the Company’s common stock at a price of $1.00 until December 31, 2020. Schaefer’s deferred compensation for 2014 (and prior years) in the amount of $394,246 (including a sum of $120,000 for calendar year 2014) was placed in a convertible promissory note with identical terms as the New Smith Note and the New Bassani Note. Additionally, pursuant to the agreement, i) the exercise period of outstanding options and warrants owned by Schafer have been extended, ii) certain of Schafer’s outstanding options and warrants had the exercise prices reduced to $1.50, and iii) 25,000 contingent stock bonuses previously granted to Schafer have been cancelled by the Company.

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Note 8 - Stockholders' Equity (Details) - Allocation of Recognized Period Costs (USD $)	3 Months Ended		6 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2014	Dec. 31, 2013
General and Administrative Expense [Member] | Individual Employee [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Stock-based employee compensation expense		$ 24,999		$ 94,998
General and Administrative Expense [Member] | Employee Stock Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Stock-based employee compensation expense	4,000	(155,728)	4,000	(87,517)
General and Administrative Expense [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Stock-based employee compensation expense	15,783	(130,729)	15,783	315,119
Change in fair value from modification of option terms	11,783		11,783	307,638
Research and Development Expense [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Stock-based employee compensation expense		(153,587)		(135,939)
Employee Stock Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Stock-based employee compensation expense	$ 4,000	$ (309,315)	$ 4,000	$ (223,457)

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Note 1 - Organization, Nature of Business, Going Concern and Management's Plans (Details) (USD $)	3 Months Ended		6 Months Ended		12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2014	Dec. 31, 2013	Jun. 30, 2014	Jun. 30, 2013	Sep. 25, 2014
Note 1 - Organization, Nature of Business, Going Concern and Management's Plans (Details) [Line Items]
Construction Loan	$ 7,800,000		$ 7,800,000
Impairment of Long-Lived Assets Held-for-use					2,000,000
Property, Plant and Equipment, Gross	6,242,511		6,242,511		6,242,511
Net Income (Loss), Including Portion Attributable to Noncontrolling Interest	(664,948)	(739,468)	(1,370,706)	(2,245,055)	(5,762,000)	(8,250,000)
Working Capital	(12,718,000)		(12,718,000)
Stockholders' Equity Attributable to Parent	(8,776,000)		(8,776,000)
Proceeds from Issuance or Sale of Equity				52,500	944,400	1,330,499
Stock Issued During Period, Shares, New Issues (in Shares)			35,000
Share Price (in Dollars per share)	$ 0.75		$ 0.75
Proceeds from Issuance of Common Stock			26,250	500,000
Stock Issued During Period, Value, New Issues			26,250
Sale of Units Price Per Unit Issued (in Dollars per Share)	$ 0.50		$ 0.50
Number of Warrants Per Unit	1		1
Sale of Units Number of Units Issued (in Shares)			135,000
Sale of Units, Value			67,500
Proceeds from Related Party Debt				105,149
CEO and Shareholder [Member] | December Notes [Member] | Maximum [Member]
Note 1 - Organization, Nature of Business, Going Concern and Management's Plans (Details) [Line Items]
Related Party Transaction, Amounts of Transaction					75,000
CEO and Shareholder [Member] | December Notes [Member]
Note 1 - Organization, Nature of Business, Going Concern and Management's Plans (Details) [Line Items]
Related Party Transaction, Amounts of Transaction					75,000
Proceeds from Related Party Debt			135,000
Subscriptions Receivable [Member] | Restricted Stock [Member]
Note 1 - Organization, Nature of Business, Going Concern and Management's Plans (Details) [Line Items]
Stock Issued During Period, Shares, New Issues (in Shares)			40,000
Stock Issued During Period, Value, New Issues			30,000
Property, Plant And Equipment of PA-1 [Member]
Note 1 - Organization, Nature of Business, Going Concern and Management's Plans (Details) [Line Items]
Impairment of Long-Lived Assets Held-for-use					2,000,000
Property, Plant and Equipment, Gross					4,349,482
Restricted Stock [Member] | Minimum [Member]
Note 1 - Organization, Nature of Business, Going Concern and Management's Plans (Details) [Line Items]
Share Price (in Dollars per share)	$ 0.43		$ 0.43
Restricted Stock [Member] | Maximum [Member]
Note 1 - Organization, Nature of Business, Going Concern and Management's Plans (Details) [Line Items]
Share Price (in Dollars per share)	$ 1.22		$ 1.22
Restricted Stock [Member]
Note 1 - Organization, Nature of Business, Going Concern and Management's Plans (Details) [Line Items]
Stock Issued During Period, Shares, New Issues (in Shares)			35,000
Share Price (in Dollars per share)	$ 0.75		$ 0.75
Proceeds from Issuance of Common Stock			26,250
Sale of Units Price Per Unit Issued (in Dollars per Share)	$ 0.75		$ 0.75
Number of Shares Per Unit	1		1
Scenario, Forecast [Member] | Minimum [Member]
Note 1 - Organization, Nature of Business, Going Concern and Management's Plans (Details) [Line Items]
Capital Required for Capital Adequacy	2,500,000		2,500,000
Scenario, Forecast [Member] | Maximum [Member]
Note 1 - Organization, Nature of Business, Going Concern and Management's Plans (Details) [Line Items]
Capital Required for Capital Adequacy	50,000,000		50,000,000
PA-1 [Member]
Note 1 - Organization, Nature of Business, Going Concern and Management's Plans (Details) [Line Items]
Debt Instrument, Debt Default, Amount							$ 8,137,117

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Note 3 - Property and Equipment (Details) - Property and Equipment (USD $)	Dec. 31, 2014	Jun. 30, 2014
Property and Equipment [Abstract]
Machinery and equipment	$ 4,111,001	$ 4,111,001
Buildings and structures	1,947,701	1,947,701
Computers and office equipment	183,809	183,809
	6,242,511	6,242,511
Less accumulated depreciation	(2,203,401)	(1,891,358)
	$ 4,039,110	$ 4,351,153

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Consolidated Statements of Changes in Equity (Deficit) (Unaudited) (USD $)	Series B Preferred Stock [Member] Additional Paid-in Capital [Member] USD ($)	Series B Preferred Stock [Member] USD ($)	Common Stock [Member]	Additional Paid-in Capital [Member] USD ($)	Retained Earnings [Member] USD ($)	Noncontrolling Interest [Member] USD ($)	Total USD ($)
Balance, amount at Jun. 30, 2014				$ 98,537,032	$ (106,067,869)	$ 74,777	$ (7,456,060)
Balance, shares (in Shares) at Jun. 30, 2014			19,576,619
Issuance of common stock for services				7,524			7,524
Issuance of common stock for services (in Shares)			10,083
Vesting of options for services				4,000			4,000
Modification of options				11,783			11,783
Issuance of warrants for interest				6,750			6,750
Modification of warrants				986			986
Sale of common stock				26,250			26,250
Sale of common stock (in Shares)			75,000				35,000
Sale of units				67,500			67,500
Sale of units (in Shares)			135,000				135,000
Dividend on Series B preferred stock	(1,000)	(1,000)
Conversion of debt (in Shares)			130,953
Net loss					(1,368,607)	(2,099)	(1,370,706)
Balance, amount at Dec. 31, 2014				$ 98,660,825	$ (107,436,476)	$ 72,678	$ (8,702,973)
Balance, shares (in Shares) at Dec. 31, 2014			19,927,655

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Note 4 - Loans Payable - Affiliates (Loans Payable - Affiliates [Member])

6 Months Ended

Dec. 31, 2014

Loans Payable - Affiliates [Member]

Note 4 - Loans Payable - Affiliates [Line Items]

Related Party Transactions Disclosure [Text Block]

4.     LOANS PAYABLE - AFFILIATES:

As of December 31, 2014, Dominic Bassani (“Bassani”), the Company’s Chief Executive Officer (“CEO”), has loaned the Company $200,000 for fiscal year 2013 working capital needs (“FY 2013 Loan”). The FY 2013 Loan bears interest at 8% per annum and was payable on August 31, 2013. The due date of the FY 2013 Loan plus accrued interest was extended to September 30, 2013. Subsequent to September 30, 2013, the FY 2013 Loan was extended to January 1, 2014 and then further extended to April 30, 2014 and then to July 1, 2014. During September 2014, the maturity date of the FY 2013 Loan was extended to January 1, 2015. During January 2015, the FY 2013 Loan was extended to April 15, 2015. Conversion terms substantially identical to those described in Note 7 have been added to the terms of the FY 2013 Loan. Interest expense related to the FY 2013 Loan was $4,113 and $4,113 for the three months ended December 31, 2014 and 2013, respectively, and $8,226 and $8,226 for the six months ended December 31, 2014 and 2013, respectively.

During the year ended June 30, 2014, Bassani loaned the Company $19,000 (“November Note”). The November Note bears interest at 8% per annum and was payable on February 28, 2014, but was extended to April 30, 2014, and then further extended to July 1, 2014. During September 2014, the maturity date of the November Note was extended to January 1, 2015. During January 2015, the November Note was extended to April 15, 2015. Interest expense related to the November Note was $383 and $150 for the three months ended December 31, 2014 and 2013, respectively, and $766 and $150 for the six months ended December 31, 2014 and 2013, respectively.

During the year ended June 30, 2014, the Company entered into promissory note agreements (“December Notes”) with Bassani and a major shareholder (“Shareholder”) whereby Bassani and Shareholder agreed to lend the Company up to $75,000 each for working capital needs. The December Notes bear interest at 8% per annum and were payable on March 31, 2014. However, since the Company did not have sufficient funds for working capital needs to allow repayment of the December Notes on March 31, 2014, the maturity date of the December Notes was extended for three months; which process may be repeated up to three additional times with the maturity date extended to a date as late as December 31, 2014. In consideration for the December Notes, the Company issued warrants to purchase up to 18,750 shares of the Company’s common stock at $0.85 per share until December 31, 2018 (proportionately reduced if the December Notes are funded for less than the $75,000 maximum). Additional warrants (in the same amount and terms) will be issued upon each extension of the maturity date of the December Notes. The warrants will vest immediately upon issuance. As of December 31, 2014, Bassani and Shareholder had loaned the Company $60,000 and $75,000, respectively, under the terms of the December Notes. Interest expense related to the December Notes was $2,722 and $286 for the three months ended December 31, 2014 and 2013, respectively, and $5,444 and $286 for the six months ended December 31, 2014 and 2013, respectively. The maturity date of the December Notes has been extended to April 15, 2015. During the six months ended December 31, 2014, the Company issued 67,500 warrants to purchase 67,500 shares of the Company’s common stock at $0.85 per share and has recorded interest expense of $3,375 and 6,750 for the three and six months ended December 31, 2014, respectively.

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Note 4 - Loans Payable - Affiliates (Details) (USD $)	3 Months Ended		6 Months Ended		12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2014	Dec. 31, 2013	Jun. 30, 2014
Note 4 - Loans Payable - Affiliates (Details) [Line Items]
Proceeds from Related Party Debt				$ 105,149
Chief Executive Officer [Member] | Loan [Member]
Note 4 - Loans Payable - Affiliates (Details) [Line Items]
Proceeds from Related Party Debt			200,000
Related Party Transaction, Rate			8.00%
Related Party Transaction, Expenses from Transactions with Related Party	4,113	4,113	8,226	8,226
Chief Executive Officer [Member] | November Note [Member]
Note 4 - Loans Payable - Affiliates (Details) [Line Items]
Proceeds from Related Party Debt					19,000
Related Party Transaction, Rate					8.00%
Interest Expense, Related Party	383	150	766	150
Chief Executive Officer [Member] | December Notes [Member]
Note 4 - Loans Payable - Affiliates (Details) [Line Items]
Proceeds from Related Party Debt			60,000
CEO and Shareholder [Member] | December Notes [Member] | Maturity Date Extension [Member]
Note 4 - Loans Payable - Affiliates (Details) [Line Items]
Interest Expense, Related Party	3,375			6,750
Class of Warrant or Right, Number of Securities Called by Warrants or Rights (in Shares)	67,500		67,500
Class of Warrant or Right, Exercise Price of Warrants or Rights (in Dollars per share)	$ 0.85		$ 0.85
Class of Warrant or Right Issued (in Shares)	67,500		67,500
CEO and Shareholder [Member] | December Notes [Member] | Maximum [Member]
Note 4 - Loans Payable - Affiliates (Details) [Line Items]
Related Party Transaction, Amounts of Transaction					75,000
CEO and Shareholder [Member] | December Notes [Member]
Note 4 - Loans Payable - Affiliates (Details) [Line Items]
Proceeds from Related Party Debt			135,000
Related Party Transaction, Rate					8.00%
Interest Expense, Related Party	2,722	286	5,444	286
Related Party Transaction, Amounts of Transaction					75,000
Related Party Transaction, Extension Period					3 months
Related Party Transaction, Number of Additional Extensions					3
Class of Warrant or Right, Number of Securities Called by Warrants or Rights (in Shares)					18,750
Class of Warrant or Right, Exercise Price of Warrants or Rights (in Dollars per share)					$ 0.85
Majority Shareholder [Member] | December Notes [Member]
Note 4 - Loans Payable - Affiliates (Details) [Line Items]
Proceeds from Related Party Debt			$ 75,000
Maximum [Member]
Note 4 - Loans Payable - Affiliates (Details) [Line Items]
Class of Warrant or Right, Exercise Price of Warrants or Rights (in Dollars per share)	$ 4.25		$ 4.25

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Note 8 - Stockholders' Equity (Tables)

6 Months Ended

Dec. 31, 2014

Stockholders' Equity Note [Abstract]

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Table Text Block]

	Weighted Average, December 31, 2014		Range, December 31, 2014		Weighted Average, December 31, 2013		Range, December 31, 2013
Volatility		80%		80%		49%		49%-50%
Dividend yield		-		-		-		-
Risk-free interest rate		0.51%		0.51%		0.62%		0.59%-0.68%
Expected term (years)		2		2		2.68		2.63-2.71

Schedule of Share-based Compensation, Stock Options, Activity [Table Text Block]

	Options			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life		Aggregate Intrinsic Value
Outstanding at July 1, 2014		4,258,870			2.81		3.2		-
Granted		50,000			1.00
Exercised		-			-
Forfeited		-			-
Expired		(397,500	)		3.06
Outstanding at December 31, 2014		3,911,370		$	2.76		3.1	$	-
Exercisable at December 31, 2014		3,911,370		$	2.76		3.1	$	-

Schedule of Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Table Text Block]

	Three months ended December 31, 2014		Three months ended December 31, 2013			Six months ended December 31, 2014		Six months ended December 31, 2013
General and administrative:
Fair value of stock issued to an employee	$	-		24,999		$	-		94,998
Change in fair value from modification of option terms		11,783		-			11,783		307,638
Fair value of stock options expensed/(credited)		4,000		(155,728	)		4,000		(87,517	)
Total	$	15,783	$	(130,729	)	$	15,783	$	315,119
Research and development:
Fair value of stock options credited	$	-	$	(153,587	)	$	-	$	(135,939	)
Total	$	-	$	(153,587	)	$	-	$	(135,939	)