-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RSr45k1qNBI4Dj7x3XUcgyy+XO2kFM3AG91fULqMbqstIFhjRNVr1asAElwseC0/ 5xE8nkhcywAnZDg5S8qdpg== 0000949303-00-000081.txt : 20000516 0000949303-00-000081.hdr.sgml : 20000516 ACCESSION NUMBER: 0000949303-00-000081 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BION ENVIRONMENTAL TECHNOLOGIES INC CENTRAL INDEX KEY: 0000875729 STANDARD INDUSTRIAL CLASSIFICATION: MISC INDUSTRIAL & COMMERCIAL MACHINERY & EQUIPMENT [3590] IRS NUMBER: 841176672 STATE OF INCORPORATION: CO FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-19333 FILM NUMBER: 634795 BUSINESS ADDRESS: STREET 1: 555 17TH ST STREET 2: STE 3310 CITY: DENVER STATE: CO ZIP: 80202 BUSINESS PHONE: 3032940750 MAIL ADDRESS: STREET 1: 555 17TH ST STREET 2: SUITE 3310 CITY: DENVER STATE: CO ZIP: 80202 FORMER COMPANY: FORMER CONFORMED NAME: RSTS CORP DATE OF NAME CHANGE: 19930328 10QSB 1 QUARTERLY REPORT SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-QSB 1.25 (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED March 31, 2000 OR --------------- [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 OR THE TRANSITION PERIOD FROM __________ TO __________ COMMISSION FILE NUMBER 0-19333 ------- Bion Environmental Technologies, Inc. ------------------------------------- (Exact name of registrant as specified in its charter) 84-1176672 - ------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 7921 Southpark Plaza, Suite 200, Littleton, CO 80120 - ------------------------------------------------ ------------------- (Address of principal executive offices) (Zip Code) (303) 738-0845 -------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No___ The number of shares outstanding of registrant's classes of common stock, as of May 8, 2000: Common Stock, No Par Value, 11,890,418 Transitional Small Business Disclosure Format (Check one): Yes No X --- --- BION ENVIRONMENTAL TECHNOLOGIES, INC. TABLE OF CONTENTS PART I FINANCIAL INFORMATION PAGE NO. - ------ --------------------- -------- ITEM 1 FINANCIAL STATEMENTS Consolidated Balance Sheets: June 30, 1999 and March 31, 2000 (Unaudited)..........................3 Unaudited Consolidated Statements of Operations: For Nine Month Periods Ended March 31, 1999 and March 31, 2000......................................4 Unaudited Consolidated Statements of Operations: For the Three Month Periods Ended March 31, 1999 and March 31, 2000......................................5 Unaudited Consolidated Statement of Changes in Shareholders' Equity for the Period June 30, 1999 through March 31, 2000....................................6 Unaudited Consolidated Statements of Cash Flows: For the Nine Month Periods Ended March 31, 1999 and March 31, 2000......................................7 Notes to Unaudited Consolidated Financial Statements..................................................9-14 ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS..............................................15-17 PART II OTHER INFORMATION ITEMS 1-6 ...................................................18-19 PART I Financial Information ITEM 1. Financial Statements BION ENVIRONMENTAL TECHNOLOGIES, INC. Consolidated Balance Sheets
March 31, June 30, 2000 1999 ------------ ------------ Unaudited Assets Current assets Cash and cash equivalents ............................. $ 3,298,849 $ 55,583 Accounts receivable (net of allowance of $2,000) ........................................... 23,317 60,452 Contract receivables (net of allowance of $10,000) ................................ 3,000 33,310 Work in Progress ...................................... -- -- Mortgage Receivables held for sale .................... -- 260,000 Prepaid assets, current portion ....................... 298,083 240,000 ------------ ------------ Total current assets ........................ 3,623,249 649,345 ------------ ------------ Property and equipment Computers and equipment ............................... 324,513 316,967 Accumulated depreciation .............................. (187,566) (146,207) ------------ ------------ 136,947 170,760 Other assets Prepaid assets, long-term portion ..................... 317,500 446,735 Accrued Interest Receivable ........................... 10,000 -- Patents, net .......................................... 37,410 39,834 Deposits and other .................................... 15,768 10,557 ------------ ------------ Total other assets .......................... 380,678 497,126 ------------ ------------ Total assets .............................................. $ 4,140,874 $ 1,317,231 ============ ============ Liabilities and Shareholders' Deficit Current liabilities Accounts payable ...................................... $ 19,376 $ 340,202 Accounts payable - related party ...................... -- 17,924 Note payable and accrued interest ..................... -- 190,065 Related party notes payable and accrued interest ..................................... 22,346 20,524 Capital lease obligations ............................. 31,676 55,688 Accrued expenses ...................................... 23,404 31,740 Accrued payroll ....................................... -- 319,461 ------------ ------------ Total current liabilities ................... 96,802 975,604 Long-term liabilities Notes payable - private placement (including related parties) .......................... 3,793,707 -- Related party notes payable and accrued interest ..................................... 4,191,550 2,478,264 Related party note payable and accrued interest for consulting services ............. 693,094 634,955 Capital lease obligations ............................. 22,555 37,196 ------------ ------------ Total liabilities ........................... 8,797,708 4,126,019 ------------ ------------ Commitments and contingencies Shareholders' deficit Common stock, no par value, 100,000,000 shares authorized, 11,850,418 and 10,092,795 shares issued and outstanding at March 31, 2000 and June 30, 1999, respectively, ........................................ 14,926,588 12,060,705 Common stock subscribed .............................. -- 60,000 Warrants issued for consulting ....................... (240,625) -- Non-recourse promissory note ......................... (500,000) -- Related party note payable discount .................. (403,939) -- Accumulated deficit .................................. (18,438,858) (14,929,493) ------------ ------------ Total Shareholders' deficit ................. (4,656,834) (2,808,788) ------------ ------------ Total liabilities and Shareholders' deficit ............... $ 4,140,874 $ 1,317,231 ============ ============
- 3 - See notes to unaudited consolidated financial statements. BION ENVIRONMENTAL TECHNOLOGIES, INC. Unaudited Consolidated Statements of Operations Nine Months Ended March 31, ------------------------------ 2000 1999 ------------ ------------ Soil sales ................................. $ 78,771 $ 50,109 System contract revenues ................... 16,000 66,696 ------------ ------------ Total revenues ............................. 94,771 116,805 Contract costs ............................. 270,902 274,183 ------------ ------------ Gross (loss) ............................... (176,131) (157,378) General and administrative expenses ........ 2,526,853 1,602,591 Research and development ................... 295,298 183,171 ------------ ------------ Loss from operations ....................... (2,998,282) (1,943,140) Other income (expense) Interest income ......................... 26,738 -- Interest expense ........................ (473,533) (59,569) Other income (expense), net ............. (7,037) 677 Loss on sale of mortgage receivable ..... (57,250) -- ------------ ------------ Net loss and comprehensive loss ............ $ (3,509,364) $ (2,002,032) ============ ============ Basic loss per common share ................ $ (.32) $ (.22) ============ ============ Weighted common shares outstanding ......... 10,963,021 8,976,796 ============ ============ - 4 - See notes to unaudited consolidated financial statements. BION ENVIRONMENTAL TECHNOLOGIES, INC. Unaudited Consolidated Statements of Operations Three Months Ended March 31, ------------------------------ 2000 1999 ------------ ------------ Soil sales ................................. $ 23,509 $ 6,881 System contract revenues ................... -- 6,000 ------------ ------------ Total revenues ............................. 23,509 12,881 Contract costs ............................. 109,707 63,435 ------------ ------------ Gross (loss) ............................... (86,198) (50,554) General and administrative expenses ........ 860,733 686,660 Research and development ................... 135,158 60,863 ------------ ------------ Loss from operations ....................... (1,082,089) (798,077) Other income (expense) Interest income ......................... 22,266 -- Interest (expense) ...................... (226,154) (24,066) Other income (expense), net ............. (7,898) 617 ------------ ------------ Net loss and comprehensive loss ............ $ (1,293,875) $ (821,526) ============ ============ Basic loss per common share ................ $ (.11) $ (.09) ============ ============ Weighted common shares outstanding ......... 11,822,388 9,144,820 ============ ============ - 5 - See notes to unaudited consolidated financial statements. BION ENVIRONMENTAL TECHNOLOGIES, INC. Consolidated Statement of Changes in Shareholders' Equity
Non-recourse Common Promissory Note Related Party Deferred Common Stock Stock Payable Stockholders' Consulting Stockholders' Accumulated Shares Amount Note Subscribed Discount Expense Deficit Total ----------- ----------- ------------ ------------ ------------- ------------ -------------- ------------ Balances at June 30, 1999 ................ 10,092,795 $12,060,705 $ -- $ 60,000 $ -- $ -- $(14,929,493) $(2,808,788) Conversion of common stock subscriptions to notes payable .... -- -- -- (60,000) -- -- -- (60,000) Issuance of common stock for cash ............ 66,667 100,000 -- -- -- -- -- 100,000 Issuance of common stock for services ........ 72,169 143,901 -- -- -- -- -- 143,901 Net (loss) for the three months ended September 30, 1999 ................ -- -- -- -- -- -- (1,184,165) (1,184,165) ---------- ----------- --------- ---------- --------- --------- ------------ ----------- Balances at September 30, 1999 ................ 10,231,631 12,304,606 -- -- -- -- (16,113,658) (3,809,052) Issuance of common stock for cash ............ 210,500 318,250 -- -- -- -- -- 318,250 Issuance of common stock for services ........ 106,853 205,830 -- -- -- -- -- 205,830 Issuance of warrants for cash and non-recourse promissory note ..... -- 1,000,000 (500,000) -- -- -- -- 500,000 Issuance of stock in conversion of a note payable ............. 60,000 127,605 -- -- -- -- -- 127,605 Issuance of a stock and warrants in related party note payable and warrant exchange . 1,172,426 461,644 -- -- (461,644) -- -- -- Net (loss) for three months ended December 31, 1999 ................. -- -- -- -- -- -- (1,031,324) (1,031,324) ---------- ----------- --------- ---------- --------- --------- ------------ ----------- Balances at December 31, 1999 ................. 11,781,410 14,417,935 (500,000) -- (461,644) -- (17,144,982) (3,688,691) Issuance of common stock for cash ............. 5,535 8,210 -- -- -- -- -- 8,210 Issuance of common stock for services ......... 63,473 177,538 -- -- -- -- -- 177,538 Warrants issued for consulting ........... -- 275,000 -- -- -- (275,000) -- -- Issuance of warrants for cash ............. -- 47,905 -- -- -- -- -- 47,905 Interest expense ...... -- -- -- -- 57,705 -- -- 57,705 Deferred consulting expense .............. -- -- -- -- -- 34,375 -- 34,375 Net (loss) for three months ended March 31, 2000 ................. -- -- -- -- -- -- (1,293,876) (1,293,876) ---------- ----------- --------- ---------- --------- --------- ------------ ----------- Balances at March 31, 2000 ................. 11,850,418 $14,926,588 $(500,000) $ -- $(403,939) $(240,625) $(18,438,858) ($4,656,834) ========== =========== ========= ========== ========= ========= ============ ===========
- 6 - See notes to unaudited consolidated financial statements.
BION ENVIRONMENTAL TECHNOLOGIES, INC. Unaudited Consolidated Statements of Cash Flows Nine Months Ended March 31, March 31, --------------------------- 2000 1999 ------------ ------------ Cash flows from operating activities Net loss ........................................... $(3,509,365) $(2,002,032) Adjustments to reconcile net loss to net cash used in operating activities - Depreciation and amortization ................... 43,783 42,061 Issuance of subscribed stock for services ....... (60,000) 34,500 Issuance of stock for services and interest ..... 527,269 189,063 Issuance of note payable for consulting services 180,000 -- Loss on sale of mortgage receivables ............ 57,250 -- Deferred consulting and interest expense ........... 92,080 -- Changes in assets and liabilities - Receivables and work-in-progress ............. 67,445 20,684 Prepaid expenses and other ................... (114,059) 349 Accounts payable ............................. (338,750) 187,091 Accrued interest receivable ..................... (10,000) -- Accrued liabilities ...................... (327,797) 191,015 ----------- ----------- Net cash used in operating activities ........................... (3,392,144) (1,337,269) ----------- ----------- Cash flows from investing activities Purchases of capital equipment .................... (7,546) (5,145) ----------- ----------- Net cash (used in) provided by investing activities ................ (7,546) (5,145) ----------- ----------- Cash flows from financing activities Payments on notes payable .......................... (199,388) (8,000) Proceeds from sale of mortgages .................... 202,750 -- Proceeds from notes payable ........................ 5,703,882 545,000 Proceeds from stock and stock subscription issuances 426,460 809,424 Proceeds from exercise of options and warrants ..... -- 92,563 Proceeds from sale of warrants ..................... 547,905 -- Payments on capital lease obligations .............. (38,653) (52,943) ----------- ----------- Net cash provided by financing activities ............................. 6,642,956 1,386,044 ----------- ----------- Net increase in cash and cash equivalents ............. 3,243,266 43,630 Cash and cash equivalents at beginning of period ...... 55,583 19,104 ----------- ----------- Cash and cash equivalents at end of period ............ $ 3,298,849 $ 62,734 =========== ===========
- 7 - See notes to unaudited consolidated financial statements. BION ENVIRONMENTAL TECHNOLOGIES, INC. Unaudited Consolidated Statements of Cash Flows Supplemental disclosure of cash flow information Cash paid during the nine months for interest was $27,812 (2000) and $9,457 (1999). Supplemental disclosures of non-cash financing activities for the nine months ended March 31, 2000 - Converted $370,455 of accounts payable to notes payable. Converted $78,333 in accrued expenses into a note payable. Converted $387,692 in accrued interest into notes payable Converted $60,000 stock subscriptions into a note payable. Issued 2,500,000 warrants for $500,000 cash and a note receivable for $500,000. Issued 60,000 shares of Common Stock to two employees as loans and received short-term notes for the value of the stock sales. Exchanged convertible notes payable with related parties and issued 1,172,426 shares of Common Stock and additional Class Z Warrants in exchange for outstanding Class X Warrants, valued at $461,644. Supplemental disclosures of non-cash financing activities for the nine months ended March 31, 1999- Converted $4,500 of Common Stock subscribed into 1300 shares of Common Stock. Converted $77,710 of notes payable and interest into 12,862 shares of Common Stock. - 8 - See notes to unaudited consolidated financial statements. BION ENVIRONMENTAL TECHNOLOGIES, INC. Notes to Unaudited Consolidated Financial Statements Note 1 - Summary of Accounting Policies - --------------------------------------- The summary of the significant accounting policies of Bion Environmental Technologies, Inc. ("Bion" or the "Company") is incorporated by reference to our annual report on Form 10-KSB/A at June 30, 1999. The accompanying unaudited financial statements and disclosures reflect all adjustments (all of which are normal recurring adjustments) in the ordinary course of business which in the opinion of management are necessary for a fair presentation of the results of operations, financial positions, and cash flow. The results of operations for the periods indicated are not necessarily indicative of the results for a full year. Note 2 - Continued Operations - ----------------------------- The accompanying financial statements have been prepared on a going concern basis which contemplates the realization of assets and liquidation of liabilities in the ordinary course of business. We have not yet begun earning significant revenue from our planned principal operations. Consequently, as of March 31, 2000, we have incurred accumulated losses totaling $18,438,858, resulting in an accumulated Shareholders' deficit of $4,656,834. Cash flows from current operations are not sufficient to meet obligations. Management plans include continuing efforts to obtain additional capital to fund operations until system sales along with sales of BionSoil(TM) are sufficient to fund operations. There can be no assurance that we will be able successful in attaining profitable operations or raising sufficient capital. Since January 1, 2000 we have spent significant funds on the development of the next generation of system design, which will include system monitoring and controls and a clean water recycle loop; an expanded research program for BionSoil(TM) (as a result there will be only limited quantities for sale); and retained consultants to support these (and other) efforts. These trends and the related expenditures will continue through the end of the calendar year. Note 3 - Capital Structure - -------------------------- Because we have a relatively complex capital structure the following capital structure details are set forth: Common Stock - ------------ As of May 8, 2000 we had 11,890,418 (1) shares of Bion Environmental Technologies, Inc. common stock (the "Common Stock") issued and outstanding. - 9 - BION ENVIRONMENTAL TECHNOLOGIES, INC. Notes to Unaudited Consolidated Financial Statements Note 3 - Capital Structure (continued) - ------------------------------------- Options - -------
Exercise Price Shares Expiration --------- --------- ---------------- Directors $ 1.55 11,112 Vested 08/19/02 $ 2.04 11,112 Vested 08/19/02 $ 2.91 11,112 Vested 11/17/03 $ 1.61 10,000 Vested 08/04/04 --------- Total Directors 43,336 Employees (Vested) $ 2.25 474,000 (2)Vested 12/21/01 $ 2.50 40,000 (3)Vested 12/21/01 $ 2.50 19,445 Vested 08/01/00 $ 2.50 150,000 Vested 12/31/01 $ 2.50 55,000 Vested 12/31/02 $ 2.70 55,556 Vested 12/31/02 $ 3.04 1,112 Vested 01/28/01 $ 3.60 143,345 Vested 05/17/00-06/30/03 $ 3.72 1,112 Vested 08/31/00 $ 4.05 1,112 Vested 11/30/00 $ 5.40 34,620 Vested 05/17/00-12/31/01 $ 5.63 1,112 Vested 05/31/00 $ 7.20 91,762 Vested 12/31/01-12/31/02 $ 9.00 11,112 Vested 12/31/01 $ 13.50 50,104 Vested 6/30/02-12/31/02 --------- Total Employees (Vested) 1,129,392 Total Vested (Directors and Employees) 1,172,728
(1) Includes 43,666 shares not vested at May 8, 2000. (2) Each holder has agreed to exercise these options with outstanding promissory notes of Bion upon certain conditions. (3) Holder has agreed to exercise using outstanding long term notes payable of Bion upon certain conditions. - 10 - BION ENVIRONMENTAL TECHNOLOGIES, INC. Notes to Unaudited Consolidated Financial Statements Note 3 - Capital Structure (continued) - -------------------------------------- Options (continued)
Employees (Non-vested) Vesting Dates Expiration $ 2.50 165,000 03/01/01-06/30/02 12/31/01-06/30/03 $ 3.60 224,694 12/20/00-04/01/03 12/31/02-06/30/03 $ 5.40 12,076 06/01/00-09/01/00 12/31/02 $ 7.20 245,666 12/20/00-04/01/03 12/31/01-06/30/03 $ 13.50 89,096 12/20/00-04/01/03 12/31/02 -------------- Total Non-Vested 736,532 ============== Total Vested and Non Vested 1,909,260 ==============
Warrants - -------- As of May 8, 2000, we have the following warrants outstanding:
Warrant Shares Expiration Date Exercise Price - --------------------------- --------- --------------- -------------- Class AA.01 ............... 15,000 (1) 5.40 Class D2P ................. 2,500,000 (2) 1.75 Class D2C ................. 2,500,000 (3) 2.50 Class G-5.1 ............... 1,115 (4) 2.70 Class G-5.2 ............... 919 (5) 2.70 Class G-6 ................. 3,148 (6) 5.40 Class G-8 ................. 27,779 (7) 5.40 Class H-1 ................. 11,112 (8) 4.50 Class H-2 ................. 16,112 (9) 2.70 Class H-9 ................. 11,112 (10) 9.00 Class H-9.1 ............... 11,112 (11) 11.25 Class H-9.2 ............... 11,112 (12) 7.20 Class H-9.3 ............... 11,112 (13) 13.50 Class H-9.4 ............... 11,112 (14) 5.40 Class H-10 ................ 18,519 (15) 3.60 *Class H-16 ............... 38,000 (16) 2.25 Class I-1 ................. 4,167 (17) 5.40 ****Class J-1 ............. 1,401,000 (18) 2.375 **Class X ................. 1,116,012 (19) 8.00 ***Class Z ................ 6,323,884 (20) 13.50 ---------- ----- 14,032,327 $ 1.75-13.50 ========== =============
- 11 - BION ENVIRONMENTAL TECHNOLOGIES, INC. Notes to Unaudited Consolidated Financial Statements Note 3 - Capital Structure (continued) - ------------------------------------- Warrants (continued) - ------------------- * Holder has agreed to exercise by cancellation of promissory note of Bion on certain conditions. ** Holders of approximately 415,199 Class X Warrants have agreed to participate in a future registered exchange offer subject to terms and conditions. *** Holders of approximately 5,937,823 Class Z Warrants have agreed to participate in a future registered exchange offer subject to certain terms and conditions. **** Does not include the Warrants that will be issued to various placement agents. 1. Class AA.01 Warrants may be exercised to purchase 15,000 shares of Common Stock for approximately a 28 month period beginning August 12, 1999 and ending December 31, 2001. 2. Class D2P Warrants may be exercised to purchase 2,500,000 shares of Common Stock for a 60 month period beginning December 23, 1999 and ending December 31, 2004. 3. Class D2C Warrants may be exercised to purchase 2,500,000 shares of Common Stock for a 54 month period beginning January 1, 2000 and ending June 30, 2004. 4. Class G-5.1 Warrants may be exercised to purchase 1,115 shares of Common Stock for a 60 month period beginning January 22, 1996 and ending January 21, 2001. 5. Class G-5.2 Warrants may be exercised to purchase 919 shares of Common Stock for a 60 month period beginning September 13, 1996 and ending September 12, 2001. 6. Class G-6 Warrants may be exercised to purchase 3,148 shares of Common Stock for a 60 month period beginning April 21, 1997 and ending April 20, 2002. 7. Class G-8 Warrants may be exercised to purchase 27,779 shares of Common Stock for a 37 month period beginning June 5, 1997 and ending June 30, 2000. 8. Class H-1 Warrants may be exercised to purchase 11,112 shares of Common Stock for a 60 month period beginning August 21, 1996 and ending August 20, 2001. 9. Class H-2 Warrants may be exercised to purchase 16,112 shares of Common Stock for a 60 month period beginning August 21, 1996 and ending August 20, 2001. 10. Class H-9 Warrants may be exercised to purchase 11,112 shares of Common Stock for a 47 month period beginning February 1, 1997 and ending December 31, 2001. 11. Class H-9.1 Warrants may be exercised to purchase 11,112 shares of Common Stock for a 47 month period beginning February 1, 1997 and ending December 31, 2001. - 12 - BION ENVIRONMENTAL TECHNOLOGIES, INC. Notes to Unaudited Consolidated Financial Statements Note 3 - Capital Structure (continued) - ------------------------------------- Warrants (continued) - ------------------- 12. Class H-9.2 Warrants may be exercised to purchase 11,112 shares of Common Stock for a 47 month period beginning February 1, 1997 and ending December 31, 2001. 13. Class H-9.3 Warrants may be exercised to purchase 11,112 shares of Common Stock for a 47 month period beginning February 1, 1997 and ending December 31, 2001. 14. Class H-9.4 Warrants may be exercised to purchase 11,112 shares of Common Stock for a 47 month period beginning February 1, 1997 and ending December 31, 2001. 15. Class H-10 Warrants may be exercised to purchase 18,519 shares of Common Stock for a 50 month period beginning November 2, 1998 and ending December 31, 2002. 16. Class H16 Warrants may be exercised to purchase 38,000 shares of Common Stock for a 24 month period beginning January 1, 2000 and ending December 31, 2002. 17. Class I-1 Warrants may be exercised to purchase 4,167 shares of Common Stock for approximately a 42 month period beginning June 9, 1998 and ending December 31, 2001. 18. Class J-1 Warrants may be exercised to purchase 1,401,000 shares of Common Stock for a 57 month period beginning March 31, 2000 and ending December 31, 2004. 19. Class X Warrants may be exercised to purchase 1,116,012 shares of Common Stock for a 24 month period beginning January 1, 2000 and ending December 31, 2001. 20. Class Z Warrants may be exercised to purchase 6,323,884 shares of Common Stock for a 24 month period beginning January 1, 2000 and ending December 31, 2001. At May 8, 2000, there were warrants exercisable to purchase 14,032,327 shares of Common Stock. Convertible Notes - ----------------- The following notes can be converted, in whole or in part, at the holders' option into shares of Common Stock at a price of $1.80 per share.
Underlying Shares of Stock Shares: if Held -------------------------- --------------- Note Amount (at 03/31/00) To Maturity ---------- ----------- LTLK ........................ $1,186,653 659,252 915,497 LTLK ........................ $ 287,560 159,756 221,852 Defined Benefit Plan Dublin Holding, ............. $1,708,876 949,376 1,316,192 Ltd ....................... H. Northrop ................. $ 339,323 188,513 224,460 ---------- ---------- ---------- TOTAL ....................... $3,522,412 1,956,897 2,678,001
- 13 - BION ENVIRONMENTAL TECHNOLOGIES, INC. Notes to Unaudited Consolidated Financial Statements Note 3 - Capital Structure (continued) - -------------------------------------- Convertible Notes (continued) - ----------------------------- Holders of the above convertible notes have agreed to convert under certain conditions. See our Forms 8-K and 8-K/A-1 dated December 11, 1999. We have $1,544,046 in long term notes due on December 31, 2001 (including the H. Northrop note above). Holders of $1,204,723 of the long term notes have agreed to exercise outstanding options/warrants under certain conditions. These notes are held by seven individuals, including Jon Northrop and Jere Northrop. See Forms 8-K and 8-K/A-1 dated December 11, 1999. A total of $3,183,089 in long-term convertible notes are due on December 31, 2002. (See above.) Note 4 - Accounting on Material Agreements - ------------------------------------------ In connection with our agreements with D2 Co. LLC ("D2"), as reported in our Forms 8-K and 8-K/A-1 dated December 11, 1999, we issued 2,500,000 warrants for $1,000,000, receiving $500,000 cash and a $500,000 non-recourse promissory note. The promissory note has been recorded as a reduction to equity until payment is received on the related warrants. We have also issued 2,500,000 warrants as part of the payment for services to be rendered by D2 under the related agreements. We will record the value of the warrants issued and recognize the expense over the three-year life of the agreement. The warrants have been valued at $275,000 ($.11/share). In connection with the exchange of related party convertible notes payable and warrants for new convertible notes payable, Common Stock and warrants, we have recorded $461,644 as a discount on the new related party notes payable. Due to the involvement of related parties, we have presented the discount as a contra to Shareholders' deficit. The amounts recorded reflect the difference in fair values of the equity instruments exchanged. The discount is being amortized over the life of the debt as additional interest expense. See our Forms 8-K and 8-K/A-1 dated December 11, 1999. Note 5 - Subsequent Events - -------------------------- During the month of April 2000, we closed an additional thirteen units in our private offering for $325,000 in long-term convertible bridge debt and $13,520 in equity for the purchase of 97,500 warrants. The total private offering consisted of $4,095,000 of long-term convertible bridge debt and $61,425 in equity for the purchase of 1,213,500 warrants. See our Form 8-K dated April 13, 2000. During the month of May 2000, we negotiated a settlement of the $94,182.84 account payable for legal fees that were deferred until December 31, 2001 for 40,000 shares of restricted Common Stock. In accordance with the agreement between LoTayLingKyur, Inc. ("LTLK"), Mark A. Smith (MAS) and Bion as reported in our Form 8-K dated December 11, 1999 (Item 10.4), LTLK and MAS have earned the fees specified. The balance of the consulting fees ($420,000) that are listed as a prepaid will be expensed in the next quarter. - 14 - ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS Management's Discussion of Financial Condition and Results of Operations Financial Condition and Results of Operations - ------------------------------------------------------------------------ The financial statements contained in this 10-QSB show more than $14,900,000 in equity being invested in Bion as of March 31, 2000. We have a negative net worth of $4,659,834, cumulative deficit of $18,438,858, limited current revenues, and substantial current operating losses. (Note that the negative net worth is less than the outstanding long-term debt to management and major shareholders, the largest part of which is convertible into Bion's Common Stock. Bion may convert notes held by LoTayLingKyur, Inc., LTLK Defined Benefit Plan, and Dublin Holding Ltd. under specific conditions. In addition, management note holders (and family entities) have agreed to use long-term notes owed by Bion to exercise outstanding options and warrants of Bion under specific conditions. See our Forms 8-K and 8-K/A-1 dated December 11, 1999. See also Footnote 3 to the Financial Statements above.) Our operations are not currently profitable; therefore, readers are further cautioned that our continued existence is uncertain if we are not successful in obtaining outside funding in an amount sufficient for us to meet our operating expenses at our current level. Management plans to continue raising additional capital to fund operations until sales of Bion systems and BionSoil are sufficient to fund operations. Bion NMS system and BionSoil sales require additional expenditures. Our system sales require additional personnel and significant capital expenditures, which will generally increase our overhead. BionSoil product sales and marketing may require wholesaler and retailer distribution networks (which may require permitting in some locations) and additional expenditures for personnel and equipment to harvest, process, package, sell, and deliver our products. Although management believes that there is a reasonable basis to remain optimistic, no assumption can be made that we will be successful in attaining profitable operations and/or raising sufficient capital to sustain operations. Since January 1, 2000 we have spent significant funds on the development of the next generation of system design, which will include system monitoring and controls and a clean water recycle loop; an expanded research program for BionSoil(TM) (as a result there will be only limited quantities for sale); and retained consultants to support these (and other) efforts. These trends and the related expenditures will continue through the end of the calendar year. Liquidity and Capital Resources - ------------------------------- Our Consolidated Balance Sheet shows Current Assets of $3,623,249 and Total Assets of $4,140,874. Our Current and Total Liabilities as of March 31, 2000 are $96,802 and $8,797,708 respectively. Total assets increased by $2,823,643 from June 30, 1999. The change is primarily attributable to the increase in cash from the private offering (See our Form 8-K dated April 13, 2000) and the sale of warrants, partially offset by the loss on the sale of the mortgage receivable (see our 10-KSB/A dated June 30, 1999) and prepaid consulting. Cash and cash equivalents increased by $3,243,266 from June 30, 1999. The cash increase is the result of a private offering that closed on April 13, 2000 (See Form 8-K dated April 13, 2000). We received $3,817,905 of the total offering through March 31, 2000. Our current ratio (current assets:current liabilities) is 37.4:1 as of March 31, 2000 as compared to 0.67:1 as of June 30, 1999. - 15 - Total liabilities increased $4,671,689 in the nine month period ended March 31, 2000. Notes payable increased by $5,376,899, partially offset by a decrease in accrued salaries and accounts payable of $319,461 and $338,750, respectively. The increases in notes payable result from additional notes issued to related parties or employees ($1,583,192)and will convert into stock if certain conditions are met, and to the long-term convertible bridge debt ($3,793,707) associated with the private offering (See our Form 8-K dated April 13, 2000). Our Consolidated Statement of Changes in Shareholders' Equity reflects a total of 1,757,623 shares of Common Stock being issued in the nine month period ended March 31, 2000. We issued 282,702 shares of Common Stock for cash ($426,460) and 242,495 shares for services ($527,269). We also issued 1,172,426 shares in an exchange of Class X Warrants for Common Stock and Class Z Warrants (see our Forms 8-K and 8-K/A-1 dated December 11, 1999) and 60,000 shares to two employees as loans and received short term notes for the value of the stock sales. Of these 1,757,623 shares, we issued a total of 1,471,936 shares of legended and restricted Common Stock and 285,687 shares of unrestricted stock. We issued a note to an employee and, as part of the note, reclassified $60,000 of subscribed stock into the note payable. We also received $500,000 cash and a $500,000 non-recourse promissory note for the issuance of 2,500,000 warrants to purchase Common Stock at $1.75 per share as part of our agreement with D2 Co. LLC (See Forms 8-K and 8-K/A-1 dated December 11, 1999.) Also, as part of this agreement, we issued an additional 2,500,000 warrants to purchase Common Stock at $2.50 per share for a 54 month period beginning January 1, 2000 valued at $275,000 or $.11 per share (See Forms 8-K and 8-K/A-1 dated December 11, 1999). Results of Operations - --------------------- Comparison of the Nine Months Ended March 31, 2000 with the Nine Months Ended March 31, 1999 - ----------------------------------------------------------------------------- Revenue in the nine months ended March 31, 2000 was $94,771 compared to $116,805 for the corresponding nine month period in 1999, a decrease of $19,034. Contract costs were lower in the fiscal year 2000 nine month period by $3,281 due to decreased expenses associated with system design. This resulted in a gross loss for the period ended March 31, 2000 of $176,131 as compared to a gross loss of $157,378 for the same nine month period in 1999. System sales were lower in the nine months ended March 31, 2000 due to hog industry and regulatory changes. Since January 1, 2000 we have spent significant funds on the development of the next generation of system design, which will include system monitoring and controls and a clean water recycle loop; an expanded research program for BionSoil(TM) (as a result there will be only limited quantities for sale); and retained consultants to support these (and other) efforts. These trends will continue through the end of the calendar year. General and administrative expenses were higher by $924,262 due to an increase in employee compensation ($233,000), professional expenses ($419,000), and investor relation expenses ($274,000). We recorded $473,533 in interest expense on our notes payable and $295,298 in research and development costs. We also recorded a loss of $57,250 on the sale of the mortgage receivables in the nine month period. As a result of the above, we recorded a net loss of $3,509,364 in the nine month period ended March 31, 2000, compared to a net loss of $2,002,032 for the nine month period ended March 31, 1999. Comparison of the Three Months Ended March 31, 2000 with the Three Months Ended March 31, 1999 - -------------------------------------------------------------------------------- Revenue in the three months ended March 31, 2000 was $23,509 compared to $12,881 for the corresponding three month period in 1999, an increase of $10,628. Since January 1, 2000 we have spent significant funds on the development of the next generation of system design, which will include system monitoring and controls and a clean water recycle loop; an expanded research program for BionSoil(TM) (as a result there will be only limited quantities for sale); and retained consultants to support these (and other) efforts. These trends and the related expenditures will continue through the end of the calendar year. - 16 - Contract costs were higher in the 2000 three month period by $46,272 due to increased expenses associated with system operations and New York BionSoil processing. This resulted in a gross loss for the quarter ended March 31, 2000 of $86,198 as compared to a gross loss of $50,554 for the same three month period in 1999. General and administrative expenses were higher by $174,073 due to an increase in professional expenses ($144,000), and investor relation expenses ($43,000). We recorded $226,154 in interest expense on our notes payable and $135,158 in research and development costs. As a result, we recorded a net loss of $1,293,875 in the three month period ended March 31, 2000, compared to a net loss of $821,526 for the three month period ended March 31, 1999. Trends, Events and Uncertainties - -------------------------------- Liquidity - --------- The funding we have received pursuant to the management agreement, reported in our Forms 8-K and 8-K/A-1 dated December 11, 1999, and the private placement reported in our Form 8-K dated April 13, 2000, have significantly increased our liquidity and funding for operations. Our current assets to current liabilities ratio is 37.4:1 as of March 31, 2000. See our Forms 8-K and 8-K/A-1 dated December 11, 1999 and Form 8-K dated April 13, 2000 for detailed information on this Management Agreement and recent financing. Seasonality - ----------- Our system sales and installation business is not seasonal in nature, except to the extent that weather conditions at certain times of the year in certain geographic areas may temporarily affect construction and installation of our systems. However, our projects and markets are geographically spread so that when weather conditions limit construction activity in southern market areas, projects in northern markets can proceed, and when northern area weather is inappropriate, southern projects can proceed. BionSoil and BionSoil product sales are expected to exhibit a somewhat seasonal sales pattern with emphasis on spring, summer and fall sales. - 17 - PART II Other Information - ------------------------- ITEM 1. Legal Proceedings We know of no material pending legal proceedings to which Bion or any of our subsidiaries is a party or in which any of our systems is the subject except as follows: The Office of the Attorney General of the State of Illinois has filed a formal complaint before the Illinois Pollution Control Board against an Illinois hog producer (who installed a Bion NMS), Murphy Farms, Inc., and Bion Technologies, Inc. alleging violations of the Illinois Environmental Protection Act. We have stated our position to the Illinois Pollution Control Board that the Bion NMS was not properly installed, maintained and operated by the hog producer involved in this suit. The parties involved in the complaint are currently in discussions to solve the problems. Management reasonably believes that the outcome of this complaint will have no material effect on our business and that it has no liability for any Illinois violations. ITEM 2. Changes in Securities and Use of Proceeds The following securities were sold in the three month period ended March 31, 2000 without registration under the Securities Act of 1933, as amended: Warrants - -------- We issued 958,100 J-1 Warrants (540,000 on February 29, 2000 and 418,100 on March 31, 2000) to purchase restricted and legended Common Stock at $2.375 per share. The warrants are exercisable from March 31, 2000 to December 31, 2004. Bion received $47,905 in cash for use in operations for these warrants. See Exhibit 10.1 and 10.3 to our Form 8-K dated April 13, 2000. We issued 75,000 J-1 Warrants on March 31, 2000 to purchase restricted and legended Common Stock at $2.375 per share to two parties. The warrants are exercisable from March 31, 2000 to December 31, 2004. Bion received consulting and management services as consideration for these warrants. On January 1, 2000 we issued 2,500,000 D2C warrants exercisable at $2.50 per share expiring on December 31, 2000. These warrants were valued at $275,000 or $.11 per share. See Form 8-K dated December 11, 1999, Exhibit 10.1. - 18 - Common Stock - ------------ We issued 5,535 shares of restricted and legended Common Stock to two private investors in privately negotiated transactions for an aggregate amount of $8,210 on January 24 and February 2, 2000. Convertible Notes - ----------------- We added $1,307,680 of principal and interest to the convertible notes listed in Note 4 of Notes to Consolidated Financial Statements in our 10-KSB/A dated June 30, 1999. Common Stock issued pursuant to the transactions set forth above was issued in reliance upon the exemptions from registration afforded by Sections 3(b), 4(2), and/or other provisions of the Securities Act of 1933, as amended. Each of the persons to whom such securities were issued made an informed investment decision based upon negotiation with us and was provided with appropriate offering documents and access to material information regarding Bion. We believe that such persons had knowledge and experience in financial and business matters such that they were capable of evaluating the merits and risks of the acquisition of our Common Stock in connection with these transactions. All certificates representing such common shares bear an appropriate legend restricting the transfer of such securities, except in accordance with the Securities Act of 1933, as amended, and stop transfer instructions have been provided to our transfer agent in accordance therewith. We added $3,793,707 of long-term convertible bridge debt and interest during the three month period January 1, 2000 to March 31, 2000. See Form 8-K dated April 13, 2000. ITEM 3. Defaults Upon Senior Securities. None ITEM 4. Submission of Matters to a Vote of Security Holders. None ITEM 5. Other Information. None ITEM 6. Exhibits and Reports on Form 8-K. - 19 - Index to Exhibits - ----------------- (2) Plan of acquisition, reorganization, arrangement, liquidation, or succession. None. (4) Instruments defining the rights of holders, incl. Indentures. None. (10) Material contracts. Management and Consulting Agreement with D2 Co. LLC incorporated herein by reference to our Forms 8-K and 8-K/A-1 dated December 11, 1999. (11) Statement re: computation of per share earnings. None. (15) Letter on unaudited interim financial information. None. (18) Letter on change in accounting principles. None. (19) Reports furnished to security holders. None. (22) Published report regarding matters submitted to vote. None. (20) Other documents or statements to security holders. None. (23) Consents of experts and counsel. None. (24) Power of attorney. None. (27) Financial Data Schedule included herewith this Form 10-QSB. (99) Additional exhibits. None. Reports on Form 8-K - ------------------- The following current reports on Form 8-K were filed during the nine months following our 10-KSB/A dated June 30, 1999. Form 8-K dated May 22, 1999: Items 5 and 7 Form 8-K dated July 23, 1999: Items 5 and 7 Form 8-K dated August 1, 1999: Item 5 Form 8-K dated December 11, 1999: Items 5 and 7 Form 8-K/A-1 dated December 11, 1999: Items 5 and 7 Form 8-K dated April 13, 2000: Items 5 and 7 - 20 - SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, we have duly caused this report to be signed on its behalf by the undersigned thereunder duly authorized. Bion Environmental Technologies, Inc. /s/Jon Northrop --------------- Jon Northrop, President Dated: May 15, 2000 - 21 - EX-27 2 FDS -- WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
5 9-MOS JUN-30-2000 MAR-31-2000 3,298,849 0 38,317 12,000 0 3,623,083 324,513 187,566 4,140,874 96,802 8,700,906 0 0 14,926,588 (19,583,422) 4,140,874 78,771 94,771 0 270,902 2,822,151 0 473,533 (3,509,364) 0 (3,509,364 0 0 0 (3,509,364) (.32) (.32)
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