Note 5 - Loan Payable

6 Months Ended

Dec. 31, 2018

Notes to Financial Statements

Debt Disclosure [Text Block]

5.

     LOAN PAYABLE:

PA1,

the Company’s wholly-owned subsidiary, owes

$9,160,313

as of

December 31, 2018

under the terms of the Pennvest Loan related to the construction of the Kreider

1

System including accrued interest and late charges totaling

$1,406,313

as of

December 31, 2018.

The terms of the Pennvest Loan provided for funding of up to

$7,754,000

which was to be repaid by interest-only payments for

three

years, followed by an additional

ten

-year amortization of principal. The Pennvest Loan accrues interest at

2.547%

per annum for years

1

through

5

and

3.184%

per annum for years

6

through maturity. The Pennvest Loan required minimum annual principal payments of approximately

$3,502,000

in fiscal years

2013

through

2018,

and

$771,000

in fiscal year

2019,

$794,000

in fiscal year

2020,

$819,000

in fiscal year

2021,

$846,000

in fiscal year

2022,

$873,000

in fiscal year

2023

and

$149,000

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

$60,408

and

$49,373

for the

three

months ended

December 31, 2018

and

2017,

respectively. The Company has incurred interest expense related to the Pennvest Loan of

$113,747

and

$98,747

for the

six

months ended

December 31, 2018

and

December 31, 2017,

respectively. Based on the limited development of the depth and breadth of the Pennsylvania nutrient reduction credit market to date,

PA1

commenced negotiations with Pennvest related to forbearance and/or re-structuring the obligations under the Pennvest Loan. In the context of such negotiations,

PA1

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, 2018.

On

September 25, 2014,

Pennvest exercised its right to declare the Pennvest Loan in default and has accelerated the Pennvest Loan and demanded that

PA1

pay

$8,137,117

(principal, interest plus late charges) on or before

October 24, 2014.

PA1

did

not

make the payment and does

not

have the resources to make the payment demanded by Pennvest.

PA1

has engaged in on/off discussions and negotiations with Pennvest concerning this matter but

no

such discussions/negotiations are currently active. As of the date of this report,

no

formal proposals are presently under consideration and only sporadic communication has taken place regarding the matters involved over the past

48

months. It is

not

possible at this date to predict the outcome of this matter, but the Company believes it is possible that an agreement

may

yet be reached that will result in a viable loan modification. Subject to the results of the negotiations with Pennvest and pending development of a more robust market for nutrient reductions in Pennsylvania,

PA1

and Bion will continue to evaluate various options with regard to Kreider

1

over the next

30

-

180

days.

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. During

August 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

PA1.