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 September 30, 2012

¨   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

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 November 6, 2012, there were 17,025,704 Common Shares issued and 16,321,395 Common Shares outstanding.

2

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	9-24
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	35
Item 4.	Controls and Procedures	35
PART II.  OTHER INFORMATION
Item 1.	Legal Proceedings	35
Item 1A.	Risk Factors	35
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35
Item 3.	Defaults Upon Senior Securities	36
Item 4.	Mine Safety Disclosures	36
Item 5.	Other Information	36
Item 6.	Exhibits	36
	Signatures	37

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.

4

PART I - FINANCIAL INFORMATION
BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBISIDIARIES
CONSOLDATED BALANCE SHEETS
		September 30, 2012		June 30, 2012
		(unaudited)
ASSETS:
Current assets:
Cash	$	99,167	$	399,992
Prepaid insurance and expenses		29,432		42,707
Deposits and other receivables		6,958		6,958
Total current assets		135,557		449,657
Restricted cash (Note 7)		57,315		57,315
Property and equipment, net (Note 3)		8,070,606		8,172,702
Total assets	$	8,263,478	$	8,679,674
LIABILITIES AND EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued expenses	$	817,160	$	711,677
Current portion of deferred compensation (Note 4)		138,833		83,083
Total current liabilities		955,993		794,760
Loan payable (Note 5)		7,754,000		7,754,000
Deferred compensation, less current portion (Note 4)		989,841		833,452
Deferred rent (Note 7)		23,726		27,992
Total liabilities		9,723,560		9,410,204
Series B Redeemable Convertible Preferred stock, $0.01 par value, 50,000   shares authorized; 200 and 450 shares issued and outstanding,   respectively; liquidation preference of $22,500 and $49,500, respectively		19,900		43,650
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; 300 shares issued and outstanding, respectively;     liquidation preference of $33,750 and $33,000, respectively		29,800		29,050
Common stock, no par value, 100,000,000 shares authorized, 16,974,517     and 16,814,103 shares issued, respectively; 16,270,208 and 16,109,794     shares outstanding, respectively		-		-
Additional paid-in capital		92,924,358		91,177,978
Accumulated deficit		(94,516,629)		(92,065,095)
Total Bion’s stockholders’ deficit		(1,562,471)		(858,067)
Noncontrolling interest		82,489		83,887
Total deficit		(1,479,982)		(774,180)
Total liabilities and deficit	$	8,263,478	$	8,679,674

See notes to consolidated financial statements

5

BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011 – (UNAUDITED)
		2012		2011
Revenue	$	-	$	-
Operating expenses:
General and administrative (including stock-based compensation     (Note 6))		2,349,060		3,762,427
Research and development (including stock-based compensation     (Note 6))		48,606		70,134
Total operating expenses		2,397,666		3,832,561
Loss from operations		(2,397,666)		(3,832,561)
Other expense (income):
Interest expense		55,316		7,215
Interest income		(50)		(1,007)
		55,266		6,208
Net loss		(2,452,932)		(3,838,769)
Net loss attributable to the noncontrolling interest		1,398		13,103
Net loss attributable to Bion		(2,451,534)		(3,825,666)
Conversion inducement		-		(548,580)
Dividends on preferred stock		(1,667)		(149,550)
Net loss applicable to Bion's common stockholders	$	(2,453,201)	$	(4,523,796)
Net loss applicable to Bion's common stockholders per basic and   diluted common share	$	(0.14)	$	(0.34)
Weighted-average number of common shares outstanding:
Basic and diluted		16,927,270		13,450,823

See notes to consolidated financial statements

6

BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (DEFICIT)
THREE MONTHS ENDED SEPTEMBER 30, 2012 (UNAUDITED)
	Bion’s Shareholders’
	Series C Preferred Stock		Common Stock
	Shares	Amount	Shares	Amount	Additional paid-in capital	Accumulated deficit	Noncontrolling interest	Total equity/(deficit)
Balances, July 1, 2012	300	$29,050	16,814,103	$         -	$91,177,978	$(92,065,095)	$83,887	$  (774,180)
Vesting of options for services	-	-	-	-	239,055	-	-	239,055
Issuance of common stock for services	-	-	17,081	-	1,156,493	-	-	1,156,493
Issuance of warrants for services	-	-	-	-	30,000	-	-	30,000
Sale of units	-	-	143,333	-	322,499	-	-	322,499
Dividends on Series B preferred stock	-	-	-	-	(917)	-	-	(917)
Dividends on Series C preferred stock	-	750	-	-	(750)	-	-	-
Net loss	-	-	-	-	-	(2,451,534)	(1,398)	(2,452,932)
Balances, September 30, 2012	300	$29,800	16,974,517	$         -	$92,924,358	$(94,516,629)	$82,489	$(1,479,982)

See notes to consolidated financial statements

7

BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011 (UNAUDITED)
		2012		2011
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(2,452,932)	$	(3,838,769)
Adjustments to reconcile net loss to net cash used in operating    activities:
Depreciation expense		165,791		4,084
Accrued interest on deferred compensation and other		21,735		4,125
Stock-based compensation		1,425,548		3,153,003
Decrease in prepaid insurance and expenses		13,275		18,155
Increase (decrease) in accounts payable and accrued expenses		104,387		(793,910)
Increase in deferred compensation		194,750		135,000
Decrease in deferred rent		(4,266)		(4,265)
Net cash used in operating activities		(531,712)		(1,322,577)
CASH FLOWS FROM INVESTING ACTIVITIES
Decrease in restricted cash		-		25,000
Purchase of property and equipment		(63,695)		(184,323)
Net cash used in investing activities		(63,695)		(159,323)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the sale of units		322,499		475,000
Proceeds from loan payable		-		884,432
Redemption of Series B preferred shares		(25,000)		-
Payment of Series B preferred dividends		(2,917)		(69,175)
Payment of Series C preferred dividends		-		(80,375)
Net cash provided by financing activities		294,582		1,209,882
Net decrease in cash		(300,825)		(272,018)
Cash at beginning of period		399,992		1,394,388
Cash at end of period	$	99,167	$	1,122,370
Supplemental disclosure of cash flow information:
Cash paid for interest, including $15,793 and $41,774 of     capitalized interest	$	49,374	$	43,767
Cash paid for income taxes	$	-	$	-
Non-cash investing and financing transactions:
Conversion of Series B preferred  to common stock	$	-	$	1,270,001
Conversion of Series C preferred to common stock	$	-	$	2,826,710
Issuance of common stock in exchange for services	$	-	$	13,744
Series B preferred stock dividends	$	917	$	-
Series C preferred stock dividends	$	750	$	-

See notes to consolidated financial statements

8

BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

THREE MONTHS ENDED SEPTEMBER 30, 2012

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 that provides a comprehensive environmental solution to a significant source of pollution in United States agriculture, large scale livestock facilities known as Confined Animal Feeding Operations ("CAFO's"). Bion's technology produces 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 technology reduces 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.

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 revenue 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 technology 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.

Bion is now actively pursuing business opportunities in two broad areas 1) installation of Bion systems to retrofit and environmentally remediate existing CAFO’s to reduce nutrient (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; and 2) development of "closed loop" Integrated Projects. Bion is pursuing these opportunities within the United States and internationally.

Management believes that Bion's technology platform 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, generates 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 nutrient rich solids recovered from the livestock waste stream 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.  

9

BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

THREE MONTHS ENDED SEPTEMBER 30, 2012

1.

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

Organization and nature of business (continued):

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), 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.

Bion is presently involved in the very early development and pre-development activities related to Integrated Projects in Pennsylvania.  The Company is also involved in pre-development evaluations and discussions regarding opportunities for Integrated Projects in New York and in Nebraska and elsewhere in the Midwest and the North Central United States (dairy and/or beef). All such discussions are still in preliminary stages.  Additionally, the Company is involved in very 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 recently commenced discussions that may lead to installation of Bion systems on existing and/or new dairies, beef facilities and swine farms in the Midwest.

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 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 expended for continuing operations. Upon successful construction and operation of these systems, the Company anticipates that it will earn revenue from the sale of nutrient (and other) environmental credits related to the Kreider system and through sales of renewable energy generated by the Kreider systems.

The Company financed Kreider 1 through a $7.8 million loan from Pennsylvania Infrastructure Investment Authority (“Pennvest”).  Initial construction-related activities of Kreider 1, including bidding and ordering of equipment, commenced in October 2010 and 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 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, Bion can now commence generating and verifying nutrient reduction credits for sale during the 2013 fiscal year while continuing to utilize the system to test improvements and add-ons.  

10

BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

THREE MONTHS ENDED SEPTEMBER 30, 2012

1.

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

Organization and nature of business (continued):

Development work, including amended credit certification and negotiations with venture partners, continues related to the details of the second phase of the Kreider project. It is anticipated that agreements related to the second Kreider project will be executed during the current calendar year and that permitting and construction will be completed in 2013.

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 revenues and has incurred net losses (including significant non-cash expenses) of approximately $6,465,000 and $6,998,000 during the years ended June 30, 2012 and 2011, respectively, and a net loss of approximately $2,453,000 for the three months ended September 30, 2012.  At September 30, 2012, the Company has a working capital deficit and a stockholders’ deficit of approximately $820,000 and $1,562,000, 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.  

During the years ended June 30, 2012 and 2011, the Company received total proceeds of $1,259,250, (including $200,000 of subscriptions receivable) and $2,649,250 (including $40,000 from the exercise of warrants into commons shares of the Company), respectively, from the sale of its equity securities.

During the three months ended September 30, 2012, the Company has sold 143,333 equity Units (Note 6) and received proceeds of approximately $322,500

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

During fiscal year 2012 and through the three months ended September 30, 2012, the Company experienced greater difficulty in raising equity funding than in the prior year. 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 several key employees have been deferring all or part of their cash compensation (Note 4). 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 and to operate the Kreider 1 facilities. The Company anticipates that it will seek to raise from $7,500,000 to $50,000,000 or more (debt and equity) during the next twelve months.  There is no assurance, especially in the extremely unsettled capital markets that presently exist, 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.

11

BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

THREE MONTHS ENDED SEPTEMBER 30, 2012

1.

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

Going concern and management’s plans (continued):

There can be no assurance that funds required during the next twelve months or thereafter will be generated from operations or 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 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.  

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. (formerly Bion Dairy Corporation) (“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 September 30, 2012, the results of operations of the Company for the three months ended September 30, 2012 and 2011 and cash flows of the Company for the three months ended September 30, 2012 and 2011.  Operating results for the three months ended September 30, 2012 are not necessarily indicative of the results that may be expected for the year ending June 30, 2013.

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.

12

BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

THREE MONTHS ENDED SEPTEMBER 30, 2012

2.

SIGNIFICANT ACCOUNTING POLICIES (continued):

Fair value measurements (continued):

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 is not practicable to estimate due to the related party nature of the underlying transactions.

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 three months ended September 30, 2012 and 2011, 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:

	September 30, 2012	September 30, 2011
Warrants	6,879,920	6,068,055
Options	5,261,145	2,620,833
Convertible debt	528,609	123,750
Convertible preferred stock	19,688	1,058,057

The following is a reconciliation of the denominators of the basic loss per share computations for the three months ended September 30, 2012 and 2011:

	Three months ended September 30, 2012	Three months ended September 30, 2011
Shares issued – beginning of period	16,814,103	13,730,291
Shares held by subsidiaries (Note 6)	(704,309)	(704,309)
Shares outstanding – beginning of period	16,109,794	13,025,982
Weighted average shares for fully vested stock   bonuses (Note 6)	766,630	323,478
Weighted average shares issued during the period	50,846	101,363
Basic weighted average shares – end of period	16,927,270	13,450,823

13

BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

THREE MONTHS ENDED SEPTEMBER 30, 2012

2.

SIGNIFICANT ACCOUNTING POLICIES (continued):

Recent Accounting Pronouncements:

The Company has evaluated all newly issued accounting pronouncements and believes such pronouncements do not have a material effect on the Company’s financial statements.

3.

PROPERTY AND EQUIPMENT:

Property and equipment consists of the following:

	September 30, 2012	June 30, 2012
Machinery and equipment	$5,432,947	$              -
Buildings and structures	2,574,010	-
Kreider 1	-	8,155,922
Leasehold improvements	31,336	31,336
Furniture	28,932	28,932
Computers and office equipment	246,900	34,240
	8,314,125	8,250,430
Less accumulated depreciation	(243,519)	(77,728)
	$8,070,606	$8,172,702

During the three months ended September 30, 2012, Kreider 1 was placed into service and the capitalized costs of $8,219,617 were allocated among its separately identifiable components.  Depreciation expense was $165,791 and $4,084 for the three months ended September 30, 2012 and 2011, respectively.  

4.

DEFERRED COMPENSATION:

Current:

The Company owes Edward Shafer, the Company’s Executive Vice Chairman, and three other key employees, aggregate deferred compensation of $138,833 as of September 30, 2012.

Non-current:

As of September 30, 2012, the Company owed Brightcap Capital Ltd. (“Brightcap”), for services provided by Dominic Bassani (“Bassani”), the Chief Executive Officer (“CEO”), deferred compensation of $662,845, including interest of $55,845, which is due and payable on January 15, 2014.  Of the $662,845, $202,125 of the deferred compensation accrues interest at 10% per annum and is convertible into the Company’s restricted common stock at $1.50 per share.  The remaining $460,720 of deferred compensation accrues interest at 8% per annum and is convertible into Units at $2.50 per Unit which consists of one share of the Company’s common stock and one warrant to purchase a share of the Company’s common stock. Conversion of this deferred compensation is at the sole discretion of Brightcap and Bassani.

14

BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

THREE MONTHS ENDED SEPTEMBER 30, 2012

4.

DEFERRED COMPENSATION (continued):

Non-current (continued)

As of September 30, 2012, the Company owes Mark A. Smith, the Company’s President, deferred compensation of $326,996, including interest of $12,792 which is due and payable on January 15, 2014.  The deferred compensation accrues interest at 8% per annum.  The deferred compensation plus accrued interest of $460,720 and $326,996 owed to Brightcap and Mr. Smith, respectively, may be converted, at the sole election of Brightcap and Mr. Smith, 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 $2.50 per Unit until December 31, 2016.  As the conversion price of $2.50 per Unit approximated the fair value of the Units at the date of the agreements, no beneficial conversion feature exists at September 30, 2012.  In addition, the conversion price of the deferred compensation plus accrued interest will be the lower of the $2.50 per Unit price or the lowest price at which the Company sells its common stock between April 1, 2012 and January 15, 2014. As of September 30, 2012, the lowest price at which the Company has sold its common stock during the relevant period is $2.00 per share.  Management evaluated the terms and conditions of the embedded conversion features based on the guidance of ASC 815-15-25-1 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”.

5.

LOAN PAYABLE:

As of September 30, 2012, 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 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.  For the three months ended September 30, 2012 and 2011, the Company has incurred interest expense related to the Pennvest Loan of $49,374 and $45,644, respectively, of which $15,793 and $43,650, respectively, has been capitalized as a cost of the Kreider 1 System.

In connection with the Pennvest Loan, 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 informed Pennvest that the Kreider 1 System had surpassed the requisite performance criteria and that, as a result, the Company’s ‘technology guaranty’ had been met.

15

BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

THREE MONTHS ENDED SEPTEMBER 30, 2012

6.

STOCKHOLDERS' EQUITY:

Series B Preferred stock:

At July 1, 2012, the Company had 450 shares of Series B redeemable convertible Preferred stock outstanding with a par value of $0.01 per share, and are 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 three months ended September 30, 2012 the Company redeemed 250 shares of its Series B Preferred stock plus accrued dividends of $2,500 for $27,500.  The remaining 200 shares have reached their maturity date, but due to the cash constraints of the Company have not been redeemed as of November 5, 2012.

During the years ended June 30, 2012 and 2011, the Company declared dividends of $72,550 and $281,700 respectively. During the three months ended September 30, 2012, the Company declared dividends of $500.  At September 30, 2012, dividends payable are $2,500.

Series C Preferred stock:

At July 1, 2012 the Company had 300 shares of Series C Preferred stock outstanding, which have a par value of $0.01 per share and are convertible at the option of the holder at any time from the date of issuance, into shares of the Company’s common stock calculated by dividing the sum of the $100 per share purchase price plus any accrued and unpaid dividends by $4.00 (the Conversion Rate), provided the shares have not been redeemed into common shares by the Company at is sole election.  A portion (up to 100% as calculated below) of each share of Series C Preferred stock shall be automatically and mandatorily converted into shares of the Company’s common stock at the Conversion Rate  upon each occasion (at least 30 calendar days apart) after a date of six months subsequent to the initial issuance of the Series C Preferred stock on which the closing price of the Company’s common stock has been equal or greater than 150% of the Conversion Rate (initially $6.00) for twenty consecutive trading days with a reported average daily trading volume of 10,000 shares or more.   On each occasion for mandatory conversion as set forth above, a sufficient portion of the outstanding shares of Series C Preferred stock shall be prorata converted so that the holders of the Series C Preferred stock receive an aggregate number of shares of the Company’s restricted common stock equal to 7.5 times the average reported daily volume of trading in the Company’s publicly traded common stock for the applicable twenty day period and each outstanding share shall thereafter be proportionately reduced in its rights to represent the effect of the partial conversions.  The Series C Preferred stock accrues dividends at a rate of 2.5% per quarter (10% per year) and shall be earned and accrued or paid quarterly.  

Dividends on the Series C Preferred stock are reflected as part of the redemption value with an offset to reduce additional paid-in capital, and are included in the determination of net loss applicable to common stockholders.

During the years ended June 30, 2012 and 2011, the Company declared dividends of $82,625 and $274,675 respectively. During the three months ended September 30, 2012, the Company declared dividends of $750.  At September 30, 2012 dividends payable are $3,750.

16

BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

THREE MONTHS ENDED SEPTEMBER 30, 2012

6.

STOCKHOLDERS' EQUITY (continued):

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 three months ended September 30, 2012, the Company issued 17,081 shares of the Company’s restricted common stock at prices ranging from $2.00 to $2.13 per share for consulting services valued at $35,243, in the aggregate, to a consultant and an employee.  

During the three months ended September 30, 2012, the Company granted Mr. Bassani and Mr. Smith shares of the Company’s common stock as bonuses for signing extensions to their employment agreements.  Mr. 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.  Mr. Smith will be issued 150,000 shares of the Company’s common shares in two tranches of 75,000 shares on each of January 15, 2014 and 2015, respectively.  The Company recorded non-cash compensation of $585,000 and $292,500 related to the future stock issuances to Mr. Bassani and Mr. Smith, respectively, as the bonuses were fully vested upon grant date during the three months ended September 30, 2012.

During the three months ended September 30, 2012, the Company declared contingent stock bonuses of 25,000 and 100,000 shares to Mr. Schafer and Mr. Smith, respectively, and recognized $48,750 and $195,000 of non-cash compensation expense, respectively.  The stock bonuses are contingent upon the Company’s stock price exceeding $10.00 and do not require that Mr. Schafer or Mr. Smith remain employed by the Company.  

In August and September 2012, the Company entered into subscription agreements to sell 2012 B UNITS for $2.25 each, with each 2012 B UNIT consisting of one 2012 B share of the Company’s restricted common stock and one 2012 B warrant to purchase one half of a share of the Company’s restricted common stock for $3.10 per share until December 31, 2014 (the “2012 B UNITS”).  During the three months ended September 30, 2012, the Company issued 143,333 2012 B UNITS for total proceeds of approximately $322,500.  The Company allocated the proceeds from the 2012 B shares and the 2012 B 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 2012 B Warrants, which was determined to be $0.075 per 2012 B Warrant.  As a result, $5,469 was allocated to the 2012 B Warrants and $317,030 was allocated to the 2012 B Shares, and both were recorded as additional paid in capital.  

17

BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

THREE MONTHS ENDED SEPTEMBER 30, 2012

6.

STOCKHOLDERS' EQUITY (continued):

Warrants:

As of September 30, 2012, the Company had approximately 6.9 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 $2.17, and the weighted-average remaining contractual life as of September 30, 2012 is 5.44 years.

In July 2012, warrants to purchase 50,000 and 250,000 shares of the Company’s common stock at $2.10 per share were issued pursuant to extension agreements with Mr. Bassani and Mr. Smith, respectively (Note 8).  These warrants were determined to have a fair value of $0.10 per warrant and expire on December 31, 2018.  The Company recorded non-cash compensation expense of $5,000 and $25,000, respectively, related to the warrant issuances.

During the three months ended September 30, 2012, the Company issued warrants to purchase 71,667 shares of the Company’s common stock in connection with the sale of 2012 B UNITS.  

Stock options:

The Company’s 2006 Consolidated Incentive Plan (the “2006 Plan”), as amended, provides for the issuance of options to purchase up to 8,000,000 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.

The Company recorded compensation expense related to employee stock options of $239,055 and $1,981,684 for the three months ended September 30, 2012 and 2011, respectively.  The Company granted 150,000 and 1,400,000 options during the three months ended September 30, 2012 and 2011, respectively.  The fair value of the options granted during the three months ended September 30, 2012 and 2011 were estimated on the grant date using the Black-Scholes option-pricing model with the following assumptions:

	Weighted average, June 30, 2012	Range, June 30, 2012	Weighted average, June 30, 2011	Range, June 30, 2011
Volatility	66%	60%-68%	84%	61%-88%
Dividend yield	-	-	-	-
Risk-free interest rate	0.32%	0.31%-0.34%	1.37%	0.25%-2.02%
Expected term (years)	3.05	2.66-3.25	4.1	2-4.5

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.

18

BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

THREE MONTHS ENDED SEPTEMBER 30, 2012

6.

STOCKHOLDERS' EQUITY (continued):

Stock options (continued):

A summary of option activity under the 2006 Plan for the three months ended September 30, 2012 is as follows:

	Options	Weighted- Average Exercise Price	Weighted- Average Remaining Contractual Life	Aggregate Intrinsic Value
Outstanding at July 1, 2012	5,111,145	2.86	4.6	274,200
Granted	150,000	2.10
Exercised	-	-
Forfeited	-	-
Expired	-	-
Outstanding at September 30, 2012	5,261,145	$2.84	4.4	$206,250
Exercisable at September 30, 2012	4,671,145	$2.85	4.2	$206,250

The following table presents information relating to nonvested stock options as of September 30, 2012:

	Options	Weighted Average Grant-Date Fair Value
Nonvested at July 1, 2011	590,000	$  1.83
Granted	150,000	0.83
Vested	(150,000)	(0.83)
Forfeited	-	-
Nonvested at June 30, 2012	590,000	$  1.83

The total fair value of stock options that vested during the three months ended September 30, 2012 and 2011 was $125,000 and $1,821,350, respectively.  As of September 30, 2012, the Company had $373,234 of unrecognized compensation cost related to stock options that will be recorded over a weighted average period of less than two years.

19

BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

THREE MONTHS ENDED SEPTEMBER 30, 2012

6.

STOCKHOLDERS' EQUITY (continued):

Stock options (continued):

Stock-based compensation charges in operating expenses in the Company’s financial statements for the three months ended September 30, 2012 and 2011 are as follows:  

	Three months ended September 30, 2012	Three months ended September 30, 2011
General and administrative:
Fair value of stock/warrant bonuses expensed	$   1,151,250	$   1,035,300
Fair value of stock issued to an employee	24,999	24,999
Change in fair value from modification of option terms	-	94,820
Fair value of stock options expensed	230,353	1,846,265
Total	$   1,406,602	$  3,001,384
Research and development:
Fair value of stock options expensed	$          8,702	$       40,598
Total	$          8,702	$       40,598

7.

OPERATING LEASE:

The Company entered into a non-cancellable operating lease commitment for office space in New York, effective August 1, 2006 and expiring November 30, 2013.  In conjunction with the signing of the lease, the Company provided the lessor with a secured letter of credit.  As of September 30, 2012, the Company has reflected $57,315 as restricted cash related to the secured letter of credit.  The Company’s obligations under the lease are partially guaranteed by Mr. Salvatore Zizza, a former officer and director of the Company.  The Company has entered into three separate agreements to sub-lease approximately 100% of the Company’s lease obligation, and the tenants have also agreed to reimburse the Company for leasehold improvements and furnishings.  Because the lease contains an escalation clause, the Company is recognizing rent under the straight-line method resulting in an average monthly rent expense of $15,820.  The Company is also recognizing the sub-lease rental income from its tenants under the straight-line method, with a monthly average of $17,242.  The difference between the straight-line method, and the actual lease payments has resulted in a deferred rent liability of $23,726 as of September 30, 2012.   Rent expense net of contractual and month-to-month sub-lease rental income, was nil for both of the three months ended September 30, 2012 and 2011, respectively.

20

BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

THREE MONTHS ENDED SEPTEMBER 30, 2012

7.

OPERATING LEASE (continued):

At September 30, 2012, future minimum rental payments due under non-cancelable leases and future minimum rental payments to be received under non-cancelable subleases are:

Fiscal year ended June 30:	Operating lease payments	Sublease rentals	Net operating lease payments
2013 (remainder of year)	169,834	169,834	-
2014	97,219	97,219	-
Total	$267,053	$267,053	$ -

Effective January 1, 2009, Mr. Zizza entered into a Master Sublease with the Company pursuant to which Mr. Zizza became a sublessee and for a one year initial period, made all payments pursuant to the lease and managed the lease premises.  Rental payments from existing sub-tenants are being deposited into a Company bank account such that Mr.  Zizza utilizes those funds towards the monthly lease payment.  During November 2009, Mr. Zizza exercised his option to continue the Master Sublease for the entire term of the lease.  Mr. Zizza fulfilled his obligations under the Master Sublease during the one-year initial period and in January 2010 he received the funds from the release of the restricted cash securing the Company’s letter of credit of $28,658.  Since Mr. Zizza exercised the option to continue the Master Sublease for the entire term of the lease, Mr. Zizza will be entitled to the balance of restricted funds securing the letter of credit of approximately $57,000 if he fulfills his obligations pursuant to the Master Sublease.  

8.

COMMITMENTS AND CONTINGENCIES:

Employment and consulting agreements:

Mr. Smith has held the positions of Director, President and General Counsel of Company and its subsidiaries under various agreements and terms since March 2003 and since September 1, 2010 has been paid a monthly salary of $19,000.  During July 2011, the Company entered into an extension agreement whereby Mr. Smith will continue to hold his current position in the Company through a date no later than December 31, 2012.  Commencing January 1, 2012, Mr. Smith has been paid a monthly salary of $20,000.  In addition, Mr. Smith will be issued 90,000 shares of the Company’s common stock in two tranches of 45,000 shares on each of January 15, 2013 and 2014, 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, Mr. 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 whereby Mr. Smith will continue to hold his current positions in the Company through a date no later than June 30, 2014.  Effective September 2012, Mr. Smith will be paid a monthly salary of $21,000 (which is currently being deferred).  In addition, Mr. 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 and 2015, which shares vested immediately.  The Company recorded expense of $292,500 for the three months ended September 30, 2012, related to the future stock issuances as the bonus was fully vested at the grant date.  As part of the extension agreement, Mr. 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 Mr. Smith is still providing services to the Company on such date).

21

BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

THREE MONTHS ENDED SEPTEMBER 30, 2012

8.

COMMITMENTS AND CONTINGENCIES (continued):

Employment and consulting agreements (continued):

Since March 31, 2005, the Company has had various agreements with Brightcap, through which the services of Mr. Bassani are provided.  On September 30, 2009 the Company entered into an extension agreement with Brightcap pursuant to which Mr. Bassani will provide services to the Company through September 30, 2012 for $312,000 annually.  The Board appointed Mr. Bassani as the Company's CEO effective May 13, 2011.  On July 15, 2011, Mr. Bassani, Brightcap and the Company agreed to an extension/amendment of the existing agreement with Brightcap which provides that Mr. Bassani will 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 Mr. 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.  Mr. 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, Mr. Bassani, Brightcap and the Company agreed to a further extension/amendment of the existing agreement with Brightcap which provides that Mr. Bassani will continue to provide the services of CEO through June 30, 2014.  Mr. 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 Mr. 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 will be immediately vested.  The Company recorded expense of $585,000 for the three months ended September 30, 2012, related to the future stock issuances as the bonus was fully vested at the grant date.   As part of the extension agreement, Mr. 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.

Effective January 1, 2011, the Company entered into an employment agreement with Edward Schafer pursuant to which for a period of three years, Mr. Schafer will provide senior management services to the Company on an approximately 75% full time basis, initially as Executive Vice Chairman and as a director.  Compensation for Mr. Schafer’s services will initially be at an annual rate of $250,000, which will consist of $150,000 in cash compensation and $100,000 payable in the Company’s common stock.  Commencing the month following the first calendar month-end after the Company has completed an equity financing in excess of $3,000,000 (net of commissions and other offering expenses), Mr. Schafer’s compensation shall be at an annual rate of $225,000, all of which shall be payable in cash.  Effective July 15, 2012, the Company entered into a deferral/employment/ compensation agreement with Edward Schafer pursuant to which Mr. Schafer will continue to provide senior management services to the Company on an approximately 75% full time basis, initially as Executive Vice Chairman and as a director.  Basic compensation for Mr. Schafer’s services will remain unchanged and Mr. Schafer will be issued 100,000 options to purchase shares of the Company’s common stock at $2.10 per share until December 31, 2018, which are immediately vested and a contingent stock bonus of 25,000 shares payable on January 1 of the first year after the Company’s stock price first reaches $10.00 per share (regardless of whether Mr. Schafer is still providing services to the Company on such date).

22

BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

THREE MONTHS ENDED SEPTEMBER 30, 2012

8.

COMMITMENTS AND CONTINGENCIES (continued):

Employment and consulting agreements (continued):

Effective September 18, 2006, the Company entered into a four-year employment agreement with Jeremy Rowland whereby Mr. Rowland assumed the position of Chief Operating Officer of Projects at an annual salary of $150,000.  In June 2008, the employment agreement terms were extended through July 1, 2012. Mr. Rowland now serves as Chief Operating Officer of the Company’s Services Group subsidiary.

During January 2012, the Company approved an employment agreement contract extension effective January 1, 2012 with Craig Scott whereby he will continue 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 and $20 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.

Effective February 1, 2011, the Company entered into an employment agreement with James Morris, pursuant to which Mr. Morris will act as Chief Technology Officer of the Company through January 31, 2015 at an annual salary of $150,000 until July 1, 2011, and $180,000 thereafter.  

Effective September 27, 2011, the Company entered into an employment agreement with George Bloom, pursuant to which Mr. Bloom, the Company’s Chief Engineering Officer, will act as Vice President-Engineering of the Company through January 31, 2016 at an annual salary of $180,000.

In May 2005 the Company declared contingent deferred stock bonuses of 690,000 shares to its key employees and consultants.  The stock bonuses of 492,500 and 197,500 shares 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 September 30, 2012, 327,500 and 115,000 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.  

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

23

BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

THREE MONTHS ENDED SEPTEMBER 30, 2012

8.

COMMITMENTS AND CONTINGENCIES (continued):

Litigation:

The Company currently is not involved in any material litigation.

9.

SUBSEQUENT EVENTS:

The Company has evaluated events that occurred subsequent to September 30, 2012 for recognition and disclosure in the financial statements and notes to the financial statements.

From October 1, 2012 through November 6, 2012 the Company has issued 16,964 shares of the Company’s common shares to various consultants and an employee valued at approximately $33,700.

From October 1, 2012 through November 6, 2012 the Company has issued 34,223 Units (each consisting of one share of the Company’s common stock and a warrant to purchase ½ share of the Company’s common stock at $3.10 per share until December 31, 2014) for approximately $77,000 of proceeds.

As of November 6, 2012, the Company has accrued additional deferred compensation totaling approximately $59,500 of which $26,000 and $21,000, respectively, is owed to Mr. Bassani and Mr. Smith, and $12,500 is due to Mr. Shafer.

24

PART I - FINANCIAL INFORMATION

Item 2.

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

The following discussion and analysis should be read in conjunction with the unaudited Consolidated Financial Statements and Notes to Consolidated Financial Statements filed herein and with the Company's Form 10-K for the year ended June 30, 2012.

BUSINESS OVERVIEW

For several years, the Company focused on completion of the development of the next generation of its technology which provides a comprehensive environmental solution to a significant source of pollution in U.S. agriculture, large scale livestock facilities known as Confined Animal Feeding Operations ("CAFO's"). The re-development process is now substantially complete and the initial commercial system, based on our updated technology, has been constructed and placed in full commercial operation. Currently, Bion is focused on using applications of its patented waste management technology to pursue two 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 and/or 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; and 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. The Company has been pursuing these opportunities within the United States during the later stages of technology re-development and has recently begun activities to pursue such opportunities internationally.

The Company has 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 an agreement with Kreider Farms ("KF") in Pennsylvania to design, construct and operate 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. 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. After substantial unanticipated delays, on August 12, 2010 the Company 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.   Bion 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 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, Bion can now commence generating and verifying nutrient reduction credits for sale during the 2013 fiscal year while continuing to utilize the system to test improvements and add-ons.  Additionally, the Kreider System has met the ‘technology guaranty’ standards which were incorporated in the Pennvest financing documents and the Pennvest Loan is now solely an obligation of PA-1.

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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 Phase 1 Kreider 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 recently amended EPA Chesapeake Bay model. The Company intends to have the Phase 2 Kreider Project operational during the 2013 calendar year, and hopes to enter into agreements related to sales of the credits for future delivery (under  long term contracts) during the 2013 fiscal year subject to verification by the PADEP.

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 Midwest (and elsewhere).  Bion considers this to be a large potential market for the Company’s growth over the next 18-36 months. It is anticipated that such activities will accelerate now that the Company has received final permits for the initial KF System (and as its credits are verified).  Now that final permitting and verification plan approval has been completed at the Kreider System, the Company intends to seek to advance commercial sales in additional areas which face deadlines to meet EPA TMDL requirements.

Additionally, we believe that Bion's technology platform will allow the integration of large-scale CAFO's 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, 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 (possibly in stages) in Pennsylvania and anticipates optioning land for such a Project during the current calendar year or soon thereafter.  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 2013-2015 to create a pipeline of Projects. Management has a 5-year development target (through calendar year 2019) 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, 2012 and 2011 have been prepared assuming the Company will continue as a going concern.  The Company has incurred net losses of approximately $6,465,000 and $6,998,000 during the years ended June 30, 2012 and 2011, respectively.  At June 30, 2012, the Company had a working capital deficit and a stockholders’ deficit of approximately $345,000 and $858,000, 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, 2012 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 net losses of approximately $2,453,000 and $3,839,000 for the three months ended September 30, 2012 and 2011, respectively.  At September 30, 2012 the Company has a working capital deficit and a stockholder’s deficit of approximately $820,000 and $1,562,000, 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 operating revenues for the past two fiscal years, the Company anticipates that it will commence generation of revenues during the 2013 fiscal year.  Revenues will be 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 expects to recognize 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 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.  

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Derivative Financial Instruments:

Pursuant to Accounting Standards Codification (“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.  

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.

THREE MONTHS ENDED SEPTEMBER 30, 2012 COMPARED TO THE THREE MONTHS ENDED SEPTEMBER 30, 2011

General and Administrative

Total general and administrative expenses were $2,349,000 and $3,762,000 for the three months ended September 30, 2012 and 2011, respectively.

General and administrative expenses, excluding stock-based compensation charges of $1,407,000 and $3,001,000, were $942,000 and $761,000 for the three months ended September 30, 2012 and 2011, respectively, representing an $181,000 increase.  The primary reason for the increase is due to the increase in depreciation expense from $4,000 for the three months ended September 30, 2011 to $166,000 for the three months ended September 30, 2012. Kreider 1 was placed in service on August 1, 2012 and its components are being depreciated over their estimated useful lives.   Salaries and related payroll tax expenses increased to $300,000 for the three months ended September 30, 2012 from $230,000 for the three months ended September 30, 2011, primarily due to the fact that during the three months ended September 30, 2011, certain salaries were being capitalized as part of Kreider 1.  

General and administrative stock-based compensation for the three months ended September 30, 2012 and 2011 consists of the following:

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	Three months ended September 30, 2012	Three months ended September 30, 2011
General and administrative:
Fair value of stock/warrant bonuses expensed	$    1,151,000	$  1,035,000
Fair value of stock issued to an employee	25,000	25,000
Change in fair value from modification of option terms	-	95,000
Fair value of stock options expensed under ASC 718	231,000	1,846,000
Total	$1,407,000	$3,001,000

Stock-based compensation charges decreased to $1,407,000 from $3,001,000 for the three months ended September 30, 2012 and 2011, respectively.  Compensation expense relating to stock options was $231,000 and $1,846,000 during the three months ended September 30, 2012 and 2011, respectively, and the decrease is due to more options being vested upon grant date during the three months ended September 30, 2011.  The Company also recognized general and administrative non-cash compensation expenses of $1,151,000 and $1,035,000 during the three months ended September 30, 2012 and 2011, respectively, due to the granting and vesting of stock and warrant bonuses.  The non-cash compensation expense related to stock and warrant bonuses for both periods were primarily in connection with the extension of employment agreements of two key officers.  Compensation expense relating to the change in fair value from the modification of option terms was nil and $95,000 for the three months ended September 30, 2012 and 2011, respectively.  During the three months ended September 30, 2011 the options of a key employee were modified.  

Research and Development

Total research and development expenses were $49,000 and $70,000 for the three months ended September 30, 2012 and 2011, respectively.

Research and development expenses, excluding stock-based compensation charges of $9,000 and $41,000  were $40,000 and $29,000 for the three months ended September 30, 2012 and 2011, respectively.  The primary reason for the increase is due to some pilot program testing related to the enhancement of the Company’s technology.  

Research and development stock-based compensation for the three months ended September 30, 2012 and 2011 consists of the following:

	Three months ended September 30, 2012	Three months ended September 30, 2011
Research and development:
Fair value of stock options expensed under ASC 718	$  9,000	$  41,000
Total	$  9,000	$  41,000

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Stock-based compensation expense decreased from $41,000 for the three months ended September 30, 2011 to $9,000 for the three months ended September 30, 2012.  The decrease is due to the signing in March 2011 of a new employment agreement with a research and development employee which vested stock options previously granted to the employee during May 2008, with issuance and vesting contingent upon the signing of the new employment agreement.  There were no similar charges for the three months ended September 30, 2012.

Loss from Operations

As a result of the factors described above, the loss from operations was $2,398,000 and $3,833,000 for the three months ended September 30, 2012 and 2011, respectively.

Other Expense (Income)

Other expense was $55,000 and $6,000 for the three months ended September 30, 2012 and 2011, respectively.  Interest expense increased to $55,000 for the three months ended September 30, 2012 from $7,000 for the three months ended September 30, 2011.  Interest expense increased primarily due to $34,000 of Pennvest loan interest no longer being capitalized as of August 1, 2012 due to Kreider 1 being placed in service.  Interest also increased due to higher deferred compensation balances owed to Brightcap and Mark Smith as of September 30, 2012.

Net Loss Attributable to the Noncontrolling Interest

The net loss attributable to the noncontrolling interest was $1,000 and $13,000 for the three months ended September 30, 2012 and 2011, 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 $2,453,000 and $4,524,000 for the three months ended September 30, 2012 and 2011, respectively, representing a $0.20 decrease in the net loss per basic and diluted common share from $0.34 to $0.14.  For the three months ended September 30, 2011, the Company recorded $549,000 as an inducement offered to its Series C Preferred stockholders to convert their Series C Preferred shares into the Company’s restricted common shares at a conversion rate of $3.00 versus the original conversion rate of $4.00.

LIQUIDITY AND CAPITAL RESOURCES

The Company's financial statements for the three months ended September 30, 2012 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 financial statements as of and for the year ended June 30, 2012 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 September 30, 2012, the Company had cash of approximately $99,000. During the three months ended September 30, 2012, net cash used in operating activities was $532,000, primarily consisting of cash operating expenses related to the KF Project that are no longer being capitalized. As previously noted, the Company is currently not generating 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 significant funding from external sources. Given the unsettled state of the current credit and capital markets, there is no assurance the Company will be able to raise the funds it needs on reasonable terms.

Investing Activities

During the three months ended September 30, 2012 the Company used $64,000 for the final testing during the certification period of the KF Project, which has been capitalized as property and equipment.  

Financing Activities

During the three months ended September 30, 2012, the Company received cash proceeds of $322,000 related to the sale of its restricted units, consisting of a common share and a warrant to purchase one half of a common share.  The Company used $25,000 and $3,000 respectively, for the redemption of 250 Series B preferred shares and accrued dividends, respectively.

As of September 30, 2012 the Company has debt obligations consisting of deferred compensation of $1,129,000 and a loan payable of $7,754,000 (owed by PA-1).  In addition, the Company entered into an 88-month operating lease for office space in New York City in August 2006, with an average monthly lease expense of $15,820. The Company has entered into sub-lease agreements with three separate parties which fully covers the lease expense.  As of September 30, 2012, the Company has 14 months remaining on the lease.

Plan of Operations and Outlook

As of September 30, 2012, the Company had cash of approximately $99,000.  

The Company continues to explore sources of additional financing to satisfy its current operating requirements as it is not currently generating any revenues. During fiscal year 2012 and for the three months ended September 30, 2012, the Company experienced greater difficulty in raising equity funding than in the prior year. As a result, the Company faced (and continues to face), significant cash flow management challenges due to severe working capital constraints. While the Company hopes to commence revenue generation during the 2013 fiscal year, it is not currently generating any revenues. To partially mitigate these working capital constraints, the Company’s core senior management and several key employees have been deferring cash compensation. As of November 6, 2012 such deferrals totaled approximately $1,188,000 (including accrued interest). During the three months ended September 30, 2012 the Company has raised proceeds of approximately $322,500 through sale of its securities (Note 6 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.  

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The Company is not currently generating any 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 facilities.  

In January 2009, the Board of Pennsylvania Infrastructure Investment Authority approved a $7.75 million loan to the Company for the initial stage of the KF Project.  The Company received a permit for construction of the KF Project on August 12, 2010. Initial construction commenced during November 2010. The settlement/closing of the Pennvest loan took place on November 3, 2010 and the Company received the initial drawdown/reimbursement from Pennvest on January 6, 2011.  From January 1, 2011 through June 30, 2012, the Company has received reimbursements of $7,754,000 pursuant to the Pennvest Loan.  The Company recently provided Pennvest with data demonstrating that the Kreider System has 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 anticipates that it will seek to raise from $7,500,000 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.  There is no assurance, especially in the extremely unsettled capital markets that presently exist, 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 can be no assurance that funds required during the next twelve months or thereafter will be generated from operations or 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 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.  

Currently, Bion is focused on using applications of its patented waste management technology to pursue two 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, and 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 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. The Company has been pursuing these opportunities within the United States during the later stages of technology re-development and has recently begun activities to pursue such opportunities internationally as well.

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Bion has completed the construction of the Phase 1 Kreider System and a period of system ‘operational shakedown’ commenced during mid-2011.  The Phase 1 Kreider System reached full, stabilized operation by the end of the 2012 fiscal year.  The Pennsylvania Department of Environmental Protection (“PADEP”) re-certified the nutrient reduction credits for this project and the Company anticipates that these credits will be verified by the PADEP during the next six months and that the Company will be able to  sell these credits (under a long term contract) during the 2012 calendar year.  Final permits and verification plan approvals were received during August 2012.

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 months. It is anticipated that such activities will accelerate now that the Company has received the final permits for the initial KF System (and its credits are verified) and publishes further data on KF System performance during the fall of 2012. Bion’s first commercial activities in this area are the Kreider projects in Pennsylvania.  

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 Phase 1 Kreider dairy 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 when it reapplies later this year pursuant to the recently amended EPA Chesapeake Bay model. The Company intends to have the Phase 2 Kreider Project operational during 2013, and hopes to enter into agreements related to sale of the credits for future delivery (under a long term contracts) during the 2013 fiscal year subject to verification by the PADEP.

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 or upstate New York and anticipates optioning land for such a Project in one of those areas during the current calendar year or soon thereafter.  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 2013-2015 to create a pipeline of Projects. Management has a 5-year development target (through calendar year 2019) 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):

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1)   The Company executed a non-cancelable operating lease for office space in New York City effective August 1, 2006 and extending to November 30, 2013. The average monthly rent expense under the lease is $15,820.  The Company has provided the lessor with a letter of credit in connection with the lease in the amount of $57,315 as of September 30, 2012. The Company's obligations under the lease are partially guaranteed by Salvatore Zizza, former Chairman of Bion Projects.  The Company has entered into sub-leases with non-affiliated parties for approximately 100% of the obligations under the lease.  Effective January 1, 2009, Mr. Zizza entered into a Master Sublease with the Company pursuant to which Mr. Zizza became a sublessee and for a one year initial period, made all payments pursuant to the lease and managed the lease premises.  Rental payments from existing sub-tenants are being deposited into a Company bank account such that Mr.  Zizza utilizes those funds towards the monthly lease payment.  During November 2009, Mr. Zizza exercised his option to continue the Master Sublease for the entire period of the lease.  Mr. Zizza fulfilled his obligations under the Master Sublease during the one year initial period and in January 2010; he received the funds from the release from the Company's letter of credit of $28,658.  Since Mr. Zizza exercised the option to continue the Master Sublease for the entire term of the lease, Mr. Zizza will be entitled to the balance of funds held under the letter of credit of approximately $57,000 if he fulfills his obligations pursuant to the Master Sublease.  

2)  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  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 Phase 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 system will be owned and operated by Bion through PA-1, in which Kreider has the option to purchase a minority interest. Funds were expended over the last year to complete the construction of the Phase 1 Kreider System and substantial capital and operating funds (equity and/or debt) has been and will continue to be expended.  The Company anticipates that it will receive revenue from the sale of nutrient (and other) environmental credits related to the Kreider 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 (“Pennvest Loan”), together with funds provided by the Company, has provided the funds for construction of the Phase 1 Kreider 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 Phase 1 Kreider 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.

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.

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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, 2012.

(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.

PART II – OTHER INFORMATION

Item 1.  Legal Proceedings.

The Company is not involved in any material legal proceedings at this time.

Item 1A.  Risk Factors.

Not applicable.

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

During the quarter ended September 30, 2012 the Company sold the following restricted securities (including  units that contained shares of restricted common stock): a) 16,403 shares issued pursuant to our 2006 Consolidated Incentive Plan (‘Plan’), valued at  $33,819, in aggregate, to certain consultants and/or employees for services; b) 678 shares issued to consultants outside the Plan, valued at $1,424, for services, which shares were issued in reliance on the exemption in Section 4(2) of the Securities Act of 1933; c) 143,333  Units, each consisting of one share and one half warrant, at a price of $2.25 per Unit 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.

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Item 3.  Defaults Upon Senior Securities.

Not applicable.

Item 4.  Mine Safety Disclosures.

Not applicable.

Item 5.  Other Information.

Not applicable.

Item 6.  Exhibits.

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

Exhibit	Description
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

36

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:  November 7, 2012	By:	/s/ Mark A. Smith
		Mark A. Smith, President and Chief Financial Officer (Principal Financial and Accounting Officer)
Date:  November 7, 2012	By:	/s/ Dominic Bassani
		Dominic Bassani
		Chief Executive Officer

37

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:  November 7, 2012

/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:  November 7, 2012

/s/ Mark A. Smith

Mark A. Smith

Executive Chairman, President and

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 September 30, 2012, 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.

November 7, 2012

/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 September 30, 2012, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), Mark A. Smith, President (Executive Chairman) and 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.

November 7, 2012

/s/ Mark A. Smith

Mark A. Smith

President, Executive Chairman and

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.

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Note 6 - Stockholders' Equity: (Detail) - Nonvested Share Activity (USD $)	12 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Mar. 31, 2011
Options			590,000
Weighted Average Grant-Date Fair Value (in Dollars per share)	$ 1.83	$ 1.83
Granted	150,000
Granted (in Dollars per share)	$ 0.83
Vested	(150,000)
Vested (in Dollars per share)	$ (0.83)
Forfeited	0
Forfeited (in Dollars per share)	$ 0
Options	590,000		590,000

XML

Note 2 - Significant Accounting Policies (Detail) - Earnings Per Share, Basic and Diluted	3 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Shares issued – beginning of period	16,814,103	13,730,291
Shares held by subsidiaries (Note 6)	(704,309)	(704,309)
Shares outstanding – beginning of period	16,109,794	13,025,982
Weighted average shares for fully vested stock bonuses (Note 6)	766,630	323,478
Weighted average shares issued during the period	50,846	101,363
Basic weighted average shares – end of period	16,927,270	13,450,823
Shares issued – beginning of period	16,974,517
Shares outstanding – beginning of period	16,270,208

XML

Note 8 - Commitments And Contingencies: (Detail) (USD $)	3 Months Ended											36 Months Ended				0 Months Ended	12 Months Ended	0 Months Ended			3 Months Ended	4 Months Ended	9 Months Ended	10 Months Ended	12 Months Ended				0 Months Ended		12 Months Ended	0 Months Ended			3 Months Ended	12 Months Ended	35 Months Ended	90 Months Ended		3 Months Ended	36 Months Ended		48 Months Ended	12 Months Ended	5 Months Ended	43 Months Ended	52 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012 Stock Bonus Payable Upon Stock Price of $10.00 per Share [Member] President [Member]	Sep. 30, 2012 Stock Bonus Payable Upon Stock Price of $10.00 per Share [Member] Mr. Shafer [Member]	Dec. 31, 2012 Stock Bonus Payable Upon Stock Price of $10.00 per Share [Member] Vice President [Member]	Sep. 30, 2012 Stock Bonus Payable Upon Stock Price of $10.00 per Share [Member]	Jul. 15, 2012 Stock Bonus Payable Upon Stock Price of $10.00 per Share [Member]	May 31, 2005 Stock Bonus Payable Upon Stock Price of $10.00 per Share [Member]	Dec. 31, 2012 Stock Bonus Payable Upon Stock Price of $20.00 per Share [Member] Vice President [Member]	Sep. 30, 2012 Stock Bonus Payable Upon Stock Price of $20.00 per Share [Member]	May 31, 2005 Stock Bonus Payable Upon Stock Price of $20.00 per Share [Member]	Dec. 31, 2013 Upon Company Has Completed an Equity Financing in Excell of $3,000,000 [Member] Cash Compensation [Member] Mr. Shafer [Member]	Dec. 31, 2013 Upon Company Has Completed an Equity Financing in Excell of $3,000,000 [Member] Mr. Shafer [Member]	Dec. 31, 2013 Cash Compensation [Member] Mr. Shafer [Member]	Dec. 31, 2013 Common Stock Payable [Member] Mr. Shafer [Member]	Jan. 15, 2014 President [Member] Initial Amounts [Member]	Jun. 30, 2012 President [Member] Initial Amounts [Member]	Jan. 15, 2015 President [Member]	Jan. 15, 2014 President [Member]	Jan. 15, 2013 President [Member]	Sep. 30, 2012 President [Member]	Dec. 31, 2012 President [Member]	Sep. 30, 2012 President [Member]	Jun. 30, 2011 President [Member]	Jun. 30, 2012 President [Member]	Jul. 31, 2012 President [Member]	Jul. 15, 2012 President [Member]	Dec. 31, 2010 President [Member]	Jan. 15, 2016 Chief Executive Officer [Member] Initial Amounts [Member]	Jan. 15, 2015 Chief Executive Officer [Member] Initial Amounts [Member]	Jun. 30, 2012 Chief Executive Officer [Member] Initial Amounts [Member]	Jan. 15, 2017 Chief Executive Officer [Member]	Jan. 15, 2016 Chief Executive Officer [Member]	Jan. 15, 2015 Chief Executive Officer [Member]	Sep. 30, 2012 Chief Executive Officer [Member]	Jun. 30, 2012 Chief Executive Officer [Member]	Jun. 30, 2014 Chief Executive Officer [Member]	Sep. 30, 2012 Chief Executive Officer [Member]	Jul. 31, 2012 Chief Executive Officer [Member]	Sep. 30, 2012 Mr. Shafer [Member]	Dec. 31, 2013 Mr. Shafer [Member]	Jul. 15, 2012 Mr. Shafer [Member]	Sep. 18, 2010 Chief Operating Officer [Member]	Dec. 31, 2012 Vice President [Member]	Jun. 30, 2011 Chief Technology Officer [Member]	Jan. 31, 2015 Chief Technology Officer [Member]	Jan. 31, 2016 Chief Engineering Officer [Member]
Monthly Officers' Compensation (in Dollars)																						$ 21,000	$ 20,000	$ 19,000												$ 26,000	$ 26,000
Stock Issued During Period, Shares, Share-based Compensation, Gross																45,000		75,000	75,000	45,000									100,000	100,000		100,000	150,000	150,000
Allocated Share-based Compensation Expense (in Dollars)	1,406,602	3,001,384															240,300				292,500				334,000						795,000				585,000	1,203,500
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross	150,000	1,400,000																					200,000													725,000				100,000				75,000
Deferred Compensation Arrangement with Individual, Exercise Price (in Dollars per share)																					$ 2.10		$ 3.00												$ 2.10	$ 3.00				$ 2.10				$ 2.75
Stock and Warrants Issued During Period, Value, Preferred Stock and Warrants (in Dollars)																					25,000														5,000
Stock Issued During Period, Shares, Conversion of Units																					250,000
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant			100,000	25,000	12,500	327,500		492,500		115,000	197,500										100,000		100,000				100,000	50,000												25,000		25,000
Share Price (in Dollars per share)	$ 2.00		$ 10.00	$ 10.00	$ 10	$ 10.00	$ 10.00	$ 10.00	$ 20	$ 20.00	$ 20.00
Annual Officers' Compensation (in Dollars)												225,000		150,000	100,000																							312,000			250,000		150,000	144,000	150,000	180,000	180,000
Class of Warrant or Right, Number of Securities Called by Warrants or Rights	71,667																									250,000									50,000			50,000	50,000
Percentage of Full-Time Employment																																									75.00%
Employment Agreement (in Dollars)													$ 3,000,000																														$ 4

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Note 2 - Significant Accounting Policies

3 Months Ended

Sep. 30, 2012

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. (formerly Bion Dairy Corporation) (“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 September 30, 2012, the results of operations of the Company for the three months ended September 30, 2012 and 2011 and cash flows of the Company for the three months ended September 30, 2012 and 2011. Operating results for the three months ended September 30, 2012 are not necessarily indicative of the results that may be expected for the year ending June 30, 2013.

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.

Fair value measurements (continued):

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 is not practicable to estimate due to the related party nature of the underlying transactions.

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 three months ended September 30, 2012 and 2011, 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:

	September 30, 2012		September 30, 2011
Warrants		6,879,920		6,068,055
Options		5,261,145		2,620,833
Convertible debt		528,609		123,750
Convertible preferred stock		19,688		1,058,057

The following is a reconciliation of the denominators of the basic loss per share computations for the three months ended September 30, 2012 and 2011:

	Three months ended September 30, 2012			Three months ended September 30, 2011
Shares issued – beginning of period		16,814,103			13,730,291
Shares held by subsidiaries (Note 6)		(704,309	)		(704,309	)
Shares outstanding – beginning of period		16,109,794			13,025,982
Weighted average shares for fully vested stock bonuses (Note 6)		766,630			323,478
Weighted average shares issued during the period		50,846			101,363
Basic weighted average shares – end of period		16,927,270			13,450,823

Recent Accounting Pronouncements:

The Company has evaluated all newly issued accounting pronouncements and believes such pronouncements do not have a material effect on the Company's financial statements.

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Note 5 - Loan Payable: (Detail) (USD $)			3 Months Ended		60 Months Ended	72 Months Ended
	Sep. 30, 2012	Aug. 12, 2010	Sep. 30, 2012 Pennvest Loan [Member]	Sep. 30, 2011 Pennvest Loan [Member]	Dec. 31, 2013 Pennvest Loan [Member]	Dec. 31, 2019 Pennvest Loan [Member]
Construction Loan		$ 7,800,000	$ 7,754,000
Debt Instrument, Interest Rate During Period					2.547%	3.184%
Long-term Debt, Maturities, Repayments of Principal in Next Twelve Months	574,000
Long-term Debt, Maturities, Repayments of Principal in Year Two	704,000
Long-term Debt, Maturities, Repayments of Principal in Year Three	723,000
Long-term Debt, Maturities, Repayments of Principal in Year Four	741,000
Long-term Debt, Maturities, Repayments of Principal in Year Five	760,000
Long-term Debt, Maturities, Repayments of Principal after Year Five	4,252,000
Interest Expense, Debt			49,374	45,644
Interest Costs Capitalized			$ 15,793	$ 43,650

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Note 4 - Deferred Compensation: (Detail) (USD $)						3 Months Ended
	Nov. 05, 2012	Sep. 30, 2012	Jun. 30, 2012	Sep. 30, 2012 Brightcap Capital Ltd CEO [Member] Accrued Interest at 10% per annum and Convertible at $1.50 per share [Member]	Sep. 30, 2012 Brightcap Capital Ltd CEO [Member] Accrued Interest at 8% per annum and Convertible at $2.50 per share [Member]	Sep. 30, 2012 Brightcap Capital Ltd CEO [Member]	Sep. 30, 2012 President [Member]
Deferred Compensation Liability, Current	$ 59,500	$ 138,833	$ 83,083
Deferred Compensation Arrangement with Individual, Recorded Liability						662,845	326,996
Accrued Interest on Deferred Compensation						55,845	12,792
Components of Deferred Compensation				$ 202,125	$ 460,720
Interest Rate on Deferred Compensation				10.00%	8.00%		8.00%
Debt Instrument, Convertible, Conversion Price (in Dollars per share)				$ 1.50	$ 2.50
Debt Instrument, Convertible, Terms of Conversion Feature						one
Share Price (in Dollars per share)		$ 2.00

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Note 6 - Stockholders' Equity: (Detail) (USD $)	3 Months Ended						3 Months Ended								12 Months Ended		3 Months Ended			12 Months Ended				3 Months Ended	0 Months Ended			3 Months Ended	12 Months Ended		3 Months Ended	0 Months Ended			3 Months Ended	9 Months Ended	12 Months Ended				3 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Jul. 31, 2012	Jun. 30, 2012	Jun. 30, 2011	Sep. 30, 2012 Centerpoint [Member]	Sep. 30, 2012 Stock Options [Member]	Sep. 30, 2011 Stock Options [Member]	Sep. 30, 2012 Warrant Issuances [Member] Chief Executive Officer [Member]	Sep. 30, 2012 Warrant Issuances [Member] President [Member]	Sep. 30, 2012 Redeemable Preferred Stock [Member] Series B Preferred Stock [Member]	Sep. 30, 2012 Series B Preferred Stock [Member]	Jun. 30, 2012 Series B Preferred Stock [Member]	Sep. 30, 2011 Series B Preferred Stock [Member]	Jun. 30, 2012 Series B Preferred Stock [Member]	Jun. 30, 2011 Series B Preferred Stock [Member]	Sep. 30, 2012 Series C Preferred Stock [Member]	Jun. 30, 2012 Series C Preferred Stock [Member]	Sep. 30, 2011 Series C Preferred Stock [Member]	Jun. 30, 2012 Series C Preferred Stock [Member]	Jun. 30, 2011 Series C Preferred Stock [Member]	Sep. 30, 2012 Restricted Common Stock [Member] Minimum [Member]	Sep. 30, 2012 Restricted Common Stock [Member] Maximum [Member]	Sep. 30, 2012 Restricted Common Stock [Member]	Jan. 15, 2017 Chief Executive Officer [Member]	Jan. 15, 2016 Chief Executive Officer [Member]	Jan. 15, 2015 Chief Executive Officer [Member]	Sep. 30, 2012 Chief Executive Officer [Member]	Jun. 30, 2012 Chief Executive Officer [Member]	Jul. 31, 2012 Chief Executive Officer [Member]	Sep. 30, 2012 President [Member] Contingent Consideration Classified as Equity [Member]	Jan. 15, 2015 President [Member]	Jan. 15, 2014 President [Member]	Jan. 15, 2013 President [Member]	Sep. 30, 2012 President [Member]	Sep. 30, 2012 President [Member]	Jun. 30, 2012 President [Member]	Jul. 31, 2012 President [Member]	Jul. 15, 2012 President [Member]	Dec. 31, 2010 President [Member]	Sep. 30, 2012 Mr. Shafer [Member] Contingent Consideration Classified as Equity [Member]	Sep. 30, 2012 Mr. Shafer [Member]	Jul. 15, 2012 Mr. Shafer [Member]	Sep. 30, 2012 Contingent Consideration Classified as Equity [Member]	Sep. 30, 2012 Minimum [Member]	Sep. 30, 2012 Maximum [Member]
Preferred Stock, Shares Outstanding (in Shares)												200	450		450		300	300		300
Preferred Stock, Par or Stated Value Per Share (in Dollars per share)												$ 0.01	$ 0.01		$ 0.01		$ 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%				10.00%
Convertible Preferred Stock, Terms of Conversion													three					are convertible at the option of the holder at any time from the date of issuance, into shares of the Company's common stock calculated by dividing the sum of the $100 per share purchase price plus any accrued and unpaid dividends by $4.00 (the Conversion Rate), provided the shares have not been redeemed into common shares by the Company at is sole election. A portion (up to 100% as calculated below) of each share of Series C Preferred stock shall be automatically and mandatorily converted into shares of the Company's common stock at the Conversion Rate upon each occasion (at least 30 calendar days apart) after a date of six months subsequent to the initial issuance of the Series C Preferred stock on which the closing price of the Company's common stock has been equal or greater than 150% of the Conversion Rate (initially $6.00) for twenty consecutive trading days with a reported average daily trading volume of 10,000 shares or more. On each occasion for mandatory conversion as set forth above, a sufficient portion of the outstanding shares of Series C Preferred stock shall be prorata converted so that the holders of the Series C Preferred stock receive an aggregate number of shares of the Company's restricted common stock equal to 7.5 times the average reported daily volume of trading in the Company's publicly traded common stock for the applicable twenty day period and each outstanding share shall thereafter be proportionately reduced in its rights to represent the effect of the partial conversions
Stock Redeemed or Called During Period, Shares (in Shares)												250
Payments of Ordinary Dividends, Preferred Stock and Preference Stock											$ 2,500	$ 2,917		$ 69,175					$ 80,375
Stock Redeemed or Called During Period, Value												27,500
Dividends, Preferred Stock												(917)			72,550	281,700	750			82,625	274,675
Declared Preferred Dividends	500
Dividends Payable												2,500					3,750
Common Stock, Voting Rights	Holders of common stock are entitled to one vote per share on all matters to be voted on by common stockholders
Common Stock, Shares, Issued (in Shares)	16,974,517			16,814,103	13,730,291	704,309
Stock Issued During Period, Shares, Issued for Services (in Shares)																								17,081
Share Price (in Dollars per share)	$ 2.00																					$ 2.00	$ 2.13																					$ 10.00
Stock Issued During Period, Value, Issued for Services	1,156,493																							35,243
Stock Issued During Period, Shares, Share-based Compensation, Gross (in Shares)																									100,000	150,000	150,000					75,000	75,000	45,000
Allocated Share-based Compensation Expense (in Dollars)	1,406,602	3,001,384					239,055	1,981,684	5,000	25,000																		585,000	1,203,500		195,000				292,500		334,000				48,750
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant (in Shares)																																			100,000	100,000			100,000	50,000		25,000	25,000
Sale of Units, Price Per Unit Issued (in Dollars per share)	$ 2.25
Sale of Stock, Description of Transaction	each 2012 B UNIT consisting of one 2012 B share of the Company's restricted common stock and one 2012 B warrant to purchase one half of a share of the Company's restricted common stock for $3.10 per share until December 31, 2014 (the "2012 B UNITS")
Sale of Units, Number of Units Issued (in Shares)	143,333
Sale of Units, Consideration Received on Transaction	322,500
Warrant Fair Value, Price Per Share (in Dollars per share)	$ 0.075
Adjustments to Additional Paid in Capital, Warrant Issued	5,469
Adjustments to Additional Paid in Capital, Other	317,030
Warrants and Rights Outstanding	6,900,000
Class of Warrant or Right, Exercise Price of Warrants or Rights (in Dollars per Item)			2.10																																										0.75	4.25
Weighted Average Exercise Price for Outstanding Warrants (in Dollars per share)	$ 2.17
Weighted Average Remaining Contractual Life for Outstanding Warrants	5 years 160 days
Class of Warrant or Right, Number of Securities Called by Warrants or Rights (in Shares)	71,667																											50,000		50,000								250,000
Fair Value per Share for Warrants (in Dollars per share)			$ 0.10
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized (in Shares)	8,000,000
Investment Options, Expiration Date	Dec. 31, 2008
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross (in Shares)	150,000	1,400,000																											725,000							200,000						100,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested in Period, Fair Value	125,000	1,821,350
Employee Service Share-based Compensation, Nonvested Awards, Total Compensation Cost Not yet Recognized	$ 373,234
Employee Service Share-based Compensation, Nonvested Awards, Total Compensation Cost Not yet Recognized, Period for Recognition	2 years

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Note 6 - Stockholders' Equity: (Detail) - Stock Options - Valuation Assumptions	3 Months Ended
	Jun. 30, 2012	Jun. 30, 2011
Volatility	66.00%	84.00%
Dividend yield		0.00%
Risk-free interest rate	0.32%	1.37%
Expected term (years)	3 years 18 days	4 years 36 days
Minimum [Member]
Volatility	60.00%	61.00%
Dividend yield	0.00%	0.00%
Risk-free interest rate	0.31%	0.25%
Expected term (years)	2 years 240 days	2 years
Maximum [Member]
Volatility	68.00%	88.00%
Dividend yield	0.00%	0.00%
Risk-free interest rate	0.34%	2.02%
Expected term (years)	3 years 3 months	4 years 6 months

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

3 Months Ended

Sep. 30, 2012

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 that provides a comprehensive environmental solution to a significant source of pollution in United States agriculture, large scale livestock facilities known as Confined Animal Feeding Operations ("CAFO's"). Bion's technology produces 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 technology reduces 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.

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 revenue 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 technology 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.

Bion is now actively pursuing business opportunities in two broad areas 1) installation of Bion systems to retrofit and environmentally remediate existing CAFO's to reduce nutrient (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; and 2) development of "closed loop" Integrated Projects. Bion is pursuing these opportunities within the United States and internationally.

Management believes that Bion's technology platform 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, generates 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 nutrient rich solids recovered from the livestock waste stream 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), 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.

Bion is presently involved in the very early development and pre-development activities related to Integrated Projects in Pennsylvania. The Company is also involved in pre-development evaluations and discussions regarding opportunities for Integrated Projects in New York and in Nebraska and elsewhere in the Midwest and the North Central United States (dairy and/or beef). All such discussions are still in preliminary stages. Additionally, the Company is involved in very 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).

Organization and nature of business (continued): 

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

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 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 expended for continuing operations. Upon successful construction and operation of these systems, the Company anticipates that it will earn revenue from the sale of nutrient (and other) environmental credits related to the Kreider system and through sales of renewable energy generated by the Kreider systems.

The Company financed Kreider 1 through a $7.8 million loan from Pennsylvania Infrastructure Investment Authority (“Pennvest”). Initial construction-related activities of Kreider 1, including bidding and ordering of equipment, commenced in October 2010 and 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 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, Bion can now commence generating and verifying nutrient reduction credits for sale during the 2013 fiscal year while continuing to utilize the system to test improvements and add-ons.

Development work, including amended credit certification and negotiations with venture partners, continues related to the details of the second phase of the Kreider project. It is anticipated that agreements related to the second Kreider project will be executed during the current calendar year and that permitting and construction will be completed in 2013.

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 revenues and has incurred net losses (including significant non-cash expenses) of approximately $6,465,000 and $6,998,000 during the years ended June 30, 2012 and 2011, respectively, and a net loss of approximately $2,453,000 for the three months ended September 30, 2012. At September 30, 2012, the Company has a working capital deficit and a stockholders' deficit of approximately $820,000 and $1,562,000, 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.

During the years ended June 30, 2012 and 2011, the Company received total proceeds of $1,259,250, (including $200,000 of subscriptions receivable) and $2,649,250 (including $40,000 from the exercise of warrants into commons shares of the Company), respectively, from the sale of its equity securities.

During the three months ended September 30, 2012, the Company has sold 143,333 equity Units (Note 6) and received proceeds of approximately $322,500

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

Going concern and management's plans (continued):

During fiscal year 2012 and through the three months ended September 30, 2012, the Company experienced greater difficulty in raising equity funding than in the prior year. 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 several key employees have been deferring all or part of their cash compensation (Note 4). 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 and to operate the Kreider 1 facilities. The Company anticipates that it will seek to raise from $7,500,000 to $50,000,000 or more (debt and equity) during the next twelve months. There is no assurance, especially in the extremely unsettled capital markets that presently exist, 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 can be no assurance that funds required during the next twelve months or thereafter will be generated from operations or 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 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.

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Note 6 - Stockholders' Equity: (Detail) - Stock Options Activity (USD $)	3 Months Ended
	Sep. 30, 2012	Jun. 30, 2012	Sep. 30, 2011
Options		5,111,145
Weighted- Average Exercise Price (in Dollars per share)		$ 2.86
Weighted- Average Remaining Contractual Life	4 years 146 days	4 years 219 days
Aggregate Intrinsic Value (in Dollars)		$ 274,200
Exercisable at September 30, 2012	4,671,145
Exercisable at September 30, 2012 (in Dollars per share)	$ 2.85
Exercisable at September 30, 2012	4 years 73 days
Exercisable at September 30, 2012 (in Dollars)	206,250
Granted	150,000		1,400,000
Granted (in Dollars per share)	$ 2.10
Exercised	0
Exercised (in Dollars per share)	$ 0
Forfeited	0
Forfeited (in Dollars per share)	$ 0
Expired	0
Expired (in Dollars per share)	$ 0
Options	5,261,145
Weighted- Average Exercise Price (in Dollars per share)	$ 2.84
Weighted- Average Remaining Contractual Life	4 years 146 days	4 years 219 days
Aggregate Intrinsic Value (in Dollars)	$ 206,250

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Consolidated Balance Sheets (Current Period Unaudited) (USD $)	Sep. 30, 2012	Jun. 30, 2012
Current assets:
Cash	$ 99,167	$ 399,992
Prepaid insurance and expenses	29,432	42,707
Deposits and other receivables	6,958	6,958
Total current assets	135,557	449,657
Restricted cash (Note 7)	57,315	57,315
Property and equipment, net (Note 3)	8,070,606	8,172,702
Total assets	8,263,478	8,679,674
Current liabilities:
Accounts payable and accrued expenses	817,160	711,677
Current portion of deferred compensation (Note 4)	138,833	83,083
Total current liabilities	955,993	794,760
Loan payable (Note 5)	7,754,000	7,754,000
Deferred compensation, less current portion (Note 4)	989,841	833,452
Deferred rent (Note 7)	23,726	27,992
Total liabilities	9,723,560	9,410,204
Bion's stockholders' equity (deficit):
Common stock, no par value, 100,000,000 shares authorized, 16,974,517 and 16,814,103 shares issued, respectively; 16,270,208 and 16,109,794 shares outstanding, respectively	0	0
Additional paid-in capital	92,924,358	91,177,978
Accumulated deficit	(94,516,629)	(92,065,095)
Total Bion's stockholders' deficit	(1,562,471)	(858,067)
Noncontrolling interest	82,489	83,887
Total deficit	(1,479,982)	(774,180)
Total liabilities and deficit	8,263,478	8,679,674
Series B Preferred Stock [Member]
Current liabilities:
Preferred stock	19,900	43,650
Series A Preferred Stock [Member]
Current liabilities:
Preferred stock	0	0
Series C Preferred Stock [Member]
Current liabilities:
Preferred stock	$ 29,800	$ 29,050

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Consolidated Statements Of Cash Flows (Unaudited) (USD $)	3 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$ (2,452,932)	$ (3,838,769)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense	165,791	4,084
Accrued interest on deferred compensation and other	21,735	4,125
Stock-based compensation	1,425,548	3,153,003
Decrease in prepaid insurance and expenses	13,275	18,155
Increase (decrease) in accounts payable and accrued expenses	104,387	(793,910)
Increase in deferred compensation	194,750	135,000
Decrease in deferred rent	(4,266)	(4,265)
Net cash used in operating activities	(531,712)	(1,322,577)
CASH FLOWS FROM INVESTING ACTIVITIES
Decrease in restricted cash		25,000
Purchase of property and equipment	(63,695)	(184,323)
Net cash used in investing activities	(63,695)	(159,323)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the sale of units	322,499	475,000
Proceeds from loan payable		884,432
Redemption of Series B preferred shares	(25,000)
Net decrease in cash	(300,825)	(272,018)
Cash at beginning of period	399,992	1,394,388
Cash at end of period	99,167	1,122,370
Supplemental disclosure of cash flow information:
Cash paid for interest, including $15,793 and $41,774 of capitalized interest	49,374	43,767
Cash paid for income taxes	0	0
Non-cash investing and financing transactions:
Issuance of common stock in exchange for services	1,156,493
Other Services [Member]
Non-cash investing and financing transactions:
Issuance of common stock in exchange for services		13,744
Series B Preferred Stock [Member]
CASH FLOWS FROM FINANCING ACTIVITIES
Payment of preferred dividends	(2,917)	(69,175)
Non-cash investing and financing transactions:
Conversion of stocks		1,270,001
Preferred stock dividends declared	917
Series C Preferred Stock [Member]
CASH FLOWS FROM FINANCING ACTIVITIES
Payment of preferred dividends		(80,375)
Net cash provided by financing activities	294,582	1,209,882
Non-cash investing and financing transactions:
Conversion of stocks		2,826,710
Preferred stock dividends declared	$ 750

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Note 7 - Operating Lease: (Detail) (USD $)					3 Months Ended
	Sep. 30, 2012	Mar. 31, 2010 Portion at Fair Value, Fair Value Disclosure [Member]	Sep. 30, 2012 Balance [Member]	Sep. 30, 2012 Secured Debt [Member]	Sep. 30, 2012 Monthly Payment [Member]
Restricted Cash and Cash Equivalents		$ 28,658	$ 57,000	$ 57,315
Operating Leases, Rent Expense					15,820
Operating Leases, Income Statement, Sublease Revenue					17,242
Deferred Rent Credit	$ 23,726

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Note 1 - Organization, Nature of Business, Going Concern and Management's Plans: (Detail) (USD $)	3 Months Ended		12 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Jun. 30, 2012	Jun. 30, 2011	Aug. 12, 2010
Construction Loan					$ 7,800,000
Net Income (Loss) Attributable to Parent	(2,451,534)	(3,825,666)	(6,465,000)	(6,998,000)
Working Capital	(820,000)
Stockholders' Equity Attributable to Parent	(1,562,471)		(858,067)
Proceeds from Issuance or Sale of Equity	322,499	475,000	1,259,250	2,649,250
Scenario, Forecast [Member] | Minimum [Member]
Capital Required for Capital Adequacy	7,500,000
Scenario, Forecast [Member] | Maximum [Member]
Capital Required for Capital Adequacy	50,000,000
2012 Units [Member]
Proceeds from Issuance or Sale of Equity	322,500
Stock Issued During Period, Shares, New Issues (in Shares)	143,333
Subscriptions Receivable [Member]
Proceeds from Issuance or Sale of Equity			200,000
Exercise of Warrants into Common Shares [Member]
Proceeds from Issuance or Sale of Equity				40,000
Approximate Amount [Member]
Net Income (Loss) Attributable to Parent	(2,453,000)
Stockholders' Equity Attributable to Parent	$ (1,562,000)

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Note 7 - Operating Lease: (Detail) - Future Minimum Rental Payments for Operating Leases (USD $)	Sep. 30, 2012
2013 (remainder of year)	$ 169,834
2014	97,219
Total	267,053
Lease Payments, Gross [Member]
2013 (remainder of year)	169,834
2014	97,219
Total	267,053
Lease Payments, Net [Member]
2013 (remainder of year)	0
2014	0
Total	$ 0

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Note 2 - Significant Accounting Policies (Detail) - Antidilutive Securities	3 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Warrant [Member]
Antidilutive Securities	6,879,920	6,068,055
Stock Options [Member]
Antidilutive Securities	5,261,145	2,620,833
Convertible Debt Securities [Member]
Antidilutive Securities	528,609	123,750
Convertible Preferred Stock, Antidilutive Securities [Member]
Antidilutive Securities	19,688	1,058,057

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Consolidated Statements Of Cash Flows (Unaudited) (Parentheticals) (USD $)	3 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Capitalized interest (in Dollars)	$ 15,793	$ 41,774

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Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) (USD $)	Sep. 30, 2012	Jun. 30, 2012
Common stock, shares authorized (in Shares)	100,000,000	100,000,000
Common stock, shares issued (in Shares)	16,974,517	16,814,103
Common stock, shares outstanding (in Shares)	16,270,208	16,109,794
Series B Preferred Stock [Member]
Par value (in Dollars per share)	0.01	0.01
Shares authorized (in Shares)	50,000	50,000
Shares issued (in Shares)	200	450
Shares outstanding (in Shares)	200	450
Liquidation preference (in Dollars per share)	22,500	49,500
Series A Preferred Stock [Member]
Par value (in Dollars per share)	0.01	0.01
Shares authorized (in Shares)	10,000	10,000
Shares issued (in Shares)	0	0
Shares outstanding (in Shares)	0	0
Series C Preferred Stock [Member]
Par value (in Dollars per share)	0.01	0.01
Shares authorized (in Shares)	60,000	60,000
Shares issued (in Shares)	300	300
Shares outstanding (in Shares)	300	300
Liquidation preference (in Dollars per share)	33,750	33,000

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Accounting Policies, by Policy (Policies)

3 Months Ended

Sep. 30, 2012

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. (formerly Bion Dairy Corporation) (“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 September 30, 2012, the results of operations of the Company for the three months ended September 30, 2012 and 2011 and cash flows of the Company for the three months ended September 30, 2012 and 2011. Operating results for the three months ended September 30, 2012 are not necessarily indicative of the results that may be expected for the year ending June 30, 2013

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.

Fair value measurements (continued):

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 is not practicable to estimate due to the related party nature of the underlying transactions

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 three months ended September 30, 2012 and 2011, the basic and diluted loss per share was the same, as the impact of potential dilutive common shares was anti-dilutive

Description of New Accounting Pronouncements Not yet Adopted [Text Block]

Recent Accounting Pronouncements:

The Company has evaluated all newly issued accounting pronouncements and believes such pronouncements do not have a material effect on the Company's financial statements

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Document And Entity Information	3 Months Ended
	Sep. 30, 2012	Nov. 06, 2012
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		16,321,395
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	Sep. 30, 2012
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q1

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Note 2 - Significant Accounting Policies (Tables)

3 Months Ended

Sep. 30, 2012

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

	September 30, 2012		September 30, 2011
Warrants		6,879,920		6,068,055
Options		5,261,145		2,620,833
Convertible debt		528,609		123,750
Convertible preferred stock		19,688		1,058,057

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

	Three months ended September 30, 2012			Three months ended September 30, 2011
Shares issued – beginning of period		16,814,103			13,730,291
Shares held by subsidiaries (Note 6)		(704,309	)		(704,309	)
Shares outstanding – beginning of period		16,109,794			13,025,982
Weighted average shares for fully vested stock bonuses (Note 6)		766,630			323,478
Weighted average shares issued during the period		50,846			101,363
Basic weighted average shares – end of period		16,927,270			13,450,823

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Consolidated Statements of Operations (Unaudited) (USD $)	3 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Revenue	$ 0	$ 0
Operating expenses:
General and administrative (including stock-based compensation (Note 6))	2,349,060	3,762,427
Research and development (including stock-based compensation (Note 6))	48,606	70,134
Total operating expenses	2,397,666	3,832,561
Loss from operations	(2,397,666)	(3,832,561)
Other expense (income):
Interest expense	55,316	7,215
Interest income	(50)	(1,007)
	55,266	6,208
Net loss	(2,452,932)	(3,838,769)
Net loss attributable to the noncontrolling interest	1,398	13,103
Net loss attributable to Bion	(2,451,534)	(3,825,666)
Conversion inducement		(548,580)
Dividends on preferred stock	(1,667)	(149,550)
Net loss applicable to Bion's common stockholders	$ (2,453,201)	$ (4,523,796)
Net loss applicable to Bion's common stockholders per basic and diluted common share (in Dollars per share)	$ (0.14)	$ (0.34)
Weighted-average number of common shares outstanding:
Basic and diluted (in Shares)	16,927,270	13,450,823

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Note 5 - Loan Payable:

3 Months Ended

Sep. 30, 2012

Debt Disclosure [Text Block]

5.     LOAN PAYABLE:

As of September 30, 2012, 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 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. For the three months ended September 30, 2012 and 2011, the Company has incurred interest expense related to the Pennvest Loan of $49,374 and $45,644, respectively, of which $15,793 and $43,650, respectively, has been capitalized as a cost of the Kreider 1 System.

In connection with the Pennvest Loan, 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 informed Pennvest that the Kreider 1 System had surpassed the requisite performance criteria and that, as a result, the Company's “technology guaranty' had been met.

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Note 4 - Deferred Compensation:

3 Months Ended

Sep. 30, 2012

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

4.     DEFERRED COMPENSATION:

Current:

The Company owes Edward Shafer, the Company's Executive Vice Chairman, and three other key employees, aggregate deferred compensation of $138,833 as of September 30, 2012.

Non-current:

As of September 30, 2012, the Company owed Brightcap Capital Ltd. (“Brightcap”), for services provided by Dominic Bassani (“Bassani”), the Chief Executive Officer (“CEO”), deferred compensation of $662,845, including interest of $55,845, which is due and payable on January 15, 2014. Of the $662,845, $202,125 of the deferred compensation accrues interest at 10% per annum and is convertible into the Company's restricted common stock at $1.50 per share. The remaining $460,720 of deferred compensation accrues interest at 8% per annum and is convertible into Units at $2.50 per Unit which consists of one share of the Company's common stock and one warrant to purchase a share of the Company's common stock. Conversion of this deferred compensation is at the sole discretion of Brightcap and Bassani.

As of September 30, 2012, the Company owes Mark A. Smith, the Company's President, deferred compensation of $326,996, including interest of $12,792 which is due and payable on January 15, 2014. The deferred compensation accrues interest at 8% per annum. The deferred compensation plus accrued interest of $460,720 and $326,996 owed to Brightcap and Mr. Smith, respectively, may be converted, at the sole election of Brightcap and Mr. Smith, 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 $2.50 per Unit until December 31, 2016. As the conversion price of $2.50 per Unit approximated the fair value of the Units at the date of the agreements, no beneficial conversion feature exists at September 30, 2012. In addition, the conversion price of the deferred compensation plus accrued interest will be the lower of the $2.50 per Unit price or the lowest price at which the Company sells its common stock between April 1, 2012 and January 15, 2014. As of September 30, 2012, the lowest price at which the Company has sold its common stock during the relevant period is $2.00 per share. Management evaluated the terms and conditions of the embedded conversion features based on the guidance of ASC 815-15-25-1 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”.

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Note 2 - Significant Accounting Policies (Detail)	Sep. 30, 2012
Equity Method Investment, Ownership Percentage	58.90%

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Note 3 - Property And Equipment: (Tables)

3 Months Ended

Sep. 30, 2012

Property, Plant and Equipment [Table Text Block]

	September 30, 2012			June 30, 2012
Machinery and equipment	$	5,432,947		$	-
Buildings and structures		2,574,010			-
Kreider 1		-			8,155,922
Leasehold improvements		31,336			31,336
Furniture		28,932			28,932
Computers and office equipment		246,900			34,240
		8,314,125			8,250,430
Less accumulated depreciation		(243,519	)		(77,728	)
	$	8,070,606		$	8,172,702

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Note 8 - Commitments And Contingencies:

3 Months Ended

Sep. 30, 2012

Commitments and Contingencies Disclosure [Text Block]

8.     COMMITMENTS AND CONTINGENCIES:

Employment and consulting agreements:

Mr. Smith has held the positions of Director, President and General Counsel of Company and its subsidiaries under various agreements and terms since March 2003 and since September 1, 2010 has been paid a monthly salary of $19,000. During July 2011, the Company entered into an extension agreement whereby Mr. Smith will continue to hold his current position in the Company through a date no later than December 31, 2012. Commencing January 1, 2012, Mr. Smith has been paid a monthly salary of $20,000. In addition, Mr. Smith will be issued 90,000 shares of the Company's common stock in two tranches of 45,000 shares on each of January 15, 2013 and 2014, 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, Mr. 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 whereby Mr. Smith will continue to hold his current positions in the Company through a date no later than June 30, 2014. Effective September 2012, Mr. Smith will be paid a monthly salary of $21,000 (which is currently being deferred). In addition, Mr. 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 and 2015, which shares vested immediately. The Company recorded expense of $292,500 for the three months ended September 30, 2012, related to the future stock issuances as the bonus was fully vested at the grant date. As part of the extension agreement, Mr. 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 Mr. Smith is still providing services to the Company on such date).

Since March 31, 2005, the Company has had various agreements with Brightcap, through which the services of Mr. Bassani are provided. On September 30, 2009 the Company entered into an extension agreement with Brightcap pursuant to which Mr. Bassani will provide services to the Company through September 30, 2012 for $312,000 annually. The Board appointed Mr. Bassani as the Company's CEO effective May 13, 2011. On July 15, 2011, Mr. Bassani, Brightcap and the Company agreed to an extension/amendment of the existing agreement with Brightcap which provides that Mr. Bassani will 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 Mr. 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. Mr. 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, Mr. Bassani, Brightcap and the Company agreed to a further extension/amendment of the existing agreement with Brightcap which provides that Mr. Bassani will continue to provide the services of CEO through June 30, 2014. Mr. 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 Mr. 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 will be immediately vested. The Company recorded expense of $585,000 for the three months ended September 30, 2012, related to the future stock issuances as the bonus was fully vested at the grant date. As part of the extension agreement, Mr. 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.

Employment and consulting agreements (continued):

Effective January 1, 2011, the Company entered into an employment agreement with Edward Schafer pursuant to which for a period of three years, Mr. Schafer will provide senior management services to the Company on an approximately 75% full time basis, initially as Executive Vice Chairman and as a director. Compensation for Mr. Schafer's services will initially be at an annual rate of $250,000, which will consist of $150,000 in cash compensation and $100,000 payable in the Company's common stock. Commencing the month following the first calendar month-end after the Company has completed an equity financing in excess of $3,000,000 (net of commissions and other offering expenses), Mr. Schafer's compensation shall be at an annual rate of $225,000, all of which shall be payable in cash. Effective July 15, 2012, the Company entered into a deferral/employment/compensation agreement with Edward Schafer pursuant to which Mr. Schafer will continue to provide senior management services to the Company on an approximately 75% full time basis, initially as Executive Vice Chairman and as a director. Basic compensation for Mr. Schafer's services will remain unchanged and Mr. Schafer will be issued 100,000 options to purchase shares of the Company's common stock at $2.10 per share until December 31, 2018, which are immediately vested and a contingent stock bonus of 25,000 shares payable on January 1 of the first year after the Company's stock price first reaches $10.00 per share (regardless of whether Mr. Schafer is still providing services to the Company on such date).

Effective September 18, 2006, the Company entered into a four-year employment agreement with Jeremy Rowland whereby Mr. Rowland assumed the position of Chief Operating Officer of Projects at an annual salary of $150,000. In June 2008, the employment agreement terms were extended through July 1, 2012. Mr. Rowland now serves as Chief Operating Officer of the Company's Services Group subsidiary.

During January 2012, the Company approved an employment agreement contract extension effective January 1, 2012 with Craig Scott whereby he will continue 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 and $20 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.

Effective February 1, 2011, the Company entered into an employment agreement with James Morris, pursuant to which Mr. Morris will act as Chief Technology Officer of the Company through January 31, 2015 at an annual salary of $150,000 until July 1, 2011, and $180,000 thereafter.

Effective September 27, 2011, the Company entered into an employment agreement with George Bloom, pursuant to which Mr. Bloom, the Company's Chief Engineering Officer, will act as Vice President-Engineering of the Company through January 31, 2016 at an annual salary of $180,000.

In May 2005 the Company declared contingent deferred stock bonuses of 690,000 shares to its key employees and consultants. The stock bonuses of 492,500 and 197,500 shares 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 September 30, 2012, 327,500 and 115,000 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.

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

Litigation:

The Company currently is not involved in any material litigation.

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Note 6 - Stockholders' Equity:

3 Months Ended

Sep. 30, 2012

Stockholders' Equity Note Disclosure [Text Block]

6.     STOCKHOLDERS' EQUITY:

Series B Preferred stock:

At July 1, 2012, the Company had 450 shares of Series B redeemable convertible Preferred stock outstanding with a par value of $0.01 per share, and are 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 three months ended September 30, 2012 the Company redeemed 250 shares of its Series B Preferred stock plus accrued dividends of $2,500 for $27,500. The remaining 200 shares have reached their maturity date, but due to the cash constraints of the Company have not been redeemed as of November 5, 2012.

During the years ended June 30, 2012 and 2011, the Company declared dividends of $72,550 and $281,700 respectively. During the three months ended September 30, 2012, the Company declared dividends of $500. At September 30, 2012, dividends payable are $2,500.

Series C Preferred stock:

At July 1, 2012 the Company had 300 shares of Series C Preferred stock outstanding, which have a par value of $0.01 per share and are convertible at the option of the holder at any time from the date of issuance, into shares of the Company's common stock calculated by dividing the sum of the $100 per share purchase price plus any accrued and unpaid dividends by $4.00 (the Conversion Rate), provided the shares have not been redeemed into common shares by the Company at is sole election. A portion (up to 100% as calculated below) of each share of Series C Preferred stock shall be automatically and mandatorily converted into shares of the Company's common stock at the Conversion Rate upon each occasion (at least 30 calendar days apart) after a date of six months subsequent to the initial issuance of the Series C Preferred stock on which the closing price of the Company's common stock has been equal or greater than 150% of the Conversion Rate (initially $6.00) for twenty consecutive trading days with a reported average daily trading volume of 10,000 shares or more. On each occasion for mandatory conversion as set forth above, a sufficient portion of the outstanding shares of Series C Preferred stock shall be prorata converted so that the holders of the Series C Preferred stock receive an aggregate number of shares of the Company's restricted common stock equal to 7.5 times the average reported daily volume of trading in the Company's publicly traded common stock for the applicable twenty day period and each outstanding share shall thereafter be proportionately reduced in its rights to represent the effect of the partial conversions. The Series C Preferred stock accrues dividends at a rate of 2.5% per quarter (10% per year) and shall be earned and accrued or paid quarterly.

6.     STOCKHOLDERS' EQUITY (continued):

Series C Preferred stock (continued):

Dividends on the Series C Preferred stock are reflected as part of the redemption value with an offset to reduce additional paid-in capital, and are included in the determination of net loss applicable to common stockholders.

During the years ended June 30, 2012 and 2011, the Company declared dividends of $82,625 and $274,675 respectively. During the three months ended September 30, 2012, the Company declared dividends of $750. At September 30, 2012 dividends payable are $3,750.

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 three months ended September 30, 2012, the Company issued 17,081 shares of the Company's restricted common stock at prices ranging from $2.00 to $2.13 per share for consulting services valued at $35,243, in the aggregate, to a consultant and an employee.

During the three months ended September 30, 2012, the Company granted Mr. Bassani and Mr. Smith shares of the Company's common stock as bonuses for signing extensions to their employment agreements. Mr. 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. Mr. Smith will be issued 150,000 shares of the Company's common shares in two tranches of 75,000 shares on each of January 15, 2014 and 2015, respectively. The Company recorded non-cash compensation of $585,000 and $292,500 related to the future stock issuances to Mr. Bassani and Mr. Smith, respectively, as the bonuses were fully vested upon grant date during the three months ended September 30, 2012.

During the three months ended September 30, 2012, the Company declared contingent stock bonuses of 25,000 and 100,000 shares to Mr. Schafer and Mr. Smith, respectively, and recognized $48,750 and $195,000 of non-cash compensation expense, respectively. The stock bonuses are contingent upon the Company's stock price exceeding $10.00 and do not require that Mr. Schafer or Mr. Smith remain employed by the Company.

In August and September 2012, the Company entered into subscription agreements to sell 2012 B UNITS for $2.25 each, with each 2012 B UNIT consisting of one 2012 B share of the Company's restricted common stock and one 2012 B warrant to purchase one half of a share of the Company's restricted common stock for $3.10 per share until December 31, 2014 (the “2012 B UNITS”). During the three months ended September 30, 2012, the Company issued 143,333 2012 B UNITS for total proceeds of approximately $322,500. The Company allocated the proceeds from the 2012 B shares and the 2012 B 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 2012 B Warrants, which was determined to be $0.075 per 2012 B Warrant. As a result, $5,469 was allocated to the 2012 B Warrants and $317,030 was allocated to the 2012 B Shares, and both were recorded as additional paid in capital.

Warrants:

As of September 30, 2012, the Company had approximately 6.9 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 $2.17, and the weighted-average remaining contractual life as of September 30, 2012 is 5.44 years.

Warrants (continued):

In July 2012, warrants to purchase 50,000 and 250,000 shares of the Company's common stock at $2.10 per share were issued pursuant to extension agreements with Mr. Bassani and Mr. Smith, respectively (Note 8). These warrants were determined to have a fair value of $0.10 per warrant and expire on December 31, 2018. The Company recorded non-cash compensation expense of $5,000 and $25,000, respectively, related to the warrant issuances.

During the three months ended September 30, 2012, the Company issued warrants to purchase 71,667 shares of the Company's common stock in connection with the sale of 2012 B UNITS.

Stock options:

The Company's 2006 Consolidated Incentive Plan (the “2006 Plan”), as amended, provides for the issuance of options to purchase up to 8,000,000 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.

The Company recorded compensation expense related to employee stock options of $239,055 and $1,981,684 for the three months ended September 30, 2012 and 2011, respectively. The Company granted 150,000 and 1,400,000 options during the three months ended September 30, 2012 and 2011, respectively. The fair value of the options granted during the three months ended September 30, 2012 and 2011 were estimated on the grant date using the Black-Scholes option-pricing model with the following assumptions:

	Weighted average, June 30, 2012			Range, June 30, 2012			Weighted average, June 30, 2011			Range, June 30, 2011
Volatility		66	%	60%	-	68%		84	%		61%	-	88%
Dividend yield		-			-			-					-
Risk-free interest rate		0.32	%	0.31%	-	0.34%		1.37	%		0.25%	-	2.02%
Expected term (years)		3.05		2.66	-	3.25		4.1			2	-	4.5

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.

Stock options (continued):

A summary of option activity under the 2006 Plan for the three months ended September 30, 2012 is as follows:

	Options		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life		Aggregate Intrinsic Value
Outstanding at July 1, 2012		5,111,145		2.86		4.6		274,200
Granted		150,000		2.10
Exercised		-		-
Forfeited		-		-
Expired		-		-
Outstanding at September 30, 2012		5,261,145	$	2.84		4.4	$	206,250
Exercisable at September 30, 2012		4,671,145	$	2.85		4.2	$	206,250

The following table presents information relating to nonvested stock options as of September 30, 2012:

	Options			Weighted Average Grant-Date Fair Value
Nonvested at July 1, 2011		590,000		$	1.83
Granted		150,000			0.83
Vested		(150,000	)		(0.83	)
Forfeited		-			-
Nonvested at June 30, 2012		590,000		$	1.83

The total fair value of stock options that vested during the three months ended September 30, 2012 and 2011 was $125,000 and $1,821,350, respectively. As of September 30, 2012, the Company had $373,234 of unrecognized compensation cost related to stock options that will be recorded over a weighted average period of less than two years.

Stock-based compensation charges in operating expenses in the Company's financial statements for the three months ended September 30, 2012 and 2011 are as follows:

	Three months ended September 30, 2012		Three months ended September 30, 2011
General and administrative:
Fair value of stock/warrant bonuses expensed	$	1,151,250	$	1,035,300
Fair value of stock issued to an employee		24,999		24,999
Change in fair value from modification of option terms		-		94,820
Fair value of stock options expensed		230,353		1,846,265
Total	$	1,406,602	$	3,001,384
Research and development:
Fair value of stock options expensed	$	8,702	$	40,598
Total	$	8,702	$	40,598

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Note 7 - Operating Lease:

3 Months Ended

Sep. 30, 2012

Operating Leases of Lessor Disclosure [Text Block]

7.     OPERATING LEASE:

The Company entered into a non-cancellable operating lease commitment for office space in New York, effective August 1, 2006 and expiring November 30, 2013. In conjunction with the signing of the lease, the Company provided the lessor with a secured letter of credit. As of September 30, 2012, the Company has reflected $57,315 as restricted cash related to the secured letter of credit. The Company's obligations under the lease are partially guaranteed by Mr. Salvatore Zizza, a former officer and director of the Company. The Company has entered into three separate agreements to sub-lease approximately 100% of the Company's lease obligation, and the tenants have also agreed to reimburse the Company for leasehold improvements and furnishings. Because the lease contains an escalation clause, the Company is recognizing rent under the straight-line method resulting in an average monthly rent expense of $15,820. The Company is also recognizing the sub-lease rental income from its tenants under the straight-line method, with a monthly average of $17,242. The difference between the straight-line method, and the actual lease payments has resulted in a deferred rent liability of $23,726 as of September 30, 2012. Rent expense net of contractual and month-to-month sub-lease rental income, was nil for both of the three months ended September 30, 2012 and 2011, respectively.

At September 30, 2012, future minimum rental payments due under non-cancelable leases and future minimum rental payments to be received under non-cancelable subleases are:

Fiscal year ended June 30:	Operating lease payments		Sublease rentals		Net operating lease payments
2013 (remainder of year)		169,834		169,834		-
2014		97,219		97,219		-
Total	$	267,053	$	267,053	$	-

Effective January 1, 2009, Mr. Zizza entered into a Master Sublease with the Company pursuant to which Mr. Zizza became a sublessee and for a one year initial period, made all payments pursuant to the lease and managed the lease premises. Rental payments from existing sub-tenants are being deposited into a Company bank account such that Mr. Zizza utilizes those funds towards the monthly lease payment. During November 2009, Mr. Zizza exercised his option to continue the Master Sublease for the entire term of the lease. Mr. Zizza fulfilled his obligations under the Master Sublease during the one-year initial period and in January 2010 he received the funds from the release of the restricted cash securing the Company's letter of credit of $28,658. Since Mr. Zizza exercised the option to continue the Master Sublease for the entire term of the lease, Mr. Zizza will be entitled to the balance of restricted funds securing the letter of credit of approximately $57,000 if he fulfills his obligations pursuant to the Master Sublease.

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Note 9 - Subsequent Events:

3 Months Ended

Sep. 30, 2012

Subsequent Events [Text Block]

9.     SUBSEQUENT EVENTS:

The Company has evaluated events that occurred subsequent to September 30, 2012 for recognition and disclosure in the financial statements and notes to the financial statements.

From October 1, 2012 through November 6, 2012 the Company has issued 16,964 shares of the Company's common shares to various consultants and an employee valued at approximately $33,700.

From October 1, 2012 through November 6, 2012 the Company has issued 34,223 Units (each consisting of one share of the Company's common stock and a warrant to purchase ½ share of the Company's common stock at $3.10 per share until December 31, 2014) for approximately $77,000 of proceeds.

As of November 6, 2012, the Company has accrued additional deferred compensation totaling approximately $59,500 of which $26,000 and $21,000, respectively, is owed to Mr. Bassani and Mr. Smith, and $12,500 is due to Mr. Shafer.

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Note 6 - Stockholders' Equity: (Detail) - Allocation of Recognized Period Costs (USD $)	3 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
General and administrative:
Fair value of stock options expensed	$ 1,406,602	$ 3,001,384
Change in fair value from modification of option terms		94,820
Stock Bonus [Member]
General and administrative:
Fair value of stock options expensed	1,151,250	1,035,300
Individual Employee [Member]
General and administrative:
Fair value of stock options expensed	24,999	24,999
General and administrative [Member]
General and administrative:
Fair value of stock options expensed	230,353	1,846,265
Research and development [Member]
General and administrative:
Fair value of stock options expensed	$ 8,702	$ 40,598

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Note 7 - Operating Lease: (Tables)

3 Months Ended

Sep. 30, 2012

Schedule of Future Minimum Rental Payments for Operating Leases [Table Text Block]

Fiscal year ended June 30:	Operating lease payments		Sublease rentals		Net operating lease payments
2013 (remainder of year)		169,834		169,834		-
2014		97,219		97,219		-
Total	$	267,053	$	267,053	$	-

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Note 3 - Property And Equipment: (Detail) (USD $)	3 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Capitalized Costs for Kreider 1	$ 8,219,617
Depreciation	$ 165,791	$ 4,084

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Consolidated Statements Of Changes In Equity (Deficit) (Unaudited) (USD $)	Series C Preferred Stock [Member] USD ($)	Series C Preferred Stock [Member] USD ($)	Common Stock [Member]	Additional Paid-in Capital [Member] Series B Preferred Stock [Member] USD ($)	Additional Paid-in Capital [Member] Series C Preferred Stock [Member] USD ($)	Additional Paid-in Capital [Member] USD ($)	Retained Earnings [Member] USD ($)	Noncontrolling Interest [Member] USD ($)	Series B Preferred Stock [Member] USD ($)	Series C Preferred Stock [Member] USD ($)	Total USD ($)
Balances, July 1, 2012 at Jun. 30, 2011
Dividends on preferred stock									$ 72,550	$ 82,625
Balances, September 30, 2012 at Jun. 30, 2012		29,050				91,177,978	(92,065,095)	83,887			(774,180)
Balances, September 30, 2012 (in Shares) at Jun. 30, 2012		300	16,814,103
Vesting of options for services						239,055					239,055
Issuance of common stock for services						1,156,493					1,156,493
Issuance of common stock for services (in Shares)			17,081
Issuance of warrants for services						30,000					30,000
Sale of units						322,499					322,499
Sale of units (in Shares)			143,333
Dividends on preferred stock	750			(917)	(750)				(917)	750
Net loss							(2,451,534)	(1,398)			(2,452,932)
Balances, September 30, 2012 at Sep. 30, 2012		$ 29,800				$ 92,924,358	$ (94,516,629)	$ 82,489			$ (1,479,982)
Balances, September 30, 2012 (in Shares) at Sep. 30, 2012		300	16,974,517

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Note 3 - Property And Equipment:

3 Months Ended

Sep. 30, 2012

Property, Plant and Equipment Disclosure [Text Block]

3.      PROPERTY AND EQUIPMENT:

Property and equipment consists of the following:

	September 30, 2012			June 30, 2012
Machinery and equipment	$	5,432,947		$	-
Buildings and structures		2,574,010			-
Kreider 1		-			8,155,922
Leasehold improvements		31,336			31,336
Furniture		28,932			28,932
Computers and office equipment		246,900			34,240
		8,314,125			8,250,430
Less accumulated depreciation		(243,519	)		(77,728	)
	$	8,070,606		$	8,172,702

During the three months ended September 30, 2012, Kreider 1 was placed into service and the capitalized costs of $8,219,617 were allocated among its separately identifiable components. Depreciation expense was $165,791 and $4,084 for the three months ended September 30, 2012 and 2011, respectively.

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Note 3 - Property And Equipment: (Detail) - Property and Equipment (USD $)	Sep. 30, 2012	Jun. 30, 2012
Machinery and equipment	$ 5,432,947
Buildings and structures	2,574,010
Kreider 1		8,155,922
Leasehold improvements	31,336	31,336
Furniture	28,932	28,932
Computers and office equipment	246,900	34,240
	8,314,125	8,250,430
Less accumulated depreciation	(243,519)	(77,728)
	$ 8,070,606	$ 8,172,702

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Note 9 - Subsequent Events: (Detail) (USD $)	3 Months Ended			2 Months Ended
	Sep. 30, 2012	Nov. 05, 2012	Jun. 30, 2012	Nov. 30, 2012 Subsequent Event [Member]	Nov. 05, 2012 Mr. Bassani [Member]	Nov. 05, 2012 Mr. Smith [Member]	Nov. 05, 2012 Mr. Shafer [Member]
Stock Issued During Period, Shares, Issued for Services (in Shares)				16,964
Stock Issued During Period, Value, Issued for Services	$ 1,156,493			$ 33,700
Sale of Units, Number of Units Issued (in Shares)	143,333			34,223
Sale of Stock, Description of Transaction	each 2012 B UNIT consisting of one 2012 B share of the Company's restricted common stock and one 2012 B warrant to purchase one half of a share of the Company's restricted common stock for $3.10 per share until December 31, 2014 (the "2012 B UNITS")			each consisting of one share of the Company's common stock and a warrant to purchase share of the Company's common stock at $3.10 per share until December 31, 2014
Sale of Units, Price Per Unit Issued (in Dollars per share)	$ 2.25			$ 3.10
Sale of Units, Consideration Received on Transaction	322,500			77,000
Deferred Compensation Liability, Current	$ 138,833	$ 59,500	$ 83,083		$ 26,000	$ 21,000	$ 12,500

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Note 6 - Stockholders' Equity: (Tables)

3 Months Ended

Sep. 30, 2012

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

	Weighted average, June 30, 2012			Range, June 30, 2012			Weighted average, June 30, 2011			Range, June 30, 2011
Volatility		66	%	60%	-	68%		84	%		61%	-	88%
Dividend yield		-			-			-					-
Risk-free interest rate		0.32	%	0.31%	-	0.34%		1.37	%		0.25%	-	2.02%
Expected term (years)		3.05		2.66	-	3.25		4.1			2	-	4.5

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, 2012		5,111,145		2.86		4.6		274,200
Granted		150,000		2.10
Exercised		-		-
Forfeited		-		-
Expired		-		-
Outstanding at September 30, 2012		5,261,145	$	2.84		4.4	$	206,250
Exercisable at September 30, 2012		4,671,145	$	2.85		4.2	$	206,250

Schedule of Nonvested Share Activity [Table Text Block]

	Options			Weighted Average Grant-Date Fair Value
Nonvested at July 1, 2011		590,000		$	1.83
Granted		150,000			0.83
Vested		(150,000	)		(0.83	)
Forfeited		-			-
Nonvested at June 30, 2012		590,000		$	1.83

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

	Three months ended September 30, 2012		Three months ended September 30, 2011
General and administrative:
Fair value of stock/warrant bonuses expensed	$	1,151,250	$	1,035,300
Fair value of stock issued to an employee		24,999		24,999
Change in fair value from modification of option terms		-		94,820
Fair value of stock options expensed		230,353		1,846,265
Total	$	1,406,602	$	3,001,384
Research and development:
Fair value of stock options expensed	$	8,702	$	40,598
Total	$	8,702	$	40,598