10-Q

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2016

☐   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.

☒  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).       ☒  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  ☒

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   ☒  No

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

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

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.  On February 10, 2017, there were 24,163,656 Common Shares issued and 23,459,347 Common Shares outstanding.

BION ENVIRONMENTAL TECHNOLOGIES, INC.

FORM 10-Q

TABLE OF CONTENTS

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

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FORWARD-LOOKING STATEMENTS

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

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PART I – FINANCIAL INFORMATION

BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	December 31,			June 30,
	2016			2016
	(unaudited)
ASSETS
Current assets:
Cash	$	7,635		$	170,194
Prepaid expenses		8,201			15,240
Subscription receivable		-			7,500
Deposits and other receivables		1,180			1,000
Total current assets		17,016			193,934
Property and equipment, net (Note 3)		3,254			4,259
Total assets	$	20,270		$	198,193
LIABILITIES AND EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued expenses	$	866,321		$	768,272
Series B Redeemable Convertible Preferred stock, $0.01 par value,    50,000 shares authorized; 200 shares issued and outstanding,    liquidation preference of $31,000 and $30,000, respectively (Note 7)		28,400			27,400
Deferred compensation (Note 4)		1,879,473			1,436,595
Convertible notes payable - affiliates (Note 6)		3,343,328			-
Loan payable and accrued interest (Note 5)		8,679,992			8,563,662
Total current liabilities		14,797,514			10,795,929
Convertible notes payable - affiliates (Note 6)		-			3,280,647
Total liabilities		14,797,514			14,076,576
Deficit:
Bion's stockholders' equity (deficit):
Series A Preferred stock, $0.01 par value, 10,000 shares authorized,     no shares issued and outstanding		-			-
Series C Convertible Preferred stock, $0.01 par value,    60,000 shares authorized; no shares issued and outstanding		-			-
Common stock, no par value, 100,000,000 shares authorized, 23,784,363    and 23,573,057 shares issued, respectively; 23,080,054    and 22,868,748 shares outstanding, respectively		-			-
Additional paid-in capital		102,797,550			102,278,364
Subscription receivable - affiliate		(40,000	)		-
Accumulated deficit		(117,593,144	)		(116,216,493	)
		(14,835,594	)		(13,938,129	)
Noncontrolling interest		58,350			59,746
Total deficit		(14,777,244	)		(13,878,383	)
Total liabilities and deficit	$	20,270		$	198,193

See notes to consolidated financial statements.

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BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

THREE AND SIX MONTHS ENDED DECEMBER 31, 2016 AND 2015

(UNAUDITED)

	Three months ended						Six months ended
	December 31,						December 31,
	2016			2015			2016			2015
Revenue	$	-		$	-		$	-		$	-
Operating expenses:
General and administrative (including stock-based
compensation  (Note 8))		526,697			550,095			951,388			1,058,000
Depreciation		503			76,083			1,005			151,962
Research and development (including stock-based
compensation (Note 8))		126,082			84,286			238,325			218,775
Total operating expenses		653,282			710,464			1,190,718			1,428,737
Loss from operations		(653,282	)		(710,464	)		(1,190,718	)		(1,428,737	)
Other expense:
Interest expense, net		94,565			86,905			187,329			201,661
		94,565			86,905			187,329			201,661
Net loss		(747,847	)		(797,369	)		(1,378,047	)		(1,630,398	)
Net loss attributable to the noncontrolling interest		862			1,274			1,396			2,569
Net loss applicable to Bion's common stockholders	$	(746,985	)	$	(796,095	)	$	(1,376,651	)	$	(1,627,829	)
Net loss applicable to Bion's common stockholders
per basic and diluted common share	$	(0.03	)	$	(0.03	)	$	(0.06	)	$	(0.07	)
Weighted-average number of common shares outstanding:
Basic and diluted		23,328,499			22,585,001			23,436,311			22,437,039

See notes to consolidated financial statements

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BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (DEFICIT)

SIX MONTHS ENDED DECEMBER 31, 2016

(UNAUDITED)

	Bion's Shareholders'
	Series C Preferred Stock				Common Stock				Additional			Subscription Receivable -			Accumulated			Noncontrolling			Total equity/
	Shares		Amount		Shares		Amount		paid-in capital			affiliate			deficit			interest			(deficit)
Balances, July 1, 2016		-	$	-		23,573,057	$	-	$	102,278,364		$	-		$	(116,216,493	)	$	59,746		$	(13,878,383	)
Issuance of common stock for services		-		-		23,687		-		19,507			-			-			-			19,507
Vesting of options and stock bonuses for services		-		-		-		-		144,600			-			-			-			144,600
Modification of options		-		-		-		-		177,471			-			-			-			177,471
Sale of common stock		-		-		30,467		-		22,850			-			-			-			22,850
Sale of units		-		-		140,000		-		105,000			-			-			-			105,000
Commissions on sale of units		-		-		-		-		(1,500	)		-			-			-			(1,500	)
Issuance of warrants		-		-		-		-		45,250			(40,000	)		-			-			5,250
Warrants exercised for common stock		-		-		10,000		-		-			-			-			-			-
Conversion of debt		-		-		7,152		-		6,008			-			-			-			6,008
Net loss		-		-		-		-		-			-			(1,376,651	)		(1,396	)		(1,378,047	)
Balances, December 31, 2016		-	$	-		23,784,363	$	-	$	102,797,550		$	(40,000	)	$	(117,593,144	)	$	58,350		$	(14,777,244	)

See notes to consolidated financial statements

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BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS

SIX MONTHS ENDED DECEMBER 31, 2016 AND 2015

BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES

(UNAUDITED)

	2016			2015
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(1,378,047	)	$	(1,630,398	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense		1,005			151,962
Accrued interest on loan payable, deferred compensation and other		204,917			201,940
Stock-based compensation		346,828			233,094
Decrease in prepaid expenses		7,039			6,153
Increase in accounts payable and accrued expenses		98,049			27,351
Increase in deferred compensation		423,800			490,800
Net cash used in operating activities		(296,409	)		(519,098	)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment		-			(4,251	)
Net cash used by investing activities		-			(4,251	)
CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in subscription receivable		7,500			13,125
Proceeds from sale of common stock		22,850			-
Proceeds from sale of units		105,000			183,000
Commissions on sale of units		(1,500	)		(18,300	)
Proceeds from exercise of warrants		-			184,689
Net cash provided by financing activities		133,850			362,514
Net decrease in cash		(162,559	)		(160,835	)
Cash at beginning of period		170,194			339,286
Cash at end of period	$	7,635		$	178,451
Supplemental disclosure of cash flow information:
Cash paid for interest	$	-		$	-
Non-cash investing and financing transactions:
Issuance of common stock to satisfy deferred compensation	$	6,008		$	171,717
Exercise of warrants for promissory note receivable for shares	$	-		$	105,000
Purchase of warrants for subscription receivable - affiliate	$	40,000			-

See notes to consolidated financial statements

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BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED DECEMBER 31, 2016

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

Organization and nature of business:

Bion Environmental Technologies, Inc. ("Bion" or "We" or the "Company") was incorporated in 1987 in the State of Colorado and has developed and continues to develop patented and proprietary technology and business models that provide comprehensive environmental solutions to a significant source of pollution in United States agriculture, large scale livestock facilities known as Confined Animal Feeding Operations ("CAFO's"). Bion's technologies (and applications related thereto) produce substantial reductions of nutrient releases (primarily nitrogen and phosphorus) to both water and air (including ammonia, which is subsequently re-deposited to the ground) from livestock waste streams based upon our operations and research to date (and third party peer review thereof). We are continually involved in research and development to upgrade and improve our technology and technology applications, including integration with third party technology. Bion provides comprehensive and cost-effective treatment of livestock waste onsite (and/or at nearby locations), while it is still concentrated and before it contaminates air, soil, groundwater aquifers and/or downstream waters, and, in certain configurations, can be optimized to maximize recovery of marketable nutrients for potential use as fertilizer (organic and/or inorganic) and/or feed additives plus renewable energy (and related environmental credits).

During the 2014 to 2016 fiscal years, the Company increased its research and development focus on augmenting the basic 'separate and aggregate' approach of its technology platform to provide additional flexibility and to increase recovery of marketable nutrient by-products (in organic and non-organic forms) and renewable energy production (either/both biogas and/or renewable electricity), thereby increasing potential related revenue streams and reducing dependence of its future projects on the monetization of nutrient reductions (which still remain a very important part of project revenue streams). This research and development effort also involves ongoing review of potential "add-ons" and applications to our technology platform for use in different regulatory and/or climate environments. These research and development activities have targeted completion of development of the next generation of Bion's technology and technology platform. We believe such activities will continue at least through the 2017 fiscal year (and likely longer), subject to availability of adequate financing for the Company's operations, of which there is no assurance.

Currently, Bion is focused on using applications of its patented and proprietary waste management technologies and technology platform to pursue three main business opportunities: 1) installation of Bion systems ( some of which may  generate verified nutrient credits and revenues from the production of renewable energy and byproducts) to retrofit and environmentally remediate existing CAFOs ("Retrofits") in selected markets where: a) government policy supports such efforts (such as the Chesapeake Bay watershed, some Great Lakes Basin states, and/or other states and watersheds facing EPA 'total maximum daily load' ("TMDL") issues, and/or b) where CAFO's need our technology to obtain permits to expand or develop without negative environmental consequences; 2) development of new state-of-the-art large scale waste treatment facilities in strategic locations ("Projects") ( some of these may be Integrated Projects as described below) with multiple revenue streams, and 3) licensing and/or joint venturing of Bion's technology and applications (primarily) outside North America. The opportunities described at 1) and 2) above each require substantial political and regulatory (federal, state and local) efforts on the part of the Company and a substantial part of Bion's efforts are focused on such political and regulatory matters. Bion intends to pursue international opportunities primarily through the use of consultants with existing relationships in target locations. The most intense focus is currently on the requirements for the clean-up of the Chesapeake Bay faced by the Commonwealth of Pennsylvania and the potential use of Bion's technology and technology platform on CAFOs as an alternative to what the Company believes is far more expensive nutrient removal downstream in storm water projects.

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Management believes that Bion's technology platform (including utilization of various third party technologies to supplement the Company's proprietary technologies), through the combination of remediation of the waste streams of large scale existing CAFOs with recovery of valuable marketable nutrients and renewable energy, can enable 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, operating costs and environmental footprint for the entire integrated complex ("Integrated Projects"). In the context of Integrated Projects, Bion's waste treatment process, in addition to mitigating polluting releases, enables generation of renewable energy from the CAFO waste stream, which renewable energy can be sold into renewable energy markets (with material economic incentives) and/or 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 and/or swine CAFO's) and/or other users as a fossil fuel replacement. The nutrients (primarily nitrogen and phosphorus) can be harvested from the solids and liquid streams recovered from the livestock waste stream and can be utilized as either high value fertilizer (organic and/or inorganic) 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 large scale Projects (including Integrated Projects) will produce high quality, traceable animal protein which can address consumer food safety/security concerns at a lower cost than current industry practices while also maintaining a far lower net environmental footprint per unit of protein produced due to water recycling (possible due to the removal of nutrients, etc. from the water by Bion's technology applications), production of renewable energy from the waste stream (reducing the use of fossil fuels), and multiple levels of economies of scale, co-location and integration savings in transportation and other logistics. Projects may involve various degrees of integration which will limit the benefits described herein.

During 2008 the Company commenced actively pursuing the opportunity presented by environmental retrofit and remediation of the waste streams of existing CAFOs which effort has met with very limited success to date. The first commercial activity in this area is represented by our agreement with Kreider Farms ("KF"), pursuant to which the Kreider 1 system to treat KF's dairy waste streams to reduce nutrient releases to the environment while generating marketable nutrient credits and renewable energy was designed, constructed and entered  full-scale operation during 2011. On January 26, 2009 the Board of the Pennsylvania Infrastructure Investment Authority ("Pennvest") approved a $7.75 million loan to Bion PA 1, LLC ("PA1"), a wholly-owned subsidiary of the Company, for the initial Kreider Farms project ("Kreider 1 System"). After substantial unanticipated delays, on August 12, 2010 PA1 received a permit for construction of the Kreider 1 system.  Construction activities commenced during November 2010.  The closing/settlement of the Pennvest Loan took place on November 3, 2010.  PA1 finished the construction of the Kreider 1 System and entered a period of system 'operational shakedown' during May 2011.  The Kreider 1 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 1 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, PA1 commenced generating nutrient reduction credits for potential sale while continuing to utilize the Kreider 1 system to test improvements and add-ons. However, to date liquidity in the Pennsylvania nutrient credit market has been slow to develop significant breadth and depth,  which limited liquidity/depth has negatively impacted Bion's business plans and has resulted in challenges to monetizing the nutrient reductions created by PA1's existing Kreider 1 project and Bion's other proposed projects. These difficulties have prevented PA1 from generating any material revenues from the Kreider 1 project to date and raise significant questions as to when, if ever, PA1 will be able to generate such revenues fromthe Kreider 1 system.  PA1 has had sporadic discussions/negotiations with Pennvest related to forbearance and/or re-structuring its obligations pursuant to the Pennvest Loan for more than three years. In the context of such discussions/negotiations, PA1 elected not to make interest payments to Pennvest on the Pennvest Loan since January 2013.  Additionally, the Company has not made any principal payments, which were to begin in fiscal 2013, and, therefore, the Company has classified the Pennvest Loan as a current liability as of December 31, 2016.  Due to the failure of the Pennsylvania nutrient reduction credit market to develop, the Company determined (on three separate occasions) that the carrying amount of the property and equipment related to the Kreider 1 project exceeded its estimated future undiscounted cash flows based on certain assumptions regarding timing, level and probability of revenues from sales of nutrient reduction credits.  Therefore, PA1 and the Company recorded impairments related to the value of the Kreider 1 assets totaling $3,750,000 through June 30, 2015.  During the 2016 fiscal year, effective June 30, 2016, PA1 and the Company recorded an additional impairment of $1,684,562 to the value of the Kreider 1 assets which reduced the value on the Company's books to $0.  This impairment reflects management's judgment that the salvage value of the Kreider 1 assets roughly equals PA1's contractual obligations related to the Kreider 1 system, including expenses related to decommissioning of the Kreider 1 system, costs associated with needed capital upgrade expenses, and re-certification/ permitting amendments.

10

On September 25, 2014, Pennvest exercised its right to declare the Pennvest Loan in default and accelerated the Pennvest Loan and demanded that PA1 pay $8,137,117 (principal, interest plus late charges) on or before October 24, 2014. PA1 did not make the payment and does not have the resources to make the payments demanded by Pennvest. PA1 has commenced discussions and negotiations with Pennvest concerning this matter but Pennvest has rejected PA1's proposal made during the fall of 2014.  No formal proposals are presently under consideration and only sporadic communication has taken place regarding the matters involved over the last 30 months.  It is not possible at this date to predict the outcome of such this matter, but the Company believes that a loan modification agreement may be reached in the future if/when a more robust market for nutrient reductions develops in Pennsylvania, of which there is no assurance. PA1 and Bion will continue to evaluate various options with regard to Kreider 1 over the next 30-180 days.

During August 2012, the Company provided Pennvest (and the PADEP) with data demonstrating that the Kreider 1 system met the 'technology guaranty' standards which were incorporated in the Pennvest financing documents and, as a result, the Pennvest Loan has been (and is now) solely an obligation of PA1 since that date.

The economics (potential revenues, profitability and continued operation) of the Kreider 1 System are based almost entirely on the long term sale of nutrient (nitrogen and/or phosphorus) reduction credits to meet the requirements of the Chesapeake Bay environmental clean-up.

On May 5, 2016, Bion PA2 LLC ("PA2") executed a stand-alone joint venture agreement with Kreider Farms covering all matters related to development and operation of a system to treat the waste streams from Kreider's poultry facilities ("Kreider 2").

The Kreider projects are owned and operated by Bion through separate subsidiaries, in which Kreider has the option to acquire a noncontrolling interest. Substantial capital (equity and/or debt) has been and will continue to be expended on these projects. Additional funds will be required for continuing operations and additional capital expenditures for upgrades at Kreider 1 until sufficient revenues can be generated, of which there is no assurance. The Company anticipates that the Kreider 1 project will generate revenue primarily from the sale of nutrient reduction (and/or other) environmental credits. A portion of Bion's research and development activities has taken place at the Kreider 1 facility.

Kreider 2 (not yet constructed) (and most future Projects) will be developed using Bion's 3G Tech to recover substantial marketable nutrients and renewable energy to supplement its revenue from nutrient reductions. The Company believes that the proceeds from multiple byproduct streams including i) fertilizer (organic and non-organic) and/or feed additives and ii) renewable energy (and related credits) can be reasonably projected to generate, in aggregate, revenue streams that, in certain circumstances, may exceed 50% of total revenues from such Project(s). To date the market for long-term nutrient reduction credits in Pennsylvania has been very slow to develop and the Company's activities have been negatively affected by the lack of such development.

Kreider 2 development work and technology evaluation, including execution of a stand-alone joint venture agreement, amended credit certification and discussions with potential joint venture partners, continues, which Project primarily relates to treatment of the wastes from Kreider's poultry operations. Assuming there are positive developments related to the market for nutrient reductions in Pennsylvania, the Company intends to pursue development, design and construction of the Kreider 2 poultry waste/renewable energy project with a goal of achieving operational status during calendar year 2018. However, as discussed above, this Project faces challenges related to the current limits of the existing nutrient reduction market and funding of technology-based, verifiable agricultural nutrient reductions which are anticipated to constitute the largest share of its revenues.

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

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Going concern and management's plans:

The consolidated financial statements have been prepared assuming the Company will continue as a going concern. The Company has not generated significant revenues and has incurred net losses (including significant non-cash expenses) of approximately $4,522,000 and $5,642,000 during the years ended June 30, 2016 and 2015, respectively and a net loss of approximately $1,378,000 during the six months ended December 31, 2016. At December 31, 2016, the Company has a working capital deficit and a stockholders' deficit of approximately $14,777,000 and $14,777,000, respectively. These factors raise substantial doubt about the Company's ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments relating to the recoverability or classification of assets or the amounts and classification of liabilities that may result should the Company be unable to continue as a going concern. The following paragraphs describe management's plans with regard to these conditions.

The Company continues to explore sources of additional financing (including potential agreements with strategic partners –both financial and ag-industry) to satisfy its current and future operating and capital expenditure requirements as it is not currently generating any significant revenues.

During the year ended June 30, 2016 the Company received total proceeds of $760,604 from the sale of its debt and equity securities. Proceeds during the 2016 fiscal year have been lower than in earlier years which reduction has negatively impacted the Company's business development efforts.

During the six months ended December 31, 2016, the Company received $127,850 gross proceeds from the sale of its debt and equity securities.

During fiscal years 2016 and 2015 and through the six months ended December 31, 2016, the Company experienced greater difficulty in raising equity funding than in the prior years. As a result, the Company faced, and continues to face, significant cash flow management challenges due to working capital constraints. To partially mitigate these working capital constraints, the Company's core senior management and several key employees and consultants have been deferring (and continue to defer) all or part of their cash compensation and/or are accepting compensation in the form of securities of the Company (Notes 5 and 7) and members of the Company's senior management have made loans to the Company. Additionally, the Company made reductions in its personnel during the year ended June 30, 2014. The constraint on available resources has had, and continues to have, negative effects on the pace and scope of the Company's efforts to develop its business. The Company has had to delay payment of trade obligations and has had to economize in many ways that have potentially negative consequences. If the Company does not have greater success in its efforts to raise needed funds during the 2017 fiscal year (and subsequent periods), management will need to consider deeper cuts (including additional personnel cuts) and curtailment of operations (including possibly Kreider 1 operations) and/or research and development activities.

The Company will need to obtain additional capital to fund its operations and technology development, to satisfy existing creditors, to develop Projects (including Integrated Projects) (including the Kreider 2 facility) and CAFO Retrofit waste remediation systems and to continue to operate the Kreider 1 facility. The Company anticipates that it will seek to raise from $2,500,000 to $50,000,000 or more debt and/or equity through joint ventures, strategic partnerships and/or sale of its equity securities (common, preferred and/or hybrid) and/or debt (including convertible) securities, and/or through use of 'rights' and/or warrants (new and/or existing) during the next twelve months. However, as discussed above, there is no assurance, especially in light of the difficulties the Company has experienced in recent periods and the extremely unsettled capital markets that presently exist (especially for companies like us), that the Company will be able to obtain the funds that it needs to stay in business, complete its technology development or to successfully develop its business and Projects.

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

12

2.    SIGNIFICANT ACCOUNTING POLICIES

Principles of consolidation:

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Bion Integrated Projects Group, Inc. ("Projects Group"), Bion Technologies, Inc., BionSoil, Inc., Bion Services, PA1, and PA2; and its 58.9% owned subsidiary, Centerpoint Corporation ("Centerpoint"). All significant intercompany accounts and transactions have been eliminated in consolidation.

The accompanying consolidated financial statements have been prepared without audit pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC").  The consolidated financial statements reflect all adjustments (consisting of only normal recurring entries) that, in the opinion of management, are necessary to present fairly the financial position at December 31, 2016, and the results of operations and cash flows of the Company for the three and six months ended December 31, 2016 and 2015.  Operating results for the three and six months ended December 31, 2016 are not necessarily indicative of the results that may be expected for the year ending June 30, 2017.

Property and equipment:

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

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.

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Fair value measurements:

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

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

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

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

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

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

Revenue Recognition:

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

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

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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 six months ended December 31, 2016 and 2015, the basic and diluted loss per share was the same, as the impact of potential dilutive common shares was anti-dilutive.

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

	December 31, 2016		December 31, 2015
Warrants		8,354,795		8,396,364
Options		4,520,037		4,513,870
Convertible debt		8,710,252		7,562,213
Convertible preferred stock		15,500		14,500

The following is a reconciliation of the denominators of the basic loss per share computations for the three and six months ended December 31, 2016 and 2015:

	Three months ended December 31, 2016			Three months ended December 31, 2015			Six months ended December 31, 2016			Six months ended December 31, 2015
Shares issued – beginning of period		23,761,168			22,606,852			23,573,057			22,089,650
Shares held by subsidiaries (Note 7)		(704,309	)		(704,309	)		(704,309	)		(704,309	)
Shares outstanding – beginning of period		23,056,859			21,902,543			22,868,748			21,385,341
Weighted average shares for fully vested  stock bonuses		260,870			652,989			430,435			626,495
Weighted average shares issued during the  period		10,770			29,469			137,128			425,203
Basic weighted average shares – end of   period		23,328,499			22,585,001			23,436,311			22,437,039

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Reclassifications:

Certain amounts in the prior year financial statements have been reclassified to conform to the current year presentation including the reclassification of accrued interest related to the Pennvest Loan from accounts payable and accrued expenses into loan payable and accrued interest.

Recent Accounting Pronouncements:

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

In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-09 "Revenue from Contracts from Customers," which supersedes the revenue recognition requirements in "Revenue Recognition (Topic 605)," and requires entities to recognize revenue in a way that depicts the transfer of potential goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to the exchange for those goods or services. ASU 2014-09 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017 and earlier application is permitted only as of annual reporting periods beginning after December 15, 2016.  Once the Company begins to generate revenue, the Company does not anticipate any material impact on its operations and financial statements.

In August 2014, the FASB issued ASU No. 2014-15, "Presentation of Financial Statements – Going Concern: Disclosures of Uncertainties about an Entity's Ability to Continue as a Going Concern." The new standard requires management to perform interim and annual assessments of an entity's ability to continue as a going concern within one year of the date the financial statements are issued. An entity must provide certain disclosures if conditions or events raise substantial doubt about the entity's ability to continue as a going concern. The guidance is effective for annual periods ending after December 15, 2016, and interim periods thereafter, early application is permitted. The adoption of ASU No. 2014-15 did not have a material impact on the Company's financial statements.

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3.    PROPERTY AND EQUIPMENT:

Property and equipment consists of the following:

	December 31, 2016			June 30, 2016
Machinery and equipment	$	2,222,670		$	2,222,670
Buildings and structures		401,470			401,470
Computers and office equipment		173,313			173,313
		2,797,453			2,797,453
Less accumulated depreciation		(2,794,199	)		(2,793,194	)
	$	3,254		$	4,259

Management reviewed property and equipment for impairment as of June 30, 2016 and determined that the carrying amount of property and equipment related to the Kreider 1 project exceeded its estimated future undiscounted cash flows based on certain assumptions regarding timing, level and probability of revenues from sales of nutrient reduction credits and potentially needed capital expenditures and it was also determined that the salvage value of the system components will be offset by contractual decommissioning obligations. Kreider 1 was measured at estimated fair value on a non-recurring basis using level 3 inputs, which resulted in an impairment of $1,684,562 of the property and equipment for the year ended June 30, 2016. As of June 30, 2016, the net book value of Kreider 1 was zero. As of December 31, 2016, management believes that no additional impairment exists.

Depreciation expense was $503 and $76,083 for the three months ended December 31, 2016 and 2015, respectively, and $1,005 and $151,962 for the six months ended December 31, 2016 and 2015, respectively.

4.     DEFERRED COMPENSATION:

The Company owes deferred compensation to various employees, former employees and consultants totaling $1,879,473 as of December 31, 2016. Included in the deferred compensation balances as of December 31, 2016, are $772,629, $281,590 and $117,292 owed Bassani, Mark A. Smith ("Smith"), the Company's President, and Edward Schafer ("Schafer"), the Company's Vice Chairman, respectively, pursuant to extension agreements effective January 1, 2015, whereby unpaid compensation earned after January 1, 2015, accrues interest at 4% per annum and can be converted into shares of the Company's common stock at the election of the employee during the first five calendar days of any month. The conversion price shall be the average closing price of the Company's common stock for the last 10 trading days of the immediately preceding month. The Company also owes various consultants, pursuant to various agreements, for deferred compensation of $466,478 as of December 31, 2016 with similar conversion terms as those described above for Bassani, Smith and Schafer, with the exception that the interest accrues at 3% per annum. The Company also owes a former employee and a current employee deferred compensation of $168,000 and $984, respectively, which is convertible into 226,168 and 1,186 shares, respectively, of the Company's common stock as of December 31, 2016 and, a former employee $72,500, which is not convertible and is non-interest bearing.

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5.     LOAN PAYABLE:

As of December 31, 2016, PA1, the Company's wholly-owned subsidiary, owes $8,679,992 under the terms of the Pennvest Loan related to the construction of the Kreider 1 System including accrued interest and late charges totaling $925,992. The terms of the Pennvest Loan provided for funding of up to $7,754,000 which was to be repaid by interest-only payments for three years, followed by an additional ten-year amortization of principal. The Pennvest Loan accrues interest at 2.547% per annum for years 1 through 5 and 3.184% per annum for years 6 through maturity. The Pennvest Loan required minimum annual principal payments of approximately $2,001,000 in fiscal years 2013 through 2016, and $741,000 in fiscal year 2017, $760,000 in fiscal year 2018, $771,000 in fiscal year 2019, $794,000 in fiscal year 2020, $819,000 in fiscal year 2021 and $1,867,000 thereafter. The Pennvest Loan is collateralized by the Kreider 1 System and by a pledge of all revenues generated from Kreider 1 including, but not limited to, revenues generated from nutrient reduction credit sales and by-product sales. In addition, in consideration for the excess credit risk associated with the project, Pennvest is entitled to participate in the profits from Kreider 1 calculated on a net cash flow basis, as defined.  The Company has incurred interest expense related to the Pennvest Loan of $49,374 for both of the three months ended December 31, 2016 and 2015, respectively. The Company has incurred interest expense related to the Pennvest Loan of $98,747 for both of the six months ended December 31, 2016 and 2015, respectively.  Based on the limited development of the depth and breadth of the Pennsylvania nutrient reduction credit market to date, PA1 commenced negotiations with Pennvest related to forbearance and/or re-structuring the obligations under the Pennvest Loan. In the context of such negotiations, PA1 has elected not to make interest payments to Pennvest on the Pennvest Loan since January 2013. Additionally, the Company has not made any principal payments, which were to begin in fiscal 2013, and, therefore, the Company has classified the Pennvest Loan as a current liability as of December 31, 2016.

On September 25, 2014, Pennvest exercised its right to declare the Pennvest Loan in default and has accelerated the Pennvest Loan and demanded that PA1 pay $8,137,117 (principal, interest plus late charges) on or before October 24, 2014. PA1 did not make the payment and does not have the resources to make the payment demanded by Pennvest. PA1 has engaged in on/off discussions and negotiations with Pennvest concerning this matter but no such discussions/negotiations are currently active. As of the date of this report, no formal proposals are presently under consideration and only sporadic communication has taken place regarding the matters involved over the past 30 months. It is not possible at this date to predict the outcome of this matter, but the Company believes it is possible that an agreement may yet be reached that will result in a viable loan modification. Subject to the results of the negotiations with Pennvest and pending development of a more robust market for nutrient reductions in Pennsylvania, PA1 and Bion will continue to evaluate various options with regard to Kreider 1 over the next 30-180 days.

In connection with the Pennvest Loan financing documents, the Company provided a 'technology guaranty' regarding nutrient reduction performance of Kreider 1 which was structured to expire when Kreider 1's nutrient reduction performance had been demonstrated. During August 2012 the Company provided Pennvest (and the PADEP) with data demonstrating that the Kreider 1 System had surpassed the requisite performance criteria and that the Company's 'technology guaranty' was met. As a result, the Pennvest Loan is solely an obligation of PA1.

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6.     CONVERTIBLE NOTES PAYABLE - AFFILIATES:

January 2015 Convertible Notes

The January 2015 Convertible Notes accrue interest at 4% per annum and are due and payable on December 31, 2017. The January 2015 Convertible Notes (including accrued interest, plus all future deferred compensation), are convertible, at the sole election of the noteholder, into Units consisting of one share of the Company's common stock and one quarter warrant to purchase a share of the Company's common stock, at a price of $0.50 per Unit until December 31, 2020. The warrant contained in the Unit shall be exercisable at $1.00 per share until December 31, 2020. The original conversion price of $0.50 per Unit approximated the fair value of the Units at the date of the agreements; therefore no beneficial conversion feature exists. Management evaluated the terms and conditions of the embedded conversion features based on the guidance of ASC 815-15 "Embedded Derivatives" to determine if there was an embedded derivative requiring bifurcation. An embedded derivative instrument (such as a conversion option embedded in the deferred compensation) must be bifurcated from its host instruments and accounted for separately as a derivative instrument only if the "risks and rewards" of the embedded derivative instrument are not "clearly and closely related" to the risks and rewards of the host instrument in which it is embedded. Management concluded that the embedded conversion feature of the deferred compensation was not required to be bifurcated because the conversion feature is clearly and closely related to the host instrument, and because of the Company's limited trading volume that indicates the feature is not readily convertible to cash in accordance with ASC 815-10, "Derivatives and Hedging".

As of December 31, 2016, the January 2015 Convertible Note balances, including accrued interest, owed Bassani, Smith and Schafer were $1,581,710, $821,360 and $408,553, respectively.  During both of the three months ended December 31, 2016 and 2015, the Company recorded interest expense of $26,247, respectively, related to the January 2015 Convertible Notes.  The Company recorded $52,495 for both the six months ended December 31, 2016 and 2015, respectively.

September 2015 Convertible Notes

During the year ended June 30, 2016, the Company entered into September 2015 Convertible Notes with Bassani, Schafer and a Shareholder which replaced previously issued promissory notes. The initial principal balances of the September 2015 Convertible Notes were $405,831, $16,382 and $82,921, respectively. The September 2015 Convertible Notes bear interest at 4% per annum, have maturity dates of December 31, 2017 and may be converted at the sole election of the noteholders into restricted common shares of the Company at a conversion price of $0.60 per share. As the conversion price of $0.60 approximated the fair value of the common shares at the date of the September 2015 Convertible Notes, no beneficial conversion feature exists. The balances of the September 2015 Convertible Notes as of December 31, 2016, including accrued interest, are $427,179, $17,244 and $87,282, respectively. The Company recorded interest expense related to the 2015 Convertible Notes of $5,092 and $5,093 for the three months ended December 31, 2016 and 2015, respectively.  The Company recorded interest expense of $10,185 and $6,311 for the six months ended December 31, 2016, respectively.

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7.     STOCKHOLDERS' EQUITY:

Series B Preferred stock:

At July 1, 2014, the Company had 200 shares of Series B redeemable convertible Preferred stock outstanding with a par value of $0.01 per share, convertible at the option of the holder at $2.00 per share, with dividends accrued and payable at 2.5% per quarter. The Series B Preferred stock is mandatorily redeemable at $2.00 per share by the Company three years after issuance and accordingly was classified as a liability. The 200 shares have reached their maturity date, but due to the cash constraints of the Company have not been redeemed.

During the years ended June 30, 2016 and 2015, the Company declared dividends of $2,000 and $2,000 respectively. During the three and six months ended December 31, 2016, the Company declared dividends of $500 and $1,000, respectively.  At December 31, 2016, accrued dividends payable are $11,000.  The dividends are classified as a component of operations as the Series B Preferred stock is presented as a liability in these financial statements.  For the three and six months ended December 31, 2015 these amounts were presented differently but the December 31, 2015 financial statements were revised even though such revision previously was and continues to be immaterial to the prior year financial statements.

Common stock:

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

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

During the six months ended December 31, 2016, the Company issued 23,687 shares of the Company's common stock at prices ranging from $0.75 to $1.02 per share for services valued at $19,507, in the aggregate, to consultants and employees.

During the six months ended December 31, 2016, the Company issued 10,000 shares of the Company's restricted common stock upon receipt of its subscription receivable of $7,500 for the exercise of 10,000 warrants.

During the six months ended December 31, 2016, the Company entered into subscription agreements to sell units for $0.75 per unit, with each unit consisting of one share of the Company's restricted common stock and one warrant to purchase one half of a share of the Company's restricted common stock for $1.00 per share until December 31, 2017 and pursuant thereto, the Company issued 140,000 units for total proceeds of $105,000, net proceeds of $103,500 after commissions.  The Company allocated the proceeds from the shares and the warrants based upon their relative fair values, using the share price on the day each of the subscription agreements were entered into and the fair value of the warrants, which was determined to be $0.05 per warrant. As a result, $2,968 was allocated to the warrants and $102,032 was allocated to the shares, and both were recorded as additional paid in capital.

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During the six months ended December 31, 2016, the Company sold 30,467 shares of the Company's common stock for $0.75 per share for total proceeds of $22,850.

During the six months ended December 31, 2016, a consultant elected to convert $6,008 of deferred compensation into 7,152 shares of the Company's common stock at a conversion rate of $0.84 per share.

Warrants:

As of December 31, 2016, the Company had approximately 8.4 million warrants outstanding, with exercise prices from $0.75 to $3.00 and expiring on various dates through December 31, 2021.

The weighted-average exercise price for the outstanding warrants is $1.26, and the weighted-average remaining contractual life as of December 31, 2016 is 3.8 years.

During the six months ended December 31, 2016, warrants to purchase 722,319 shares of common stock of the Company at prices between $0.75 per share expired.

At June 30, 2016 the Company had a subscription agreement for the exercise of 10,000 warrants at an exercise price of $0.75, resulting in a subscription receivable of $7,500.  During the six months ended December 31, 2016, the received the subscription receivable of $7,500 and the Company issued 10,000 shares of the Company's common stock in satisfaction of the warrant exercise.

During the six months ended December 31, 2016, Smith and a consultant each purchased 40,000 warrants at an exercise price of $1.00, with expiry dates of December 31, 2021.  Smith and the consultant utilized deferred compensation of $2,000 each to purchase the warrants.

During the six months ended December 31, 2016, a consultant was issued 25,000 warrants at $0.90, expiring on December 31, 2019 in exchange for services valued at $1,250.

During the six months ended December 31, 2016, the Company entered into subscription agreements to sell units for $0.75 per unit, with each unit consisting of one share of the Company's restricted common stock and one warrant to purchase one half of a share of the Company's restricted common stock for $1.00 per share until December 31, 2017 and pursuant thereto, the Company issued 140,000 units for gross proceeds of $105,000.  The Company allocated the proceeds from the shares and the warrants based upon their relative fair values, using the share price on the day each of the subscription agreements were entered into and the fair value of the warrants, which was determined to be $0.05 per warrant. As a result, $2,968 was allocated to the warrants and $102,032 was allocated to the shares, and both were recorded as additional paid in capital.

During the six months ended December 31, 2016, the Company received an interest bearing, secured promissory note for $40,000 from Bassani as consideration to purchase warrants to purchase 800,000 shares of the Company's restricted common stock, which warrants are exercisable at $1.00 and have expiry dates of December 31, 2021 ("Bassani Warrant").  The promissory note bears interest at 4% per annum, is secured by a perfected security interest in the Bassani Warrant, and is payable on November 15, 2017.

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Stock options:

The Company's 2006 Consolidated Incentive Plan, as amended (the "2006 Plan"), provides for the issuance of options (and/or other securities) to purchase up to 22,000,000 shares of the Company's common stock. Terms of exercise and expiration of options/securities 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.

During the six months ended December 31, 2016, the Company approved the modification of existing stock options held by an employee and two former employees, who are now consultants, which extended certain expiration dates and reduced certain exercise prices, which resulted in incremental non-cash compensation expense of $177,471.

During the six months ended December 31, 2016, the Company approved the issuance of 100,000 shares in stock bonuses to an employee and a consultant with various vesting dates from April 15, 2017 through January 15, 2020.  The Company recorded $14,784 of non-cash compensation related to the stock bonuses for the three and six months ended December 31, 2016, respectively.

The Company recorded compensation expense related to employee stock options of $108,960 and $74,320 for the three months ended December 31, 2016 and 2015, respectively, and $129,816 and $89,640 for the six months ended December 31, 2016 and 2015, respectively. The Company granted 294,500 and 100,000 options during the six months ended December 31, 2016 and 2015, respectively.

The fair value of the options granted during the six months ended December 31, 2016 and 2015 were estimated on the grant date using the Black-Scholes option-pricing model with the following assumptions:

	Weighted Average, December 31, 2016	Range, December 31, 2016	Weighted Average, December 31, 2015	Range, December 31, 2015
Volatility	79%	78%-86%	74%	74%
Dividend yield	-	-	-	-
Risk-free interest rate	1.14%	0.82%-1.17%	1.75%	1.75%
Expected term (years)	4.0	3-4	5	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.

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A summary of option activity under the 2006 Plan for the six months ended December 31, 2016 is as follows:

	Options		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life		Aggregate Intrinsic Value
Outstanding at July 1, 2016		4,225,537	$	1.79		4.1	$	158,675
Granted		294,500		1.00
Exercised		-		-
Forfeited		-		-
Expired		-		-
Outstanding at December 31, 2016		4,520,037	$	1.42		3.4	$	31,125
Exercisable at December 31, 2016		4,420,037	$	1.44		3.3	$	38,625

The following table presents information relating to nonvested stock options as of December 31, 2016:

	Options	Weighted Average Grant-Date Fair Value
Nonvested at July 1, 2016	50,000	$ 0.76
Granted	294,500	0.47
Vested	(244,500)	(0.47)
Nonvested at December 31, 2016	100,000	$ 0.61

The total fair value of stock options that vested during the six months ended December 31, 2016 and 2015 was $113,770 and $59,000, respectively. As of December 31, 2016, the Company had $16,867 of unrecognized compensation cost related to stock options.

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Stock-based employee compensation charges in operating expenses in the Company's financial statements for the three and six months ended December 31, 2016 and 2015 are as follows:

	Three months ended December 31, 2016		Three months ended December 31, 2015		Six months ended December 31, 2016		Six months ended December 31, 2015
General and administrative:
Fair value of stock bonuses expensed	$	6,830	$	69,000	$	6,830	$	69,000
Change in fair value from modification of option terms		166,031		42,550		166,031		42,550
Fair value of stock options expensed		90,067		62,371		106,565		64,209
Total	$	262,928	$	173,921	$	279,426	$	175,759
Research and development:
Fair value of stock bonus expensed	$	7,954	$	-	$	7,954	$	-
Change in fair value from modification of option terms		11,440		-		11,440		-
Fair value of stock options expensed		18,889		11,949		23,251		25,431
Total	$	38,283	$	11,949	$	42,645	$	25,431

8.    COMMITMENTS AND CONTINGENCIES:

Employment and consulting agreements:

Smith has held the positions of Director, President and General Counsel of Company and its subsidiaries under various agreements and terms since March 2003.  During September 2014, Smith agreed to continue his employment agreement through April 15, 2015 and also agreed to continue to defer his temporarily reduced salary of $14,000 per month until such date.  On February 10, 2015, the Company executed an Extension Agreement with Smith pursuant to which Smith extended his employment with the Company to December 31, 2015 (with the Company having an option to extend his employment an additional six months). As part of the Extension Agreement, the balance of Smith's existing convertible note payable as of December 31, 2014, adjusted for conversions subsequent to that date, was replaced with a new convertible note with an initial principal amount of $760,520 with terms that i) materially reduce the interest rate by 50% (from 8% to 4%), ii) increases the conversion price by 11% (from $0.45 to $0.50), iii) sets the conversion price at a fixed price so there can be no further reductions, iv) reduces the number of warrants received on conversion by 75% (from 1 warrant per unit to 1/4 per unit) and v) extends the maturity date to December 31, 2017. Additionally, pursuant to the Extension Agreement, Smith: i) will continue to defer his cash compensation ($18,000 per month) until the Board of Directors re-instates cash payments to all employees and consultants who are deferring their compensation, ii) cancelled 150,000 contingent stock bonuses previously granted to him by the Company, iii) has been granted 150,000 new options which vested immediately and iv) outstanding options and warrants owned by Smith (and his donees) have been extended and had the exercise prices reduced to $1.50 (if the exercise price exceeded $1.50). In October 2015, the Company executed an Extension Agreement ("FY2016 Extension Agreement") with Smith pursuant to which Smith extended his employment with the Company to June 30, 2016 (with Company having an option to extend his employment an additional six months). As part of the FY2016 Extension Agreement, Smith: i) will continue to defer his cash compensation ($19,000 per month) until the Board of Directors re-instates cash payments, ii) has been granted 100,000 new options which vested immediately, and iii) has been granted 75,000 shares of common stock as an extension bonus which are immediately vested and were issued on January 5, 2016. As of July 1, 2016, Smith is working under a month to month contract extension until a longer term agreement is reached.  On October 10, 2016, the Company approved a month to month contract extension with Smith which includes provisions for i)   issuance of 25,000 bonus shares of the Company's common shares on January 15, 2017 (which were subsequently cancelled), ii) grant of 75,000 options to purchase shares of the Company's common shares at $0.90 per share with expiry date of December 31, 2020, which options are subject to the exercise/extension bonus, iii) a monthly deferred salary of $18,000 effective October 1, 2016, iv) the right to convert up to $125,000 of his deferred compensation, at his sole election, at $0.75 per share, until March 15, 2018 (which  was expanded on January 27, 2017 to the right to convert up to $250,000 of his deferred compensation, at his sole election, at $0.75 per share, until December 31, 2018), and v) the right to convert his deferred compensation in whole or in part, at his sole election, at any time in any amount at "market" or into securities sold in the Company's current/most recent private offering at the price of such offering to third parties.

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Since March 31, 2005, the Company has had various agreements with Brightcap and/or Bassani, through which the services of Bassani are provided. The Board appointed Bassani as the Company's CEO effective May 13, 2011. During the fiscal years 2012 and 2013, Bassani entered into extension agreements whereby he was awarded fully vested stock grants totaling 600,000 shares, 500,000 shares of which are to be issued January 15, 2016 and 100,000 shares are to be issued January 15, 2017. The stock grants were expensed in the years they were awarded as they are fully vested. On February 10, 2015, the Company executed an Extension Agreement with Bassani pursuant to which Bassani extended the term of his service to the Company to December 31, 2017, (with the Company having an option to extend the term an additional six months.) As part of the agreement, the Company's then existing loan payable, deferred compensation and convertible note payable to Bassani, were restructured into two promissory notes as follows: a) The sum of the cash loaned by Bassani to the Company of $279,000 together with $116,277 of unreimbursed expenses through December 31, 2014, were placed into a new promissory note with initial principal of $395,277 which was due and payable on December 31, 2015 and now has been replaced with a September 2015 Convertible Note (Note 8). In connection with these sums and the new promissory note, Bassani was issued warrants to purchase 592,916 shares of the Company's common stock at a price of $1.00 until December 31, 2020; and b) the remaining balances of the Company's accrued obligations to Bassani ($1,464,545) were replaced with a new convertible promissory note with terms that compared with the largest prior convertible note obligation to Bassani: i) materially reduce the interest rate by 50% (from 8% to 4%), ii) increase the conversion price by 11% (from $0.45 to $0.50), iii) sets the conversion price at a fixed price so there can be no further reductions, iv) reduces the number of warrants received on conversion by 75% (from 1 warrant per unit to 1/4 per unit) and v) extends the maturity date to December 31, 2017 (Note 8). Additionally, pursuant to the Extension Agreement, Bassani i) will continue to defer his cash compensation ($31,000 per month) until the Board of Directors re-instates cash payments to all employees and consultants who are deferring their compensation, ii) cancelled 250,000 contingent stock bonuses previously granted to him by the Company, iii) has been granted 450,000 new options which vested immediately and iv) outstanding options and warrants owned by Bassani (and his donees) have been extended and had the exercise prices reduced to $1.50 (if the exercise price exceeded $1.50).During October 2016 Bassani was granted the right to convert up to $125,000 of his deferred compensation, at his sole election, at $0.75 per share, until March 15, 2018 (which  was expanded on January 27, 2017 to the right to convert up to $250,000 of his deferred compensation, at his sole election, at $0.75 per share, until December 31, 2018).

On February 10, 2015, the Company entered into an agreement with Schafer pursuant to which Schafer will continue to provide services to the Company through December 31, 2015.  Additionally, pursuant to the agreement, i) the exercise period of outstanding options and warrants owned by Schafer have been extended, and ii) 25,000 contingent stock bonuses previously granted to Schafer have been cancelled by the Company. In January 2016, Schafer agreed to extend his agreement with the Company through December 31, 2016. During June 2016, Schafer and the Company determined that due to other obligations Schafer's involvement with the Company during the 2016 fiscal year was less than anticipated and reduced his fiscal year 2016 compensation (all of which had been deferred) by $160,000 and future compensation will be determined periodically based on evaluation by the board of directors.

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Contingent stock bonuses:

The Company has declared contingent deferred stock bonuses to its key employees and consultants at various times throughout the years. The stock bonuses were contingent upon the Company's stock price exceeding a certain target price per share, and the grantees still being employed by or providing services to the Company at the time the target prices are reached. During the six months ended December 31, 2016, the Company cancelled all 117,500 outstanding contingent stock bonuses.  In consideration for the cancellations, the Company granted 109,500 fully vested options to certain employees and a consultant to purchase common stock of the Company at $1.00 per share until December 31, 2020.

Execution/exercise bonuses:

As part of agreements the Company entered into with Bassani and Smith effective May 15, 2013, they were each granted the following: a) a 50% execution/exercise bonus which shall be applied upon the effective date of the notice of intent to exercise (for options and warrants) or issuance event, as applicable, of any currently outstanding and/or subsequently acquired options, warrants and/or contingent stock bonuses owned by each (and/or their donees) as follows: i) in the case of exercise by payment of cash, the bonus shall take the form of reduction of the exercise price; ii) in the case of cashless exercise, the bonus shall be applied to reduce the exercise price prior to the cashless exercise calculations; and iii) with regard to contingent stock bonuses, issuance shall be triggered upon the Company's common stock reaching a closing price equal to 50% of currently specified price; and b) the right to extend the exercise period of all or part of the applicable options and warrants for up to five years (one year at a time) by annual payments of $.05 per option or warrant to the Company on or before a date during the three months prior to expiration of the exercise period at least three business days before the end of the expiration period. Effective January 1, 2016 such annual payments to extend warrant exercise periods have been reduced to $.01 per option or warrant.

During the year ended June 30, 2014, the Company extended execution/exercise bonuses with the same terms as described above to Schafer and to Jon Northrop, the Company's other board member.

As of December 31, 2016, the execution/exercise bonus was applicable to 3,145,000 of the Company's outstanding options and 7,657,153 of the Company's outstanding warrants.

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Litigation:

On September 25, 2014, Pennvest exercised its right to declare the Pennvest Loan in default and has accelerated the Pennvest Loan and has demanded that PA1 pay $8,137,117 (principal, interest plus late charges) on or before October 24, 2014. PA1 did not make the payment and does not have the resources to make the payment demanded by Pennvest. During August 2012, the Company provided Pennvest (and the PADEP) with data demonstrating that the Kreider 1 system met the 'technology guaranty' standards which were incorporated in the Pennvest financing documents and, as a result, the Pennvest Loan is now solely an obligation of PA1. No litigation has commenced related to this matter but such litigation is likely if negotiations do not produce a resolution (Notes 1 and Note 6).

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

9. SUBSEQUENT EVENTS:

The Company has evaluated events that occurred subsequent to December 31, 2016 for recognition and disclosure in the financial statements and notes to the financial statements.

From January 1, 2017 through February 10, 2017, the Company has issued 131,386 shares of the Company's common shares to an employee and consultants for services valued at approximately $99,000.

From January, 1, 2017 through February 10, 2017, two consultants have elected to convert approximately $134,000 of deferred compensation into 177,390 shares of the Company's common shares. The Company also issued 79,614 warrants to purchase common shares of the Company for $1.00 per share with expiry dates of December 31, 2018 in conjunction with one of the conversions.

From January 1, 2017 through February 10, 2017, the Company sold 70,517 Units of its securities at $0.75 per Unit for aggregate consideration of approximately $52,900.  Each Unit consists of one share of common stock and a callable warrant to purchase ½ share of the Company's common shares at $1.00 per share until December 31, 2017.

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ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

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

These factors include adverse economic conditions, entry of new and stronger competitors, inadequate capital, unexpected costs, failure (or delay)  to gain product or regulatory approvals in the United States (or particular states) or foreign countries and failure to capitalize upon access to new markets.  Additional risks and uncertainties that may affect forward looking statements about Bion's business and prospects include the possibility that markets for nutrient reduction credits (discussed below) and/or other ways to monetize nutrient reductions will be slow to develop (or not develop at all), the existing default by PA1 on its loan secured by the Kreider 1 system, the possibility that a competitor will develop a more comprehensive or less expensive environmental solution, Bion's limited management team, delays in market awareness of Bion and our Systems, uncertainties and costs related to research and development efforts to update and improve Bion's technologies and applications thereof, and/or  delays in Bion's development of Projects and failure of marketing strategies, each of which could have both immediate and long term material adverse effects by placing us behind our competitors and requiring expenditures of our limited resources. Bion disclaims any obligation subsequently to revise any forward looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

The following discussion and analysis should be read in conjunction with the unaudited Consolidated Financial Statements and Notes to Consolidated Financial Statements filed herein with the Company's Form 10-K for the year ended June 30, 2016.

BUSINESS OVERVIEW

During the 2014 and 2015 fiscal years, the Company increased its research and development activities toward development of our 3G Tech with focus on augmenting the basic 'separate and aggregate' approach of its technology platform to provide additional flexibility and to increase recovery of nutrient by-products (in organic and non-organic forms) and renewable energy production (either/both biogas and/or renewable electricity), thereby increasing potential related revenue streams and reducing dependence of its future projects on the monetization of nutrient reductions (which still remain a very important part of project revenue streams). This research and development effort also involves ongoing review of potential "add-ons" and applications to our technology platform for use in different regulatory and/or climate environments. These research and development activities continued through the 2016 fiscal year with increased focus on recovery of marketable 'byproducts' (including nutrients and renewable natural gas) and completion of development of Bion's 3G Tech and technology platform. We believe such activities will continue at least through the 2017 fiscal year, subject to availability of adequate financing for the Company's operations, of which there is no assurance.

Operational results from the initial commercial system (utilizing our 2G Tech) confirmed the ability of Bion's technologies to meet its nutrient reduction goals at commercial scale for an extended period of operation. Bion's current 2G Tech platform (and the new variations under development) center on its patented and proprietary processes that separate and aggregate the various assets in the CAFO waste stream so they become benign, stable and/or transportable. Bion systems can: a) remove up to 95% of the nutrients (primarily nitrogen and phosphorus) in the effluent, b) reduce greenhouse gases by 90% (or more) including elimination of virtually all ammonia emissions, c) while materially reducing pathogens, antibiotics and hormones in the livestock waste stream. In addition to capturing a portion of valuable nutrients for reuse (in organic and/or non-organic forms), Bion's 2^nd generation technology platform also recovers cellulosic biomass which can be used to generate renewable energy from the waste stream in a process more efficient than other technologies that seek to exploit this CAFO waste stream. Our core technology and its primary CAFO applications are now proven in commercial operations. It has been accepted by the Environmental Protection Agency ("EPA") and other regulatory agencies and it is protected by Bion's portfolio of U.S. and international patents (both issued and applied for). Currently, research and development activities are underway to improve, update and move toward completion and commercialization of our 3G Tech systems to meet the needs of CAFOs in various geographic and climate areas with nutrient release constraints and to increase the recovery and generation of valuable by-products while adding the capability to treat dry (poultry) waste streams in addition to wet manure streams.

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Currently, Bion is focused on using applications of its patented and proprietary waste management technologies and technology platform to pursue three main business opportunities: 1) installation of Bion systems ( some of which may  generate verified nutrient credits and revenues from the production of renewable energy and byproducts) to retrofit and environmentally remediate existing CAFOs ("Retrofits") in selected markets where: a) government policy supports such efforts (such as the Chesapeake Bay watershed, some Great Lakes Basin states, and/or other states and watersheds facing EPA 'total maximum daily load' ("TMDL") issues, and/or b) where CAFO's need our technology to obtain permits to expand or develop without negative environmental consequences; 2) development of new state-of-the-art large scale waste treatment facilities in strategic locations ("Projects") ( some of these may be Integrated Projects as described below) with multiple revenue streams, and 3) licensing and/or joint venturing of Bion's technology and applications (primarily) outside North America. The opportunities described at 1) and 2) above each require substantial political and regulatory (federal, state and local) efforts on the part of the Company and a substantial part of Bion's efforts are focused on such political and regulatory matters. Bion is currently pursuing the international opportunities primarily through the use of consultants with existing relationships in target.

During 2008 the Company commenced actively pursuing the opportunity presented by environmental retrofit and remediation of the waste streams of existing CAFOs which effort has met with very limited success to date. The first commercial activity in this area is represented by our agreement with Kreider Farms ("KF"), pursuant to which the Kreider 1 system to treat KF's dairy waste streams to reduce nutrient releases to the environment while generating marketable nutrient credits and renewable energy was designed, constructed and entered  full-scale operation during 2011. On January 26, 2009 the Board of the Pennsylvania Infrastructure Investment Authority ("Pennvest") approved a $7.75 million loan to Bion PA 1, LLC ("PA1"), a wholly-owned subsidiary of the Company, for the initial Kreider Farms project ("Kreider 1 System"). After substantial unanticipated delays, on August 12, 2010 PA1 received a permit for construction of the Kreider 1 system.  Construction activities commenced during November 2010.  The closing/settlement of the Pennvest Loan took place on November 3, 2010.  PA1 finished the construction of the Kreider 1 System and entered a period of system 'operational shakedown' during May 2011.  The Kreider 1 System reached full, stabilized operation by the end of the 2012 fiscal year.  During 2011 the PADEP re-certified the nutrient credits for this project.  The PADEP issued final permits for the Kreider 1 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, PA1 commenced generating nutrient reduction credits for potential sale while continuing to utilize the Kreider 1 system to test improvements and add-ons. However, to date liquidity in the Pennsylvania nutrient credit market has been slow to develop significant breadth and depth,  which limited liquidity/depth has negatively impacted Bion's business plans and has resulted in challenges to monetizing the nutrient reductions created by PA1's existing Kreider 1 project and Bion's other proposed projects. These difficulties have prevented PA1 from generating any material revenues from the Kreider 1 project to date and raise significant questions as to when, if ever, PA1 will be able to generate such revenues from the Kreider 1 system.  PA1 has had sporadic discussions/negotiations with Pennvest related to forbearance and/or re-structuring its obligations pursuant to the Pennvest Loan for more than three years. In the context of such discussions/negotiations, PA1 elected not to make interest payments to Pennvest on the Pennvest Loan since January 2013.  Additionally, the Company has not made any principal payments, which were to begin in fiscal 2013, and, therefore, the Company has classified the Pennvest Loan as a current liability as of December 31, 2016.  Due to the failure of the PA nutrient reduction credit market to develop, the Company determined that the carrying amount of the property and equipment related to the Kreider 1 project exceeded its estimated future undiscounted cash flows based on certain assumptions regarding timing, level and probability of revenues from sales of nutrient reduction credits and, therefore, PA1 and the Company recorded impairments related to the value of the Kreider 1 assets of $1,750,000 and $2,000,000 at June 30, 2015 and June 30, 2014, respectively.  During the 2016 fiscal year, effective June 30, 2016, PA1 and the Company recorded an impairment of $1,684,562 to the value of the Kreider 1 assets which reduced the value on the Company's books to $0.  This impairment reflects management's judgment that the salvage value of the Kreider 1 assets roughly equals PA1's contractual obligations related to the Kreider 1 system, including expenses related to decommissioning of the Kreider 1 system, costs associated with needed capital upgrade expenses, and re-certification/ permitting amendments. See "Impairment loss on property and equipment" below.

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On September 25, 2014, Pennvest exercised its right to declare the Pennvest Loan in default and accelerated the Pennvest Loan and demanded that PA1 pay $8,137,117 (principal, interest plus late charges) on or before October 24, 2014. PA1 did not make the payment and does not have the resources to make the payments demanded by Pennvest. PA1 has commenced discussions and negotiations with Pennvest concerning this matter but Pennvest has rejected PA1's proposal made during the fall of 2014.  As of the date of this report, no formal proposals are currently under consideration and only sporadic communication has taken place regarding the matters involved over the last 30 months.  It is not possible at this date to predict the outcome of this matter, but the Company believes that a loan modification agreement may be reached in the future if/when a more robust market for nutrient reductions develops in PA, of which there is no assurance. PA1 and Bion will continue to evaluate various options with regard to Kreider 1 over the next 30-180 days.

The economics (potential revenues, profitability and continued operation) of the Kreider 1 System are based almost entirely on the long term sale of nutrient (nitrogen and/or phosphorus) reduction credits to meet the requirements of the Chesapeake Bay environmental clean-up. See below for further discussion.

During August 2012, the Company provided Pennvest (and the PADEP) with data demonstrating that the Kreider 1 system met the 'technology guaranty' standards which were incorporated in the Pennvest financing documents and, as a result, the Pennvest Loan has been (and is now) solely an obligation of PA1 since that date.

The Company is currently operating the Kreider 1 System in a limited manner pending development of a more robust market for its nutrient reductions.

Bion continues its pre-develop work related to a waste treatment/renewable energy production facility to treat the waste from KF's approximately 5+ million chickens (planned to expand to approximately 9-10 million)(and potentially other poultry operations and/or other waste streams)('Kreider Renewable Energy Facility' or ' Kreider 2 Project').  On May 5, 2016, the Company executed a stand-alone joint venture agreement with Kreider Farms covering all matters related to development and operation of Kreider 2 system to treat the waste streams from Kreider's poultry facilities in Bion PA2 LLC ("PA2").During May 2011 the PADEP certified a smaller version of the Kreider 2 Project for 559,457 nutrient credits under the old EPA's Chesapeake Bay model.  The Company anticipates that the Kreider 2 Project will be re-certified for between 1.5-2 million nutrient reduction credits (for treatment of the waste stream from Kreider's poultry) pursuant to the Company's subsequent amended application during 2017 pursuant to the amended EPA Chesapeake Bay model and agreements between the EPA and PA. Note that this Project may be expanded in the future to treat wastes from other local and regional CAFOs (poultry and/or dairy) and/or additional Kreider poultry expansion (some of which may not qualify for nutrient reduction credits). The review process to clarify certain issues related to credit calculation and verification commenced during 2014 but has been largely placed on hold while certain matters are resolved between the EPA and PA and pending development of a robust market for nutrient reductions in PA. The Company anticipates it will submit an amended application once these matters are clear. Design and engineering work for this facility, which will probably be the first to utilize Bion's 3G Tech,  have not commenced, and the Company does not yet have financing in place for the Kreider 2 Project. This opportunity is being pursued through PA2.  If there are positive developments related to the market for nutrient reductions in PA, of which there is no assurance, the Company intends to pursue development, design and construction of the Kreider 2 Project with a goal of achieving operational status during the 2018 calendar year, and hopes to enter into agreements related to sales of the nutrient reduction credits for future delivery (under long term contracts) during 2017 subject to verification by the PADEP based on operating data from the Kreider 2 Project. The economics (potential revenues and profitability) of the Kreider 2 Project, despite its use of Bion's 3G Tech for increased recovery of marketable by-products, are based in material part the long term sale of nutrient (nitrogen and/or phosphorus) reduction credits to meet the requirements of the Chesapeake Bay environmental clean-up.  However, liquidity in the PA nutrient credit market has been slow to develop significant breadth and depth, which lack of liquidity has negatively impacted Bion's business plans and has resulted in challenges to monetizing the nutrient reduction credits generated by PA1's existing Kreider 1 project and will most likely delay PA2's Kreider 2 Project and other proposed projects in PA.

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Note that while Bion believes that the Kreider 1 System, the Kreider 2 Project and/or subsequent Bion Projects will eventually generate revenue from the sale of: a) nutrient reductions (credits or in other form), b) renewable energy (and related credits), c) sales of fertilizer products, and/or d) potentially, in time, credits for the reduction of greenhouse gas emissions.  We believe that the potential market is very large, but it is not possible to predict the exact timing and/or magnitude of these potential markets at this time.

A significant portion of Bion's current activities concern efforts with private and public stakeholders (at local and state level) in PA, (and other Chesapeake Bay, Midwest and Great Lakes states) and at the federal level (EPA and other executive departments and Congress) to establish appropriate public policies which will create regulations and funding mechanisms that foster installation of the low cost, technology-based  environmental solutions that Bion (and others) can provide through clean-up of agricultural waste streams. In January 2013, the Pennsylvania Legislative Budget and Finance Committee issued a report stating that targeting upstream livestock would save Pennsylvania's taxpayers up to 80% of previously estimated costs (potential savings for PA in excess of a billion dollars per year over the next 20 years) which would be available for other needs (notably aging drinking water and sewer infrastructure) while creating large local benefits of an upstream treatment strategy including reduced freshwater compliance costs, future cost avoidance of treating drinking water from contaminated local aquifers and increased economic activity for agriculture, tourism and recreation.  The Coalition for an Affordable Bay Solution ("Coalition") was formed to support the creation of a competitively-bid nitrogen trading program in Pennsylvania that will enable Pennsylvania to capture the economic benefits outlined in the legislative study. The Coalition supports legislation to establish a competitively-bid RFP program for nitrogen reductions, where bids will also be 'scored' to reflect the value of the benefits to PA's interior waterways and communities.  Founding members of the Coalition represent both Chesapeake Bay and national industry participants, and include Bion, JBS, SA, Kreider Farms, and Fair Oaks Farms. The head of the Coalition is Ed Schafer, Bion's Vice Chairman. The Company believes that: i)  the April 2015 release of a report from the Pennsylvania Auditor General titled "Special Report on the Importance of Meeting Pennsylvania's Chesapeake Bay Nutrient Reduction Targets" which highlighted the economic consequences of EPA-imposed sanctions if the state fails to meet the 2017 TMDL targets, as well as the need to support using low-cost solutions and technologies as alternatives to higher-cost public infrastructure projects, where possible, and ii)  the April 2015 introduction of Senate Bill 724 (successor to prior SB 924) 'The Watershed Improvement Act', which, if adopted, would have established a program that will allow the Pennsylvania's tax- and rate-payers to meet their EPA-mandated Chesapeake Bay pollution reductions at significantly lower cost by purchasing verified reductions (by competitive bidding) from all sources, including those that Bion can produce through livestock waste treatment, represent visible evidence of progress being made on these matters in Pennsylvania. Such legislation, if passed and signed into law, will potentially enable Bion (and others) to compete for public funding on an equal basis with subsidized agricultural 'best management practices' and public works and storm water authorities. On May 6, 2015, the PA Senate Majority Policy Committee held a hearing on SB 724.  Testifying in support of this legislation was Elliot Keller of JBS in Souderton PA, Phil Durgin – Executive Director of the PA Legislative Budget and Finance Committee, Ron Kreider of Kreider Farms, Ed Schafer representing the Coalition, and Mike McCloskey representing the National Milk Distributors Association.Bion's activity related to such legislation has intensified with increased stakeholder support and increasing attacks on the Company by those opposed to the legislation and Bion believes the primary provisions of such legislation will be incorporated into legislation that may be passed (in some version) by the Pennsylvania Legislature during 2017, but cannot predict the exact final content of such legislation or guarantee such passage. Note, however, that there was vocal opposition to SB 724 from threatened stakeholders committed to the existing status quo approaches--- a significant portion of which was focused on attacking (in often inaccurate and/or vilifying ways) Bion in/through social media and internet articles, blogs, press releases, twitter posts and re-tweets, rather than engaging the substantive issues. The Company responded in a press release and postings on its website. As a result, Bion is exploring the use of social media including Facebook, twitter and other approaches to accurately communicate about the Company's business and positions. If legislation similar to SB 724 is passed and implemented (in something close to its current form), Bion expects that the policies and strategies being developed in PA will not only benefit the Company's existing and proposed PA projects, but will also subsequently provide the basis for a larger Chesapeake Bay watershed strategy and, thereafter, a national clean water strategy.

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The Company believes that Pennsylvania is 'ground zero' in the long-standing clean water battle between agriculture and the further regulation of agriculture relative to nutrient impacts. The ability of Bion and other technology providers to achieve verified reductions from agricultural non-point sources can resolve the current stalemate and enable implementation of constructive solutions that benefit all stakeholders, providing a mechanism that ensures that taxpayer funds will be used to achieve the most beneficial result at the lowest cost, regardless of source. All sources, point and non-point, rural and urban, will be able to compete for tax payer-funded nitrogen reductions in a fair and transparent process; and since payment from the tax and rate payers would now be performance-based, these providers will be held financially accountable.

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

Bion will also pursue the opportunities related to development of Projects, including Integrated Projects.  Integrated Projects will include large CAFOs (such as large dairies, beef cattle feed lots and/or hog farms) with Bion waste treatment system modules processing the aggregate CAFO waste stream from the equivalent of 20,000 to 80,000 (or more) beef or dairy cows (or the waste stream equivalent of other species) while recovering cellulosic biomass to be utilized for renewable energy production (and possibly high nutrient fine solids to be marketed as feed and/or fertilizer), integrated with CAFO end product users/processing facilities and/or a biofuel/ethanol plant capable of producing  40 million to 100 (or more) million gallons of ethanol per year. Such Integrated Projects will involve multiple CAFO modules of 10,000 or more beef or dairy cows (or waste stream equivalent of other species) with waste treatment modules on a single site and/or on sites within an approximately 30 mile radius.  Bion believes its technology platform (2G Tech, 3G Tech and/or a hybrid in different situations) will allow integration of large-scale CAFO's with end product processors and/or ethanol production together with renewable energy production from cellulosic biomass recovered from the waste streams and on-site energy utilization in a 'closed loop' manner that will reduce the capital expenditures, operating costs and carbon footprint for the entire Integrated Project and each component facility. Some Projects may be developed from scratch while others may be developed in geographic proximity to (and in coordination with) existing participating CAFOs, ethanol plants and/or end product processors. Each Project is likely to have different degrees of integration, especially in the early development phases.

The Company currently anticipates that the Kreider 2 poultry waste treatment facility in PA will be its initial Project. Bion anticipates that it will select a site for the Kreider 2 Project and/or its initial Integrated Project (and possibly additional Projects) during calendar year 2017. Bion hopes to commence development of its initial Project by optioning land and beginning the site-specific design and permitting process during calendar year 2017, but delays are possible. It is not possible at this time to firmly predict where the initial Project will be developed or the order in which Projects will be developed. All potential Projects are in very early pre-development stages and may never progress to actual development or may be developed after other Projects not yet under active consideration.

Bion also hopes to be able to move forward on additional Projects through 2017-19 to create a pipeline of Projects. Management has a 5-year development target (through calendar year 2023) of approximately 10 or more Projects. Management hopes to have identified and begun development work related to 3-5 Projects over the next 2 years. At the end of the 5-year period, Bion projects that 3-8 of these Projects will be in full operation in 3-6 states (and possibly one or more foreign countries), and the balance would be in various stages ranging from partial operation to early development stage. It is possible that one or more Projects will be developed in 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). No Projects (including Integrated Projects) has been developed to date.

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The Company's audited financial statements for the years ended June 30, 2016 and 2015 have been prepared assuming the Company will continue as a going concern. The Company has incurred net losses of approximately $4,522,000 and $5,642,000 during the years ended June 30, 2016 and 2015, 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, 2016 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 $1,378,000 and $1,630,000 for the six months ended December 31, 2016 and 2015.  At December 31, 2016, the Company had a working capital deficit and a stockholders' deficit of approximately $14,777,000 and $14,777,000, 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

Revenue Recognition

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

Stock-based compensation

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

Derivative Financial Instruments:

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

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.

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Property and equipment:

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

Recent Accounting Pronouncements:

In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-09 "Revenue from Contracts from Customers," which supersedes the revenue recognition requirements in "Revenue Recognition (Topic 605)," and requires entities to recognize revenue in a way that depicts the transfer of potential goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to the exchange for those goods or services. ASU 2014-09 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017 and earlier application is permitted only as of annual reporting periods beginning after December 15, 2016. Once the Company begins to generate revenue, the Company does not anticipate any material impact on its operations and financial statements.

In August 2014, the FASB issued ASU No. 2014-15, "Presentation of Financial Statements – Going Concern: Disclosures of Uncertainties about an Entity's Ability to Continue as a Going Concern." The new standard requires management to perform interim and annual assessments of an entity's ability to continue as a going concern within one year of the date the financial statements are issued. An entity must provide certain disclosures if conditions or events raise substantial doubt about the entity's ability to continue as a going concern. The guidance is effective for annual periods ending after December 15, 2016, and interim periods thereafter, early application is permitted. The Company believes the adoption of ASU No. 2014-15 will not have a material impact on its financial statements.

THREE MONTHS ENDED DECEMBER 31, 2016 COMPARED TO THE THREE MONTHS ENDED DECEMBER 31, 2015

Revenue

Total revenues were nil for both the three months ended December 31, 2016 and 2015, respectively.

General and Administrative

Total general and administrative expenses were $527,000 and $550,000 for the three months ended December 31, 2016 and 2015, respectively.

General and administrative expenses, excluding stock-based compensation charges of $263,000 and $174,000, were $264,000 and $376,000 for the three months ended December 31, 2016 and 2015, respectively, representing a $112,000 decrease.  Salaries and related payroll tax expenses were $74,000 for both of the three months ended December 31, 2016 and 2015, respectively.  Consulting costs were $104,000 and $198,000 for the three months ended December 31, 2016 and 2015, respectively, representing a $94,000 decrease primarily due to decrease in the costs of services provided by Schafer during the three months ended December 31, 2016 and a shift in services provided by the Company's CEO to more research and development activities.   Investor relation costs decreased from $35,000 for the three months ended December 31, 2015 to $10,000 for the three months ended December 31, 2016 due to the Company's negotiations to reduce fees of an investor relations development firm and reduced presence at investor relations conferences.

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General and administrative stock-based employee compensation for the three months ended December 31, 2016 and 2015 consists of the following:

	Three Months ended December 31, 2016		Three Months ended December 31, 2015
General and administrative:
Fair value of stock bonuses expensed	$	7,000	$	69,000
Change in fair value from modification of option terms		166,000		43,000
Fair value of stock options expensed under ASC 718		90,000		62,000
Total	$	263,000	$	174,000

Stock-based compensation charges were $263,000 and $174,000 for the three months ended December 31, 2016 and 2015, respectively.  Compensation expense relating to stock bonuses expensed for the three months ended December 31, 2016 related to 100,000 shares in stock bonuses granted to an employee and a consultant with vesting periods ranging from April 2017 through January 2020 (a portion of which were allocated to research and development).  Compensation expense relating to stock bonus expensed for the three months ended December 31, 2015 related to Mark Smith's employment agreement extension for which he was granted 75,000 shares of fully vested stock which was issued in January 2016.Compensation expense relating to the change in fair value from the modification of option terms was $166,000 and $43,000 for the three months ended December 31, 2016 and 2015, respectively, as the Company granted a reduction in certain exercise prices and an extension of certain option expiration dates for an employee and two consultants during the three months ended December 31, 2016.The fair value of stock options expensed for the three months ended December 31, 2016 was $90,000 versus $62,000 for the three months ended December 31, 2015.  The increase is due to the fact that 259,500 options were granted of which 209,500 vested during the three months ended December 31, 2016, while 100,000 options were granted during the same period in fiscal year 2016.

Depreciation

Total depreciation expense was $500 and $76,000 for the three months ended December 31, 2016 and 2015, respectively.  Depreciation expense is lower for the three months ended December 31, 2016 due to the fiscal year 2016 $1,685,000 impairment of the Kreider 1 assets which reduced the net book value of those assets to zero.

Research and Development

Total research and development expenses were $126,000 and $84,000 for the three months ended December 31, 2016 and 2015, respectively.

Research and development expenses, excluding stock-based compensation expenses of $38,000 and $12,000 were $88,000 and $72,000 for the three months ended December 31, 2016 and 2015, respectively.  The primary reason for the increase is due to a shift in services provided by the Company's CEO to more research and development activities which was partially offset by less expenses related to the pilot program testing to enhance the Company's technology during the three months ended December 31, 2016.

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Research and development stock-based employee compensation for the three months ended December 31, 2016 and 2015 consists of the following:

	Three Months ended December 31, 2016		Three Months ended December 31, 2015
Research and development:
Fair value of stock bonuses expensed	$	8,000	$	-
Change in fair value from modification of option terms		11,000		-
Fair value of stock options expensed under ASC 718		19,000		12,000
Total	$	38,000	$	12,000

Stock-based compensation expenses were $38,000 and $12,000 and for the three months ended December 31, 2016 and 2015, respectively.    Compensation expense relating to stock bonuses expensed for the three months ended December 31, 2016 related to 70,000 shares in stock bonuses granted to an employee, whose time is partially allocated to research and development, with vesting periods ranging from April 2017 through January 2020.  The compensation expense of $11,000 attributed to the change in fair value from modification of options terms for the three months ended December 31, 2016 is due to a research and development employee's having certain option exercise prices reduced during the period.

Loss from Operations

As a result of the factors described above, the loss from operations was $653,000 and $710,000 for the three months ended December 31, 2016 and 2015, respectively.

Other Expense (Income)

Other expense was $95,000 and $87,000 for the three months ended December 31, 2016 and 2015, respectively.  Interest expense increased $8,000 for the three months ended December 31, 2016 compared to the three months ended December 31, 2015 due to higher interest bearing balances on deferred compensation during the three months ended December 31, 2016.  Interest expense related to the Pennvest loan was $49,000 for both periods.

Net Loss Attributable to the Noncontrolling Interest

The net loss attributable to the noncontrolling interest was $1,000 for both the three months ended December 31, 2016 and 2015, respectively.

Net Loss Attributable to Bion's Common Stockholders

As a result of the factors described above, the net loss attributable to Bion's stockholders was $747,000 and $796,000 for the three months ended December 31, 2016 and 2015, respectively, and the net loss per basic and diluted common share was $0.03 for both of the three months ended December 31, 2016 and 2015, respectively.

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SIX MONTHS ENDED DECEMBER 31, 2016 COMPARED TO THE SIX MONTHS ENDED DECEMBER 31, 2015

Revenue

Total revenues were nil for both the six months ended December 31, 2016 and 2015, respectively.

General and Administrative

Total general and administrative expenses were $951,000 and $1,058,000 for the six months ended December 31, 2016 and 2015, respectively.

General and administrative expenses, excluding stock-based compensation charges of $279,000 and $176,000, were $672,000 and $882,000 for the six months ended December 31, 2016 and 2015, respectively, representing a $210,000 decrease.  Salaries and related payroll tax expenses remained constant at $150,000 for the six months ended December 31, 2016 compared to $151,000 for the six months ended December 31, 2015.  Consulting costs were $263,000 and $446,000 for the six months ended December 31, 2016 and 2015, respectively, representing a $183,000 decrease primarily due to decrease in the costs of services provided by Schafer during the six months ended December 31, 2016 and a shift in services provided by the Company's CEO to more research and development activities.  Investor relation costs decreased from $60,000 for the six months ended December 31, 2015 to $43,000 for the six months ended December 31, 2016 due to the Company's presence at multiple investor conferences and the hiring of an investor relations development firm during the six months ended December 31, 2015.

General and administrative stock-based employee compensation for the six months ended December 31, 2016 and 2015 consists of the following:

	Six months ended December 31, 2016		Six months ended December 31, 2015
General and administrative:
Fair value of stock bonus expensed	$	7,000	$	69,000
Change in fair value from modification of option terms		166,000		43,000
Fair value of stock options expensed under ASC 718		106,000		64,000
Total	$	279,000	$	176,000

Stock-based compensation charges were $279,000 and $176,000 for the six months ended December 31, 2016 and 2015, respectively.  Compensation expense relating to stock bonuses expensed for the six months ended December 31, 2016 related to 100,000 shares in stock bonuses granted to an employee and a consultant with vesting periods ranging from April 2017 through January 2020 (a portion of which were allocated to research and development).  Compensation expense relating to stock bonus expensed for the six months ended December 31, 2015 related to Mark Smith's employment agreement extension for which he was granted 75,000 shares of fully vested stock which was issued in January 2016.Compensation expense relating to the change in fair value from the modification of option terms was $166,000 and $43,000 for the six months ended December 31, 2016 and 2015, respectively, as the Company granted a reduction in certain exercise prices and an extension of certain option expiration dates for an employee and two consultants during the three months ended December 31, 2016.The fair value of stock options expensed for the six months ended December 31, 2016 was $106,000 versus $64,000 for the six months ended December 31, 2015.  The increase is due to the fact that 294,500 options were granted of which 244,500 vested during the six months ended December 31, 2016, while 100,000 options were granted during the same period in fiscal year 2016.

Depreciation

Total depreciation expense was $1,000 and $152,000 for the six months ended December 31, 2016 and 2015, respectively.  Depreciation expense is lower for the six months ended December 31, 2016, due to the fiscal year 2016 $1,685,000 impairment of the Kreider 1 assets which reduced the net book value of those assets to zero.

Research and Development

Total research and development expenses were $238,000 and $219,000 for the six months ended December 31, 2016 and 2015, respectively.

Research and development expenses, excluding stock-based compensation expenses of $43,000 and $25,000 were $195,000 and $194,000 for the six months ended December 31, 2016 and 2015, respectively.

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Research and development stock-based employee compensation for the six months ended December 31, 2016 and 2015 consists of the following:

	Six Months ended December 31, 2016		Six Months ended December 31, 2015
Research and development:
Fair value of stock bonuses expensed	$	8,000	$	-
Change in fair value from modification of option terms		11,000		-
Fair value of stock options expensed under ASC 718		24,000		25,000
Total	$	43,000	$	25,000

Stock-based compensation expenses were $43,000 and $25,000 and for the six months ended December 31, 2016 and 2015, respectively.    Compensation expense relating to stock bonuses expensed for the six months ended December 31, 2016 related to 70,000 shares in stock bonuses granted to an employee, whose time is partially allocated to research and development, with vesting periods ranging from April 2017 through January 2020.  The compensation expense of $11,000 attributed to the change in fair value from modification of options terms for the six months ended December 31, 2016 is due to a research and development employee's having certain option exercise prices reduced during the period.

Loss from Operations

As a result of the factors described above, the loss from operations was $1,191,000 and $1,429,000 for the six months ended December 31, 2016 and 2015, respectively.

Other Expense

Other expense was $187,000 and $201,000 for the six months ended December 31, 2016 and 2015, respectively.  Interest expense decreased slightly due to the restructuring of certain debt during September 2015 but was partially offset by higher interest bearing deferred compensation balances as of December 31, 2016 compared to December 31, 2015.  Interest expense related to the Pennvest loan was $99,000 for both periods.

Net Loss Attributable to the Noncontrolling Interest

The net loss attributable to the noncontrolling interest was $1,000 and $3,000 for the six months ended December 31, 2016 and 2015, respectively.

Net Loss Attributable to Bion's Common Stockholders

As a result of the factors described above, the net loss attributable to Bion's stockholders was $1,377,000 and $1,628,000 for the six months ended December 31, 2016 and 2015, respectively, and the net loss per basic and diluted common share was $0.06 and $0.07 for the six months ended December 31, 2016 and 2015, respectively.

LIQUIDITY AND CAPITAL RESOURCES

The Company's consolidated financial statements for the six months ended December 3, 2016 have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business.  The Report of our Independent Registered Public Accounting Firm on the Company's consolidated financial statements as of and for the year ended June 30, 2016 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.

Operating Activities

As of December 31, 2016, the Company had cash of approximately $8,000. During the six months ended December 31, 2016, net cash used in operating activities was $296,000, primarily consisting of cash operating expenses related to salaries and benefits, and other general and administrative costs such as insurance and legal and accounting expenses. As previously noted, the Company is currently not generating significant revenue and accordingly has not generated cash flows from operations.  The Company does not anticipate generating sufficient revenues to offset operating and capital costs for a minimum of two to five years.  While there are no assurances that the Company will be successful in its efforts to develop and construct its Projects and market its Systems, it is certain that the Company will require substantial funding from external sources. Given the unsettled state of the current credit and capital markets for companies such as Bion, there is no assurance the Company will be able to raise the funds it needs on reasonable terms.

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Investing Activities

During the six months ended December 31, 2016, the Company did not have any investing activities.

Financing Activities

During the six months ended December 31, 2016, the Company received cash proceeds of $7,500 due to the receipt of a subscription receivable for the exercise of 10,000 warrants.  The Company also received cash proceeds of $23,000 from the sale of 30,467 shares the Company's common stock at a price of $0.75 per share.  The Company also received gross cash proceeds of $105,000 from the sale of 140,000 units which consisted of one share of the Company's restricted common stock and one warrant to purchase one half of a share of the Company's restricted common stock for $1.00 per share until December 30, 2017.   In connection with the sale of units, the Company paid $1,500 in commissions.

As of December 31, 2016 the Company has debt obligations consisting of: a) deferred compensation of $1,879,000, b) convertible notes payable – affiliates of $3,343,000, and, c) a loan payable of $7,754,000 (owed by PA1) (plus accrued interest of $926,000).

Plan of Operations and Outlook

As of December 31, 2016, the Company had cash of approximately $8,000.

The Company continues to explore sources of additional financing to satisfy its current operating requirements as it is not currently generating any significant revenues. During fiscal years 2014 through 2016, the Company experienced greater difficulty in raising equity and debt funding than in the prior years. During the years ended June 30, 2014 and through 2016, the Company had the greatest difficulty raising funds to date. As a result, the Company faced, and continues to face, significant cash flow management challenges due to material working capital constraints. These difficulties, challenges and constraints have continued during fiscal year 2017 and the Company anticipates that they may continue for the next twelve (12) months or longer. To partially mitigate these working capital constraints, the Company's core senior management and some key employees and consultants have been deferring all or part of their cash compensation and/or are accepting compensation in the form of securities of the Company (Notes 4 and 6 to Financial Statements) and members of the Company's senior management have made loans to the Company which have been converted into convertible promissory notes. As of December 31, 2016, such deferrals totaled approximately $5,223,000 (including accrued interest and deferred compensation converted into promissory notes but excluding conversions of deferred compensation into the Company's common stock by officers, employees and consultants that have already been completed). The extended constraints on available resources have had, and continue to have, negative effects on the pace and scope of the Company's effort to develop its business. The Company made reductions in its personnel during the year ended June 30, 2014. The Company has had to delay payments of trade obligations and economize in many ways that have potentially negative consequences. If the Company does not have greater success in its efforts to raise needed funds during the current year (and subsequent periods), we will need to consider deeper cuts (including additional personnel cuts) and curtailments of operations (including possibly Kreider 1 operations). The Company will need to obtain additional capital to fund its operations and technology development, to satisfy existing creditors, to develop Projects (including Integrated Projects) and CAFO Retrofit waste remediation systems (including the Kreider 2 facility) and to continue to operate the Kreider 1 facility (subject to agreements being reached with Pennvest as discussed above). The Company anticipates that it will seek to raise from $2,500,000 to $50,000,000 or more (debt and equity) during the next twelve months. However, as discussed above, there is no guarantee that we will be able to raise sufficient funds or further capital for the operations planned in the near future.

The Company is not currently generating any significant revenues. Further, the Company's anticipated revenues, if any, from existing projects and proposed Projects will not be sufficient to meet the Company's anticipated operational and capital expenditure needs for many years. During the six months ended December 31, 2016 the Company raised proceeds of approximately $128,000 through the sale of its securities (Note 7 to Financial Statements) and anticipates raising additional funds from such sales and transactions. 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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Because the Company is not currently generating significant revenues, the Company will need to obtain additional capital to fund its operations and technology development, to satisfy existing creditors, to develop Projects and to sustain operations at the KF 1 facility.

The first commercial activity in the Retrofit segment is represented by our agreement with Kreider Farms ("KF"), pursuant to which the Kreider 1 system to treat KF's dairy waste streams to reduce nutrient releases to the environment while generating marketable nutrient credits and renewable energy was designed, constructed and entered  full-scale operation during 2011. On January 26, 2009 the Board of the Pennsylvania Infrastructure Investment Authority ("Pennvest") approved a $7.75 million loan to Bion PA 1, LLC ("PA1"), a wholly-owned subsidiary of the Company, for the initial Kreider Farms project ("Kreider 1 System"). After substantial unanticipated delays, on August 12, 2010 PA1 received a permit for construction of the Kreider 1 system.  Construction activities commenced during November 2010.  The closing/settlement of the Pennvest Loan took place on November 3, 2010.  PA1 finished the construction of the Kreider 1 System and entered a period of system 'operational shakedown' during May 2011.  The Kreider 1 System reached full, stabilized operation by the end of the 2012 fiscal year.  During 2011 the PADEP re-certified the nutrient credits for this project.  The PADEP issued final permits for the Kreider 1 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, PA1 commenced generating nutrient reduction credits for potential sale while continuing to utilize the Kreider 1 system to test improvements and add-ons. However, to date liquidity in the Pennsylvania nutrient credit market has been slow to develop significant breadth and depth,  which limited liquidity/depth has negatively impacted Bion's business plans and has resulted in challenges to monetizing the nutrient reductions created by PA1's existing Kreider 1 project and Bion's other proposed projects. These difficulties have prevented PA1 from generating any material revenues from the Kreider 1 project to date and raise significant questions as to when, if ever, PA1 will be able to generate such revenues from the Kreider 1 system.  PA1 has had sporadic discussions/negotiations with Pennvest related to forbearance and/or re-structuring its obligations pursuant to the Pennvest Loan for more than three years. In the context of such discussions/negotiations, PA1 elected not to make interest payments to Pennvest on the Pennvest Loan since January 2013.  Additionally, the Company has not made any principal payments, which were to begin in fiscal 2013, and, therefore, the Company has classified the Pennvest Loan as a current liability as of December 31, 2016.  Due to the failure of the PA nutrient reduction credit market to develop, the Company determined that the carrying amount of the property and equipment related to the Kreider 1 project exceeded its estimated future undiscounted cash flows based on certain assumptions regarding timing, level and probability of revenues from sales of nutrient reduction credits and, therefore, PA1 and the Company recorded impairments related to the value of the Kreider 1 assets of $1,750,000 and $2,000,000 at June 30, 2015 and June 30, 2014, respectively.  During the 2016 fiscal year, effective June 30, 2016, PA1 and the Company recorded an impairment of $1,684,562 to the value of the Kreider 1 assets which reduced the value on the Company's books to $0.  This impairment reflects management's judgment that the salvage value of the Kreider 1 assets roughly equals PA1's contractual obligations related to the Kreider 1 system, including expenses related to decommissioning of the Kreider 1 system, costs associated with needed capital upgrade expenses, and re-certification/ permitting amendments. See "Impairment loss on property and equipment" above.

On September 25, 2014, Pennvest exercised its right to declare the Pennvest Loan in default and accelerated the Pennvest Loan and demanded that PA1 pay $8,137,117 (principal, interest plus late charges) on or before October 24, 2014. PA1 did not make the payment and does not have the resources to make the payments demanded by Pennvest. PA1 has commenced discussions and negotiations with Pennvest concerning this matter but Pennvest has rejected PA1's proposal made during the fall of 2014.  As of the date of this report, no formal proposals are currently under consideration and only sporadic communication has taken place regarding the matters involved over the last 30 months.  It is not possible at this date to predict the outcome of this matter, but the Company believes that a loan modification agreement may be reached in the future if/when a more robust market for nutrient reductions develops in PA, of which there is no assurance. PA1 and Bion will continue to evaluate various options with regard to Kreider 1 over the next 30-180 days.

The economics (potential revenues, profitability and continued operation) of the Kreider 1 System are based almost entirely on the long term sale of nutrient (nitrogen and/or phosphorus) reduction credits to meet the requirements of the Chesapeake Bay environmental clean-up. See below for further discussion.

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During August 2012, the Company provided Pennvest (and the PADEP) with data demonstrating that the Kreider 1 system met the 'technology guaranty' standards which were incorporated in the Pennvest financing documents and, as a result, the Pennvest Loan is now solely an obligation of PA1.

The Company is currently operating the Kreider 1 System in a limited manner pending development of a more robust market for its nutrient reductions.

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

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

Currently, Bion is focused on using applications of its patented and proprietary waste management technologies and technology platform to pursue three main business opportunities: 1) installation of Bion systems ( some of which may  generate verified nutrient credits and revenues from the production of renewable energy and byproducts) to retrofit and environmentally remediate existing CAFOs ("Retrofits") in selected markets where: a) government policy supports such efforts (such as the Chesapeake Bay watershed, Great Lakes Basin states, and/or other states and watersheds facing EPA 'total maximum daily load' ("TMDL") issues, and/or b) where CAFO's need our technology to obtain permits to expand or develop without negative environmental consequences; 2) development of new state-of-the-art large scale waste treatment facilities in strategic locations ("Projects") ( some of these may be Integrated Projects as described below) with multiple revenue streams, and 3) licensing and/or joint venturing of Bion's technology and applications (primarily) outside North America. The opportunities described at 1) and 2) above each require substantial political and regulatory (federal, state and local) efforts on the part of the Company and a substantial part of Bion's efforts are focused on such political and regulatory matters. Bion is currently pursuing the international opportunities primarily through the use of consultants with existing relationships in target. While 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), we have met with extremely limited success to date. Bion considers these to be a large potential markets for the Company's growth over the next 36 months (and thereafter). Assuming that the Company can be successful in raising necessary funding and the development of a more robust market for nutrient reductions in Pennsylvania (and elsewhere), neither of which are assured at this date, the Company believes it will be able to succeed at such activities based on the operating results of its technologies and systems.

41

Additionally, the Kreider agreements provide for Bion to develop a waste treatment/renewable energy production facility to treat the waste from Kreider's approximately 5+ million chickens (planned to expand to approximately 9 million)(and potentially other poultry operations and/or other waste streams)('Kreider Renewable Energy Facility' or ' Kreider 2 Project').  On May 5, 2016, the Company executed a stand-alone joint venture agreement with Kreider Farms covering all matters related to development and operation of a system to treat the waste streams from Kreider's poultry facilities in Bion PA2 LLC ("PA2").The Company continues its development work related to the details of the Kreider 2 Project. During May 2011 the PADEP certified Kreider 2 Project for 559,457 nutrient credits under the old EPA's Chesapeake Bay model.  The Company anticipates that the Kreider 2 Project will be re-certified for between 1.5-2 million nutrient reduction credits (for treatment of the waste stream from Kreider's poultry) pursuant to the Company's pending reapplication (or subsequent amended application) during 2017 pursuant to the amended EPA Chesapeake Bay model and agreements between the EPA and PA. Note that this Project may be expanded in the future to treat wastes from other local and regional CAFOs (poultry and/or dairy) and/or Kreider poultry expansion (some of which may not qualify for nutrient reduction credits). The review process to clarify certain issues related to credit calculation and verification commenced during 2014 but has been largely placed on hold while certain matters are resolved between the EPA and PA and pending development of a robust market for nutrient reductions in PA. The Company anticipates it will submit an amended application once these matters are clear. Design and engineering work for this facility, which will probably be the first to utilize Bion's 3G Tech,  have not commenced, and the Company does not yet have financing in place for the Kreider 2 Project. This opportunity is being pursued through PA2.  If there are positive developments related to the market for nutrient reductions in PA, of which there is no assurance, the Company intends to pursue development, design and construction of the Kreider 2 Project with a goal of achieving operational status during the 2018 calendar year, and hopes to enter into agreements related to sales of the nutrient reduction credits for future delivery (under long term contracts) during 2017 subject to verification by the PADEP based on operating data from the Kreider 2 Project. The economics (potential revenues and profitability) of the Kreider 2 Project, despite its use of Bion's 3G Tech for increased recovery of marketable by-products, are based in material part the long term sale of nutrient (nitrogen and/or phosphorus) reduction credits to meet the requirements of the Chesapeake Bay environmental clean-up.  However, liquidity in the PA nutrient credit market has been slow to develop significant breadth and depth, which lack of liquidity has negatively impacted Bion's business plans and has resulted in challenges to monetizing the nutrient reduction credits generated by PA1's existing Kreider 1 project and will most likely delay PA2's Kreider 2 Project and other proposed projects in PA.

Note that while Bion believes that the Kreider 1 System, the Kreider 2 Project and/or subsequent Bion Projects will eventually generate revenue from the sale of: a) nutrient reductions (credits or in other form), b) renewable energy (and related credits), c) sales of fertilizer products, and/or d) potentially, in time, credits for the reduction of greenhouse gas emissions.  We believe that the potential market is very large, but it is not possible to predict the exact timing and/or magnitude of these potential markets at this time.

The Company anticipates that the Kreider 2 poultry waste treatment facility in PA will be its initial Project. Bion anticipates that it will select a site for the Kreider 2 Project and/or its initial Integrated Project (and possibly additional Projects) during calendar year 2017. Bion hopes to commence development of its initial Project by optioning land and beginning the site specific design and permitting process during calendar year 2017, but delays are possible. It is not possible at this time to firmly predict where the initial Project will be developed or the order in which Projects will be developed. All potential Projects are in very early pre-development stages and may never progress to actual development or may be developed after other Projects not yet under active consideration.

Bion also hopes to be able to move forward on additional Projects through 2017-19 to create a pipeline of Projects. Management has a 5-year development target (through calendar year 2023) of approximately 10 or more Projects. Management hopes to have identified and begun development work related to 3-5 Projects over the next 2 years. At the end of the 5-year period, Bion projects that 3-8 of these Projects will be in full operation in 3-6 states (and possibly one or more foreign countries), and the balance would be in various stages ranging from partial operation to early development stage. It is possible that one or more Projects will be developed in 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). No Projects (including Integrated Projects) 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):

42

During 2008 the Company commenced actively pursuing the opportunity presented by environmental retrofit and remediation of the waste streams of existing CAFOs which effort has met with very limited success to date. The first commercial activity in this area is represented by our agreement with Kreider Farms ("KF"), pursuant to which the Kreider 1 system to treat KF's dairy waste streams to reduce nutrient releases to the environment while generating marketable nutrient credits and renewable energy was designed, constructed and entered  full-scale operation during 2011. On January 26, 2009 the Board of the Pennsylvania Infrastructure Investment Authority ("Pennvest") approved a $7.75 million loan to Bion PA 1, LLC ("PA1"), a wholly-owned subsidiary of the Company, for the initial Kreider Farms project ("Kreider 1 System"). After substantial unanticipated delays, on August 12, 2010 PA1 received a permit for construction of the Kreider 1 system.  Construction activities commenced during November 2010.  The closing/settlement of the Pennvest Loan took place on November 3, 2010.  PA1 finished the construction of the Kreider 1 System and entered a period of system 'operational shakedown' during May 2011.  The Kreider 1System reached full, stabilized operation by the end of the 2012 fiscal year.  During 2011 the PADEP re-certified the nutrient credits for this project.  The PADEP issued final permits for the Kreider 1 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, PA1 commenced generating nutrient reduction credits for potential sale while continuing to utilize the Kreider 1 system to test improvements and add-ons. However, to date liquidity in the Pennsylvania nutrient credit market has been slow to develop significant breadth and depth,  which limited liquidity/depth has negatively impacted Bion's business plans and has resulted in challenges to monetizing the nutrient reductions created by PA1's existing Kreider 1 project and Bion's other proposed projects. These difficulties have prevented PA1 from generating any material revenues from the Kreider 1 project to date and raise significant questions as to when, if ever, PA1 will be able to generate such revenues from the Kreider 1 system.  PA1 has had sporadic discussions/negotiations with Pennvest related to forbearance and/or re-structuring its obligations pursuant to the Pennvest Loan for more than three years. In the context of such discussions/negotiations, PA1 elected not to make interest payments to Pennvest on the Pennvest Loan since January 2013.  Additionally, the Company has not made any principal payments, which were to begin in fiscal 2013, and, therefore, the Company has classified the Pennvest Loan as a current liability as of December 31, 2016.  Due to the failure of the PA nutrient reduction credit market to develop, the Company determined that the carrying amount of the property and equipment related to the Kreider 1 project exceeded its estimated future undiscounted cash flows based on certain assumptions regarding timing, level and probability of revenues from sales of nutrient reduction credits and, therefore, PA1 and the Company recorded impairments related to the value of the Kreider 1 assets of $1,750,000 and $2,000,000 at June 30, 2015 and June 30, 2014, respectively.  During the 2016 fiscal year, effective June 30, 2016, PA1 and the Company recorded an impairment of $1,684,562 to the value of the Kreider 1 assets which reduced the value on the Company's books to $0.  This impairment reflects management's judgment that the salvage value of the Kreider 1 assets roughly equals PA1's contractual obligations related to the Kreider 1 system, including expenses related to decommissioning of the Kreider 1 system, costs associated with needed capital upgrade expenses, and re-certification/ permitting amendments. See "Impairment loss on property and equipment" above.

On September 25, 2014, Pennvest exercised its right to declare the Pennvest Loan in default and accelerated the Pennvest Loan and demanded that PA1 pay $8,137,117 (principal, interest plus late charges) on or before October 24, 2014. PA1 did not make the payment and does not have the resources to make the payments demanded by Pennvest. PA1 has commenced discussions and negotiations with Pennvest concerning this matter but Pennvest has rejected PA1's proposal made during the fall of 2014.  As of the date of this report, no formal proposals are currently under consideration and only sporadic communication has taken place regarding the matters involved over the last 30 months.  It is not possible at this date to predict the outcome of this matter, but the Company believes that a loan modification agreement may be reached in the future if/when a more robust market for nutrient reductions develops in PA, of which there is no assurance. PA1 and Bion will continue to evaluate various options with regard to Kreider 1 over the next 30-180 days.

The economics (potential revenues, profitability and continued operation) of the Kreider 1 System are based almost entirely on the long term sale of nutrient (nitrogen and/or phosphorus) reduction credits to meet the requirements of the Chesapeake Bay environmental clean-up. See below for further discussion.

During August 2012, the Company provided Pennvest (and the PADEP) with data demonstrating that the Kreider 1 system met the 'technology guaranty' standards which were incorporated in the Pennvest financing documents and, as a result, the Pennvest Loan is now solely an obligation of PA1.

The Company is currently operating the Kreider 1 System in a limited manner pending development of a more robust market for its nutrient reductions.

43

OFF-BALANCE SHEET ARRANGEMENTS

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

Item 3.  Quantitative and Qualitative Disclosures About Market Risk.

Not applicable.

Item 4.  Controls and Procedures.

(a)  Evaluation of Disclosure Controls and Procedures.

The term "disclosure controls and procedures" is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). This term refers to the controls and procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files under the Exchange Act is recorded, processed, summarized, and reported within the required time periods. Our Chief Executive Officer and Principal Financial Officer has evaluated the effectiveness of the design and operations of our disclosure controls and procedures as of the end of the period covered by this quarterly report, and has concluded that, as of that date, our disclosure controls and procedures were not effective at ensuring that required information will be disclosed on a timely basis in our reports filed under the Exchange Act, as a result of the material weakness in internal control over financial reporting discussed in Item 9(A) of our Form 10-K for the year ended June 30, 2016.

(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.

44

PART II – OTHER INFORMATION

Item 1.  Legal Proceedings.

On September 25, 2014, Pennvest exercised its right to declare the Pennvest Loan in default and has accelerated the Pennvest Loan and has demanded that our wholly-owned subsidiary Bion PA-1 LLC ('PA-1') pay $8,137,117 (principal, interest plus late charges) on or before October 24, 2014. The Company anticipates that discussions and negotiations will take place between PA-1 and Pennvest concerning this matter over the next 90-180 days.  No proposals are currently under consideration to resolve this matter.  It is not possible at this date to predict the outcome of such negotiations, but the Company believes that it remains possible that negotiations will lead to a commercially reasonable loan modification agreement  be reached between PA-1 and Pennvest. Subject to the results of the negotiations with Pennvest and pending development of a more robust market for nutrient reductions in Pennsylvania, PA-1 and Bion anticipate that it will be necessary for the Company to evaluate various options with regard to Kreider 1 over the coming months.  Litigation has not commenced in this matter but has been threatened by Pennvest.

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

Item 1A.  Risk Factors.

Not applicable.

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

During the quarter ended December 31, 2016, the Company sold the following restricted securities: a) 3,195  shares issued pursuant to our 2006 Consolidated Incentive Plan ('Plan'), valued at $2,952 in aggregate, to an employee for services, and b) 20,000 units at $0.75 per unit were sold and the Company received proceeds of $15,000 (each unit consisted of one share of the Company's restricted common stock and one warrant to purchase half of a share of the Company's restricted common stock at $1.00 per share until December 31, 2017).   In all of these transactions the Company relied on the exemptions in Section 4(2) of the Securities Act of 1933, as amended, and/or under Rule 506 of Regulation D under the Securities Act of 1933, as amended. See Notes to Financial Statements (included herein) for additional details.

The proceeds were utilized for general corporate purposes.

Item 3.  Defaults Upon Senior Securities.

Not applicable.

Item 4.  Mine Safety Disclosures.

Not applicable.

Item 5.  Other Information.

Not applicable.

45

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
101	XBRL Exhibits

46

SIGNATURES

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

		BION ENVIRONMENTAL TECHNOLOGIES, INC.
Date:  February 10, 2017	By:	/s/ Mark A. Smith
		Mark A. Smith, President and Chief Financial Officer (Principal Financial and Accounting Officer)
Date:  February 10, 2017	By:	/s/ Dominic Bassani
		Dominic Bassani, Chief Executive Officer

47

EX-31.1

Exhibit 31.1

SECTION 302 CERTIFICATION

I, Dominic Bassani, certify that:

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

2.   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.   Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the of the registrant as of, and for, the periods presented in this report;

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

(a)  Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

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

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

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

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

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

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

Date:  February 10, 2017

/s/ Dominic Bassani

Dominic Bassani

Chief Executive Officer

EX-31.2

Exhibit 31.2

SECTION 302 CERTIFICATION

I, Mark A. Smith, certify that:

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

2.   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.   Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the of the registrant as of, and for, the periods presented in this report;

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

(a)  Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

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

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

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

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

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

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

Date:  February 10, 2017

/s/ Mark A. Smith

Mark A. Smith

Executive Chairman, President and

Interim Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION OF CEO PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Form 10-Q of Bion Environmental Technologies, Inc., a company duly formed under the laws of Colorado (the "Company"), for the period ended December 31, 2016, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), Dominic Bassani, Chief Executive Officer of the Company, hereby certifies, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of his knowledge, that:

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

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

February 10, 2017 

/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-32.2

Exhibit 31.1

CERTIFICATION OF CEO PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Form 10-Q of Bion Environmental Technologies, Inc., a company duly formed under the laws of Colorado (the "Company"), for the period ended December 31, 2016, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), Mark A. Smith,, Chief Financial Officer of the Company, hereby certifies, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of his knowledge, that:

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

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

February 10, 2017

/s/ Mark A. Smith

Mark A. Smith

Chief Financial Officer

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

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

XML

Document And Entity Information - shares	6 Months Ended
	Dec. 31, 2016	Feb. 10, 2017
Document Information [Line Items]
Entity Registrant Name	BION ENVIRONMENTAL TECHNOLOGIES INC
Entity Central Index Key	0000875729
Trading Symbol	bnet
Current Fiscal Year End Date	--06-30
Entity Filer Category	Smaller Reporting Company
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Entity Common Stock, Shares Outstanding (in shares)		23,459,347
Document Type	10-Q
Document Period End Date	Dec. 31, 2016
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q2
Amendment Flag	false

XML

Consolidated Balance Sheets (Current Period Unaudited) - USD ($)	Dec. 31, 2016	Jun. 30, 2016
Current assets:
Cash	$ 7,635	$ 170,194
Prepaid expenses	8,201	15,240
Subscription receivable		7,500
Deposits and other receivables	1,180	1,000
Total current assets	17,016	193,934
Property and equipment, net (Note 3)	3,254	4,259
Total assets	20,270	198,193
Current liabilities:
Accounts payable and accrued expenses	866,321	768,272
Deferred compensation (Note 4)	1,879,473	1,436,595
Convertible notes payable - affiliates (Note 6)	3,343,328
Loan payable and accrued interest (Note 5)	8,679,992	8,563,662
Total current liabilities	14,797,514	10,795,929
Convertible Notes Payable, Noncurrent		3,280,647
	14,797,514	14,076,576
Deficit:
Common stock, no par value, 100,000,000 shares authorized, 23,784,363 and 23,573,057 shares issued, respectively; 23,080,054 and 22,868,748 shares outstanding, respectively
Additional paid-in capital	102,797,550	102,278,364
Subscription receivable - affiliate	(40,000)
Accumulated deficit	(117,593,144)	(116,216,493)
	(14,835,594)	(13,938,129)
Noncontrolling interest	58,350	59,746
Total deficit	(14,777,244)	(13,878,383)
Total liabilities and deficit	20,270	198,193
Series B Preferred Stock [Member]
Current liabilities:
Series B Redeemable Convertible Preferred stock, $0.01 par value, 50,000 shares authorized; 200 shares issued and outstanding, liquidation preference of $31,000 and $30,000, respectively (Note 7)	28,400	27,400
Series A Preferred Stock [Member]
Deficit:
Preferred stock, value
Series C Preferred Stock [Member]
Deficit:
Preferred stock, value

XML

Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - USD ($)	Dec. 31, 2016	Jun. 30, 2016
Common stock, par value (in dollars per share)	$ 0	$ 0
Common stock, authorized (in shares)	100,000,000	100,000,000
Common stock, issued (in shares)	23,784,363	23,573,057
Common stock, outstanding (in shares)	23,080,054	22,868,748
Series B Preferred Stock [Member]
Preferred stock, par value (in dollars per share)
Preferred stock, authorized (in shares)
Preferred stock, issued (in shares)
Preferred stock, outstanding (in shares)
Preferred stock, liquidation preference
Series A Preferred Stock [Member]
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, authorized (in shares)	10,000	10,000
Preferred stock, issued (in shares)	0	0
Preferred stock, outstanding (in shares)	0	0
Series C Preferred Stock [Member]
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, authorized (in shares)	60,000	60,000
Preferred stock, issued (in shares)	0	0
Preferred stock, outstanding (in shares)	0	0

XML

Consolidated Statements of Operations (Unaudited) - USD ($)	3 Months Ended		6 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2016	Dec. 31, 2015
Revenue
Operating expenses:
General and administrative (including stock-based compensation (Note 8))	526,697	550,095	951,388	1,058,000
Depreciation	503	76,083	1,005	151,962
Research and development (including stock-based compensation (Note 8))	126,082	84,286	238,325	218,775
Total operating expenses	653,282	710,464	1,190,718	1,428,737
Loss from operations	(653,282)	(710,464)	(1,190,718)	(1,428,737)
Other expense:
Interest expense, net	94,565	86,905	187,329	201,661
Total other expense	94,565	86,905	187,329	201,661
Net loss	(747,847)	(797,369)	(1,378,047)	(1,630,398)
Net loss attributable to the noncontrolling interest	862	1,274	1,396	2,569
Net loss applicable to Bion's common stockholders	$ (746,985)	$ (796,095)	$ (1,376,651)	$ (1,627,829)
Net loss applicable to Bion's common stockholders per basic and diluted common share (in dollars per share)	$ (0.03)	$ (0.03)	$ (0.06)	$ (0.07)
Basic and diluted (in shares)	23,328,499	22,585,001	23,436,311	22,437,039

XML

Consolidated Statements of Changes in Equity (Deficit) (Unaudited) - 6 months ended Dec. 31, 2016 - USD ($)	Preferred Stock [Member]	Common Stock [Member]	Additional Paid-in Capital [Member]	Subscriptions Receivable [Member]	Retained Earnings [Member]	Noncontrolling Interest [Member]	Total
Balances (in shares) at Jun. 30, 2016		23,573,057
Balances at Jun. 30, 2016			$ 102,278,364		$ (116,216,493)	$ 59,746	$ (13,878,383)
Issuance of common stock for services (in shares)		23,687					23,687
Issuance of common stock for services			19,507				$ 19,507
Vesting of options and stock bonuses for services			144,600				144,600
Modification of options			177,471				$ 177,471
Sale of common stock (in shares)		30,467					30,467
Sale of common stock			22,850				$ 22,850
Sale of units (in shares)		140,000
Sale of units			105,000				105,000
Commissions on sale of units			(1,500)				(1,500)
Issuance of warrants			45,250	(40,000)			5,250
Warrants exercised for common stock (in shares)		10,000
Warrants exercised for common stock
Conversion of debt (in shares)		7,152
Conversion of debt			6,008				6,008
Net loss					(1,376,651)	(1,396)	(1,378,047)
Balances (in shares) at Dec. 31, 2016		23,784,363
Balances at Dec. 31, 2016			$ 102,797,550	$ (40,000)	$ (117,593,144)	$ 58,350	$ (14,777,244)

XML

Consolidated Statements of Cash Flows (Unaudited) - USD ($)	6 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss), Including Portion Attributable to Noncontrolling Interest	$ (1,378,047)	$ (1,630,398)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation	1,005	151,962
Accrued interest on loan payable, deferred compensation and other	204,917	201,940
Stock-based compensation	346,828	233,094
Decrease in prepaid expenses	7,039	6,153
Increase in accounts payable and accrued expenses	98,049	27,351
Increase in deferred compensation	423,800	490,800
Net cash used in operating activities	(296,409)	(519,098)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment		(4,251)
Net cash used by investing activities		(4,251)
CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in subscription receivable	7,500	13,125
Proceeds from sale of common stock	22,850
Proceeds from sale of units	105,000	183,000
Commissions on sale of units	(1,500)	(18,300)
Proceeds from exercise of warrants		184,689
Net cash provided by financing activities	133,850	362,514
Net decrease in cash	(162,559)	(160,835)
Cash at beginning of period	170,194	339,286
Cash at end of period	7,635	178,451
Supplemental disclosure of cash flow information:
Cash paid for interest
Non-cash investing and financing transactions:
Issuance of common stock to satisfy deferred compensation	6,008	171,717
Purchase of warrants for subscription receivable - affiliate	40,000
Note Receivable as Consideration for Warrants Exercise [Member]
Non-cash investing and financing transactions:
Exercise of warrants for promissory note receivable for shares		$ 105,000

XML

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

6 Months Ended

Dec. 31, 2016

Notes to Financial Statements

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

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

Organization and nature of business:

Bion Environmental Technologies, Inc. (“Bion” or “We” or the “Company”) was incorporated in

1987

in the State of Colorado and has developed and continues to develop patented and proprietary technology and business models that provide comprehensive environmental solutions to a significant source of pollution in United States agriculture, large scale livestock facilities known as Confined Animal Feeding Operations (“CAFO’s”). Bion’s technologies (and applications related thereto) produce substantial reductions of nutrient releases (primarily nitrogen and phosphorus) to both water and air (including ammonia, which is subsequently re-deposited to the ground) from livestock waste streams based upon our operations and research to date (and

third

party peer review thereof). We are continually involved in research and development to upgrade and improve our technology and technology applications, including integration with

third

party technology. Bion provides comprehensive and cost-effective treatment of livestock waste onsite (and/or at nearby locations), while it is still concentrated and before it contaminates air, soil, groundwater aquifers and/or downstream waters, and, in certain configurations, can be optimized to maximize recovery of marketable nutrients for potential use as fertilizer (organic and/or inorganic) and/or feed additives plus renewable energy (and related environmental credits).

During the

2014

to

2016

fiscal years, the Company increased its research and development focus on augmenting the basic ‘separate and aggregate’ approach of its technology platform to provide additional flexibility and to increase recovery of marketable nutrient by-products (in organic and non-organic forms) and renewable energy production (either/both biogas and/or renewable electricity), thereby increasing potential related revenue streams and reducing dependence of its future projects on the monetization of nutrient reductions (which still remain a very important part of project revenue streams). This research and development effort also involves ongoing review of potential “add-ons” and applications to our technology platform for use in different regulatory and/or climate environments. These research and development activities have targeted completion of development of the next generation of Bion’s technology and technology platform. We believe such activities will continue at least through the

2017

fiscal year (and likely longer), subject to availability of adequate financing for the Company’s operations, of which there is no assurance.

Currently, Bion is focused on using applications of its patented and proprietary waste management technologies and technology platform to pursue

three

main business opportunities:

1)

installation of Bion systems ( some of which

may

generate verified nutrient credits and revenues from the production of renewable energy and byproducts)

to retrofit and environmentally remediate existing CAFOs (“Retrofits”)

in selected markets where: a) government policy supports such efforts (such as the Chesapeake Bay watershed, some Great Lakes Basin states, and/or other states and watersheds facing EPA ‘total maximum daily load’ (“TMDL”) issues, and/or b) where CAFO’s need our technology to obtain permits to expand or develop without negative environmental consequences;

2)

development of new state-of-the-art large scale waste treatment facilities in strategic locations (“Projects”) ( some of these

may

be Integrated Projects as described below)

with multiple revenue streams, and

3)

licensing and/or joint venturing of Bion’s technology and applications (primarily) outside North America. The opportunities described at

1)

and

2)

above each require substantial political and regulatory (federal, state and local) efforts on the part of the Company and a substantial part of Bion’s efforts are focused on such political and regulatory matters. Bion intends to pursue international opportunities primarily through the use of consultants with existing relationships in target locations. The most intense focus is currently on the requirements for the clean-up of the Chesapeake Bay faced by the Commonwealth of Pennsylvania and the potential use of Bion’s technology and technology platform on CAFOs as an alternative to what the Company believes is far more expensive nutrient removal downstream in storm water projects.

Management believes that Bion’s technology platform (including utilization of various

third

party technologies to supplement the Company’s proprietary technologies), through the combination of remediation of the waste streams of large scale existing CAFOs with recovery of valuable marketable nutrients and renewable energy, can enable 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, operating costs and environmental footprint for the entire integrated complex (“Integrated Projects”). In the context of Integrated Projects, Bion’s waste treatment process, in addition to mitigating polluting releases, enables generation of renewable energy from the CAFO waste stream, which renewable energy can be sold into renewable energy markets (with material economic incentives) and/or 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 and/or swine CAFO’s) and/or other users as a fossil fuel replacement. The nutrients (primarily nitrogen and phosphorus) can be harvested from the solids and liquid streams recovered from the livestock waste stream and can be utilized as either high value fertilizer (organic and/or inorganic) 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 large scale Projects (including Integrated Projects) will produce high quality, traceable animal protein which can address consumer food safety/security concerns at a lower cost than current industry practices while also maintaining a far lower net environmental footprint per unit of protein produced due to water recycling (possible due to the removal of nutrients, etc. from the water by Bion’s technology applications), production of renewable energy from the waste stream (reducing the use of fossil fuels), and multiple levels of economies of scale, co-location and integration savings in transportation and other logistics. Projects

may

involve various degrees of integration which will limit the benefits described herein.

During

2008

the Company commenced actively pursuing the opportunity presented by environmental retrofit and remediation of the waste streams of existing CAFOs which effort has met with very limited success to date. The

first

commercial activity in this area is represented by our agreement with Kreider Farms (“KF”), pursuant to which the Kreider

1

system to treat KF's dairy waste streams to reduce nutrient releases to the environment while generating marketable nutrient credits and renewable energy was designed, constructed and entered full-scale operation during

2011.

On

January

26,

2009

the Board of the Pennsylvania Infrastructure Investment Authority (“Pennvest”) approved a

$7.75

million loan to Bion PA

1,

LLC

(“PA1”),

a wholly-owned subsidiary of the Company, for the initial Kreider Farms project (“Kreider

1

System”). After substantial unanticipated delays, on

August

12,

2010

PA1

received a permit for construction of the Kreider

1

system. Construction activities commenced during

November

2010.

The closing/settlement of the Pennvest Loan took place on

November

3,

2010.

PA1

finished the construction of the Kreider

1

System and entered a period of system ‘operational shakedown’ during

May

2011.

The Kreider

1

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

1

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,

PA1

commenced generating nutrient reduction credits for potential sale while continuing to utilize the Kreider

1

system to test improvements and add-ons. However, to date liquidity in the Pennsylvania nutrient credit market has been slow to develop significant breadth and depth, which limited liquidity/depth has negatively impacted Bion’s business plans and has resulted in challenges to monetizing the nutrient reductions created by

PA1’s

existing Kreider

1

project and Bion’s other proposed projects. These difficulties have prevented

PA1

from generating any material revenues from the Kreider

1

project to date and raise significant questions as to when, if ever,

PA1

will be able to generate such revenues fromthe Kreider

1

system.

PA1

has had sporadic discussions/negotiations with Pennvest related to forbearance and/or re-structuring its obligations pursuant to the Pennvest Loan for more than

three

years. In the context of such discussions/negotiations,

PA1

elected not to make interest payments to Pennvest on the Pennvest Loan since

January

2013.

Additionally, the Company has not made any principal payments, which were to begin in fiscal

2013,

and, therefore, the Company has classified the Pennvest Loan as a current liability as of

December

31,

2016.

Due to the failure of the Pennsylvania nutrient reduction credit market to develop, the Company determined (on

three

separate occasions) that the carrying amount of the property and equipment related to the Kreider

1

project exceeded its estimated future undiscounted cash flows based on certain assumptions regarding timing, level and probability of revenues from sales of nutrient reduction credits. Therefore,

PA1

and the Company recorded impairments related to the value of the Kreider

1

assets totaling

$3,750,000

through

June

30,

2015.

During the

2016

fiscal year, effective

June

30,

2016,

PA1

and the Company recorded an additional impairment of

$1,684,562

to the value of the Kreider

1

assets which reduced the value on the Company’s books to

$0.

This impairment reflects management’s judgment that the salvage value of the Kreider

1

assets roughly equals

PA1’s

contractual obligations related to the Kreider

1

system, including expenses related to decommissioning of the Kreider

1

system,

costs associated with needed capital upgrade expenses, and re-certification/ permitting amendments.

On

September

25,

2014,

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

PA1

pay

$8,137,117

(principal, interest plus late charges) on or before

October

24,

2014.

PA1

did not make the payment and does not have the resources to make the payments demanded by Pennvest.

PA1

has commenced discussions and negotiations with Pennvest concerning this matter but Pennvest has rejected

PA1’s

proposal made during the fall of

2014.

No formal proposals are presently under consideration and only sporadic communication has taken place regarding the matters involved over the last

30

months. It is not possible at this date to predict the outcome of such this matter, but the Company believes that a loan modification agreement

may

be reached in the future if/when a more robust market for nutrient reductions develops in Pennsylvania, of which there is no assurance.

PA1

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

1

over the next

30

-

180

days.

During

August

2012,

the Company provided Pennvest (and the PADEP) with data demonstrating that the Kreider

1

system met the ‘technology guaranty’ standards which were incorporated in the Pennvest financing documents and, as a result, the Pennvest Loan has been (and is now) solely an obligation of

PA1

since that date.

The economics (potential revenues, profitability and continued operation) of the Kreider

1

System are based almost entirely on the long term sale of nutrient (nitrogen and/or phosphorus) reduction credits to meet the requirements of the Chesapeake Bay environmental clean-up.

On

May

5,

2016,

Bion

PA2

LLC

(“PA2”)

executed a stand-alone joint venture agreement with Kreider Farms covering all matters related to development and operation of a system to treat the waste streams from Kreider’s poultry facilities (“Kreider

2”).

The Kreider projects are owned and operated by Bion through separate subsidiaries, in which Kreider has the option to acquire a noncontrolling interest. S

ubstantial capital (equity and/or debt) has been and will continue to be expended on these projects. Additional funds will be required for continuing operations and additional capital expenditures for upgrades at Kreider

1

until sufficient revenues can be generated, of which there is no assurance. The Company anticipates that the Kreider

1

project will generate revenue primarily from the sale of nutrient reduction (and/or other) environmental credits. A portion of Bion’s research and development activities has taken place at the Kreider

1

facility.

Kreider

2

(not yet constructed) (and most future Projects) will be developed using Bion’s

3G

Tech to recover substantial marketable nutrients and renewable energy to supplement its revenue from nutrient reductions. The Company believes that the proceeds from multiple byproduct streams including i) fertilizer (organic and non-organic) and/or feed additives and ii) renewable energy (and related credits) can be reasonably projected to generate, in aggregate, revenue streams that, in certain circumstances,

may

exceed

50%

of total revenues from such Project(s). To date the market for long-term nutrient reduction credits in Pennsylvania has been very slow to develop and the Company’s activities have been negatively affected by the lack of such development.

Kreider

2

development work and technology evaluation, including execution of a stand-alone joint venture agreement, amended credit certification and discussions with potential joint venture partners, continues, which Project primarily relates to treatment of the wastes from Kreider’s poultry operations. Assuming there are positive developments related to the market for nutrient reductions in Pennsylvania, the Company intends to pursue development, design and construction of the Kreider

2

poultry waste/renewable energy project with a goal of achieving operational status during calendar year

2018.

However, as discussed above, this Project faces challenges related to the current limits of the existing nutrient reduction market and funding of technology-based, verifiable agricultural nutrient reductions which are anticipated to constitute the largest share of its revenues.

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

12

months and in various additional states thereafter.

Going concern and management’s plans:

The consolidated financial statements have been prepared assuming the Company will continue as a going concern. The Company has not generated significant revenues and has incurred net losses (including significant non-cash expenses) of approximately

$4,522,000

and

$5,642,000

during the years ended

June

30,

2016

and

2015,

respectively and a net loss of approximately

$1,378,000

during the

six

months ended

December

31,

2016.

At

December

31,

2016,

the Company has a working capital deficit and a stockholders’ deficit of approximately

$14,777,000

and

$14,777,000,

respectively. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments relating to the recoverability or classification of assets or the amounts and classification of liabilities that

may

result should the Company be unable to continue as a going concern. The following paragraphs describe management’s plans with regard to these conditions.

The Company continues to explore sources of additional financing (including potential agreements with strategic partners –both financial and ag-industry) to satisfy its current and future operating and capital expenditure requirements as it is not currently generating any significant revenues.

During the year ended

June

30,

2016

the Company received total proceeds of

$760,604

from the sale of its debt and equity securities. Proceeds during the

2016

fiscal year have been lower than in earlier years which reduction has negatively impacted the Company’s business development efforts.

During the

six

months ended

December

31,

2016,

the Company received

$127,850

gross proceeds from the sale of its debt and equity securities.

During fiscal years

2016

and

2015

and through the

six

months ended

December

31,

2016,

the Company experienced greater difficulty in raising equity funding than in the prior years. As a result, the Company faced, and continues to face, significant cash flow management challenges due to working capital constraints. To partially mitigate these working capital constraints, the Company’s core senior management and several key employees and consultants have been deferring (and continue to defer) all or part of their cash compensation and/or are accepting compensation in the form of securities of the Company (Notes

5

and

7)

and members of the Company’s senior management have made loans to the Company. Additionally, the Company made reductions in its personnel during the year ended

June

30,

2014.

The constraint on available resources has had, and continues to have, negative effects on the pace and scope of the Company’s efforts to develop its business. The Company has had to delay payment of trade obligations and has had to economize in many ways that have potentially negative consequences. If the Company does not have greater success in its efforts to raise needed funds during the

2017

fiscal year (and subsequent periods), management will need to consider deeper cuts (including additional personnel cuts) and curtailment of operations (including possibly Kreider

1

operations) and/or research and development activities.

The Company will need to obtain additional capital to fund its operations and technology development, to satisfy existing creditors, to develop Projects (including Integrated Projects) (including the Kreider

2

facility) and CAFO Retrofit waste remediation systems and to continue to operate the Kreider

1

facility. The Company anticipates that it will seek to raise from

$2,500,000

to

$50,000,000

or more debt and/or equity through joint ventures, strategic partnerships and/or sale of its equity securities (common, preferred and/or hybrid) and/or debt (including convertible) securities, and/or through use of ‘rights’ and/or warrants (new and/or existing) during the next

twelve

months. However, as discussed above, there is no assurance, especially in light of the difficulties the Company has experienced in recent periods and the extremely unsettled capital markets that presently exist (especially for companies like us), that the Company will be able to obtain the funds that it needs to stay in business, complete its technology development or to successfully develop its business and Projects.

There is no realistic likelihood that funds required during the next

twelve

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

XML

Note 2 - Significant Accounting Policies

6 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Significant Accounting Policies [Text Block]

2.

     SIGNIFICANT ACCOUNTING POLICIES

Principles of consolidation:

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Bion Integrated Projects Group, Inc. (“Projects Group”), Bion Technologies, Inc., BionSoil, Inc., Bion Services,

PA1,

and

PA2;

and its

58.9%

owned subsidiary, Centerpoint Corporation (“Centerpoint”). All significant intercompany accounts and transactions have been eliminated in consolidation.

The accompanying consolidated financial statements have been prepared without audit pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The consolidated financial statements reflect all adjustments (consisting of only normal recurring entries) that, in the opinion of management, are necessary to present fairly the financial position at

December

31,

2016,

and the results of operations and cash flows of the Company for the

three

and

six

months ended

December

31,

2016

and

2015.

Operating results for the

three

and

six

months ended

December

31,

2016

are not necessarily indicative of the results that

may

be expected for the year ending

June

30,

2017.

Property and equipment:

Property and equipment are stated at cost and are depreciated, when placed into service, using the straight-line method over the estimated useful lives of the related assets, generally

three

to

twenty

years. The Company capitalizes all direct costs and all indirect incrementally identifiable costs related to the design and construction of its Integrated Projects. The Company reviews its property and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset

may

not be recoverable. An impairment loss would be recognized based on the amount by which the carrying value of the assets or asset group exceeds its estimated fair value, and is recognized as a loss from operations.

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.

Fair value measurements:

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or most advantageous market. The Company uses a fair value hierarchy that has

three

levels of inputs, both observable and unobservable, with use of the lowest possible level of input to determine fair value.

Level

1

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

Level

2

– observable inputs other than Level

1,

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

Level

3

– assets and liabilities whose significant value drivers are unobservable.

Observable inputs are based on market data obtained from independent sources, while unobservable inputs are based on the Company’s market assumptions. Unobservable inputs require significant management judgment or estimation. In some cases, the inputs used to measure an asset or liability

may

fall into different levels of the fair value hierarchy. In those instances, the fair value measurement is required to be classified using the lowest level of input that is significant to the fair value measurement. Such determination requires significant management judgment.

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

Revenue Recognition:

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

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

Loss per share:

Basic loss per share amounts are calculated using the weighted average number of shares of common stock outstanding during the period. Diluted loss per share assumes the conversion, exercise or issuance of all potential common stock instruments, such as options or warrants, unless the effect is to reduce the loss per share. During

six

months ended

December

31,

2016

and

2015,

the basic and diluted loss per share was the same, as the impact of potential dilutive common shares was anti-dilutive.

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

	December 31, 2016		December 31, 2015
Warrants		8,354,795		8,396,364
Options		4,520,037		4,513,870
Convertible debt		8,710,252		7,562,213
Convertible preferred stock		15,500		14,500

The following is a reconciliation of the denominators of the basic loss per share computations for the

three

and

six

months ended

December

31,

2016

and

2015:

	Three months ended December 31, 2016			Three months ended December 31, 2015			Six months ended December 31, 2016			Six months ended December 31, 2015
Shares issued – beginning of period		23,761,168			22,606,852			23,573,057			22,089,650
Shares held by subsidiaries (Note 7)		(704,309	)		(704,309	)		(704,309	)		(704,309	)
Shares outstanding – beginning of period		23,056,859			21,902,543			22,868,748			21,385,341
Weighted average shares for fully vested stock bonuses		260,870			652,989			430,435			626,495
Weighted average shares issued during the period		10,770			29,469			137,128			425,203
Basic weighted average shares – end of period		23,328,499			22,585,001			23,436,311			22,437,039

Reclassifications:

Certain amounts in the prior year financial statements have been reclassified to conform to the current year presentation including the reclassification of accrued interest related to the Pennvest Loan from accounts payable and accrued expenses into loan payable and accrued interest.

Recent Accounting Pronouncements:

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

In

May

2014,

the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2014

-

09

“Revenue from Contracts from Customers,” which supersedes the revenue recognition requirements in “Revenue Recognition (Topic

605),”

and requires entities to recognize revenue in a way that depicts the transfer of potential goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to the exchange for those goods or services. ASU

2014

-

09

is effective for fiscal years, and interim periods within those years, beginning after

December

15,

2017

and earlier application is permitted only as of annual reporting periods beginning after

December

15,

2016.

 

In

August

2014,

the FASB issued ASU No.

2014

-

15,

“Presentation of Financial Statements – Going Concern: Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern.” The new standard requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within

one

year of the date the financial statements are issued. An entity must provide certain disclosures if conditions or events raise substantial doubt about the entity’s ability to continue as a going concern. The guidance is effective for annual periods ending after

December

15,

2016,

and interim periods thereafter, early application is permitted. The adoption of ASU No.

2014

-

15

did not have a material impact on the Company’s financial statements.

XML

Note 3 - Property and Equipment

6 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Property, Plant and Equipment Disclosure [Text Block]

3.

     PROPERTY AND EQUIPMENT:

Property and equipment consists of the following:

	December 31, 2016			June 30, 2016
Machinery and equipment	$	2,222,670		$	2,222,670
Buildings and structures		401,470			401,470
Computers and office equipment		173,313			173,313
		2,797,453			2,797,453
Less accumulated depreciation		(2,794,199	)		(2,793,194	)
	$	3,254		$	4,259

Management reviewed property and equipment for impairment as of

June

30,

2016

and determined that the carrying amount of property and equipment related to the Kreider

1

project exceeded its estimated future undiscounted cash flows based on certain assumptions regarding timing, level and probability of revenues from sales of nutrient reduction credits and potentially needed capital expenditures and it was also determined that the salvage value of the system components will be offset by contractual decommissioning obligations. Kreider

1

was measured at estimated fair value on a non-recurring basis using level

3

inputs, which resulted in an impairment of

$1,684,562

of the property and equipment for the year ended

June

30,

2016.

As of

June

30,

2016,

the net book value of Kreider

1

was

zero.

As of

December

31,

2016,

management believes that

no

additional impairment exists.

Depreciation expense was

$503

and

$76,083

for the

three

months ended

December

31,

2016

and

2015,

respectively, and

$1,005

and

$151,962

for the

six

months ended

December

31,

2016

and

2015,

respectively.

XML

Note 4 - Deferred Compensation

6 Months Ended

Dec. 31, 2016

Notes to Financial Statements

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

4.

     DEFERRED COMPENSATION:

The Company owes deferred compensation to various employees, former employees and consultants totaling

$1,879,473

as of

December

31,

2016.

Included in the deferred compensation balances as of

December

31,

2016,

are

$772,629,

$281,590

and

$117,292

owed Bassani, Mark A. Smith (“Smith”), the Company’s President, and Edward Schafer (“Schafer”), the Company’s Vice Chairman, respectively, pursuant to extension agreements effective

January

1,

2015,

whereby unpaid compensation earned after

January

1,

2015,

accrues interest at

4%

per annum and can be converted into shares of the Company’s common stock at the election of the employee during the

first

five

calendar days of any month. The conversion price shall be the average closing price of the Company’s common stock for the last

10

trading days of the immediately preceding month. The Company also owes various consultants, pursuant to various agreements, for deferred compensation of

$466,478

as of

December

31,

2016

with similar conversion terms as those described above for Bassani, Smith and Schafer, with the exception that the interest accrues at

3%

per annum. The Company also owes a former employee and a current employee deferred compensation of

$168,000

and

$984,

respectively, which is convertible into

226,168

and

1,186

shares, respectively, of the Company’s common stock as of

December

31,

2016

and, a former employee

$72,500,

which is not convertible and is non-interest bearing.

XML

Note 5 - Loan Payable

6 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Debt Disclosure [Text Block]

5.

     LOAN PAYABLE:

As of

December

31,

2016,

PA1,

the Company’s wholly-owned subsidiary, owes

$8,679,992

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

1

System including accrued interest and late charges totaling

$925,992.

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

$7,754,000

which was to be repaid by interest-only payments for

three

years, followed by an additional

ten

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

2.547%

per annum for years

1

through

5

and

3.184%

per annum for years

6

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

$2,001,000

in fiscal years

2013

through

2016,

and

$741,000

in fiscal year

2017,

$760,000

in fiscal year

2018,

$771,000

in fiscal year

2019,

$794,000

in fiscal year

2020,

$819,000

in fiscal year

2021

and

$1,867,000

thereafter. The Pennvest Loan is collateralized by the Kreider

1

System and by a pledge of all revenues generated from Kreider

1

including, but not limited to, revenues generated from nutrient reduction credit sales and by-product sales. In addition, in consideration for the excess credit risk associated with the project, Pennvest is entitled to participate in the profits from Kreider

1

calculated on a net cash flow basis, as defined. The Company has incurred interest expense related to the Pennvest Loan of

$49,374

for both of the

three

months ended

December

31,

2016

and

2015,

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

$98,747

for both of the

six

months ended

December

31,

2016

and

2015,

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

PA1

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

PA1

has elected not to make interest payments to Pennvest on the Pennvest Loan since

January

2013.

Additionally, the Company has not made any principal payments, which were to begin in fiscal

2013,

and, therefore, the Company has classified the Pennvest Loan as a current liability as of

December

31,

2016.

On

September

25,

2014,

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

PA1

pay

$8,137,117

(principal, interest plus late charges) on or before

October

24,

2014.

PA1

did not make the payment and does not have the resources to make the payment demanded by Pennvest.

PA1

has engaged in on/off discussions and negotiations with Pennvest concerning this matter but no such discussions/negotiations are currently active. As of the date of this report, no formal proposals are presently under consideration and only sporadic communication has taken place regarding the matters involved over the past

30

months. It is not possible at this date to predict the outcome of this matter, but the Company believes it is possible that an agreement

may

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

PA1

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

1

over the next

30

-

180

days.

In connection with the Pennvest Loan financing documents, the Company provided a ‘technology guaranty’ regarding nutrient reduction performance of Kreider

1

which was structured to expire when Kreider

1’s

nutrient reduction performance had been demonstrated. During

August

2012

the Company provided Pennvest (and the PADEP) with data demonstrating that the Kreider

1

System had surpassed the requisite performance criteria and that the Company’s ‘technology guaranty’ was met. As a result, the Pennvest Loan is solely an obligation of

PA1.

XML

Note 6 - Convertible Notes Payable - Affiliates

6 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Convertible Debt [Text Block]

6.

     CONVERTIBLE NOTES PAYABLE - AFFILIATES:

January

2015

Convertible Notes

The

January

2015

Convertible Notes accrue interest at

4%

per annum and are due and payable on

December

31,

2017.

The

January

2015

Convertible Notes (including accrued interest, plus all future deferred compensation), are convertible, at the sole election of the noteholder, into Units consisting of

one

share of the Company’s common stock and

one

quarter warrant to purchase a share of the Company’s common stock, at a price of

$0.50

per Unit until

December

31,

2020.

The warrant contained in the Unit shall be exercisable at

$1.00

per share until

December

31,

2020.

The original conversion price of

$0.50

per Unit approximated the fair value of the Units at the date of the agreements; therefore no beneficial conversion feature exists. Management evaluated the terms and conditions of the embedded conversion features based on the guidance of ASC

815

-

15

“Embedded Derivatives” to determine if there was an embedded derivative requiring bifurcation. An embedded derivative instrument (such as a conversion option embedded in the deferred compensation) must be bifurcated from its host instruments and accounted for separately as a derivative instrument only if the “risks and rewards” of the embedded derivative instrument are not “clearly and closely related” to the risks and rewards of the host instrument in which it is embedded. Management concluded that the embedded conversion feature of the deferred compensation was not required to be bifurcated because the conversion feature is clearly and closely related to the host instrument, and because of the Company’s limited trading volume that indicates the feature is not readily convertible to cash in accordance with ASC

815

-

10,

“Derivatives and Hedging”.

As of

December

31,

2016,

the

January

2015

Convertible Note balances, including accrued interest, owed Bassani, Smith and Schafer were

$1,581,710,

$821,360

and

$408,553,

respectively. During both of the

three

months ended

December

31,

2016

and

2015,

the Company recorded interest expense of

$26,247

,

respectively, related to the

January

2015

Convertible Notes. The Company recorded

$52,495

for both the

six

months ended

December

31,

2016

and

2015,

respectively.

September

2015

Convertible Notes

During the year ended

June

30,

2016,

the Company entered into

September

2015

Convertible Notes with Bassani, Schafer and a Shareholder which replaced previously issued promissory notes. The initial principal balances of the

September

2015

Convertible Notes were

$405,831,

$16,382

and

$82,921,

respectively. The

September

2015

Convertible Notes bear interest at

4%

per annum, have maturity dates of

December

31,

2017

and

may

be converted at the sole election of the noteholders into restricted common shares of the Company at a conversion price of

$0.60

per share. As the conversion price of

$0.60

approximated the fair value of the common shares at the date of the

September

2015

Convertible Notes, no beneficial conversion feature exists. The balances of the

September

2015

Convertible Notes as of

December

31,

2016,

including accrued interest, are

$427,179,

$17,244

and

$87,282,

respectively. The Company recorded interest expense related to the

2015

Convertible Notes of

$5,092

and

$5,093

for the

three

months ended

December

31,

2016

and

2015,

respectively. The Company recorded interest expense of

$10,185

and

$6,311

for the

six

months ended

December

31,

2016,

respectively.

XML

Note 7 - Stockholders' Equity

6 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Stockholders' Equity Note Disclosure [Text Block]

7.

     STOCKHOLDERS' EQUITY:

Series B Preferred stock:

At

July

1,

2014,

the Company had

200

shares of Series B redeemable convertible Preferred stock outstanding with a par value of

$0.01

per share, convertible at the option of the holder at

$2.00

per share, with dividends accrued and payable at

2.5%

per quarter. The Series B Preferred stock is mandatorily redeemable at

$2.00

per share by the Company

three

years after issuance and accordingly was classified as a liability. The

200

shares have reached their maturity date, but due to the cash constraints of the Company have not been redeemed.

During the years ended

June

30,

2016

and

2015,

the Company declared dividends of

$2,000

and

$2,000

respectively. During the

three

and

six

months ended

December

31,

2016,

the Company declared dividends of

$500

and

$1,000,

respectively. At

December

31,

2016,

accrued dividends payable are

$11,000.

The dividends are classified as a component of operations as the Series B Preferred stock is presented as a liability in these financial statements. For the

three

and

six

months ended

December

31,

2015

these amounts were presented differently but the

December

31,

2015

financial statements were revised even though such revision previously was and continues to be immaterial to the prior year financial statements.

Common stock:

Holders of common stock are entitled to

one

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

may

be adversely affected by, the rights of the holders of any outstanding series of preferred stock or any series of preferred stock the Company

may

designate in the future.

Centerpoint holds

704,309

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

During the

six

months ended

December

31,

2016,

the Company issued

23,687

shares of the Company’s common stock at prices ranging from

$0.75

to

$1.02

per share for services valued at

$19,507,

in the aggregate, to consultants and employees.

During the

six

months ended

December

31,

2016,

the Company issued

10,000

shares of the Company’s restricted common stock upon receipt of its subscription receivable of

$7,500

for the exercise of

10,000

warrants.

During the

six

months ended

December

31,

2016,

the Company entered into subscription agreements to sell units for

$0.75

per unit, with each unit consisting of

one

share of the Company’s restricted common stock and

one

warrant to purchase

one

half of a share of the Company’s restricted common stock for

$1.00

per share until

December

31,

2017

and pursuant thereto, the Company issued

140,000

units for total proceeds of

$105,000,

net proceeds of

$103,500

after commissions. The Company allocated the proceeds from the shares and the warrants based upon their relative fair values, using the share price on the day each of the subscription agreements were entered into and the fair value of the warrants, which was determined to be

$0.05

per warrant. As a result,

$2,968

was allocated to the warrants and

$102,032

was allocated to the shares, and both were recorded as additional paid in capital.

During the

six

months ended

December

31,

2016,

the Company sold

30,467

shares of the Company’s common stock for

$0.75

per share for total proceeds of

$22,850.

During the

six

months ended

December

31,

2016,

a consultant elected to convert

$6,008

of deferred compensation into

7,152

shares of the Company’s common stock at a conversion rate of

$0.84

per share.

Warrants:

As of

December

31,

2016,

the Company had approximately

8.4

million warrants outstanding, with exercise prices from

$0.75

to

$3.00

and expiring on various dates through

December

31,

2021.

 

The weighted-average exercise price for the outstanding warrants is

$1.26,

and the weighted-average remaining contractual life as of

December

31,

2016

is

3.8

years.

During the

six

months ended

December

31,

2016,

warrants to purchase

722,319

shares of common stock of the Company at prices between

$0.75

per share expired.

At

June

30,

2016

the Company had a subscription agreement for the exercise of

10,000

warrants at an exercise price of

$0.75,

resulting in a subscription receivable of

$7,500.

During the

six

months ended

December

31,

2016,

the received the subscription receivable of

$7,500

and the Company issued

10,000

shares of the Company’s common stock in satisfaction of the warrant exercise.

During the

six

months ended

December

31,

2016,

Smith and a consultant each purchased

40,000

warrants at an exercise price of

$1.00,

with expiry dates of

December

31,

2021.

Smith and the consultant utilized deferred compensation of

$2,000

each to purchase the warrants.

During the

six

months ended

December

31,

2016,

a consultant was issued

25,000

warrants at

$0.90,

expiring on

December

31,

2019

in exchange for services valued at

$1,250.

During the

six

months ended

December

31,

2016,

the Company entered into subscription agreements to sell units for

$0.75

per unit, with each unit consisting of

one

share of the Company’s restricted common stock and

one

warrant to purchase

one

half of a share of the Company’s restricted common stock for

$1.00

per share until

December

31,

2017

and pursuant thereto, the Company issued

140,000

units for gross proceeds of

$105,000.

The Company allocated the proceeds from the shares and the warrants based upon their relative fair values, using the share price on the day each of the subscription agreements were entered into and the fair value of the warrants, which was determined to be

$0.05

per warrant. As a result,

$2,968

was allocated to the warrants and

$102,032

was allocated to the shares, and both were recorded as additional paid in capital.

During the

six

months ended

December

31,

2016,

the Company received an interest bearing, secured promissory note for

$40,000

from Bassani as consideration to purchase warrants to purchase

800,000

shares of the Company’s restricted common stock, which warrants are exercisable at

$1.00

and have expiry dates of

December

31,

2021

(“Bassani Warrant”). The promissory note bears interest at

4%

per annum, is secured by a perfected security interest in the Bassani Warrant, and is payable on

November

15,

2017.

Stock options:

The Company’s

2006

Consolidated Incentive Plan, as amended (the

“2006

Plan”), provides for the issuance of options (and/or other securities) to purchase up to

22,000,000

shares of the Company’s common stock. Terms of exercise and expiration of options/securities 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.

During the

six

months ended

December

31,

2016,

the Company approved the modification of existing stock options held by an employee and

two

former employees, who are now consultants, which extended certain expiration dates and reduced certain exercise prices, which resulted in incremental non-cash compensation expense of

$177,471.

During the

six

months ended

December

31,

2016,

the Company approved the issuance of

100,000

shares in stock bonuses to an employee and a consultant with various vesting dates from

April

15,

2017

through

January

15,

2020.

The Company recorded

$14,784

of non-cash compensation related to the stock bonuses for the

three

and

six

months ended

December

31,

2016,

respectively.

The Company recorded compensation expense related to employee stock options of

$108,960

and

$74,320

for the

three

months ended

December

31,

2016

and

2015,

respectively, and

$129,816

and

$89,640

for the

six

months ended

December

31,

2016

and

2015,

respectively. The Company granted

294,500

and

100,000

options during the

six

months ended

December

31,

2016

and

2015,

respectively.

The fair value of the options granted during the

six

months ended

December

31,

2016

and

2015

were estimated on the grant date using the Black-Scholes option-pricing model with the following assumptions:

	Weighted Average, December 31, 2016			Range, December 31, 2016			Weighted Average, December 31, 2015			Range, December 31, 2015
Volatility		79	%	78%	-	86%		74	%		74	%
Dividend yield		-			-			-			-
Risk-free interest rate		1.14	%	0.82%	-	1.17%		1.75	%		1.75	%
Expected term (years)		4.0		3	-	4		5			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.

A summary of option activity under the

2006

Plan for the

six

months ended

December

31,

2016

is as follows:

	Options		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life		Aggregate Intrinsic Value
Outstanding at July 1, 2016		4,225,537	$	1.79		4.1	$	158,675
Granted		294,500		1.00
Exercised		-		-
Forfeited		-		-
Expired		-		-
Outstanding at December 31, 2016		4,520,037	$	1.42		3.4	$	31,125
Exercisable at December 31, 2016		4,420,037	$	1.44		3.3	$	38,625

The following table presents information relating to nonvested stock options as of

December

31,

2016:

	Options			Weighted Average Grant-Date Fair Value
Nonvested at July 1, 2016		50,000		$	0.76
Granted		294,500			0.47
Vested		(244,500	)		(0.47	)
Nonvested at December 31, 2016		100,000		$	0.61

The total fair value of stock options that vested during the

six

months ended

December

31,

2016

and

2015

was

$113,770

and

$59,000,

respectively. As of

December

31,

2016,

the Company had

$16,867

of unrecognized compensation cost related to stock options.

Stock-based employee compensation charges in operating expenses in the Company’s financial statements for the

three

and

six

months ended

December

31,

2016

and

2015

are as follows:

	Three months ended December 31, 2016		Three months ended December 31, 2015		Six months ended December 31, 2016		Six months ended December 31, 2015
General and administrative:
Fair value of stock bonuses expensed	$	6,830	$	69,000	$	6,830	$	69,000
Change in fair value from modification of option terms		166,031		42,550		166,031		42,550
Fair value of stock options expensed		90,067		62,371		106,565		64,209
Total	$	262,928	$	173,921	$	279,426	$	175,759
Research and development:
Fair value of stock bonus expensed	$	7,954	$	-	$	7,954	$	-
Change in fair value from modification of option terms		11,440		-		11,440		-
Fair value of stock options expensed		18,889		11,949		23,251		25,431
Total	$	38,283	$	11,949	$	42,645	$	25,431

XML

Note 8 - Commitments and Contingencies

6 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

8.

     COMMITMENTS AND CONTINGENCIES:

Employment and consulting agreements:

Smith has held the positions of Director, President and General Counsel of Company and its subsidiaries under various agreements and terms since

March

2003.

During

September

2014,

Smith agreed to continue his employment agreement through

April

15,

2015

and also agreed to continue to defer his temporarily reduced salary of

$14,000

per month until such date. On

February

10,

2015,

the Company executed an Extension Agreement with Smith pursuant to which Smith extended his employment with the Company to

December

31,

2015

(with the Company having an option to extend his employment an additional

six

months). As part of the Extension Agreement, the balance of Smith’s existing convertible note payable as of

December

31,

2014,

adjusted for conversions subsequent to that date, was replaced with a new convertible note with an initial principal amount of

$760,520

with terms that i) materially reduce the interest rate by

50%

(from

8%

to

4%),

ii) increases the conversion price by

11%

(from

$0.45

to

$0.50),

iii) sets the conversion price at a fixed price so there can be no further reductions, iv) reduces the number of warrants received on conversion by

75%

(from

1

warrant per unit to

1/4

per unit) and v) extends the maturity date to

December

31,

2017.

Additionally, pursuant to the Extension Agreement, Smith: i) will continue to defer his cash compensation

($18,000

per month) until the Board of Directors re-instates cash payments to all employees and consultants who are deferring their compensation, ii) cancelled

150,000

contingent stock bonuses previously granted to him by the Company, iii) has been granted

150,000

new options which vested immediately and iv) outstanding options and warrants owned by Smith (and his donees) have been extended and had the exercise prices reduced to

$1.50

(if the exercise price exceeded

$1.50).

In

October

2015,

the Company executed an Extension Agreement

(“FY2016

Extension Agreement”) with Smith pursuant to which Smith extended his employment with the Company to

June

30,

2016

(with Company having an option to extend his employment an additional

six

months). As part of the

FY2016

Extension Agreement, Smith: i) will continue to defer his cash compensation

($19,000

per month) until the Board of Directors re-instates cash payments, ii) has been granted

100,000

new options which vested immediately, and iii) has been granted

75,000

shares of common stock as an extension bonus which are immediately vested and were issued on

January

5,

2016.

As of

July

1,

2016,

Smith is working under a month to month contract extension until a longer term agreement is reached. On

October

10,

2016,

the Company approved a month to month contract extension with Smith which includes provisions for i) issuance of

25,000

bonus shares of the Company’s common shares on

January

15,

2017

(which were subsequently cancelled), ii) grant of

75,000

options to purchase shares of the Company’s common shares at

$0.90

per share with expiry date of

December

31,

2020,

which options are subject to the exercise/extension bonus, iii) a monthly deferred salary of

$18,000

effective

October

1,

2016,

iv) the right to convert up to

$125,000

of his deferred compensation, at his sole election, at

$0.75

per share, until

March

15,

2018

(which was expanded on

January

27,

2017

to the right to convert up to

$250,000

of his deferred compensation, at his sole election, at

$0.75

per share, until

December

31,

2018),

and v) the right to convert his deferred compensation in whole or in part, at his sole election, at any time in any amount at “market” or into securities sold in the Company’s current/most recent private offering at the price of such offering to

third

parties.

Since

March

31,

2005,

the Company has had various agreements with Brightcap and/or Bassani, through which the services of Bassani are provided. The Board appointed Bassani as the Company's CEO effective

May

13,

2011.

During the fiscal years

2012

and

2013,

Bassani entered into extension agreements whereby he was awarded fully vested stock grants totaling

600,000

shares,

500,000

shares of which are to be issued

January

15,

2016

and

100,000

shares are to be issued

January

15,

2017.

The stock grants were expensed in the years they were awarded as they are fully vested. On

February

10,

2015,

the Company executed an Extension Agreement with Bassani pursuant to which Bassani extended the term of his service to the Company to

December

31,

2017,

(with the Company having an option to extend the term an additional

six

months.) As part of the agreement, the Company’s then existing loan payable, deferred compensation and convertible note payable to Bassani, were restructured into

two

promissory notes as follows: a) The sum of the cash loaned by Bassani to the Company of

$279,000

together with

$116,277

of unreimbursed expenses through

December

31,

2014,

were placed into a new promissory note with initial principal of

$395,277

which was due and payable on

December

31,

2015

and now has been replaced with a

September

2015

Convertible Note (Note

8).

In connection with these sums and the new promissory note, Bassani was issued warrants to purchase

592,916

shares of the Company’s common stock at a price of

$1.00

until

December

31,

2020;

and b) the remaining balances of the Company’s accrued obligations to Bassani

($1,464,545)

were replaced with a new convertible promissory note with terms that compared with the largest prior convertible note obligation to Bassani: i) materially reduce the interest rate by

50%

(from

8%

to

4%),

ii) increase the conversion price by

11%

(from

$0.45

to

$0.50),

iii) sets the conversion price at a fixed price so there can be no further reductions, iv) reduces the number of warrants received on conversion by

75%

(from

1

warrant per unit to

1/4

per unit) and v) extends the maturity date to

December

31,

2017

(Note

8).

Additionally, pursuant to the Extension Agreement, Bassani i) will continue to defer his cash compensation

($31,000

per month) until the Board of Directors re-instates cash payments to all employees and consultants who are deferring their compensation, ii) cancelled

250,000

contingent stock bonuses previously granted to him by the Company, iii) has been granted

450,000

new options which vested immediately and iv) outstanding options and warrants owned by Bassani (and his donees) have been extended and had the exercise prices reduced to

$1.50

(if the exercise price exceeded

$1.50).

During

October

2016

Bassani was granted the right to convert up to

$125,000

of his deferred compensation, at his sole election, at

$0.75

per share, until

March

15,

2018

(which was expanded on

January

27,

2017

to the right to convert up to

$250,000

of his deferred compensation, at his sole election, at

$0.75

per share, until

December

31,

2018).

On

February

10,

2015,

the Company entered into an agreement with Schafer pursuant to which Schafer will continue to provide services to the Company through

December

31,

2015.

Additionally, pursuant to the agreement, i) the exercise period of outstanding options and warrants owned by Schafer have been extended, and ii)

25,000

contingent stock bonuses previously granted to Schafer have been cancelled by the Company. In

January

2016,

Schafer agreed to extend his agreement with the Company through

December

31,

2016.

During

June

2016,

Schafer and the Company determined that due to other obligations Schafer’s involvement with the Company during the

2016

fiscal year was less than anticipated and reduced his fiscal year

2016

compensation (all of which had been deferred) by

$160,000

and future compensation will be determined periodically based on evaluation by the board of directors.

Contingent stock bonuses:

The Company has declared contingent deferred stock bonuses to its key employees and consultants at various times throughout the years. The stock bonuses were contingent upon the Company’s stock price exceeding a certain target price per share, and the grantees still being employed by or providing services to the Company at the time the target prices are reached. During the

six

months ended

December

31,

2016,

the Company cancelled all

117,500

outstanding contingent stock bonuses. In consideration for the cancellations, the Company granted

109,500

fully vested options to certain employees and a consultant to purchase common stock of the Company at

$1.00

per share until

December

31,

2020.

Execution/exercise bonuses:

As part of agreements the Company entered into with Bassani and Smith effective

May

15,

2013,

they were each granted the following: a) a

50%

execution/exercise bonus which shall be applied upon the effective date of the notice of intent to exercise (for options and warrants) or issuance event, as applicable, of any currently outstanding and/or subsequently acquired options, warrants and/or contingent stock bonuses owned by each (and/or their donees) as follows: i) in the case of exercise by payment of cash, the bonus shall take the form of reduction of the exercise price; ii) in the case of cashless exercise, the bonus shall be applied to reduce the exercise price prior to the cashless exercise calculations; and iii) with regard to contingent stock bonuses, issuance shall be triggered upon the Company’s common stock reaching a closing price equal to

50%

of currently specified price; and b) the right to extend the exercise period of all or part of the applicable options and warrants for up to

five

years

(one

year at a time) by annual payments of

$.05

per option or warrant to the Company on or before a date during the

three

months prior to expiration of the exercise period at least

three

business days before the end of the expiration period. Effective

January

1,

2016

such annual payments to extend warrant exercise periods have been reduced to

$.01

per option or warrant.

During the year ended

June

30,

2014,

the Company extended execution/exercise bonuses with the same terms as described above to Schafer and to Jon Northrop, the Company’s other board member.

As of

December

31,

2016,

the execution/exercise bonus was applicable to

3,145,000

of the Company’s outstanding options and

7,657,153

of the Company’s outstanding warrants.

Litigation:

On

September

25,

2014,

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

PA1

pay

$8,137,117

(principal, interest plus late charges) on or before

October

24,

2014.

PA1

did not make the payment and does not have the resources to make the payment demanded by Pennvest. During

August

2012,

the Company provided Pennvest (and the PADEP) with data demonstrating that the Kreider

1

system met the ‘technology guaranty’ standards which were incorporated in the Pennvest financing documents and, as a result, the Pennvest Loan is now solely an obligation of

PA1.

No litigation has commenced related to this matter but such litigation is likely if negotiations do not produce a resolution (Notes

1

and Note

6).

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

XML

Note 9 - Subsequent Events

6 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Subsequent Events [Text Block]

9. SUBSEQUENT EVENTS:

The Company has evaluated events that occurred subsequent to

December

31,

2016

for recognition and disclosure in the financial statements and notes to the financial statements.

From

January

1,

2017

through

February

10,

2017,

the Company has issued

131,386

shares of the Company’s common shares to an employee and consultants for services valued at approximately

$99,000.

 

From

January,

1,

2017

through

February

10,

2017,

two

consultants have elected to convert approximately

$134,000

of deferred compensation into

177,390

shares of the Company’s common shares. The Company also issued

79,614

warrants to purchase common shares of the Company for

$1.00

per share with expiry dates of

December

31,

2018

in conjunction with

one

of the conversions.

From

January

1,

2017

through

February

00,

2017,

the Company sold

70,517

Units of its securities at

$0.75

per Unit for aggregate consideration of approximately

$52,900.

Each Unit consists of

one

share of common stock and a callable warrant to purchase ½ share of the Company’s common shares at

$1.00

per share until

December

31,

2017.

XML

Significant Accounting Policies (Policies)

6 Months Ended

Dec. 31, 2016

Accounting Policies [Abstract]

Consolidation, Policy [Policy Text Block]

Principles of consolidation:

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Bion Integrated Projects Group, Inc. (“Projects Group”), Bion Technologies, Inc., BionSoil, Inc., Bion Services,

PA1,

and

PA2;

and its

58.9%

owned subsidiary, Centerpoint Corporation (“Centerpoint”). All significant intercompany accounts and transactions have been eliminated in consolidation.

The accompanying consolidated financial statements have been prepared without audit pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The consolidated financial statements reflect all adjustments (consisting of only normal recurring entries) that, in the opinion of management, are necessary to present fairly the financial position at

December

31,

2016,

and the results of operations and cash flows of the Company for the

three

and

six

months ended

December

31,

2016

and

2015.

Operating results for the

three

and

six

months ended

December

31,

2016

are not necessarily indicative of the results that

may

be expected for the year ending

June

30,

2017.

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

Property and equipment:

Property and equipment are stated at cost and are depreciated, when placed into service, using the straight-line method over the estimated useful lives of the related assets, generally

three

to

twenty

years. The Company capitalizes all direct costs and all indirect incrementally identifiable costs related to the design and construction of its Integrated Projects. The Company reviews its property and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset

may

not be recoverable. An impairment loss would be recognized based on the amount by which the carrying value of the assets or asset group exceeds its estimated fair value, and is recognized as a loss from operations.

Equity Issuances Warrants Policy [Policy Text Block]

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.

Fair Value Measurement, Policy [Policy Text Block]

Fair value measurements:

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or most advantageous market. The Company uses a fair value hierarchy that has

three

levels of inputs, both observable and unobservable, with use of the lowest possible level of input to determine fair value.

Level

1

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

Level

2

– observable inputs other than Level

1,

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

Level

3

– assets and liabilities whose significant value drivers are unobservable.

Observable inputs are based on market data obtained from independent sources, while unobservable inputs are based on the Company’s market assumptions. Unobservable inputs require significant management judgment or estimation. In some cases, the inputs used to measure an asset or liability

may

fall into different levels of the fair value hierarchy. In those instances, the fair value measurement is required to be classified using the lowest level of input that is significant to the fair value measurement. Such determination requires significant management judgment.

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

Revenue Recognition, Policy [Policy Text Block]

Revenue Recognition:

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

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

Earnings Per Share, Policy [Policy Text Block]

Revenue Recognition:

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

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

Loss per share:

Basic loss per share amounts are calculated using the weighted average number of shares of common stock outstanding during the period. Diluted loss per share assumes the conversion, exercise or issuance of all potential common stock instruments, such as options or warrants, unless the effect is to reduce the loss per share. During

six

months ended

December

31,

2016

and

2015,

the basic and diluted loss per share was the same, as the impact of potential dilutive common shares was anti-dilutive.

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

	December 31, 2016		December 31, 2015
Warrants		8,354,795		8,396,364
Options		4,520,037		4,513,870
Convertible debt		8,710,252		7,562,213
Convertible preferred stock		15,500		14,500

The following is a reconciliation of the denominators of the basic loss per share computations for the

three

and

six

months ended

December

31,

2016

and

2015:

	Three months ended December 31, 2016			Three months ended December 31, 2015			Six months ended December 31, 2016			Six months ended December 31, 2015
Shares issued – beginning of period		23,761,168			22,606,852			23,573,057			22,089,650
Shares held by subsidiaries (Note 7)		(704,309	)		(704,309	)		(704,309	)		(704,309	)
Shares outstanding – beginning of period		23,056,859			21,902,543			22,868,748			21,385,341
Weighted average shares for fully vested stock bonuses		260,870			652,989			430,435			626,495
Weighted average shares issued during the period		10,770			29,469			137,128			425,203
Basic weighted average shares – end of period		23,328,499			22,585,001			23,436,311			22,437,039

Reclassification, Policy [Policy Text Block]

Reclassifications:

Certain amounts in the prior year financial statements have been reclassified to conform to the current year presentation including the reclassification of accrued interest related to the Pennvest Loan from accounts payable and accrued expenses into loan payable and accrued interest.

New Accounting Pronouncements, Policy [Policy Text Block]

Recent Accounting Pronouncements:

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

In

May

2014,

the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2014

-

09

“Revenue from Contracts from Customers,” which supersedes the revenue recognition requirements in “Revenue Recognition (Topic

605),”

and requires entities to recognize revenue in a way that depicts the transfer of potential goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to the exchange for those goods or services. ASU

2014

-

09

is effective for fiscal years, and interim periods within those years, beginning after

December

15,

2017

and earlier application is permitted only as of annual reporting periods beginning after

December

15,

2016.

 

In

August

2014,

the FASB issued ASU No.

2014

-

15,

“Presentation of Financial Statements – Going Concern: Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern.” The new standard requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within

one

year of the date the financial statements are issued. An entity must provide certain disclosures if conditions or events raise substantial doubt about the entity’s ability to continue as a going concern. The guidance is effective for annual periods ending after

December

15,

2016,

and interim periods thereafter, early application is permitted. The adoption of ASU No.

2014

-

15

did not have a material impact on the Company’s financial statements.

XML

Note 2 - Significant Accounting Policies (Tables)

6 Months Ended

Dec. 31, 2016

Notes Tables

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

	December 31, 2016		December 31, 2015
Warrants		8,354,795		8,396,364
Options		4,520,037		4,513,870
Convertible debt		8,710,252		7,562,213
Convertible preferred stock		15,500		14,500

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

	Three months ended December 31, 2016			Three months ended December 31, 2015			Six months ended December 31, 2016			Six months ended December 31, 2015
Shares issued – beginning of period		23,761,168			22,606,852			23,573,057			22,089,650
Shares held by subsidiaries (Note 7)		(704,309	)		(704,309	)		(704,309	)		(704,309	)
Shares outstanding – beginning of period		23,056,859			21,902,543			22,868,748			21,385,341
Weighted average shares for fully vested stock bonuses		260,870			652,989			430,435			626,495
Weighted average shares issued during the period		10,770			29,469			137,128			425,203
Basic weighted average shares – end of period		23,328,499			22,585,001			23,436,311			22,437,039

XML

Note 3 - Property and Equipment (Tables)

6 Months Ended

Dec. 31, 2016

Notes Tables

Property, Plant and Equipment [Table Text Block]

	December 31, 2016			June 30, 2016
Machinery and equipment	$	2,222,670		$	2,222,670
Buildings and structures		401,470			401,470
Computers and office equipment		173,313			173,313
		2,797,453			2,797,453
Less accumulated depreciation		(2,794,199	)		(2,793,194	)
	$	3,254		$	4,259

XML

Note 7 - Stockholders' Equity (Tables)

6 Months Ended

Dec. 31, 2016

Notes Tables

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

	Weighted Average, December 31, 2016			Range, December 31, 2016			Weighted Average, December 31, 2015			Range, December 31, 2015
Volatility		79	%	78%	-	86%		74	%		74	%
Dividend yield		-			-			-			-
Risk-free interest rate		1.14	%	0.82%	-	1.17%		1.75	%		1.75	%
Expected term (years)		4.0		3	-	4		5			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, 2016		4,225,537	$	1.79		4.1	$	158,675
Granted		294,500		1.00
Exercised		-		-
Forfeited		-		-
Expired		-		-
Outstanding at December 31, 2016		4,520,037	$	1.42		3.4	$	31,125
Exercisable at December 31, 2016		4,420,037	$	1.44		3.3	$	38,625

Schedule of Nonvested Share Activity [Table Text Block]

	Options			Weighted Average Grant-Date Fair Value
Nonvested at July 1, 2016		50,000		$	0.76
Granted		294,500			0.47
Vested		(244,500	)		(0.47	)
Nonvested at December 31, 2016		100,000		$	0.61

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

	Three months ended December 31, 2016		Three months ended December 31, 2015		Six months ended December 31, 2016		Six months ended December 31, 2015
General and administrative:
Fair value of stock bonuses expensed	$	6,830	$	69,000	$	6,830	$	69,000
Change in fair value from modification of option terms		166,031		42,550		166,031		42,550
Fair value of stock options expensed		90,067		62,371		106,565		64,209
Total	$	262,928	$	173,921	$	279,426	$	175,759
Research and development:
Fair value of stock bonus expensed	$	7,954	$	-	$	7,954	$	-
Change in fair value from modification of option terms		11,440		-		11,440		-
Fair value of stock options expensed		18,889		11,949		23,251		25,431
Total	$	38,283	$	11,949	$	42,645	$	25,431

XML

Note 1 - Organization, Nature of Business, Going Concern and Management's Plans (Details Textual) - USD ($)	3 Months Ended		6 Months Ended		12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2016	Dec. 31, 2015	Jun. 30, 2016	Jun. 30, 2015	Sep. 25, 2014	Jan. 26, 2009
Construction Loan								$ 7,750,000
Impairment of Long-Lived Assets Held-for-use					$ 1,684,562
Property, Plant and Equipment, Net	$ 3,254		$ 3,254		4,259
Net Income (Loss), Including Portion Attributable to Noncontrolling Interest	(747,847)	$ (797,369)	(1,378,047)	$ (1,630,398)	(4,522,000)	$ (5,642,000)
Working Capital	(14,777,000)		(14,777,000)
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest	(14,777,244)		(14,777,244)		(13,878,383)
Proceeds from Issuance or Sale of Equity			127,850		760,604
Minimum [Member]
Capital Required for Capital Adequacy	2,500,000		2,500,000
Maximum [Member]
Capital Required for Capital Adequacy	$ 50,000,000		50,000,000
PA-1 [Member]
Debt Instrument, Debt Default, Amount							$ 8,137,117
Property, Plant and Equipment of PA1 [Member]
Impairment of Long-Lived Assets Held-for-use			$ 0		1,684,562	$ 3,750,000
Property, Plant and Equipment, Net					$ 0

XML

Note 2 - Significant Accounting Policies (Details Textual)	6 Months Ended
	Dec. 31, 2016
Minimum [Member]
Property, Plant and Equipment, Useful Life	3 years
Maximum [Member]
Property, Plant and Equipment, Useful Life	20 years
Centerpoint [Member]
Equity Method Investment, Ownership Percentage	58.90%

XML

Note 2 - Significant Accounting Policies - Antidilutive Securities (Details) - shares	6 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Warrant [Member]
Antidilutive securities (in shares)	8,354,795	8,396,364
Employee Stock Option [Member]
Antidilutive securities (in shares)	4,520,037	4,513,870
Convertible Debt Securities [Member]
Antidilutive securities (in shares)	8,710,252	7,562,213
Convertible Preferred Stock Antidilutive Securities [Member]
Antidilutive securities (in shares)	15,500	14,500

XML

Note 2 - Significant Accounting Policies - Earnings Per Share, Basic and Diluted (Details) - shares	3 Months Ended		6 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2016	Dec. 31, 2015	Sep. 30, 2016	Jun. 30, 2016	Sep. 30, 2015	Jun. 30, 2015
Common stock, issued (in shares)	23,784,363		23,784,363		23,761,168	23,573,057	22,606,852	22,089,650
Shares held by subsidiaries (Note 7) (in shares)	(704,309)	(704,309)	(704,309)	(704,309)
Common stock, outstanding (in shares)	23,080,054		23,080,054		23,056,859	22,868,748	21,902,543	21,385,341
Weighted average shares for fully vested stock bonuses (in shares)	260,870	652,989	430,435	626,495
Weighted average shares issued during the period (in shares)	10,770	29,469	137,128	425,203
Basic weighted average shares – end of period (in shares)	23,328,499	22,585,001	23,436,311	22,437,039

XML

Note 3 - Property and Equipment (Details Textual) - USD ($)	3 Months Ended		6 Months Ended		12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2016	Dec. 31, 2015	Jun. 30, 2016	Jun. 30, 2015
Impairment of Long-Lived Assets Held-for-use					$ 1,684,562
Property, Plant and Equipment, Net	$ 3,254		$ 3,254		4,259
Depreciation	$ 503	$ 76,083	1,005	$ 151,962
Property, Plant and Equipment of PA1 [Member]
Impairment of Long-Lived Assets Held-for-use			$ 0		1,684,562	$ 3,750,000
Property, Plant and Equipment, Net					$ 0

XML

Note 3 - Property and Equipment - Property and Equipment (Details) - USD ($)	Dec. 31, 2016	Jun. 30, 2016
Machinery and equipment	$ 2,222,670	$ 2,222,670
Buildings and structures	401,470	401,470
Computers and office equipment	173,313	173,313
Total	2,797,453	2,797,453
Less accumulated depreciation	(2,794,199)	(2,793,194)
Net	$ 3,254	$ 4,259

XML

Note 4 - Deferred Compensation (Details Textual) - USD ($)	6 Months Ended
	Dec. 31, 2016	Jun. 30, 2016
Deferred Compensation Liability, Current	$ 1,879,473	$ 1,436,595
Interest Rate on Deferred Compensation	4.00%
Deferred Compensation Conversion Days	5 days
Deferred Compensation Consecutive Trading Days	10 days
Chief Executive Officer [Member]
Deferred Compensation Liability, Current	$ 772,629
President [Member]
Deferred Compensation Liability, Current	281,590
Executive Vice Chairman [Member]
Deferred Compensation Liability, Current	117,292
Consultants [Member]
Deferred Compensation Liability, Current	$ 466,478
Interest Rate on Deferred Compensation	3.00%
Former Employee 1 [Member]
Deferred Compensation Liability, Current	$ 168,000
Deferred Compensation Shares Issued upon Conversion	226,168
Individual Employee [Member]
Deferred Compensation Liability, Current	$ 984
Deferred Compensation Shares Issued upon Conversion	1,186
Former Employee [Member]
Deferred Compensation Liability, Current	$ 72,500

XML

Note 5 - Loan Payable (Details Textual) - USD ($)	3 Months Ended		6 Months Ended		54 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2016	Sep. 25, 2014	Jan. 26, 2009
Construction Loan							$ 7,750,000
PA-1 [Member]
Debt Instrument, Debt Default, Amount						$ 8,137,117
Pennvest Loan [Member]
Construction Loan	$ 8,679,992		$ 8,679,992		$ 8,679,992
Accrued Interest and Late Charges Payable	925,992		925,992		925,992
Line of Credit Facility, Maximum Borrowing Capacity	7,754,000		7,754,000		7,754,000
Repayments of Long-term Debt					2,001,000
Long-term Debt, Maturities, Repayments of Principal, Remainder of Fiscal Year	741,000		741,000		741,000
Long-term Debt, Maturities, Repayments of Principal in Year Two	760,000		760,000		760,000
Long-term Debt, Maturities, Repayments of Principal in Year Three	771,000		771,000		771,000
Long-term Debt, Maturities, Repayments of Principal in Year Four	794,000		794,000		794,000
Long-term Debt, Maturities, Repayments of Principal in Year Five	819,000		819,000		819,000
Long-term Debt, Maturities, Repayments of Principal after Year Five	1,867,000		1,867,000		$ 1,867,000
Interest Expense, Debt	$ 49,374	$ 49,374	$ 98,747	$ 98,747
Pennvest Loan [Member] | Amortization of Principal Number of Years [Member]
Term Loan Payment Term			3 years
Pennvest Loan [Member] | Interest Only Payments Number of Years [Member]
Term Loan Payment Term			10 years
Pennvest Loan [Member] | Years One Through Five [Member]
Debt Instrument, Interest Rate During Period			2.547%
Pennvest Loan [Member] | Years Six Through Maturity [Member]
Debt Instrument, Interest Rate During Period			3.184%

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Note 6 - Convertible Notes Payable - Affiliates (Details Textual)	3 Months Ended		6 Months Ended
	Dec. 31, 2016 USD ($) $ / shares shares	Dec. 31, 2015 USD ($)	Dec. 31, 2016 USD ($) $ / shares shares	Dec. 31, 2015 USD ($)	Jun. 30, 2016 USD ($)	Sep. 30, 2015 USD ($)	Feb. 10, 2015 $ / shares
Convertible Notes Payable, Noncurrent					$ 3,280,647
Interest Expense	$ 94,565	$ 86,905	$ 187,329	$ 201,661
Chief Executive Officer [Member]
Class of Warrant or Right, Exercise Price of Warrants or Rights | $ / shares	$ 1.50		$ 1.50
President [Member]
Number of Share Per Unit | shares	1		1
Number of Warrants Per Unit	1		1
Class of Warrant or Right, Exercise Price of Warrants or Rights | $ / shares							$ 1.50
January 2015 Convertible Notes [Member] | Convertible Debt [Member]
Debt Instrument, Interest Rate, Stated Percentage	4.00%		4.00%
Number of Share Per Unit | shares	1		1
Number of Warrants Per Unit	0.25		0.25
Conversion Price Per Unit | $ / shares	$ 0.50		$ 0.50
Class of Warrant or Right, Exercise Price of Warrants or Rights | $ / shares	$ 1		$ 1
Interest Expense	$ 26,247	26,247	$ 52,495	52,495
January 2015 Convertible Notes [Member] | Convertible Debt [Member] | Chief Executive Officer [Member]
Convertible Notes Payable, Noncurrent	1,581,710		1,581,710
January 2015 Convertible Notes [Member] | Convertible Debt [Member] | President [Member]
Convertible Notes Payable, Noncurrent	821,360		821,360
January 2015 Convertible Notes [Member] | Convertible Debt [Member] | Executive Vice Chairman [Member]
Convertible Notes Payable, Noncurrent	$ 408,553		$ 408,553
September 2015 Convertible Notes [Member] | Convertible Debt [Member]
Debt Instrument, Interest Rate, Stated Percentage	4.00%		4.00%
Conversion Price Per Unit | $ / shares	$ 0.60		$ 0.60
Interest Expense	$ 5,092	$ 5,093	$ 10,185	$ 6,311
September 2015 Convertible Notes [Member] | Convertible Debt [Member] | Chief Executive Officer [Member]
Convertible Notes Payable, Noncurrent	427,179		427,179			$ 405,831
September 2015 Convertible Notes [Member] | Convertible Debt [Member] | Executive Vice Chairman [Member]
Convertible Notes Payable, Noncurrent	87,282		87,282
September 2015 Convertible Notes [Member] | Convertible Debt [Member] | Chief Financial Officer [Member]
Convertible Notes Payable, Noncurrent	$ 17,244		$ 17,244			16,382
September 2015 Convertible Notes [Member] | Convertible Debt [Member] | Executive Vice President [Member]
Convertible Notes Payable, Noncurrent						$ 82,921

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Note 7 - Stockholders' Equity (Details Textual)				3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2016 USD ($) $ / shares shares	Feb. 10, 2015 $ / shares shares	Jul. 02, 2014 $ / shares shares	Dec. 31, 2016 USD ($) $ / shares $ / item shares	Dec. 31, 2015 USD ($) shares	Dec. 31, 2016 USD ($) $ / shares $ / item shares	Dec. 31, 2015 USD ($) shares	Jun. 30, 2016 USD ($) $ / shares shares	Jun. 30, 2015 USD ($)
Common Stock Voting Rights Votes Per Share						1
Shares Held by Subsidiaries | shares				704,309	704,309	704,309	704,309
Stock Issued During Period, Shares, Issued for Services | shares						23,687
Share Price | $ / shares				$ 0.75		$ 0.75
Stock Issued During Period, Value, Issued for Services						$ 19,507
Stock Issued During Period, Shares, New Issues | shares						30,467
Stock Issued During Period, Value, New Issues						$ 22,850
Proceeds from the Sale of Units						105,000	$ 183,000
Adjustments to Additional Paid in Capital, Warrant Issued						5,250
Proceeds from Issuance of Common Stock						$ 22,850
Class of Warrant or Right, Outstanding | shares				8,400,000		8,400,000
Weighted Average Exercise Price for Outstanding Warrants | $ / shares						$ 1.26
Weighted Average Remaining Contractual Life for Outstanding Warrants						3 years 292 days
Share-based Compensation Arrangement by Share-based Payment Award, Options, Expirations in Period | shares						722,319
Common Stock, Share Subscribed but Unissued, Subscriptions Receivable				$ 40,000		$ 40,000
Sale of Units, Value						$ 105,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross | shares						294,500	100,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested in Period, Fair Value						$ 113,770	$ 59,000
Employee Service Share-based Compensation, Nonvested Awards, Compensation Not yet Recognized, Stock Options				$ 16,867		16,867
Note Receivable as Consideration for Warrants Exercise [Member]
Other Significant Noncash Transaction, Value of Consideration Received							105,000
Subscription Agreement [Member]
Share Price | $ / shares				$ 1		$ 1
Number of Share Per Unit | shares				0.5		0.5
Sale of Units, Number Of Units Issued | shares						140,000
Proceeds from the Sale of Units						$ 105,000
Proceeds from Sale of Units, Net of Commissions						$ 103,500
Warrant Fair Value Price Per Share | $ / shares				$ 0.05		$ 0.05
Adjustments to Additional Paid in Capital, Warrant Issued						$ 2,968
Adjustments to Additional Paid in Capital, Other						$ 102,032
Subscription Agreement Two [Member]
Share Price | $ / shares				$ 1		$ 1
Number of Share Per Unit | shares				1		1
Number of Warrants Per Unit				1		1
Sale of Units, Number Of Units Issued | shares						140,000
Warrant Fair Value Price Per Share | $ / shares				$ 0.05		$ 0.05
Adjustments to Additional Paid in Capital, Warrant Issued						$ 2,968
Adjustments to Additional Paid in Capital, Other						$ 102,032
Sale Of Units Price Per Unit Issued | $ / item				0.75		0.75
Warrant Component of Equity Unit, Number of Shares of Restricted Common Stock Called by Each Warrant | shares				0.5		0.5
Sale of Units, Value						$ 105,000
Restricted Stock [Member] | Subscription Agreement [Member]
Class of Warrant or Right, Exercise Price of Warrants or Rights | $ / shares				$ 0.75		$ 0.75
Restricted Stock [Member] | Subscriptions Receivable [Member]
Stock Issued During Period, Shares, New Issues | shares						10,000
Stock Issued During Period, Value, New Issues						$ 7,500
Class of Warrant or Right Exercised During Period | shares						10,000
Employee Stock Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized | shares				22,000,000		22,000,000
Share-based Compensation Arrangement by Share-based Payment Award, Plan Modification, Incremental Compensation Cost						$ 177,471
Allocated Share-based Compensation Expense				$ 108,960	$ 74,320	$ 129,816	$ 89,640
Stock Bonus [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross | shares						109,500
Minimum [Member]
Class of Warrant or Right, Exercise Price of Warrants or Rights | $ / shares				$ 0.75		$ 0.75
Maximum [Member]
Class of Warrant or Right, Exercise Price of Warrants or Rights | $ / shares				$ 3		$ 3
Maximum [Member] | Employee Stock Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period						10 years
Employees and Consultants [Member] | Stock Bonus [Member]
Stock Issued During Period, Value, New Issues						$ 100,000
Allocated Share-based Compensation Expense				$ 14,784		$ 14,784
Employees and Consultants [Member] | Minimum [Member]
Share Price | $ / shares				$ 0.75		$ 0.75
Employees and Consultants [Member] | Maximum [Member]
Share Price | $ / shares				$ 1.02		$ 1.02
President [Member]
Class of Warrant or Right, Exercise Price of Warrants or Rights | $ / shares		$ 1.50
Number of Share Per Unit | shares				1		1
Number of Warrants Per Unit				1		1
President [Member] | Stock Bonus [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross | shares		150,000
Consultants [Member]
Class of Warrant or Right, Exercise Price of Warrants or Rights | $ / shares				$ 0.90		$ 0.90
Deferred Compensation Converted to Common Stock Amount						$ 6,008
Deferred Compensation Converted to Common Stock Shares | shares						7,152
Deferred Compensation, Stock Conversion, Price Per Share | $ / shares				$ 0.84		$ 0.84
Class of Warrant or Right, Aggregate Purchase Price of Warrants or Rights						$ 1,250
Class of Warrant or Right Issued | shares				25,000		25,000
Various Warrant Holders [Member] | Subscription Agreement [Member]
Class of Warrant or Right Exercised During Period | shares	10,000
Class of Warrant or Right, Exercise Price of Warrants or Rights | $ / shares	$ 0.75							$ 0.75
Common Stock, Share Subscribed but Unissued, Subscriptions Receivable	$ 7,500							$ 7,500
Proceeds from Collection of Notes Receivable						$ 7,500
Common Stock Shares Issued upon Exercise of Warrants | shares						10,000
President and Various Consultants [Member]
Class of Warrant or Right, Exercise Price of Warrants or Rights | $ / shares				$ 1		$ 1
Class of Warrant or Right, Aggregate Purchase Price of Warrants or Rights						$ 2,000
President and Various Consultants [Member] | Restricted Stock [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights | shares				40,000		40,000
Chief Executive Officer [Member]
Class of Warrant or Right, Exercise Price of Warrants or Rights | $ / shares				$ 1.50		$ 1.50
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross | shares						450,000
Chief Executive Officer [Member] | Bassani Warrants [Member]
Class of Warrant or Right, Exercise Price of Warrants or Rights | $ / shares				$ 1		$ 1
Class of Warrant or Right, Number of Securities Called by Warrants or Rights | shares				800,000		800,000
Chief Executive Officer [Member] | Bassani Warrants [Member] | Convertible Debt [Member]
Debt Instrument, Interest Rate, Stated Percentage				4.00%		4.00%
Chief Executive Officer [Member] | Bassani Warrants [Member] | Note Receivable as Consideration for Warrants Exercise [Member]
Other Significant Noncash Transaction, Value of Consideration Received						$ 40,000
Centerpoint [Member]
Shares Held by Subsidiaries | shares				704,309		704,309
Series B Preferred Stock [Member]
Preferred Stock, Shares Outstanding | shares			200
Preferred Stock, Par or Stated Value Per Share | $ / shares			$ 0.01
Preferred Stock, Redemption Price Per Share | $ / shares			$ 2
Preferred Stock, Dividend Rate, Percentage			2.50%
Convertible Preferred Stock Redemption Period			3 years
Dividends, Preferred Stock				$ 500		$ 1,000		$ 2,000	$ 2,000
Dividends Payable				$ 11,000		$ 11,000

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Note 7 - Stockholders' Equity - Black-scholes Valuation Assumptions for Options (Details) - Employee Stock Option [Member]	6 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Volatility		74.00%
Dividend yield
Risk-free interest rate		1.75%
Expected term (years) (Year)		5 years
Weighted Average [Member]
Volatility	79.00%	74.00%
Dividend yield
Risk-free interest rate	1.14%	1.75%
Expected term (years) (Year)	4 years	5 years
Minimum [Member]
Volatility	78.00%
Dividend yield
Risk-free interest rate	0.82%
Expected term (years) (Year)	3 years
Maximum [Member]
Volatility	86.00%
Dividend yield
Risk-free interest rate	1.17%
Expected term (years) (Year)	4 years

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Note 7 - Stockholders' Equity - Stock Options Activity (Details) - USD ($)	6 Months Ended		12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Jun. 30, 2016
Outstanding, beginning balance (in shares)	4,225,537
Outstanding, weighted-average exercise price, beginning balance (in dollars per share)	$ 1.79
Outstanding, weighted-average remaining contractual life (Year)	3 years 146 days		4 years 36 days
Outstanding, aggregate intrinsic value	$ 31,125		$ 158,675
Granted, options (in shares)	294,500	100,000
Granted, weighted-average exercise price (in dollars per share)	$ 1
Outstanding, ending balance (in shares)	4,520,037		4,225,537
Outstanding, weighted-average exercise price, ending balance (in dollars per share)	$ 1.42		$ 1.79
Exercisable, options (in shares)	4,420,037
Exercisable, weighted-average exercise price (in dollars per share)	$ 1.44
Exercisable, weighted-average remaining contractual life (Year)	3 years 109 days
Exercisable, aggregate intrinsic value	$ 38,625

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Note 7 - Stockholders' Equity - Nonvested Share Activity (Details) - $ / shares	6 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Nonvested (in shares)	50,000
Nonvested, weighted-average grant-date fair value (in dollars per share)	$ 0.76
Granted, options (in shares)	294,500	100,000
Granted, weighted-average grant-date fair value (in dollars per share)	$ 0.47
Vested (in shares)	(244,500)
Vested, weighted-average grant-date fair value (in dollars per share)	$ (0.47)
Nonvested (in shares)	100,000
Nonvested, weighted-average grant-date fair value (in dollars per share)	$ 0.61

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Note 7 - Stockholders' Equity - Allocation of Recognized Period Costs (Details) - USD ($)	3 Months Ended		6 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2016	Dec. 31, 2015
Employee Stock Option [Member]
Allocated Share-based Compensation Expense	$ 108,960	$ 74,320	$ 129,816	$ 89,640
Change in fair value from modification of option terms			177,471
General and Administrative Expense [Member]
Allocated Share-based Compensation Expense	262,928	173,921	279,426	175,759
General and Administrative Expense [Member] | Stock Bonus [Member]
Allocated Share-based Compensation Expense	6,830	69,000	6,830	69,000
General and Administrative Expense [Member] | Employee Stock Option [Member]
Allocated Share-based Compensation Expense	90,067	62,371	106,565	64,209
Change in fair value from modification of option terms	166,031	42,550	166,031	42,550
Research and Development Expense [Member]
Allocated Share-based Compensation Expense	38,283	11,949	42,645	25,431
Research and Development Expense [Member] | Stock Bonus [Member]
Allocated Share-based Compensation Expense	7,954		7,954
Research and Development Expense [Member] | Employee Stock Option [Member]
Allocated Share-based Compensation Expense	18,889	11,949	23,251	25,431
Change in fair value from modification of option terms	$ 11,440		$ 11,440

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Note 8 - Commitments and Contingencies (Details Textual)					1 Months Ended					6 Months Ended		12 Months Ended	24 Months Ended
	Jan. 15, 2017 shares	Jan. 05, 2016 shares	Feb. 10, 2015 USD ($) $ / shares shares	Sep. 25, 2014 USD ($)	Feb. 10, 2017 $ / shares shares	Oct. 31, 2016 USD ($) $ / shares shares	Jun. 30, 2016 USD ($) shares	Oct. 31, 2015 USD ($) shares	Sep. 30, 2014 USD ($)	Dec. 31, 2016 USD ($) $ / shares shares	Dec. 31, 2015 USD ($) shares	Dec. 31, 2016 USD ($) $ / shares shares	Dec. 31, 2013 shares	Jan. 27, 2017 USD ($) $ / shares	Oct. 10, 2016 USD ($) $ / shares	Dec. 31, 2014 USD ($) $ / shares	May 15, 2013
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross										294,500	100,000
Stock Issued During Period, Shares, Issued for Services										23,687
Share-based Compensation Arrangements by Share-based Payment Award, Options, Grants in Period, Weighted Average Exercise Price | $ / shares										$ 1
Common Stock, Capital Shares Reserved for Future Issuance	100,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number							4,225,537			4,520,037		4,520,037
Class of Warrant or Right, Outstanding										8,400,000		8,400,000
Pennvest Loan [Member]
Loss Contingency, Damages Sought, Value | $				$ 8,137,117
Subsequent Event [Member]
Number of Warrants Per Unit					1
Class of Warrant or Right, Exercise Price of Warrants or Rights | $ / shares					$ 1
Stock Issued During Period, Shares, Issued for Services					131,386
Stock Bonus [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Forfeitures in Period										117,500
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross										109,500
Share-based Compensation Arrangements by Share-based Payment Award, Options, Grants in Period, Weighted Average Exercise Price | $ / shares										$ 1
Exercise Bonus [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number										3,145,000		3,145,000
Class of Warrant or Right, Outstanding										7,657,153		7,657,153
Mr. Bassani [Member]
Convertible Notes Payable | $										$ 1,464,545		$ 1,464,545
Mr. Bassani [Member] | Convertible Debt [Member]
Debt Instrument, Interest Rate Reduction, Percentage										50.00%		50.00%
Debt Instrument, Interest Rate, Stated Percentage										4.00%		4.00%				8.00%
Debt Instrument, Convertible Conversion Price, Incease, Percentage										11.00%		11.00%
Debt Instrument, Convertible, Conversion Price | $ / shares										$ 0.50		$ 0.50				$ 0.45
Number of Warrants Per Unit Reduction Percentage										75.00%		75.00%
President [Member]
Number of Warrants Per Unit										1		1
Monthly Officers' Cash Compensation | $			$ 18,000
Class of Warrant or Right, Exercise Price of Warrants or Rights | $ / shares			$ 1.50
President [Member] | Stock Bonus [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Forfeitures in Period			150,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross			150,000
President [Member] | New Smith Note [Member]
Convertible Notes Payable | $			$ 760,520
President [Member] | New Smith Note [Member] | Convertible Debt [Member]
Debt Instrument, Interest Rate Reduction, Percentage			50.00%
Debt Instrument, Interest Rate, Stated Percentage			4.00%													8.00%
Debt Instrument, Convertible Conversion Price, Incease, Percentage			11.00%
Debt Instrument, Convertible, Conversion Price | $ / shares			$ 0.50													$ 0.45
Accrued Interest on Deferred Compensation and Other Expenses			7500.00%
Number of Warrants Per Unit			0.25													1
Chief Executive Officer [Member]
Monthly Officers' Cash Compensation | $										$ 31,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross										450,000
Class of Warrant or Right, Exercise Price of Warrants or Rights | $ / shares										$ 1.50		$ 1.50
Due to Related Parties, Current | $																$ 279,000
Unreimbursed Expenses | $																$ 116,277
Chief Executive Officer [Member] | Stock Bonus [Member]
Execution Bonus as Percentage of Exercised Options and Warrants																	50.00%
Chief Executive Officer [Member] | Cash Note [Member]
Class of Warrant or Right, Exercise Price of Warrants or Rights | $ / shares										$ 1		$ 1
Debt Instrument, Face Amount | $											$ 395,277
Class of Warrant or Right, Number of Securities Called by Warrants or Rights										592,916		592,916
Chief Executive Officer [Member] | Mr. Bassani [Member] | Convertible Debt [Member]
Number of Warrants Per Unit																1
Executive Vice Chairman [Member]
Adjustment for Deferred Compensation During the Period | $							$ 160,000
Executive Vice Chairman [Member] | Stock Bonus [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Forfeitures in Period			25,000
CEO and President [Member] | Exercise Bonus [Member]
ContingentStockBonusPercentageThresholdForIssuance										50.00%		50.00%
ExtensionOfExercisePeriod										5 years
Extension of Exercise Period Annual Payment per Option or Warrant | $ / shares										$ 0.05		$ 0.01
Extension Agreement One [Member] | President [Member]
Monthly Officer's Compensation | $									$ 14,000
Extension Agreement One [Member] | Chief Executive Officer [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross													600,000
Common Stock, Capital Shares Reserved for Future Issuance													500,000
FY2016 Extension Agreement [Member] | President [Member]
Monthly Officers' Cash Compensation | $								$ 19,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross								100,000
FY2016 Extension Agreement [Member] | President [Member] | Extension Bonus [Member]
Monthly Officers' Cash Compensation | $						$ 18,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross						75,000
Stock Issued During Period, Shares, Issued for Services		75,000
Share-based Compensation Arrangements by Share-based Payment Award, Options, Grants in Period, Weighted Average Exercise Price | $ / shares						$ 0.90
Deferred Compensation, Maximum Convertible Amount | $						$ 125,000									$ 125,000
Deferred Compensation, Stock Conversion, Price Per Share | $ / shares						$ 0.75									$ 0.75
FY2016 Extension Agreement [Member] | President [Member] | Extension Bonus [Member] | Subsequent Event [Member]
Stock Issued During Period, Shares, Issued for Services	25,000
Deferred Compensation, Maximum Convertible Amount | $														$ 250,000
Deferred Compensation, Stock Conversion, Price Per Share | $ / shares														$ 0.75
FY2016 Extension Agreement [Member] | Chief Executive Officer [Member] | Extension Bonus [Member] | Subsequent Event [Member]
Deferred Compensation, Maximum Convertible Amount | $														$ 250,000
Deferred Compensation, Stock Conversion, Price Per Share | $ / shares														$ 0.75
Extension Agreement Two [Member] | Chief Executive Officer [Member] | Stock Bonus [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Forfeitures in Period										250,000

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Note 9 - Subsequent Events (Details Textual)	1 Months Ended	6 Months Ended
	Feb. 10, 2017 USD ($) $ / shares shares	Dec. 31, 2016 USD ($) $ / shares shares
Stock Issued During Period, Shares, Issued for Services		23,687
Stock Issued During Period, Value, Issued for Services | $		$ 19,507
Sale of Units, Value | $		$ 105,000
Share Price | $ / shares		$ 0.75
Subsequent Event [Member]
Stock Issued During Period, Shares, Issued for Services	131,386
Stock Issued During Period, Value, Issued for Services | $	$ 99,000
Deferred Compensation Converted to Common Stock Amount | $	$ 134,000
Deferred Compensation Converted to Common Stock Shares	177,390
Class of Warrant or Right Issued During Period	79,614
Class of Warrant or Right, Exercise Price of Warrants or Rights | $ / shares	$ 1
Sale of Units, Number Of Units Issued	70,517
Shares Issued, Price Per Share | $ / shares	$ 0.75
Sale of Units, Value | $	$ 52,900
Number of Share Per Unit	1
Share Price | $ / shares	$ 1
Warrant Component of Equity Unit, Number of Shares of Restricted Common Stock Called by Each Warrant	0.5
Number of Warrants Per Unit	1