Bion Environmental Technologies Inc · 10KSB · For 6/30/07

Filed On 10/10/07 1:14pm ET   ·   SEC File 0-19333   ·   Accession Number 1263279-7-246

Annual Report -- Small Business   ·   Form 10-KSB
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10KSB       Bion Environmental June 30, 2007 10-Ksb               79±   273K 
 2: EX-31       Certification per Sarbanes-Oxley Act (Section 302)     2±     6K 
 3: EX-32       Certification per Sarbanes-Oxley Act (Section 906)     1      5K 

10KSB   ·   Bion Environmental June 30, 2007 10-Ksb
Document Table of Contents

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION  
Washington, D.C.  20549 

FORM 10-KSB   

[X]    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE                     
SECURITIES EXCHANGE ACT OF 1934                                   

For the Fiscal Year ended:  June 30, 2007                         

OR                                                                

[ ]    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 Small Business Issuer in its Charter)  

COLORADO                                         84-1176672   
-------------------------------                    ------------------------     
(State or Other Jurisdiction of                    (I.R.S. Employer Identi-     
Incorporation or Organization)                         fication No.)            

641 Lexington Avenue, 17th Floor, New York, New York 10022
------------------------------------------------------------
(Address of Principal Executive Offices, Including Zip Code)

Issuer's Telephone Number:  (212) 758-6622  

Securities Registered Pursuant to Section 12(b) of the Act:  None.              

Securities Registered Pursuant to Section 12(g) of the Act:                     

COMMON STOCK, NO PAR VALUE  
--------------------------  
(Title of each class) 

Check whether the Issuer (1) filed all reports required to be filed by          
Section 13 or 15(d) of the Securities Exchange Act during the past 12 months    
(or for such shorter period that the registrant was required to file such       
reports), and (2) has been subject to such filing requirements for the past     
90 days.  Yes [X] No [ ]                                                        
Check if there is no disclosure of delinquent filers in response to Item 405    
of Regulation S-B contained in this form, and no disclosure will be             
contained, to the best of registrant's knowledge, in definitive proxy or        
information statements incorporated by reference in Part III of this Form       
10-KSB or any amendment to this Form 10-KSB. [X]                                
Indicate by check mark whether the registrant is a shell company (as defined    
in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]                              

State issuer's revenues for its most recent fiscal year:  $0.                   

As of September 30, 2007, 8,076,280 shares of common stock were outstanding,    
and the aggregate market value of the common stock of the Registrant held by    
non-affiliates was approximately $9,555,968.                                    

Transitional Small Business Disclosure Format (check one): Yes [ ]  No [X]      

Documents Incorporated By Reference:  None.                                     

PART I  

ITEM 1.  DESCRIPTION OF BUSINESS.                                               

GENERAL                                                                         

 Bion Environmental Technologies, Inc.'s ("Bion," "Company," "We," "Us,"
or "Our") patented and proprietary technology provides a comprehensive          
environmental solution to a significant source of pollution in US               
agriculture, Confined Animal Feeding Operations ("CAFO's").  Bion's             
technology is "comprehensive" in that it surpasses current environmental        
regulations for both nutrient releases to water and air emissions from          
livestock waste streams based upon our research to date. Because Bion's         
technology reduces the harmful emissions from a CAFO on which it is utilized,   
the CAFO can increase its herd concentration while lowering or maintaining      
its level of nutrient releases and atmospheric emissions.  Additionally, we     
believe that Bion's technology platform allows the integration of ethanol       
production, renewable energy production and on-site energy utilization with     
large-scale CAFO's (and their end-product users) in an environmentally and      
economically sustainable manner while reducing the aggregate capital expense    
and operating costs for the entire integrated complex. In the context of        
Integrated Projects (defined below), Bion's waste treatment process, in         
addition to mitigating polluting releases, generates renewable energy from      
portions of the CAFO waste stream that can be used by ethanol plants or other   
users as a natural gas replacement.  The ethanol plant's main by-product,       
called distillers grain, can be added to the feed of the animals in wet form    
thereby lowering the capital expenditures and operating cost of the ethanol     
production process.  The ethanol plant thereby acts as a feed mill for the      
CAFO, thus reducing the CAFO's feeding costs and generating revenue to the      
ethanol plant, and also provides a market for the renewable energy that         
Bion's System (defined below) produces from the CAFO waste stream. Bion, as     
developer of and participant in Integrated Projects, anticipates that it will   
share in the cost savings and revenue generated from these activities.          

Since 2002, the Company has focused on completing development of its  
technology platform and business model.  As such, we have not pursued near      
term revenue opportunities such as retrofitting existing CAFO's with our        
waste management solutions, because such efforts would have diverted scarce     
management and financial resources and negatively impacted our ability to       
complete development of an integrated technology platform in support of         
large-scale sustainable Integrated Projects.  The Company now intends to        
focus its efforts on development and operation of Integrated Projects based     
on Bion's waste handling/renewable energy technology platform ("Bion System"    
or "System") integrating large-scale CAFO's and ethanol production and/or       
end-product facilities (cheese producers or other dairy processors, beef        
processing facilities, etc.) ("Projects" or "Integrated Projects").             

The financial statements for the years ended June 30, 2007 and 2006   
included herein have been prepared assuming the Company will continue as a      
going concern.  The Company has not recorded any revenue for either of the      
years ended June 30, 2007 or June 30, 2006.  The Company has incurred net       
losses of approximately $2,549,000 and $5,173,000 during the years ended June   
30, 2007 and 2006, respectively. The Company had a working capital deficiency   
and a stockholders' deficit, respectively, of approximately $1,219,000 and      

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$4,663,000 as of June 30, 2007.  The report of the independent registered       
public accounting firm on the Company's financial statements as of and for      
the years ended June 30, 2007 and June 30, 2006 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.   

PRINCIPAL PRODUCTS AND SERVICES                                                 

Currently, Bion is focused on using applications of its patented waste
management technology to develop Integrated Projects which will include large   
CAFOs, such as large dairies, beef cattle feed lots and hog farms, with Bion    
waste treatment System modules processing the aggregate CAFO waste stream       
from the equivalent of 20,000 to 40,000 or more beef or dairy cows (or the      
waste stream equivalent of other species) while producing solids to be          
utilized for renewable energy production and to be marketed as feed and/or      
fertilizer, integrated with an ethanol plant capable of producing 20 million    
to 40 (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) on a single site and/or on sites      
within an approximately 30 mile radius.  Bion believes its technology           
platform will allow integration of large-scale CAFO's with ethanol              
production, renewable energy production from waste streams and on-site energy   
utilization in a manner that reduces the capital expenditures and operating     
costs for the entire Integrated Project and each component facility. Some       
Projects may be developed from scratch while others may be developed around     
either existing CAFOs or ethanol plants. Bion anticipates that some Projects    
will also include end-product facilities.                                       

Bion is currently working with local, state and federal officials and 
with potential industry participants to evaluate opportunities and/or sites     
for Projects and/or System installations in multiple states including without   
limitation New York, Indiana, Pennsylvania, Nebraska, California and other      
states. The Company anticipates selecting a site for its initial Project        
during the current fiscal year. Bion anticipates that one of its initial        
Integrated Projects will be located in upstate New York and will include a 42   
million gallon per year ethanol plant balanced with an 84,000-head beef         
cattle finishing facility that will be made up of six 14,000-head satellite     
farm modules.  Bion intends to commence development of its initial Integrated   
Project during the 2008 fiscal year by optioning land and beginning the         
permitting process.                                                             

In addition, Bion intends to choose sites for additional Projects through       
2008 to create a pipeline of Projects. Management has a 5-year development      
target (through fiscal year 2013) of approximately 12-25 Integrated Projects.   
At the end of the 5-year period, Bion projects that 8-16 of these Integrated    
Projects will be in full operation in 3-8 states, and the balance would be in   
various stages ranging from partial operation to early construction stage. No   
Integrated Project has been developed to date.                                  

Bion has focused on establishing its implementation management team 
(including both employees and consultants) with the intention of commencing     
development and construction of an initial Project during the current fiscal    
year. In September 2006, Jeremy Rowland joined the Company's subsidiary, Bion   

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Dairy Corporation ("Bion Dairy") as its Chief Operating Officer and has         
served in that capacity since that time. Mr. Rowland has further agreed to      
serve as the Company's Chief Operating Officer once it has secured adequate     
director and officer liability insurance coverage.  Mr. Rowland has eighteen    
years experience in multi-disciplinary energy and environmental project         
development and management throughout the U.S. and overseas. Mr. Rowland's      
areas of expertise include renewable energy project development, distributed    
generation (mostly combined heat/power), large-scale power plant                
developments, and strategic energy management.  In addition, Sal Zizza, who     
rejoined Bion and Bion Dairy during 2005 on a consulting basis, assumed the     
positions of Chairman and Director of Bion Dairy on January 1, 2006. Jeff       
Kapell, who became a consultant to Bion and Bion Dairy in December 2003,        
joined the Bion management team on a full-time basis in April 2006 as Bion      
Dairy's Vice-President--Renewables.  Mr. Zizza and Mr. Kapell have performed    
these services for Bion Dairy since January 2006 and April 2006,                
respectively.  Mr. Zizza and Mr. Kapell have further agreed to serve the        
Company in similar positions once it has secured adequate director and          
officer liability insurance coverage. Bion will need to continue to hire and    
engage additional management and technical personnel as it moves from the       
technology re-development phase to the implementation phase during the 2008     
fiscal year.                                                                    

  The Company's successful accomplishment of these activities is dependent
upon many factors including the following, neither of which can be assured at   
this date:                                                                      

*  Successful development and completion of the first Project to      
demonstrate the operation of a fully integrated, environmentally compliant,     
Bion-based CAFO/ethanol Project at a profitable level; and                      

*  Our ability to raise sufficient funds to allow us to finance our   
activities.                                                                     

INDUSTRY BACKGROUND                                                             

  The traditional business model for CAFO's, regardless of livestock type,
has relied on a combination of: 1) a passive environmental regulatory regime,   
and 2) access to a relatively unlimited supply of cheap land and water to       
serve as the basis for "environmental" treatment of animal waste.  Such land    
and water resources have now become significantly more expensive while          
ongoing consolidation of the CAFO industry has produced substantially           
increased and more concentrated waste streams.  At the same time, regulatory    
scrutiny of, and public concern about, the environmental impact from CAFO's     
has intensified greatly.                                                        

  Agricultural runoff is the largest water pollution problem in the United
States. Over-application of animal waste to cropland has resulted in manure     
nutrients polluting surface and ground water systems, adversely impacting       
water quality throughout the country.  Clean-up initiatives for the             
Chesapeake Bay and the Great Lakes (and elsewhere) are requiring the            
expenditure of substantial sums of money to reduce excess nutrient pollution.   
In each such case, agriculture in general and CAFO's in particular have been    

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identified among the main contributors of pollution.  CAFO's are also           
significant emitters of pollutants to air, with dairies having been             
identified as the largest contributor to airborne ammonia and other polluting   
gases in the San Joaquin Valley.                                                

We believe Bion's technology will enable increased CAFO herd          
concentration that is economically and environmentally sustainable because      
the technology removes nutrients from the waste streams generated by animal     
operations while dramatically reducing atmospheric emissions.  The resulting    
herd concentration potentially creates reduced marginal costs and results in    
a core Bion technology platform that integrates environmental treatment and     
renewable energy production and utilization with ethanol production.            

Bion's technology platform and the resulting herd concentration, in   
turn, potentially provide the opportunity to integrate a number of revenue      
generating operations while maximizing the realized value of the renewable      
energy production.  The Bion model will access diversified revenue streams      
through a balanced integration of technologies to provide a hedge of the        
commodity risks associated with any of the separate enterprises.  We believe    
that Bion's Integrated Projects will generate revenues and profits from:        

*  Waste processing and technology licensing fees;                    
*  High-value organic fertilizer and/or high protein feed products;   
*  Fees related to permanently integrated utilization of the wet      
distiller grains, which are a by-product of ethanol production; 
*  Renewable energy production from the waste streams combined with   
  utilization of the energy produced within the Integrated Projects;
and                                                             
*  Ethanol production.                                                

 Exactly what fees and revenues accrue to Bion will depend on the nature
of Bion's participation in each Integrated Project and on negotiations with     
other participants in such Projects.  If Bion is simply the operator of its     
waste System within an Integrated Project that it develops, it would generate   
revenue from: a) waste processing and technology licensing fees charged to      
the CAFO, b) sales of the fertilizer and other products generated from the      
waste treatment process, c) sales of energy to the ethanol plant and/or other   
facilities, d) fees related to the utilization of the wet distillers grain      
made possible by the integration, and e) fees for its "developer" role.  If     
Bion also participates in the ownership and/or operation of the ethanol         
plant, it would further generate revenue from sales of ethanol and sales of     
feed products to the CAFO.  Sales of wet distillers grain as feed products      
generally represent 14-20% of the total revenues of an ethanol plant if there   
is an available market for the wet distillers grain. If Bion also               
participates in ownership and/or operation of the integrated CAFO (and its      
facilities), it would generate revenues from the sale of the CAFO's end         
products. It is likely that Bion will have differing ownership interests        
(from 0% to 100%) in each component of an Integrated Project.                   

  We believe that our technology platform and the proposed Projects do not
involve significant technology risk.  Our waste handling technology has been    
utilized efficiently in the past and has been verified by peer-reviewed data.   

5     

The other Project components required for an integrated operation, such as      
CAFO facilities, ethanol plants and solids drying and combustion equipment,     
all consist of available and fully-tested processes and equipment that do not   
pose any experimental challenges once properly sized, selected and installed.   
It is Bion's ability to integrate the component parts in a balanced             
proportion with large CAFO herds and ethanol production in an environmentally   
sustainable manner that creates this unique economic opportunity. Bion has a    
patent pending relating to the Bion integration model described herein.         
Although we have developed the structure and basic design work related to       
Integrated Projects, we have not yet actually constructed an Integrated         
Project.  Further, we have not completed the development of all of the System   
applications that will be necessary to address all targeted markets (such as    
swine, poultry, etc.) and all geographic areas and we anticipate a continuing   
need for the development of additional applications and more efficient          
integration.                                                                    

The basic integration in a fully integrated Project will probably     
include:                                                                        

  *  An ethanol plant and CAFO combination sized to balance the distillers
     grain by-product of the ethanol production with the feed requirements
   of the CAFO herd and the energy needs of the ethanol plant with the
     renewable energy produced by Bion from the CAFO waste stream.  Beyond
  the production of ethanol, the ethanol facility will function as a
   feed mill for the CAFO herd which will utilize the spent grain from
ethanol production in its feed ration, materially reducing the  
operating expenses (energy and transportation) and capital      
  expenditure requirements (for items such as dryers) and increasing
the net energy efficiency of ethanol production;                

  *  Additionally, the ethanol plant is potentially a source of waste heat
(which, if not productively utilized, would increase ethanol    
production costs for required disposal) to be used  to maintain 
temperatures throughout the co-located Bion System.  In colder  
     climates, additional uses of this waste heat will potentially include
heating some of the CAFO facilities;                            

 *  Drying and processing of the fine solids portion of the CAFO's waste
stream into a value-added, marketable, organic fertilizer and/or
high protein feed product ingredients;                          

*  Processing, drying and combusting the coarse solids portion of     
   the CAFO's manure stream to produce heat used for solids drying and
  to replace natural gas usage by the ethanol production process and
other co-located facilities; and                                

*  Co-located end-product production facilities (cheese and/or other  
dairy processors, beef processing facilities, etc.) which will  
    utilize the output of the CAFO and consume renewable energy produced
from the CAFO waste stream.                                     

6     

In order to implement this plan, Bion must work with both CAFO's and  
ethanol producers (and, in some cases, end-product producers)to generate        
multi-party agreements pursuant to which the Integrated Projects will be        
developed and which will provide that at least the following take place: a)     
the CAFO and ethanol plant(and other facilities) agree to locate in             
geographic proximity to each other, b) Bion licenses, constructs and operates   
its System to process the CAFO's waste stream and produce renewable energy      
and other products therefrom, c) the CAFO agrees to purchase and utilize the    
wet distillers grain by-product of the ethanol plant in its feed ration and     
d)the ethanol plant agrees to purchase and utilize the renewable energy         
produced by Bion from the CAFO waste stream in the place of natural gas or      
other energy purchases.  These agreements could be in the form of joint         
ventures, in which all parties share the cost of construction of all            
facilities in the Integrated Project (in negotiated uniform or varied manners   
across the various facilities), or in other forms of multi-party agreements     
including agreements pursuant to which Bion would bear the cost of              
construction of its System and the owners of the CAFO and the ethanol plant     
would bear the cost of construction of the CAFO facilities and ethanol plant,   
respectively, and negotiated contractual arrangements would set forth the       
terms of transfer of products (wet distillers grain, combustible dried          
solids, etc.), energy and dollars among the parties.                            

CORPORATE BACKGROUND                                                            

The Company is a Colorado corporation organized on December 31, 1987. 
Our principal executive offices are located at 641 Lexington Avenue, 17th       
Floor, New York, New York 10022.  Our telephone number at that address is       
212-758-6622. We have no additional offices at this time.                       

DEVELOPMENT OF OUR BUSINESS                                                     

Substantially all of our business and operations are conducted through
three wholly owned subsidiaries, Bion Technologies, Inc. (a Colorado            
corporation organized September 20, 1989), BionSoil, Inc. (a Colorado           
corporation organized June 3, 1996) and Bion Dairy Corporation ("Bion Dairy")   
(formerly Bion Municipal, Inc., a Colorado corporation organized July 23,       
1999). Bion is also the parent of Bion International, Inc. (a Colorado          
corporation organized July 23, 1999), which is a wholly owned, presently        
inactive subsidiary.  Bion is also the parent of Dairy Parks, LLC (an           
inactive Delaware entity organized July 25, 2001). In January 2002, Bion        
entered into a series of transactions whereby the Company became a 57.7%        
owner of Centerpoint Corporation (a Delaware corporation organized August 9,    
1995) ("Centerpoint").                                                          

  Although we have been conducting business since 1989, we determined that
we needed to redefine how we could best utilize our technology during fiscal    
year 2002.  Since that time, we have been working on technology improvements    
and applications and in furtherance of our business model of Integrated         
Project development leading toward construction and operation of an initial     
Integrated Project.                                                             

Our original systems were wastewater treatment systems for dairy farms
and food processing plants.  The basic design was modified in late 1994 to      
create Nutrient Management Systems ("NMS") that produced organic soil           

7     

products as a byproduct of remediation of the waste stream when installed on    
large dairy or swine farms.  Through June 30, 2001, we sold and subsequently    
installed, in the aggregate, 32 of these first generation systems in 7          
states, of which we believe approximately 15 are still in operation in 3        
states.  We discontinued marketing of our first generation NMS systems during   
fiscal year 2002.  We were unable to produce a business model based on the      
first generation technology that would generate sufficient revenues to create   
a profitable business.  While continuing to market and operate the first        
generation systems during the second half of calendar year 2000, we began to    
focus our activities on developing the next generation of the Bion              
technology. We no longer operate or own any of the first generation NMS         
systems.                                                                        

As a result of our research and development efforts, the core of our  
current technology was developed during fiscal years 2001-2003.  We have        
designed and tested Systems that use state-of-the-art, computerized, real-      
time monitoring and system control with the potential to be remotely accessed   
for both reporting requirements and control functions.  These Systems are       
smaller, faster and require less capital per animal than our first generation   
NMS systems.  The new generation of Bion Systems is designed to harvest         
solids used to produce our organic fertilizer and soil amendments or            
additives(the "BionSoil(R) products") in a few weeks as compared to six to      
twelve months with our first generation systems.                                

  The first phase of this research and re-development, which was conducted
during the summer and fall of 2000 at DreamMaker Dairy, our former research     
facility located outside Buffalo, New York, accelerated the speed at which we   
could treat the CAFO waste stream and harvest the solids from the waste (the    
"Bion Process") in a System which was substantially less than 20% of the size   
of a comparable first generation system.  We began second phase testing and     
development during the winter of 2000-2001, based on the faster, smaller        
System design at the DreamMaker Dairy.  We placed the System into a             
configuration of enclosed tanks that fully contained the process.  This         
configuration allowed control and monitoring of the entire System from all      
inputs through all outputs.  This closed tank system gave us the ability to     
perform complete mass balance calculations (measuring all inputs of the         
animal waste stream and all outputs from the System, including nitrogen and     
phosphorus, which are the two elements of most critical concern from a          
nutrient and water pollution control standpoint, and hydrogen sulfide and       
ammonia, which are two of the main compounds of critical concern from an air    
pollution control standpoint) on the System to produce the                      
scientific/technical data necessary to demonstrate definitively the             
performance of our technology.  Essentially, the tank configuration enabled     
our technical staff to measure the amount and manner of nitrogen and            
phosphorous removed and the amount and manner of gaseous emissions from the     
waste stream and compare such quantities to the inputs to the System            
contained in the CAFO waste stream (also known as a "mass balance analysis").   
Initial results of the mass balance analysis calculations demonstrated that     
phosphorus and nitrogen removals from the total waste stream approximated       
80%.  Additionally, measurements on the primary odor producing compounds        
indicated levels low enough to essentially eliminate odor problems associated   
with CAFO waste handling.  In January 2002, we announced results of testing     
the fully contained Bion prototype at DreamMaker Dairy.  The goals of that      
initiative (which were successfully reached) were to:                           

8     

*  Increase the efficiencies of the first generation system;          
*  Convert the core Bion technology into an operating System          
that could be integrated with complementary technologies; and   
*  Develop a computerized monitoring and control system capable of    
precise measurements and adjustments and remote reporting.      

  During 2003 we designed, installed and began testing a commercial scale,
second generation Bion System as a modification or retrofit to a waste lagoon   
on a 1,250 milking cow dairy farm in Texas known as the DeVries Dairy.  In      
December 2004, Bion published an independently peer-reviewed report, a copy     
of which may be found on our website, www.biontech.com, with data from the      
DeVries project demonstrating a reduction in nutrients (nitrogen and            
phosphorus) of approximately 75% and air emissions of approximately 95%.        
More specifically, those published results indicated that on a whole farm       
basis, the Bion System produced a 74% reduction of nitrogen and a 79%           
reduction of phosphorus.  The air results show that the Bion System limited     
emissions as follows: (in pounds per 1,400 pound dairy cow per year):           

*  Ammonia                         0.20                               
*  Hydrogen Sulfide                0.56                               
*  Volatile Organic Compounds      0.08                               
*  Nitrogen Oxides                 0.17                               

These emissions represented a reduction from published baselines of 95%-99%.    

The demonstration project at the DeVries Dairy in Texas also provided 
Bion with the opportunity to explore mechanisms to best separate the            
processed manure into streams of coarse and fine solids, with the coarse        
solids supporting generation of renewable energy and the fine solids            
potentially becoming the basis of organic fertilizer products and/or a high     
protein animal feed ingredients.                                                

For the past two years, Bion has focused on completing development of 
its technology platform and business model.  As such, we have not pursued       
near term revenue opportunities such as retrofitting existing CAFO's with our   
waste management solutions, because such efforts would have diverted scarce     
management and financial resources and negatively impacted our ability to       
complete development of an integrated technology platform in support of         
large-scale sustainable Integrated Projects. We believe significant retrofit    
opportunities exist that may enable us to generate additional future revenue    
streams from Bion's technology. However, Bion's management team remains         
focused on implementation of its integrated technology platform as the basis    
for development of its large-scale Projects, which represents our long-term     
strategic goal.                                                                 

 We currently anticipate that Bion will be the developer and manager of,
and a direct participant in and/or owner of components of, the Projects.  As    
such, Bion will:                                                                

*  Locate, secure and develop appropriate sites;                      

9     

*  Negotiate agreements with both input providers and in certain      
instances end-product users;                                    

*  Secure required permits based upon clear standards that establish  
acceptable environmental operating parameters for each component
of the Integrated Projects;                                     

*  Manage construction and operation of the Projects; and             

*  Provide its waste treatment services to CAFO operators for a fee   
   while producing renewable energy for on-site use (including sale to
the ethanol plant) and fine solids products for sale.           

In turn, the CAFO operator will use the wet distiller grains from the 
ethanol plant as a feed component for the herd at a long-term competitive       
price.  The CAFO facilities, which will be subject to permits imposing          
standards limiting their emissions and releases, can be owned either by the     
CAFO operator or by an independent third party finance source and               
subsequently leased to the CAFO operator.  The CAFO operator will be            
responsible to provide its herd and operate the CAFO. In some instances, Bion   
will own direct interests in the CAFO herd, ethanol plant, end-product user     
and/or the related facilities in addition to its ownership interest in the      
Bion System.                                                                    

  In June 2006, the Company entered into an agreement with Fair Oaks Dairy
Farm ("FODF") to construct a Bion research facility ("Stage I System") at       
FODF.  Bion has been working with FODF since May 2005 for the purpose of        
installing a waste treatment facility at FODF that could become the basis for   
a future Integrated Project.  The June 2006 agreement contemplates expansion    
beyond the initial waste treatment facility.  The Stage I System, if            
constructed, will initially be used for testing necessary for: a)               
finalization of design criteria for permitting and construction of, and b)      
optimization of renewable energy production and utilization for, a full scale   
Integrated Project. Certain technical and financial issues concerning this      
facility remain unresolved between Bion and FODF and, therefore, permitting     
and construction have not yet commenced. It is not possible to predict when     
and if these matters will be resolved or whether this installation will ever    
be constructed.                                                                 

On August 18, 2007, Bion Environmental Technologies, Inc. ("Bion")    
entered into a Letter of Intent with Evergreen Farms, Inc. ("Letter of          
Intent") related to a Bion waste treatment system at Evergreen Farms, a         
3,000-head dairy operation near Spruce Creek, Huntingdon County, Pennsylvania   
(the "System").  Construction of any such System is subject to contingencies    
including execution of a binding agreement between Bion and Evergreen Farms     
upon terms which have not yet been negotiated.  Pursuant to the Letter of       
Intent, Bion intends to conduct initial planning on this project, which will    
include a site survey and preliminary engineering.                              

10      

RECENT FINANCINGS                                                               

SERIES C NOTES AND CONVERSION OF OUTSTANDING DEBT TO EQUITY                     

On September 30, 2005, the Company, through Bion Dairy, completed a   
$1,917,500 placement of Series C Notes that caused, in conjunction with the     
Company's technical progress and agreements with certain creditors,             
conversion of 100% of Bion Dairy's convertible debt ($5,239,489, in             
aggregate, principal and accrued interest) into the Company's restricted        
common stock on that date according to their terms.                             

In conversion of the Series A, A*, B, B*, & C Notes, respectively, the
Company issued 1,381,031, 645,753, 581,883, 274,434 and 964,117 shares of its   
restricted common stock including issuance of:                                  

*  83,340 shares to Bion which have been cancelled as treasury stock; 

* 691,528 shares to Centerpoint Corporation ("Centerpoint"), of which 
   shares Bion is the "beneficial owner" of 57.7% (approximately 399,011
shares) based on its ownership of Centerpoint.  Centerpoint has   
   declared a dividend of these shares. When and if Centerpoint delivers
shares to its shareholders, the Company will cancel the shares it 
receives upon receipt;                                            

*  1,005,692 shares to Chris-Dan, of which Dominic Bassani, former    
General Manager of Bion Dairy, is the owner.                    

DECEMBER 2005 PRIVATE PLACEMENT OF COMMON STOCK                                 

On December 23, 2005 Bion closed an offering of its restricted common 
stock at a price of $4.00 per share that raised net proceeds of $1,136,500.     
We also issued 3,750 shares of common stock as commissions in connection with   
the financing.                                                                  

2006 SERIES A CONVERTIBLE PROMISSORY NOTES                                      

On September 13, 2006, Bion closed an offering of its Series A        
Convertible Promissory Notes in the principal amount of $700,000.  The notes    
earn interest at the rate of 6%, payable on May 31, 2008, the maturity of the   
notes.  All principal and accrued interest under the notes are required to be   
converted into common shares of Bion at the rate of $6 per share if the         
closing market price of Bion's common stock has been at or above $7.20 per      
share for 10 consecutive trading days and the earlier to occur of (i) an        
effective registration statement allowing public resale of the shares           
received upon conversion of the notes or (ii) one year after September 13,      
2006.  No conversion may occur unless Bion is a "reporting company" with the    
Securities and Exchange Commission pursuant to the Securities Exchange Act of   
1934, as amended ("Exchange Act").  The notes may also be converted, in whole   
or in part, at the election of the noteholders.                                 

11      

2007 SERIES A CONVERTIBLE PROMISSORY NOTES                                      

In March and April 2007, Bion sold $800,000 of its 2007 Series A      
Convertible Promissory Notes to existing investors.  The notes earn interest    
at the rate of 6%, payable on July 1, 2008, the maturity date of the notes.     
Principal and accrued interest under the notes is convertible at $4.00 per      
share.  Additionally, Mark A. Smith, our President, agreed to accept $151,645   
of the Company's 2007 Series A Convertible Notes in exchange for his deferred   
compensation for the period from January 1, 2007 through March 31, 2007 and     
the Company's promissory note issued on January 1, 2007 for Mr. Smith's         
deferred compensation from April 1, 2006 through December 31, 2006.             
Salvatore Zizza, Chairman and a Director of Bion's operating subsidiary, Bion   
Dairy Corporation, and Bright Capital, Ltd. ("Brightcap"), which provide the    
consulting services of Dominic Bassani to the Bion companies, agreed to         
accept $379,389 and $455,486, respectively, of the Company's Series A Notes     
in exchange for their respective deferred compensation for the period from      
January 1, 2007 through March 31, 2007 and the Company's promissory notes       
issued on January 1, 2007 for their respective deferred compensation owed by    
Bion on December 31, 2006.                                                      

COMPETITION                                                                     

There are a significant number of competitors in the waste treatment  
industry who are working on animal related pollution issues. This competition   
is increasing with the growing governmental and public concern focused on       
pollution due to CAFO wastes.  Waste treatment lagoons which depend on          
anaerobic microorganisms ("anaerobic lagoons")are the most common traditional   
treatment process for animal waste on large farms within the swine and dairy    
industries.  These lagoons are coming under increasing regulatory pressure      
due to associated odor, nutrient management and water quality issues and are    
facing possible phase-out in some states.  Although we believe that Bion has    
the most economically and technologically viable solution for the current       
problems, other alternative (though partial) solutions do exist including,      
for example, synthetic lagoon covers (which are placed on the top of the        
water in the lagoon to trap the gases), methane digesters (a tank which uses    
anaerobic microorganisms to break down the waste to produce methane),           
multistage anaerobic lagoons and solids separators (processes which separate    
large solids from fine solids).  Additionally, many efforts are underway to     
develop and test new technologies.                                              

 Our ability to compete is dependent upon our ability to obtain required
approvals and permits from regulatory authorities and upon our ability to       
introduce and market our Systems in the appropriate markets.                    

There is also extensive competition in the ethanol production, potting
soil, organic soil amendment, fertilizer and organic fertilizer and feed        
ingredient markets.  There are many companies that are already selling          
products to satisfy demand in the sectors of these markets we are trying to     
enter.  Many of these companies have established marketing and sales            
organizations and retail customer commitments, are supporting their products    
with advertising, sometimes on a national basis, and have developed brand       
name recognition and customer loyalty in many cases.                            

12      

  Additionally, a number of companies, including without limitation, Panda
Ethanol, E3 BioFuels and Prime BioSolutions, are pursuing the development of    
projects which combine CAFOs and ethanol plants and utilize the CAFO waste      
stream to produce energy for the ethanol plant and the CAFO herd to consume     
the distillers grain by-product of the ethanol production.  While a very        
limited number of entities (including those named above) have announced         
projects and/or solutions that sound similar to the Company's Integrated        
Projects, there appear to be significant differences including without          
limitation, the use of technology that is based on either  manure               
'gasification' or capturing methane from the waste stream using anaerobic       
digesters (ADs).  Although ADs do produce methane that can be used to replace   
some or all of the natural gas requirement of an ethanol plant, the AD          
process produces only about one third of the energy per animal that is          
produced by Bion's use of combustible solids extracted from the waste stream    
based on Bion's internal analysis. Further, none of the technologies of which   
the Company is aware appear to represent solutions to the nutrient and          
atmospheric environmental problems of CAFOs addressed by Bion's technology,     
or have any independent data supporting claimed environmental benefits, and,    
therefore, the Company believes that their potential projects will be limited   
to locations in which CAFOs have already been permitted and limited to the      
existing CAFO size.                                                             

DEPENDENCE ON ONE OR A FEW MAJOR CUSTOMERS                                      

We will be dependent upon one or a few major customers.  Our business 
model is focused on development of Integrated Projects.  We anticipate          
initially developing, owning interests in, and operating only one or a few      
fully Integrated Projects commencing during fiscal 2008, and, thereafter,       
developing a limited number of Projects at a time.  Thus, at least for the      
near future, our revenues will be dependent on a few major Projects or          
customers.                                                                      

PATENTS                                                                         

We are the sole owner of eight United States patents, one Canadian    
patent, one patent from Mexico and one New Zealand patent:                      

*  U.S. Patent No. 4,721,569, Phosphorus Treatment Process,           
expires April 2007.                                             
*  U.S. Patent No. 5,078,882, Bioconversion Reactor and System,       
expires March 2010.                                             
*  U.S. Patent No. 5,472,472, Animal Waste Bioconversion System,      
expires September 2013.                                         
*  U.S. Patent No. 5,538,529, Bioconverted Nutrient Rich Humus,       
expires August 2014.                                            
*  U.S. Patent No. 5,626,644, Storm Water Remediatory Bioconversion   
System, expires October   2015.                                 
*  U.S. Patent No. 5,755,852, Bioconverted Nutrient Rich Humus,       
expires July 2016.                                              
*  U.S. Patent No. 6,689,274, Low Oxygen Waste Bioconversion System,  
expires November 2020.                                          
*  U.S. Patent No. 6,908,495, extension of Low Oxygen Waste           
Bioconversion System, expires June 2023.                        

13      

*  Canadian Patent No. 1,336,623, Aqueous Stream Treatment Process,   
expires August 2012.                                            
*  New Zealand Patent No. 526,342, Low Oxygen Organic Waste           
Bioconversion System, expires November 8, 2021.                 
*  Mexican Patent No. 240,124, Low Oxygen Organic Waste Bioconversion 
System, expires November 8, 2021.                               

On April 15, 2005, we filed a patent application titled "Low Oxygen   
Biologically Mediated Nutrient Removal."  The application number is             
11/106,751.                                                                     

On November 3, 2006, we filed a patent application titled "Low Oxygen 
Biologically Mediated Nutrient Removal."  The application number is             
11/592,513.  On November 3, 2006, we also filed a patent application titled     
"Environmentally Compatible Integrated Food and Energy Production System."      
The application number is 11/592,511.                                           

In addition to such factors as innovation, technological expertise and
experienced personnel, we believe that a strong patent position is              
increasingly important to compete effectively in the businesses on which we     
are focused.  It is likely that we will file applications for additional        
patents in the future. There is, however, no assurance that any such patents    
will be granted.                                                                

It may become necessary or desirable in the future for us to obtain   
patent and technology licenses from other companies relating to technologies    
that may be employed in future products or processes.  To date, we have not     
received notices of claimed infringement of patents based on our existing       
processes or products, but due to the nature of the industry, we may receive    
such claims in the future.                                                      

  We generally require all of our employees and consultants, including our
management, to sign a non-disclosure and invention assignment agreements upon   
employment with us.                                                             

RESEARCH AND DEVELOPMENT                                                        

During the year ended June 30, 2007 we expended $1,510,000 (including 
non-cash expenditures) on undertaking research and development related to our   
technology platform applications in support of large-scale, economically and    
environmentally sustainable Integrated Projects.  Bion's main efforts were      
directed at further development of our technology and its applications. In      
addition, substantial research and development activity was focused on design   
and refinement of all aspects of the technology and integration engineering     
related to the energy balances, renewable energy production and on-site         
utilization, related to Integrated Project issues and our business model.       
Research activities have focused on factors related to renewable energy         
production from CAFO waste including coarse solid recovery, drying and use      
for renewable energy production, as well as fine solids recovery, drying and    
utilization as fertilizer and/or animal feed.  On-going research related to     
reduction of nutrient releases and gaseous emissions from CAFO waste streams    
also took place at the DeVries dairy facility and elsewhere.                    

14      

During the year ended June 30, 2006 we expended $3,810,000 (including 
non-cash expenditures) on undertaking similar research and development          
related to our technology platform applications in support of large-scale,      
economically and environmentally sustainable Integrated Projects.               

Environmental Protection/Regulation                                             

In regard to development of Projects, we will be subject to extensive 
environmental regulations related to CAFO's and ethanol production.  To the     
extent that we are a provider of systems and services to others that result     
in the reduction of pollution, we are not under direct enforcement or           
regulatory pressure.  However, we are involved in CAFO waste treatment and      
are impacted by environmental regulations in at least four different ways:      

*  Our marketing and sales success depends, to a substantial degree,  
on the pollution clean-up requirements of various governmental  
agencies, from the Environmental Protection Agency (EPA) at     
the federal level to state and local agencies;                  

*  Our System design and performance criteria must be responsive to   
the changes in federal, state and local environmental agencies' 
effluent and emission standards and other requirements;         

*  Our System installations and operations require governmental permit
approvals in many jurisdictions; and                            

*  To the extent we own or operate Integrated Projects including      
CAFO facilities and ethanol plants, those facilities will be    
subject to environmental regulations.                           

EMPLOYEES                                                                       

As of September 15, 2007, we had 11 employees and consultants, all of 
whom are full-time except for Jere Northrop, our Senior Technology Director,    
who works for the Company on a part-time basis.  Our future success depends     
in significant part on the continued service of our key technical and senior    
management personnel.  The competition for highly qualified personnel is        
intense, and there can be no assurance that we will be able to retain our key   
managerial and technical employees or that we will be able to attract and       
retain additional highly qualified technical and managerial personnel in the    
future.  None of our employees is represented by a labor union, and we          
consider our relations with our employees to be good.  None of our employees    
is covered by "key person" life insurance.                                      

ITEM 2.  DESCRIPTION OF PROPERTY.                                               

The Company maintains its offices at 641 Lexington Avenue, 17th Floor,
New York, New York 10022, telephone number (212) 758-6622.  These offices are   
leased pursuant to a non-cancellable operating lease that became effective on   
August 1, 2006 and expires on November 30, 2013.  The average monthly rental    
under the terms of the lease is $15,820. The Company has entered into sub-      
leases with non-affiliated parties for approximately thirty-two per cent        
(32%) of its obligations under this lease.                                      

15      

 The Company holds eight United States patents, one Canadian patent, one
patent from Mexico and one New Zealand patent as described above.  Three        
patent applications have been filed and are pending.                            

ITEM 3.  LEGAL PROCEEDINGS                                                      

Bion, our President Mark A. Smith and Bion Dairy were defendants in a   
class action/derivative action lawsuit in Delaware Chancery Court (TCMP#3       
Partners, LLP, et al v. Trident Rowan Group, Inc., et al, Civil Action No.      
170-N) (the "TCMP Litigation"), which was settled on August 10, 2007.           
Pursuant to the settlement, Bion, Bion Dairy Corporation and Mark Smith, paid   
$165,000, through insurance, into a settlement fund.  As part of the            
settlement reached in the TCMP Litigation, Bion, its majority owned             
subsidiary Centerpoint Corporation ("Centerpoint"), and Bion's shareholders     
(as of January 15, 2002 other than the 'Released Parties' in these two          
actions who are not current officers and/or directors of Bion) ("Shareholder    
Class") filed an action against Comtech Group, Inc. ("Comtech") (formerly       
known as Trident Rowan Group, Inc.), OAM S.p.A  ("OAM") and others in the       
Court of Chancery in the State of Delaware, case number 2968-VCP (the           
"Comtech Litigation"), along with a stipulated settlement of the litigation.    
Pursuant to that settlement, Comtech and OAM agreed to deliver to the           
Shareholder Class:  a) 144,240 shares of Bion common stock; b) a warrant to     
purchase 100,000 shares of Bion's common stock, and c) 140,000 shares of the    
common stock of Centerpoint Corporation. It is anticipated that delivery of     
these securities (net of 10% attorneys' fees) will take place during the        
fourth quarter of 2007 and each member of the Shareholder Class will receive    
the equivalent of approximately .05 Bion shares for each share of Bion common   
stock (split adjusted) owned on January 15, 2002. Additionally, Comtech and     
OAM assigned to Bion and Centerpoint all of their rights to any proceeds of     
an escrow established from the sale of Centerpoint's assets to Aprilia S.p.A.   
(the "Aprilia Escrow") and any proceeds from litigation related to the          
transaction with Aprilia.  On September 18, 2007 Bion and Centerpoint           
received $798,000 (before attorneys' fees and other expenses), in aggregate,    
from the Aprilia Escrow.  As part of the settlement, one of the other           
defendants paid $150,000 into a settlement fund, through insurance, from        
which funds Bion and Centerpoint  received $110,000, in aggregate, on           
September 10, 2007.                                                             

 On May 6, 2002, Arab Commerce Bank Ltd. ("ACB"), an unaffiliated party,
filed a complaint against the Company in the Supreme Court of the State of      
New York regarding $100,000 of the Company's convertible bridge notes ("ACB     
Notes") that were purchased by ACB in March of 2000.  The complaint includes    
a breach of contract claim asserting that the Company owes ACB either           
a)$265,400 plus interest or b) $121,028 including interest based on ACB's       
interpretation of the terms of the ACB Notes and subsequent amendments.         
Effective June 30, 2001, the Company issued ACB 5,034 shares of common stock    
in full payment of its ACB Note based on the Company's interpretation of the    
ACB Note, as amended.  The Company has filed an answer to the complaint         
denying the allegations. No activity has taken place in this lawsuit since      
2002. The Company does not believe that the ultimate resolution of this         
litigation will have a material adverse effect on the Company, its operations   
or its financial condition.                                                     

16      

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.                   

None.                                                                 

PART II   

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND SMALL     
BUSINESS ISSUER PURCHASES AND EQUITY SECURITIES.                                

(a)  Market Information                                               

During the past two fiscal years, we have had only limited volumes of 
trading in our common stock in the over the counter pink sheets market, and     
there is no assurance that such trading will expand or even continue.           

Our common stock is now quoted on the Over-The-Counter Electronic     
Bulletin Board  under the symbol "BNET."  The following quotations reflect      
inter dealer prices, without retail mark up, markdown or commission and may     
not represent actual transactions.                                              

                            2007            2006
                             --------------   --------------
Fiscal Year Ending June 30,            High     Low     High     Low            
---------------------------            ----     -----   -----    -----          

First Fiscal Quarter                   $7.00    $5.20   $2.75    $1.15          
Second Fiscal Quarter                  $6.00    $5.00   $6.00    $2.40          
Third Fiscal Quarter                   $5.50    $3.55   $9.50    $4.00          
Fourth Fiscal Quarter                  $3.90    $2.75   $7.00    $4.16          

(b)  Holders                                                          

The number of holders of record of our common stock at September 30,  
2007 was approximately 754.  Many of our shares of common stock are held by     
brokers and other institutions on behalf of stockholders, so we are unable to   
estimate the number of stockholders represented by these record holders.        

The transfer agent for our common stock is Corporate Stock Transfer,  
Inc., 3200 Cherry Creek Drive South, Suite 430, Denver, Colorado 80209.         

(c)  Dividends                                                        

  We have never paid any cash dividends on our common stock.  Our board of
directors does not intend to declare any cash dividends in the foreseeable      
future, but instead intends to retain earnings, if any, for use in our          
business operations.  The payment of dividends, if any, in the future is        
within the discretion of the board of directors and will depend on our future   
earnings, if any, our capital requirements and financial condition, and other   
relevant factors.                                                               

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.             

Included in Part F/S are the audited Consolidated Financial Statements
for the fiscal years ended June 30, 2007 and 2006 ("Financial Statements").     

17      

Statements made in this Form 10K-SB 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 to gain     
product approval in the United 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 a competitor will develop a more         
comprehensive or less expensive environmental solution, delays in market        
awareness of Bion and our Systems, or possible delays in Bion's development     
of Projects and failure of marketing strategies, each of which could have an    
immediate and material adverse effect by placing us behind our competitors.     
Bion disclaims any obligation subsequently to revise any forward looking        
statements to reflect events or circumstances after the date of such            
statements or to reflect the occurrence of anticipated or unanticipated         
events.                                                                         

  The following discussion and analysis should be read in conjunction with
the Consolidated Financial Statements and Notes to Consolidated Financial       
Statements filed with this Report.                                              

BUSINESS OVERVIEW                                                               

  The Company is currently focused on completion of the development of its
second-generation technology which provides solutions for environmentally       
sound clean-up of the waste streams of large-scale CAFO's and creates           
economic opportunities for integration of renewable energy production,          
ethanol production, sustainable animal husbandry and organic soil/fertilizer    
and feed production.  We believe our technology will also allow development     
of Projects that can also directly integrate with dairy (and other CAFO) end-   
users and that can potentially increase profitability and quality control of    
each participant while mitigating the environmental impact of the entire        
integrated complex.  The Company is in the process of finalizing engineering,   
design and economic modeling for applications and Integrated Projects and       
expects to select the site for and commence development of its initial          
Integrated Project during its 2008 fiscal year.                                 

18      

  The financial statements for the years ended June 30, 2007 and 2006 have
been prepared assuming the Company will continue as a going concern.  The       
Company has incurred net losses of approximately $2,549,000 and $5,173,000      
during the years ended June 30, 2007 and 2006, respectively.  At June 30,       
2007, the Company had a working capital deficiency and a stockholders'          
deficit of approximately $1,219,000 and $4,663,000, respectively.  The report   
of the independent registered public accounting firm on the Company's           
financial statements as of and for the year ended June 30, 2007 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.  Management's plans with respect to these matters are            
described in this section and in our financial statements, and this material    
does not include any adjustments that might result from the outcome of this     
uncertainty.  There is no guarantee that we will be able to raise the funds     
or raise further capital for the operations planned in the near future.         

CRITICAL ACCOUNTING POLICIES                                                    

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

Revenue Recognition                                                             

  While the Company has not recognized any operating revenues for the past
two fiscal years, the Company anticipates that future revenues will be          
generated from product sales, technology license fees, annual waste treatment   
fees and direct ownership interests in Integrated Projects.  The Company        
expects to recognize revenue from product sales 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.                                              

Compensation Cost for Options with Service Conditions and Graded Vesting        
Schedules                                                                       

The Company has issued non-employee options that include service      
conditions and have graded vesting schedules.  Generally for these              
arrangements, the measurement date of the services occurs when the options      

19      

vest.  In accordance with Emerging Issues Task Force Issue No. 96-18,           
recognition of compensation cost for reporting periods prior to the             
measurement date is based on the then current fair value of the options.        
Fair value of the options is determined using a Black-Scholes option-pricing    
model.  Any subsequent changes in fair value will be recorded on the            
measurement date.  Compensation cost in connection with options that are not    
fully vested is being recognized on a straight-line basis over the requisite    
service period for the entire award.                                            

Stock-based compensation                                                        

On July 1, 2006, the Company adopted the provisions of Statement of   
Financial Accounting Standards ("SFAS") No. 123 (Revised), "Share-Based         
Payment" (SFAS 123(R)), which supersedes Accounting Principles Board Opinion    
No. 25 ("APB 25"), and generally requires that share-based compensation         
transactions be accounted and recognized in the statement of income based on    
their fair values.  The Company adopted SFAS 123(R)using the modified           
prospective application under which all share based awards granted on or        
after the adoption date and  modifications, repurchases or cancellation of      
prior awards made after the adoption date shall be accounted for under SFAS     
123(R).  The modified prospective application does not require the Company to   
restate prior period's financial results to reflect the adoption.  Pro forma    
disclosure for prior period issuances of share based grants have been made in   
the notes to the financial statements and the Company has used the Black-       
Scholes option pricing model for determining fair value of stock options        
granted.  As of June 30, 2007 the Company had $739,000 of unrecognized          
compensation cost related to stock options that will be recorded over a         
weighted average period of approximately 1.5 years.                             

Cumulative Effect of Change in Accounting Principle                             

In accordance with SFAF 123(R), outstanding instruments previously    
classified as liabilities and measured at intrinsic values, are to be           
measured initially at fair value with differences to be recorded as a           
cumulative effect of a change in accounting principle.  The Company recorded    
the cumulative effect of a change in accounting principle of $731,000 due to    
the calculation of the fair value of convertible deferred compensation owed     
Mark Smith ($1,522,000) and Brightcap ($2,081,000) as of July 1, 2006.  The     
Company re-measures the fair value of the convertible notes at each reporting   
period after July 1, 2006, using a Black-Scholes model approach, and records    
any adjustments as non-cash compensation expense in the re-measurement          
period.  At June 30, 2007, the fair value of deferred compensation owed Mark    
Smith and Brightcap was re-measured at $766,000 and $1,047,000, respectively    
and resulted in a credit to earnings of $779,000 and $1,066,000,                
respectively, for the year June 30, 2007.                                       

YEAR ENDED JUNE 30, 2007 COMPARED TO YEAR ENDED JUNE 30, 2006                   

General and Administrative                                                      

Total general and administrative expenses decreased $1,155,000 from   
$1,343,000 to $188,000 for the years ended June 30, 2006 and 2007,              
respectively.                                                                   

20      

 General and administrative expenses, excluding stock-based compensation
(credits)/expenses of $(604,000) and $834,000 for the years ended June 30,      
2007 and 2006, respectively, were $792,000 versus $509,000 for the years        
ended June 30, 2007 and 2006, respectively.  The increase of approximately      
$283,000 was due primarily to higher rent, accounting and audit fees, and       
salary and related payroll taxes for the year ended June 30, 2007 over the      
same period in 2006.  The Company incurred rent expense of $141,000 for         
fiscal year 2007 due to the signing of a lease for office space in New York     
City in August 2007, while no similar expense was incurred in fiscal year       
2006.  Accounting and audit fees were $124,000 higher for the year ended June   
30, 2007 over the comparable period for 2006 due to the costs associated with   
the fiscal year 2006 audit, preparation of the Company's Form 10-SB and         
related responses to a Securities and Exchange Commission comment letter,       
preparation and review of quarterly financial statements for December 31,       
2006 and March 31, 2007, and the tax preparation fees for fiscal years 2002     
through 2005.  In addition, the Company had higher salary and payroll tax       
costs of $57,000 for the year ended June 30, 2007 due to additional salary      
costs being allocated to general and administrative expenses and the addition   
of an investor relations manager in June 2007.                                  

 General and administrative stock-based compensation for the years ended
June 30, 2007 and 2006 respectively consist of the following:                   

                                       2007         2006
                                     ----------    ---------
Fair value remeasurement of convertible                               
notes - affiliates                       $ (779,000)   $    -       
Intrinsic value remeasurement of                                      
convertible notes - affiliates                 -         834,000    
Amortization of expenses prepaid with                                 
stock options granted to non-employees       10,000         -       
Fair value of stock options expensed                                  
under SFAS 123(R)                           165,000         -       
                                     ----------    ---------
Total                                $ (604,000)   $ 834,000
                                     ==========    =========

 Stock-based compensation  expenses decreased to ($604,000) for the year
ended June 30, 2007 from $834,000 for the year ended June 30, 2006.  The        
decrease in stock-based compensation expense relating to the President's        
convertible deferred compensation is due to: a) the Company's adoption of       
SFAS 123(R) which measures the fair value of the convertible feature of the     
liability, versus valuing under the intrinsic value method, and b) the          
decrease in the price of the Company's stock from $6.40 to $3.25 per share      
for the year ended June 30, 2007 versus the increase from the $2.00 per share   
floor to $6.40 per share for the year ended June 30, 2006.                      

Research and development                                                        

Total research and development expenses have decreased $2,300,000 from
$3,810,000 to $1,510,000 for the years ended June 30, 2006 and 2007,            
respectively.                                                                   

21    

Research and development expenses, excluding stock-based compensation 
(credits)/expenses of $(632,000) and $1,892,000 for the years ended June 30,    
2007 and 2006, respectively, increased $224,000 from $1,918,000 to $2,142,000   
for the years ended June 30, 2006 and 2007, respectively.  Contributing to      
the increase was salary and payroll taxes, consulting fees,  and legal fees.    
During fiscal year 2007, the company hired a chief operating officer and also   
declared bonuses to the research and development employees which increased      
salary and related payroll taxes by $292,000 over the prior year.  Consulting   
expenses increased approximately $170,000 when comparing fiscal year ended      
June 30, 2007 to the same period in 2006 due to the Company's                   
consulting/employment agreement with the Chairman and director of Dairy which   
was in effect for the full year during fiscal year 2007, versus six months in   
the 2006 fiscal year.    Offsetting the increases described above were          
decreased expenditures of $177,000 relating to research and development         
subcontractor and material expenses on the DeVries project due to the           
majority of the project testing being completed in fiscal year 2006.            

Research and development stock-based compensation for the years ended 
June 30, 2007 and 2006 consist of the following:                                

                                        2007          2006
                                       -----------    ----------
Fair value remeasurement of convertible                               
notes - affiliates                       $(1,066,000)   $     -     
Intrinsic value remeasurement of                                      
convertible notes - affiliate                   -        1,140,000  
Fair value remeasurement of options with                              
service conditions                           (16,000)      727,000  
Amortization of expenses prepaid with                                 
stock options granted to non-employees        33,000        25,000  
Fair value of stock options expensed                                  
under SFAS 123 (R)                           417,000          -     
                                       -----------    ----------
  Total                                $  (632,000)   $1,892,000
                                       ===========    ==========

 Stock-based compensation expense decreased from $1,892,000 for the year
ended June 30, 2006 to ($633,000) for the same period in 2007.  The decrease    
is attributable to Brightcap's convertible deferred compensation and            
compensation costs relating to the Company's options with service conditions    
and graded vesting.  Stock-based compensation (credit) expense of               
($1,066,000) and $1,140,000 for the years ended June 30, 2007 and 2006,         
respectively, was recorded to re-measure the fair value and to recognize the    
intrinsic value of Brightcap's convertible deferred compensation at June 30,    
2007 and 2006, respectively, due, in part, to the decrease in the price of      
the Company's stock from $6.40 to $3.25 per share for the year ended June 30,   
2007, compared to the increase from the $2.00 per share floor to $6.40 per      
share for the year ended June 30, 2006.  Stock-based compensation (credit)      
expense of ($16,000) and $727,000 was recorded for the years ended June 30,     
2007 and 2006, respectively for the non-employee options that include service   
conditions and have graded vesting schedules.  The decrease is due to the       
decrease in the stock price from $6.40                                          

22    

per share at June 30, 2006 to $3.25 per share at June 30, 2007. The Company     
recorded stock-based compensation expense of $417,000 under the provisions of   
SFAS 123(R)for the year ended June 30, 2007 for options vested to research      
and development employees.  No similar expense was recorded for the prior       
year as the Company adopted SFAS 123(R)effective July 1, 2006.                  

Loss from Operations                                                            

  As a result of the factors described above, the loss from operations was
$1,697,000 and $5,153,000 for the years ended June 30, 2007 and 2006,           
respectively.                                                                   

Other expense                                                                   

  Other expense was $121,000 and $20,000 for the years ended June 30, 2007
and 2006, respectively.  Interest expense increased $38,000 from $135,000 for   
the year ended June 30, 2006 to $156,000 for the year ended June 30, 2007.      
Interest expense increased due to the higher debt balances due to the 2006      
and 2007 Series A Notes and higher convertible deferred compensation balances   
from the prior year.  Meanwhile interest income increased from $22,000 for      
the year ended June 30, 2006 to $35,000 for the same period in 2007 due to      
higher average cash balances during fiscal year 2007.  During the year ended    
June 30, 2006, the Company had other income of approximately $91,000 from the   
settlement of debt with third party vendors.                                    

Cumulative Effect of Change in Accounting Principle                             

  During the year ended June 30, 2007, the Company recorded the cumulative
effect of a change in accounting principle of $731,000.                         

On July 1, 2006, the Company adopted the provisions of Statement of   
Financial Accounting Standards ("SFAS") No. 123 (Revised), "Share-Based         
Payment" (SFAS 123(R)), which supersedes APB 25, using the modified             
prospective application.  In accordance with SFAF 123(R), outstanding           
instruments previously classified as liabilities and measured at intrinsic      
values, are to be measured initially at fair value with differences to be       
recorded as a cumulative effect of a change in accounting principle.  The       
Company recorded the cumulative effect of a change in accounting principle of   
$731,000 due to the calculation of the fair value of convertible deferred       
compensation owed Mark Smith and Brightcap as of July 1, 2006.  The             
cumulative effect of change in accounting principle resulted in a net loss      
per common share of $0.09 for the year ended June 30, 2007.                     

Net Loss                                                                        

 As a result of the factors described above, the net loss was $2,549,000
and $5,173,000 for the years ended June 30, 2007 and 2006, respectively,        
representing a $0.38 decrease in the net loss per common share from $0.70 for   
the year ended June 30, 2006 to $0.32 for the same period in 2007.              

23    

LIQUIDITY AND CAPITAL RESOURCES                                                 

 As of June 30, 2007, the Company had cash and cash equivalents equal to
$373,000.  As previously noted, the Company is currently not generating         
revenue and accordingly has not generated cash flows from operations.  The      
Company does not anticipate generating sufficient revenues to offset            
operating and capital costs for a minimum of two to five years.  While there    
are no assurances that the Company will be successful in its efforts to         
develop and construct its Projects and market its Systems, it is certain that   
the Company will require significant funding from external sources.             

Investing Activities                                                            

  During the year ended June 30, 2007 the Company used $79,000 of cash for
investing activities to purchase property and equipment for the New York City   
office.  In addition the Company used $172,000 of cash to secure a guarantee    
for the office lease obligation.                                                

Financing Activities                                                            

During the year ended June 30, 2007, $545,000 and $800,000 of cash was
provided by financing activities resulting from the sale of the 2006 Series A   
and 2007 Series A convertible promissory notes, respectively.                   

As of June 30, 2007 the Company has significant debt obligations      
consisting primarily of mandatorily convertible notes - affiliates of           
$1,812,908, 2006 Series A convertible promissory notes - current of $737,974,   
2007 Series A convertible promissory notes - affiliates of 1,001,116, 2007      
Series A convertible promissory notes of $811,540 and deferred compensation     
of $187,500.  The Company has entered into an 88-month operating lease for      
office space in New York City, with an average monthly lease expense of         
$15,820.                                                                        

Convertible Notes                                                               

Under the terms of a convertible deferred compensation agreement with 
our President that was exchanged for a promissory note and conversion           
agreement on April 4, 2006, sums accrued through March 31, 2006 accrue          
interest at 6% per annum and are convertible into the Company's common stock    
at the lower of the current market value at the time of conversion, or $2.00    
per share.  Through July 1, 2007, conversions may occur by mutual agreement     
between the Company and the President.  The Company may convert the             
promissory note, in whole or part, at any date after July 1, 2007 and the       
convertible note owned by the President is mandatorily converted to common      
stock of the Company on July 1, 2009. Through June 30, 2006, the Company        
accounted for this employee stock-based compensation agreement under APB 25     
and recorded the intrinsic value of the deferred compensation agreement at      
each reporting date.  On July 1, 2006, the Company adopted the provisions of    
SFAS 123(R), which supersedes APB 25.  In accordance with SFAS 123(R),          
outstanding instruments previously classified as liabilities and measured at    
intrinsic values, are to be measured initially at fair value with differences   
to be recorded as the cumulative effect of a change in accounting principle.    

24    

The fair value of deferred compensation owed to Mark A. Smith on July 1, 2006   
was $1,521,609, and the cumulative effect of the change in accounting           
principle of $308,870 was recorded.  Fair value at July 1, 2006 was             
calculated using a Black-Scholes option pricing model with the following        
assumptions: a dividend yield of zero, a risk-free interest rate of 5.13%,      
volatility of 181%, a remaining contractual life of 3 years and a stock price   
of $6.40 per share.  At June 30, 2007 the fair value of deferred compensation   
owed to Mark A. Smith was re-measured as $765,722 and resulted in a credit to   
earnings of $778,859 for the year ended June 30, 2007.  Fair value at June      
30, 2007 was calculated utilizing the following assumptions: a dividend yield   
of zero, a risk-free interest rate of 4.87%, volatility of 69%, a remaining     
contractual life of 2 years and a stock price of $3.25 per share.  Sums         
accrued after April 1, 2006, ($150,000 through March 31, 2007), were            
converted as of March 31, 2007 into the Company's 2007 Series A convertible     
promissory notes and sums accrued after April 1, 2007 ($37,500 through June     
30, 2007) have been recorded as deferred compensation.  The President earns     
compensation of $150,000 annually.  All these sums related to Mr. Smith's       
deferred compensation are net of $55,000 and $60,000 of deferred compensation   
that was converted to 50,000 and 30,000 shares of the Company's restricted      
common stock on December 31, 2004 and 2005, respectively.                       

On December 31, 2005, convertible deferred compensation payable to    
Brightcap for services provided to the Company by the former general manager    
of Bion Dairy between April 1, 2003 and September 30, 2005 was exchanged for    
a promissory note which note bears interest at 6% per annum and conversion      
agreement pursuant to which all sums accrued through September 30, 2005 are     
convertible into the Company's common stock at the lower of the current         
market value at the time of conversion or $2.00 per share.  Through January     
1, 2007 conversion may occur by mutual agreement between the Company and        
Brightcap.  The Company may convert the promissory note, in whole or in part,   
at any date after January 1, 2007 and, on July 1, 2009, the promissory note     
is mandatorily convertible to common stock of the Company. Through June 30,     
2006, the Company accounted for this employee stock-based compensation          
agreement under APB 25 and recorded the intrinsic value of the deferred         
compensation agreement at each reporting date.  On July 1, 2006, the Company    
adopted the provisions of SFAS 123(R), which supersedes APB 25.  The fair       
value of deferred compensation owed to Brightcap on July 1, 2006 was            
$2,081,475, and the cumulative effect of the change in accounting principle     
of $422,516 was recorded.  Fair value at July 1, 2006 was calculated using a    
Black-Scholes option pricing model with the following assumptions: a dividend   
yield of zero, a risk-free interest rate of 5.13%, volatility of 181%, a        
remaining contractual life of 3 years and a stock price of $6.40 per share.     
At June 30, 2007 the fair value of deferred compensation owed to Brightcap      
was re-measured as $1,047,186 and resulted in a credit to earnings of           
$1,065,569 for the year ended June 30, 2007.  Fair value at June 30, 2007 was   
calculated utilizing the following assumptions: a dividend yield of zero, a     
risk-free interest rate of 4.87%, volatility of 69%, a remaining contractual    
life of 2 years and a stock price of $3.25 per share. Brightcap receives        
annual compensation of $300,000 for the full time consulting services of        
Dominic Bassani with payment deferred. Sums accrued after October 1, 2005       
total $450,000 as of March 31, 2007, and were converted into the Company's      
2007 Series A convertible promissory notes as of March 31, 2007, while sums     
accrued after April 1, 2007 ($75,000 as of June 30, 2007) have been recorded    
as deferred compensation.                                                       

25    

Deferred Compensation                                                           

Prior to March 31, 2003, the Company incurred management fees under   
various management agreements for management and consulting services.  The      
fees totaled $607,629 including interest at 6%, as of March 31, 2007.  It was   
agreed in March 2003 that payment would be made on March 31, 2007 by            
conversion of the deferred compensation into common stock of the Company at     
the higher of the average price of the Company's common stock during the ten    
trading days ending March 27, 2007 or $4.00 per share.  The Company issued      
151,908 shares of common stock on March 31, 2007 to satisfy its obligation.     

 The Company has aggregate deferred compensation liabilities of $187,500
for three of its officers/directors/consultants as of June 30, 2007.  This      
deferred compensation does not accrue interest and is not convertible.          
Payment is to be made at the earliest date that the Company has in excess of    
$2,000,000 in cash and cash equivalents or as decided by the Board of           
Directors or by December 31, 2007.                                              

Convertible Promissory Notes                                                    

2006 Series A Convertible Promissory Notes:                                     

On September 13, 2006, the Company closed the offering of its 2006    
Series A Convertible Promissory Notes, totaling $700,000 (the "2006 Notes").    
The holders of the 2006 Notes earn interest on the unpaid principal balance     
of the 2006 Notes at 6%, payable on May 31, 2008, the maturity date of the      
2006 Notes.  All of the principal and accrued interest under the 2006 Notes     
shall be converted into common shares of the Company at the conversion rate     
of one share for each $6.00 that is owed under the terms of the 2006 Notes if   
the following conditions are met:                                               

  A) The closing market price of the Company's shares has been at or above
$7.20 per share for 10 consecutive trading days, and                            

B) The earliest of the following events:                              

     1)  An effective registration allowing public resale of the shares to
be received by the Note holders upon conversion, or                             
2)  One year after the initial closing date of the offering, and
   3)  No conversion without an effective registration statement shall
take place until the Company has become a "reporting company" with the          
Securities and Exchange Commission pursuant to the Securities Exchange Act of   
1934, as amended, which occurred on January 13, 2007.                           

The 2006 Notes may also be convertible, in whole or in part, into the 
Company's common shares at any time at the election of the Note holders at a    
conversion rate of $6.00 per share, which was above the approximate market      
price of the Company's common shares at the commitment date of the offering.    
2007 Series A Convertible Promissory Notes:                                     

During March and April 2007, the Company sold $800,000 of its 2007    
Series A Convertible Notes (the "2007 Notes") for cash proceeds. In addition    
the Company issued 2007 Notes to affiliates totaling $986,521 in exchange for   

26    

promissory notes with convertible features and deferred compensation.  The      
2007 Notes are convertible into shares of the Company's common stock at $4.00   
per share until maturity on July 1, 2008, at the election of the 2007 Note      
holder, and will accrue interest at 6% per annum.  The note holders will have   
the option to exchange the 2007 Notes, plus interest, into securities           
substantially identical to securities the Company sells in any subsequent       
offering of up to $3,000,000.    The Company has the right to require the       
2007 Notes (principal plus interest) be converted into its common shares at     
the lesser of $4.00 per share or the price of an offering in which the          
Company raises $3,000,000 or more.  The conversion price of the 2007 Notes of   
$4.00 per share was above the approximate market price of the Company's         
common shares at the commitment date of the offering.                           

Plan of Operations and Outlook                                                  

As of June 30, 2007 the Company had cash and cash equivalents of      
$373,109.  During September 2007 the Company received gross proceeds of         
$1,228,000 consisting of $798,000 from litigation settlements and $430,000      
from the release of escrowed funds.  Based on our operating plan, management    
believes that existing cash on hand will be sufficient to fund the Company's    
basic overhead through the end of the 2008 fiscal year.  However, the Company   
will need to raise additional capital to execute our business plan discussed    
below.                                                                          

The Company currently intends to seek financing of between $5,000,000 
and $50,000,000 during fiscal year 2008 in the form of equity and/or debt.      
The proceeds would be used to expand and accelerate the development             
activities of Bion's initial Integrated Projects and for general corporate      
purposes.  If we do not receive sufficient funding on a timely basis, it        
could have a material adverse effect on our liquidity, financial condition      
and business prospects.  Additionally, in the event that we receive funding,    
it may be on terms that are not favorable to the Company and its                
shareholders.  There is no assurance that the Company will successfully         
complete any financings.                                                        

Currently, Bion is focused on using applications of its patented waste
management technology to develop Integrated Projects which will include large   
CAFOs, such as large dairies, beef cattle feed lots and hog farms, with Bion    
waste treatment System modules processing the aggregate CAFO waste stream       
from the equivalent of 20,000 to 40,000 or more dairy cows (or the waste        
stream equivalent of beef cattle or other species) while producing solids to    
be utilized for renewable energy production and to be marketed as feed and/or   
fertilizer, integrated with an ethanol plant capable of producing 20 million    
to 40 (or more) million gallons of ethanol per year.                            

  In June 2006, the Company entered into an agreement with Fair Oaks Dairy
Farm ("FODF") to construct a Bion facility ("Stage I System") at FODF.  Bion    
has been working with FODF since May 2005 for the purpose of installing a       
waste treatment facility at FODF that could become the basis for a future       
Integrated Project.  The June 2006 agreement contemplates expansion beyond      
the initial waste treatment facility.    The Stage I System, if constructed,    
will initially be used for testing necessary for: a) finalization of design     

27    

criteria for permitting and construction of, and b) optimization of renewable   
energy production and utilization for the full scale Integrated Projects.  We   
are currently in negotiations toward an amended agreement with FODF pursuant    
to which: a) the Company will construct a commercial scale Bion System          
designed to handle the waste stream from approximately 3500-6200 milking cows   
("Initial System") at existing FODF facilities in Indiana which will            
incorporate and expand the scope of the Stage I System; and b) when the         
Initial System has completed start-up phase and demonstrated environmental      
results consistent with the published results achieved at Bion's DeVries        
research facility, the Initial System will become the basis of expansion into   
an Integrated Project at FODF through development stages including dairy        
expansion, construction of additional Bion System modules including renewable   
energy production and solids processing facilities and construction of an       
ethanol plant. Preliminary engineering, design and site work at FODF has        
begun pursuant to the existing agreement.  However, certain technical and       
financial issues related to these facilities remain unresolved and it is not    
currently possible to predict when, if ever, these facilities will be           
constructed.                                                                    

Bion is currently working with local, state and federal officials and 
with potential industry participants to evaluate sites in multiple states and   
anticipates selecting a site for its initial Project during the 2008 fiscal     
year. In addition, Bion intends to choose sites for additional Projects from    
during 2008 to create a pipeline of Projects. Management has a 5-year           
development target (through calendar year 2013) of approximately 12-25          
Integrated Projects.  At the end of the 5-year period, Bion projects that 8-    
16 of these Integrated Projects will be in full operation in 3-8 states, and    
the balance would be in various stages ranging from partial operation to        
early construction stage. No Integrated Project has been developed to date.     

Bion is presently establishing its implementation management team with
the intention of commencing development and construction of an initial          
Project during fiscal year 2008. Bion will need to continue to hire             
additional management and technical personnel as it moves from the technology   
re-development phase to the implementation phase during the 2008 calendar       
year.                                                                           

CONTRACTUAL OBLIGATIONS                                                         

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

1) The Company executed a non-cancelable operating lease for office   
space in New York City effective August 1, 2006 and extending to November 30,   
2013. The average monthly rent expense under the lease is $15,820.  The         
Company has provided the lessor with a letter of credit in the amount of        
$171,945 in connection with the lease.  The Company's obligations under the     
lease are partially guaranteed by Salvatore Zizza, Chairman of Bion Dairy.      
The Company has entered into sub-leases with non-affiliated parties for         
approximately 32% of the obligations under the lease.                           

28    

2) In June 2006, the Company entered into an agreement with Fair Oaks 
Dairy Farm ("FODF") to construct a Bion facility ("Stage I System") at FODF.    
Bion has been working with FODF since May 2005 for the purpose of installing    
a waste treatment facility at FODF that could become the basis for a future     
Integrate Project.  The June 2006 agreement contemplates expansion beyond the   
initial waste treatment facility.  The Stage I System, if constructed, will     
initially be used for testing necessary for: a) finalization of design          
criteria for permitting and construction of, and b) optimization of renewable   
energy production and utilization for, full scale Integrated Projects. The      
estimated cost of Stage I under the June 2006 agreement, including Stage I      
System construction and testing operations, is $750,000, which Bion and FODF    
have agreed to split equally net of any grants. However, certain technical      
and financial issues concerning this facility remain unresolved between Bion    
and FODF and, therefore, permitting and construction have not yet commenced.    
It is not possible to predict when and if these matters will be resolved or     
whether this installation will ever be constructed.                             

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.                                                                      

RECENT ACCOUNTING PRONOUNCEMENTS                                                

During June 2006, the Financial Accounting Standards Board ("FASB")   
issued Interpretation No. ("FIN") 48, "Accounting for Uncertainty in Income     
Taxes " - an interpretation of FASB Statement No. 109. This interpretation      
clarifies the accounting for uncertainty in income taxes recognized in an       
enterprise's financial statements in accordance with SFAS No. 109,              
"Accounting for Income Taxes," and prescribes a recognition threshold and       
measurement attribute for the financial statement recognition and measurement   
of a tax position taken or expected to be taken in a tax return. This           
interpretation also provides guidance on derecognition, classification,         
interest and penalties, accounting in interim periods, disclosure, and          
transition. This interpretation is effective for fiscal years beginning after   
December 15, 2006. The Company does not believe this interpretation will have   
an impact on its consolidated operating results, cash flows or financial        
position upon adoption.                                                         

During October 2006, the FASB issued SFAS No. 157, "Fair Value        
Measurements" ("SFAS 157"). This statement does not require any new fair        
value measurements but provides guidance on how to measure fair value and       
clarifies the definition of fair value under accounting principles generally    
accepted in the United States of America. The statement also requires new       
disclosures about the extent to which fair value measurements in financial      
statements are based on quoted market prices, market-corroborated inputs, or    
unobservable inputs that are based on management's judgments and estimates.     
The statement is effective for fiscal years beginning after November 15,        
2007. The statement will be applied prospectively by the Company for any fair   
value measurements that arise after the date of adoption.                       

29    

The FASB has also issued SFAS No. 158, "Employers' Accounting for     
Defined Benefit Pension and Other Postretirement Plans-an amendment of FASB     
Statements No. 87, 88, 106, and 132(R)".  The Company believes this standard    
will not have an impact on its consolidated operating results, cash flows or    
financial position upon adoption.  In February 2007, the FASB issued SFAS No.   
159, "The Fair Value Option for Financial Assets and Financial Liabilities-     
Including an amendment of FASB Statement No. 115."  This statement permits      
entities to choose to measure eligible items at fair value at specified         
election dates.  The statement is effective as of the beginning of an           
entity's first fiscal year that begins after November 15, 2007 although early   
adoption is permitted provided that an entity also adopts SFAS 157. The         
Company has not determined the impact this standard will have on its            
consolidated operating results or financial position upon adoption.             

The SEC has issued Staff Accounting Bulletin No. 108, "Considering the
Effects of Prior Year Misstatements when Quantifying Misstatements in Current   
Year Financial Statements" ("SAB 108"), in September 2006. SAB 108 requires     
entities to quantify misstatements based on their impact on each of their       
financial statements and related disclosures. SAB 108 is effective as of        
December 31, 2006. The adoption of this standard did not have an impact on      
the Company's consolidated results of operations, cash flows or financial       
position.                                                                       

ITEM 7.  FINANCIAL STATEMENTS.                                                  

  The consolidated financial statements are set forth on pages F-1 through
F-29 hereto.                                                                    

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND        
FINANCIAL DISCLOSURE.                                                           

None.                                                                 

ITEM 8A.  CONTROLS AND PROCEDURES.                                              

 As of August 31, 2007, under the supervision and with the participation
of the Company's Chief Executive Officer and Principal Financial Officer,       
management has evaluated the effectiveness of the design and operations of      
the Company's disclosure controls and procedures.  Based on that evaluation,    
the Chief Executive Officer and Principal Financial Officer concluded that      
the Company's disclosure controls and procedures were effective as of June      
30, 2007.  There have been no changes in internal control over financial        
reporting that occurred during the fiscal year covered by this report that      
have materially affected, or are reasonably likely to affect, the Company's     
internal control over financial reporting.                                      

ITEM 8B.  OTHER INFORMATION                                                     

None.                                                                 

30    

PART III  

ITEM 10.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS AND         
CORPORATE GOVERNANCE; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.        

  Our directors, executive officers and significant employees/consultants,
along with their respective ages and positions are as follows:                  

Name                       Age     Position                                     
----                       ---     --------                                     

Director and Officers:                                                          

Mark A. Smith            57      President, General Counsel, Interim Chief  
                    Financial Officer and Director

Jere Northrop            65      Senior Technology Director and Director    

Jon Northrop             63      Secretary and Director                     

Salvatore J. Zizza       62      Chairman and Director of Bion Dairy        

George W. Bloom          52      Chief Operating Officer of Bion            
  Technologies

Jeremy Rowland           44      Chief Operating Officer of Bion Dairy      

Significant Employees:                                                          

James W. Morris          57      Chief Technology Officer of Bion           
  Technologies

Jeff Kapell              61      V.P. for Renewables of Bion Dairy          

David Mager              54      V.P. for Public Policy of Bion Dairy       

Dominic Bassani          61      Full Time Consultant to Bion and Bion      
Dairy     

Mark A. Smith (57) has been President, General Counsel, interim Chief 
Financial Officer and a director of Bion Environmental Technologies, Inc.       
since late March 2003.  Since that time, he has also served as sole director,   
President and General Counsel of Bion's wholly-owned subsidiaries including     
Bion Dairy Corporation.  Since mid-February 2003, Mr. Smith has served as       
sole director and President and General Counsel of Bion's majority-owned        
subsidiary, Centerpoint Corporation. Previously, from May 21, 1999 through      
January 31, 2002, Mr. Smith served as a director of Bion. From July 23, 1999,   
when he became President of Bion, until mid-2001 when he ceased to be           
Chairman, Mr. Smith served in senior positions with Bion on a consulting        
basis.  Additionally, Mr. Smith was the president of RSTS Corporation prior     
to its acquisition of Bion Technologies, Inc. in 1992.  Mr. Smith received a    
Juris Doctor Degree from the University of Colorado School of Law, Boulder,     

31    

Colorado  (1980) and a BS from Amherst College, Amherst, Massachusetts          
(1971). Mr. Smith has engaged in the private practice of law in Colorado        
since 1980.  In addition, Mr. Smith has been active in running private family   
companies, Stonehenge Corporation (until 1994) and LoTayLingKyur, Inc. (1994-   
2002). Until returning to Bion during March 2003, Mr. Smith had been in         
retirement with focus on charitable work and spiritual retreat.                 

 Jere Northrop (65) is the founder of Bion and developed its technology.
He has served as the Company's Senior Technology Director since 1999 and has    
been a Board of Directors member since April 9, 1992.  Dr. Northrop is a        
founder of Bion Technologies, Inc. and was its President from October 1989 to   
July 23, 1999. Since 2003, Dr. Northrop has served as a director of As It Is,   
Inc., a private company of which he is a cofounder.  Prior to founding Bion,    
he had ten years experience in the management of operations and process         
control at a large municipal advanced wastewater treatment plant in Amherst,    
New York (1979-1989).  He also has twenty-five years of experimental research   
on both individual and complex systems of microorganisms.  Dr. Northrop has a   
BS degree in biology from Amherst College, Amherst, Massachusetts (1964), a     
PhD in biophysics from Syracuse University, Syracuse, New York, (1969), and     
has done post doctoral work at the University of California at Davis, Davis,    
California and The Center for Theoretical Biology, State University of New      
York at Buffalo, Buffalo, New York.                                             

  Jon Northrop (63) has served as our Secretary and a Director since March
of 2003.  Since September 2001 he has been self employed as a consultant with   
a practice focused on business buyer advocacy.  Mr. Northrop is one of our      
founders and served as our Chief Executive Officer and a Director from our      
inception in September 1989 until August 2001.  Before founding Bion            
Technologies, Inc., he served in a wide variety of managerial and executive     
positions. He was most recently the Executive Director of Davis, Graham &       
Stubbs, one of Denver's largest law firms, from 1981 to 1989. Prior to his      
law firm experience, Mr. Northrop worked at Samsonite Corporation's Luggage     
Division in Denver, Colorado, for over 12 years.  His experience was in all     
aspects of manufacturing, systems design and implementation, and planning and   
finance, ending with three years as the Division's Vice President, Finance.     
Mr. Northrop has a bachelor's degree in Physics from Amherst College,           
Amherst, Massachusetts (1965), an MBA in Finance from the University of         
Chicago, Chicago, Illinois (1969), and spent several years conducting post      
graduate research in low energy particle physics at Case Institute of           
Technology, Cleveland, Ohio. Jon Northrop is the brother of Jere Northrop.      

 Salvatore J. Zizza (62) recently rejoined Bion and Dairy during 2005 on
a consulting basis and assumed the positions of Chairman and Director of Bion   
Dairy Corporation on January 1, 2006.  Mr. Zizza served as a Director of Bion   
from December 1999 through February 2003.  Mr. Zizza has agreed to join         
Bion's Board of Directors and serve as Bion's Chairman once Bion has            
commenced Exchange Act reporting with Securities and Exchange Commission and    
has secured adequate director and officer liability insurance coverage. From    
2003 to 2005, Mr. Zizza was self employed providing consulting services as      
well as his board of director duties as described below. He served as           
Chairman of the Board, President and Treasurer from 1992 through 1997 of        
Hollis Eden Pharmaceuticals (HEPH) (f/k/a IAC) and has served as a Director     

32    

since 1998. Mr. Zizza served as Chairman of the Board of Directors of The       
Lehigh Group, Inc. (f/k/a The LVI Group Inc.) ("LHG") beginning in 1991, and    
was President and Chief Financial Officer of The Lehigh Group, Inc. from 1985   
to 1991.  LHG, a New York Stock Exchange listed company, was engaged, through   
its subsidiary, in the distribution of electrical products, and from 1985       
until 1991 was one of the largest interior construction and asbestos            
abatement firms in the United States.  Mr. Zizza was Chief Operating and        
Chief Financial Officer of NICO, Inc., an interior construction firm, from      
1978 until its acquisition in 1985 by LHG.  Mr. Zizza is a director of The      
Gabelli Equity Trust, The Gabelli Asset Fund, The Gabelli Growth Fund and The   
Gabelli Convertible Securities Fund and other funds in the Gabelli Fund         
family. Mr. Zizza is presently Chairman of Hallmark Electrical Supplies Corp,   
a distributor of electrical products, Bethlehem Advanced Metals which designs   
and manufactures high-temperature furnaces for sale and for its own use in      
the processing of specialty carbon, graphite and ceramic materials for          
semiconductor and aerospace applications, and Chairman of Metropolitan Paper    
Recycling, the largest independent recycler in New York.                        

George W. Bloom (52) has been with Bion Technologies, Inc. since      
December 2000 and has served as Chief Operating Officer since January 15,       
2002.  From 1986 through December 2000, Mr. Bloom was employed by Woodard &     
Curran, Inc., an environmental engineering and science-consulting firm, where   
he held the position of Chief Engineer of the Municipal Business Center at      
the time of his departure.  Mr. Bloom is a registered professional engineer     
with over twenty years environmental engineering and consulting experience      
specializing in the planning, design, construction and operation of waste       
treatment facilities.  Mr. Bloom is responsible at Bion for oversight of the    
planning, design and construction of waste treatment systems and solids         
processing facilities. He has his BS in Environmental Science from Cornell      
University.                                                                     

  Jeremy Rowland (44) joined Bion Dairy on September 18, 2006 as its Chief
Operating Officer. Mr. Rowland has agreed to serve as Chief Operating Officer   
of Bion once Bion has commenced reporting with the Securities & Exchange        
Commission and has secured adequate director and officer liability insurance    
coverage. Prior to joining Bion, he worked for URS Corporation, a major         
national engineering/consulting firm, for 16 years where he developed and       
lead URS's efforts in the renewable energy marketplace. Mr. Rowland has         
eighteen years experience in multi-disciplinary energy and environmental        
project development and management throughout the U.S. and overseas. Mr.        
Rowland's areas of expertise include renewable energy project development,      
distributed generation (mostly combined heat/power), large-scale power plant    
developments, and strategic energy management. Mr. Rowland earned his MS in     
Environmental Science in 1987 and his BS in Forest Ecology in 1985 from         
Southern Illinois University, School of Agriculture Science.                    

James W. Morris (57) has served as Chief Technology Officer of Bion   
Technologies, Inc. since February 2002 and is co-inventor of portions of the    
Bion Process.  Prior to joining Bion, Dr. Morris provided the Company with      
technical assistance and technical advice for over two years as a consultant.   
Other consulting work included eight years acting as the Senior Technical       
Consultant for a large environmental consulting firm and the formation of       

33    

James W. Morris & Associates, Inc. that allowed him to serve clients ranging    
from small commercial establishments, to municipalities and corporations, as    
well as a sub consultant to several larger engineering firms. Dr. Morris is a   
licensed professional engineer in Maine and Vermont with more than 30 years     
of engineering experience.  Over a twelve-year period he performed research     
and taught graduate and undergraduate engineering as a member of the            
faculties of Cornell University, the University of Manitoba and the             
University of Vermont. He earned his BSCE and MSCE at Tennessee Technological   
University and a Ph.D. in Environmental Quality/Agricultural Engineering from   
Cornell University.  He is a member of the American Society of Civil            
Engineers, Water Environment Federation, Institute of Food Technologists,       
American Society of Agricultural Engineers, Agricultural Engineering Society,   
Aquacultural Engineering Society and American Water Works Association, Tau      
Beta Phi (Engineering honor society), Chi Epsolon (Civil Engineering honor      
society) and is a member of Sigma Xi, The Scientific Research Society of        
North America.                                                                  

 Jeff Kapell (61) became a consultant to Bion and Bion Dairy in December
2003 and joined the Bion management team on a full-time basis during April      
2006 as Bion Dairy's Vice-President -- Renewables. Previously, Mr. Kapell was   
Associate Principal at SJH & Company, a strategic management-consulting group   
serving the global agri-food industry.  Mr. Kapell served SJH & Company from    
2000 to 2005.  While at SJH, he led the firm's development of a practice area   
in "renewables" and has become recognized throughout the industry as a sector   
expert at the intersection of agriculture and renewable energy.  Commencing     
in mid-2005, Mr. Kapell provided consulting services to Bion and Bion Dairy     
as Principal of Kapell Consulting.  Mr. Kapell has also been a cranberry        
grower for the past twenty-five years and has served on the Board of Ocean      
Spray Cranberries, Inc., as president of The Cape Cod Cranberry Growers         
Association, and is currently Vice-Chairman of the Board of the Cranberry       
Institute.  Mr. Kapell is an engineer by training, having performed systems     
analysis for several firms prior to launching his farming and consulting        
ventures.  Mr. Kapell is a graduate of Lehigh University.                       

David Mager (54) became a consultant on a full time basis to Bion and 
Bion Dairy in June 2003 and serves as Bion Dairy's Vice President for Public    
Policy. He is a scientist, inventor and consultant whose specialty is helping   
companies serve a "dual bottom line" of being profitable while being            
environmentally and socially responsible. Prior to joining Bion, Mr. Mager      
was employed for over 20 years  providing environmental consulting to           
companies such as  Amoco, General Electric, General Motors, Coca Cola, IBM,     
Unilever, Aveda, Tommy Boy Records, Rhino Records, Eileen Fisher, Stonyfield    
Farm Yogurt, Kozy Shack, Gaiam and ABC Home.  He has focused on helping his     
clients continuously improve their environmental footprints.   Since 2001, he   
has been a principal of Meadowbrook Lane Capital, LLC, an investment bank,      
through which he provides his services to Bion and Bion Dairy. Mr. Mager has    
a BS in biology from the State University of New York at Stony Brook (1975).    

Dominic Bassani (61) served as the General Manager of Bion Dairy from 
April 2003 through September 2006.  He now serves Bion (and its subsidiaries)   
as a consultant (through Bright Capital, Ltd. ("Brightcap")) on a full-time     
basis with focus on strategic planning and special projects.  He has been an    

34    

investor in and consultant to Bion since December 1999. He is an independent    
investor and since 1990 has owned and operated Brightcap, a management          
consulting company that provides management services to early stage             
technology companies. He was a founding investor in 1993 in Initial             
Acquisition Corp. that subsequently merged in 1995 with Hollis Eden Corp.       
(HEPH), a biotech company specializing in immune response drugs. From early     
1998 until June 1999 he was a consultant to Internet Commerce Corp. (ICCA), a   
leader in business-to-business transactions using the Internet. He is           
presently an investor in numerous private and public companies primarily in     
technology related businesses. From 1980 until 1986, Mr. Bassani focused        
primarily on providing management reorganization services to manufacturing      
companies and in particular to generic pharmaceutical manufacturers and their   
financial sponsors.                                                             

In addition, the following person became a director of Bion Dairy     
effective October 15, 2006 and has agreed to become a director of Bion upon     
the Company's acquisition of director and officer liability insurance:          

Richard Berman (65) has a business career that spans over 35 years of 
venture capital, management and merger & acquisitions experience. Since 1982,   
Richard Berman has mainly been active as an investor, advisor, manager,         
director, and financier to over 100 public and private companies, with          
emphasis on biotech, internet, and other technology sectors.  In the last       
five years, Mr. Berman has served as a director and/or officer of               
approximately a dozen public and private companies.  He is currently CEO of     
Nexmed, a small public biotech company; Chairman of National Investment         
Managers, a public company in pension administration and investment             
management; and Chairman of Candidate Resources, a private company delivering   
human resources services over the web, and Chairman of Fortress Technology      
Systems (homeland security). Mr. Berman is a director of seven public           
companies: Dyadic International, Inc., Broadcaster, Inc., Internet Commerce     
Corporation, MediaBay, Inc., NexMed, Inc., National Investment Managers, and    
Advaxis, Inc.  From 1998-2000, Mr. Berman was employed by Internet Commerce     
Corporation as Chairman and CEO. From 1975-1982 Mr. Berman served Banker        
Trust Company, New York with a final position of Senior Vice President where    
he was Head of Mergers & Acquisitions and Leverage Buyout Departments. Mr.      
Berman is active in real estate and venture capital investing.  He is a past    
Director of the Stern School of Business of NYU where he obtained his BS        
(1964) and MBA (1973).  He also has US and foreign law degrees from Boston      
College (1969) and The Hague Academy of International Law, respectively.        

Family Relationships                                                            

There are currently no family relationships among our Directors and   
Executive Officers except that Jon Northrop and Jere Northrop are brothers.     

Compliance with Section 16(a) of the Exchange Act                               

Section 16(a) of the Exchange Act requires our officers and directors,
and stockholders owning more than ten percent of a registered class of our      
equity securities, to file reports of ownership and changes in ownership with   
the Securities and Exchange Commission.  The Company is not aware of any        
persons who failed to timely file reports under this section.                   

35    

Involvement in Legal Proceedings                                                

To the best of our knowledge, during the past five years, none of the 
following occurred with respect to our directors or executive officers:         

(1)  any bankruptcy petition filed by or against any business of which
one of them was a general partner or executive officer either  at the time of   
the bankruptcy or within two years prior to that time;                          

(2)  any conviction in a criminal proceeding or being subject to a    
pending criminal proceeding (excluding traffic violations and other minor       
offenses).                                                                      

(3)  being subject to any order, judgment or decree of any court of   
competent jurisdiction, permanently or temporarily inquiring, barring,          
suspending or otherwise limiting involvement in any type of business,           
securities or banking activities, and                                           

(4)  being found by a court of competent jurisdiction, the SEC or the 
CFTC to have violated Federal or state securities or commodities laws.          

Audit Committee                                                                 

 The Company has no audit committee and is not now required to have one,
or an audit committee financial expert.                                         

Code of Ethics                                                                  

To date, the Company has not adopted a code of business conduct and   
ethics applicable to its officers, directors or accounting officer.             

ITEM 11.  EXECUTIVE COMPENSATION.                                               

  The following table sets forth the compensation paid to, or accrued for,
each of our current and former executive officers during each of our last       
three fiscal years and the compensation paid to, or accrued for, each of our    
significant employees and consultants for the same period.                      

36    

                                                        [Enlarge/Download Table]

                                               Summary Compensation Table                                      

                                          Annual Compensation                   Long-Term Compensation         
                                      --------------------------    -------------------------------------------
                                                                                Securi-                        
                                                                                ties                           
                                                                                Under-                         
                                                         Other      Restricted  lying              All Other   
                              Fiscal                     Compen-    Stock       Options/  LTIP     Compensation
Name and Principal Position   Year    Salary(1)  Bonus   sation     Awards      SARs      Payouts  (2)(3)      
---------------------------   ------  ---------  ------  -------    ----------  --------  -------  ------------
                                                                                                               
Mark A. Smith (2),            2007    150,000      -     26,892 (5)     -       390,000     -         (778,859)
 President and Interim Chief  2006    150,000    12,500  20,569 (5)     -       121,875     -          833,758 
Financial Officer since       2005    150,000      -     19,908 (5)     -        25,000     -             -    
 March 25, 2003, Director                                                                                      

Jere Northrop,                2007     60,000    19,000    -            -          -        -             -    
 Senior Technology Officer,   2006     57,999    12,000    -            -       118,750     -             -    
 Director                     2005     63,000      -       -            -       112,500     -             -    

Jon Northrop,                 2007       -         -       -            -          -        -             -    
 Secretary, Director          2006       -         -       -            -        68,750     -             -    
                              2005       -         -       -            -          -        -             -    

Brightcap/                                                                                                     
 Dominic Bassani (3),         2007    300,000    20,000  56,647 (5)      -         -        -       (1,065,569)
 General Manager of Dairy     2006    300,000      -     44,719 (5)      -         -        -        1,140,535 
                              2005    195,000      -     41,405 (5)      -         -        -             -    

Salvatore J. Zizza, (4)       2007    300,000      -     10,002          -         -        -             -    
 Chairman and Director        2006    210,000      -       -             -         -        -             -    
 of Bion Dairy                2005       -         -       -             -       37,500     -             -    

George W. Bloom,              2007    150,000    47,500    -             -         -        -             -    
 Chief Operating Officer      2006    142,500    30,000    -             -         -        -             -    
 Bion Technologies            2005    120,000      -       -             -      197,500     -             -    

James W. Morris,              2007    150,000    67,500    -             -         -        -             -    
 Chief Technology Officer     2006    142,500    30,000    -             -         -        -             -    
 Bion Technologies            2005    120,000      -       -             -       40,000     -             -    

David Mager,                  2007    150,000      -       -             -         -        -             -    
 Vice President for Public    2006    150,000      -       -             -         -        -             -    
 Policy Bion Dairy            2005    137,500      -       -             -      124,999     -             -    

Jeremy Rowland                2007    118,750      -       -             -      795,000     -             -    
  Chief Operating Officer     2006       -         -       -             -         -        -             -    
  Bion Dairy                  2005       -         -       -             -         -        -             -    

Jeff Kapell                   2007    120,000      -       -             -         -        -             -    
  Vice President Renewables   2006     60,000      -       -             -         -        -             -    
  Bion Dairy                  2005      5,000      -       -             -         -        -             -    
______________________________                                                                                 

                                            37                                                                 

(1)  Includes compensation paid by Bion Technologies, Inc. and Bion Dairy,                                     
our wholly owned subsidiaries.                                                                                 

(2)  Mr. Smith has agreed to provide services to Bion and Dairy through                                        
December 31, 2007 at a salary of $150,000 all of which has been deferred to                                    
date. On April 4, 2006, Mr. Smith's accrued deferred compensation was                                          
exchanged for a promissory note and conversion agreement.  Through June 30,                                    
2007, $401,954 had been accrued on the note, including interest at the rate                                    
of 6% per annum.  The note is convertible into our common stock at the lower                                   
of current market value at the time of conversion or $2.00 per share.  We may                                  
convert the note, in whole or in part, at any date after July 1, 2007 and the                                  
note is mandatorily converted to common stock on July 1, 2009.   The "Other                                    
Compensation" represents the change in the fair value of Mr. Smith's deferred                                  
compensation recorded as an expense of the Company for the year ended June                                     
30, 2007 ($765,722).  On March 31, 2007, Mr. Smith agreed to accept $151,645                                   
of the Company's 2007 Series A Convertible Notes in exchange for his deferred                                  
compensation for the period from January 1, 2007 through March 31, 2007 and                                    
the Company's promissory note issued on January 1, 2007 for Mr. Smith's                                        
deferred compensation from April 1, 2006 through December 31, 2006.  Mr.                                       
Smith's deferred compensation earned from April 1, 2007 through June 30, 2007                                  
of $37,500 is non-convertible and non-interest bearing.                                                        

(3)  On December 31, 2005, convertible deferred compensation payable to                                        
Brightcap for services provided to the Company by Dominic Bassani between                                      
April 2, 2003 and September 30, 2005 was exchanged for a promissory note and                                   
conversion agreement upon the same terms as Mr. Smith's note.  At June 30,                                     
2007, the note balance (including accrued interest at a rate of 6% per annum)                                  
due to Brightcap was $549,704.  Effective March 31, 2005, Brightcap entered                                    
into an agreement to provide Mr. Bassani's services to the Company through                                     
March 31, 2009, with annual compensation in the amount of $300,000. The                                        
"Other Compensation" represents the change in the fair value of Brightcap's                                    
deferred compensation recorded as an expense of the Company for the year                                       
ended June 30, 2007 ($1,047,186). On March 31, 2007 Brightcap agreed to                                        
accept $455,486 of the Company's Series A Notes in exchange for its deferred                                   
compensation for the period from January 1, 2007 through March 31, 2007 and                                    
the Company's promissory notes issued on January 1, 2007 for its deferred                                      
compensation owed by Bion on December 31, 2006.                                                                

(4)  Mr. Zizza is working for the Company at an annual compensation rate of                                    
$300,000 per annum.  On March 31, 2007 Mr. Zizza agreed to accept $379,389 of                                  
the Company's Series A Notes in exchange for his deferred compensation for                                     
the period from January 1, 2007 through March 31, 2007 and the Company's                                       
promissory notes issued on January 1, 2007 for his deferred compensation owed                                  
by Bion on December 31, 2006.  Mr. Zizza received a fee of $60,000 for his                                     
service to the Company through December 31, 2005.                                                              

(5)  Represents interest accruals on deferrals and related notes.                                              


 The following table sets forth the options that were granted during the
fiscal years ended June 30, 2007 and 2006 respectively to Executive Officers    
and Significant Employees and Consultants:                                      

38    

Number of                                 
Securities   Percent of                   
Underlying   Total Options                
Options      Granted to      Exercise     
         Granted      Employees in    Price       Expiration
Name               2007         Fiscal 2007     Per Share   Date                
----               ----------   -------------   ---------   ----------          

Mark A. Smith     100,000      100%        $4.25   3/31/2011                    

Number of                                 
Securities   Percent of                   
Underlying   Total Options                
Options      Granted to      Exercise     
         Granted      Employees in    Price       Expiration
Name               2006         Fiscal 2006     Per Share   Date                
----               ----------   -------------   ---------   ----------          

Mark A. Smith        12,500         13.23%        $5.50     12/31/2010          
           12,500         13.23%        $4.25     12/31/2010

Jere Northrop        12,500         13.23%        $5.50     12/31/2010          
         20,000         21.16%        $2.50     5/1/2005

Jon Northrop         12,500         13.23%        $5.50     12/31/2010          

Aggregated Option Exercises and Option Value Table as of June 30, 2007          

The following table sets forth the options exercised during the fiscal
year ended June 30, 2007 and the value of exercisable and unexercisable         
options outstanding as of June 30, 2007.                                        

                                                                [Download Table]

                                           Number of                           
                                           Securities                          
                                           Underlying        Value of          
                                           Unexercised       Unexercised       
                                           Options at        In-the-Money      
                    Shares                 June 30, 2007     Options at FYE    
                    Acquired     Value     Exercisable/      Exercisable/      
Name                on Exercise  Realized  Unexercisable     Unexercisable     
---------------     -----------  --------  -------------     ---------------   
                                                                               
Mark A. Smith            -          -      145,000 / 60,000  $ 32,500 / $0     
Jere Northrop            -          -      122,500 / 0       $ 51,250 / $0     
Jon Northrop             -          -       37,500 / 0       $ 16,250 / $0     
George W. Bloom          -          -      150,000 / 50,000  $101,250 / $81,250
James W. Morris          -          -      150,000 / 50,000  $101,250 / $81,250
Salvatore J. Zizza       -          -        7,500 / 0       $      0 / $0     
David Mager              -          -      143,333 / 10,000  $ 48,333 / $0     
Jeremy Rowland           -          -       37,500 /113,500  $      0 / $0     

39    

Employment Agreements                                                           

Effective March 31, 2007 Mark A. Smith, our President, agreed to serve
as President, General Counsel and as a Director of the Company and its          
subsidiaries until December 31, 2007 for compensation at an annual rate of      
$150,000. The amount deferred through June 30, 2007 under this arrangement is   
$37,500 which sum has been accrued on a non-convertible and non-interest        
bearing basis.  Amounts accrued prior to April 1, 2006 in the amount of         
$401,954 (principal and accrued interest) are represented by a convertible      
promissory note bearing interest at the rate of 6% per annum and convertible    
after July 1, 2007 into the Company's common stock at the lower of the          
current market value at the time of conversion, or $2.00 per share.  The note   
is mandatorily convertible on July 1, 2009.  On March 31, 2007, Mr. Smith       
agreed to accept $151,645 of the Company's 2007 Series A Convertible Notes      
("Series A Notes") in exchange for his deferred compensation for the period     
from January 1, 2007 through March 31, 2007 and the Company's promissory note   
issued on January 1, 2007 for Mr. Smith's deferred compensation from April 1,   
2006 through December 31, 2006.                                                 

Effective May 1, 2005, the Company entered into a four-year           
consulting/employment agreement with a former officer and director of the       
Company, Salvatore Zizza.  Mr. Zizza received $60,000 for his services to the   
Company through December 31, 2005 which sum he used to purchase 600,000         
warrants. As of January 1, 2006, the former officer and director assumed the    
position of Chairman and Director of Bion Dairy, with an annual salary of       
$300,000, all of which has been deferred to date. The amounts deferred          
through June 30, 2007  under this arrangement is $75,000 which sum is accrued   
on a non-convertible and non-interest bearing basis.  On March 31, 2007 Mr.     
Zizza agreed to accept $379,389 of the Company's Series A Notes in exchange     
for his deferred compensation for the period from January 1, 2007 through       
March 31, 2007 and the Company's promissory notes issued on January 1, 2007     
for his deferred compensation owed by Bion on December 31, 2006.                

Dominic Bassani, former General Manager of Dairy, has agreed, through 
Brightcap, to serve as a consultant to Bion and Bion Dairy until March 31,      
2009 for compensation of $300,000 per year.  Amounts accrued prior to           
September 30, 2005 in the amount of $549,704 (principal and accrued interest)   
are represented by a convertible promissory note bearing interest at the rate   
of 6% per annum and convertible after July 1, 2007 into the Company's common    
stock at the lower of the current market value at the time of conversion or     
$2.00 per share.  The note is mandatorily convertible on July 1, 2009.  On      
March 31, 2007 Brightcap agreed to accept $455,486 of the Company's Series A    
Notes in exchange for its deferred compensation for the period from January     
1, 2007 through March 31, 2007 and the Company's promissory notes issued on     
January 1, 2007 for its deferred compensation owed by Bion on December 31,      
2006. The amount deferred through June 30, 2007 under this arrangement is       
$75,000 which sum is accrued on a non-convertible and non-interest bearing      
basis.                                                                          

40    

Effective May 1, 2005, Bion entered into a four-year consulting/      
employment agreement with Jeff Kapell.  Under the terms of the agreement, Mr.   
Kapell provided part-time consulting services to Bion through March 2006.  In   
April 2006, Mr. Kapell was appointed as Bion Dairy's Vice-President -           
Renewables at a salary of $120,000 per year.                                    

Effective September 18, 2006, Bion entered into a four-year employment
agreement with Jeremy Rowland.  Under the terms of the agreement, Mr. Rowland   
was appointed as Bion Dairy's Chief Operating Officer at a salary of $150,000   
per year.                                                                       

Other Agreements                                                                

In May 2005, Bion declared contingent Stock Bonuses of 690,000 shares,
in aggregate, to its key employees and consultants.  Stock bonuses of 492,500   
and 197,500 shares are contingent upon the Company's stock price exceeding      
$10.00 and $20.00 per share, respectively, and the grantees still being         
employed by or providing services to the Company at the time the target         
prices are reached.                                                             

Director Compensation                                                           

Members of the Board of Directors do not currently receive any cash   
compensation for their services as Directors, but are entitled to be            
reimbursed for their reasonable expenses in attending meetings of the Board.    
However, it is the Company's intention to begin to pay cash compensation to     
Board members at some future date.                                              

Stock Option Plans                                                              

In June 2006 the Company adopted its 2006 Consolidated Incentive Plan 
("Plan") which terminated all prior plans and merged them into the Plan.  The   
Plan was ratified by the Company's shareholders in October 2006.  Under the     
Plan, Directors may grant Options, Stand Alone stock appreciation rights        
("SAR's), shares of Restricted Stock, shares of Phantom Stock and Stock         
Bonuses with respect to a number of Common Shares that in the aggregate does    
not exceed 3,200,000 shares. The maximum number of Common Shares for which      
Incentive Awards, including Incentive Stock Options, may be granted to any      
one Participant shall not exceed 500,000 shares in any one calendar year; and   
the total of all cash payments to any one participant pursuant to the Plan in   
any calendar year shall not exceed $500,000.  1,833,333 Options have been       
granted under the Plan (as amended), including all options granted under        
prior merged plans. Additionally, 690,000 shares of contingent Stock Bonuses    
have been granted under the Plan.                                               

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND    
RELATED STOCKHOLDER MATTERS.                                                    

At August 31, 2007, the Company had issued 8,777,079 shares of its    
common stock, of which 8,076,280 are outstanding (the balance of 693,799        
shares are owned by Centerpoint, the Company's majority owned subsidiary).      

The following table sets forth certain information regarding the      
beneficial ownership of our common stock as of August 31, 2007 by:              

41    

*  each person that is known by us to beneficially own more than      
5% of our common stock;                                         
*  each of our directors;                                             
*  each of our executive officers and significant employees; and      
*  all our executive officers, directors and significant employees    
as a group.                                                     

Under the rules of the Securities and Exchange Commission, beneficial 
ownership includes voting or investment power with respect to securities and    
includes the shares issuable under stock options that are exercisable within    
sixty (60) days of June 30, 2007.  Those shares issuable under stock options    
are deemed outstanding for computing the percentage of each person holding      
options but are not deemed outstanding for computing the percentage of any      
other person.  The percentage of beneficial ownership schedule is based upon    
8,777,079 shares outstanding as of August 31, 2007.  The address for those      
individuals for which an address is not otherwise provided is c/o Bion          
Environmental Technologies, 641 Lexington Avenue, 17th Floor, New York, New     
York 10022.  To our knowledge, except as indicated in the footnotes to this     
table and pursuant to applicable community property laws, the persons named     
in the table have sole voting power and investment power with respect to all    
shares of common stock listed as owned by them.                                 

                                                                [Download Table]

                                                  Shares of Common Stock       
                                                    Beneficially Owned         
                                             ----------------------------------
                                                         Percent of            
                                                            Class      Entitled
Name and Address                              Number     Outstanding   to Vote 
----------------                             ---------   -----------   --------
                                                                               

Centerpoint Corporation (1)                    693,799       7.9%          -   
641 Lexington Avenue, 17th Floor                                               
New York, NY  10022                                                            

Dominic Bassani/Chris-Dan, LLC (2)            2,770,500      26.9%       28.9% 
64 Village Hills Drive                                                         
Dix Hills, NY  11746                                                           

Anthony Orphanos (3)                          1,580,627      16.4%       17.7% 
c/o Austin Investments Management                                              
520 Madison Avenue, 28th Floor                                                 
New York, NY  10022                                                            

Donald Codignotto (4)                           811,409       8.5%        9.1% 
4 Keenan Drive                                                                 
Garden City, NY 11530                                                          

                                         42                                    

The Danielle Christine Bassani Trust (5)        566,000       6.1%        6.5% 
 Anthony Orphanos and                                                          
 Donald Codignotto, Trustees                                                   
4 Keenan Drive                                                                 
Garden City, NY  11530                                                         

Mark A. Smith (6)                             1,084,842      11.7%       12.7% 

Jere Northrop (7)                               256,248       2.9%        3.1% 

Jon Northrop (8)                                198,710       2.3%        2.4% 

Salvatore Zizza (9)                             746,628       7.9%        8.5% 

Jeremy Rowland (10)                             150,000       1.7%        1.8% 

James Morris (11)                               200,000       2.2%        2.4% 

George Bloom (12)                               202,112       2.3%        2.4% 

David Mager  (13)                               194,209       2.2%        2.4% 

Jeff Kapell (14)                                100,000       1.1%        1.2% 

Richard Berman (15)                              74,755        *         1.0%  

All executive officers, directors                                              
and significant employees as                                                   
a group ( 12 persons)                         6,008,024      47.9%       50.7% 

___________________                                                             

* Less than 1%                                                                  

(1)  Centerpoint Corporation is currently majority owned by the Company.        
Under Colorado law, Centerpoint Corporation is not entitled to vote these       
shares unless otherwise ordered by a court.  These shares of common stock may   
be distributed to the shareholders of Centerpoint Corporation at a future       
date pursuant to a dividend declared during July 2004.  The shares              
distributed to Bion, if any, will be cancelled immediately upon receipt.        

(2)   Includes 51,112 shares and 600,000 shares underlying warrants held        
directly by Mr. Bassani; 3,981 shares and 500,000 shares underlying warrants    
held by Brightcap Capital, Ltd. ("Brightcap") of which Mr. Bassani is the       
owner; 1,055,692 shares held by Chris-Dan, LLC of which Mr. Bassani is owner;   
30,432 shares and 25,000 shares underlying warrants held by Mr. Bassani's       
wife; 101,961 shares which represents 50% of the shares held by D2 Trust, of    
which he is 50% beneficial owner; and 277,607 shares that Brightcap may         
receive pursuant to conversion of an outstanding note of the Company            
calculated at August 31, 2007 at the $2.00 maximum conversion price and         
116,715 shares that Bright Capital, Ltd. may receive pursuant to conversion     
of an outstanding note of the Company at $4.00 per share.  Mr. Bassani has      

43    

also been granted 250,000 shares of contingent stock bonuses that are not       
included in this calculation.  Mr. Bassani disclaims ownership of 566,000       
shares underlying warrants held by The Danielle Christine Bassani Trust,        
which is separately itemized herein. Mr. Bassani's adult daughter, who lives    
with him, is the beneficiary of the Danielle Christine Bassani Trust.  Mr.      
Bassani's daughter also owns 8,000 shares, which are included herein.  Mr.      
Bassani further disclaims beneficial ownership of shares and warrants owned     
by various family members, none of whom live with him or are his dependents,    
and such shares are not included in this calculation.                           

(3)  Includes 319,464 shares and 10,000 shares underlying options held          
directly by Mr. Orphanos; 130,263 shares held jointly with his wife; and        
260,904 shares held in an IRA.   Also includes 176,755 shares that Mr.          
Orphanos may receive pursuant to conversion of an outstanding note of the       
Company at a $4.00 per share conversion price. Also includes 566,000 shares     
underlying warrants held by the Danielle Christine Bassani Trust, of which      
Mr. Orphanos is a co-trustee and 93,411 common shares and 23,820 common         
shares underlying conversion of promissory notes owned by certain clients of    
Mr. Orphanos, over which Mr. Orphanos exercises discretionary authority.        

(4)  Includes 11,409 shares held directly by Mr. Codignotto; 566,000 shares     
underlying warrants held by The Danielle Christine Bassani Trust of which Mr.   
Codignotto serves as co-Trustee (see note 5); and 234,000 shares underlying     
warrants held by The Christopher Parlow Trust of which Mr. Codignotto serves    
as co-Trustee.                                                                  

(5)  Represents shares underlying warrants held by The Danielle Christine       
Bassani Trust, Anthony Orphanos and Donald Codignotto, trustees.                

(6)  Includes 359,582 shares held directly by Mark A. Smith; 205,000 shares     
underlying options and 35,000 shares underlying warrants held directly by Mr.   
Smith; 20,334 shares held jointly with his wife; 66,145 shares held by his      
wife; and 156,931 shares of common stock held by LoTayLingKyur Foundation       
which is controlled by Mr. Smith.  Also includes 202,992 shares that Mr.        
Smith may receive pursuant to conversion of an outstanding note of the          
Company calculated at August 31, 2007 at the $2.00 maximum conversion price,    
and 38,858 shares that Mr. Smith may receive pursuant to conversion of an       
outstanding note of the Company at a $4.00 per share conversion price.  Does    
not include shares and warrants owned by various family members of which Mr.    
Smith disclaims beneficial ownership.  Mr. Smith is also the President of       
Centerpoint, although shares owned by Centerpoint are not entitled to a vote    
while held by Centerpoint.                                                      

(7)  Includes 67,401 shares held by Jere Northrop's wife; 3,549 shares held     
by a family trust; 62,598 shares and 122,500 shares underlying options held     
by Jere Northrop; and 200 shares owned jointly by Jere Northrop and his wife.   
Does not include 12,608 shares owned by the Jere and Lynn Northrop Family       
Foundation, 7,906 shares owned by the Jere Northrop Family trust and 805        
shares owned by the Harley Northrop Charitable Trust, for each of which Mr.     
Northrop disclaims beneficial ownership.  Jere Northrop has also been granted   
22,500 shares of contingent stock bonus that are not included in this           
calculation.                                                                    

44    

(8)  Includes 108,466 shares held directly by Jon Northrop; 16,464 shares       
owned by Jon Northrop's wife; 4,100 shares owned jointly by Jon Northrop and    
his wife; options to purchase 50,000 shares held by Jon Northrop; and 19,680    
shares owned by a family trust.  Does not include shares owned by the adult     
children of Jon Northrop or 2,007 shares owned by the Harley Northrop Family    
Foundation.                                                                     

(9)  Includes 41,912 shares held by Mr. Zizza; 7,500 shares underlying          
options and 600,000 shares underlying warrants held by him, 97,216 shares       
that Mr. Zizza may receive pursuant to conversion of an outstanding note of     
the Company at a $4.00 per share conversion price. Mr. Zizza has also been      
granted 150,000 shares of contingent stock bonus that are not included in       
this calculation.                                                               

(10) Mr. Rowland holds warrants to purchase 150,000 shares.                     

(11) Mr. Morris holds options to purchase 200,000 shares. Mr. Morris has also   
been granted 75,000 shares of contingent stock bonus that are not included in   
this calculation.                                                               

(12) Mr. Bloom holds 2,112 shares and options to purchase 200,000 shares. Mr.   
Bloom has also been granted 75,000 shares of contingent stock bonus that are    
not included in this calculation.                                               

(13) Mr. Mager holds 40,876 shares and  warrants to purchase 153,333 shares.    
Mr. Mager has also been granted 37,500 shares of contingent stock bonus that    
are not included in this calculation.                                           

(14) Mr. Kapell holds warrants to purchase 100,000 shares.  Mr. Kapell has      
also been granted 37,500 shares of contingent stock bonus that are not          
included in this calculation.                                                   

(15) Mr. Berman holds 3,928 shares and options to purchase 35,000 shares.       
Also includes 35,289 shares into which a $200,000 (initial principal amount)    
2006 Series A Convertible Note held by Mr. Berman is (including accrued         
interest) were convertible as of June 30, 2006.                                 

EQUITY COMPENSATION PLAN INFORMATION                                            

The following table summarizes share and exercise price information   
about the Company's equity compensation plans as of June 30, 2007:              

45    

                                                        [Enlarge/Download Table]


----------------------------------------------------------------------------------------
                                                                   Number of            
                                                                   securities remain-   
                                                                   ing available for    
                                                                   future issuance      
                     Number of securi-                             under equity         
                     ties to be issued      Weighted-average       compensation plans   
                     upon exercise of       exercise price of      (excluding securi-   
                     outstanding options,   outstanding options,   ties reflected       
                     warrants and rights    warrants and rights    in column (a))       
Plan Category             (a)                     (b)                    (c)            
----------------------------------------------------------------------------------------
                                                                                        
Equity compensation                                                                     
plans approved by                                                                       
security holders        1,833,333               $3.33                 1,326,667         
----------------------------------------------------------------------------------------
Equity compensation                                                                     
plans not approved                                                                      
by security holders         -                     -                       -             
----------------------------------------------------------------------------------------
     Total              1,833,333               $3.33                 1,326,667         
----------------------------------------------------------------------------------------

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR          
INDEPENDENCE.                                                                   

Other than the employment/consulting agreements, deferred compensation
arrangements and conversions of debt described above in Item 1 Business and     
Item 6 Executive Compensation, there are no related party transactions except   
that:                                                                           

1)   Bion has accrued a payable of $41,647 to a company controlled by 
Salvatore Zizza for rental of office space in 2003.                             

2)   The Company executed a non-cancellable operating lease for office
space in New York City effective August 1, 2006 and extending to November 30,   
2013.  The average monthly rent under the lease is $15,820.  The Company has    
provided the lessor with a letter of credit in the amount of $171,945 in        
connection with the lease.  The Company's obligations under the lease are       
partially guaranteed by Salvatore Zizza, Chairman of Bion Dairy.                

3)  In June 2006, the Company entered into an agreement with Fair Oaks
Dairy Farm ("FODF") to construct a Bion research facility ("Stage I System")    
at FODF.  Bion has been working with FODF since May 2005 for the purpose of     

46    

installing a waste treatment facility at FODF that could become the basis for   
a future Integrated Project.  FODF is owned and controlled by Michael           
McCloskey and Timothy Den Dulk who have served as consultants to the Company    
since May 2005. Certain technical and financial issues related to these         
facilities remain unresolved and, therefore, there is no assurance that these   
facilities will ever be constructed.                                            

ITEM 13.  EXHIBITS.                                                             

EXHIBIT                                                                         
NUMBER      DESCRIPTION AND LOCATION                                            
-------     ------------------------                                            

3.1     Articles of Incorporation.*                                       

3.2     Bylaws.*                                                          

10.1     Subscription Agreement dated January 10, 2002 between Bion         
 Environmental Technologies, Inc and Centerpoint Corporation
 regarding issuance of stock in exchange for cash and claims
regarding Aprilia.*                                       

10.2     Agreement dated March 15, 2002 and effective January 15, 2002      
   between Bion Environmental Technologies, Inc. and Centerpoint
Corporation regarding purchase of warrant and management  
agreement.*                                               

10.3     Agreement dated February 12, 2003 between Bion Environmental       
Technologies, Inc. and Centerpoint Corporation canceling  
  provisions of the Subscription Agreement by and between Bion
    Environmental Technologies, Inc. and Centerpoint Corporation.*

10.4     Promissory Note and Security Agreement between Bion                
Environmental Technologies, Inc. and Bright Capital, LLC.*

10.5     First Amendment to Lease between Bion Environmental                
Technologies, Inc. and Pan Am Equities Corp.*             

10.6     Agreement between Bion Environmental Technologies, Inc. and        
Bergen Cove.*                                             

10.7     Agreement between Bion Environmental Technologies, Inc. and        
David Mitchell dated April 7, 2003.*                      

10.8     Letter Agreement with Bright Capital, Ltd.*                        

10.9     Agreement with OAM, S.p.A. dated May 2003.*                        

10.10    Amended Agreement with Centerpoint Corporation dated               
April 23, 2003. *                                         

47    

10.11    Form of Series A Secured Convertible Notes issued in August 2003.* 

10.12    Financing Documents for Bion Dairy Corporation.*                   

10.13    Form of Class SV/DB Warrant.*                                      

10.14    Form of Class SV/DM Warrant.*                                      

10.15    Form of Series A* Secured Convertible Notes issued in April 2004.* 

10.16    Form of Series B Secured Convertible Notes issued in Spring 2004.* 

10.17    Form of Series B* Secured Convertible Notes issued in June 2004.*  

10.18    Form of Series C Notes issued in September 2005.*                  

10.19    Form of 2006 Series A Convertible Promissory Notes issued in       
September 2006.*                                          

10.20    Form of Non-Disclosure Agreement used by the Company.*             

10.21    Promissory Note and Conversion Agreement between Bion              
   Environmental Technologies, Inc. and Mark A. Smith related to
deferred compensation.*                                   

10.22    Promissory Note and Conversion Agreement between Bion              
Environmental Technologies, Inc. and Bright Capital, Ltd. 
related to deferred compensation.*                        

10.23    Employment agreement with Mark A. Smith.*                          

10.24    Employment agreement with Salvatore Zizza.*                        

10.25    Employment agreement with Bright Capital, Ltd.*                    

10.26    Employment agreement with Jeff Kapell.*                            

10.27    Employment agreement with Jeremy Rowland.*                         

10.28    Office lease at 641 Lexington Avenue, 17th Floor, New York.*       

10.29    2006 Consolidated Incentive Plan.*                                 

10.30    Memo to Dominic Bassani & Bright Capital, Ltd. dated October 16,   
2006 regarding Change in Title/Status of DB/Amendment to  
Brightcap Agreement.*                                     

10.31    Letter Agreement between Bion Dairy Corporation and Fair Oaks      
Dairy Farms dated June 19, 2006.**                        

48    

10.32    Waiver and Release Agreement with Ardour Capital Investments,      
LLC.**                                                    

10.33    Promissory Note and Conversion Agreement for Mark Smith, dated     
January 1, 2007.**                                        

10.34    Promissory Note and Conversion Agreement for Salvatore Zizza,      
dated January 1, 2007.**                                  

10.35    Promissory Note and Conversion Agreement for Bright Capital,       
Ltd., dated January 1, 2007.**                            

10.36    Extension Agreement dated March 31, 2007 between the Company       
and Mark A Smith.***                                      

10.37    Form of Note dated March 31, 2007 in the amount of $151,645.89     
in favor of Mark A. Smith.***                             

10.38    Form of Note dated March 31, 2007 in the amount of $379,389.04     
in favor of Salvatore Zizza.***                           

10.39    Form of Note dated March 31, 2007 in the amount of $455.486.30     
in favor of Bright Capital, Ltd.***                       

10.40    Stipulation and Agreement of Compromise and Release dated May 21,  
2007 between Centerpoint Corporation, Bion Environmental  
      Technologies, Richard Anderson and Joseph Foglia, as Plaintiffs,
       and Comtech Group, Inc., OAM S.p.A., Invested Ernst & Company and
others as Defendants.****                                 

10.41    Stipulation and Agreement of Compromise, Settlement and Release    
     dated May 15, 2007 between TCMP3 Partners, LLP as Plaintiff and
       Bion Environmental Technologies, Inc. and Bion Dairy Corporation,
among others, as Defendants.****                          

10.42    Stipulation and Agreement of Compromise, Settlement and Release as 
      to Certain Defendants dated May 15, 2007 between TCMP3 Partners,
LLP as Plaintiff and certain defendants other than Bion   
      Environmental Technologies, Inc. and Bion Dairy Corporation.****

10.43    Letter of Intent dated August 18, 2007 between Bion Environmental  
Technologies, Inc. and Evergreen Farm, Inc.*****          

31.1     Certification of Chief Executive Officer and Principal Financial   
       Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
- Filed herewith electronically                           

32.1     Certification of Chief Executive Officer and Principal Financial   
Officer Pursuant to Section 18 U.S.C. Section 1350 - Filed
herewith electronically                                   

21       Subsidiaries of the Registrant.*                                   
____________                                                                    

49    

*    Filed with Form 10SB12G on November 14, 2006.                              
**   Filed with Form 10SB12G/A on February 1, 2007.                             
***  Filed with Form 8-K on April 3, 2007.                                      
**** Filed with Form 9-K on August 13, 2007.                                    
*****Filed with Form 8-K on August 22, 2007.                                    

ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES.                               

AUDIT FEES                                                                      

In December 2005, the Company engaged GHP Horwath, P.C. as its        
independent registered public accounting firm.  The aggregate fees billed for   
each of the last two fiscal years ended June 30, 2006 and June 30, 2007 by      
GHP Horwath, P.C. for professional services rendered for the audit of the       
Company's annual financial statements and review of financial statements        
included in the Company's quarterly reports on Form 10-QSB were $98,200 and     
$84,300 respectively.                                                           

AUDIT RELATED FEES                                                              

  There were no fees billed by GHP Horwath, P.C. for consultation services
in each of the last two fiscal years ended June 30, 2006 and June 30, 2007.     

TAX FEES                                                                        

  The aggregate fees billed for tax services rendered by GHP Horwath, P.C.
for tax compliance and tax advice for the two fiscal years ended June 30,       
2006 and June 30, 2007 were $0 and $57,200, respectively.                       

ALL OTHER FEES                                                                  

None.                                                                 

AUDIT COMMITTEE PRE-APPROVAL POLICY                                             

Under provisions of the Sarbanes-Oxley Act of 2002, the Company's     
principal accountant may not be engaged to provide non-audit services that      
are prohibited by law or regulation to be provided by it, and the Board of      
Directors (which serves as the Company's audit committee) must pre-approve      
the engagement of the Company's principal accountant to provide audit and       
permissible non-audit services. The Company's Board has not established any     
policies or procedures other than those required by applicable laws and         
regulations.                                                                    

50    

BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES    
CONSOLIDATED FINANCIAL STATEMENTS   
YEARS ENDED JUNE 30, 2007 AND 2006  

CONTENTS  

                                                         Page(s)

Report of independent registered public accounting firm .......   F-2           

Consolidated financial statements:                                              

Balance sheet ............................................   F-3      

Statements of operations .................................   F-4      

Statements of changes in stockholders' deficit ...........   F-5      

Statements of cash flows .................................   F-6      

 Notes to consolidated financial statements ...............   F-7 - F-29

F-1   

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 

Board of Directors and Stockholders                                             
Bion Environmental Technologies, Inc.                                           

We have audited the accompanying consolidated balance sheet of Bion             
Environmental Technologies, Inc. and subsidiaries ("the Company") as of June    
30, 2007, and the related consolidated statements of operations, changes in     
stockholders' deficit and cash flows for each of the years in the two-year      
period ended June 30, 2007.  These financial statements are the                 
responsibility of the Company's management. Our responsibility is to express    
an opinion on these consolidated financial statements based on our audits.      

We conducted our audits in accordance with the standards of the Public          
Company Accounting Oversight Board (United States).  Those standards require    
that we plan and perform the audit to obtain reasonable assurance about         
whether the financial statements are free of material misstatement.  An audit   
includes examining, on a test basis, evidence supporting the amounts and        
disclosures in the financial statements.  An audit also includes assessing      
the accounting principles used and significant estimates made by management,    
as well as evaluating the overall financial statement presentation.  We         
believe that our audits provide a reasonable basis for our opinion.             

In our opinion, the consolidated financial statements referred to above         
present fairly, in all material respects, the financial position of Bion        
Environmental Technologies, Inc. and subsidiaries as of June 30, 2007, and      
the results of their operations and cash flows for each of the years in the     
two-year period ended June 30, 2007, in conformity with accounting principles   
generally accepted in the United States of America.                             

The accompanying consolidated financial statements have been prepared           
assuming that the Company will continue as a going concern.  As discussed in    
Note 1 to the consolidated financial statements, the Company has suffered       
recurring losses from operations and has a stockholders' deficit at June 30,    
2007 that raise substantial doubt about its ability to continue as a going      
concern.  Management's plans in regard to these matters are also discussed in   
Note 1.  The consolidated financial statements do not include any adjustments   
that might result from the outcome of this uncertainty.                         

As discussed in Notes 2 and 7 to the consolidated financial statements,         
effective July 1, 2006, the Company adopted Statement of Financial Accounting   
Standards No. 123 (R), "Share Based Payment".                                   

/s/ GHP Horwath, P.C.                                                           

GHP Horwath, P.C.                                                               
Denver, Colorado                                                                
October 10, 2007                                                                

F-2 

BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES  
CONSOLIDATED BALANCE SHEET
 JUNE 30, 2007

ASSETS

Current assets:                                                                 
Cash and cash equivalents                                   $    373,109    
Prepaid rent and expenses                                         20,110    
Deposits and other receivables                                     2,844    
                                                        ------------
Total current assets                                          396,063 
                                                        ------------
Restricted cash                                                    171,945      
Property and equipment, net                                         75,621      
                                                        ------------
Total assets                                             $    643,629 
                                                        ============

LIABILITIES AND STOCKHOLDERS' DEFICIT 

Current liabilities                                                             
Accounts payable and accrued expenses                       $    648,318    
Accrued payable - affiliate                                       41,647    
2006 Series A convertible promissory notes                       737,974    
Deferred compensation                                            187,500    
                                                        ------------
Total current liabilities                                   1,615,439 

Deferred rent                                                     65,973    
2007 Series A convertible promissory notes                       811,540    
2007 Series A convertible promissory notes - affiliates        1,001,116    
Convertible notes - affiliates                                 1,812,908    
                                                        ------------
Total liabilities                                           5,306,976 
                                                        ------------
Stockholders' deficit:                                                          
Preferred stock, $.01 par value, 10,000 shares authorized,          -       
no shares issued and outstanding                                        
Common stock, no par value, 100,000,000 shares authorized,          -       
8,770,079 shares issued, 8,076,280 outstanding                          
Additional paid-in capital                                    67,900,379    
Accumulated deficit                                          (72,563,726)   
                                                        ------------
Total stockholders' deficit                                (4,663,347)
                                                        ------------
Total liabilities and stockholders' deficit              $    643,629 
                                                        ============

 See notes to consolidated financial statements.

F-3   

BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES  
CONSOLIDATED STATEMENTS OF OPERATIONS 
YEARS ENDED JUNE 30, 2007 AND 2006  

                                              2007          2006
                                              -----------    -----------

Revenue                                           $      -       $      -       

Operating expenses:                                                             
General and administrative (including stock-                                
based compensation of $(604,029) and                                    
$834,194 (Note 2))                                187,572      1,343,431
Research and development (including stock-                                  
based compensation of $(632,438) and                                    
$1,892,423 (Note 2))                            1,509,521      3,809,716
                                              -----------    -----------
 Total operating expenses                       1,697,093      5,153,147
                                              -----------    -----------
Loss from operations                               (1,697,093)    (5,153,147)   
                                              -----------    -----------
Other (income) and expense:                                                     
Interest expense                                    156,166        134,540  
Interest income                                     (35,320)       (21,514) 
Other, net                                             -           (92,879) 
                                              -----------    -----------
                                                  120,846         20,147
                                              -----------    -----------
Loss before cumulative effect of change in                                      
accounting principle                             (1,817,939)    (5,173,294) 

Cumulative effect of change in accounting                                       
principle (Note 7)                                 (731,386)          -     
                                              -----------    -----------
Net loss                                          $(2,549,325)   $(5,173,294)   
                                              ===========    ===========
Net loss per common share, basic and diluted:                                   
Before cumulative effect of change in                                       
 accounting principle                          $     (0.23)   $     (0.70)
Cumulative effect of change in accounting                                   
principle                                           (0.09)          -   
                                              -----------    -----------
Net loss                                          $     (0.32)   $     (0.70)   
                                              ===========    ===========
Weighted-average number of common shares                                        
outstanding, basic and diluted                    7,961,217      7,353,914  
                                              ===========    ===========

 See notes to consolidated financial statements.

F-4   

BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES    
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT   
YEARS ENDED JUNE 30, 2007 AND 2006

                                                        [Enlarge/Download Table]


                                      Common Stock     Accumulated                     Total      
                                   ------------------    paid-in     Accumulated    stockholders' 
                                     Shares    Amount    capital       deficit        deficit     
                                   ---------   ------  -----------   -------------  ------------  
                                                                                                  
Balances, July 1, 2005             4,256,194   $  -    $59,989,962   $ (64,754,054)  $ (4,764,092)
 Conversion of debt to equity      4,077,642      -      4,651,207            -         4,651,207 
 Retirement of common stock          (83,340)     -           -            (87,053)       (87,053)
 Conversion of deferred                                                                           
  compensation to common stock        30,000                60,000                         60,000 
 Sale of common stock                295,500      -      1,136,500            -         1,136,500 
 Issuance of common stock                                                                         
  for services                        50,000      -        100,000            -           100,000 
 Sale of warrants                       -         -         32,500            -            32,500 
 Issuance of warrants for services      -         -          5,000            -             5,000 
 Issuance of options for services       -         -         34,918            -            34,918 
 Vesting of options for services        -         -        726,787            -           726,787 
 Net loss                               -         -           -         (5,173,294)    (5,173,294)
                                   ---------   ------  -----------   -------------   ------------ 
Balances, June 30, 2006            8,625,996      -     66,736,874     (70,014,401)    (3,277,527)

Conversion of debt to equity         164,083      -        638,067            -           638,067 
 Return of shares previously                                                                      
  issued for services                (20,000)     -        (40,000)                       (40,000)
 Vesting of options for services        -         -        565,438            -           565,438 
 Net loss                               -         -           -         (2,549,325)    (2,549,325)
                                   ---------   ------  -----------   -------------   ------------ 
Balances, June 30, 2007            8,770,079   $  -    $67,900,379   $ (72,563,726)  $ (4,663,347)
                                   =========   ======  ===========   =============   ============ 

 See notes to consolidated financial statements.

F-5   

BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN CASH FLOWS
YEARS ENDED JUNE 30, 2007 AND 2006

                                              2007          2006
                                              -----------    -----------
CASH FLOWS FROM OPERATING ACTIVITIES                                            
Net loss                                        $(2,549,325)   $(5,173,294) 
Adjustments to reconcile net loss to net                                    
cash used in operating activities:                                        
Cumulative effect of change in accounting                               
principle                                       731,386           - 
Depreciation expense                               10,475         77,971
Accrued interest on convertible notes and debt    156,167           -   
Stock-based compensation                          565,438        866,706
Decrease in fair value of convertible notes    (1,844,428)          -   
Increase in intrinsic value of convertible                              
  notes                                              -         1,974,292
Decrease (increase) in prepaid rent and                                 
   expenses                                         43,403         (4,509)
Decrease (increase) in deposits and other                               
   receivables                                       3,263         (6,107)
Increase (decrease) in accounts payable and                             
   accrued expenses                                194,126       (465,037)
Increase in deferred rent                          65,973           -   
Increase in deferred compensation                 750,000        689,270
                                              -----------    -----------
  Net cash used in operating activities         (1,873,522)    (2,040,708)
                                              -----------    -----------
CASH FLOWS FROM INVESTING ACTIVITIES                                            
Increase in restricted cash                        (171,945)          -     
Purchase of property and equipment                  (78,623)        (9,166) 
                                              -----------    -----------
  Net cash used in investing activities           (250,568)        (9,166)
                                              -----------    -----------
CASH FLOWS FROM FINANCING ACTIVITIES                                            
Proceeds from sale of convertible debt            1,345,000      2,025,821  
Net proceeds from sale of common stock                 -         1,136,500  
Proceeds from sale of warrants                         -            32,500  
                                              -----------    -----------
 Net cash provided by financing activities      1,345,000      3,194,821
                                              -----------    -----------
Net (decrease) increase in cash and cash                                        
equivalents                                        (779,090)     1,144,947  
Cash and cash equivalents at beginning of year      1,152,199          7,252    
                                              -----------    -----------
Cash and cash equivalents at end of year          $   373,109    $ 1,152,199    
                                              ===========    ===========
Supplemental disclosure of cash flow information:                               
Cash paid for interest and income taxes         $      -       $      -     
Non-cash investing and financing transactions:                                  
Conversion of debt to equity                    $   638,067    $ 4,610,832  
Return of common stock for unearned services         40,000           -     
Conversion of deferred compensation to                                      
convertible notes - affiliates                    787,500      2,100,266
Conversion of deferred compensation to common                               
stock                                                -            60,000

 See notes to consolidated financial statements.

F-6   

BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES    
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  
YEARS ENDED JUNE 30, 2007 AND 2006  

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

Organization and business:                                                      

Bion Environmental Technologies, Inc. ("Bion" or the "Company") was             
incorporated in 1987 in the State of Colorado.                                  

Bion's patented and proprietary technology provides solutions for               
environmentally sound clean-up of the waste streams of large-scale animal       
farming operations ("confined animal feeding operations" or "CAFO's") (dairy,   
cattle feedlot, hogs and poultry) and creates economic opportunities for        
development of integrated complexes including alternative renewable energy      
production, ethanol production, sustainable animal husbandry and organic        
soil/fertilizer and feed production ("Projects" or "Integrated Projects").      
Bion's technology also potentially allows direct integration with dairy end-    
users (bottling operations, cheese and ice cream plants, etc.) and the end-     
users of other CAFO's that can potentially increase the profitability and       
quality control of each participant while mitigating the environmental impact   
of the entire integrated complex. The Company is in the process of finalizing   
engineering, design and economic modeling for dairy and beef applications and   
Integrated Projects based on its second-generation technology.                  

Bion is currently evaluating sites in multiple states and anticipates           
selecting a site for its initial Integrated Project during fiscal year 2008.    
Bion is presently establishing its implementation management team with the      
intention of commencing development and construction of the initial Project     
during fiscal year 2008. In addition, Bion will seek to site additional         
Projects during 2008 and 2009 to create a pipeline of Projects that will        
insure significant market share and profitability within 3-5 years (both        
regionally and nationally).  Each Project is expected to include: a) Bion       
waste treatment modules, b) processing the CAFO waste stream from the           
equivalent of approximately 40,000 (or more) dairy cows (or beef cattle         
equivalent) in modules, c) while producing renewable energy to replace          
natural gas or other energy use within the Project CAFO modules and ethanol     
plant, d) solids to be marketed as feed and/or fertilizer, e) which is          
integrated with a 40+M gallon/year ethanol plant (though some smaller           
projects may be undertaken in appropriate situations). At the end of the 5-     
year period, Bion hopes to have numerous Projects in various stages of          
development ranging from full operation to early construction stage.            

Through 2001 the Company was primarily an environmental service company         
focused on the needs of CAFOs. Thereafter, Bion elected to cease sales of its   
first generation systems and focused its activity on development of its         
second-generation technology.                                                   

F-7   

BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES    
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  
YEARS ENDED JUNE 30, 2007 AND 2006  

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

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 incurred net losses of        
approximately $2,549,000 and $5,173,000 during the years ended June 30, 2007    
and 2006, respectively.  At June 30, 2007, the Company has a working capital    
deficiency and a stockholders' deficit of approximately $1,219,000 and          
$4,663,000, 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.                                          

In 2006, the Company completed a convertible note offering, raising $700,000    
("2006 Notes") (Note 5).                                                        

During March and April 2007, the Company raised $800,000 in cash proceeds       
from the sale of its 2007 Series A Convertible Notes ("2007 Notes") (Note 5).   

As discussed in Note 13, during September 2007, the Company received gross      
proceeds of $1,228,000 consisting of $798,000 from litigation settlements and   
$430,000 from the release of escrowed funds.                                    

The Company continues to explore sources of additional financing to satisfy     
its current operating requirements.                                             

While the Company currently does not face a severe working capital shortage,    
it is not currently generating any revenues. The Company will need to obtain    
additional capital to fund its operations and technology development, and to    
satisfy existing creditors. There is no assurance 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.                            

There can be no assurance that funds required during the next twelve months     
or thereafter will be generated from operations or that those funds will be     
available from external sources such as debt or equity financings or other      
potential sources. The lack of additional capital resulting from the            
inability to generate cash flow from operations or to raise capital from        
external sources would force the Company to substantially curtail or cease      
operations and would, therefore, have a material adverse effect on its          
business. Further, there can be no assurance that any such required funds, if   
available, will be available on attractive terms or that they will not have a   
significantly dilutive effect on the Company's existing shareholders.           

F-8     

BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES    
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  
YEARS ENDED JUNE 30, 2007 AND 2006  

2.   SIGNIFICANT ACCOUNTING POLICIES:                                           

Principles of consolidation:                                                    

The consolidated financial statements include the accounts of the Company and   
its wholly-owned subsidiaries, Bion Technologies, Inc., BionSoil, Inc. and      
Bion Dairy Corporation ("Dairy") and its 57.7% owned subsidiary, Centerpoint    
Corporation ("Centerpoint").  All significant intercompany accounts and         
transactions have been eliminated in consolidation.                             

Property and equipment:                                                         

Property and equipment are stated at cost and are depreciated using the         
straight-line method over the estimated useful lives of the related assets,     
generally three to ten years.  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.  Management believes that   
no impairment exists at June 30, 2007.                                          

Income taxes:                                                                   

The Company recognizes deferred tax assets and liabilities for the future tax   
consequences attributable to differences between the financial statement        
carrying amounts of existing assets and liabilities and their tax bases, as     
well as net operating losses.                                                   

Deferred tax assets and liabilities are measured using enacted tax rates        
expected to apply to taxable income in the years in which those temporary       
differences are expected to be recovered or settled.  The effect on deferred    
tax assets or liabilities of a change in tax rates is recognized in the         
period in which the tax change occurs.  A valuation allowance is provided to    
reduce the deferred tax assets to a level, that more likely than not, will be   
realized.                                                                       

Cash and cash equivalents:                                                      

The Company considers all highly liquid investments purchased with an           
original maturity of three months or less to be cash equivalents.               

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 earnings      
(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 or increase earnings per share.  During each of    
the years ended June 30, 2007 and 2006, the effect of outstanding options and   
warrants would have been anti-dilutive.                                         

F-9   

BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES    
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  
YEARS ENDED JUNE 30, 2007 AND 2006  

2.   SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):                               

Fair value of financial instruments:                                            

The fair values of cash and cash equivalents, convertible debt and accounts     
payable approximate their carrying amounts due to their short-term              
maturities. It is not practicable to estimate the fair value of the accounts    
payable-affiliate, and convertible notes to affiliates due to the related       
party nature of the underlying transactions                                     

Stock-based compensation:                                                       

Effective July 1, 2006, the Company adopted Statement of Financial Accounting   
Standards ("SFAS") No. 123 (Revised), "Share-Based Payment" ("SFAS 123(R)"),    
using the prospective method.  SFAS 123(R) requires the recognition of the      
cost of employee services received in exchange for an award of equity           
instruments in the financial statements and is measured based on the grant      
date fair value of the award.  SFAS 123(R) also requires the stock option       
compensation expense to be recognized over the period during which an           
employee is required to provide service in exchange for the award (the          
vesting period).  The Company utilizes the Black-Scholes option-pricing model   
to determine fair value.  Key assumptions of the Black-Scholes option-pricing   
model include applicable volatility rates, risk-free interest rates and the     
instrument's expected remaining life.  These assumptions require significant    
management judgment.                                                            

Prior to adopting SFAS 123(R), the Company accounted for stock-based            
compensation awards under SFAS No. 123, Accounting for Stock-Based              
Compensation ("SFAS No. 123"), which established financial accounting and       
reporting standards for stock-based employee compensation plans.  SFAS No.      
123 encouraged entities to adopt a fair-value-based method of accounting for    
stock compensation plans.  However, SFAS No. 123 also permitted entities to     
continue to measure compensation cost under Accounting Principles Board         
Opinion No. 25 ("APB 25") with the requirement that pro forma disclosures of    
net income (loss) and earnings (loss) per share be included in the notes to     
the financial statements.   The Company had elected to measure compensation     
cost under APB 25; accordingly, the Company used the intrinsic value method     
to account for its stock-based employee compensation plans prior to July 1,     
2006.  Had compensation cost for these plans been determined consistent with    
the fair value method prescribed by SFAS No. 123, the Company's pro forma net   
loss and loss per share would have been as follows:                             

F-10  

BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES    
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  
YEARS ENDED JUNE 30, 2007 AND 2006  

2.   SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):                               

Stock based compensation (continued):                                           

                                                 June 30, 2006
                                                 -------------

Net loss:                                                             
As reported                                         $(5,173,000)  
Less: Stock-based compensation expense                            
determined under fair value method                    (464,000) 
                                                 -----------
Pro forma                                           $(5,637,000)  
                                                 ===========
Basic and diluted net loss per share:                                 
As reported                                              ($0.70)  
                                                 ===========
Pro forma                                                ($0.77)  
                                                 ===========

The fair value of each option grant was estimated on the date of grant using    
the Black-Scholes option-pricing model with the following weighted-average      
assumptions for the grants in each of the following years:                      

Options granted    Expected     Expected       Risk-Free      Expected  
year ended       dividend    volatility    interest rate      term  
---------------    --------    ----------    --------------   --------  
June 30, 2004       nil          177            2.87%        4 years  
June 30, 2005       nil          196            3.90%        5 years  
June 30, 2006       nil          195            4.75%        3.5 years

Stock-based compensation charges/(credits)  in operating expenses in the        
Company's financial statements for the years ended June 30, 2007 and 2006 are   
as follows:                                                                     

F-11  

BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES    
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  
YEARS ENDED JUNE 30, 2007 AND 2006  

2.   SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):                               

Stock based compensation (continued):                                           

                                                2007          2006
                                               -----------    ----------
General and administrative:                                                     
Fair value remeasurement of convertible notes -                               
affiliates (Note 7)                              $  (778,859)   $     -     
Intrinsic value remeasurement of convertible                                  
notes - affiliates (Note 7)                             -          833,758  
Amortization of expenses prepaid with stock                                   
options granted to non-employees (Note 9)              9,855           436  
Fair value of stock options expensed under                                    
SFAS 123(R) (Note 9)                                 164,975          -     
                                               -----------    ----------
 Total                                         $  (604,029)   $  834,194
                                               ===========    ==========
Research and development:                                                       
Fair value remeasurement of convertible                                     
notes - affiliates (Note 7)                     $(1,065,569)   $     -    
Intrinsic value remeasurement of convertible                                
notes - affiliates (Note 7)                            -        1,140,534 
Fair value remeasurement of options with                                    
service conditions (Note 9)                         (16,503)      726,787 
Amortization of expenses prepaid with stock                                 
options granted to non-employees (Note 9)            32,668        25,102 
Fair value of stock options expensed under                                  
SFAS 123(R) (Note 9)                                416,966          -    
                                               -----------    ----------
 Total                                         $  (632,438)   $1,892,423
                                               ===========    ==========
Use of estimates:                                                               

In preparing financial statements in conformity with accounting principles      
generally accepted in the United States of America, management is required to   
make estimates and assumptions that affect the reported amounts of assets and   
liabilities and the disclosure of contingent assets and liabilities at the      
date of the financial statements and the reported amounts of revenues and       
expenses during the reporting period.  Actual results could differ from those   
estimates.                                                                      

Concentrations of credit risk:                                                  

The Company's financial instruments that are exposed to concentrations of       
credit risk consist of cash and cash equivalents.  The Company's cash and       
cash equivalents are in demand deposit accounts placed with federally insured   
financial institutions and selected brokerage accounts. Such deposit accounts   
at times may exceed federally insured limits.  The Company has not              
experienced any losses on such accounts.                                        

F-12  

BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES    
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  
YEARS ENDED JUNE 30, 2007 AND 2006  

2.   SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):                               

Comprehensive income (loss):                                                    

SFAS No. 130, Reporting Comprehensive Income establishes standards for          
reporting and display of comprehensive income (loss), its components, and       
accumulated balances.  For the years ended June 30, 2007 and 2006, there was    
no difference between net loss and comprehensive loss.                          

Revenue recognition:                                                            

While the Company has not reported any revenues for the years ended June 30,    
2007 and 2006, the Company anticipates that future revenues will be generated   
from product sales and technology license fees.  The Company expects to         
recognize revenue from product sales when there is persuasive evidence that     
an arrangement exits, 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.                                      

Recent accounting pronouncements:                                               

During June 2006, the Financial Accounting Standards Board ("FASB") issued      
Interpretation No. ("FIN") 48, "Accounting for Uncertainty in Income Taxes"     
an interpretation of FASB Statement No. 109. This interpretation clarifies      
the accounting for uncertainty in income taxes recognized in an enterprise's    
financial statements in accordance with SFAS No. 109, "Accounting for Income    
Taxes," and prescribes a recognition threshold and measurement attribute for    
the financial statement recognition and measurement of a tax position taken     
or expected to be taken in a tax return. This interpretation also provides      
guidance on derecognition, classification, interest and penalties, accounting   
in interim periods, disclosure, and transition. This interpretation is          
effective for fiscal years beginning after December 15, 2006.  The Company      
believes this interpretation will not have an impact on its consolidated        
operating results, cash flows or financial position upon adoption.              

During October 2006, the FASB issued SFAS No. 157, "Fair Value Measurements"    
("SFAS 157"). This statement does not require any new fair value measurements   
but provides guidance on how to measure fair value and clarifies the            
definition of fair value under accounting principles generally accepted in      
the United States of America. The statement also requires new disclosures       
about the extent to which fair value measurements in financial statements are   
based on quoted market prices, market-corroborated inputs, or unobservable      

F-13  

BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES    
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  
YEARS ENDED JUNE 30, 2007 AND 2006  

2.   SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):                               

Recent accounting pronouncements (continued):                                   

inputs that are based on management's judgments and estimates. The statement    
is effective for fiscal years beginning after November 15, 2007. The            
statement will be applied prospectively by the Company for any fair value       
measurements that arise after the date of adoption.                             

The FASB has also issued SFAS No. 158, "Employers' Accounting for Defined       
Benefit Pension and Other Postretirement Plans-an amendment of FASB             
Statements No. 87, 88, 106, and 132(R)".  The Company believes this standard    
will not have an impact on its consolidated operating results, cash flows or    
financial position upon adoption.                                               

In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for      
Financial Assets and Financial Liabilities-Including an amendment of FASB       
Statement No. 115."  This statement permits entities to choose to measure       
eligible items at fair value at specified election dates.  The statement is     
effective as of the beginning of an entity's first fiscal year that begins      
after November 15, 2007 although early adoption is permitted provided that an   
entity also adopts SFAS 157. The Company has not determined the impact this     
standard will have on its consolidated operating results or financial           
position upon adoption.                                                         

The SEC issued Staff Accounting Bulletin No. 108, "Considering the Effects of   
Prior Year Misstatements when Quantifying Misstatements in Current Year         
Financial Statements" ("SAB 108"), in September 2006. SAB 108 requires          
entities to quantify misstatements based on their impact on each of their       
financial statements and related disclosures. SAB 108 is effective as of        
December 31, 2006. The adoption of this standard did not have an impact on      
the Company's consolidated results of operations, cash flows or financial       
position.                                                                       

3.   MINORITY INTEREST OF CENTERPOINT CORPORATION:                              

In January 2002, Bion purchased a 57.7% majority interest in Centerpoint from   
a third party.  For the years ended June 30, 2007 and 2006, the losses          
applicable to the minority interest in Centerpoint exceeded the minority        
interest in the equity capital of Centerpoint, therefore the losses             
attributable to the minority interest have been charged against the Company's   
earnings as there is no obligation of the minority interest to make good on     
such losses.  If Centerpoint has future earnings, the Company shall be          
credited to the extent of the minority interest losses previously absorbed.     
See Note 13.                                                                    

F-14  

BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES    
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  
YEARS ENDED JUNE 30, 2007 AND 2006  

4.   PROPERTY AND EQUIPMENT:                                                    

Property and equipment consists of the following as of June 30, 2007:           

Research and development equipment     $  305,266                     
Leasehold improvements                     36,594                     
Furniture                                  28,932                     
Computers and office equipment             26,286                     
                  ----------
                     397,078
Less accumulated depreciation            (321,457)                    
                  ----------
                  $   75,621
                  ==========

Depreciation expense was $10,475 and $77,971 for the years ended June 30,       
2007 and 2006, respectively.                                                    

5.   CONVERTIBLE PROMISSORY NOTES:                                              

2006 Series A Convertible Promissory Notes:                                     

On September 13, 2006, the Company closed the offering of its 2006 Series A     
Convertible Promissory Notes, totaling $700,000 (the "2006 Notes").  The        
holders of the 2006 Notes earn interest on the unpaid principal balance of      
the 2006 Notes at 6%, payable on May 31, 2008, the maturity date of the 2006    
Notes.  All of the principal and accrued interest under the 2006 Notes shall    
be converted into common shares of the Company at the conversion rate of one    
share for each $6.00 that is owed under the terms of the 2006 Notes if the      
following conditions are met:                                                   

  A) The closing market price of the Company's shares has been at or above
$7.20 per share for 10 consecutive trading days, and                            

B) The earliest of the following events:                              

    1) An effective registration allowing public resale of the shares to
be received by the 2006 Note holders upon conversion, or                        
2) One year after the initial closing date of the offering, and 
  3) No conversion without an effective registration statement shall
take place until the Company has become a "reporting company" with the          
Securities and Exchange Commission pursuant to the Securities Exchange Act of   
1934, as amended, which occurred on January 13, 2007.                           

The 2006 Notes may also be convertible, in whole or in part, into the           
Company's common shares at any time at the election of the 2006 Note holders    
at a conversion rate of $6.00 per share, which was above the approximate        
market price of the Company's common shares at the commitment date of the       
offering.  For the year ended June 30, 2007, the 2006 Notes accrued interest    
of $37,974.                                                                     

F-15  

BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES    
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  
YEARS ENDED JUNE 30, 2007 AND 2006  

5.   CONVERTIBLE PROMISSORY NOTES:                                              

2007 Series A Convertible Promissory Notes:                                     

In March and April 2007, the Company sold $800,000 of its 2007 Series A         
Convertible Notes (the "2007 Notes") for cash proceeds. In addition the         
Company issued 2007 Notes to affiliates totaling  $986,521 in exchange for      
promissory notes with convertible features and deferred compensation (Note      
8).  The 2007 Notes are convertible into shares of the Company's common stock   
at the price of $4.00 per share until maturity at the election of the 2007      
Note holder and will accrue interest at 6% per annum.  The 2007 Note holders    
have the option to exchange the 2007 Notes, plus interest, into securities      
substantially identical to securities the Company sells in any offering prior   
to the completion of an offering in which the Company raises less than          
$3,000,000.    The Company has the right to require the 2007 Notes (principal   
plus interest) be converted into its common shares at the lesser of $4.00 per   
share or the price of an offering in which the Company raises $3,000,000 or     
more.  The conversion price of the 2007 Notes of $4.00 per share is above the   
approximate market price of the Company's common shares at the commitment       
date of the offering.   The 2007 Notes accrued interest of $26,135 for the      
year ended June 30, 2007.                                                       

6.   CONVERTIBLE DEBT:                                                          

In June 2005, the Company and a vendor signed an agreement whereby $30,437 of   
unpaid consulting fees due to the vendor could be convertible into common       
stock of the Company at a conversion price of $2.50 per share at the vendor's   
option until May 1, 2007.  If the vendor did not elect to convert the debt      
prior to May 1, 2007, the debt was to be repaid by the Company on that date.    
The market value of the Company's shares at the time of the agreement was       
approximately $1.25 per share, therefore no beneficial conversion feature       
resulted from the agreement.  On April 20, 2007, at the vendor's election,      
the Company issued 12,175 common shares to satisfy its obligation.              

7.   CONVERTIBLE NOTES - AFFILIATES:                                            

On April 4, 2006 convertible deferred compensation due to the Company's         
president, Mark A. Smith, pursuant to an April 2003 deferred compensation       
agreement, was exchanged for a promissory note and conversion agreement.  The   
promissory note and conversion agreement have the same terms and conversion     
features as the April 2003 deferred compensation agreement.  Under the          
agreements, the president earned compensation of $150,000 annually, all of      
which has been deferred to date.  Sums accrued through March 31, 2006, accrue   
interest at 6% per annum, and are convertible into the Company's common stock   
at the lower of the current market value at the time of conversion, or $2.00    
per share.  Through July 1, 2007, conversions could occur by mutual agreement   
between the Company and Mr. Smith. The Company may convert the deferred         

F-16  

BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES    
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  
YEARS ENDED JUNE 30, 2007 AND 2006  

7.   CONVERTIBLE NOTES - AFFILIATES (CONTINUED):                                

compensation, in whole or in part, at any date after July 1, 2007 and the       
convertible deferred compensation owed the president is mandatorily converted   
to common stock of the Company on July 1, 2009.  Through June 30, 2006, the     
Company accounted for this employee stock-based compensation agreement under    
APB 25 and recorded the intrinsic value of the deferred compensation            
agreement at each reporting date.  On July 1, 2006, the Company adopted the     
provisions of SFAS 123(R), which supersedes APB 25.  In accordance with SFAS    
123(R), outstanding instruments previously classified as liabilities and        
measured at intrinsic values, are to be measured initially at fair value with   
differences to be recorded as the cumulative effect of a change in accounting   
principle.  The fair value of deferred compensation owed to Mark A. Smith on    
July 1, 2006 was $1,521,609, and the cumulative effect of the change in         
accounting principle of $308,870 was recorded.  Fair value at July 1, 2006      
was calculated using a Black-Scholes option pricing model with the following    
assumptions: a dividend yield of zero, a risk-free interest rate of 5.13%,      
volatility of 181%, a remaining contractual life of 3 years and a stock price   
of $6.40.  At June 30, 2007 the fair value of deferred compensation owed to     
Mark A. Smith was re-measured as $765,722 and resulted in a credit to           
earnings of $778,859 for the year ended June 30, 2007.  Fair value at June      
30, 2007 was calculated utilizing the following assumptions: a dividend yield   
of zero, a risk-free interest rate of 4.87%, volatility of 69%, a remaining     
contractual life of 2 years and a stock price of $3.25.                         

On December 31, 2005, convertible deferred compensation payable to Bright       
Capital, Ltd. ("Brightcap") for services provided to the Company by Dominic     
Bassani, the former general manager of Dairy, between April 1, 2003 and         
September 30, 2005 was exchanged for a promissory note and conversion           
agreement with the same terms and features as the deferred compensation         
agreement.  Effective March 31, 2005, Brightcap entered into an agreement to    
continue to provide Mr. Bassani's services to the Company through March 31,     
2009 and Brightcap earns compensation of $300,000 annually with payment         
deferred.  Sums accrued through September 30, 2005, accrue interest at 6% per   
annum and are convertible into the Company's common stock at the lower of the   
current market value at the time of conversion or $2.00 per share. Through      
January 1, 2007 conversions could occur by mutual agreement between the         
Company and Brightcap.  The Company may convert the deferred compensation, in   
whole or in part, at any date after January 1, 2007 and, on July 1, 2009, the   
Company's obligation owed Brightcap is mandatorily convertible to common        
stock of the Company. Through June 30, 2006, the Company accounted for this     
employee stock-based compensation agreement under APB 25 and recorded the       
intrinsic value of the deferred compensation agreement at each reporting        
date.  On July 1, 2006, the Company adopted the provisions of SFAS 123(R),      
which supersedes APB 25.  The fair value of deferred compensation owed to       
Brightcap on July 1, 2006 was $2,081,475, and the cumulative effect of the      
change in accounting principle of $422,516 was recorded.  Fair value at         

F-17  

BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES    
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  
YEARS ENDED JUNE 30, 2007 AND 2006  

7.   CONVERTIBLE NOTES - AFFILIATES (CONTINUED):                                

July 1, 2006 was calculated using a Black-Scholes option pricing model with     
the following assumptions: a dividend yield of zero, a risk-free interest       
rate of 5.13%, volatility of 181%, a remaining contractual life of 3 years      
and a stock price of $6.40.  At June 30, 2007 the fair value of deferred        
compensation owed to Brightcap was re-measured as $1,047,186 and resulted in    
a credit to earnings of $1,065,569 for the year ended June 30, 2007.  Fair      
value at June 30, 2007 was     calculated utilizing the following               
assumptions: a dividend yield of zero, a risk-free interest rate of 4.87%,      
volatility of 69%, a remaining contractual life of 2 years and a stock price    
of $3.25.                                                                       

Effective September 30, 2006, Mr. Bassani no longer serves in the capacity of   
general manager of Dairy.  However, he continues to provide services through    
Brightcap as per the agreement above.                                           

Prior to March 31, 2003, the Company incurred management fees under various     
management agreements with the D2 LLC Deferred Compensation Trust ("Trust")     
for management and consulting services. These fees totaled $581,344 including   
interest at 6%, as of July 1, 2006.  The services were provided in part by      
Dominic Bassani, who beneficially owns 50% of the Trust.  In March 2003, the    
Trust agreed to accept payment on March 31, 2007, by conversion of the          
deferred compensation into common stock of the Company at the higher of the     
average price of the Company's common stock during the ten trading days         
ending March 27, 2007, or $4.00 per share.  On March 31, 2007, this             
obligation of $607,630 was converted at $4.00 per share and the Company         
issued 151,908 common shares to satisfy its obligation.                         

8.   DEFERRED COMPENSATION:                                                     

As of July 1, 2006, the Company had also recorded deferred compensation         
liabilities of $412,500 for three officers of the Company consisting of         
$37,500 to Mark A. Smith, $225,000 to Brightcap, and $150,000 to Salvatore      
Zizza, a former officer and director of the Company, who assumed the position   
of Chairman and director of Dairy with an annual salary of $300,000.  Through   
December 31, 2006, an additional $375,000 was accrued ($75,000 to Mark A.       
Smith, $150,000 to Brightcap and $150,000 to Salvatore Zizza).  Effective       
January 1, 2007, the Company entered into agreements converting deferred        
compensation amounts owed as of December 31, 2006 into promissory notes with    
conversion agreements.  The notes accrue interest at 6% per annum, with         
principal and interest due and payable on January 1, 2009, if not previously    
paid.  The conversion agreements allow for the conversion of the notes into     
shares of the Company's common stock at the equivalent price of the Company's   
next private financing in excess of $2,000,000 as follows: a) by the holder     
at any time after July 1, 2007; b) by the Company any time after there has      
been an effective registration including the shares underlying conversion of    

F-18  

BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES    
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  
YEARS ENDED JUNE 30, 2007 AND 2006  

8.   DEFERRED COMPENSATION (CONTINUED):                                         

the notes for six months; c) by the holder and the Company by mutual            
agreement at any time prior to payment by the Company of outstanding            
principal and interest.  As of March 31, 2007 the accrued principal and         
interest owed under the promissory notes with conversion agreements, $787,500   
and $11,521, respectively, in addition to deferred compensation owed for the    
three months ended March 31, 2007 ($37,500 to Mark A. Smith, $75,000 to         
Brightcap, $75,000 to Salvatore Zizza) were converted to 2007 Series A          
Promissory Notes (Note 5).                                                      

As of June 30, 2007, the Company owed deferred compensation totaling $187,500   
($37,500 to Mark A. Smith, $75,000 to Brightcap and $75,000 to Salvatore        
Zizza).                                                                         

9.   STOCKHOLDERS' EQUITY:                                                      

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. 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 other series of preferred stock   
the Company may designate in the future.                                        

On September 30, 2005, the Company completed a $1,917,500 (net proceeds         
$1,870,821) placement of Series C notes of Dairy, which triggered the           
conversion of the Dairy's Series A, B and C notes ($5,239,489 in aggregate)     
into 3,847,217 shares of the Company's common stock, including 693,799 shares   
issued to Centerpoint and 83,340 shares issued to Bion.                         

In conjunction with the conversion, the Company retired the 83,340 shares of    
common stock issued to the Company.  The shares issued to Bion and              
Centerpoint were recorded at $87,053 and $807,045, being the carrying value     
of the debt that was converted.                                                 

As a result of dividends declared in July 2004, Centerpoint holds the 693,799   
shares of the Company's common stock for the benefit of its shareholders        
without any beneficial interest.  The Company accounts for these shares         
similar to  treasury stock. The Company issued 20,428 shares of common stock    
as commissions in connection with the placement of the C Notes of Dairy.        

F-19  

BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES    
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  
YEARS ENDED JUNE 30, 2007 AND 2006  

9.   STOCKHOLDERS' EQUITY (CONTINUED):                                          

Common stock (continued):                                                       

On December 31, 2005, the president of the Company converted, with similar      
terms as the Dairy A, B and C notes, promissory notes of the Company,           
totaling $265,440 in principal and interest for 209,997 shares of common        
stock and converted $60,000 of deferred compensation into 30,000 shares of      
common stock.  The conversion rate of $2.00 per share was based on the          
deferred compensation agreement with the president (Note 7).                    

In December 2005, the Company completed a private financing of 291,750 shares   
of common stock priced at $4.00 per share.  Net proceeds to the Company were    
$1,136,500 and the Company also issued 3,750 shares of common stock as          
commissions in connection with the financing.                                   

During the year ended June 30, 2006, the Company issued 50,000 shares of        
common stock to a consultant for services valued at $100,000.  The number of    
shares issued was based upon the market price of the common shares at the       
time the service agreement was entered into.                                    

In November 2006, the Company entered into a mutual release and agreement       
with a consultant to whom the Company had issued 50,000 shares of common        
stock valued at $100,000 during the year ended June 30, 2006.  Under the        
terms of the mutual release and agreement, 20,000 shares valued at $40,000      
were returned by the consultant and cancelled by the Company.                   

On March 31, 2007, the Company issued 151,908 share of its common stock to      
satisfy its deferred compensation obligation owed to the Trust of $607,629      
(Note 8).                                                                       

On April 20, 2007, the Company issued 12,175 shares of its common stock to      
satisfy a debt owed to a vendor of $30,437 (Note 6).                            

F-20  

BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES    
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  
YEARS ENDED JUNE 30, 2007 AND 2006  

9.   STOCKHOLDERS' EQUITY (CONTINUED):                                          

Warrants:                                                                       

As of June 30, 2007 the Company had the following common stock warrants         
outstanding:                                                                    

Number of      Exercise     
                 Shares         Price        Expiration Date
                ---------     ----------     ---------------
Class SVDB 1-6         800,000     $     3.00     July 31, 2013       
Class SVDM-1           387,343     $     5.00     July 31, 2008       
Class DB-1             600,000     $     1.00     January 31, 2014    
Class A 1-3            600,000     $     2.50     May 14, 2015        
Class SVMAS-1           67,500     $     3.50     May 31, 2009        
Class SVMAS-1A          40,000     $     3.50     October 11, 2009    
Class SVMAS-2           32,500     $     2.50     September 30, 2009  
Class SVMAS-3           40,000     $     2.50     September 30, 2015  
Class SVB 1-3           50,000     $     2.50     April 30, 2015      
Class SVB-4             75,000     $     2.50     April 30, 2015      
Class SVC 1-5          125,000     $     4.25     December 31, 2012   
Class SV-SEI 1-2        41,667     $     1.50     June 30, 2009       
Class C, D, E          725,000     $     2.50     April 30, 2015      
Class O                100,000     $     3.00     December 31, 2008   
---------                   
3,684,010                   
=========                   

During the year ended June 30, 2006, the president of the Company purchased     
80,000 warrants in two separate transactions of 40,000 Class SVMAS-1A           
warrants and 40,000 SVMAS-3 warrants, each at $.25 per warrant, totaling        
$20,000.  The president also purchased 125,000 Class SVB 1-4 warrants at $.10   
per warrant for $12,500.                                                        

The Company issued 25,000 Class E warrants priced at $.20 per warrant to a      
consultant during the year ended June 30, 2006 for services valued at $5,000.   

During the year ended June 30, 2007, 10,573 warrants with an exercise price     
of $6 expired.  The weighted average exercise for the outstanding warrants is   
$2.72 and the weighted average life as of June 30, 2007 is 6 years.             

Stock options:                                                                  

Prior to June 2006, the Company had various incentive plans (the "Plans")       
that provided for incentive stock options to be granted to selected employees   
and directors of the Company, and selected non-employee advisors to the         
Company.  Effective June 2006, the Company approved the 2006 Consolidated       
Incentive Plan (the "2006 Plan"), which consolidated previously reserved        

F-21  

BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES    
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  
YEARS ENDED JUNE 30, 2007 AND 2006  

9.   STOCKHOLDERS' EQUITY (CONTINUED):                                          

Stock options (continued):                                                      

incentive stock options under the Plans into the 2006 Plan.  The Company has    
reserved 3,200,000 shares, the maximum number of shares of the common stock     
of the Company issuable pursuant to the 2006 Plan. Terms of exercise and        
expiration of options granted under the 2006 Plan may be established at the     
discretion of the Board of Directors, but no option may be exercisable for      
more than ten years.                                                            

During the year ended June 30, 2006, the Company granted options to purchase    
17,000 shares of common stock at $3.00 to $6.00 per share to non-employees.     
The fair value of the options, using the Black-Scholes option pricing model,    
was $34,918, of which options totaling $32,738 vested immediately and were      
recognized as non-cash stock compensation expense.  The remaining $2,180 of     
options vested over a year and was amortized on a straight line basis in the    
year ended June 30, 2007, respectively, as non-cash stock compensation.         

The Company granted options to purchase 77,500 shares of common stock to        
employees and directors for the year ended June 30, 2006.  The options have     
an exercise price of $4.25 to $5.50 per share and are fully vested.             

During the year ended June 30, 2007, the Company granted options to purchase    
435,000 shares of the Company's common stock and recorded compensation          
expense related to stock options of $581,941.   Unvested options to purchase    
12,500 shares of the Company's common stock were cancelled during the year      
ended June 30, 2007.  The fair value of the options granted during the year     
ended June 30, 2007 is estimated on the grant date using the Black-Scholes      
option-pricing model with the weighted average following assumptions:           

Volatility                  132%                      
Dividend yield                0%                      
Risk-free interest rate    4.77%                      
Expected life (years)      3.46                       

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 life of the stock   
options.  The U.S. Treasury bill rate for the expected life 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 two years ended June   
30, 2007 and 2006 is as follows:                                                

F-22  

BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES    
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  
YEARS ENDED JUNE 30, 2007 AND 2006  

9.   STOCKHOLDERS' EQUITY (CONTINUED):                                          

Stock options (continued):                                                      

                                Weighted
                    Weighted-  Average
                                   Average    Remaining    Aggregate
                                   Exercise   Contractual  Intrinsic
                    Shares     Price      Life         Value
                        ---------  ---------  -----------  ---------

Outstanding at July 1, 2005   1,316,333   $ 2.82                                
Granted                        94,500     4.69                              
Exercised                        -         -                                
Cancelled                        -         -                                

Outstanding at July 1, 2006   1,410,833   $ 3.15        5.5      $4,898,082     
Granted                       435,000     4.63                              
Exercised                        -         -                                
Cancelled                     (12,500)     5.5                              

Outstanding at June 30, 2007  1,833,333   $ 3.33        4.8      $  611,458     
Exercisable at June 30, 2007  1,272,500   $ 3.12        3.9      $  178,750     

The weighted-average grant-date fair value of options granted during the        
years ended June 30, 2007 and 2006 was $3.30 and $4.36, respectively.           

The following table presents information relating to nonvested stock options    
as of June 30, 2007:                                                            

                                        Weighted Average
                            Shares       Grant-Date Fair Value
                           ---------     ---------------------

Nonvested at July 1, 2006       449,166            $  1.78            
Granted                         335,000               3.30            
Vested                         (210,833)             (1.45)           
Cancelled                       (12,500)             (4.89)           
                   --------            -------
Nonvested at June 30, 2007      560,833            $  2.34            
                   ========            =======

The total fair value of stock options that vested during the years ended June   
30, 2007 and 2006 was $368,706 and $474,510, respectively.  The intrinsic       
value of stock options exercised during the years ended June 30, 2007 and       
2006 was $0 as there were no options exercised during these periods.  As of     
June 30, 2007 the Company had $739,307 of unrecognized compensation cost        
related to stock options that will be recorded over a weighted average period   
of approximately 1.5 years.                                                     

F-23  

BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES      
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  
YEARS ENDED JUNE 30, 2007 AND 2006  

9.   STOCKHOLDERS' EQUITY (CONTINUED):                                          

Stock options (continued):                                                      

The Company has issued options to purchase shares of the Company's common       
stock in exchange for services.  As of June 30, 2007, non-employee options      
represented 630,833 of the 1,833,333 options outstanding under the Company's    
2006 Consolidated Incentive Plan.  Of the 630,833 non-employee options          
outstanding, 260,833 were fully vested and contained no service conditions as   
of June 30, 2007. These non-employee options were valued using the Black-       
Scholes option-pricing model.  The fully vested options have been fully         
amortized on the straight-line method and resulted in expense of $42,523 and    
$25,538 for the years ended June 30, 2007 and 2006, respectively                

The remaining 370,000 non-employee options outstanding include service          
conditions and have graded vesting schedules through May 1, 2009.  As of June   
30, 2007, 195,000 of these options were fully vested.  Generally for these      
agreements, the measurement date of the services occurs when the options        
vest.  In accordance with Emerging Issues Task Force ("EITF") Issue No. 96-     
18, recognition of compensation cost for reporting periods prior to the         
measurement date is based on the then current fair value of the options based   
on the market price of the Company's common shares as of the reporting date.    
Any subsequent change in fair value is recorded on the measurement date.        
The fair value of these options were determined using the Black-Scholes         
option-pricing model, using the following assumptions at June 30, 2007; a       
dividend yield of zero, a risk-free interest rate of 4.96%, volatility of       
162% and an expected life of 7.83 years.  Consulting cost in connection with    
options that are not fully vested as of June 30, 2007 is being recognized on    
a straight-line basis over the requisite service period for the entire award.   
Non-cash fair value (credits) charges of ($16,503) and $726,787 were recorded   
as research and development expenses during the years ended June 30, 2007 and   
2006, respectively.                                                             

10.  INCOME TAXES:                                                              

The reconciliation between the expected federal income tax benefit computed     
by applying the Federal statutory rate to loss before income taxes and the      
actual benefit for taxes on loss for the year ended June 30, 2007 is as         
follows:                                                                        

Expected income tax benefit at statutory rate       $ (970,000)       
Change in valuation allowance attributable to:                        
Expiration of Net Operating Loss carryforwards        758,000       
Deferred compensation                                 350,000       
Stock-based compensation                             (200,000)      
Other                                                  62,000       
                                            ----------
Income tax benefit                                  $     -           
                                            ==========

F-24  

BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES      
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  
YEARS ENDED JUNE 30, 2007 AND 2006  

10.  INCOME TAXES (CONTINUED):                                                  

The Company has net operating loss carry-forwards ("NOLs") for tax purposes     
of approximately $36,800,000 as of June 30, 2007.  These NOLs expire on         
various dates through 2027.                                                     

The utilization of the NOLs may be limited under Section 382 of the Internal    
Revenue Code.                                                                   

The Company's deferred tax assets as of June 30, 2007, are estimated as         
follows:                                                                        

NOLs                         $ 13,900,000         
Stock-based compensation          200,000         
Deferred compensation           1,100,000         
                    ------------
                      15,200,000
Valuation allowance           (15,200,000)        
                    ------------
Net deferred tax assets      $       -            
                    ============

Deferred income taxes reflect the net tax effects of temporary differences      
between the carrying amounts of assets and liabilities for financial            
reporting purposes and the amounts used for income tax purposes.                

The Company has provided a valuation allowance of 100% of its net deferred      
tax asset due to the uncertainty of generating future profits that would        
allow for the realization of such deferred tax assets.                          

11.  OPERATING LEASE:                                                           

The Company entered into a non-cancellable operating lease commitment for       
office space in New York, effective August 1, 2006 and expiring November 30,    
2013.  In conjunction with the signing of the lease, the Company provided the   
lessor with a secured letter of credit in the amount of $171,945, which is      
reflected as restricted cash as of June 30, 2007.  The Company's obligations    
under the lease are partially guaranteed by Salvatore Zizza, chairman of Bion   
Dairy.  The Company has entered into two separate agreements to sub-lease       
approximately 32% of the Company's lease obligation and the tenants have also   
agreed to reimburse the Company for leasehold improvements and furnishings.     
Because the lease contains an escalation clause, the Company is recognizing     
rent under the straight-line method resulting in an average monthly rent        
expense of $15,820.  The Company is also recognizing the sub-lease rental       
income from its tenants under the straight-line method, with a monthly          
average of $5,250.  The difference between the straight-line method, and the    
actual lease payments have resulted in a deferred rent liability of $65,973     
as of June 30, 2007.   Rent expense, net of sub-lease rental income, was        
$140,863 for the year ended June 30, 2007.                                      

F-25  

BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES      
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  
YEARS ENDED JUNE 30, 2007 AND 2006  

11.  OPERATING LEASE (CONTINUED):                                               

As of June 30, 2007 the Company had prepaid rent relating to its operating      
leases of $15,179.                                                              

At June 30, 2007, future minimum rental payments due under non-cancelable       
leases and future minimum rental payments to be received under non-cancelable   
subleases are:                                                                  

                     Operating lease   Sublease    Net operating
                         payments       rentals     lease payments
                      ---------------   ---------   --------------
Fiscal year:                                                          
2008                  $   177,829      $  56,905     $ 120,924  
2009                      184,484         59,035       125,449  
2010                      191,405         61,249       130,156  
2011                      198,602         63,553       135,049  
2012                      212,775         68,088       144,687  
Thereafter                322,975        103,352       219,623  
                    -----------      ---------     ---------
Total                 $ 1,288,070      $ 412,182     $ 875,888  
                    ===========      =========     =========

12.  401(k) PLAN:                                                               

Effective December 1, 2001, the Company adopted the Bion Technologies, Inc.     
401(k) Profit Sharing Plan and Trust (the "401(k) Plan"), a defined             
contribution retirement plan for the benefit of its employees.  The 401(k)      
Plan is currently a salary deferral only plan and at this time the Company      
does not match employee contributions.  The 401(k) is open to all employees     
over 21 years of age and no service requirement is necessary.                   

13.  COMMITMENTS AND CONTINGENCIES:                                             

Employment and consulting agreements:                                           

The Company has an employment agreement with its president, Mark A. Smith,      
through December 31, 2007 providing $150,000 per year compensation.             

Effective March 31, 2005, an agreement with Brightcap, through which the        
services of Dominic Bassani, are provided, was extended through March 31,       
2009.  Under the terms of the agreement, Brightcap will be paid $300,000        
annually for Mr. Bassani's services.                                            

F-26  

BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES      
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  
YEARS ENDED JUNE 30, 2007 AND 2006  

13.  COMMITMENTS AND CONTINGENCIES (CONTINUED):                                 

Employment and consulting agreements (continued):                               

Effective May 1, 2005, the Company entered into a four-year                     
consulting/employment agreement with a former officer and director of the       
Company, Salvatore Zizza.  As of January 1, 2006, the former officer and        
director assumed the position of Chairman and director of Dairy, with an        
annual salary of $300,000 (Note 8).                                             

Effective May 1, 2005, the Company entered into a four-year                     
consulting/employment agreement with Jeff Kapell.  Under the terms of the       
agreement, Mr. Kapell provided part-time services to the Company through        
March 2006.  In April 2006, Mr. Kapell was appointed Dairy's Vice President-    
Renewables at a salary of $120,000 per year.                                    

Effective September 18, 2006, the Company entered into a four-year employment   
agreement with Jeremy Rowland whereby Mr. Rowland assumed the position of       
Chief Operating Officer of Dairy at an annual salary of $150,000.               

Effective June 1, 2007, the Company entered into an employment agreement,       
effective through August 31, 2009, with Craig Scott.  Mr. Scott was appointed   
Vice President of Capital Markets/Investor Relations at an annual salary of     
$120,000.                                                                       

In May 2005 the Company declared contingent deferred stock bonuses of 690,000   
shares to its key employees and consultants.  The stock bonuses of 492,500      
and 197,500 shares are contingent upon the Company's stock price exceeding      
$10.00 and $20.00 per share, respectively, and the grantees still being         
employed by or providing services to the Company at the time the target         
prices are reached.                                                             

Joint venture agreement:                                                        

In June 2006, the Company entered into an agreement with Fair Oaks Dairy Farm   
("FODF") to construct a Bion facility ("Stage I System") at FODF.  Bion has     
been working with FODF since May 2005 for the purpose of installing a waste     
treatment facility at FODF that could become the basis for a future             
Integrated Project.  The June 2006 agreement contemplates expansion beyond      
the initial waste treatment facility.    The Stage I System, if constructed,    
will initially be used for testing necessary for: a) finalization of design     
criteria for permitting and construction of, and b) optimization of renewable   
energy production and utilization for the full scale Integrated Projects.       
The Company is currently in negotiations toward an amended agreement with       
FODF pursuant to which: a) the Company will construct a commercial scale Bion   
System designed to handle the waste stream from approximately 3,500-6,200       
milking cows ("Initial System") at existing FODF facilities in Indiana which    
will incorporate and expand the scope of the Stage I System; and b) when the    

F-27  

BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES      
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  
YEARS ENDED JUNE 30, 2007 AND 2006  

13.  COMMITMENTS AND CONTINGENCIES (CONTINUED):                                 

Joint venture agreement (continued):                                            

Initial System has completed start-up phase and demonstrated environmental      
results consistent with the published results achieved at Bion's DeVries        
research facility, the Initial System will become the basis of expansion into   
an Integrated Project at FODF through development stages including dairy        
expansion, construction of additional Bion System modules, including            
renewable energy production, solids processing facilities, and construction     
of an ethanol plant.  It is anticipated that the amended agreement will be      
executed during calendar year 2007.  Preliminary engineering, design and site   
work at FODF has begun pursuant to the existing agreement.  However, due to     
the inability to resolve certain technical and financial issues, it is          
uncertain whether any of these facilities will be constructed.  FOFD is owned   
and controlled by Michael McCloskey and Timothy Den Dulk who have served as     
consultants to the Company since May 2005.                                      

Claims contingency:                                                             

In May 2002, Arab Commerce Bank Ltd. ("ACB"), an unaffiliated party, filed a    
complaint against the Company in the Supreme Court of the State of New York     
regarding $100,000 of the Company's convertible bridge notes ("Bridge Notes")   
that were issued to ACB in March 2000.  The complaint includes a breach of      
contract claim asserting that the Company owes ACB approximately $285,000       
plus interest of $121,028 plus interest based on ACB's interpretation of the    
terms of the Bridge Notes and subsequent amendments.  Effective June 30,        
2001, the Company issued ACB 5,034 shares of common stock in full               
satisfaction of the Bridge Notes based on the Company's interpretation of the   
Bridge Notes, as amended. The Company has filed an answer to the complaint      
denying the allegations. No activity has taken place on this lawsuit since      
early 2002.  The Company believes that the ultimate resolution of this          
litigation will not have a material adverse effect on the Company, its          
operations or its financial condition.                                          

The Company, its president and Dairy were defendants in a class                 
action/derivative action lawsuit in Delaware Chancery Court (TCMP#3 Partners,   
LLP, et al v. Trident Rowan Group, Inc., et al, Civil Action No. 170-N) (the    
"TCMP Litigation") and on August 10, 2007 a settlement was approved.            
Pursuant to the settlement, the Company, its president and Dairy paid           
$165,000, through insurance, into a settlement fund.  As part of the            
settlement reached in the TCMP Litigation, the Company, Centerpoint and         
certain shareholders of the Company ("Shareholder Class") filed an action       
against Comtech Group, Inc. ("Comtech") (formerly known as Trident Rowan        
Group, Inc.), OAM S.p.A ("OAM") and others in the Court of Chancery in the      
State of Delaware (the "Comtech Litigation"), along with a stipulated           
settlement of the litigation.  Pursuant to that settlement, Comtech and OAM     
agreed to deliver to the Shareholder Class:  a) 144,240 shares of the           

F-28  

BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES      
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  
YEARS ENDED JUNE 30, 2007 AND 2006  

13.  COMMITMENTS AND CONTINGENCIES (CONTINUED):                                 

Claims contingency (continued):                                                 

Company's common stock; b) a warrant to purchase 100,000 shares of the          
Company's common stock, and c) 140,000 shares of the common stock of            
Centerpoint.  It is anticipated that delivery of these securities (net of 10%   
attorneys' fees) will take place during the second quarter of fiscal 2008 and   
each member of the Shareholder Class will receive the equivalent of             
approximately .05 of the Company's shares for each share of the Company's       
common shares (split adjusted) owned on January 15, 2002.  Additionally,        
Comtech and OAM assigned to the Company all of their rights to the proceeds     
of an escrow established from the sale of Centerpoint's assets to Aprilia       
S.p.A. (the "Aprilia Escrow") and any proceeds from litigation related to the   
transaction with Aprilia.  On September 18, 2007 the Company received           
$798,000 (net receipts were $160,000 to Centerpoint and $559,000 to Bion,       
after payment of attorneys' fees) from the Aprilia Escrow.  As part of the      
settlement, one of the other defendants in the Comtech litigation paid          
$150,000 into a settlement fund, through insurance, from which the Company      
and Centerpoint received $110,000, in aggregate, on September 10, 2007.         

Also on September 18, 2007, Centerpoint received $430,000 from its direct 35%   
ownership interest in the Aprilia Escrow.                                       

14.  RELATED PARTY TRANSACTIONS:                                                

The Company has an accrued payable of $41,647 to a company controlled by        
Salvatore Zizza for rental of office space in 2003.                             

F-29  

SIGNATURES      

Pursuant to the requirements of Section 13 or 15(d) of the Securities 
Exchange Act of 1934, the Registrant has duly caused this Report to be signed   
on its behalf by the undersigned thereunder duly authorized.                    

                                 BION ENVIRONMENTAL TECHNOLOGIES, INC.

Dated: October 10, 2007               By:/s/Mark A. Smith                       
                                 Mark A. Smith, President (Chief
                                      Executive Officer) and Interim Chief
                              Financial Officer (Principal
                                   Financial and Accounting Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934,  
this Report has been signed by the following persons on behalf of the           
Registrant and in the capacities and on the dates indicated:                    

SIGNATURE                      TITLE                     DATE   

/s/ Mark A. Smith             President, General Counsel,   October 10, 2007    
Mark A. Smith                 Interim Chief Financial                           
Officer and Director

/s/ Jon Northrop              Secretary and Director        October 10, 2007    
Jon Northrop                                                                    

/s/ Salvatore J. Zizza        Chairman and Director of      October 10, 2007    
Salvatore J. Zizza            Bion Dairy                                        

/s/ Jere Northrop             Senior Technology Director    October 10, 2007    
Jere Northrop                 and Director                                      

Dates Referenced Herein   and   Documents Incorporated By Reference

This 10KSB Filing		Date		Other Filings
		4/9/92
		8/9/95
		6/3/96
		5/21/99		8-K
		7/23/99		8-K
		6/30/01		10KSB, 10KSB/A, NT 10-K
		7/25/01
		12/1/01
		1/10/02
		1/15/02
		1/31/02
		3/15/02
		5/6/02
		2/12/03
		3/25/03		8-K, 3
		3/31/03		10QSB
		4/1/03
		4/2/03
		4/7/03
		4/23/03
		6/30/04
		12/31/04
		3/31/05
		4/15/05
		5/1/05
		6/30/05
		9/30/05
		10/1/05
		12/23/05
		12/31/05
		1/1/06
		3/31/06
		4/1/06
		4/4/06
		6/19/06
		6/30/06
		7/1/06
		8/1/06
		9/13/06
		9/18/06
		9/30/06
		10/15/06
		10/16/06
		11/3/06
		11/14/06		10SB12G
		12/15/06
		12/31/06		10QSB/A, 10QSB
		1/1/07
		1/13/07		3/A, 3
		2/1/07		10SB12G/A
		3/27/07
		3/31/07		4, 10QSB
		4/1/07
		4/3/07		4, 3/A, 8-K
		4/20/07		4, 8-K
		5/1/07
		5/15/07
		5/21/07		8-K
		6/1/07		8-K
For The Period Ended		6/30/07		NT 10-K
		7/1/07
		8/10/07		8-K
		8/13/07
		8/18/07		8-K
		8/22/07		8-K
		8/31/07
		9/10/07		8-K
		9/15/07
		9/18/07
		9/30/07		10QSB
Filed On / Filed As Of		10/10/07
		11/15/07		4
		12/31/07		10QSB, 4
		5/31/08		4, 8-K
		7/1/08		4
		7/31/08
		12/31/08		8-K, 10-Q, 4
		1/1/09
		3/31/09		10-Q
		5/1/09
		5/31/09
		6/30/09		10-K/A, 10-K, 4
		7/1/09
		8/31/09
		9/30/09		4, 8-K, 10-Q
		10/11/09
		12/31/12
		7/31/13
		11/30/13
		1/31/14
		4/30/15
		5/14/15
		9/30/15
		11/8/21
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