Bion Environmental Technologies Inc.

Efficient, Low-Cost Livestock Waste Treatment and Byproduct Refining Technology

This Bion Environmental Technologies Inc. profile is part of a paid investor education campaign.*

Overview

Bion Environmental Technologies Inc. (OTCQB:BNET) has developed a proprietary technology platform aimed at reducing costs and improving efficiencies in the multi-billion dollar water treatment sector. The technology also has direct applications in the dairy, meat and egg production industries.

Bion is well-positioned to capture a significant portion of the evolving cleantech space — the company’s technology can reduce water pollution at a fraction of the cost US taxpayers are currently spending on outdated water treatment strategies, while simultaneously improving efficiencies in livestock production, processing and distribution.

Bion’s Kreider Farms project demonstrates that the company’s livestock waste treatment technology can resolve major environmental and public health issues, reduce costs to all stakeholders, spur economic growth in rural communities and provide investment opportunities in a newly-developing sector.

Bion’s Company Highlights

• Ground-breaking technology developed and proven over the last 29 years.
• Excess nutrients are now recognized by US EPA as “one of the greatest water quality problems in the US today”.
• There is no other known cost-effective technology that provides Bion’s level of treatment of wet livestock waste.
• Bion’s treatment solutions are scalable, proven in commercial operations and their verified reductions have been accepted by EPA, the US Department of Agriculture and other regulatory agencies.
• Bion currently holds seven US and six international patents and was recently granted the first patent on its third-generation technology.
• Bion’s second-generation technology qualified by USDA/Rural Development Technical Assessment for programs that provide loan guarantees up to $250 million.
• Bion’s technology provides environmental improvements that are verified, so they back a USDA-certified sustainable brand

Costly Clean-Up of Unregulated Livestock Waste from US Watersheds

“Bion’s technology platform provides a comprehensive cleantech ‘makeover’ for large-scale livestock production. We can substantially reduce, and in some cases almost eliminate, the environmental and health impacts associated with livestock waste, while simultaneously providing significant improvements in resource and operational efficiencies throughout the supply chain,” said Craig Scott, Bion’s Director of Communications.

Government expenditures on wastewater treatment are rising: from $38 million per year between 1956 and 2000, to $87 million per year from 2001 to 2010, to $114 billion spent in 2010 alone.

The primary cost driver in wastewater treatment: nutrient removal

The EPA identified excessive levels of nitrogen and phosphorus as the greatest threat to water quality in the US. More than a billion pounds of nitrogen and phosphorus need to be reduced in the Mississippi River Basin, Great Lakes and Chesapeake Bay watersheds to restore water quality.

Under the 1972 Clean Water Act (CWA), the large majority of the above spending went to successfully reduce waste from “point sources”, which are anything with a smokestack or a discharge pipe with measurable discharge (e.g., power, water treatment, food processing and manufacturing plants).

But the real problem today is excess nutrient run-off from agriculture. According to Bion, agriculture accounts for more than half of the excess nutrients in most major US watersheds. More specifically, livestock waste is one of the largest sources of nitrogen and phosphorus in most major watersheds.

Since the passage of the CWA, the livestock industry has undergone tremendous expansion and consolidation, leading to ever-larger Concentrated Animal Feeding Operations (CAFOs). Today, well over 60 percent of U.S. livestock production comes from these large-scale facilities. CAFOs still dispose of their waste the way small farmers have for centuries: by spreading it on the ground, essentially untreated, for its nutrient and fertilizer value. Although they are much like an industrial point-source manufacturing facility, CAFOs enjoy significantly less regulation than a point source.

“Livestock production is one of the largest, if not THE largest, unregulated “man-made” sources of pollution in the US and in the world. In the US, it has been subject to very little regulation compared to point sources, so there is tremendous room for improvement. Bion’s onsite treatment technology is capable of providing nutrient reductions that can be achieved very cost-effectively,” said Bion Director of Communications Craig Scott.

The US livestock inventory includes more than nine million dairy cows, 90 million cattle, 60 million swine and over two billion poultry. These animals produce more than a billion tons of livestock waste each year. According to Bloomberg, 300 million tons are produced just from feedlots. However, agriculture is considered a “non-point source” and is not regulated under the Clean Water Act.

“Currently, the problem is not being dealt with at its source,” said Scott. “Instead, billions of dollars are being spent to upgrade downstream waste treatment plants and to construct large-scale stormwater projects that re-collect and treat the nutrients AFTER they have been released to contaminate the environment. This is not an acceptable solution – from either a cost or a common-sense perspective.”

Scott added, “A critical recent development from our perspective is that a growing number of livestock industry producers, including much of the US dairy industry, support a new market-driven strategy that encourages the industry to participate in more meaningful watershed cleanup. And now, so does the US EPA and USDA.”

Bion’s Efficient, Low-Cost Livestock Waste Treatment Technology

Bion Environmental Technologies’ proven comprehensive environmental management systems can eliminate the impacts from up to 95 percent of nitrogen and phosphorus from livestock waste, reduce greenhouse gases and ammonia emissions by 90 percent and substantially reduce pathogens. Over $100 million has been invested in developing this technology and policy change over the past 29 years.

Bion’s second-generation (2G) technology has been proven in commercial operations. At its core is a biological process that facilitates the growth of large populations of naturally-occurring bacteria that convert nitrogen and phosphorus in the waste stream to solid forms that are removable by other processes. Some of the nitrogen is released as a harmless and inert gas. Bion’s systems also create new revenue sources through the extraction of renewable energy and the production of value-added products such as fertilizer and soil amendment products.

Bion’s 2G treatment solution is protected by seven US and six international patents, and has been accepted by the EPA, US Department of Agriculture (USDA) and other regulatory agencies. Patents are pending in the EU, New Zealand, Mexico, Brazil, Argentina and Australia. The USDA, under its technical assessment review process, has reviewed and qualified Bion’s 2G technology platform.

“USDA’s Technical Assessment is a very rigorous technology vetting for anything to do with renewable energy production in the US,” said Scott. “The successful review indicates that Bion’s projects will qualify for federal loan guarantees of up to $250 million per project, although most of our projects would cost significantly less than that. the real takeaway from this is that the USDA has confirmed the technology does what we claim. We are equally confident that the 3G technology will qualify under the Technical Assessment, as well.”

Bion is finalizing R&D on its patented third-generation (3G) technology which provides substantially greater resource recovery, including pipeline-quality natural gas and a high-value ‘pure’ nitrogen product that Bion believes will meet Organic Materials Research Institute (OMRI) standards for certification in organic production. An organic certification could translate to substantially higher pricing in the fertilizer markets. According to the company, the 3G technology is expected to generate enough value from by-products to support projects absent nutrient credit revenues. The first patent on Bion’s 3G technology was granted in October 2018.

In April 2019, Bion successfully completed its computer simulations and stage two evaporation testing for its 3G technology. Testing confirmed Bion’s projections for the percentage of ammonia, carbon dioxide, gas capture and vapor that will be transferred to the distillation and crystallization processes that produce ammonium bicarbonate.

Following the successful testing, Bion conducted a pilot program focused on increasing the technology’s efficiency and flexibility, as well as producing ammonium bicarbonate liquid, which concluded in July. Small quantities of ammonium bicarbonate liquid produced during the pilot will be sent to the OMRI to secure certification for use as an organic fertilizer. Bion expects to complete it’s latest round of pilots in September, which will provide data for the Kreider 2 project final design, as well as produce ammonium bicarbonate crystals for additional OMRI certification.

Bion expects to develop a monitoring and control system for a small 3G commercial system in the near term. The initial commercial installation will provide field-tested and continuous operating data that can be used to expand into full-scale commercial systems. The initial system will also produce ammonium bicarbonate liquid and crystals for growth trials by potential customers in the row crop, hydroponic, greenhouse, lawn and garden and food markets.

Opportunities for Bion’s Technology

Chesapeake Bay: Strategic US watershed at risk

The Chesapeake Bay is the largest estuary in the US, with about 150 streams, creeks and rivers draining into the watershed. Chesapeake Bay is one of the most severely degraded watersheds in the nation, suffering from frequent algal blooms and declining fish, crab and oyster populations.

In 2010, under an Executive Order, the EPA established the Chesapeake Bay total maximum daily load (TMDL) – the maximum amount of pollutants that the water body can receive and still meet water quality standards. The TMDL calls for significant reductions in excess nutrients and sediment that flow into the Bay and includes heavy penalties for non-compliance. The reductions include approximately 78 million pounds of nitrogen annually. The TMDL required that practices were in place by 2017 to meet 60 percent of the overall nitrogen, phosphorus and sediment reductions and that all pollution control measures needed to fully restore the Bay and its tidal rivers are in place by 2025.

Pennsylvania: Legislation to establish a program to acquire competitively-bid verified nitrogen reductions

Under the Chesapeake Bay TMDL, the state of Pennsylvania is responsible for reducing nearly half of the excess nitrogen in the Chesapeake Bay. However, Pennsylvania has fallen far behind in meeting its mandated nitrogen targets. The state acknowledged it is substantially behind in its obligation to reduce pollution to the Bay and it’s current plan still leaves the state 16 million pounds of nitrogen short of its goals. The state could face expensive sanctions from the EPA as detailed in a special report issued by the State’s Auditor General in April 2015. While there have been threats of federal funding cuts to the Bay efforts, the Trump Administration has also stated that there will be no rollback on Bay regulations, making it even more critical for Pennsylvania to focus limited resources on cost-effective solutions.

PA Senate Bill 575, the Pennsylvania Clean Water Procurement Act, was introduced in June 2019. The Bill seeks to establish a competitive procurement program for verified nutrient reductions which will enable private-sector companies such as Bion to compete for public funding on an equal basis with public works and stormwater authorities – based on cost. SB 799 was in response to a 2013 PA legislative study that estimated 90 percent savings in Chesapeake Bay compliance costs if such a program were implemented. The bill was passed in the Senate at the end of June in a bipartisan vote of 33-17. Its House companion bill, HB 1642, is in the House State Government Committee awaiting the legislature’s return from recess on September 27.

Bion is a founding member of the Coalition for an Affordable Bay Solution, formed to support the creation of a competitively bid nitrogen trading program in Pennsylvania. The coalition includes JBS (the largest livestock processor in the world) and is headed by Ed Schafer, Bion’s Executive Vice Chairman, a former US Secretary of Agriculture and former Governor of North Dakota.

“Adoption of the SB 799 [575] strategy will create public policy that can help Pennsylvania meet Federal compliance mandates while reducing costs to the Commonwealth’s taxpayers,” said Schafer. “Economic studies show a savings of up to US$1.5 billion annually in Bay costs alone. Further, high-impact solutions are needed to help stem the increasing nitrate contamination of drinking water in Lancaster and York Counties.”

Bion believes a market-driven strategy will be adopted by Pennsylvania in 2019, which could allow the private sector to compete for public funding based on cost and effectiveness. Bion is equally confident the credits it can verify through livestock waste treatment represent some of the few large-scale low-cost solutions currently available.

Kreider Farms: The only livestock facility that generates verified reductions from treatment of dairy waste

Located in Pennsylvania, Bion Environmental Technologies’ Kreider Farms project is part of one of the largest dairy and poultry operations in the Chesapeake Bay watershed. The Phase 1 dairy waste treatment project at Kreider Farms was placed in service nearly five years ago and includes a total of 1,200 dairy cows. The project was financed by the Pennsylvania Infrastructure Investment Authority (PENNVEST) and was issued the first-ever full water quality permit for a livestock facility in the US.

Phase 2, which is anticipated to include more than nine million chickens, is currently slated for development in the second half of 2019. The Kreider Farms projects are expected to produce at least two million pounds of verified nitrogen reductions annually to the Chesapeake Bay. Further, the projects will provide significant additional environmental and economic benefits to the local area.

If Senate Bill 575, or a similar market-driven strategy is adopted, Bion and other technology providers could compete to sell these reductions to Pennsylvania under long term contracts. Bion expects that verified credits will have a value of at least $8 to $12 per credit, consistent with the PA legislative study.

Once fully operational, Bion expects the Kreider Farms projects to generate revenues up to $20 million annually from nutrient reduction credits alone. Substantial additional revenues from energy, other credits and by-product sales are also expected to push revenues over $50 million.

Market-driven strategy best path to low-cost solution

A 2015 report by the University of Maryland’s Environmental Finance Center validates the need for a more efficient, market-driven approach to state compliance with the EPA-mandated reductions.

“There is no shortage of private capital available for financing environmental projects; what has been missing is the appropriate structure and risk profiles associated with the necessary investments,” state the report’s authors. “It is essential that financing and funding decisions be made based on efficiency and effectiveness of projects rather than political outcomes and motivations.”

Policies are changing now,” added Scott. “The strategies that are being developed today to restore the Chesapeake Bay can serve as a model for the many states in the Mississippi River Basin, Great Lakes and other watersheds that suffer from similar issues. Verified credits create a common currency that can be used to offset EPA-mandated requirements that will provide opportunity and stimulate investment from the private sector. The livestock industry is ready to engage. Large-scale solutions from livestock waste treatment will drive down costs, speed implementation, spur rural economic growth and provide invaluable environmental benefits to those local upstream communities.”

Bion’s Management Team

Mark A. Smith – Chairman & President
Mark Smith 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 Services Group. Since 1992, Smith has served Bion in various senior positions including director, Chairman and President.

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

Dominic Bassani – CEO
Dominic Bassani was promoted to Chief Executive Officer in May 2011. He had previously served as the General Manager of Bion Integrated Projects Group (then Bion Dairy) (‘Projects Group’) from April 2003 through September 2006 and as a consultant (through Bright Capital, Ltd. (“Brightcap”)) on a full-time basis with a focus on strategic planning and special projects. He has been an investor in and consultant to Bion since December 1999. As an independent investor, since 1990 he has owned and operated Brightcap, a management consulting company that provides management services to early-stage technology companies.

Bassani 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, Bassani focused primarily on providing management reorganization services to manufacturing companies and in particular to generic pharmaceutical manufacturers and their financial sponsors.

Ed Schafer – Executive Vice Chairman
Ed Schafer joined Bion in August, 2010, as Executive Vice Chairman, to provide Bion with strategic advice, focusing on areas of public policy related to the livestock industry both domestically and internationally. Commencing in early 2011, Schafer became a key member of Bion’s three-person senior management team with direct management responsibility for Bion’s: a) state and federal government interfaces, b) relationships with the agriculture (including livestock) industry, and c) international initiatives in Asia and the Middle East.

Schafer was the US Secretary of Agriculture from 2008 to 2009 and Governor of North Dakota from 1992 to 2000. In addition to his public sector experience, he has successfully led a multi-national consumer products business and several entrepreneurial start-up companies. Schafer graduated from the University of North Dakota with a Bachelor of Science degree in business, earned a Master of Business Administration at the University of Denver, and has been awarded two honorary doctorate degrees. Schafer has served on public and private corporate boards of directors and held leadership positions in foundations and trade associations. He is also an active member of many civic and service organizations.

Craig Scott – Director of Communications
Craig Scott rejoined Bion Environmental Technologies as a full-time employee in June 2007 and is now the Director of Communications. Scott participated in several private placements for Bion in 1993 when he was then licensed with the National Association of Securities Dealers (NASD) as a registered representative. He left the securities industry in 1996 to take a position with Bion where he was instrumental in business development, capital raising and developing public and market awareness of Bion. Since 1996, Scott has held various full- and part-time, as well as consulting, positions with the Company.

Scott was licensed with the NASD in 1981 and primarily focused on marketing, but he is experienced in many facets of the securities industry, including investment banking, syndication, trading and compliance. He was successful in raising substantial capital and increasing institutional ownership and market awareness of two AMEX-traded energy companies from 2003 through 2006 and is experienced in dealing with large institutional investors and sell-side firms as well as investment advisors and brokers from smaller regional to large national firms.

Jon Northrop – Secretary
Jon Northrop 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. 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. Northrop has a bachelor’s degree in Physics from Amherst College, Amherst, Massachusetts (1965), an MBA in Finance 2 from the University of Chicago, Chicago, Illinois (1969), and spent several years conducting postgraduate research in low energy particle physics at Case Institute of Technology, Cleveland, Ohio. Northrop is the brother of Jere Northrop.

Before founding Bion Technologies Inc., Northrop 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, he 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.

Jeremy Rowland – COO
Jeremy Rowland transitioned to a consultant in December 2013. Mr. Rowland joined Bion in September 2006 as its Chief Operating Officer of Projects Group and Chief Operating Officer of Bion Services Group. 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. 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. Rowland has 18 years of experience in multi-disciplinary energy and environmental project development and management throughout the US and overseas. 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.

This document includes information supplied by Bion Environmental Technologies, Inc., which includes forward-looking statements based on Bion management’s current reasonable business expectations. In this document, the words ‘can’, ‘expected’, ‘confident’, ‘will’, ‘believe’ and similar expressions identify certain forward-looking statements. These statements are made in reliance on the Private Securities Litigation Reform Act, Section 27A of the Securities act of 1933, as amended. There are numerous risks and uncertainties that could result in actual results differing materially from expected outcomes. Potential investors should carefully review the materials and disclosures on Bion’s website www.biontech.com and its SEC filings.

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