King of the Cow Pats

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by Debra Fiakas CFA

Last week Bion Environmental Technologies, Inc. (BNET: OTC/QB) announced that the company has applied for patent protection of a process to recover nitrogen from livestock waste.  The process yields a crystalline, water-soluble fertilizer product that is about 12% to 15% nitrogen.  Since the nitrogen is extracted from the livestock waste without the use of chemicals and leaves behind potentially toxic salts, metals and minerals, the company is also applying for certification as an organic material.

The company believes there will be a strong demand in the agriculture sector for its products.  First, feedlot owners have to worry about federal mandates to stem contaminated run-off that can pollute streams and rivers.  Nitrogen and other nutrients in run-off can lead to reduced oxygen levels in water and otherwise harm aquatic life.  There is a strong incentive to find alternatives for livestock waste and Bion expects to find an eager reception among livestock finishers. 

Second, there is a ready market for organic fertilizer to satisfy the increasingly discerning consumer interested in eating more wholesome foods.  Its fertilizer product is easy to handle, package and distribute  –  qualities that are supporting of a high-margin fertilizer product.

The nitrogen fertilizer product could be a breakthrough for Bion, which has reported only a few thousand dollars in revenue since inception.  With so little money coming in the door, Bion is not profitable and is burning cash.  In the twelve months ending March 2015, the company used $715,960 in cash to support development work and other operations.  It does not sound like a large sum until an investor notes that at the end of March Bion only had about $500,000 in cash in the bank.

It might be a bit dicey accumulating a meaningful position in Bion Environmental.  Trading volumes are quite modest and the stock does not trade every day.  Trading near $1.00 per share, BNET trades less like a stock priced on future cash flows and more like an option on management’s ability to commercialize its technology.

Debra Fiakas is a cattle rancher’s daughter and the Managing Director of Crystal Equity Research, an alternative research resource on small capitalization companies in selected industries. 

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein. 


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