SECURITIES AND EXCHANGE COMMISSION
                    Washington, D.C.  20549
                          Form 10-QSB


(Mark One)
[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
     SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD
     ENDED   December 31, 1996   OR
[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
     SECURITIES EXCHANGE ACT OF 1934 OR THE TRANSITION PERIOD
     FROM __________ TO __________


Commission file number    0-19333


                 Bion Environmental Technologies, Inc.
     (Exact name of registrant as specified in its charter)


           Colorado                           84-1176672
(State or other jurisdiction of             (I.R.S. Employer
 incorporation or organization)            Identification No.)


   555 17th Street, Suite 3310
      Denver, Colorado                          80202
(Address of principal                        (Zip Code)
      executive offices)


                          (303) 294-0750
(Registrant's telephone number, including area code)



Indicate  by check mark whether the registrant (1) has filed  all
reports  required  to be filed by Section  13  or  15(d)  of  the
Securities  Exchange Act of 1934 during the preceding  12  months
(or  for such shorter period that the registrant was required  to
file  such  reports),  and (2) has been subject  to  such  filing
requirements for the past 90 days.  Yes X   No___

The  number  of  shares  outstanding of registrant's  classes  of
common equity, as of February 18, 1997:

          Common Stock, No Par Value, 1,946,326
          Series B Convertible Preferred Stock, $.001
            Par Value, 18,834 shares
          
Bion Environmental Technologies, Inc.               Form 10-QSB
                                              December 31, 1996




                             INDEX



PART I    FINANCIAL INFORMATION                       PAGE NO.


ITEM 1    FINANCIAL STATEMENTS

          Consolidated Balance Sheets:
               June 30, 1996 and
               December 31, 1996..................        F2

          Consolidated Statements of Operations:
               For the Six Month Periods Ended
               December 31, 1995 and
               December 31, 1996..................        F3

          Consolidated Statements of Operations:
               For the Three Month Periods Ended
               December 31, 1995 and
               December 31, 1996..................        F4

          Consolidated Statements of Cash Flows:
               For the Six Month Periods Ended
               December 31, 1995 and
               December 31, 1996..................        F5

          Consolidated Statement of Changes in
          Stockholders' Equity....................        F6

          Notes to Consolidated Financial Statements      F7-F10


ITEM 2    MANAGEMENT'S DISCUSSION AND ANALYSIS OR
          PLAN OF OPERATION........................          3



PART II        OTHER INFORMATION


ITEMS 1-6      ........................................      15



                     FINANCIAL INFORMATION


PART I

ITEM 1.  FINANCIAL STATEMENTS


          BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES
                     Consolidated Balance Sheets

<TABLE>
<CAPTION>
                                                 December 31,    June 30,
                                                     1996          1996
                                                  (Unaudited)    (Audited)
<S>                                                   <C>           <C>
          Assets
Current assets
 Cash and cash equivalents                       $    8,035     $  118,612
 Contract receivables                                12,738         22,070
 Work in progress (net of allowance of $20,000)     241,803        219,686
 Prepaid expenses and other                               0          2,128
      Total current assets                          262,576        362,496

Property and equipment, net                         207,608         66,216

Other assets
 Patents, net                                        39,407         40,778
 Deferred long term contract costs                   82,433         82,433
 Other                                                7,282          4,387
     Total other assets                             129,122        127,598

       Total assets                              $  599,306     $  556,310

          Liabilities and Stockholder (Deficit)
Current liabilities
 Accounts payable and accrued liabilities        $  397,870     $  228,712
 Accounts payable - related party                         0         23,351
 Notes payable - stockholders                        82,171         96,050
 Capital lease obligations                           45,544         18,482
 Accrued payroll - officers                          66,750        206,667
      Total current liabilities                     592,335        573,262

Long-term liabilities
 Notes payable - stockholders                     2,092,035      2,007,035
 Line of credit                                           0              0
 Capital lease obligation                           131,424         43,047
 Deferred contract revenue                          206,500        206,500
       Total liabilities                          3,022,294      2,829,844

Commitments and contingency

Stockholders' (deficit)
 Preferred stock, $.001 par value 10,000,000
  shares authorized, 18,834 series B
  (December 31, 1996 and June 30, 1996)
  shares issued and outstanding                     95,482          95,482
 Common stock, no par value, 100,000,000
  shares authorized, 1,903,369 (December 31,
  1996) and 1,683,777 (June 30, 1996) shares
  issued and outstanding                         4,181,736       3,485,270
 Common stock subscribed                           330,158          49,538
 Accumulated deficit                            (7,030,364)     (5,903,824)
     Total stockholders (deficit)               (2,422,988)     (2,273,534)

     Total  liabilities  and stockholders 
      (deficit)                               $    599,306      $  556,310
</TABLE>
       
            See Notes to Consolidated Financial Statements




          BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES

                Consolidated Statements of Operations

<TABLE>
<CAPTION>
                                              Six Months Ended
                                                  December 31
                                               1996        1995
                                           (Unaudited)  (Unaudited)
<S>                                             <C>         <C>
Contract revenues                            $  61,807  $  84,988

Contract costs                                 285,702     65,132

     Gross profit (loss)                      (223,895)    19,856

General and administrative expenses            796,533    746,372

Loss from operations                        (1,020,428)  (726,516)

Other income (expense)
     Interest income                           107,194         21
     Interest expense                         (141,334)   (93,936)
     Research and development                  (66,887)   (37,818)
     Gain (loss) on marketable equity 
      securities                                     0    173,228

Net   (loss)                               $(1,121,455) $(685,021)

(Loss)  per  weighted average share
  of common stock                          $     (0.63) $   (0.45)


Weighted common shares outstanding           1,768,698  1,538,170

</TABLE>

            See Notes to Consolidated Financial Statements




          BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES

                Consolidated Statements of Operations

<TABLE>
<CAPTION>
                                               Three Months Ended
                                                  December 31,
                                                1996       1995
                                            (Unaudited)(Unaudited)
<S>                                             <C>         <C>
Contract revenues                            $  26,260  $  46,803

Contract costs                                 173,520     38,130

     Gross profit (loss)                      (147,260)     8,673

General and administrative expenses            455,101    433,146

Loss from operations                          (602,361)  (424,473)

Other income (expense)
     Interest income                             2,064         21
     Interest expense                          (73,399)   (53,060)
     Research and development                  (32,336)   (21,897)
     Gain  (loss)  on marketable 
      equity securities                              0    (39,316)

Net   (loss)                                 $(706,032) $(538,725)

(Loss) per weighted average share
  of common stock                           $    (0.39) $   (0.34)

Weighted common shares outstanding           1,819,820  1,578,960

</TABLE>
            See Notes to Consolidated Financial Statements



             BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES
                    Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>
                                                   Six Months Ended
                                                      December 31,
                                                    1996       1995
                                                 (Unaudited)(Unaudited)
<S>                                                  <C>         <C>
Cash flows from operating activities
     Net (loss)                                 $(1,126,540) $(685,021)
     Adjustments to reconcile net loss to
     net cash provided/used by
     operating activities -
       Depreciation and amortization                15,850      1,660
       (Increase) decrease in valuation allowance        0   (173,228)
       Issuance of stock for services
         and interest                              641,145    102,086
     Change in assets and liabilities -
       Contract receivables                        (12,785)   (31,634)
       Prepaid expenses                               (767)    (2,693)
       Accounts payable and accrued liabilities    145,807     45,645
       Accrued payroll - officers                 (139,917)         0

          Net cash (used in) operating activities (477,207) (743,185)

Cash flows from investing activities
     Investments in patents                             0     (1,595)
     Sale of marketable equity securities               0    677,237
          Net cash (used in) provided by investing
          activities                                    0    675,642

Cash flows from financing activities
     Proceeds from shareholder notes - net         71,120    (30,000)
     Proceeds from sale of stock                  304,691    302,020
     Payments on capital lease obligations        (40,431)         0
     Proceeds from the sale of warrants            31,250          0

          Net cash provided by financing
            activities                            366,630    272,020

Net increase (decrease) in cash and
  cash equivalents                               (110,577)   204,477

Cash and cash equivalents at
  beginning of period                             118,612      3,801

Cash and cash equivalents at end of period      $   8,035   $208,278

       Supplemental Cash Flow Information
          Cash paid for interest                 $73,337     $93,936

</TABLE>
        Supplemental disclosure of non-cash financing activities
         The Company entered into capital leases for
          equipment in the amount of      $135,052
            The Company declared accrued dividends of$5,085
             for the Series "B" preferred stock.



            See Notes to Consolidated Financial Statements



                               BION ENVIRONMENTAL TECHNOLOGIES, INC.
                                          AND SUBSIDIARIES

                     Consolidated Statement of Changes in Stockholders' Equity
<TABLE>
<CAPTION>

                               Series "B"                               Common 
                              Preferred Stock         Common Stock       Stock
                              Shares    Amount    Shares      Amount  Subscribed
<S>                            <C>        <C>       <C>        <C>         <C>
Balances at June 30, 1996      18,834  $ 95,482  1,683,777  $3,485,270  $ 49,538 

Common stock subscriptions
 for services                      --       --          --         --     20,935

Warrants issued for cash           --       --          --     $31,250      -- 

Issuance of common stock
 for cash                          --       --      56,183    $151,216      --  

Issuance of common stock
  for services                     --       --       7,846     $23,540      --

Dividends declared, preferred
  stock Series B                   --       --          --         --       -- 

Net (loss) for the period ended
  September 30, 1996               --       --          --         --       -- 

Balances at September 30, 1996   18,834  $ 95,482 1,747,806 $3,691,276  $ 70,473

Common stock subscriptions
  for services and debt            --       --          --         --   $259,685

Issuance of common stock for cash  --       --       41,287   $153,475       --  

Issuance of common stock
  for services                     --       --          734     $2,200       --

Issuance of common stock
  for reduction of debt            --       --      113,542   $334,785       --

Dividends declared, preferred
  stock Series B                   --       --           --         --       --

Net (loss) for the period ended
  December 31, 1996                --       --           --         --       --

Balances  at December 31, 1996  18,834  $ 95,482   1,903,369 $4,181,736 $330,158

</TABLE>

    Continued below
                             See Notes to Consolidated Financial Statements


                   BION ENVIRONMENTAL TECHNOLOGIES, INC. AND SUBSIDIARIES
                  Consolidated Statement of Changes in Stockholders' Equity

<TABLE>
<CAPTION>

                                    Accumulated    
                                     (Deficit)                Total
<S>                                     <C>                    <C>
Balances at June 30, 1996            $(5,903,824)         $(2,273,534)

Common stock subscriptions
 for services                               --                 20,935

Warrants issued for cash                    --                 31,250

Issuance of common stock
 for cash                                   --                151,216

Issuance of common stock
 for services                               --                 23,540

Dividends declared, preferred
 stock Series B                           (2,544)              (2,544)

Net (loss) for the period ended
 September 30, 1996                     (415,423)            (415,423)

Balance at September 30, 1996         (6,321,791)          (2,464,560)

Common stock subscriptions
 for services and debt                       --                259,685 

Issuance of common stock
 for cash                                    --                153,475

Issuance of common stock
 for services                                --                  2,200

Issuance of common stock
 for reduction of debt                       --                334,785

Dividends declared, preferred
 stock Series B                           (2,541)               (2,541)

Net (loss) for the period
 ended December 31, 1996                (706,032)             (706,032)

Balances at December 31, 1996        $(7,030,364)          $(2,422,988)
</TABLE>

                       See notes to consolidated financial statements.



           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 1 - Summary of Accounting Policies

The    summary    of   the   registrant's   significant   accounting    policies
are   incorporated   by   reference   to  the   Company's   annual   report   on
Form 10-KSB at June 30, 1996.

The     accompanying    unaudited    condensed    financial    statements    and
disclosures    reflect   all   adjustments   (all   of    which    are    normal
recurring   accruals)   in   the   ordinary  course   of   business   which   in
the   opinion   of   management   are  necessary   for   a   fair   presentation
of   the   results   of  operations,  financial  positions,   and   cash   flow.
The    results   of   operations   for   the   periods   indicated    are    not
necessarily indicative of the results for a full year.


Note 2 - Continued Operations

The    accompanying   financial   statements   have   been   prepared    on    a
going   concern   basis   which   contemplates   the   realization   of   assets
and    liquidation    of    liabilities    in    the    ordinary    course    of
business.    To   date,   the  Company  had  been  in  the   development   stage
and    its    principal   activities   had   consisted   of   raising   capital,
performing     research     and     development     activities      and      the
development   of   their   products.    The   Company   has   not   yet    begun
earning      significant     revenue     from     its     planned      principal
operations.    Consequently,   as   of   December   31,   1996,   the    Company
has       incurred      accumulated      losses      totaling      approximately
$7,000,000,    resulting   in   a   accumulated   stockholders'    deficit    of
approximately   $2,500,000.    Cash   flows   from   current   operations    are
not     sufficient    to    meet    the    obligations    of    the     Company.
Management    plans   include   continuing   efforts   to   obtain    additional
capital   to   fund   operations  until  contract   sales   along   with   sales
of   BionSoilO   are  sufficient  to  fund  operations.    There   can   be   no
assurance   that   the   Company   will   be   able   to   successfully   attain
profitable operations or raise sufficient capital.

Note 3 - Cost and Estimated Earnings on Uncompleted Contracts

The     Company's    costs    and    estimated    earnings    on     uncompleted
treatment system contracts consist of the following:

<TABLE>
<CAPTION>
                                   December 31,        June 30,
                                       1996              1996
<S>                                     <C>              <C>
     Costs incurred on contracts    $1,307,275         $1,023,774
      Estimated (losses)              (425,216)          (201,321)
                                       882,059            822,453
     Less billings to date            (744,323)          (706,834)
                                    $  137,736        $  115,619
</TABLE>


Note 4 - Stockholders' Deficit

The   Company   has   various  classes  of  warrants,  please   refer   to   the
Company's Form 10-KSB/A dated June 30, 1996 for details.


Note 5 - Offer to Warrant Holders

Effective   December   1,   1996  through  December  31,   1996,   the   Company
made    an    offer   (the   "Offer")   to   all   holders   of   warrants    to
purchase   shares   of   the   Company's   restricted   and   legended    common
stock   at   a   price  per  share  of  $4.50,  to  exchange   each   of   their
warrants   for   1.5   Class   E-1  Warrants   to   purchase   shares   of   the
Company's   restricted   and   legended   common   stock   at   a   price    per
share    of   $6.00   for   a   period   commencing   January   1,   2001    and
expiring   December   31,   2001.    The  holders   of   warrants   subject   to
this    offer    are   primarily   officers,   directors,   members    of    the
Northrop    family,    Dublin   Holding,   Ltd.("DHL"),   LoTayLingKyur,    Inc.
("LTLK"),    and   principals   of   DHL   and   LTLK.    All    such    warrant
holders    accepted   the   Offer.    (See   Form   8-K   dated   December    1,
1996.)


Note 6 - Investment Banking Agreement

Effective December 1, 1996, the Company entered into an agreement
(the  "Agreement")  with  Global Financial  Group,  Inc.  ("GFG")
whereby  Company  has engaged GFG to provide  investment  banking
services  from December 1, 1996 to November 30, 1998.  Under  the
Agreement  GFG  has  agreed to provide Company  with  advice;  to
consult  with Company concerning business and financial planning,
corporate  organization  and  structure,  financial  matters   in
connection with the operation of the business of Company, private
and  public equity and debt financing, acquisitions, mergers  and
other similar business combinations, Company's relations with its
securities  holders,  preparation and  distribution  of  periodic
reports, and shall periodically provide to Company an analysis of
its  financial  statements.  Company will provide  GFG  with  the
following  compensation for the provision of  these  services:  a
warrant  to purchase 100,000 shares of Company's common stock  at
$6.00  per  share exercisable for a six months period  commencing
June  1,  1998.  Additionally, if, directly or indirectly through
the  efforts of GFG, Company raises not less than $1,250,000,  or
other  amount satisfactory to Company by June 30, 1997, GFG shall
have  earned  a warrant to purchase 150,000 shares  of  Company's
common  stock  at $8.00 per share exercisable for  a  six  months
period commencing June 1, 1999, and a warrant to purchase 200,000
shares  of Company's common stock at $12.00 per share exercisable
for a six months period
commencing June 1, 2001 and expiring December 1, 2001.  If at any
time  prior  to the exercise of these warrants Company undertakes
to  register any shares of its common stock pursuant to a form of
registration  statement  which would allow  registration  of  the
shares  underlying the exercise of these warrants,  then  Company
shall   include  the  underlying  shares  in  such   registration
statement at Company's sole cost; PROVIDED, HOWEVER, in the event
of  a  registration  statement  involving  an  underwriter,  such
underwriter  shall  have the right, in its  sole  discretion,  to
impose  restrictions on the resale of Company's securities issued
pursuant hereto and/or eliminate this registration right from the
underwritten    registration   statement   in    its    entirety.
Additionally,  the  agreement between GFG and  Company  effective
August  1,  1995 to July 31, 1996 (see Form 8-K dated  August  1,
1995)  contained warrants to purchase 50,000 shares of  Company's
common stock at $2.00 per share for a period ending July 31, 1996
which  warrants  have expired, and warrants  to  purchase  50,000
shares  of Company's common stock at $4.00 per share for a period
ending  July 31, 1997 and warrants to purchase 100,000 shares  of
Company's  common stock at $6.00 per share for  a  period  ending
July  31, 1998 which warrants have been cancelled.  However,  for
services  provided to this date under the agreement, the  Company
has issued to GFG warrants to purchase 25,000 shares of Company's
common  stock  at  $6.00  per  share  for  a  six  months  period
commencing  June 1, 1998, warrants to purchase 50,000  shares  of
Company's common stock at $8.00 per share for a six months period
commencing June 1, 1999 and warrants to purchase 25,000 shares of
Company's  common  stock at a price of $10.00  per  share  for  a
period commencing March 1, 2001 and ending October 1, 2003.  (See
Form 8-K dated December 1, 1996.)

Note 7 - Subsequent Events

Effective  January 2, 1997, the Company entered into an agreement
(the  "Agreement") with LoTayLingKyur, Inc. ("LTLK") whereby LTLK
will  convert the note between Company and LTLK in the amount  of
$2,007,035  which is due on May 15, 2000 (see Form  10-KSB/A  for
fiscal year ended June 30, 1996)(the "Note") in full on June  30,
1997  into 1,274,308 shares of the restricted and legended common
stock of the Company plus warrants to purchase 637,154 shares  of
the  common  stock of the Company at a price per share  of  $6.00
exercisable  for  a period from January 1, 2001 through  December
31, 2001, provided that:

 (i)  all   interest  payments  are  made  timely  from   January
       through June 1997
 (ii) all  consulting payments (to continue past June  30,  1997)
       are made timely through June 30, 1997
 
 (iii) the  Company  has not less than 36,000 Bion Animals  under
       contract as of June 30, 1997
 (iv) the  Company  has  raised  not less  than  $1,250,000  cash
       equity  (net of offering costs) from January  1,  1997  to
       June 30, 1997.

Upon  conversion, all other covenants and conditions not directly
related  to  the  Note and its security interest  would  continue
through  the term of the earlier agreement.  LTLK could elect  to
convert, in its sole discretion, even if all conditions have  not
been met.  (See Form 8-K dated January 2, 1997.)

Effective  January 8, 1997 the Company (along  with  its  wholly-
owned  subsidiary BionSoil, Inc., "BSI") entered into a financing
agreement  (the  "Agreement") with LoTayLingKyur,  Inc.  ("LTLK")
whereby  LTLK  advanced  the sum of $73,870  to  Company  on  the
following terms and conditions: as security, LTLK took  title  to
7,387 cubic yards of raw unscreened BionSoil, BSI shall have  the
right to acquire the collateral, BionSoil, in whole or in part by
payment to LTLK the sum of $11.50 per cubic yard through June 30,
1997, thereafter the price shall increase by $.20 per cubic  yard
per  month,  BSI shall repurchase all of the collateral  BionSoil
not previously repurchased at a price of $12.70 per cubic yard by
December 31, 1997.  (See Form 8-K dated January 2, 1997.)

On  January  16,  1997  the Company and Duane  Kennedy  signed  a
Memorandum of Understanding whereby the Company has employed  Mr.
Kennedy in the position of President, Bion Technologies, Inc. and
BionSoil, Inc.  Mr. Kennedy has spent the last five years as Vice
President of Sales and Marketing at Pursell Industries,  Inc.,  a
privately held company located in Birmingham, Alabama.  Prior  to
his  employment  at Pursell, Mr. Kennedy worked for  twenty  five
years   in   marketing   and   sales  positions   of   increasing
responsibility for Armstrong World Industries, Olympic Stain, and
PPG  Industries.  Mr. Kennedy received a B.S. degree in Education
from  the  University of Arkansas, Fayetteville, in  1966.   (See
Form 8-K dated January 2, 1997.)


ITEM  2.    MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OR  PLAN  OF
OPERATION

The  Company  is a service provider to customers with  wastewater
treatment  requirements  and  is  engaged  in  the  business   of
designing,   marketing,  and  monitoring  the  installation   and
operation of proprietary systems for the biological treatment  of
wastewater  produced  from  agricultural,  food  processing,  and
similar sources.

The  Company  currently has systems treating swine, dairy,  juice
processing,  and sugar plantation waste streams in  Florida,  New
York,  North  Carolina, and Washington. The  Company  is  in  the
process  of  designing  or monitoring the installation  of  seven
projects,  raising  capital  for operations  and  future  growth,
reviewing strategic partners for various aspects of the business,
continuing  a  research and development effort  on  both  systems
applications  and  byproducts,  and  strengthening   its   patent
coverage.

Liquidity and Capital Resources

The  Company's current ratio as of December 31, 1996 was .44 :  1
as  compared to .63 : 1 as of June 30, 1996. Cash as of  December
31,  1996 decreased to $8,035 as compared to $118,612 as of  June
30, 1996.

The   Company  has  entered  into  capital  leases  for  BionSoil
processing equipment in the amount of $135,052 during the 6 month
period ended December 31,1996.

During  the  six months ended December 31, 1996 the Company  sold
57,470  shares of restricted and legended stock for net  cash  of
$154,691, received the proceeds, from the exercise of options  to
purchase  40,000 shares of its common stock, of $150,000,  issued
6,435  shares of restricted and legended stock valued at  $12,870
as  payment of a note (principal and interest), and issued  7,846
shares  of restricted and legended common stock valued at $23,540
to a shareholder in exchange for rent.

Effective  December 1, 1996 the Company converted a note  in  the
amount  of  $319,527 into units (the "Units") consisting  of  one
share of the Company's common stock plus one class K Warrant (the
"Warrants")(each Warrant authorizing the holder to  purchase  one
share  of  Company's restricted and legended common stock  for  a
price of $4.50 per share for a period commencing January 1,  2001
and  expiring December 31, 2001, which warrants were subsequently
converted  to Class E-1 Warrants pursuant to the offer  described
in the Form 8-K dated December 1, 1996.

Effective  December  1, 1996 Jon Northrop,  Company's  CEO,  Jere
Northrop,  Company's President and COO, and  M.  Duane  Stutzman,
Company's  Treasurer and CFO signed Investor  Representation  and
Subscription   Agreements  ("Agreements")  to  purchase   33,334,
33,334,  and 13,334 shares of the restricted and legended  common
stock of the Company plus 50,000, 50,000, and 20,000 E-1 Warrants
to purchase additional shares of the Company's common stock at  a
per  share  price of $6.00 for a price of $100,000, $100,000  and
$40,000  respectively.   Further,  each  of  the  officers   have
notified the Company that payment for the subscribed stock  would
be made by cancellation of salary amounts owed to the officers by
the  Company  in the amounts of $100,000, $100,000,  and  $40,000
respectively,  such  cancellation  and  payment  to  occur   upon
issuance of the restricted and legended common stock.  (See  Form
8-K dated December 1, 1996.)

On  October  26,  1996, the Company secured a  $500,000  line-of-
credit  from  a  shareholder, interest at 12% per  annum  payable
monthly,  with  all outstanding principal and  interest   due  on
December 31, 1999. (See Form 8-K dated December 1, 1996)

On  August  20,  1996,  the Company issued warrants  to  purchase
14,500  shares of common stock at a price of $3.00 per share  and
10,000  shares of common stock at a price of $5.00 per share  for
$30,000. The warrants are effective beginning August 21, 1996 for
a 60 month period ending August 21, 2001.

On  August  30,  1996, the Company issued warrants  to  employees
under  the  Fiscal  Year  1994 Incentive  Compensation  Plan,  to
purchase  60,000 shares of common stock at $5.00 per  share.  The
warrants  are effective for a 60 month period beginning September
1,  1996  through September 1, 2001. On September 25,  1996,  the
Company issued warrants to an employee under the Fiscal Year 1994
Incentive Compensation Plan, to purchase 50,000 shares of  common
stock  at  $3.75 per share and 50,000 shares of common  stock  at
$5.25  per  share.  the warrants are effective  for  the  periods
September 25, 1996 through January 1, 1996 and September 25, 1996
through  April 1, 1997, respectively. On December  31,  1996  the
Company  issued  additional warrants under the plan  to  purchase
50,000  shares of common stock at $6.25 per share.  The  warrants
are  effective for the period December 31, 1996 through  May  30,
1997.

The  Company  has  incurred losses since inception  approximating
$7,000,000  and  is  currently experiencing  liquidity  problems.
Continued losses without the infusion of additional capital raise
doubt   about  its  ability  to  continue  as  a  going  concern.
Management  plans include continuing efforts to obtain additional
capital  to fund operations until such time, if ever, as contract
sales and the sale of BionSoil are sufficient to fund operations.
The  Company  is  currently negotiating  with  independent  third
parties  to  obtain  the  necessary additional  funding  for  the
Company. No assumption can be made that the Company will be  able
to   successfully  attain  profitable  operations  and/or   raise
sufficient capital to sustain operations.


Results of Operations

     Comparison of the Six Months Ended December 31, 1996 with
               Six Months Ended December 31, 1995

Revenue  in  the  six months ended December 31, 1996  was  $61,807
compared  to  $84,988 for the corresponding six  month  period  in
1995, a decrease of $23,181. Contract costs were higher ($225,000)
in  the 1996 six month period due to startup expenses for BionSoil
processing  sites  in  New  York  and  Florida.  Included  in  the
processing sites startup expenses are facilities (rent, utilities,
maintenance, etc.), equipment, and additional personnel.

General and administrative expenses were higher ($50,161) due  to
increased compensation.

The Company recorded $105,000 in interest income from the sale of
Delta  stock associated with the Settlement Agreement and General
Release on the UFG note. This is the final amount to be collected
on the UFG note. The total amount collected is $191,581 in excess
of  the original principal of the note. The Company also recorded
$141,334  in  interest expense on its notes to  shareholders  and
capital equipment leases, and $66,887 in research and development
costs. As a result of the above, the Company recorded a net  loss
of  $1,121,455 in the six month period ended December  31,  1996,
compared to a net loss of $685,021 for the six month period ended
December 31, 1995.

     Comparison of the Three Months Ended December 31, 1996 with
              Three Months Ended December 31, 1995

Revenue  in the three months ended December 31, 1996 was  $26,260
compared  to $46,803 for the corresponding three month period  in
1995,  a  decrease  of  $20,543. Contract costs  were  higher  by
$135,390 in the three month period. Startup expenses for BionSoil
processing  sites in New York and Florida accounted for  $112,000
of  the  increase.  The above resulted in a gross  loss  for  the
period ended December 31, 1996 of $147,260 as compared to a gross
profit of $8,673 for the same three month period in 1995.

Included  in the higher contract costs startup expenses  for  the
BionSoil  processing sites in New York and Florida are facilities
(rent,  utilities, maintenance, etc.), equipment, and  additional
personnel.

General and administrative expenses were higher ($21,955) in  the
period due to increased compensation.

The Company recorded $73,399 in interest expense on its notes  to
shareholders and capital equipment leases and $32,336 in research
and  development  costs. As a result of the  above,  the  Company
recorded  a  net  loss of $706,032 compared  to  a  net  loss  of
$538,725 for the three months ended December 31, 1995.

General Discussion of Current and Proposed Operations

As  shown  in the financials in this Form 10-QSB, over $4,607,000
has  been  invested in the Registrant through the  close  of  the
fiscal   quarter  ended  December  31,  1996.   These   financial
statements also show that on December 31, 1996 the Company had  a
negative   net   worth  of  $2,422,988,  cumulative   losses   of
$7,030,364,  limited  current revenues  and  substantial  current
operating  losses.  However, additional information is  necessary
to evaluate the Company and its progress relative to the business
it is pursuing and the associated value the Company has developed
during the last several years.

The  following section of this 10-QSB is presented by  management
to  give the reader a better understanding of the development  of
the business of the Company to date, and its plans for growth  in
the future.

Business Development

The  Company's  mission  is  to  provide  services,  systems  and
products  which  solve environmental problems and recycle  wastes
into  high  value  horticultural products which produce  superior
plant  performance.   Based on this, the  Company's  business  is
focused on the application of its patented proprietary technology
in   two  complementary  business  areas;  first,  BionSoil  NMSO
systems:  the  design, sales, installation oversight,  operations
management,  and material harvesting of BionSoil NMS systems  for
large   animal  raising  agricultural  facilities;  and,  second,
BionSoilO:  the  processing, blending,  packaging,  distribution,
marketing and sales of BionSoil and BionSoil-based products which
use the material harvested from the BionSoil NMS systems.

From  prior to September 20, 1989, (when Bion Technologies, Inc.,
one  of the subsidiaries of the Company was incorporated) through
at  least  March  31,  1995, the Company was  in  the  technology
development  mode with limited sales of primarily first-of-a-kind
wastewater and/or BionSoil NMS systems.

As of December 31, 1996, the Company has, in the aggregate, sold,
installed,  or  had under construction systems in  four  distinct
regions:   New  York, Florida, North Carolina,  and  the  Pacific
Northwest.   The  sales  in  these  regions  establish   multiple
applications for the Company's technology including:

  (a)   Three  dairy  farm  wastewater  treatment  and   nutrient
  reduction:  systems which treat the wastewater discharges  from
  dairy  farms to remove phosphorus, nitrogen and other nutrients
  and create water suitable for discharge or reuse.
         * Florida
         * New York
         * Washington

  (b)  Seventeen dairy farm BionSoil NMS: systems which solve the
  environmental  problems associated with dairy  farms  and  also
  create BionSoil.
         * New York and the northeast, including Maryland
         * North Carolina
         * Florida
         * Washington and the Northwest, including Oregon

  (c)  One  feedlot  BionSoil  NMS: a  system  which  solves  the
  environmental  problems  associated  with  feedlots  and   also
  creates BionSoil.
         * New York

  (d)  Three  hog  farm  BionSoil NMS: systems  which  solve  the
  environmental  problems  associated with  hog  farms  and  also
  create BionSoil:
         * North Carolina

  (e)  One  combination food processing waste  and  manure  waste
  treatment  system:  a system which treats nutrients  and  solid
  wastes  from  food  processing plants  and  animal  confinement
  areas.
         * New York

  (f)  Three fruit processing wastewater treatment: systems which
  treat  the  wastewater discharges from fruit processing  plants
  to  remove  solids, nutrients and other contaminants to  create
  water suitable for discharge or reuse:
         * Florida, citrus juice plants
         * New York, cherry processing plant

  (g)   Three   storm  water  run-off,  surface   water   run-off
  treatment:  systems  which  treat  storm  water  run  off  from
  agricultural  installations  to  remove  nutrients  and   other
  contaminants to create water suitable for discharge or reuse:
         *  Florida, run-off from dairy farm pastures, industrial
         installations and sugar cane plantations

Geographic Expansion

In designing, permitting, installing and operating these systems,
the  Company has established credibility with federal, state, and
local    regulators    and   environmental    and    agricultural
professionals.   The Company estimates that the  cost  associated
with  staffing,  servicing,  and marketing  its  systems  in  new
geographic  regions,  including  initial  sales  calls,   design,
regulatory approvals, installation and operation through the cash-
flow break-even point, is not less than $500,000 per region,  and
may  exceed $1,000,000.  Based on experience to date in the  four
regions  where system sales and installation activity is ongoing,
the  Company  estimates that approximately $3  million  has  been
expensed related to these matters which has created what might be
called "good will", "marketing" and "regulatory" value.

An  example  of the accumulation of these costs can be understood
by reference to the development and installation of the Company's
initial  hog farm BionSoil NMS system in North Carolina.   During
February 1994 the Company opened its office in Smithfield,  North
Carolina  with  one full time sales employee.  Numerous  contacts
were  made  in both the hog raising and dairy farming industries,
and  the first contract (for a hog system) was signed in December
1994.  The second full time employee (required to provide design,
engineering,  construction and system  operation  expertise)  was
transferred to North Carolina in February 1995.  Adverse  weather
conditions  during the construction period resulted in  a  longer
construction time than anticipated, however, system start-up  was
achieved  in June of 1995, and the system has been in  continuous
operation since. Based on this investment of time and effort  and
the  successful operation of the system, the Company is expanding
its  marketing  and sales efforts in North Carolina.   Currently,
the  Company  has  submitted proposals to a number  of  potential
customers,  is engaged in discussions with several of these,  and
has  signed  contracts for three additional system installations.
Management  estimates that, to date, in excess  of  $400,000  has
been  devoted to the effort to support this first hog  system  in
North  Carolina  and,  therefore, to  support  the  marketing  of
additional systems.  Current projections are that it will require
an  additional  twelve to eighteen months before sufficient  cash
flow  will be generated from system and BionSoil sales  in  North
Carolina to offset ongoing expenses.
The  Company anticipates continuing its expansion into new  areas
in the future, and this expansion will require similar additional
capital resources which, when expended will also be expensed  and
not shown as balance sheet assets.

Technology Expansion

The Company has four issued U.S. Patents: a Bioconversion Reactor
and  System, an Animal Waste Bioconversion System, a Bioconverted
Nutrient  Rich Humus, and a Phosphorous Treatment  Process.   The
Company also has an issued Canadian Patent for an Aqueous  Stream
Treatment  Process, and has received formal Notice  of  Allowance
from  the  U.S.  Patent  Office for its Storm  Water  Remediatory
Bioconversion  System application.  These patents  provide  broad
coverage  of  the  fundamental  technology  that  underlies   the
Company's systems and processes.  Additional patent filings  will
occur as further applications are developed.

The  Company  estimates  that a large portion  of  the  net  loss
through  fiscal year 1995 (then shown on the financial statements
as  $4.0  million)  was actually expended  on  research  and  the
development  of  the  technology and  construction  of  prototype
systems  that  are  the  basis of the  Company's  planned  future
expansion.  All of these costs have been expensed by the Company.

Just   as   there   are  additional  expenses   associated   with
geographical  expansion,  there also are  substantial  additional
expenses  associated  with the adaptation of existing  technology
for use in regions where climate, soil, and regulatory conditions
are different from those experienced in other already established
installations.   Further,  the  Company  anticipates   additional
expenditures in the near future associated with expansions of the
technology into the cattle feedlot and poultry raising businesses
where  adaptation of the technology is necessary to  treat  waste
with  both  different  characteristics and  different  collection
technologies than for existing dairy or swine waste systems.  The
majority  of  such  expenses  (  which  are  investments  in  the
Company's  future) will not show as balance sheet assets  despite
the  fact  that very real long term technological value is  being
developed.

Financial Discussion

The  Company receives two distinct revenue streams from  BionSoil
NMS  systems:  1)  initial  fees for system  design,  permitting,
startup   and  initial  operation  (and,  for  selected  systems,
periodic management or technology license fees), and 2) after the
initial  start-up  period for a system (approximately  12  to  15
months  after the contract is signed), an on-going revenue stream
to  the  Company  from  the sale of BionSoil  and  BionSoil-based
products produced from the systems.

BionSoil Economics

The  Company  analyzes BionSoil production  on  the  basis  of  a
Company  defined  standard  unit  (a  "BionAnimal"),  where   one
BionAnimal is defined as a manure producing unit (made up of  one
or more animals) which produce wastes (that can be captured in  a
BionSoil  NMS system) equivalent to those produced by  one  1,400
pound dairy cow living in a total confinement facility.  When all
the  manure and urine produced by one BionAnimal is collected and
converted  into  BionSoil, it will yield approximately  10  cubic
yards  of  processed BionSoil per year.  Based on data  available
from  the American Society of Agricultural Engineers (ASAE D384.1
-  1989)  the  Company has calculated that, for totally  confined
animals  where all wastes are captured, approximately  one  dairy
cow,  2.2 beef cattle, 11 market hogs, 200 turkeys, or 475  layer
chickens equal one BionAnimal.

As  of January 31, 1997 the Company has eleven systems containing
5,530 BionAnimals that are on line and producing BionSoil.  Three
of  these systems (representing 1,200 BionAnimals) were added  as
the result of system start-ups in the last 60 days.  Further, the
Company  has  ten additional systems containing 5,650 BionAnimals
under  contract but not yet in production.  These systems are  in
various stages from preliminary design through construction.   Of
these,  two systems (representing 1,250 BionAnimals) are  covered
by  contracts signed within the last 60 days.  As a  result,  the
Company   has   twenty  one  systems  containing   11,180   total
BionAnimals  in  production or under contract as of  February  1,
1997.   The  Company  estimates  that  these  BionAnimals  should
produce  approximately 110,000 cubic yards of BionSoil  per  year
when  all of the systems are on line, which is currently expected
to occur within the next eight months.

As  systems  are  brought  on  line and  BionSoil  is  harvested,
BionSoil, Inc. (the Company's other wholly-owned subsidiary) will
purchase   (for   cash)   the  harvested   BionSoil   from   Bion
Technologies, Inc to process it into final products for  sale  to
customers.  Subsequently, each farm is paid a percentage  of  the
wholesale price that Bion Technologies, Inc. has received for the
BionSoil.   These payments are expected to represent an important
part  of the strategy developed by the Company for the successful
marketing  of  BionSoil NMS systems.  Most large  animal  raising
facilities have substantial operating costs associated  with  the
disposal of waste products which are produced in large quantities
at  these facilities.  With the construction and operation  of  a
BionSoil  NMS  on  a  farm  site, many  of  these  costs  can  be
substantially  reduced,  and the farm should  receive  a  revenue
stream from the cash payments made by the Company to the farm.

While  sales of BionSoil NMS systems have been sporadic over  the
last   four   years,  and  significant  quantities  of   BionSoil
(resulting  in  significant payments  to  the  farms)  have  only
recently been available, the Company has clearly demonstrated the
technology with eleven systems in successful operation, three  of
which  have  been on line for more than two years.  Additionally,
through  both  Company performed and independent tests,  BionSoil
has  been  shown  to  clearly enhance plant  growth  performance.
Based  on  these results and analysis of the Company's  potential
markets, a series of aggressive planning targets for system sales
and installations have been established.  These targets which, if
actually  achieved  would  result in a  major  expansion  of  the
Company,  are  based  on historical sales  during  the  past  few
months,  the large number of proposals and preliminary  contracts
currently  being  prepared, and the apparent steadily  increasing
interest  in BionSoil NMS systems in the large animal agriculture
area.  Management's sales plans at present project a level of  45
systems containing 30,000 BionAnimals under contract by June  30,
1997,  the end of the current fiscal year.  If these targets  are
met  and  the systems are brought into production as anticipated,
BionSoil in the approximate amount of 300,000 cubic yards  should
be available for harvest and preparation for sale.

Initial  BionSoil  harvests have been made from installations  in
Florida,  New York, North Carolina and Washington.   During  1996
approximately  11,200 cubic yards have been harvested.   Of  that
amount, 2,000 cubic yards of BionSoil were sold in bulk at prices
ranging  from  $4.00  to $20.00 per yard.   Small  quantities  of
processed and bagged BionSoil, in 20 to 75 pound bags, have  been
sold  to  organic farmers, nurseries, and at farmers markets  and
green  markets  in  New York and Florida for  the  equivalent  of
$40.00  to  $100.00 per cubic yard.  Additionally, processed  and
bagged  BionSoil  has  been sold to nursery growers  and  organic
growers  in  Florida  (in 75 pound bags) for  the  equivalent  of
$80.00  per  cubic  yard.  As of January 31,  1997,  the  average
selling  price  during the prior 12 months for bulk,  unprocessed
BionSoil was $11.64 per cubic yard, and for processed and  bagged
BionSoil was $58.45 per cubic yard.  Note however, that  a  large
part of this BionSoil was from  first harvests of various systems
which,  due  to start-up issues, yield a lower quantity  of  high
quality product.

Market Size

The  sales  goal outlined above represents aggressive growth  for
the  Company.  Although an examination of the size of the  target
markets  for  system sales and installations and  BionSoil  sales
shows  that  the percent of total market penetration which  these
goals  represent are very modest, there can be no assurance  that
the Company will be successful in achieving its targeted goals.

In  the  area of system sales, the Company has analyzed the  1992
U.S. Department of Agriculture Census statistics (the most recent
information  available from the U.S. Department  of  Agriculture)
and  developed  the  data presented below for the  target  market
segments.   The  Company  has analyzed the  economics  of  system
installation  and operation as it relates to the size  of  farms,
and  based  on  this analysis has established a potential  target
universe of 28 million BionAnimals which are on large farms,  and
therefore  are believed by the Company to be potential candidates
for  system installation.  On the basis of these assumptions  and
the  analysis  done, the goal for fiscal year 1997  system  sales
(and  the  associated BionAnimals) would represent a 0.1%  market
penetration in fiscal 1997.

The  potential market for BionSoil and the various products  that
the  Company  will  blend using BionSoil has been  described  and
quantified in a study by Batelle ("Compost: United States  Supply
and  Demand Potential" in Biomass and Bioenergy Vol. 3, Nos  3-4,
pp.  281-299,  1992).  In that analysis, Batelle shows  that  the
demand  for compost and compost-like products (including products
ranging  from manures to composted organic wastes to manufactured
potting soils and soil enhancers) in the U.S. alone is in  excess
of  one billion cubic yards per year.  On the basis of this total
potential market, the BionSoil that the Company anticipates  will
be  produced  from the 30,000 BionAnimals if the Company  reaches
its  fiscal year 1997 sales target would result in a 0.03% market
penetration.

Based on current pricing experience, a review of prices for soils
and  soil-enhancing products in the market, target market segment
strategies  being  developed, and  limited  sales  to  date,  the
Company believes that BionSoil will sell at no less than $10  per
cubic  yard  when  sold unprocessed in bulk, and  will  sell  for
higher prices when processed and bagged, prices which may rise to
$100  per cubic yard (or greater).  Additionally, based on actual
costs  experienced in BionSoil harvesting and processing to date,
and  projected  costs as volume levels increase to  the  forecast
levels,  the  Company  has established projected  costs  for  the
various  levels of processing required to sell BionSoil products.
Therefore,  given  the  contract terms  and  projected  costs  of
production  and sales, the potential return to the  Company  from
BionSoil products sales alone has been calculated for a series of
potential  price  points  (and  the  implied  processing   levels
required  to  achieve  the products to be  sold  at  these  price
points).

<TABLE>
<CAPTION>

                            Table 1

         BionSoil selling                      Annual gross margin
         price per cubic      Bion           per cubic    per Bion
              yard          Expenses           yard         Animal
<S>            <C>             <C>              <C>            <C> 
           $   10.00     $   8.00            $   2.00   $   20.00
               20.00        13.00                7.00       70.00
               40.00        28.00               12.00      120.00
               60.00        37.00               23.00      230.00
               80.00        40.00               40.00      400.00
              100.00        43.00               57.00      570.00
</TABLE>

Income  from BionSoil sales is anticipated to begin in an average
of  one  and a half to two years after the signing of a  contract
for a BionSoil NMS system.  These gross margins would be expected
to  be repeated each year as long as the installations remain  in
operation.   No  fees  for  system  installation,  licensing,  or
management are included in these projections.

If the Company is successful in bringing targeted systems on line
producing BionSoil within the 12 to 15 month start-up time frame,
and  is  successful in realizing a target average sales price  of
$40   per  cubic  yard  (starting  in  fiscal  year  1998),  each
BionAnimal  would  contribute $400 of revenue  per  year  to  the
Company, resulting in gross margins of $120 per year.  Under  the
terms of most BionSoil NMS contracts this contribution to revenue
and  gross margin is anticipated to continue for at least  a  15-
year  period.  If the net present value (discounted  at  10%)  of
this  gross  margin  cash  flow is calculated  for  this  15-year
period,  it  shows  that each BionAnimal is anticipated  to  have
approximately $950 net present value to the Company.

Based  on  experience to date, the Company expects that  contract
fees,  independent of BionSoil revenues, will  be  sufficient  to
cover direct expenses (such as system design, permitting support,
construction oversight and initial system operation)  related  to
these  system installations.  Therefore, once a sufficient number
of  systems are under contract and the BionSoil production is  on
line, the Company is expected to achieve financial break-even.

Even  though the Company is extremely small at present,  has  not
yet  developed  substantial market penetration,  needs  to  raise
additional capital, and has (and is continuing to accrue)  losses
to date, the potential return based on the Company's growth plans
is  apparent  if  the  Company  is successful  in  achieving  its
targets.

As  the above discussion includes forward looking statements made
in reliance upon the provisions of Rule 175 promulgated under the
Securities  Act  of  1933, readers are cautioned  that,  although
management  believes  it currently has a  reasonable  good  faith
basis  for  disclosing  the substance of  some  of  its  internal
projections to the public at this time, there can be no assurance
given  that the Company will ever be successful in achieving  any
of   its  stated  goals.   As  stated  previously,  the  ultimate
realization  of  most  (if not all) of the company's  goals  will
require  significant expenditures of funds which as of this  date
are not currently available to the Company.

It  is currently anticipated that the selling and installation of
additional  BionSoil  Systems will require the  Company  to  hire
additional  personnel, make significant capital expenditures  and
generally  increase its overhead.  Moreover,  the  marketing  and
sale  of BionSoil products will require the implementation  of  a
distribution  network  of  wholesalers  and/or  retailers  and  a
transportation system for delivery of the product to the intended
recipients.  Additional expenditures for personnel and  equipment
will  be necessary to harvest, process, package, sell and deliver
the  product.  The projections stated by management  assume  that
the  Company will be successful in obtaining the requisite  funds
on  commercially  reasonable terms  and  that  the  other  stated
obstacles will be successfully overcome in the process of  making
sales of products in the future.

As  the Company has never operated at a profit and has a negative
net  worth  at  the  present time, its  ability  to  successfully
confront even the currently identified challenges which lie ahead
in  meeting its stated goals is far from certain.  It  is  likely
that  the Company will face additional challenges which have  not
as  yet  even been identified.  In the event the Company  is  not
able to obtain sufficient outside funding to accomplish its goals
within the time periods indicated, the goals will not be met.  In
the  event  the Company is not able to successfully overcome  the
other  stated  obstacles in the process of  making  future  sales
within the time periods indicated, the goals will not be met.  As
the  Company's  operations are not currently profitable,  readers
are  further cautioned that, if the Company is not successful  in
obtaining outside funding in an amount sufficient for it to  meet
its  operating  expenses  at  its current  level,  the  Company's
continued existence is uncertain.





                       OTHER INFORMATION

PART II

ITEM 1.   Legal Proceedings.

      The  Company knows of no material pending legal proceedings
to  which the Company (or the Subsidiary) is a party or to  which
any  of  its  systems is the subject and no such proceedings  are
known to the Company.

ITEM 2.   Changes in Securities.  None

ITEM 3.   Defaults Upon Senior Securities.  None

ITEM 4.   Submission  of  Matters to a Vote of Security  Holders.
          None

ITEM 5.   Other Information.  None

ITEM 6.   Exhibits and Reports on Form 8-K.
          (a) Exhibits - none
          (b) Reports on Form 8-K:
           Form  8K (dated August 30, 1996) reporting on items  5  & 7.
           Form 8K (dated December 1, 1996) reporting on items  5  & 7.
           Form  8K (dated January 2, 1997) reporting on items  5  & 7.




                           SIGNATURE




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


Bion Environmental Technologies, Inc.



    /s/ M. Duane Stutzman
M. Duane Stutzman
Chief Financial Officer

Dated:    February 18, 1997