1.       BUSINESS AND ORGANIZATION: 

Nature of Operations

Bion Environmental Technologies, Inc.'s ("Bion," "Company," "We," "Us," or "Our") was incorporated in 1987 in the State of Colorado.

Our patented and proprietary technology was developed to provide advanced waste treatment and resource recovery for large-scale livestock production facilities (also known as “Concentrated Animal Feeding Operations” or “CAFOs"). Our Gen3Tech can largely mitigate the environmental problems of CAFOs, while simultaneously improving operational/ resource efficiencies by recovering high-value co-products from the waste stream, including renewable energy, nutrients, and clean water. For the last several years, Bion was focused on the beef industry because we believe it faces the most challenges of all the livestock sectors and can benefit the most from the application of Bion’s technology and business strategy.

Until recently, we believed that the best opportunity for the Company to prove its technology, along with the sustainable beef concept, was with the Stovall Ranch, in Montana. In June 2024, Bion formed a strategic relationship with Turk Stovall and Stovall Ranching Companies. Bion and Stovall agreed to establish a JV, to be led by Mr. Stovall, with the goal of developing a 16,000-head sustainable beef project at Stovall’s Yellowstone Cattle Feeders (‘YCF’) location in Shepherd, Montana. We anticipated establishing the Stovall-Bion JV and creating related distribution agreements with key value chain partners, with the intent to begin construction in the first quarter of 2025. However, due to several factors, including 1) the extended development timeline to reach revenues at Stovall (which could be at least two years or more), 2) a need to both prove our technology at full-scale as quickly as possible, and 3) enter the fertilizer markets with product in the 2026 growing season, at the end of calendar 2024 we shifted our focus to smaller ‘bolt-on’ opportunities in both the animal waste and industrial sectors that we think can be developed more quickly.

Bion’s patents were expanded in 2024 to include industrial and municipal wastewater sources, in addition to animal waste streams that were previously covered. To that end, Bion has directed most of its limited resources to pursuing opportunities to apply its Ammonia Recovery System (ARS) as a bolt-on or ‘standalone’ ammonia control solution in the industrial sector. In such cases, the ARS would be deployed as an ammonia control solution (vs integrated into a Bion Gen3Tech livestock platform) for facilities (both new and existing) that produce biogas from organic waste streams, such as food, food processing, and livestock packing/slaughter. These facilities are subject to EPA-mandated discharge limits that require ammonia control or face other limitations on ammonia/nitrogen in the effluent from biogas production. We will also seek to identify opportunities to provide ammonia control solutions in the livestock/animal waste at existing farms with anaerobic digesters already in place (which will also shorten the development timeline). While we have not abandoned developing new integrated livestock projects with our Gen3tech platform, we believe there is a robust opportunity to provide bolt-on ammonia control solutions to the operators of their own biogas projects, and we are now devoting almost all of our resources to developing this opportunity.

Going Concern

The Company’s consolidated financial statements have been prepared assuming the Company will continue as a going concern.

The Company is not currently generating any significant revenues. Further, the Company’s anticipated revenues, if any, from existing JVs and proposed projects will not be sufficient to offset operating and capital costs (for Projects) for a minimum of two to five years. Further, there are no assurances that the Company will ultimately be successful in its efforts to develop and construct its Projects and market its Systems; but, it is certain that the Company will require substantial funding from external sources. Given the unsettled state of the current credit and capital markets for companies such as Bion, there is no assurance the Company will be able to raise the funds it needs on reasonable terms. The aggregate effect of these factors raises substantial doubt about the Company’s ability to continue as a going concern.

During the year ended June 30, 2025 the Company had a loss of $2,380,000 including $844,000 non-cash compensation expenses related to extension of warrants and options.

During the year ended June 30, 2024, a one-time, non-recurring, non-cash charge of $9,460,425 was incurred by the Company in connection with a write-down of the capitalized carrying value of the Initial Project (at Fair Oaks, Indiana) because the Initial Project was recently reclassified as largely a research & development facility and is located on land subject to a short term lease (as described above in Item 7, Management’s Discussion and Analysis). This charge reduced the Company shareholders’ equity to ($5,808,501) and resulted in a loss of $11,691,115 for the 2024 fiscal year.

The constraints on available resources have had, and continue to have, negative effects on the pace and scope of the Company’s efforts to operate and develop its business. The Company has had to delay payment of trade obligations and has had to economize in many ways that have potentially negative consequences. If the Company is able to raise needed funds during the subsequent fiscal year, of which there is no assurance, management will not need to consider deeper cuts (including additional personnel cuts) and/or curtailment of ongoing activities including research and development activities. The Company will need to obtain additional capital to fund its operations and technology development, to satisfy existing creditors, and to develop Projects. The Company anticipates that it may seek to raise from $3,000,000 to $10,000,000 or more debt and/or equity through sale of its equity securities (common, preferred and/or hybrid) and/or debt (including convertible) securities, and/or through use of ‘rights’ and/or warrants (new and/or existing) and/or license payments and/or through other means during the next twelve months. Further, Bion may be required to fund $15 million (or more) in project finance for the initial ARS project, in a combination of debt financing and equity investment. However, as discussed above, there is no assurance, especially in light of the difficulties the Company has experienced in many recent years and the extremely unsettled capital markets that presently exist for small pre- revenue companies like us, that the Company will be able to obtain the funds that it needs to stay in business, complete its technology development or to successfully develop its business and Projects. Ultimately, in the event the Company cannot secure additional financial resources, or complete a strategic transaction in the longer term, the Company may need to curtail or suspend its operational plans or current initiatives, or potentially liquidate its business interests, and investors may lose all or part of their investment. 

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.

Management’s Plan

The Company continues to explore sources of financing to satisfy its current operating requirements and future growth needs. The Company faced substantial demand for capital and operating expenditures during fiscal year 2025, which we expect to increase for the periods thereafter as we move toward commercial implementation of our ARS (including costs associated with additions of personnel to carry out the business activities of the Company). As a result, the Company has faced, and continues to face, significant cash flow management challenges due to material working capital constraints. To partially mitigate these working capital constraints, the Company's core senior management and some key employees and consultants have been deferring most of their cash compensation and/or are accepting compensation in the form of securities of the Company and members of the Company's senior management have from time-to-time made loans to the Company in the past and may do so in future periods.

To help alleviate short-term cash needs for continued operations, in August, three affiliates of the Company (Greg Schoener, Interim COO & Director; Turk Stovall, Director; Bob Weerts, Director) and two shareholders (one of whom is the brother of Greg Schoener) began advancing money to Bion to cover critical payables. They subsequently formed a loan group, BION BLG, LLC (“BLG”), and have continued to provide short-term funding for Bion in a secured promissory note of up to $500,000. Schoener, Weerts, and the two non-affiliate members were also large Bion shareholders, prior to the formation of BLG. As a group, Schoener, Stovall, and Weerts own 60% of BLG, which has a security interest in the Company’s Intellectual Property. The BLG note will bear interest at a rate of 7.5% per annum and the maturity date is April 15, 2025, see further details in subsequent events. As of the filing date, BLG has advanced 407,384. The BLG note will convert into Units (shares and/or warrants) in the Company at the terms of a later capital raise, in which Bion crosses the threshold of $3 (three) million in aggregate capital raised (or other source of funding, and other terms as defined in the note). If the Company is unable to complete such funding within six (6) months, it will be in default of the BLG note, which is secured by the Company’s Intellectual Property (“IP” “Collateral”). BLG will share the Collateral on a pro rata basis with investors in a secured promissory note with similar terms being offered to previous Bion investors. The BLG note and security agreements contain other terms set forth therein and are included as exhibits to this filing. 

In November 2024, the Company launched a series of secured promissory note offerings to previous investors/shareholders (and certain others)(Shareholder Notes) with similar terms to the BLG note. Based on feedback from shareholders and registered representatives with which the Company has long standing relationships, management believed at that time that sufficient capital could be raised with this group to 1) continue to cover critical payables to maintain operations that will allow the Company to finish the engineering report and technology demonstration at Fair Oaks, 2) move forward with pre-development work on the Stovall project, 3) continue discussions with potential strategic partners, and 4) position ourselves for the larger offering/ funding that will be required. As of the filing date, Bion has raised $611,000     in the Shareholder Note offerings. Further, Bion has changed its focus from pre-development work on the Stovall project, to an initial bolt-on project at an existing facility.

To date, the Company has primarily raised funds through private placements with accredited investors, often conducted through FINRA-registered broker/dealers. However, the Company anticipates moving forward, it will need to raise capital using a combination of financial instruments and sources, that could also include strategic and/or institutional investors, including family offices and private equity, brokered equity or debt offerings with both public and private investors, and banks and other ag lending institutions, among others, although there can be no assurance it will be successful. Many of these financing options may involve dilution, potentially substantial, for current shareholders. Management intends to augment its access to capital by adding one or more staff members (or consultants) with experience in the capital markets, as well as utilizing its current contacts and relationships in the capital markets.

Bion is currently in discussions with several potential strategic partners in engineering, renewable energy (biogas/RNG) and clean fuels, organic fertilizer distribution, and others involved in reducing the environmental footprint of biogas and livestock production. With today’s U.S, and global emphasis on decarbonizing energy and the food supply chain, and their impacts on water and air pollution, the sectors have become closely intertwined. They are evolving quickly, and integrated solutions have become increasingly desired, but complex. Bion is now evaluating engineering and construction firms, biogas operators, and others as potential development partners for industrial and livestock opportunities. Further, with the recent OMRI Listing for its commercial fertilizer, the Company has initiated discussions with several large U.S. fertilizer manufacturers and distributors that have expressed interest in the product. Bion believes that such relationships could entail a direct investment in Bion, licensing fee, or some other ‘up front’ financial benefit to Bion, although there is no assurance that they will. The Company recently finished data acquisition at Fair Oaks needed to complete an independent engineering report that is critical to demonstrating the technology performance and economics of its ammonia recovery technology to potential strategic partners.

THERE IS NO ASSURANCE THAT THE COMPANY WILL REACH OR APPROACH THE GOALS/TARGETS SET FORTH ABOVE. REACHING SUCH GOALS/TARGETS WILL REQUIRE RESOLUTION OF THE COMPANY’S EXISTING FINANCIAL DIFFICULTIES AND ACCESS TO VERY LARGE AMOUNTS OF CAPITAL (EQUITY AND DEBT) AS EACH ARS MODULE IS PROJECTED TO COST IN EXCESS OF $10 MILLION TO CONSTRUCT AND WILL REQUIRE MOBILIZATION OF SUBSTANTIAL PERSONNEL, TECHNICAL RESOURCES AND MANAGEMENT SKILLS. THE COMPANY DOES NOT POSSESS EITHER THE FINANCIAL OR PERSONNEL RESOURCES INTERNALLY AND WILL NEED TO SOURCE SUCH RESOURCES FROM STRATEGIC PARTNERS.