5. NOTES PAYABLE:

Adjusted 2020 Convertible Obligations and Adjusted September 2015 Convertible Notes

Effective February 1, 2023, three (3) directors/officers of the Company agreed to adjust the provisions of long term convertible obligations (including most of the 2020 Convertible Obligations and September 2015 Convertible Notes --- see below) owed to them by the Company in a manner which reduced the indebtedness of the Company by 80% (approximately $3.47 million, in aggregate while equitably maintaining existing conversion rights). The debt modification was treated as an equity transaction because the modifications were with affiliates that are related parties.

Mark A. Smith (the Company’s former President)(“Smith”), Dominic Bassani (the Company’s former Chief Operating Officer) (“Bassani”) (NOTE: Dominic Bassani passed away on November 11, 2023) and Ed Schafer (Director)(“Schafer”), adjusted/reduced the principal owed to them by $1,109,649, $1,939,670 and $424,873, respectively. Subsequent to the adjustment, the adjusted portion of the 2020 Convertible Obligations were renamed Adjusted 2020 Convertible Obligations and the adjusted portion of the September 2015 Convertible Notes were renamed Adjusted September 2015 Convertible Notes. The Adjusted 2020 Convertible Obligations of Smith, Bassani and Schafer are convertible into Units (consisting of 1 share and from one half (1/2) to one (1) warrant) at prices of $.0946, $.0953, and $.0953, respectively, and the Adjusted September 2015 Convertible Notes may be converted at the sole election of the noteholders into restricted common shares of the Company at a conversion price of $0.115 per share. The adjusted conversion prices slightly reduce the securities to be issued on conversion of each instrument from the amount receivable under the unadjusted instruments. The Adjusted 2020 Convertible Obligations and Adjusted September 2015 Convertible Notes do not accrue any interest until their maturity date. After the adjustment, the Company owed Smith, Bassani (and trust) and Schafer $262,154, $434,016 and $96,364, respectively, of Adjusted 2020 Convertible Obligations and Bassani and Schafer, respectively, $24,230 and $4,012 of Adjusted September 2015 Convertible Notes. The Company extended the maturity dates to September 15, 2025.

As of March 31, 2026, the Adjusted 2020 Convertible Obligation balances, including accrued interest, owed Bassani (and his donees), Smith and Edward Schafer were nil. As of June 30, 2025, the Adjusted 2020 Convertible Obligation balances, including accrued interest, owed Bassani (and his donees), Smith and Edward Schafer were $459,277, nil 0 and $101,973, respectively.

As of March 31, 2026 the Adjusted September 2015 Convertible Notes balances, including accrued interest, owed Bassani Family Trusts and Schafer were nil. As of June 30, 2025 the Adjusted September 2015 Convertible Notes balances, including accrued interest, owed Bassani Family Trusts and Schafer were $7,907 and nil 0, respectively.

On September 15, 2025, a settlement was reached with the Bassani family and Mark Smith to cancel the 2020 Convertible Note, effective on that date. For details on the settlement agreement, see Stockholder Equity (Note 6).

2020 Convertible Obligations

The 2020 Convertible Obligations (which combined/replaced prior convertible instruments dating to 2017 (or earlier), which accrue interest at either 4% per annum or 4% compounded quarterly and effective January 1, 2020 were due and payable on July 1, 2024. The 2020 Convertible Obligations (including accrued interest, plus all future deferred compensation added subsequently), are convertible, at the sole election of the holder, into Units consisting of one share of the Company’s common stock and one half to one warrant to purchase a share of the Company’s common stock, at a price of $0.50 per Unit until July 1, 2024. The maturity date of the notes was extended to July 15, 2025. The original conversion price of $0.50 per Unit approximated the fair value of the Units at the date of the agreements; therefore, no beneficial conversion feature exists. Management evaluated the terms and conditions of the embedded conversion features based on the guidance of ASC 815-15 “Embedded Derivatives” to determine if there was an embedded derivative requiring bifurcation. An embedded derivative instrument (such as a conversion option embedded in the deferred compensation) must be bifurcated from its host instruments and accounted for separately as a derivative instrument only if the “risks and rewards” of the embedded derivative instrument are not “clearly and closely related” to the risks and rewards of the host instrument in which it is embedded. Management concluded that the embedded conversion feature of the deferred compensation was not required to be bifurcated because the conversion feature is clearly and closely related to the host instrument, and because of the Company’s limited trading volume that indicates the feature is not readily convertible to cash in accordance with ASC 815-10, “Derivatives and Hedging”. Effective February 1, 2023, a large portion of the 2020 Convertible Obligations were adjusted as set forth herein. The maturity date of the notes was extended to September 15, 2025.

Effective January 9, 2025, the Board of Directors amended the terms of the 2020 Adjusted Convertible Note owned by Ed Schafer, who retired from the Company’s Board of Directors on December 31, 2024. The maturity date of the 2020 Adjusted Convertible Note was extended to September 15, 2025.

On September 15, 2025, a settlement was reached with Smith, Bassani and Schafer to cancel the 2020 Adjusted Convertible Note, effective on that date. For details on the settlement agreement, see Stockholder Equity (Note 6).

As of March 31, 2026, the remaining unadjusted portion of the 2020 Convertible Obligation balances were nil. As of June 30, 2025, the remaining unadjusted portion of the 2020 Convertible Obligation balances, including accrued interest, owed Bassani Family Trusts and Smith were $386,676 and $125,919, respectively.

The Company recorded interest expense of nil 0 and $4,380 for the three months ended March 31, 2026 and 2025, respectively. The Company recorded interest expense of $3,690 and $13,141 for the nine months ended March 31, 2026 and 2025, respectively.

Effective February 1, 2023, three (3) directors/officers of the Company agreed to adjust the provisions of long-term convertible obligations (including most of the 2020 Convertible Obligations and September 2015 Convertible Notes) owed to them by the Company in a manner which reduced the indebtedness of the Company by 80% (approximately $3.47 million, in aggregate) while equitably maintaining existing conversion rights. Because the modifications were with affiliates that are related parties, the debt modification was treated as an equity transaction. The Company recorded a deemed dividend for the reductions.

Smith, Bassani and Schafer, adjusted/reduced the principal owed to them by $1,109,649, $1,939,670 and $424,873, respectively. Subsequent to the adjustment, the adjusted portion of the 2020 Convertible Obligations were renamed Adjusted 2020 Convertible Obligations (see above and Note 8).

September 2015 Convertible Notes

During the year ended June 30, 2016, the Company entered into September 2015 Convertible Notes with Bassani, Schafer and a Shareholder which replaced previously issued promissory notes. The September 2015 Convertible Notes bear interest at 4% per annum, have maturity dates of July 1, 2024, and may be converted at the sole election of the noteholders into restricted common shares of the Company at a conversion price of $0.60 per share. As the conversion price of $0.60 approximated the fair value of the common shares at the date of the September 2015 Convertible Notes, no beneficial conversion feature exists. The maturity date of the notes was extended to September 15, 2025 for all note holders. On September 15, 2025 the maturity date for two of the 2015 Convertible Notes was extended to September 15, 2027.

Effective January 16, 2025, Mr. Schafer voluntarily surrendered 36,918 shares of common stock that would have been issued as the result of the conversion of his $4,246 Adjusted 2015 Convertible Note. The note was convertible at $0.115 per share.

The balances of the September 2015 Convertible Notes as of March 31, 2026, including accrued interest owed Bassani, Schafer and Shareholder, are nil, nil, and $502,444, respectively. As of June 30, 2025, the remaining unadjusted portion of the 2015 Convertible Notes balances including accrued interest, were $169,383, nil 0 and $491,107, respectively.

The Company recorded interest expense of $3,779 and $5,079 for the three months ended March 31, 2026 and 2025, respectively. The Company recorded interest expense of $12,421 and $15,238 for the nine months ended March 31, 2026 and 2025, respectively.

Convertible Bridge Loan/Default

On September 28, 2023, the Company entered into an agreement for a $1,500,000 bridge loan and executed documents including a convertible promissory note (“Note”) and a binding subscription agreement (“Subscription”) (collectively the Note and the Subscription are the “Bridge Loan Agreements”) with SEB LLC, a non-affiliated party (“Lender”). SEB and the note represented a strategic investment that would ‘anchor’ a larger capital raise. In addition to SEB, it was to include an offering to Bion shareholders, alongside new retail and institutional investors introduced by Titan Partners, the NY investment banking firm Bion engaged to underwrite the offering. The Bridge Loan Agreements required the Lender to loan the Company $1,500,000 in six monthly tranches of $250,000 commencing October 2023. All sums advanced under the Bridge Loan Agreements (and accrued interest thereon) would be due and payable (with interest accrued at 9% per annum) on October 1, 2024 if not previously converted into securities of the Company. The Note is convertible at $1.00 per unit, at the sole election of the Lender, into units consisting of one share of the Company’s common stock and a warrant to purchase one half share. The initial $250,000 tranche was received by the Company on October 5, 2023. However, no further funds were received by the Company from the Lender. 

The balances of the Convertible Bridge Loan, including accrued interest, are $482,206 and $454,957 as of March 31, 2026 and June 30, 2025, respectively.

On May 10, 2024 the Company received $150,000 from affiliates of the Bridge Loan Lender on terms not yet finalized and included in an agreement. These funds were received in the context of negotiations/discussions regarding a potential larger investment by affiliates and/or associates of the Lender but no further funds were received and the larger transaction was never completed. The funds were used primarily to re-initiate operations at the Initial Project. The Company is currently involved in discussions with representatives of SEB in an effort to achieve a mutually satisfactory resolution.

The Company recorded interest expense of $8,950 and $8,950 for the three months ended March 31, 2026 and 2025, respectively. The Company recorded interest expense of $27,249 and $27,249 for the nine months ended March 31, 2026 and 2025, respectively.

Note payable - related party

On October 22, 2024, Bion's Board of Directors ratified an agreement with the Bion BLG, LLC, loan group, effective October 15, 2024, to purchase a Convertible Promissory Note in the principal amount of up to $500,000. The Company received advances during the year ended June 30, 2025 in the amount of $399,763 and interest was applied based on the date the funds were received. The Company received an additional amount of $7,972 during the quarter ended September 30, 2025. The note bears interest at 7.5% per annum and had a maturity date of April 15, 2025.

Three Bion Directors (Schoener, Stovall – former/resigned, and Weerts – former/deceased) are members of the loan group and together comprise 60% ownership of the loan group (each member owns 20%). The Note is secured by the Company's Intellectual Property (IP)/patents. The Note will convert into securities in the Company at the terms of a later capital raise (or other source of funding) in excess of $3.0 million, which must be completed within six (6) months.

Effective May 29, 2025, the Company entered into a Forbearance Agreement with Bion BLG, LLC, extending the maturity date of the BLG Note to July 15, 2025 (See Bion’s Form 8-K, dated May 30, 2025).

On July 24, 2025, the Company entered into a Forbearance Agreement with Bion BLG, LLC, (effective July 15, 2025) extending the maturity date of the BLG Note to January 15, 2026 (attached as exhibit). The agreement was ratified by Bion’s Board on July 24, 2025. Under the terms of the Forbearance Agreement, the amounts outstanding under the Note will continue to bear interest at a rate of 9% per annum. Bion agreed to a new formula to determine BLG’s obligation for up to $100,000 in legal costs related to litigation over delinquent payment for construction costs incurred at Bion’s demonstration facility near Fair Oaks, IN (see Bion’s Forms 8-K, dated April 17, May 30 and July 24, 2025). Bion BLG, LLC, also extended their agreement to share their collateral with investors in the three prior Shareholder Note offerings, with investors participating in a new offering, dated July 25, 2025.

On January 8, 2026, the Bion Loan Group (BLG) informed Bion it was extending the maturity date of its Convertible Promissory Note’s Second Forbearance Agreement, with an effective date of July 15, 2025 (see 8-K filed July 24, 2025), under the same terms and conditions (including the collateral sharing agreement), until June 30, 2026. Bion BLG, LLC, also extended their agreement to share their collateral with investors in the three prior Shareholder Note offerings, with investors participating in a new offering, dated January 8, 2026.

The balances of the Convertible Note Advances including accrued interest owed is $466,521 and $423,053 as of March 31, 2026 and June 30, 2025, respectively.

The Company recorded interest expense of $9,198 and $7,393 for the three months ended March 31, 2026 and 2025, respectively. The Company recorded interest expense of $27,496 and $14,550 for the nine months ended March 31, 2026 and 2025, respectively.

May 2024 Convertible Notes

During the year ended June 30, 2024, the Company entered into May 2024 Convertible Notes with five individuals. The May 2024 Convertible Notes bear interest at 6% per annum, had maturity dates of December 31, 2025, and may be converted at the sole election of the noteholders into one restricted common shares and one warrant of the Company at a conversion price of $1.00 per unit. The maturity date of the notes has been extended to June 30, 2026. As the conversion price of $1.00 approximated the fair value of the common shares at the date of the May 2024 Convertible Notes, no beneficial conversion feature exists.

The balances of the May 2024 Convertible Notes including accrued interest owed is $138,697 and $133,067 as of March 31, 2026 and June 30, 2025, respectively.

The Company recorded interest expense of $1,890 and $1,890 for the three months ended March 31, 2026 and 2025, respectively. The Company recorded interest expense of $5,630 and $5,630 for the nine months ended March 31, 2026 and 2025, respectively.

Convertible Notes

The Company has issued multiple series of convertible notes to various individuals from November 1, 2024 through March 31, 2026. The convertible notes bear interest at a rate of 7.5% per annum. The original maturity date for all series was December 31, 2025, which has subsequently been extended to June 30, 2026.

The Notes will automatically convert into units of the Company ("Units") upon the closing of a later capital raise in which the Company raises aggregate capital of at least $3 million. The conversion will occur at the terms of that future capital raise.

The aggregate balances of all convertible notes, including accrued interest are $1,165,969 and $434,823 as of March 31, 2026 and June 30, 2025, respectively.

The company recorded interest expense of $17,751 and $2,787 for the three months ended March 31, 2026 and 2025, respectively. The Company recorded interest expense of $42,076 and $2,868, for the nine months ended March 31, 2026 and 2025, respectively.