6. STOCKHOLDERS’ EQUITY:

Write down of carry value of Initial Project

Effective June 30, 2024, at the same time the Initial Project was deemed placed in service, the Board of Directors determined that the capitalized carrying value of the Initial Project on the Company balance sheet as of that date be reduced to $0 in order to conform to the applicable accounting practices, 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 below in Item 2, Management’s Discussion and Analysis). As a result, a large ‘one time/non-recurring’ ‘non-cash’ charge of $9,460,425 has been taken by the Company at that date which charge reduced the Company shareholders’ equity to ($5,808,501) and resulted in a loss of $11,691,115 for the 2024 fiscal year.

“Giveback Agreements” and “Settlement Agreements” to Additional Paid in Capital

Effective April 1, 2024 the Company entered into two material definitive agreements (“Giveback Agreements”) regarding voluntary surrender for cancellation of securities of the Company (and related matters) by: a) members of the family of Dominic Bassani, recently deceased former Chief Executive Officer and (with his family) the Company’s largest shareholder (collectively “Bassani Family”)(see Exhibit 10.1)(“Bassani Family Agreement”), and b) Mark A. Smith, recently retired President of the Company and a director (see Exhibit 10.2)(“MAS Agreement”). The Bassani Family and Smith entered into these agreements with the intention of mitigating dilution to shareholders as new, successor management is added to the Company’s management team. The “giveback” agreements were treated as equity transactions because the forfeitures were with affiliates that are related parties.

The Bassani Family agreed to surrender not less than approximately 20% of its Company holdings (as of December 2023), which surrender would increase to approximately 30% based on certain financing performances. The Bassani Family elected to surrender deferred compensation of $652,252 (for 770,792 shares), $17,734 of partial surrender of the 2015 adjusted replacement note (for 154,208 shares) and 4,025,000 options as of June 30, 2024. The Bassani Family Agreement also sets forth requirements regarding conversion of convertible notes held by members of the Bassani Family after the security surrender.

On January 18, 2025, under the Bassani Family Agreement described above, Bion cancelled 1,237,500 warrants owned by the Bassani Family. Under the terms of the Agreement, the Bassani Family was required to surrender an additional 5% of their holdings after Bion successfully raised $500,000 in funding, following the date of the agreement. The warrants had a net exercise cost of $0.1875.

MAS agreed to surrender approximately 30% of his Company holdings (as of December 2023). Immediately upon the effectiveness of the MAS Agreement, he cancelled all Company options held by him (2,425,000, in aggregate) and waived $56,250 of accrued deferred compensation (convertible into 75,000 shares of the Company’s common stock). The MAS Agreement also sets forth requirements regarding conversion of convertible notes held by MAS after the security surrender and references the planned retirement of MAS on or before May 15, 2024.

Subsequently, and effective June 27, 2024, the Board of Directors of the Company agreed to amend the terms of the agreements dated April 1, 2024. The amendments solely extend any dates of certain required conversions and/or exercises (and related promissory note maturity dates and warrant expiration dates), if any, that were earlier than January 15, 2025, to said date.

On January 9, 2025, the Company agreed to amend the terms of the agreements dated April 1, 2024 regarding voluntary surrender for cancellation of securities of the Company (and related matters) by: a) members of the family of Dominic Bassani, recently deceased former Chief Executive Officer and (with his family) the Company’s largest shareholder (collectively “Bassani Family”)(see Form 8-K dated April 3, 2024, Exhibit 10.1)(“Bassani Family Agreement”), and b) Mark A. Smith, President of the Company and a director (“MAS”)(see Form 8-K dated April 3, 2024, Exhibit 10.2)(“MAS Agreement”). The Bassani Family and MAS entered into these agreements with the intention of mitigating dilution to shareholders as new, successor management is added to the Company’s management team. The amendments solely extend any dates of certain required conversions and/or exercises (and related promissory note maturity dates and warrant expiration dates), if any, that were dated January 15, 2025, to April 15, 2025. No changes were made regarding any ‘give backs’ of securities of the Company.

Effective September 15, 2025, family members of the late Dominic Bassani, Bion’s former CEO, Mark A. Smith, previously a Director and President, and Edward Schafer, previously a Director, have each individually agreed to a settlement (“Settlement Agreements”) that will simplify Bion’s capital structure and substantially reduce the number of Fully Diluted Shares. In consideration of the cancellation of various obligations, as noted below, and security instruments held by the Holders, including without limitation deferred compensation, convertible notes, warrants, and options, that could have increased the Company's outstanding shares by up to 22,498,405 shares, if all were fully converted or exercised. The Holders (as a whole) will receive, in aggregate, 8,101,746 shares of common stock. The transactions will produce a net reduction in fully diluted shares of approximately 14,369,659 shares. Included in the Bassani family agreement was a provision to cancel their remaining 5% obligation under the Giveback Agreement.

On September 18, 2025 the Bassani family agreed to 7,200,000 shares and surrendered 7,506,369 warrants, 2020 Adjusted Trust Note balance of $459,277, 2020 Collateral Note balance of $389,318, Replacement Note balance $170,466, adjusted replacement note balance of $7,908, deferred compensation balance of $12,409, accrued life insurance payable balance of $140,000, offset with the subscription receivable balance of $555,333, representing up to 18,466,011 shares if fully converted or exercised.

On September 17, 2025, MAS agreed to 400,000 shares and surrendered 2020 Collateral Note balance of $126, 958, deferred compensation balance of $84,664, expense reimbursement balance of $41,246, offset with the subscription receivable balance of $38,531, representing up to 1,188,428 shares if fully converted or exercised.

On September 18, 2025, Schafer agreed to 501,746 shares and surrendered 23,934 warrants, 1,215,000 options and the 2020 Adjusted Convertible Note balance of $101,974, representing up to 2,843,966 shares if fully converted or exercised.

On January 22, 2026, the Board of Directors ratified granting a 90-day extension to the issuance of 7,701,746 settlement shares to two affiliates of the Company (Danielle Lominy and Christopher Parlow, family members of the late Dominic Bassani, Bion’s former CEO), and two non-affiliates of the Company (Dominic Bassani’s spouse and Edward Schafer, previously a Director) (referred to hereinafter collectively as ‘Holders’), effective January 15, 2026. The Holders have agreed to the extension. The shares will be issued by April 15, 2026, or earlier upon the election of the individual Holders.

On April 15, 2026, at the request of Danielle Lominy, Christopher Parlow, Edward Schafer, and Dominic Bassani’s spouse, Bion agreed to extend the issuance of their settlement shares to December 31, 2026, subject to a capital raise or other source of funding which would trigger the immediate issuance of the shares. 

Series B Preferred stock:

Since July 1, 2014, the Company had 200 shares of Series B redeemable convertible Preferred stock outstanding with a par value of $0.01 per share, convertible at the option of the holder at $2.00 per share, with dividends accrued and payable at 2.5% per quarter. The Series B Preferred stock is mandatorily redeemable at $100 per share by the Company three years after issuance and accordingly was classified as a liability. The 200 shares had reached their redemption date and the Company approved the redemption of the Series B preferred stock during the year ended June 30, 2022. The 200 shares of Series B redeemable convertible Preferred stock were redeemed for $41,000, which included the $21,000 in accrued dividend payable.

During the nine months ended March 31, 2026 and the year ended June 30, 2025, the Company declared dividends of nil 0 and nil 0 respectively. The dividends are classified as a component of operations as the Series B Preferred stock is presented as a liability in these condensed consolidated financial statements. There is no liability at March 31, 2026.

Common stock:

Holders of common stock are entitled to one vote per share on all matters to be voted on by common stockholders. In the event of liquidation, dissolution or winding up of the Company, the holders of common stock are entitled to share in all assets remaining after liabilities have been paid in full or set aside and the rights of any outstanding preferred stock have been satisfied. Common stock has no preemptive, redemption or conversion rights. The rights of holders of common stock are subject to, and may be adversely affected by, the rights of the holders of any outstanding series of preferred stock or any series of preferred stock the Company may designate in the future.

Centerpoint holds 704,309 shares of the Company’s common stock. These shares of the Company’s common stock held by Centerpoint are for the benefit of its shareholders without any beneficial interest.

During the nine months ended March 31, 2026, 330,144 shares of common stock were issued as cashless warrant exercises.

During the nine months ended March 31, 2026, 400,000 shares of common stock were issued as to Mark Smith for the Settlement Agreement.

Warrants:

As of March 31, 2026, the Company had approximately 6.7 million warrants outstanding, with exercise prices from $0.74 to $1.60 and expiring on various dates through December 31, 2026.

The weighted-average exercise price for the outstanding warrants is $0.91, and the weighted-average remaining contractual life as of March 31, 2026 is .41 years.

On March 31, 2026 the Company modified 1,915,090 warrants by extending the exercise date from March 31, 2026 to December 31, 2026. The valuation method used by the Company determines the valuation based on prior private placements. 9 month extensions were valued at $0.0375. The Company had interest expense of $71,816.

On December 31, 2025 the Company modified 2,020,090 warrants by extending the exercise date from December 31, 2025 to March 31, 2026. The valuation method used by the Company determines the valuation based on prior private placements. Three month extensions were valued at $0.013. The Company had interest expense of $25,251.

On October 28, 2025 the Company modified 35,000 warrants by extending the exercise date from November 30, 2025 to September 30, 2026. The valuation method used by the Company determines the valuation based on prior private placements. Ten month extensions were valued at $0.042. The Company had interest expense of $1,458.

On October 28, 2025 the Company modified 50,000 warrants by extending the exercise date from October 31, 2025 to September 30, 2026. The valuation method used by the Company determines the valuation based on prior private placements. Eleven month extensions were valued at $0.046. The Company had interest expense of $2,292.

On July 15, 2025 the Company modified 3,000,000 warrants by extending the exercise date from July 15, 2025 to September 15, 2025. The valuation method used by the Company determines the valuation based on prior private placements. Six month or less extensions were valued at $0.002. The Company had non-cash employee compensation of $68,750.

On July 15, 2025 the Company modified 5,909,869 warrants by extending the exercise date from July 15, 2025 to August 15, 2025. On August 15, 2025 the Company modified the same warrants by extending the exercise date from August 15, 2025 to September 15, 2025. The valuation method used by the Company determines the valuation based on prior private placements. Six month extensions or less were valued at $0.002. The Company had non-cash employee compensation of $48,697.

On September 30, 2025 the Company modified 1,222,005 warrants by extending the exercise date from September 30, 2025 to September 30, 2026. The valuation method used by the Company determines the valuation based on prior private placements. Twelve month extensions were valued at $0.05. The Company had interest expense of $61,100. 

On September 15, 2025, settlements were reached with MAS, the Bassani family and Schafer, to surrender additional securities. Included in the Bassani family agreement was a provision to cancel their remaining 5% obligation under the Giveback Agreement. For details on the settlement agreement, see Giveback and Settlement Agreements above.

Stock options:

On April 7, 2022 the Company’s shareholders approved the Bion Environmental Technologies, Inc. 2021 Equity Incentive Award Plan (the “Equity Plan”). The Equity Plan provides for the issuance of options (and/or other securities) to purchase up to 30,000,000 shares of the Company’s common stock. The Equity Plan was adopted and ratified by Board of Directors on April 8, 2022. Terms of exercise and expiration of options/securities granted under the Equity Plan may be established at the discretion of the Board of Directors, but no option may be exercisable for more than ten years. No grants have been made pursuant to the Equity Plan as of the date of this report.

The Company’s 2006 Consolidated Incentive Plan, as amended during the year ended June 30, 2021 (the “2006 Plan”), provides for the issuance of options (and/or other securities) to purchase up to 36,000,000 shares of the Company’s common stock. Terms of exercise and expiration of options/securities granted under the 2006 Plan may be established at the discretion of the Board of Directors, but no option may be exercisable for more than ten years. The 2006 Plan will be maintained to service grants already made thereunder (together with new grants, if any, to employees and consultants who already has received grants pursuant to its terms).

The Company recorded compensation expense related to employee stock options of nil 0 and $332,128 for the nine months ended March 31, 2026 and 2025, respectively. The Company granted nil 0 and nil 0 options for the nine months ended March 31, 2026 and 2025, respectively.

On July 15, 2024 the Company modified 3,806,600 options by extending the exercise date. 3,736,600 options held by employees and directors were extended two years from December 31, 2024 to December 31, 2026. 70,000 options with a non-employee were extended one year from December 31, 2024 to December 31, 2025. The Company used the Black- Scholes valuation method and expensed $332,128 to non-cash compensation.

 On September 15, 2025, a settlement was reached with Mr. Schafer to cancel the 2020 Adjusted Convertible Note and surrender 1,215,000 options, effective on that date. For details on the settlement agreement, see giveback and settlement agreements above.

On December 31, 2025 the Company modified 430,000 options held by employees, directors and non-employees by extending the exercise date three months from December 31, 2025 to March 31, 2026. The Company used the Black- Scholes valuation method and expensed nil to non-cash compensation.

On March 31, 2026 the Company modified 430,000 options held by employees, directors and non-employees by extending the exercise date nine months from March 31, 2026 to December 31, 2026. The Company used the Black- Scholes valuation method and expensed $7,260 to non-cash compensation.

A summary of option activity under the 2006 Plan for the nine months ended March 31, 2026 is as follows:

The total fair value of stock options that vested during the nine months ended March 31, 2026 and 2025, was nil 0 and nil 0 respectively. As of March 31, 2026, the Company had no unrecognized compensation cost related to stock options.