BION ENVIRONMENTAL TECHNOLOGIES INC

1) Convertible Bridge Loan/Default

On September 28, 2023, the Company entered into an agreement for a $1,500,000 bridge loan with SEB LLC, a non-affiliated party (the "Lender"), and executed a convertible promissory note (the "Note") and a binding subscription agreement (together, the "Bridge Loan Agreements"). The Bridge Loan Agreements required the Lender to loan the Company $1,500,000 in six monthly tranches of $250,000 beginning in October 2023. All amounts advanced, together with interest accrued at 9% per annum, were due and payable on October 1, 2024, if not previously converted. The Note is convertible at the sole election of the Lender at $1.00 per unit, each unit consisting of one share of the Company's common stock and a warrant to purchase one-half share. The Company received the initial $250,000 tranche on October 5, 2023. In early November 2023, the Lender informed the Company verbally that it did not intend to fund the remaining tranches, and no further tranches were received.

On May 10, 2024, the Company received an additional $150,000 from affiliates of the Lender, in connection with discussions regarding a potential larger investment by affiliates and/or associates of the Lender. The larger transaction was never completed. The Company has included the $150,000 in the convertible bridge note balance and accrues interest on it at 9% per annum, consistent with the terms of the Note. The funds were used primarily to restart operations at the Initial Project.

The Note matured on October 1, 2024 and has not been repaid or converted. As a result, the Company has been in default under the Note since that date. The balance of the Note, including accrued interest, was $491,256 as of June 30, 2026. The Company is in discussions with representatives of the Lender in an effort to reach a mutually satisfactory resolution. The Lender's failure to fund the remaining tranches materially damaged the Company and contributed to the substantial increase in its current liabilities, including accounts payable, over recent periods. See Note 5 to the consolidated financial statements and Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations."

2) Creditor Matters

Hamstra Builders and Dilling Group. On March 31, 2025, Dilling Group, Inc., a subcontractor on the Company's Ammonia Recovery System demonstration facility at Fair Oaks, Indiana, filed suit to recover unpaid invoices, as disclosed in the Company's Form 8-K dated April 7, 2025. On April 16, 2025, the Company was served a summons by Hamstra Builders, Inc. ("Hamstra"), the general contractor of the project, which named as defendants the Company, Bion Technologies, Inc. and Bion 3G-1, LLC (both subsidiaries of the Company), and North Prairie Holdings, LLC, the property lessor. The Hamstra suit related to a Notice of Intent to file a Mechanic's Lien filed April 16, 2024. Together, the two suits sought to recover $1,494,513 in unpaid invoices.

On July 14, 2026, the Company executed a Settlement Agreement with Hamstra, which, together with a separate agreement between Hamstra and Dilling Group, resulted in the dismissal of all mechanic's liens and litigation related to the construction of the Fair Oaks facility. Under the Settlement Agreement, the Company issued Hamstra a convertible promissory note of $1,774,512, which bears interest at 10% per annum and matures December 31, 2026. The note requires a cash payment of $653,915 at the closing of a future Company financing, with the remaining balance convertible into the Company's common stock at the price of that financing. The amounts due to Hamstra, including $284,828 of interest accrued in connection with the settlement, are included in accounts payable and accrued expenses as of June 30, 2026. See Notes 8 and 11 to the consolidated financial statements.

North Prairie Holdings. On August 25, 2026, the Company executed a Settlement and Mutual Release Agreement with North Prairie Holdings, LLC, the landlord of the property in Newton County, Indiana on which the Fair Oaks facility is located, resolving amounts owed under the lease. In connection with the settlement, the Company issued North Prairie Holdings a convertible promissory note in the initial principal amount of $162,500. The Settlement Agreement and note are filed as exhibits to the Company's Form 8-K dated August 27, 2026. See Notes 8 and 11 to the consolidated financial statements.

The Company currently is not involved in any other material litigation or similar events.