What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2021-09-29 compared with 2020-09-22 · 824 added, 906 removed, 101 unchanged (94% of the section changed)

MANAGEMENT'S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Included in ITEM 8 are the audited Consolidated

Financial Statements for the fiscal years ended June 30, 2020 and 2019 ("Financial Statements").

Statements made in this Form 10-K that are

not historical or current facts, which represent the Company's expectations or beliefs including, but not limited to, statements

concerning the Company's operations, performance, financial condition, business strategies, and other information, involve substantial

risks and uncertainties.

The Company's actual results of operations, most of which are beyond the Company's control, could differ

These statements often can be identified by the use of terms such as "may,"

MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Included in ITEM 8 are the audited Consolidated Financial

Statements for the fiscal years ended June 30, 2021 and 2020 ("Financial Statements").

Statements made in this Form 10-K that are not

historical or current facts, which represent the Company's expectations or beliefs including, but not limited to, statements concerning

the Company's operations, performance, financial condition, business strategies, and other information, involve substantial risks and

uncertainties.

The Company's actual results of operations, most of which are beyond the Company's control, could differ materially.

statements often can be identified by the use of terms such as "may,"

"will,"

5 unchanged sentences

or the negative thereof.

We wish to caution

readers not to place undue reliance on any such forward looking statements, which speak only as of the date made.

Any forward-looking

statements represent management's best judgment as to what may occur in the future.

However, forward looking statements are subject

to risks, uncertainties and important factors beyond our control that could cause actual results and events to differ materially

from historical results of operations and events and those presently anticipated or projected.

We wish to caution readers not to place undue

reliance on any such forward looking statements, which speak only as of the date made.

Any forward-looking statements represent management's

best judgment as to what may occur in the future.

However, forward looking statements are subject to risks, uncertainties and important

factors beyond our control that could cause actual results and events to differ materially from historical results of operations and events

and those presently anticipated or projected.

These factors include adverse economic conditions,

entry of new and stronger competitors, inadequate capital, unexpected costs, failure (or delay) to gain product or regulatory approvals

in the United States (or particular states) or foreign countries, loss (permanently or for any extended period of time) of the

services of members of the Company’s small core management team (all of whom are age 70 or older) and failure to capitalize

upon access to new markets.

Additional risks and uncertainties that may affect forward looking statements about Bion's business

and prospects include the possibility that markets for nutrient reduction credits (discussed below) and/or other ways to monetize

nutrient reductions will be slow to develop (or not develop at all), the existing default by PA1 on its loan secured by the Kreider

1 system, the possibility that a competitor will develop a more comprehensive or less expensive environmental solution, delays

in market awareness of Bion and our Systems, uncertainties and costs related to research and development efforts to update and

improve Bion’s technologies and applications thereof, and/or delays in Bion's development of Projects and failure of marketing

strategies, each of which could have both immediate and long term material adverse effects by placing us behind our competitors

and requiring expenditures of our limited resources.

THESE RISKS, UNCERTAINTIES AND FACTORS BEYOND

OUR CONTROL ARE MAGNIFIED DURING THE CURRENT UNCERTAIN PERIOD RELATED TO THE COVID-19 PANDEMIC AND THE UNIQUE ECONOMIC, FINANCIAL,

GOVERNMENTAL AND HEALTH-RELATED CONDITIONS IN WHICH THE COMPANY, THE ENTIRE COUNTRY AND THE ENTIRE WORLD NOW RESIDE.

THE COMPANY HAS EXPERIENCED DIRECT IMPACTS IN VARIOUS AREAS INCLUDING WITHOUT LIMITATION:

I) GOVERNMENT-ORDERED SHUTDOWNS

WHICH HAVE SLOWED THE COMPANY’S RESEARCH AND DEVELOPMENT PROJECTS AND OTHER INITIATIVES, II) SHIFTED FOCUS OF STATE AND FEDERAL

GOVERNMENT WHICH IS LIKELY TO NEGATIVELY IMPACT THE COMPANY’S LEGISLATIVE INITIATIVES IN PENNSYLVANIA AND WASHINGTON DC,

III) STRAINS AND UNCERTAINTIES IN BOTH THE EQUITY AND DEBT MARKETS HAVE MADE DISCUSSION AND PLANNING OF FUNDING OF THE COMPANY

AND ITS INITIATIVES AND PROJECTS WITH INVESTMENT BANKERS, BANKS AND POTENTIAL STRATEGIC PARTNERS MORE TENUOUS, IV) STRAINS AND

UNCERTAINTIES IN THE AGRICULTURAL SECTOR AND MARKETS HAVE MADE DISCUSSION AND PLANNING OF FUNDING OF THE COMPANY AND ITS INITIATIVES

AND PROJECTS MORE DIFFICULT AS FUTURE INDUSTRY CONDITIONS ARE NOW MORE DIFFICULT TO ASSESS/PREDICT, V) DUE TO THE AGE AND HEALTH

OF OUR CORE MANAGEMENT TEAM, ALL OF WHOM ARE AGE 70 OR OLDER AND HAVE HAD ONE OR MORE EXISTING HEALTH ISSUES, THE COVID-19 PANDEMIC

PLACES THE COMPANY AT GREATER RISK THAN WAS PREVIOUSLY THE CASE (TO A HIGHER DEGREE THAN WOULD BE THE CASE IF THE COMPANY HAD A

LARGER, DEEPER AND/OR YOUNGER CORE MANAGEMENT TEAM), AND VI) THERE ALMOST CERTAINLY WILL BE OTHER UNANTICIPATED CONSEQUENCES FOR

THE COMPANY AS A RESULT OF THE CURRENT PANDEMIC EMERGENCY AND ITS AFTERMATH.

Bion disclaims any obligation subsequently

to revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the

occurrence of anticipated or unanticipated events.

The following discussion and analysis should

be read in conjunction with the Consolidated Financial Statements and Notes to Consolidated Financial Statements filed with this

in the United States (or particular states) or foreign countries, loss (permanently or for any extended period of time) of the services

of members of the Company’s small core management team (all of whom are age 70 or older) and failure to capitalize upon access to

Additional risks and uncertainties that may affect forward looking statements about Bion's business and prospects include

the possibility that markets for nutrient reduction credits (discussed below) and/or other ways to monetize nutrient reductions will be

slow to develop (or not develop at all), the existing default by PA1 on its loan secured by the Kreider 1 system, the possibility that

competitors will develop more comprehensive and/or less expensive environmental solution, delays in market awareness of Bion and our Systems,

uncertainties and costs related to research and development efforts to update and improve Bion’s technologies and applications thereof,

and/or delays in Bion's development of JVs, Projects and failure of marketing strategies, each of which could have both immediate and

long term material adverse effects by placing us behind our competitors and requiring expenditures of our limited resources.

THESE RISKS, UNCERTAINTIES AND FACTORS BEYOND OUR

CONTROL ARE MAGNIFIED DURING THE CURRENT UNCERTAIN PERIOD RELATED TO THE COVID-19 PANDEMIC AND THE UNIQUE ECONOMIC, FINANCIAL, GOVERNMENTAL

AND HEALTH-RELATED CONDITIONS IN WHICH THE COMPANY, THE ENTIRE COUNTRY AND THE ENTIRE WORLD NOW RESIDE.

TO DATE THE COMPANY HAS

EXPERIENCED DIRECT IMPACTS IN VARIOUS AREAS INCLUDING WITHOUT LIMITATION:

I) GOVERNMENT-ORDERED SHUTDOWNS WHICH HAVE SLOWED

THE COMPANY’S RESEARCH AND DEVELOPMENT PROJECTS AND OTHER INITIATIVES, II) SHIFTED FOCUS OF STATE AND FEDERAL GOVERNMENT WHICH IS

LIKELY TO NEGATIVELY IMPACT THE COMPANY’S LEGISLATIVE INITIATIVES IN PENNSYLVANIA AND WASHINGTON DC, III) STRAINS AND UNCERTAINTIES

IN BOTH THE EQUITY AND DEBT MARKETS HAVE MADE DISCUSSION AND PLANNING OF FUNDING OF THE COMPANY AND ITS INITIATIVES AND PROJECTS WITH

INVESTMENT BANKERS, BANKS AND POTENTIAL STRATEGIC PARTNERS MORE TENUOUS, IV) STRAINS AND UNCERTAINTIES IN THE AGRICULTURAL SECTOR AND

MARKETS HAVE MADE DISCUSSION AND PLANNING OF FUNDING OF THE COMPANY AND ITS INITIATIVES AND PROJECTS MORE DIFFICULT AS FUTURE INDUSTRY

CONDITIONS ARE NOW MORE DIFFICULT TO ASSESS/PREDICT, V) CONSTRAINTS DUE TO PROBLEMS EXPERIENCED IN THE GLOBAL INDUSTRIAL SUPPLY CHAIN,

VI) DUE TO THE AGE AND HEALTH OF OUR CORE MANAGEMENT TEAM, ALL OF WHOM ARE AGE 70 OR OLDER AND HAVE HAD ONE OR MORE EXISTING HEALTH ISSUES,

THE COVID-19 PANDEMIC PLACES THE COMPANY AT GREATER RISK THAN WAS PREVIOUSLY THE CASE (TO A HIGHER DEGREE THAN WOULD BE THE CASE IF THE

COMPANY HAD A LARGER, DEEPER AND/OR YOUNGER CORE MANAGEMENT TEAM), AND VII) THERE ALMOST CERTAINLY WILL BE OTHER UNANTICIPATED CONSEQUENCES

FOR THE COMPANY AS A RESULT OF THE CURRENT PANDEMIC EMERGENCY AND ITS AFTERMATH.

Bion disclaims any obligation subsequently to revise

any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated

or unanticipated events.

The following discussion and analysis should be

read in conjunction with the Consolidated Financial Statements and Notes to Consolidated Financial Statements filed with this Report.

BUSINESS OVERVIEW

Bion Environmental Technologies, Inc.'s ("Bion,"

"Company,"

"We,"

"Us,"

or "Our") patented and proprietary technology provides comprehensive

environmental solutions to one of the greatest water air and water quality problems in the U.S.

pollution from large-scale

livestock production facilities (also known as “Concentrated Animal Feeding Operations”

or ”CAFOs").

Application of our technology and technology platform can simultaneously remediate environmental problems and improve operational/resource

efficiencies by recovering value high-value co-products from the CAFOs’

waste stream that has traditionally been wasted or

underutilized, including renewable energy, nutrients (including ammonia nitrogen and phosphorus) and water.

From 2016 to present,

the Company has focused a large portion of its activities on developing, testing and demonstrating the 3rd generation of its technology

and technology platform (“3G Tech”) with emphasis on increasing the efficiency of production of valuable by-products

of its waste treatment including ammonia nitrogen in the form of organic ammonium bicarbonate products.

The Company’s initial

ammonium bicarbonate liquid product completed its Organic Materials Review Institute (“OMRI”) application and review

process with approval during May 2020.

(See discussion at “Organic Fertilizer products”

in Item 1 above.)

The Company believes that, in addition to providing

superior environmental remediation, its 3G Tech will create the opportunity for large scale production of sustainable and/or organic

branded livestock products that will command premium pricing (in part due to ongoing monitoring and third party verification of

environmental performance to provide meaningful assurances to both consumers and regulators).

As co-products, our 3G Tech will

produce valuable organic fertilizer products which can be:

a) utilized in the production of organic grains for use as feed in support

of joint venture Projects (“JVs”) raising organic livestock, and/or b) marketed to the growing organic fertilizer market.

Our 3G Tech patented technology was developed to be part of a comprehensive technology platform that could generate multiple present

and projected future revenue streams to offset the costs of technology adoption.

Bion’s technology platform includes onsite

monitoring and data collection as well as independent 3 rd party verified lab data confirming the environmental reduction

The third party verified data regarding the environmental impact reductions will also be used to qualify the final consumer

products (livestock protein—including meat, eggs and dairy products) for a US Department of Agriculture (“USDA”)

“Environmentally Sustainable”

Our patented and proprietary technology provides economically

sustainable comprehensive environmental solutions to one of the greatest water air and water quality problems in the U.S.

from large-scale livestock production facilities (also known as “Concentrated Animal Feeding Operations”

or “CAFOs”).

Application of our technology and technology platform can simultaneously mitigate environmental problems and improve operational/resource

efficiencies by recovering high-value co-products from the CAFOs’

waste stream that have traditionally been wasted or underutilized,

including renewable energy, nutrients (including ammonia nitrogen and phosphorus) and water.

During the 2016 to 2021 fiscal years, the Company

focused a large portion of its activities on developing, testing and demonstrating the 3rd generation of its technology and technology

platform (“3G Tech”) with emphasis on increasing the efficiency of production of valuable co-products from the waste treatment

process, including ammonia nitrogen in the form of organic ammonium bicarbonate products.

The Company’s initial ammonium bicarbonate

liquid product completed its Organic Materials Review Institute (“OMRI”) application and review process with approval during

An application for our first solid ammonium bicarbonate product –

AD Nitrogen –

has been filed and is in the review

process (see discussion at “Organic Fertilizer products”

at Item 1 above).

Bion is now focused primarily on:

i) development/construction

of its initial commercial-scale 3G Tech installation, ii) developing applications and markets for its organic fertilizer products and

its sustainable (conventional and organic) animal protein products, and iii) initiation and development of joint ventures (“JVs”

as discussed above) (and related projects) based on the augmented capabilities of our 3G Tech, while (iv) continuing to pursue development

opportunities related to large retrofit projects (such as the Kreider poultry project JV described above) and ongoing R&D activities.

The $175 billion U.S.

livestock industry is

under intense scrutiny for its environmental and public health impacts –

its ‘environmental sustainability’--

at the same time it is struggling with declining revenues and margins (derived in part from clinging to its historic practices

and resulting impacts).

Its failure to respond to consumer concerns ranging from food safety to its ‘socialized’

environmental

impacts have provided impetus for plant-based alternatives such as Beyond Meat and Impossible Burger providing “sustainable”

alternatives to this growing consumer segment of the market.

The plant-based threat to the livestock industry market (primarily

beef and pork) has succeeded in focusing the large scale livestock production facilities (also known as “Concentrated Animal

Feeding Operations”

or “CAFOs") on how to meet the plant-based market challenge by addressing the consumer sustainability

The adoption of livestock waste treatment technology by industry segments is largely dependent upon adoption generating

sufficient revenues to offset the capital and operating costs associated with technology adoption.

We believe that Bion’s 3G Tech platform,

coupled with common-sense policy changes to U.S.

clean water strategy that are already underway, will combine to provide a pathway

to true economic and environmental sustainability with ‘win-win’

benefits for at least a premium sector of the livestock

industry, the environment, and the consumer.

Bion’s business model and technology

can open up the opportunity for JVs (in various contractual forms) between the Company and large livestock/food/fertilizer industry

participants, based upon the supplemental cash flow generated by implementation our 3G Tech business model (described and discussed

below) which will support the costs of technology implementation (including related debt).

We anticipate this will result in long

term value for Bion.

Long term, Bion anticipates that the sustainable branding opportunity may expand to represent the single largest

contributor to the economic opportunity provided by Bion.

During 2018, the Company had its first patent

issued on its 3G Tech and has continued its work to expand its patent coverage for our 3G Tech.

In August 2020, the Company received

a Notice of Allowance on its third patent which significantly expands the breadth and depth of the Company’s 3G Tech coverage.

(See “Patents”

The 3G Tech platform has been designed to maximize the value of co-products produced during

the waste treatment/recovery processes, including pipeline-quality renewable natural gas and organic commercial fertilizer products.

All processes will be verifiable by third-parties (including regulatory authorities, certifying boards and consumers) to comply

with environmental regulations and trading programs and meet the requirements for:

a) renewable energy credits, b) organic certification

of the fertilizer coproducts and c) the USDA PVP ‘Environmentally Sustainable’

branding program (See discussion at

Item 1 above and below herein.) Bion anticipates moving forward with the development process of its initial commercial installations

of its 3G technology during the 2021 (current) and 2022 fiscal years.

livestock industry is under

intense scrutiny for its environmental and public health impacts –

its ‘environmental sustainability’-- at the same

time it is struggling with declining revenues and margins (derived in part from clinging to its historic practices and resulting limitations

and impacts) which threaten its ‘economic sustainability’.

Its failure to adequately respond to consumer concerns ranging

including food safety, environmental impacts, and humane treatment of animals have provided impetus for plant-based alternatives such

as Beyond Meat and Impossible Burger (and many others) being marketed as “sustainable”

alternatives for this growing consumer

segment of the market.

The Company believes that its 3G Tech, in addition

to providing superior environmental remediation, creates opportunities for large scale production of i) verifiably sustainable-branded

livestock products and ii) verifiably sustainable organic-branded livestock products that will command premium pricing (in part due to

ongoing monitoring and third-party verification of environmental performance which will provide meaningful assurances to both consumers

and regulatory agencies).

Each of these two distinct market segments (which the Company intends to pursue in parallel) presents a large

production/marketing opportunity for Bion.

Our 3G Tech will also produce (as co-products) biogas and valuable organic fertilizer products,

which can be utilized in the production of organic grains for use as feed for raising organic livestock (some of which may be utilized

in the Company’s JV projects) and/or marketed to the growing organic fertilizer market.

During the 2021 fiscal year, Bion completed a series

of core optimization trials of its 3G Tech platform that were required to move forward with its initial commercial scale 3G Tech project.

As described in more detail in Item 1above, Bion is now engaged in activities to develop a sustainable beef demonstration facility on

approximately four (4) leased acres near Fair Oaks, Indiana.

The project, as presently planned, will include a covered barn for up to

300 head of cattle, designed to allow daily manure production to flow into Bion’s 3G Tech waste treatment/resource recovery platform

that includes an anaerobic digester (“AD”) to generate biogas and CO2, followed by Bion’s patented 3G Tech ammonia recovery

process to produce organic ammonium bicarbonate and nutrient-rich solids.

We believe that Bion’s 3G Tech platform, coupled

with common-sense policy changes to U.S.

clean water strategy that are already underway, will combine to provide a pathway to true economic

and environmental sustainability with ‘win-win’

benefits for at least a premium sector of the livestock industry, the environment,

and the consumer.

Bion’s business model and technology can open

up the opportunity for JVs (in various contractual forms) between the Company and large livestock/food/fertilizer industry participants,

based upon the supplemental cash flow generated by implementation our 3G Tech business model (described and discussed below) which will

support the costs of technology implementation (including related debt).

We anticipate this will result in long term value for Bion.

term, Bion anticipates that the sustainable branding opportunity may expand to represent the single largest contributor to the economic

opportunity provided by Bion.

During 2018 the Company had its first patent issued

on its 3G Tech and has continued its work to expand its patent coverage for our 3G Tech.

During October 2020, the Company the Company’s

third 3G patent, which patent significantly expands the breadth and depth of the Company’s 3G Tech coverage.

The Company has filed

and anticipates filing additional patent applications (and/or continuations of existing patents) related to its technology developments

during the next 12 months.

The 3G Tech platform has been designed to maximize the value of co-products produced during the waste treatment/recovery

processes, including pipeline-quality renewable natural gas and organic commercial fertilizer products.

All processes will be verifiable

by third-parties (including regulatory authorities, certifying boards and consumers) to comply with environmental regulations and trading

programs and meet the requirements for:

a) renewable energy credits, b) organic certification of the fertilizer coproducts and c) the

USDA PVP ‘Environmentally Sustainable’

branding program (See discussion at Item 1 above and elsewhere herein.) Bion anticipates

moving forward with the development process of its initial large-scale commercial installations of its 3G technology during the 2022 calendar

year on a JV basis.

In parallel, Bion has worked (which work continues)

to advance public policy initiatives that will potentially create markets (in Pennsylvania and other states) that will utilize

taxpayer funding for the purchase of verified pollution reductions from agriculture (“credits”) by the state (or others)

through a competitively-bid procurement programs.

to advance public policy initiatives that will potentially create markets (in Pennsylvania and other states) that will utilize taxpayer

funding for the purchase of verified pollution reductions from agriculture (“credits”) by the state (or others) through competitively-bid

procurement programs.

Such credits can then be used as a ‘qualified offset’

by an individual

state (or municipality) to meet its federal clean water mandates at significantly lower cost to the taxpayer.

Competitive procurement

of verified credits is now supported by US EPA, the Chesapeake Bay Commission, national livestock interests, and other key stakeholders.

Legislation in Pennsylvania to establish the first such state competitive procurement program passed the Pennsylvania Senate by

a bi-partisan majority during March 2019.

However, the Covid-19 pandemic and related financial/budgetary crises have subsequently

slowed progress for this and other policy initiatives and, as a result, it is not currently possible to project the timeline for

this and other similar initiatives (see discuss at Item 1 above and below herein).

The livestock industry is under tremendous

pressure ( from regulatory agencies, a wide range of advocacy groups, institutional investors and the industry’s own consumers)

to adopt sustainable practices.

by an individual state (or municipality) to meet

its federal clean water mandates at significantly lower cost to the taxpayer.

Competitive procurement of verified credits is now supported

by US EPA, the Chesapeake Bay Commission, national livestock interests, and other key stakeholders.

Legislation in Pennsylvania to establish

the first such state competitive procurement program passed the Pennsylvania Senate by a bi-partisan majority during March 2019.

the Covid-19 pandemic and related financial/budgetary crises have subsequently slowed progress for this and other policy initiatives and,

as a result, it is not currently possible to project the timeline for this and other similar initiatives (see discussion at Item 1 above

and below herein).

The livestock industry is under tremendous pressure

(from regulatory agencies, a wide range of advocacy groups, institutional investors and the industry’s own consumers) to adopt sustainable

Environmental cleanup is inevitable - policies are already changing.

Bion’s 3G technology

was developed for implementation on large scale livestock production facilities, where scale drives lower treatment costs and efficient

production of co-products.

We believe that scale, coupled with Bion’s verifiable treatment technology platform, will create

a transformational opportunity to integrate clean production practices at (or close to) the point of production—the source

from which most of the industry’s environmental impacts are initiated.

Bion intends to assist the forward-looking segment

of the livestock industry in actually bringing animal protein production in line with Twenty-first Century consumer demands for

sustainability.

Bion’s 3G Tech and technology platform

are designed to capture four revenue streams under one umbrella and provide the basis for joint ventures between the Company and

larger livestock producers seeking to produce environmental/sustainable product lines.

Bion’s 3G technology was developed for implementation

on large scale livestock production facilities, where scale drives lower treatment costs and efficient production of co-products.

that scale, coupled with Bion’s verifiable treatment technology platform, will create a transformational opportunity to integrate

clean production practices at (or close to) the point of production—the source from which most of the industry’s environmental

impacts are initiated.

Bion intends to assist the forward-looking segment of the livestock industry in actually bringing animal protein

production in line with Twenty-first Century consumer demands for sustainability.

Bion’s 3G Tech and technology platform are designed

to capture four revenue streams under one umbrella and provide the basis for joint ventures between the Company and larger livestock producers

seeking to produce environmental/sustainable product lines.

The revenue streams are:

a) renewable energy

and associated greenhouse gas credits (including US Renewable Fuel Standard (RFS) and/or Low Carbon Fuel Standard (LCFS) credits)(the

value and availability of which will vary based on livestock type, geographical locations, and state regulatory programs), b) verified

nutrient reductions (primarily nitrogen and phosphorus) that can be used as qualified offsets to the federal Chesapeake Bay mandate

and US EPA TMDL (‘total maximum daily limit’) requirements (the value of which will vary based on livestock type, geographical

locations, and state regulatory programs), c) co-products consisting of high value fertilizer for use in organic food production

for human consumption and/or to grow feed for use by livestock in Projects, and d) an environmentally sustainable USDA certification

that will be incorporated into a “brand”

that can address the consumer concerns regarding food safety and sustainability

(based on incorporation of all of the third party verified data for greenhouse gas reductions, nutrient reductions and fertilizer

products into a digital register).

The Company believes that the “branding”

opportunity will offer large scale livestock

producer / processor / distributors of livestock products the opportunity to differentiate and identify their products in the marketplace

and, thereby creates the opportunity to achieve “premium pricing”

by addressing consumer concerns related to safety

and sustainability in a manner similar to the premiums achieved by organic producers.

a) renewable energy and associated greenhouse gas

credits (including US Renewable Fuel Standard (RFS) and/or Low Carbon Fuel Standard (LCFS) credits)(the value and availability of which

will vary based on livestock type, geographical locations, and state regulatory programs), b) verified nutrient reductions (primarily

nitrogen and phosphorus) that can be used as qualified offsets to the federal Chesapeake Bay mandate and US EPA TMDL (‘total maximum

daily limit’) requirements (the value of which will vary based on livestock type, geographical locations, and state regulatory programs),

c) co-products consisting of high value fertilizer for use in organic food production for human consumption and/or to grow feed for use

by livestock in Projects, and d) an environmentally sustainable USDA certification that will be incorporated into a “brand”

that can address the consumer concerns regarding food safety and sustainability (based on incorporation of all of the third party verified

data for greenhouse gas reductions, nutrient reductions and fertilizer products into a digital register).

The Company believes that the

“branding”

opportunity will offer large scale livestock producer / processor / distributors of livestock products the opportunity

to differentiate and identify their products in the marketplace and, thereby creates the opportunity to achieve “premium pricing”

by addressing consumer concerns related to safety and sustainability in a manner similar to the premiums achieved by organic producers.

Operational results from the initial commercial

system (Kreider 1 utilizing our 2G Tech) confirmed the ability of Bion’s technologies to meet nutrient reduction goals at

commercial scale for an extended period of operation.

Bion’s 3G Tech platform (and the new variations under development)

center on its patented and proprietary processes that separate and aggregate the various assets in the CAFO waste stream so they

become benign, stable and/or transportable.

system (Kreider 1 utilizing our 2G Tech) confirmed the ability of Bion’s technologies to meet nutrient reduction goals at commercial

scale for an extended period of operation.

Bion’s 3G Tech platform (and the new variations under development) center on its patented

and proprietary processes that separate and aggregate the various assets in the CAFO waste stream so they become benign, stable and/or

transportable.

Bion systems can:

a) remove up to 95% of the nutrients (primarily nitrogen and phosphorus)

in the effluent, b) reduce greenhouse gases by 90% (or more) including elimination of virtually all ammonia emissions, c) while

materially reducing pathogens, antibiotics and hormones in the livestock waste stream.

Our core technology and its primary CAFO

applications were now proven in the Kreider 1 commercial operations.

It has been accepted by the Environmental Protection Agency

(“EPA”) and other regulatory agencies and it is protected by Bion’s portfolio of U.S.

and international patents

(both issued and applied for).

Currently, our research and development

activities are underway to improve, update and commercialization of our 3G Tech systems (which is ready to be implemented) during

the current fiscal year to meet the needs of JVs in various geographic and climate areas with nutrient release constraints and

to increase the recovery and generation of valuable co-products while adding the capability to treat dry (poultry) waste streams

in addition to wet manure streams at lower capital costs and operating costs

Bion business activity is focused on using

applications of its 3G Tech for utilization in JVs and Projects (including Integrated Projects) in which the Company will participate

as developer, technology provider and direct participant.

Currently our efforts and funds are being expended on pre-development

activities related to:

1) the Kreider 2 poultry JV and 2) Midwest sustainable/organic grain-finished beef JV (see discussion at

Item 1 above and below herein).

a) remove up to 95% of the nutrients (primarily nitrogen and phosphorus) in the effluent, b) reduce greenhouse

gases by 90% (or more) including elimination of virtually all ammonia emissions, c) while materially reducing pathogens, antibiotics and

hormones in the livestock waste stream.

Our core technology and its primary CAFO applications were now proven in the Kreider 1 commercial

It has been accepted by the Environmental Protection Agency (“EPA”) and other regulatory agencies and it is protected

by Bion’s portfolio of U.S.

and international patents (both issued and applied for).

Currently, our research and development activities

are underway to improve, update and commercialization of our 3G Tech systems (which is ready to be implemented) during the current fiscal

year to meet the needs of JVs in various geographic and climate areas with nutrient release constraints and to increase the recovery and

generation of valuable co-products while adding the capability to treat dry (poultry) waste streams in addition to wet manure streams

at lower capital costs and operating costs

Bion business activity is focused on development of its initial

3G Tech installation and using applications of its 3G Tech for utilization in JVs and Projects (including Integrated Projects) in which

the Company will participate as developer, technology provider and direct participant.

Currently our efforts and funds are being expended

on pre-development activities related to:

1) sustainable/organic grain-finished beef JV and 2) the Kreider 2 poultry JV.

KREIDER 1 (HISTORY AND STATUS)

During 2008 the Company commenced actively

pursuing the opportunity presented by environmental retrofit and remediation of the waste streams of existing CAFOs which effort

has met with very limited success to date.

The first commercial activity in this area is represented by our agreement with Kreider

Farms (“KF”), pursuant to which the Kreider 1 system to treat KF's dairy waste streams to reduce nutrient releases

to the environment while generating marketable nutrient credits and renewable energy was designed, constructed and entered full-scale

operation during 2011.

On January 26, 2009 the Board of the Pennsylvania Infrastructure Investment Authority (“Pennvest”)

approved a $7.75 million loan to Bion PA 1, LLC (“PA1”), a wholly-owned subsidiary of the Company, for the initial

Kreider Farms project (“Kreider 1 System”).

After substantial unanticipated delays, on August 12, 2010 PA1 received

a permit for construction of the Kreider 1 System based our 2G Tech (which the Company is no longer implementing).

activities commenced during November 2010.

The closing/settlement of the Pennvest Loan took place on November 3, 2010.

the construction of the Kreider 1 System and entered a period of system ‘operational shakedown’

During 2008 the Company commenced actively pursuing

the opportunity presented by environmental retrofit and remediation of the waste streams of existing CAFOs which effort has met with very

limited success to date.

The first commercial activity in this area is represented by our agreement with Kreider Farms (“KF”),

pursuant to which the Kreider 1 system to treat KF's dairy waste streams to reduce nutrient releases to the environment while generating

marketable nutrient credits and renewable energy was designed, constructed and entered full-scale operation during 2011.

On January 26,

2009 the Board of the Pennsylvania Infrastructure Investment Authority (“Pennvest”) approved a $7.75 million loan to Bion

PA 1, LLC (“PA1”), a wholly-owned subsidiary of the Company, for the initial Kreider Farms project (“Kreider 1 System”).

After substantial unanticipated delays, on August 12, 2010 PA1 received a permit for construction of the Kreider 1 System based our 2G

Tech (which the Company is no longer implementing).

Construction activities commenced during November 2010.

The closing/settlement of

the Pennvest Loan took place on November 3, 2010.

PA1 finished the construction of the Kreider 1 System and entered a period of system

‘operational shakedown’

during May 2011.

Kreider 1 System reached full, stabilized operation by the end of the 2012 fiscal year.

During 2011 the PADEP re-certified the

nutrient credits for this project.

The PADEP issued final permits for the Kreider 1 System (including the credit verification plan)

on August 1, 2012 on which date the Company deemed that the Kreider 1 System was ‘placed in service’.

PA1 commenced generating nutrient reduction credits for potential sale while continuing to utilize the Kreider 1 System to test

improvements and add-ons.

However, to date liquidity in the Pennsylvania nutrient credit market has failed to develop significant

breadth and depth, which limited liquidity/depth has negatively impacted Bion’s business plans and has resulted in insurmountable

challenges to monetizing the nutrient reductions created by PA1’s existing Kreider 1 project and Bion’s other proposed

These difficulties have prevented PA1 from generating any material revenues from the Kreider 1 project to date and raise

significant questions as to when, if ever, PA1 will be able to generate such revenues from the Kreider 1 System which has now been

inactive for several years.

The Kreider 1 System reached full, stabilized operation by the end of the 2012 fiscal

During 2011 the PADEP re-certified the nutrient credits for this project.

The PADEP issued final permits for the Kreider 1 System

(including the credit verification plan) on August 1, 2012 on which date the Company deemed that the Kreider 1 System was ‘placed

in service’.

As a result, PA1 commenced generating nutrient reduction credits for potential sale while continuing to utilize the

Kreider 1 System to test improvements and add-ons.

However, to date liquidity in the Pennsylvania nutrient credit market has failed

to develop significant breadth and depth, which limited liquidity/depth has negatively impacted Bion’s business plans and has resulted

in insurmountable challenges to monetizing the nutrient reductions created by PA1’s existing Kreider 1 project and Bion’s

other proposed projects.

These difficulties have prevented PA1 from generating any material revenues from the Kreider 1 project to date

and raise significant questions as to when, if ever, PA1 will be able to generate such revenues from the Kreider 1 System which has now

been inactive for several years.

PA1 had sporadic discussions/negotiations with Pennvest related to forbearance and/or re-structuring

its obligations pursuant to the Pennvest Loan for more than five years.

In the context of such discussions/negotiations, PA1 elected

not to make interest payments to Pennvest on the Pennvest Loan since January 2013.

Additionally, the Company has not made any principal

payments, which were to begin in fiscal 2013, and, therefore, the Company has classified the Pennvest Loan as a current liability

as of June 30, 2020.

Due to the failure of the Pennsylvania nutrient reduction credit market to develop, the Company determined

that the carrying amount of the property and equipment related to the Kreider 1 project exceeded its estimated future undiscounted

cash flows based on certain assumptions regarding timing, level and probability of revenues from sales of nutrient reduction credits

and, therefore, PA1 and the Company recorded impairments related to the value of the Kreider 1 assets of $1,750,000 and $2,000,000

at June 30, 2015 and June 30, 2014, respectively.

During the 2016 fiscal year, PA1 and the Company recorded an impairment of $1,684,562

to the value of the Kreider 1 assets which reduced the value on the Company’s books to zero ($0).

This impairment reflects

management’s judgment that the salvage value of the Kreider 1 assets roughly equals PA1’s contractual obligations related

to the Kreider 1 System, including expenses related to decommissioning of the Kreider 1 System .

On September 25, 2014, Pennvest exercised

its right to declare the Pennvest Loan in default and accelerated the Pennvest Loan and demanded that PA1 pay $8,137,117 (principal,

interest plus late charges) on or before October 24, 2014.

PA1 did not make the payment and does not have the resources to make

the payments demanded by Pennvest.

PA1 commenced discussions and negotiations with Pennvest concerning this matter but Pennvest

rejected PA1’s proposal made during the fall of 2014.

As of the date of this report, no formal proposals are currently under

consideration and only sporadic communication has taken place regarding the matters involved over the last 5 years.

It is not possible

at this date to predict the outcome of this matter, but the Company believes that a loan modification agreement (coupled with an

agreement regarding an update and re-start of full operations of KF1) may be reached in the context of development of the Kreider

2 Project (see discussion at Item 1 above and below herein) in the future if/when a robust market for nutrient reductions develops

in Pennsylvania, of which there is no assurance.

PA1 and Bion will continue to evaluate various options with regard to Kreider

1 over the next 6-12 months.

its obligations pursuant to the Pennvest Loan for more than 7 years.

In the context of such discussions/negotiations, PA1 elected not

to make interest payments to Pennvest on the Pennvest Loan since January 2013.

Additionally, the Company has not made any principal payments,

which were to begin in fiscal 2013, and, therefore, the Company has classified the Pennvest Loan as a current liability as of June 30,

Due to the failure of the Pennsylvania nutrient reduction credit market to develop, the Company determined that the carrying amount

of the property and equipment related to the Kreider 1 project exceeded its estimated future undiscounted cash flows based on certain

assumptions regarding timing, level and probability of revenues from sales of nutrient reduction credits and, therefore, PA1 and the Company

recorded impairments related to the value of the Kreider 1 assets of $1,750,000 and $2,000,000 at June 30, 2015 and June 30, 2014, respectively.

During the 2016 fiscal year, PA1 and the Company recorded an impairment of $1,684,562 to the value of the Kreider 1 assets which reduced

the value on the Company’s books to zero.

This impairment reflects management’s judgment that the salvage value of the Kreider

1 assets roughly equals PA1’s contractual obligations related to the Kreider 1 System, including expenses related to decommissioning

of the Kreider 1 System .

On September 25, 2014, Pennvest exercised its right

to declare the Pennvest Loan in default and accelerated the Pennvest Loan and demanded that PA1 pay $8,137,117 (principal, interest plus

late charges) on or before October 24, 2014.

PA1 did not make the payment and does not have the resources to make the payments demanded

PA1 commenced discussions and negotiations with Pennvest concerning this matter but Pennvest rejected PA1’s proposal

made during the fall of 2014.

PA1 made a new proposal to Pennvest during September 2021 which proposal is presently under consideration

by Pennvest.PA1 provides Pennvest with its financial statements (which include a description of system status) annually.

During the 2021

fiscal year, Pennvest’s auditors requested a ‘corrective action plan’

and PA1 informed Pennvest that “…

there is no viable corrective action plan for the Pennvest Loan (‘Loan’).

The facility funded by the Loan has been shut down

for many years (which has been disclosed in the annual financial reports to Pennvest and in public filings by the parent of PA1) and the

technology utilized in the facility is now obsolete.

The facility has not been commercially operated for approximately six years and has

generated zero income.

We recommend that Pennvest take appropriate steps to remove and sell the equipment.”

Pennvest recently responded

favorably to the approach of selling the equipment but no actions have yet taken place.

PA1 and the Company are currently discussing proposals

with Pennvest seeking full resolution to these matters.

The Company anticipates additional communication with Pennvest on this matter

during the current year.

It is not possible at this date to predict the final outcome of this matter, but the Company believes it is likely

that that the equipment will be sold with the proceeds delivered to Pennvest during our current fiscal year.

However, the resolution of

these matters including the manner and means of such equipment sale has not been agreed upon as of this date.

PA1 will evaluate the appropriate

manner to resolve/wrap-up its business over the balance of this calendar year.

The economics (potential revenues, profitability

and continued operation) of the Kreider 1 System were based almost entirely on the long-term sale of nutrient (nitrogen and/or

phosphorus) reduction credits to meet the requirements of the Chesapeake Bay environmental clean-up.

and continued operation) of the Kreider 1 System were based almost entirely on the long-term sale of nutrient (nitrogen and/or phosphorus)

reduction credits to meet the requirements of the Chesapeake Bay environmental clean-up.

See below for further discussion.

During August

2012, the Company provided Pennvest (and the PADEP) with data demonstrating that the Kreider 1 System met the ‘technology

guaranty’

standards which were incorporated in the Pennvest financing documents and, as a result, the Pennvest Loan has been

(and is now) solely an obligation of PA1 since that date.

However, the Company’s consolidated balance sheet as of

June 30, 2020 reflects the Pennvest Loan as a liability of $9,585,883 despite the fact that the obligation (if any) solely an obligation

PA1 is currently maintaining some equipment

at the Kreider 1 System pending its potential inclusion within the Kreider 2 Project discussed below.

During August 2012, the Company provided Pennvest

(and the PADEP) with data demonstrating that the Kreider 1 System met the ‘technology guaranty’

standards which were incorporated

in the Pennvest financing documents and, as a result, the Pennvest Loan has been (and is now) solely an obligation of PA1 since that date.

However, the Company’s consolidated balance sheet as of June 30, 2021 reflects the Pennvest Loan as a liability of $9,868,495 despite

the fact that the obligation (if any) solely an obligation of PA 1 .

PA1 is currently maintaining some equipment at

the Kreider 1 System pending its potential inclusion within the Kreider 2 Project discussed below.

3G TECH KREIDER 2 POULTRY PROJECT

Bion continues

its pre-development work related to a waste treatment/renewable energy production facility to treat the waste from KF’s

approximately 6+ million chickens (planned to expand to approximately 9-10 million) (and potentially other poultry operations

and/or other waste streams) ('Kreider Renewable Energy Facility' or ‘

Bion has done extensive pre-development work related

to a waste treatment/renewable energy production facility to treat the waste from KF’s approximately 6+ million chickens (planned

to expand to approximately 9-10 million) (and potentially other poultry operations and/or other waste streams) ('Kreider Renewable Energy

Facility' or ‘

Kreider 2 Project’).

On May 5, 2016, the Company

executed a stand-alone joint venture agreement with Kreider Farms covering all matters related to development and operation of

Kreider 2 system to treat the waste streams from Kreider’s poultry facilities in Bion PA2 LLC (“PA2”).

May 2011 the PADEP certified a smaller version of the Kreider 2 Project (utilizing our 3G Tech) for 559,457 nutrient credits under

the old EPA’s Chesapeake Bay model.

The Company has been in ongoing discussions with the PADEP regarding the appropriate

credit calculation methodology for large-scale technology-based nutrient reduction installations such as the KF2 Project utilizing

our 3G Tech platform.

Based on these discussions and the size of the Kreider 2 Project, we anticipate that when designs are finalized,

the Kreider 2 Project will be re-certified for a far larger number of credits (management’s current estimates are between

2-4 million (or more) nutrient reduction credits for treatment of the waste stream from Kreider’s poultry pursuant to the

Company’s subsequent amended application during the current fiscal year pursuant to the amended EPA Chesapeake Bay model

and agreements between the EPA and PA.

Note that this Project may be expanded in the future to treat wastes from other local and

regional CAFOs (poultry and/or dairy---including the Kreider Dairy) and/or additional Kreider poultry expansion (some of which

may not qualify for nutrient reduction credits).

A review process to clarify certain issues related to credit calculation and

verification commenced during 2014 based on Bion’s 2G Tech but has been placed on hold while certain matters are resolved

between the EPA and Pennsylvania and pending development of a robust market for nutrient reductions in Pennsylvania.

anticipates it will submit an amended or new application based on our 3G Technology.

Site specific design and engineering work

for this facility, which will probably be one of the first full-scale commercial projects to utilize Bion’s 3G Tech, have

not commenced, and the Company does not yet have financing in place for the Kreider 2 Project.

On May 5, 2016, the Company executed a stand-alone joint venture agreement with Kreider

Farms covering all matters related to development and operation of Kreider 2 system to treat the waste streams from Kreider’s poultry

facilities in Bion PA2 LLC (“PA2”).

During May 2011 the PADEP certified a smaller version of the Kreider 2 Project (utilizing

our 3G Tech) for 559,457 nutrient credits under the old EPA’s Chesapeake Bay model.

The Company has been in ongoing discussions

with the PADEP regarding the appropriate credit calculation methodology for large-scale technology-based nutrient reduction installations

such as the KF2 Project utilizing our 3G Tech platform.

Based on these discussions and the size of the Kreider 2 Project, we anticipate

that when designs are finalized, the Kreider 2 Project will be re-certified for a far larger number of credits (management’s current

estimates are between 2-4 million (or more) nutrient reduction credits for treatment of the waste stream from Kreider’s poultry

pursuant to the Company’s subsequent amended application pursuant to the amended EPA Chesapeake Bay model and agreements between

the EPA and PA.

Note that this Project, if it is constructed, may be expanded in the future to treat wastes from other local and regional

CAFOs (poultry and/or dairy---including the Kreider Dairy) and/or additional Kreider poultry expansion (some of which may not qualify

for nutrient reduction credits).

A review process to clarify certain issues related to credit calculation and verification commenced

during 2014 based on Bion’s 2G Tech but was been placed on hold.

The Company anticipates if and when PA2 re-commences work on the

Kreider 2 Project, it will submit a new application based on our 3G Tech.

Site specific design and engineering work for this facility

have not commenced, and the Company does not yet have financing in place for the Kreider 2 Project.

This opportunity is being pursued

If there are positive developments related to the market for nutrient reductions in Pennsylvania, of which there

is no assurance, the Company intends to pursue development, design and construction of the Kreider 2 Project with a goal of achieving

operational status for its initial modules during the coming calendar year, and hopes to enter into agreements related to sales

of the nutrient reduction credits for future delivery (under long term contracts) in the future.

The economics (potential revenues

and profitability) of the Kreider 2 Project, despite its use of Bion’s 3G Tech for increased recovery of marketable by-products,

are based in material part the long-term sale of nutrient (nitrogen and/or phosphorus) reduction credits to meet the requirements

of the Chesapeake Bay environmental clean-up.

However, liquidity in the Pennsylvania nutrient credit market has not yet developed

significant breadth and depth, which lack of liquidity has negatively impacted Bion’s business plans and will most likely

delay PA2’s Kreider 2 Project and other proposed projects in Pennsylvania.

If there are positive developments related to the market for nutrient reductions in Pennsylvania, of which there is no assurance,

the Company intends to pursue development, design and construction of the Kreider 2 Project with a goal of achieving operational status

for its initial modules during then following calendar year.

The economics (potential revenues and profitability) of the Kreider 2 Project,

despite its proposed use of Bion’s 3G Tech for increased recovery of marketable by-products, are based in material part the long-term

sale of nutrient (nitrogen and/or phosphorus) reduction credits to meet the requirements of the Chesapeake Bay environmental clean-up.

However, liquidity in the Pennsylvania nutrient credit market has not yet developed significant breadth and depth, which lack of liquidity

has negatively impacted Bion’s business plans and will most likely delay PA2’s Kreider 2 Project and other proposed projects

in Pennsylvania.

Note that while Bion believes that the Kreider

2 Project and/or subsequent Bion Projects in PA and the Chesapeake Bay Watershed will eventually generate revenue from the sale

a) nutrient reductions (credits or in other form), b) renewable energy (and related credits), c) sales of fertilizer products,

and/or d) potentially, in time, credits for the reduction of greenhouse gas emissions, plus e) license fees related to a ‘sustainable

brand’, the Covid-19 pandemic has delayed legislative efforts needed to commence its development.

We believe that the potential

market is very large, but it is not possible to predict the exact timing and/or magnitude of these potential markets at this time.

MIDWEST SUSTAINABLE/ORGANIC GRAIN-FINISHED

BEEF JV OPPORTUNITY

Bion believes there is a potentially large opportunity

to develop JVs to produce sustainable/organic grain-finished beef in the Midwest and is actively involved in early pre-development

work and discussions regarding pursuit of this opportunity.

We are moving forward with preliminary

pre-development work on a JV to build a state of the art beef cattle operation in the Midwest U.S.

The project would produce corn-fed

USDA-certified organic- and/or sustainable-branded beef.

Organic beef would be finished on organic corn (vs grass fed), produced

using the ammonium bicarbonate fertilizer captured from the cattle’s waste.

We believe Bion’s unique ability to produce

fertilizer for growing of a supply of low-cost organic corn, and the resulting opportunity to produce organic beef, will dramatically

differentiate us from potential competitors.

This organic opportunity is dependent on successfully establishing Bion’s fertilizer

products as acceptable for use in organic grain production.

We intend to develop JVs with organic farmers which use Bion’s

organic ammonium bicarbonate fertilizers to support organic grain production.

This grain can be fed (in the finishing stage) to

livestock to raise organic beef (and beef products) that will meet consumer demand with respect to sustainability and safety and

provide the tenderness and taste American consumers have come to expect from premium American beef.

Such a product is largely

unavailable in the market today (See discussion at Item 1 above).

2 Project and/or subsequent Bion Projects in PA and the Chesapeake Bay Watershed will eventually generate revenue from the sale of:

nutrient reductions (credits or in other form), b) renewable energy (and related credits), c) sales of fertilizer products, and/or d)

potentially, in time, credits for the reduction of greenhouse gas emissions, plus e) license fees related to a ‘sustainable brand’,

the Covid-19 pandemic has delayed legislative efforts needed to commence its development.

We believe that the potential market is very

large, but it is not possible to predict the exact timing and/or magnitude of these potential markets at this time.

SUSTAINABLE/ORGANIC GRAIN-FINISHED BEEF JV OPPORTUNITY

Bion believes there is a potentially large opportunity to develop

JVs to produce sustainable/organic grain-finished beef in the Midwest and elsewhere and has actively engaged in discussions regarding

pursuit of this opportunity with multiple parties over the past two years.

( See extended discussion at Item 1 above ).

PUBLIC POLICY INITIATIVES

A substantial portion of our activities involve

public policy initiatives (by the Company and other stakeholders) to encourage the establishment of appropriate public policies

and regulations (at federal, regional, state and local levels) to facilitate cost effective environmental clean-up and, thereby,

support our business activities.

Bion has been joined by National Milk Producers Federation, Land O’Lakes, JBS and other

national livestock interests to support changes to our nation’s clean water strategy that will allow states to acquire low-cost

nutrient reductions through a competitive procurement process, in a similar manner to how government entities now acquire

many other goods and services on behalf of the taxpayer.

As developing markets for nutrient reductions become fully-established,

Bion anticipates a robust business opportunity to retrofit existing CAFOs and develop Projects, based primarily on the sale of

nutrient credits that provide cost-effective alternatives to today’s high-cost and failing clean water strategy.

To date the market for long-term nutrient

reduction credits in Pennsylvania (‘PA’) has been very slow to develop and the Company’s activities have been

negatively affected by such lack of development.

However, Bion is confident that once these markets are established, the credits

it produces will be competitive in the credit trading markets, based on its cost to remove nitrogen from the livestock waste stream,

compared to the cost to remove nitrogen through various other treatment activities.

Several independent studies have calculated

the average cost to remove nitrogen through various sector practices.

Reports prepared for the PA Senate (2008), Chesapeake Bay

Commission (2012) and PA legislature (2013;

described below), as well as the Maryland Chesapeake Bay Financing Strategy Report

(2015), demonstrate that the cost to remove nitrogen (per pound on average) from agriculture is $44 to $54, municipal wastewater:

A substantial portion of our activities involve public

policy initiatives (by the Company and other stakeholders) to encourage the establishment of appropriate public policies and regulations

(at federal, regional, state and local levels) to facilitate cost effective environmental clean-up and, thereby, support our business

Bion has been joined by National Milk Producers Federation, Land O’Lakes, JBS and other national livestock interests

to support changes to our nation’s clean water strategy that will allow states to acquire low-cost nutrient reductions through a

competitive procurement process, in a similar manner to how government entities now acquire many other goods and services on behalf

of the taxpayer.

As developing markets for nutrient reductions become fully-established, Bion anticipates a robust business opportunity

to retrofit existing CAFOs and develop Projects, based primarily on the sale of nutrient credits that provide cost-effective alternatives

to today’s high-cost and failing clean water strategy.

To date the market for long-term nutrient reduction

credits in Pennsylvania (‘PA’) has been very slow to develop and the Company’s activities have been negatively affected

by such lack of development.

However, Bion is confident that once these markets are established, the credits it produces will be competitive

in the credit trading markets, based on its cost to remove nitrogen from the livestock waste stream, compared to the cost to remove nitrogen

through various other treatment activities.

Several independent studies have calculated the average

cost to remove nitrogen through various sector practices.

Reports prepared for the PA Senate (2008), Chesapeake Bay Commission (2012)

and PA legislature (2013;

described below), as well as the Maryland Chesapeake Bay Financing Strategy Report (2015), demonstrate that

the cost to remove nitrogen (per pound on average) from agriculture is $44 to $54, municipal wastewater:

$28 to $43, and storm water:

$386 to $633.

Pursuant to the PA legislative Report, by replacing sector allocation (for all sectors)

with competitive bidding, up to 80 percent savings could be achieved in PA’s Chesapeake Bay compliance costs ($1.5 billion

annually) by 2025.

If the legislative study had focused on the cost differentials of competitive bidding compared only with storm

water, the relative savings would be substantially greater.

Since these studies were completed, most of

the larger (Tier 1) municipal wastewater treatment plants in PA have been upgraded, at a cost of approximately $2.5 billion (vs

initial 2004 PA DEP cost estimates of $376 million).

US EPA is now focused on PA’s storm water allocation (3.5 million pounds

(per last published data)) and has this sector on ‘backstop level actions’, the highest level of EPA-oversight and

the final step before sanctions.

In the same 2004 PA DEP cost estimate that led to the more than a $2 billion underestimate/miscalculation

in municipal wastewater plant upgrade costs, the estimate for storm water cost was $5.6 billion.

In April 2017, US EPA sent a Letter

of Expectation to PA DEP, expressing the agency’s support for the use of nutrient credit trading and competitive bidding

to engage the private-sector to lower costs.

The letter specifically encouraged the use of credit trading to offset the state’s

looming storm water obligations.

Pursuant to the PA legislative Report, by replacing sector allocation (for all sectors) with competitive bidding, up to

80 percent savings could be achieved in PA’s Chesapeake Bay compliance costs ($1.5 billion annually) by 2025.

If the legislative

study had focused on the cost differentials of competitive bidding compared only with storm water, the relative savings would be substantially

Since these studies were completed, most of the larger

(Tier 1) municipal wastewater treatment plants in PA have been upgraded, at a cost of approximately $2.5 billion (vs initial 2004 PA DEP

cost estimates of $376 million).

US EPA is now focused on PA’s storm water allocation (3.5 million pounds (per last published data))

and has this sector on ‘backstop level actions’, the highest level of EPA-oversight and the final step before sanctions.

the same 2004 PA DEP cost estimate that led to the more than a $2 billion underestimate/miscalculation in municipal wastewater plant upgrade

costs, the estimate for storm water cost was $5.6 billion.

In April 2017, US EPA sent a Letter of Expectation to PA DEP, expressing the

agency’s support for the use of nutrient credit trading and competitive bidding to engage the private-sector to lower costs.

letter specifically encouraged the use of credit trading to offset the state’s looming storm water obligations.

The Company believes that:

i) the April 2015

release of a report from the Pennsylvania Auditor General titled “Special Report on the Importance of Meeting Pennsylvania’s

Chesapeake Bay Nutrient Reduction Targets”

which highlighted the economic consequences of EPA-imposed sanctions if the state

fails to meet the 2017 TMDL targets, as well as the need to support using low-cost solutions and technologies as alternatives to

higher-cost public infrastructure projects, where possible, and ii) Senate Bill 575 (introduced in April 2019 as successor to prior

SB 799 (which was passed by PA Senate during January 2018 but was not voted on in the House)) which, if adopted, will establish

a program that will allow the Pennsylvania’s tax- and rate-payers to meet significant portions of their EPA-mandated Chesapeake

Bay pollution reductions at significantly lower cost by purchasing verified reductions (by competitive bidding) from all sources,

including those that Bion can produce through livestock waste treatment, represent visible evidence of progress being made on these

matters in Pennsylvania.

SB 575 was passed by the PA Senate in 2019 and introduced in the PA House which is scheduled to be taken

up the bill during its current session which is now underway.

Such legislation (which has bi-partisan support), if passed and signed

into law (of which there is no assurance), will potentially enable Bion (and others) to compete for public funding on an equal

basis with subsidized agricultural ‘best management practices’

and public works and storm water authorities.

however, that there is opposition to SB 575 (as was the case for SB 799 and its predecessors) from threatened stakeholders committed

to the existing status quo approaches--- a significant portion of which was focused on attacking (in often inaccurate and/or vilifying

ways) Bion in/through social media and internet articles, blogs, press releases, twitter posts and re-tweets, rather than engaging

the substantive issues.

Further note that the current COVID-19 crisis has shifted government, legislative and budget focuses in

PA in manners which may delay our efforts.

If legislation similar to SB 575 is passed (on a stand-alone basis or as part of a larger

piece of legislation) and implemented (in a form which maintains its core provisions), Bion expects that the policies and strategies

being developed in PA will not only benefit the Company’s existing and proposed PA projects, but will also subsequently provide

the basis for a larger Chesapeake Bay watershed strategy and, thereafter, a national clean water strategy.

THE COVID-19 PANDEMIC HAS FURTHER INCREASED

UNCERTAINTIES RE SB 575 AND ALL POLICY INITIATIVES.

i) the April 2015 release

of a report from the Pennsylvania Auditor General titled “Special Report on the Importance of Meeting Pennsylvania’s Chesapeake

Bay Nutrient Reduction Targets”

which highlighted the economic consequences of EPA-imposed sanctions if the state fails to meet

the 2017 TMDL targets, as well as the need to support using low-cost solutions and technologies as alternatives to higher-cost public

infrastructure projects, where possible, and ii) Senate Bill 575 (introduced in April 2019 as successor to prior SB 799 (which was passed

by PA Senate during January 2018 but was not voted on in the House)) which, if adopted, will establish a program that will allow the Pennsylvania’s

tax- and rate-payers to meet significant portions of their EPA-mandated Chesapeake Bay pollution reductions at significantly lower cost

by purchasing verified reductions (by competitive bidding) from all sources, including those that Bion can produce through livestock waste

treatment, represent visible evidence of progress being made on these matters in Pennsylvania.

SB 575 was passed by the PA Senate in 2019

and introduced in the PA House which is scheduled to be taken up the bill during its current session which is now underway.

Such legislation

(which has bi-partisan support), if passed and signed into law (of which there is no assurance), will potentially enable Bion (and others)

to compete for public funding on an equal basis with subsidized agricultural ‘best management practices’

and public works

and storm water authorities.

Note, however, that there is opposition to currently filed SB 475 and SB832 (as was the case for SB 575 and

its predecessors) from threatened stakeholders committed to the existing status quo approaches--- a significant portion of which was focused

on attacking (in often inaccurate and/or vilifying ways) Bion in/through social media and internet articles, blogs, press releases, twitter

posts and re-tweets, rather than engaging the substantive issues.

Further note that the current COVID-19 crisis has shifted government,

legislative and budget focuses in PA in manners which may delay our efforts.

If SB 475 and/or SB832 (or similar legislation) is passed

(on a stand-alone basis or as part of a larger piece of legislation) and implemented (in a form which maintains its core provisions),

Bion expects that the policies and strategies being developed in PA will not only benefit the Company’s existing and proposed PA

projects, but will also subsequently provide the basis for a larger Chesapeake Bay watershed strategy and, thereafter, a national clean

water strategy.

THE COVID-19 PANDEMIC HAS FURTHER INCREASED UNCERTAINTIES

RE SB 575 AND ALL POLICY INITIATIVES.

SEE FURTHER DISCUSSION IN ITEM 1 ABOVE.

1 unchanged sentence

in the long-standing clean water battle between agriculture and the further regulation of agriculture relative to nutrient

The ability of Bion and other technology providers to achieve verified reductions from agricultural non-point sources

can resolve the current stalemate and enable implementation of constructive solutions that benefit all stakeholders, providing

a mechanism that ensures that taxpayer funds will be used to achieve the most beneficial result at the lowest cost, regardless

All sources, point and non-point, rural and urban, will be able to compete for tax payer-funded nitrogen reductions

in a fair and transparent process;

and since payment from the tax and rate payers would now be performance-based, these providers

will be held financially accountable.

We believe that the overwhelming environmental,

economic, quality of life and public health benefits to all stakeholders in the watershed, both within and outside of Pennsylvania,

make the case for adoption of the strategies outlined in the Report less an issue of ‘if’, but of ‘when and

The adoption of a competitive procurement program will have significant positive impact on technology providers that

can deliver verified nitrogen reductions such as Bion, by allocating existing tax- and rate-payer clean water funding to low cost

solutions based upon a voluntary and transparent procurement process.

The Company believes that implementation of a competitively-bid

nutrient reduction program to achieve the goals for the Chesapeake Bay watershed can also provide a working policy model and platform

for other states to adopt that will enhance their efforts to comply with both current and future requirements for local and federal

estuarine watersheds, including the Mississippi River/Gulf of Mexico, the Great Lakes Basin and other nutrient-impaired watersheds.

(Note, however, that current COVID-19 crisis has shifted government, legislative and budget focuses in manners which may delay

the fruition of our efforts.)

The Company currently anticipates that either

a Midwest Sustainable/Organic Grain-Fed Beef JV or the Kreider 2 poultry JV in PA will be its initial full-scale 3G Project.

hopes to commence development of its initial s by optioning land and beginning the site-specific design and permitting processes

during the current fiscal year, but further delays are possible.

It is not possible at this time to firmly predict where the initial

Project will be developed or the order in which Projects will be developed.

All potential Projects are in very early discussion

and pre-development stages and may never progress to actual development or may be developed after other Projects not yet under

active consideration.

Bion also hopes to be able to move forward

on multiple JVs/Projects through 2021-2024 to create a pipeline of Projects.

Management has a 5-year development target (through

calendar year 2026) of approximately 3-8 or more JVs/Projects pursuant to joint ventures (or similar agreements).

Management hopes

to have identified and begun development work related to 3-5 Projects over the next 2 years.

At the end of the 5-year period, Bion

projects that 3-5 or more of these JVs/Projects will be in full operation in 3 or more states (and possibly one or more foreign

countries), and the balance would be in various stages ranging from partial operation to early development stage.

It is possible

that one or more Projects will be developed in joint ventures specifically targeted to meet the growing animal protein demand outside

of the United States (including without limitation Asia, Europe and/or the Middle East).

The ability of Bion and other technology providers to achieve verified reductions from agricultural non-point sources can resolve

the current stalemate and enable implementation of constructive solutions that benefit all stakeholders, providing a mechanism that ensures

that taxpayer funds will be used to achieve the most beneficial result at the lowest cost, regardless of source.

All sources, point and

non-point, rural and urban, will be able to compete for tax payer-funded nitrogen reductions in a fair and transparent process;

payment from the tax and rate payers would now be performance-based, these providers will be held financially accountable.

We believe that the overwhelming environmental, economic,

quality of life and public health benefits to all stakeholders in the watershed, both within and outside of Pennsylvania, make the case

for adoption of the strategies outlined in the Report less an issue of ‘if’, but of ‘when and how’.

of a competitive procurement program will have significant positive impact on technology providers that can deliver verified nitrogen

reductions such as Bion, by allocating existing tax- and rate-payer clean water funding to low-cost solutions based upon a voluntary and

transparent procurement process.

The Company believes that implementation of a competitively-bid nutrient reduction program to achieve

the goals for the Chesapeake Bay watershed can also provide a working policy model and platform for other states to adopt that will enhance

their efforts to comply with both current and future requirements for local and federal estuarine watersheds, including the Mississippi

River/Gulf of Mexico, the Great Lakes Basin and other nutrient-impaired watersheds.

(Note, however, that current COVID-19 crisis has

shifted government, legislative and budget focuses in manners which may delay the fruition of our efforts.)

The Company currently anticipates that a Sustainable/Organic

Grain-Fed Beef JV is likely to be its initial full-scale 3G Project (but the Kreider 2 poultry JV in PA remains a possibility).

that Bion has commenced development of its initial 3G Tech installation by leasing land and beginning the site-specific design and permitting

processes, we believe it will be possible to commence development of a full-scale 3G Project during late 2022 calendar year, but further

delays are possible.

It is not possible at this time to firmly predict where the initial JVs and Projects will be developed or the order

in which Projects will be developed.

All potential Projects are in very early discussion and pre-development stages and may never progress

to actual development or may be developed after other Projects not yet under active consideration.

Bion intends to carry out its business plan to move

forward on multiple JVs/Projects during the 2022-2026 period to create a pipeline of Projects.

Management has a 5-year development target

(through calendar year 2026) of commencing approximately 3-8 or more JVs/Projects of various sizes (and potentially in multiple species)

pursuant to joint ventures (or similar agreements).

Management hopes to have identified and begun development work related to 3 (or more)

Projects over the next 3 years.

At the end of the 5-year period, Bion projects that 3-5 or more of these JVs/Projects will be in commercial

operation in 3 or more states, and the balance would be in various stages ranging from partial operation to early development stage.

is possible that one or more Projects will be developed in joint ventures specifically targeted to meet the growing animal protein demand

outside of the United States (including without limitation Asia, Europe and/or the Middle East).

No JVs/Projects (including Integrated

2 unchanged sentences

for the years ended June 30, 2021 and 2020 were prepared assuming the Company will continue as a going concern.

The Company has

incurred net losses of approximately $4,553,000 and $2,659,000 during the years ended June 30, 2020 and 2019, respectively.

Report of the Independent Registered Public Accounting Firm on the Company’s consolidated financial statements as of and

for the year ended June 30, 2020 includes a “going concern”

explanatory paragraph which means that there are factors

that raise substantial doubt about the Company’s ability to continue as a going concern.

At June 30, 2020, the Company had

a working capital deficit and a stockholders’

The Company has incurred

net losses of approximately $3,451,000 and $4,553,000 during the years ended June 30, 2021 and 2020, respectively.

The Report of the Independent

Registered Public Accounting Firm on the Company’s consolidated financial statements as of and for the year ended June 30, 2021

includes a “going concern”

explanatory paragraph which means that there are factors that raise substantial doubt about the

Company’s ability to continue as a going concern.

At June 30, 2021, the Company had a working capital deficit and a stockholders’

deficit of approximately $6,614,000 and $11,445,000, respectively.

Management’s

plans with respect to these matters are described in this section and in our consolidated financial statements (and notes thereto),

and this material does not include any adjustments that might result from the outcome of this uncertainty.

However, there is no

guarantee that we will be able to raise sufficient funds or further capital for the operations planned in the near future.

Management’s plans with respect to these matters are described

in this section and in our consolidated financial statements (and notes thereto), and this material does not include any adjustments that

might result from the outcome of this uncertainty.

However, there is no guarantee that we will be able to raise sufficient funds or further

capital for the operations planned in the near future.

COVID-19 PANDEMIC RELATED MATTERS:

The Company faces risks and uncertainties

and factors beyond our control that are magnified during the current Covid-19 pandemic and the unique economic, financial, governmental

and health-related conditions in which the Company, the country and the entire world now reside.

To date the Company has experienced

direct impacts in various areas including but without limitation:

i) government ordered shutdowns which have slowed the Company’s

research and development projects and other initiatives, ii) shifted focus of state and federal governments which is likely to

negatively impact the Company’s legislative initiatives in Pennsylvania and Washington D.

C., iii) strains and uncertainties

in both the equity and debt markets which have made discussion and planning of funding of the Company and its initiatives and projects

with investment bankers, banks and potential strategic partners more tenuous, iv) strains and uncertainties in the agricultural

sector and markets have made discussion and planning more difficult as future industry conditions are now more difficult to assess

and predict, v) due to the age and health of our core management team, all of whom are age 70 or older and have had one or more

existing health issues, the Covid-19 pandemic places the Company at greater risk than was previously the case (to a higher degree

than would be the case if the Company had a larger, deeper and/or younger core management team), and vi) there almost certainly

will be other unanticipated consequences for the Company as a result of the current pandemic emergency and its aftermath.

The Company faces risks and uncertainties and factors

beyond our control that are magnified during the current Covid-19 pandemic and the unique economic, financial, governmental and health-related

conditions in which the Company, the country and the entire world now reside.

To date the Company has experienced direct impacts in various

areas including but without limitation:

i) government ordered shutdowns which have slowed the Company’s research and development

projects and other initiatives, ii) shifted focus of state and federal governments which is likely to negatively impact the Company’s

legislative initiatives in Pennsylvania and Washington D.

C., iii) strains and uncertainties in both the equity and debt markets which

have made discussion and planning of funding of the Company and its initiatives and projects with investment bankers, banks and potential

strategic partners more tenuous, iv) strains and uncertainties in the agricultural sector and markets have made discussion and planning

more difficult as future industry conditions are now more difficult to assess and predict, v) constraints due to problems experienced

in the global industrial supply chain, vi) due to the age and health of our core management team, all of whom are age 70 or older and

have had one or more existing health issues, the Covid-19 pandemic places the Company at greater risk than was previously the case (to

a higher degree than would be the case if the Company had a larger, deeper and/or younger core management team), and vii) there almost

certainly will be other unanticipated consequences for the Company as a result of the current pandemic emergency and its aftermath.

CRITICAL ACCOUNTING POLICIES

Revenue Recognition

The Company currently does not generate

revenue and if and when the Company begins to generate revenue the Company will comply with the provisions of Accounting Standards

Codification (“ASC”) 606 “Revenue from Contracts with Customers”.

The Company currently does not generate revenue

and if and when the Company begins to generate revenue the Company will comply with the provisions of Accounting Standards Codification

(“ASC”) 606 “Revenue from Contracts with Customers”.

Stock-based compensation

The Company follows the provisions of ASC 718,

718, which generally requires that share-based compensation transactions be accounted and recognized in the statement of income

based upon their grant date fair values.

which generally requires that share-based compensation transactions be accounted and recognized in the statement of income based upon

their grant date fair values.

Derivative Financial Instruments:

Pursuant to ASC Topic 815 “Derivatives

and Hedging”

(“Topic 815”), the Company reviews all financial instruments for the existence of features which

may require fair value accounting and a related mark-to-market adjustment at each reporting period end.

Once determined, the Company

assesses these instruments as derivative liabilities.

The fair value of these instruments is adjusted to reflect the fair value

at each reporting period end, with any increase or decrease in the fair value being recorded in results of operations as an adjustment

to fair value of derivatives.

The Company has issued warrants to purchase

common shares of the Company.

Warrants are valued using a fair value based method, whereby the fair value of the warrant is determined

at the warrant issue date using a market-based option valuation model based on factors including an evaluation of the Company’s

value as of the date of the issuance, consideration of the Company’s limited liquid resources and business prospects, the

market price of the Company’s stock in its mostly inactive public market and the historical valuations and purchases of the

Company’s warrants.

When warrants are issued in combination with debt or equity securities, the warrants are valued and accounted

for based on the relative fair value of the warrants in relation to the total value assigned to the debt or equity securities and

warrants combined.

Pursuant to ASC Topic 815 “Derivatives and

Hedging”

(“Topic 815”), the Company reviews all financial instruments for the existence of features which may require

fair value accounting and a related mark-to-market adjustment at each reporting period end.

Once determined, the Company assesses these

instruments as derivative liabilities.

The fair value of these instruments is adjusted to reflect the fair value at each reporting period

end, with any increase or decrease in the fair value being recorded in results of operations as an adjustment to fair value of derivatives.

The Company has issued warrants to purchase common

shares of the Company.

Warrants are valued using a fair value based method, whereby the fair value of the warrant is determined at the

warrant issue date using a market-based option valuation model based on factors including an evaluation of the Company’s value as

of the date of the issuance, consideration of the Company’s limited liquid resources and business prospects, the market price of

the Company’s stock in its mostly inactive public market and the historical valuations and purchases of the Company’s warrants.

When warrants are issued in combination with debt or equity securities, the warrants are valued and accounted for based on the relative

fair value of the warrants in relation to the total value assigned to the debt or equity securities and warrants combined.

Recent Accounting Pronouncements :

In June 2018, the FASB issued ASU No.

“Compensation –

2018-07 “Compensation

Stock Compensation –

Improvements to Nonemployee Share-Based Payment Accounting”

the accounting for share based payments granted to nonemployees and was adopted by the Company effective July 1, 2019.

guidance, payments to nonemployees is aligned with the requirements for share-based payments granted to employees.

of this guidance did not have a material impact on the Company’s financial statements as previously issued share-based payments

to nonemployees had already reached a measurement date.

YEAR ENDED JUNE 30, 2020 COMPARED

TO THE YEAR ENDED JUNE 30, 2019

Total revenues were nil for both the

years ended June 30, 2020 and 2019, respectively.

to simplify the accounting for share

based payments granted to nonemployees and was adopted by the Company effective July 1, 2019.

Under this guidance, payments to nonemployees

are aligned with the requirements for share-based payments granted to employees.

The adoption of this guidance did not have a material

impact on the Company’s financial statements as previously issued share-based payments to nonemployees had already reached a measurement

YEAR ENDED JUNE 30, 2021 COMPARED TO THE

YEAR ENDED JUNE 30, 2020

Total revenues were nil for both the years

ended June 30, 2021 and 2020, respectively.

General and Administrative

3 unchanged sentences

stock-based compensation charges of $850,000 and $1,931,000, were $1,228,000 and $1,159,000 for the years ended June 30, 2021 and 2020,

2019, respectively, representing a $30,000 decrease.

Salaries and related payroll tax expenses were $266,000 and $254,000 for the

year ended June 30, 2020 and 2019, respectively.

Consulting costs were $458,000 and $446,000 for the years ended June 30, 2020

and 2019, respectively, as there were no significant changes in the Company’s use of consultants.

Insurance related expenses

were $93,000 and $86,000 for the years ended June 30, 2020 and 2019, representing a $7,000 increase due to renewal of insurance

coverage and higher premium costs.

Investor relations related expenses were $72,000 and $145,000 for the years ended June 30, 2020

and 2019, respectively, a $73,000 decrease due to the fact the pandemic curtailed investor conferences and related travel during

the latter part of the year ended June 30, 2020.

Accounting and tax related costs were $105,000 and $87,000 for the years ended

June 30, 2020 and 2019, respectively, with the increase being attributed to tax preparation fees.

General and administrative stock-based

employee compensation for the years ended June 30, 2020 and 2019 consists of the following:

respectively, representing a $69,000 increase.

Salaries and related payroll tax expenses were $319,000 and $266,000 for the years ended

June 30, 2021 and 2020, respectively, representing a $53,000 increase due to a consultant being partially paid as an employee and a bonus

given to Smith for payroll taxes during the year ended June 30, 2021.

Consulting costs were $391,000 and $458,000 for the years ended

June 30, 2021 and 2020, respectively.

The decrease in consulting costs is partially due a consultant being paid as an employee and the

absence of political consulting to further the environmental mandates in Pennsylvania during the years ended June 30, 2021.

Investor relations

expenses were $149,000 and $72,000 for the years ended June 30, 2021 and 2020, respectively, and the increase is due to a new contract

with an investor relations firm during the latter part of fiscal year 2021.

Travel costs were $13,000 and $28,000 for the years ended

June 30, 2021 and 2020, respectively, with the decrease due to travel restrictions during the pandemic.

General and administrative stock-based employee

compensation for the years ended June 30, 2021 and 2020 consists of the following:

General and administrative:

2 unchanged sentences

Fair value of stock options expensed under ASC 718

Stock-based compensation charges were $1,931,000

and $536,000 for the years ended June 30, 2020 and 2019, respectively.

Compensation expense relating to the change in fair value

from the modification of option terms was $511,000 and $211,000 for the years ended June 30, 2020 and 2019, respectively, as the

Company granted a reduction in certain exercise prices and an extension of certain option expiration dates for 7,121,600 and 1,025,000

options during the years ended June 30, 2020 and 2019, respectively.

During the years ended June 30, 2020 and 2019, the Company

extended expiration dates of warrants for certain employees and consultants which resulted in the recognition of $1,065,000 and

$118,000, respectively, in non-cash compensation.

The fair value of stock options expensed for the years ended June 30, 2020 and

2019 was $355,000 and $207,000, respectively.

The Company granted 2,210,000 and 655,000 fully vested options during the years ended

June 30, 2020 and 2019, respectively.

Stock-based compensation charges were $850,000 and

$1,931,000 for the years ended June 30, 2021 and 2020, respectively.

The fair value of stock options expensed for the years ended June

30, 2021 and 2020 was $816,000 and $355,000, respectively.

The Company granted 960,000 and 2,210,000 fully vested options during the years

ended June 30, 2021 and 2020, respectively.

Compensation expense relating to the change in fair value from the modification of option

terms was $9,000 and $511,000 for the years ended June 30, 2021 and 2020, respectively, as the Company granted an extension of certain

option expiration dates and modified selected exercise prices for 50,000 and 7,121,600 options during the years ended June 30, 2021 and

2020, respectively.

During the years ended June 30, 2021 and 2020, the Company extended expiration dates of warrants for certain employees

and consultants which resulted in the recognition of $25,000 and $1,065,000, respectively, in non-cash compensation.

Total depreciation expense was $827 and $1,248

1 unchanged sentence

Research and Development

Total research and development expenses

were $1,124,000 and $520,000 for the years ended June 30, 2020 and 2019, respectively.

Research and development expenses, excluding

stock-based compensation expenses of $646,000 and $85,000 were $478,000 and $435,000 for the years ended June 30, 2020 and 2019,

respectively.

Salaries and related payroll tax expenses were $80,000 for both the years ended June 30, 2020 and 2019, respectively.

Consulting costs were $218,000 and $230,000 for the years ended June 30, 2020 and 2019, respectively, while expenses related to

the development of a new pilot program for its anaerobic digestate process were $112,000 and $51,000, respectively for the years

ended June 30, 2020 and 2019, respectively.

Research and development stock-based employee

compensation for the years ended June 30, 2020 and 2019 consists of the following:

Total research and development expenses were $749,000

and $1,124,000 for the years ended June 30, 2021 and 2020, respectively.

Research and development expenses, excluding stock-based

compensation expenses of $202,000 and $646,000 were $547,000 and $478,000 for the years ended June 30, 2021 and 2020, respectively.

and related payroll tax expenses were $94,000 and $80,000 for the years ended June 30, 2021 and 2020, respectively.

Consulting costs were

$214,000 and $218,000 for the years ended June 30, 2021 and 2020, respectively.

The Company also incurred $144,000 and $112,000

for the years ended June 30, 2021 and 2020, respectively in the development of new components of the pilot program for its anaerobic digestate

The overall increase in research and development expenses were attributable, in part, to increased cash availability during the

latter part of fiscal year 2021.

Research and development stock-based employee compensation

for the years ended June 30, 2021 and 2020 consists of the following:

June 30, 2021

5 unchanged sentences

Stock-based compensation expenses were $202,000

$646,000 and $85,000 and for the years ended June 30, 2020 and 2019, respectively.

The compensation expense of $115,000 and $11,000

for the years ended June 30, 2020 and 2019, respectively was for the change in fair value from modification of options terms is

due to a research and development employee and consultant having certain option exercise prices reduced during those periods.

the years ended June 30, 2020 and 2019, the Company extended expiration dates of warrants for certain research and development

employees and consultants which resulted in the recognition of $457,000 and $45,000, respectively, in non-cash compensation.

Company expensed $74,000 and $29,000 for the fair value of stock options that vested during the years ended June 30, 2020 and 2019.

The Company granted 2,210,000 and 655,000 options during the years ended June 30, 2020 and 2019, respectively, that were fully

vested within that time period and a portion of the stock compensation was allocated to research and development.

and $646,000 for the years ended June 30, 2021 and 2020, respectively.

The Company expensed $202,000 and $74,000 for the fair value of

stock options that vested during the years ended June 30, 2021 and 2020, respectively.

The Company granted 960,000 and 2,210,000 fully

vested options during the years ended June 30, 2021 and 2020, respectively, a portion of which was allocated to research and development.

The compensation expense of nil and $115,000 for the years ended June 30, 2021 and 2020, respectively was for the change in fair value

from modification of options terms is due to a research and development employee and consultant having certain option exercise prices

reduced during the year ended June 30, 2020.

During the year ended June 30, 2020, the Company extended expiration dates of warrants for

certain research and development employees and consultants which resulted in the recognition of $457,000 in non-cash compensation, while

no such modifications were made for the year ended June 30, 2021.

Loss from Operations

As a result of the factors described above,

the loss from operations was $4,215,000 and $2,246,000 for the years ended June 30, 2020 and 2019, respectively.

Other (Income) Expense

Other (income) expense was $338,000 and

$413,000 for the years ended June 30, 2020 and 2019, respectively.

Interest expense related the Pennvest Loan was $247,000 and

$239,000 for the years ended June 30, 2020 and 2019, respectively, while interest expense related to deferred compensation and

convertible notes was $182,000 and $147,000 for the years ended June 30, 2020 and 2019, respectively, with the increase being attributable

to overall higher deferred compensation and note balances.

Additionally, interest expense of $36,000 and $25,000 was recorded during

the years ended June 30, 2020 and 2019, respectively, due to the modification of warrant expiry dates for warrants held by investors.

During the year ended June 30, 2020, the Company recognized other income of $122,000 due to the extinguishment of liabilities due

to the legal release of certain accounts payable and $6,000 due to the grant of an Economic Impact Disaster Loan.

As a result of the factors described above, the

loss from operations was $2,828,000 and $4,215,000 for the years ended June 30, 2021 and 2020, respectively.

Other Expense

Other expense was $623,000 and $338,000 for the

years ended June 30, 2021 and 2020, respectively.

Interest expense of $187,000 and $36,000 was recorded during the years ended June 30,

2021 and 2020, respectively, due to the modification of warrant expiry dates for warrants held by investors and brokers.

Interest expense

related to convertible notes was $197,000 and $159,000 for the years ended June 30, 2021 and 2020, respectively and the increase is attributable

to higher convertible note balances.

Offsetting higher interest expenses for the year ended June 30, 2021 was $35,000 on forgiveness of

debt due to the Company’s PPP loan being forgiven by the Small Business Administration.

During the year ended June 30, 2020, the

Company recognized other income of $122,000 due to the extinguishment of liabilities due to the legal release of certain accounts payable

and $6,000 due to the grant of an Economic Impact Disaster Loan.

Net Loss Attributable to the Noncontrolling

1 unchanged sentence

interest was $3,000 and $8,000 for the years ended June 30, 2021 and 2020, respectively.

Net Loss Attributable to Bion’s

Common Stockholders

As a result of the factors described above,

the net loss attributable to Bion’s stockholders was $4,546,000 and $2,654,000 for the years ended June 30, 2020 and 2019,

respectively, and the net loss per basic common share was $0.16 and $0.10 for the years ended June 30, 2020 and 2019, respectively.

Net Loss Attributable to Bion’s Common

As a result of the factors described above, the

net loss attributable to Bion’s stockholders was $3,448,000 and $4,546,000 for the years ended June 30, 2021 and 2020, respectively,

and the net loss per basic common share was $0.10 and $0.16 for the years ended June 30, 2021 and 2020, respectively.

LIQUIDITY AND CAPITAL RESOURCES

The Company's consolidated financial statements

for the year ended June 30, 2020 have been prepared on a going concern basis, which contemplates the realization of assets and

the settlement of liabilities and commitments in the normal course of business.

The Report of our Independent Registered Public

Accounting Firm on the Company's consolidated financial statements as of and for the year ended June 30, 2020 includes a "going

concern"

explanatory paragraph which means that the auditors stated that conditions exist that raise substantial doubt about

the Company's ability to continue as a going concern.

The Company's consolidated financial statements for

the year ended June 30, 2021 have been prepared on a going concern basis, which contemplates the realization of assets and the settlement

of liabilities and commitments in the normal course of business.

The Report of our Independent Registered Public Accounting Firm on the

Company's consolidated financial statements as of and for the year ended June 30, 2021 includes a "going concern"

paragraph which means that the auditors stated that conditions exist that raise substantial doubt about the Company's ability to continue

as a going concern.

Operating Activities

As of June 30, 2020, the Company had cash

of approximately $561,000.

During the year ended June 30, 2020, net cash used in operating activities was $966,000, primarily consisting

of cash operating expenses related to salaries and benefits, and other general and administrative costs such as insurance, legal,

accounting, consulting and investor relations expenses.

As previously noted, the Company is currently not generating significant

revenue and accordingly has not generated cash flows from operations.

The Company does not anticipate generating sufficient revenues

to offset operating and capital costs for a minimum of two to five years.

While there are no assurances that the Company will be

successful in its efforts to develop and construct its Projects and market its Systems, 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.

As of June 30, 2021, the Company had cash of approximately

During the year ended June 30, 2021, net cash used in operating activities was $1,389,000, primarily consisting of cash operating

expenses related to salaries and benefits, and other general and administrative costs such as insurance, legal, accounting, consulting

and investor relations expenses.

As previously noted, the Company is currently not generating significant revenue and accordingly has

not generated cash flows from operations.

The Company does not anticipate generating sufficient revenues to offset operating and capital

costs for a minimum of two to five years.

While there are no assurances that the Company will be successful in its efforts to develop

and construct its Projects and market its Systems, 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.

Financing Activities

During the years ended June 30, 2020, the Company

received gross cash proceeds of $1,584,000 from the sale of 3,168,001 units which consists of one share of the Company’s

restricted common stock and one warrant to purchase one share of the Company’s restricted common stock for $0.75 per share

through December 2020 and December 2021.

During the year ended June 30, 2021, the Company

received gross cash proceeds of $1,860,000 from the sale of 3,720,000 units which consists of one share of the Company’s restricted

common stock and one warrant to purchase one share of the Company’s restricted common stock for $0.75 per share through December

The Company paid cash commissions related to the sale of units of $161,000.

received proceeds from loans from affiliates of $35,000 during the year ended June 30, 2020 and used $20,000 to repay such loans

during the same period.

The Company also received a Paycheck Protection Program loan in the amount of $35,000 during the year ended

June 30, 2020.

During the year ended June 30, 2021, 300,000 shares

of the Company’s restricted company stock were sold to an investor for $300,000.

The Company also received $3,049,490 in gross proceeds

from the exercise of 4,065,988 warrants into shares of the Company’s common stock and paid approximately $4,000 in cash commissions

related to the exercise of warrants.

As of June 30, 2021, the Company has debt obligations

1 unchanged sentence

a) deferred compensation of $479,200, b) convertible notes payable –

affiliates of $4,596,000, c) a loan payable

and accrued interest of $9,586,000 (owed by PA1), and d) a Paycheck Protection Program loan of $35,000.

affiliates of $4,793,000, and c) a loan payable

and accrued interest of $9,868,000 (owed solely by PA1).

Plan of Operations and Outlook

As of June 30, 2020, the Company had cash of

approximately $561,000.

The Company continues to explore sources

of additional financing to satisfy its current operating requirements as it is not currently generating any significant revenues.

During the past six years (fiscal years 2014 through 2019), the Company experienced greater difficulty in raising equity and debt

funding than in the prior years (which is not mitigated by the relative increase in equity funding during the year ended June 30,

As a result, the Company faced, and continues to face, significant cash flow management challenges due to material working

capital constraints.

These difficulties, challenges and constraints have continued during fiscal years 2019 and 2020.

anticipates that they may continue for the next twelve (12) months or longer.

As of June 30, 2021, the Company had cash of approximately

The Company continues to explore sources of additional

financing to satisfy its current operating requirements as it is not currently generating any significant revenues.

During fiscal

years 2021 and 2020, the Company has faced progressively less difficulty in raising equity funding (but substantial equity dilution has

gone along with the larger amounts of equity financing during the periods).

However, the Company anticipates substantial increases in

demands for capital and operating expenditures as it moves toward commercial implementation of its 3G Tech and development of JVs and,

therefore, is likely to continue to face, significant cash flow management challenges due to limited capital resources and working capital

constraints which have only recently begun to be alleviated.

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 all or part of their cash compensation

and/or are accepting compensation in the form of securities of the Company (Notes 5 and 7 to Financial Statements) and members

of the Company's senior management have made loans to the Company which have been converted into convertible promissory notes as

of June 30, 2020.

During the year ended June 30, 2018 senior management and certain core employees and consultants agreed to a

one-time extinguishment of liabilities owed by the Company which in aggregate totaled $2,404,000.

As of June 30, 2020, such deferrals

totaled approximately $5,374,000 (including accrued interest and deferred compensation converted into promissory notes but excluding

conversions of deferred compensation into the Company's common stock by officers, employees and consultants that have already been

The extended constraints on available resources have had, and continue to have, negative effects on the pace and

scope of the Company's effort to develop its business .

The Company made reductions in its personnel during the years ended

June 30, 2014 and 2015 and again in 2018.

The Company has had to delay payments of trade obligations and economize in many ways

that have potentially negative consequences.

If the Company does not have greater success in its efforts to raise needed funds

during the current year (and subsequent periods), we will need to consider deeper cuts (including additional personnel cuts) and

curtailments of operations (including possibly Kreider 1 operations).

The Company will need to obtain additional capital to fund

its operations and technology development, to satisfy existing creditors, to develop Projects (including Integrated Projects) and

CAFO Retrofit waste remediation systems (including the Kreider 2 facility) and to continue to operate the Kreider 1 facility (subject

to agreements being reached with Pennvest as discussed above).

and/or are accepting compensation in the form of securities of the Company (Notes 4 and 6 to Financial Statements) and members of the

Company's senior management have from time to time made loans to the Company.

During the year ended June 30, 2018 senior management and

certain core employees and consultants agreed to a one-time extinguishment of liabilities owed by the Company which in aggregate totaled

As of June 30, 2021, such deferrals totaled approximately $5,272,000 (including accrued interest and deferred compensation

converted into promissory notes but excluding conversions of deferred compensation into the Company's common stock by officers, employees

and consultants that have already been completed).

The extended constraints on available resources have had, and continue to have,

negative effects on the pace and scope of the Company's effort to develop its business .

The Company made reductions in its personnel

during the years ended June 30, 2014 and 2015 and again in 2018.

The constraint on available resources has had, and continues to have,

negative effects on the pace and scope of the Company’s efforts to 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 continue

its recent increased success in its efforts to raise needed funds during the remainder of the current fiscal year (and subsequent periods),

of which there is no assurance, management will not need to consider deeper cuts (including additional personnel cuts) and 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, to develop JVs, Projects (including Integrated Projects)

and CAFO Retrofit waste remediation systems (including the Kreider 2 facility) and to continue to maintain equipment at the Kreider 1

facility (subject to agreements being reached with Pennvest as discussed above).

The Company anticipates that it will seek to raise from

$5,000,000 to $50,000,000 or more (debt and equity) during the next twelve months.

However, as discussed above, there is no guarantee that

we will be able to raise sufficient funds or further capital for the operations planned in the near future.

The Company is not currently generating

any significant revenues.

Further, the Company’s anticipated revenues, if any, from existing projects and proposed projects

will not be sufficient to meet the Company’s anticipated operational and capital expenditure needs for many years.

the year ended June 30, 2020 the Company raised gross proceeds of approximately $1,584,000 through the sale of its securities and

paid commissions of approximately $148,000, and anticipates raising additional funds from such sales and transactions.

there is no guarantee that we will be able to raise sufficient funds or further capital for the operations planned in the near

However, as discussed above, there is no guarantee

that we will be able to raise sufficient funds or further capital for the operations planned in the near future.

The Company is not currently generating any significant

Further, the Company’s anticipated revenues, if any, from existing projects, JVs and proposed projects will not be sufficient

to meet the Company’s anticipated operational and capital expenditure needs for many years.

During the year ended June 30, 2021

the Company raised gross proceeds of approximately $5,209,000 through the sale of its securities and paid commissions of approximately

$165,000, and anticipates raising additional funds from such sales and transactions.

However, there is no guarantee that we will be

able to raise sufficient funds or further capital for the operations planned in the near future.

Because the Company is not currently generating

significant revenues, the Company will need to obtain additional capital to fund its operations and technology development, to

satisfy existing creditors, to develop Projects and to sustain operations at the KF 1 facility.

significant revenues, the Company will need to obtain additional capital to fund its operations and technology development, to satisfy

existing creditors, to develop Projects and to sustain operations at the KF 1 facility.

The first commercial activity in the Retrofit

segment is represented by our agreement with Kreider Farms ("KF"), pursuant to which the Kreider 1 system to treat KF's

dairy waste streams to reduce nutrient releases to the environment while generating marketable nutrient credits and renewable energy

was designed, constructed and entered full-scale operation during 2011.

On January 26, 2009 the Board of the Pennsylvania Infrastructure

Investment Authority ("Pennvest") approved a $7.75 million loan to Bion PA 1, LLC ("PA1"), a wholly-owned subsidiary

of the Company, for the initial Kreider Farms project ("Kreider 1 System").

After substantial unanticipated delays, on

August 12, 2010 PA1 received a permit for construction of the Kreider 1 system.

segment is represented by our agreement with Kreider Farms ("KF"), pursuant to which the Kreider 1 system to treat KF's dairy

waste streams to reduce nutrient releases to the environment while generating marketable nutrient credits and renewable energy was designed,

constructed and entered full-scale operation during 2011.

On January 26, 2009 the Board of the Pennsylvania Infrastructure Investment

Authority ("Pennvest") approved a $7.75 million loan to Bion PA 1, LLC ("PA1"), a wholly-owned subsidiary of the Company,

for the initial Kreider Farms project ("Kreider 1 System").

After substantial unanticipated delays, on August 12, 2010 PA1 received

a permit for construction of the Kreider 1 system.

Construction activities commenced during November 2010.

The closing/settlement of the

Pennvest Loan took place on November 3, 2010.

PA1 finished the construction of the Kreider 1 System and entered a period of system 'operational

shakedown' during May 2011.

The Kreider 1 System reached full, stabilized operation by the end of the 2012 fiscal year.

During 2011 the

PADEP re-certified the nutrient credits for this project.

The PADEP issued final permits for the Kreider 1 System (including the credit

verification plan) on August 1, 2012 on which date the Company deemed that the Kreider System was 'placed in service'.

As a result, PA1

commenced generating nutrient reduction credits for potential sale while continuing to utilize the Kreider 1 system to test improvements

However, to date liquidity in the Pennsylvania nutrient credit market has been slow to develop significant breadth and

depth, which limited liquidity/depth has negatively impacted Bion's business plans and has resulted in challenges to monetizing the nutrient

reductions created by PA1's existing Kreider 1 project and Bion's other proposed projects.

These difficulties have prevented PA1 from

generating any material revenues from the Kreider 1 project to date and raise significant questions as to when, if ever, PA1 will be able

to generate such revenues from the Kreider 1 system.

PA1 has had sporadic discussions/negotiations with Pennvest related to forbearance

and/or re-structuring its obligations pursuant to the Pennvest Loan for more than 7 years.

In the context of such discussions/negotiations,

PA1 elected not to make interest payments to Pennvest on the Pennvest Loan since January 2013.

Additionally, the Company has not made

any principal payments, which were to begin in fiscal 2013, and, therefore, the Company has classified the Pennvest Loan as a current

liability as of June 30, 2021.

Due to the failure of the PA nutrient reduction credit market to develop, the Company determined that the

carrying amount of the property and equipment related to the Kreider 1 project exceeded its estimated future undiscounted cash flows based

on certain assumptions regarding timing, level and probability of revenues from sales of nutrient reduction credits and, therefore, PA1

and the Company recorded impairments related to the value of the Kreider 1 assets of $1,750,000 and $2,000,000 at June 30, 2015 and June

30, 2014, respectively.

During the 2016 fiscal year, PA1 and the Company recorded an impairment of $1,684,562 to the value of the Kreider

1 assets which reduced the value on the Company's books to zero.

This impairment reflects management's judgment that the salvage value

of the Kreider 1 assets roughly equals PA1's contractual obligations related to the Kreider 1 system, including expenses related to decommissioning

of the Kreider 1 system.

On September 25, 2014, Pennvest exercised its right

to declare the Pennvest Loan in default and accelerated the Pennvest Loan and demanded that PA1 pay $8,137,117 (principal, interest plus

late charges) on or before October 24, 2014.

PA1 did not make the payment and does not have the resources to make the payments demanded

PA1 commenced discussions and negotiations with Pennvest concerning this matter but Pennvest rejected PA1’s proposal

made during the fall of 2014.

PA1 made a new proposal to Pennvest during September 2021 which proposal is presently under consideration

PA1 provides Pennvest with its financial statements (which include a description of system status) annually.

During the 2021

fiscal year, Pennvest’s auditors requested a ‘corrective action plan’

and PA1 informed Pennvest that “…

there is no viable corrective action plan for the Pennvest Loan (‘Loan’).

The facility funded by the Loan has been shut down

for many years (which has been disclosed in the annual financial reports to Pennvest and in public filings by the parent of PA1) and the

technology utilized in the facility is now obsolete.

The facility has not been commercially operated for approximately six years and has

generated zero income.

We recommend that Pennvest take appropriate steps to remove and sell the equipment.”

Pennvest recently responded

favorably to the approach of selling the equipment but no actions have yet taken place.

PA1 and the Company are currently discussing proposals

with Pennvest seeking full resolution to these matters.

The Company anticipates additional communication with Pennvest on this matter

during the current year.

It is not possible at this date to predict the final outcome of this matter, but the Company believes it is likely

that that the equipment will be sold with the proceeds delivered to Pennvest during our current fiscal year.

However, the resolution of

these matters including the manner and means of such equipment sale has not been agreed upon as of this date.

PA1 will evaluate the appropriate

manner to resolve/wrap-up its business over the balance of this calendar year.

The economics (potential revenues, profitability

and continued operation) of the Kreider 1 System were based almost entirely on the long-term sale of nutrient (nitrogen and/or phosphorus)

reduction credits to meet the requirements of the Chesapeake Bay environmental clean-up.

See below for further discussion.

During August 2012, the Company provided Pennvest

(and the PADEP) with data demonstrating that the Kreider 1 system met the 'technology guaranty' standards which were incorporated in the

Pennvest financing documents and, as a result, the Pennvest Loan is now solely an obligation of PA1.

As indicated above, the Company anticipates that

it will seek to raise from $5,000,000 to $50,000,000 or more (from debt, equity, joint venture, strategic partnering, etc.) during the

next twelve months, some of which may be in the context of joint ventures for the development of one or more large scale projects.

reiterate that there is no assurance, especially in the extremely unsettled capital markets that presently exist for companies such as

Bion, that the Company will be able to obtain the funds that it needs to stay in business, finance its Projects and other activities,

continue its technology development and/or to successfully develop its business.

There is extremely limited likelihood that funds

required during the next twelve months or in the periods immediately thereafter will be generated from operations and there is no assurance

that those funds will be available from external sources such as debt or equity financings or other potential sources.

The lack of additional

capital resulting from the inability to generate cash flow from operations and/or to raise capital from external sources would force the

Company to substantially curtail or cease operations and would, therefore, have a material adverse effect on its business.

Further, there

can be no assurance that any such required funds, if available, will be available on attractive terms or that they will not have a significantly

dilutive effect on the Company's existing shareholders.

All of these factors have been exacerbated by the extremely limited and unsettled

credit and capital markets presently existing for companies such as Bion.

Covid-19 pandemic related matters: