What changed in this filing

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Item 7. Management’s Discussion and Analysis

2022-09-27 compared with 2021-09-29 · 464 added, 816 removed, 109 unchanged (92% of the section changed)

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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,"

"expect,"

"believe,"

anticipate,"

"estimate,"

or "continue"

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.

This Annual Report on Form 10-K (and the documents

incorporated herein by reference) contain forward-looking statements, within the meaning of Section 27A of the Securities Act and Section

21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), that involve substantial risks and uncertainties.

Forward-looking statements generally can be identified by the use of forward-looking terminology such as "may," "will,"

"expect," "intend," "estimate," "anticipate," "project," "predict," "plan,"

"believe," or "continue," or the negative thereof or variations thereon and/or references to “goals”,

“targets”, “projections” or similar terminology.

The expectations reflected in forward-looking statements may

prove to be incorrect.

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

We wish to caution readers not to place undue reliance on any such forward looking statements, which speak only as of the

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

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.

entry of new and stronger competitors, inadequate capital and limited ability to obtain financing, needed personnel and equipment, unexpected

costs, failure (or delay) to gain product certifications and/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 (many 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:

i) the possibility that markets for nutrient reduction

credits (discussed below) and/or other ways to monetize nutrient reductions and other environmental benefits will be slow to develop (or

not develop at all), ii) PA1’s dissolution and its effect on how the Company is viewed, (if any), iii) the possibility that competitors

will develop more comprehensive and/or less expensive environmental solutions, iv) delays in market awareness of Bion and our Systems,

v) uncertainties and costs increases related to research and development efforts to update and improve Bion’s technologies and applications

thereof, and/or vi) delays and/or costs exceeding expectations relating to Bion's development of the Initial Project, JVs and/or Projects

and vii) 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

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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

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

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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.

WHICH HAVE INCREASED ANTICIPATED PROJECT DEVELOPMENT COSTS, VI) DUE TO THE AGE AND HEALTH OF OUR CORE MANAGEMENT TEAM, MOST 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

Bion disclaims any obligation subsequently to revise

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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.

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

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 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 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.

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.

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.

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.

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

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).

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

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 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.

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, 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 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”).

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 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 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

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

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.

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.

The Company believes that Pennsylvania is ‘ground

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 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

Projects) have been developed to date.

The Company’s audited financial statements

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 $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.

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

"Company," "We," "Us," or "Our") was incorporated in 1987 in the State of Colorado.

mission is to create extraordinary value for our shareholders and employees (all of whom own securities in the Company) while delivering

premium, sustainable products to our customers through ventures developing profitable, transparent, and sustainable solutions for livestock

Our patented and proprietary technology provides advanced

waste treatment and resource recovery for large-scale livestock production facilities (also known as “Concentrated Animal Feeding

Operations” or “CAFOs").

Livestock production and its waste, particularly from CAFOs, has been identified as one of the

greatest soil, air, and water quality problems in the U.S.

Application of our third generation technology and business/technology

platform (“Gen3Tech”) can largely mitigate these environmental problems, while simultaneously improving operational/ resource

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

These waste stream ‘assets’ –

nutrients and methane – have traditionally been wasted or underutilized and are the same ‘pollutants’ that today fuel

harmful algae blooms, contaminate groundwater, and exacerbate climate change.

Bion’s business model and technology platform

can create the opportunity for joint ventures s (in various contractual forms)(“JVs”) between the Company and large livestock/food/fertilizer

industry participants based upon the supplemental cash flow generated by implementation of our Gen3Tech business model, which cash flows

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

We anticipate this will result in substantial

long term value for Bion.

In the context of such JVs, we believe that the verifiable sustainable branding opportunities (conventional

and organic) in meat will represent the single largest enhanced revenue contributor provided by Bion to the JVs (and Bion licensees).

The Company believes that the largest portion of its business with be conducted through such JVs, but a material portion may involve licensing

and or other approaches.

Bion’s Gen3 Tech was designed to capture and

stabilize these assets and produce renewable energy, fertilizer products, and clean water as part of the process of raising verifiably

sustainable livestock.

All steps and stages in the treatment process will be third-party verified, providing the basis for additional

revenues, including renewable energy-related credits and, eventually, payment for ecosystem services, such as nutrient credits as described

The same verified data will be used to substantiate the claims of a USDA-certified sustainable brand that will support premium

pricing for the meat/ animal protein products that are produced in Bion facilities.

During the first half of 2022 Bion began marketing

our sustainable beef opportunity to retailers, food service distributors and the meat industry in the U.S.

In general, the response

has been favorable.

During July 2022, Bion announced a letter of intent (“Ribbonwire LOI”) to develop its first large-scale

commercial project, a 15,000-head sustainable beef cattle feeding operation together with the Ribbonwire Ranch, in Dalhart, Texas (with

a provision to expand to 60,000 head) (“Dalhart Project”).

The Dalhart Project will be developed to produce blockchain-verified,

sustainable beef (with reduced the stress on cattle caused by extreme weather and temperatures and resulting higher feed/weight gain efficiency)

while remediating the environmental impacts associated usually associated with cattle CAFOs.

Bion’s patented technology will treat

the waste stream and recover/refine valuable coproducts that include clean water, renewable natural gas (RNG), photovoltaic solar electricity,

organic fertilizer and potentially other products.

We anticipate converting the Ribbonwire LOI into a definitive agreement with Ribbonwire

Ranch and creating distribution agreements with key retailers and food service distributors during the current fiscal year.

Bion’s business model and technology platform

can create the opportunity for joint ventures s (in various contractual forms)(“JVs”) between the Company and large livestock/food/fertilizer

industry participants based upon the supplemental cash flow generated by implementation of our Gen3Tech business model, which cash flows

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

We anticipate this will result in substantial

long-term value for Bion.

In the context of such JVs, we believe that the verifiable sustainable branding opportunities (conventional

and organic) in meat will represent the single largest enhanced revenue contributor provided by Bion to the JVs (and, in some cases, Bion

The Company believes that the largest portion of its business with be conducted through such JVs, but a material portion may

involve licensing and or other approaches.

Bion’s Gen3Tech was designed to capture and

stabilize these assets and produce renewable energy, fertilizer products, and clean water as part of the process of raising verifiably

sustainable livestock.

All steps and stages in the treatment process will be third-party verified, providing the basis for additional

revenues, including renewable energy-related credits and, eventually, payment for ecosystem services, such as nutrient credits as described

The same verified data will be used to substantiate the claims of a USDA-certified sustainable brand that will support premium

pricing for the meat/ animal protein products that are produced in Bion facilities.

Our business plan is focused on executing multiple

agreements and letters of intent related to the “Bion Beef Opportunity” and commencing development of multiple sustainable

beef joint venture projects over the next twelve-eighteen (12-18) months while moving forward with the Initial Project (see below) and

the Dalhart Project.

Bion also intends to pursue other opportunities in the livestock industry enabled by our Gen3Tech business model.

The Ribbonwire LOI announcement has generated significant interest within the livestock industry (among ranchers, feedlot operators, farmers

and other AG industry parties).

We believe that this interest, combined with consumer interest in ‘sustainable products’ and

the growing enthusiasm among some livestock industry parties for environmental/sustainable/regenerative practices, provides Bion (and

its partners/venturers) with an opportunity to move forward with a truly sustainable solution in this industry segment.

During the next six months, the Company intends

to construct and begin operations of phase 1 of our Initial Project located near Fair Oaks, Indiana.

Bion expects the Initial

Project to provide data that illustrates the effectiveness of our Gen3Tech in a commercial setting by the end of the 2 nd

quarter in fiscal 2023 which will support development of the Dalhart Project (and other projects) during fiscal 2023 and

We believe this data will also provide additional potential stakeholders (cattle producers, cattle feeders,

packers, distributors, retailers and financial institutions) with the information they need to proceed with confidence in

collaborating with Bion on multiple new projects (see below).

is now focused primarily on:

i) development/construction of the Initial Project, our initial commercial-scale Gen3Tech installation (see

discussion herein below and Notes to Financial Statements ,

ii) development/construction of the Dalhart Project, iii) developing applications and markets for its sustainable (conventional and organic)

animal protein products and its low carbon organic fertilizer products , iv) discussions regarding initiation and development of agreements

and joint ventures (“JVs” as discussed below) (and related projects) based on the augmented capabilities of our Gen3Tech

business platform (in the sustainable beef and other livestock segments), while (v) continuing to pursue business opportunities related

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

HISTORY, BACKGROUND AND CURRENT ACTIVITIES

See discussion at Item 1 above.

Pennvest Loan and Bion PA1 LLC (“PA1”)

PA1, the Company’s

wholly-owned subsidiary, was dissolved on December 29, 2021 on which date it owed approximately $10,010,000 under the terms of the Pennvest

Loan related to the construction of the Kreider 1 System including accrued interest and late charges totaling $2,255,802 as of that date.

Through the date of the dissolution, PA1 was a wholly-owned subsidiary of the Company and its assets and liabilities were included on

the Company’s consolidated balance sheets.

At September 30, 2021, PA1’s total assets were $297 and its total liabilities were

$10,154,334 (including the Pennvest Loan in the aggregate amount of $9,939,148, accounts payable of $214,235 and accrued liabilities of

$950) which sums were included in the Company’s consolidated balance sheets in its Form 10-Q for the quarter ended September 30,

Subsequent to the dissolution of PA1, its assets and liabilities are no longer consolidated and included in the Company’s

balance sheets.

As of December 29, 2021, PA1’s total assets were nil and its total liabilities were $10,234,501 (including the Pennvest

Loan in the aggregate amount of $10,009,802, accounts payable of $212,263 and accrued liabilities of $12,436.

The net amount of $10,234,501

was recognized as a gain on the legal dissolution of a subsidiary in other (income) expense.

As background, the terms

of the Pennvest Loan provided for funding of up to $7,754,000 which was to be repaid by interest-only payments for three years, followed

by an additional ten-year amortization of principal.

The Pennvest Loan accrued interest at 2.547% per annum for years 1 through 5 and

3.184% per annum for years 6 through maturity.

The Pennvest Loan required minimum annual principal payments of approximately $5,886,000

in fiscal years 2013 through 2021, and $846,000 in fiscal year 2022, $873,000 in fiscal year 2023 and $149,000 in fiscal year 2024.

Pennvest Loan was collateralized by PA1’s Kreider 1 System and by a pledge of all revenues generated from Kreider 1 including, but

not limited to, revenues generated from nutrient reduction credit sales and by-product sales.

In addition, in consideration for the excess

credit risk associated with the project, Pennvest was entitled to participate in the profits from Kreider 1 calculated on a net cash flow

basis, as defined.

The Company has incurred interest expense related to the Pennvest Loan of $123,444 and $246,887 for the years ended

June 30, 2022 and 2021, respectively.

Based on the limited development of the depth and breadth of the Pennsylvania nutrient reduction

credit market, PA1 commenced discussions and negotiations with Pennvest related to forbearance and/or re-structuring the obligations under

the Pennvest Loan during 2013.

In the context of such negotiations, PA1 elected not to make interest payments to Pennvest on the Pennvest

Loan since January 2013.

Additionally, the PA1 did not make any principal payments, which were to begin in fiscal 2013, and, therefore,

the Company classified the Pennvest Loan as a current liability through the dissolution of PA1 on December 29, 2021.

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 solely an obligation of PA1 since

Note, however, the Company’s consolidated balance sheets as of June 30, 2021 reflects the Pennvest Loan as a liability

of $9,868,495 despite the fact that the obligation (if any) was solely an obligation of PA1 .

On September 25, 2014, the

Pennsylvania Infrastructure Investment Authority (“Pennvest”) exercised its right to declare the PA1’s Pennvest Loan

in default, accelerated the Pennvest Loan and demanded that PA1 pay $8,137,117 (principal, interest plus late charges) on or before October

PA1 did not make the payment and did/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.

a final proposal to Pennvest during September 2021 which proposal was also rejected by Pennvest.

PA1 provided 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 Bion PA 1, LLC) 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.

that Pennvest take appropriate steps to remove and sell the equipment.” Pennvest responded favorably to the approach of selling

the equipment.

On December 29, 2021, the

Company approved and executed a ‘Consent of the Sole Member of Bion PA 1’ (the “Consent to Dissolution”) that

authorized the complete liquidation and dissolution of PA1.

A Statement of Dissolution was filed by PA1 with the Colorado Secretary of

State on December 29, 2021.

The Company is of the understanding that the liquidation value of Bion PA 1’s property is substantially

below the current amount outstanding under the Funding Agreement dated October 27, 2010 by and between PA1 and Pennvest, the only known

secured creditor of PA1.

Post-dissolution, PA1’s activities will be limited entirely to activities required to properly distribute

its net assets to creditors and wind down its business.

PA1 and Pennvest agreed to

have the equipment sold by a third party auctioneer who arranged for the sale of its property and delivery of all proceeds (net of

commissions and customary costs of sale) to Pennvest.

The auction took place during the period between May 13-18, 2022.

The Company’s

personnel assisted PA1 with this process as needed at no cost to PA1.

The net sum of $104,725 was realized from the asset sale, which

sum was delivered to Pennvest on June 15, 2022.

PA1 believes that the remaining unsold assets will be transferred to Kreider Farms during

the next quarter in order to complete the winding up of the Kreider 1 project.

Upon the complete distribution

of all assets of PA1, whether by transfer or sale and distribution of net proceeds as provided above, PA1 will use commercially reasonable

efforts to cause the cessation of all activities.

No distributions of PA1’s assets will be made to the Company or its affiliates.

The Consent to Dissolution authorized Mark A.

Smith, the Company’s President and the sole manager of PA1, to cause to be delivered

for filing the Statement of Dissolution, to give notice of the dissolution, and to take any other act necessary to wind up and liquidate

the business.

PA1 has made no payments

to vendors or other creditors in connection with the dissolution other than the payment to Pennvest described above.

No distributions

or payments of any kind have ever been made to the Company, the sole member of PA1 since inception and no payment will be made to the

Company or any affiliate in connection with the dissolution.

For more information regarding the history and

background of the Pennvest Loan and PA1, please review our Form’s 10-K for the years from 2008 through 2021 including the Notes

to the Consolidated Financial Statements included therein.

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) 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.

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 since the onset of the Covid-19 pandemic, which have delayed certain research and development

testing and have delayed and/or increased the cost of construction of the Company’s initial 3G Tech installation as equipment/services

remain difficult to acquire in a timely manner, vi) due to the age and health of our core management team, many of whom are age 70 or

older and have had one or more existing health issues (including brief periods of Covid-19 infection), 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

CRITICAL ACCOUNTING POLICIES

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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

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.

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

of operations based upon their grant date fair values.

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.

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.

As of June 30, 2022 and 2021, there are no derivative financial instruments.

Company has issued options to employees and consultants under the 2006 Plan to purchase common shares of the Company.

Options are valued

on the grant date using the Black-Scholes option-pricing model.

The expected volatility is based on the historical price volatility of

the Company’s common stock.

The dividend yield represents the Company’s anticipated cash dividend on common stock over the

expected term of the stock options.

Treasury bill rate for the expected term of the stock options was utilized to determine

the risk-free interest rate.

The expected term of stock options represents the period of time the stock options granted are expected

to be outstanding based upon management’s estimates.

The Company has issued warrants to purchase common

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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.

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.

2018-07 “Compensation

Stock Compensation –

Improvements to Nonemployee Share-Based Payment Accounting”

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

Lease Accounting:

The Company accounts for leases under ASC 842, Leases (“ASC

Accordingly, the Company will determine whether an arrangement contains a lease at the inception of the arrangement.

lease is determined to exist, the term of such lease is assessed based on the date on which the underlying asset is made available for

the Company’s use by the lessor.

The Company’s assessment of the lease term reflects the non-cancelable term of the lease,

inclusive of any rent-free periods and/or periods covered by early-termination options which the Company is reasonably certain of not

exercising, as well as periods covered by renewal options which the Company is reasonably certain of exercising.

The Company also determines

lease classification as either operating or finance at lease commencement, which governs the pattern of expense recognition and the presentation

reflected in the consolidated statements of operations over the lease term.

For leases with a term exceeding 12 months,

a lease liability is recorded on the Company’s consolidated balance sheets at lease commencement reflecting the present value of

its fixed minimum payment obligations over the lease term.

A corresponding right-of-use (“ROU”) asset equal to the initial

lease liability is also recorded, adjusted for any prepaid rent and/or initial direct costs incurred in connection with execution of

the lease and reduced by any lease incentives received.

For purposes of measuring the present value of its fixed payment obligations

for a given lease, the Company uses its incremental borrowing rate, determined based on information available at lease commencement,

as rates implicit in its leasing arrangements are typically not readily determinable.

The Company's incremental borrowing rate reflects

the rate it would pay to borrow on a secured basis and incorporates the term and economic environment of the associated lease.

YEAR ENDED JUNE 30, 2022 COMPARED TO

THE YEAR ENDED JUNE 30, 2021

Total revenues were nil for both the years

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stock-based compensation charges of $269,000 and $850,000, were $2,079,000 and $1,228,000 for the years ended June 30, 2022 and 2021,

respectively, representing a $69,000 increase.

respectively, representing an $851,000 increase.

Salaries and related payroll tax expenses were $340,000 and $319,000, 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.

June 30, 2022 and 2021, respectively, representing a $21,000 increase.

Consulting costs were $561,000 and $391,000 for the years ended

June 30, 2022 and 2021, 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.

The $170,000 increase in consulting costs is due to a general increase in the levels of Company’s

business activity without a large increase in the Company’s personnel including the consulting engagement with William O’Neill,

who is now the Company’s CEO, during the periods from July 1, 2021 through April 30, 2022 during which the Company paid $160,000

to secure his services ($25,000 was capitalized to the 3G project).

Investor relations expenses were $395,000 and $149,000 for the years

ended June 30, 2022 and 2021, respectively, and the $246,000 increase is due to the 2022 shareholder meeting and new contract with an

investor relations firm and increased activity during the year ended June 30, 2022 due to the resumption of investor conferences.

costs were $291,000 and $8,000 for the years ended June 30, 2022 and 2021, respectively, due to the hiring of a law firm to represent

the Company in a lawsuit for the hack and attempt to steal the Company’s domain, engaging a law firm on the dissolution of PA-1,

legal work in relation to corporate structure matters and preparation for the 2022 shareholder meeting and other matters.

General and administrative stock-based employee

4 unchanged sentences

Fair value of stock options expensed under ASC 718

Stock-based compensation charges were $850,000 and

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

Stock-based compensation charges were $269,000

and $850,000 for the years ended June 30, 2022 and 2021, respectively.

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

30, 2022 and 2021 was $261,000 and $816,000, 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.

The Company capitalized $136,000 in stock-based compensation to the 3G project

as of June 30, 2022.

The Company granted 730,000 options during the year ended June 30, 2022 which were fully vested at grant date, and

960,000 options during the period ended June 30, 2021, which were fully vested at grant date.

Total depreciation expense was $1,161 and

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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

June 30, 2020

compensation charges of $22,000 and $202,000, were $179,000 and $547,000 for the years ended June 30, 2022 and 2021, respectively, representing

a $368,000 decrease largely resulting from completion of the bulk of the research and development work on our Gen3Tech as we shifted our

efforts to work on the Initial Project.

Salaries and related payroll tax expenses were $32,000 and $94,000 for the years ended June 30,

2022 and 2021, respectively, as more salary expense was allocated to administrative expense for the year ended June 30, 2022.

costs were $80,000 and $214,000 for the years ended June 30, 2022 and 2021, respectively.

The decrease in consulting is due to capitalizing

costs on the 3G project in 2022.

The Company also incurred $55,000 and $48,000 for the years ended June 30, 2022 and 2021, respectively

in legal costs related to patent applications and renewals.

The Company incurred $6,000 and $144,000 for the years ended June 30, 2022

and 2021, respectively in the development of new technologies for its anaerobic digestate process.

Research and development stock-based employee

compensation for the years ended June 30, 2022 and 2021 consists of the following:

Research and Development:

Change in fair value from modification of option terms

Change in fair value from modification of warrant terms

Fair value of stock options expensed under ASC 718

Stock-based compensation expenses were $202,000

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.

Stock-based compensation charges were $22,000 and

$202,000 for the years ended June 30, 2022 and 2021, respectively.

The Company granted 730,000 and 960,000 fully vested options during

the years ended June 30, 2022 and 2021, a portion of which were allocated to research and development.

Loss from Operations

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

As a result of the factors described above,

the loss from operations was $2,550,000 and $2,828,000 for the years ended June 30, 2022 and 2021, respectively.

Other (Income) Expense

Other (income) expense was ($10,841,000) and $623,000 for the years ended

June 30, 2022 and 2021, respectively.

The Company recognized a gain on the dissolution of PA1 of $10,235,000 and a gain of $902,000 for

the sale of a domain name.

Total interest expense of $302,000 and $658,000 was recorded during the years ended June 30, 2022 and 2021,

respectively.

Interest of $32,000 and nil was capitalized as part of the 3G project in property and equipment during the years ended June

30, 2022 and 2021, respectively.

Interest expense related to deferred

compensation, loan payable and convertible notes prior to capitalization of $32,000 to the 3G project was $334,000 and $472,000 for

years ended June 30, 2022 and 2021, 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.

The $138,000 decrease is due the dissolution of PA-1 and no interest related to

the Pennvest loan during the last six months ended June 30, 2022.

Interest expense related to investor warrant modifications was nil

and $187,000 for year end June 30, 2022 and 2021.

Net Loss Attributable to the Noncontrolling

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interest was $1,500 and $2,800 for the years ended June 30, 2022 and 2021, 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.

Net Income (Loss) Attributable to Bion’s

Common Stockholders

As a result of the factors described above,

the net income (loss) attributable to Bion’s stockholders was $8,292,000 and ($3,448,000) for the years ended June 30, 2022 and

2021, respectively, and the net income (loss) per basic common share was $.20 and ($.10) for the years ended June 30, 2022 and 2021, respectively.

LIQUIDITY AND CAPITAL RESOURCES

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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"

Company's consolidated financial statements as of and for the year ended June 30, 2022 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

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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.

and investor relations expenses as well as the purchase of property and equipment.

Cash expenditures were offset by proceeds from financing

activities, primarily the exercise of warrants.

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

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.

Investing Activities

During the year ended June 30, 2022, the Company

invested $2,062,000 in the purchase of property and equipment, primarily related to project construction in process.

During the year ended

June 30, 2022, the Company invested $666,375 in a non-cash purchase of equipment for accounts payable related to the June 6, 2022 notice

of completion of certain work in process and an invoice from Buflovak for the next 25% payment on the January 28, 2022 purchase order

related to the Initial Project.

The $666,375 was included in construction in process and accounts payable at June 30, 2022 and was paid

on July 5, 2022 bringing the aggregate payments to $1,999,125 as of the date of

Financing Activities

During the year ended June 30, 2022, 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.

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.

received gross cash proceeds of $1,737,000 from the exercise of 2,315,550 warrants into shares of the Company’s common stock and

paid approximately $19,000 in cash commissions related to the exercise of warrants.

As of June 30, 2022, the Company has debt obligations

consisting of:

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

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

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

a) deferred compensation of $595,000 and b) convertible notes payable – affiliates of $5,171,000.

Plan of Operations and Outlook

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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 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

During fiscal years

2022 and 2021, the Company has faced progressively less difficulty in raising equity funding (but substantial equity dilution has resulted

from 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

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 $2,404,000.

As of June 30 2022, such

deferrals/loans totaled approximately $5,765,000 (including accrued interest and deferred compensation converted into convertible obligations

and convertible 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 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.

to fund its operations and technology development, to satisfy existing creditors, to develop the Initial Project, JVs, Projects (including

Integrated Projects) and CAFO Retrofit waste remediation systems (potentially including the Kreider 2 facility.

The Company anticipates

that it will seek to raise from $20,000,000 to $80,000,000 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

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.

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

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$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.

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.

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.

During the year ended June 30, 2022 the Company

raised gross proceeds for approximately $1,737,000 and paid commissions of approximately $18,600.

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 the Initial Project and subsequent Projects.

As indicated above, the Company anticipates that

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continue its technology development and/or to successfully develop its business.

See “ Pennvest Loan and Bion PA1 LLC

(“PA1”) Dissolution ” above and the Company’s Forms 10-K for the year 2009-2021 for discussion and more

details related to the dissolution of PA1, the Pennvest Loan and the Kreider 1 project.

There is extremely limited likelihood that funds

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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.

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.

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:

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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

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.

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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.

in the global industrial supply chain since the onset of the Covid-19 pandemic, which have delayed certain research and development testing

and have delayed and/or increased the cost of construction of the Company’s initial 3G Tech installation as equipment/services

remain difficult to acquire in a timely manner, vi) due to the age and health of our core management team, many of whom are age 70 or

older and have had one or more existing health issues (including brief periods of Covid-19 infection), 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.

CONTRACTUAL OBLIGATIONS

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(in addition to employment and consulting agreements with management and employees):

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.

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 1System 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 and add-ons.

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.

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

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.

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.

The Company is currently maintaining some equipment

at the Kreider 1 System in a limited manner.

OFF-BALANCE SHEET ARRANGEMENTS

We do not have any off-balance sheet arrangements (as that term is defined

in Item 303 of Regulation S-K) that are reasonably likely to have a current or future material effect on our financial condition, revenue

or expenses, results of operations, liquidity, capital expenditures or capital resources.

QUANTITATIVE AND QUALITATIVE DISCLOSURES

ABOUT MARKET RISK.

FINANCIAL STATEMENTS AND SUPPLEMENTARY

The consolidated financial statements are set forth

on pages F-1 through F-26 hereto.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS

ON ACCOUNTING AND FINANCIAL DISCLOSURE.

The Company entered into an agreement on September

23, 2021, to lease approximately four acres of land near Fair Oaks, Indiana, for the development site of its Initial Project.

The following table summarized the supplemental

cash flow information for the year ended June 30, 2022:

Cash paid for noncancelable operating lease included in the operating cash flows

Right of use assets obtained in exchange for operating lease liabilities

The future minimum lease payment under noncancelable operating lease with

terms greater than one year as of June 30, 2022:

Year ended June 30, 2023

Year ended June 30, 2024

Year ended June 30, 2025

Undiscounted cash flow

Less imputed interest

The weighted average remaining lease term and discounted rate related to

the Company’s lease liability as of June 30, 2022 were 3 years and 10%, respectively.

The Company’s lease discount rate is

generally based on the estimates of its incremental borrowing rate as the discount rates implicit in the Company’s lease cannot

be readily determined.

Through 3G1 the Company is in the process of developing

the Initial Project.

See discussion above and in the Notes to our Financial Statements.

OFF-BALANCE SHEETS ARRANGEMENTS

The Company does not have any off-balance sheets arrangements (as that term

is defined in Item 303 of Regulation S-K) that are reasonably likely to have a current or future material effect on our financial condition,

revenue or expenses, results of operations, liquidity, capital expenditures or capital resources.

Quantitative and Qualitative Disclosures About Market Risk.

Not applicable.

FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA

The consolidated financial statements are set forth on pages F-1 through

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis