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Item 3. Legal Proceedings

2024-09-30 compared with 2023-09-28 · 58 added, 134 removed, 3 unchanged (98% of the section changed)

LEGAL PROCEEDINGS.

LEGAL PROCEEDINGS (Litigation (and related

The Company is currently involved in no litigation

matters except:

Domain Sale/Resolved Litigation/Hacking/Theft

On March 23, 2022 the Company entered into an

agreement to sell domain name <biontech.com> and other related assets to BioNTech SE (“BNTX”) for the sum of $950,000

(before expenses related to the transaction) which sale was closed/completed on April 2, 2022 with a one-time gain of $902,490.

has been using www.bionenviro.com as its primary website (and domain) since July 2021 due to the events described below.

Company has not been using biontech.com as its primary website since July 2021 so domain name <biontech.com> no longer

represented a core asset of the Company.

As previously reported, on Saturday morning, July

17, 2021, our historical website domain – biontech.com – and email services were compromised and disabled.

indicated that an unknown party had ‘hijacked’ the domain in a theft attempt.

On September 10, 2021, the Company filed a federal

lawsuit ‘in rem’ to recover the <biontech.com> domain and the unknown ‘John Doe’ who hacked and attempted

to steal the website.

The litigation was filed in the United States District Court for the Eastern District of Virginia, Alexandria Division

under the heading ‘Bion Environmental Technologies, Inc., Plaintiff, vs John Doe and <biontech.com>, Defendants’ (Case

1:21-cv-01034), seeking recovery of the domain name and other relief as set forth therein.

On November 19, 2021, the United States District Court

for the Eastern District of Virginia, Alexandria Division issued an order stating that “… ORDERED, ADJUDGED and Decreed that

plaintiff Bion Environmental Technologies, Inc.

(‘plaintiff) Is the lawful owner of domain name <biontech.com> ….”

under the heading ‘Bion Environmental Technologies, Inc., Plaintiff, vs John Doe and <biontech.com>, Defendants’ (Case

1:21-cv-01034).

The Company has moved the domain name <biontech.com> to a new registrar and reactivated it for the Company’s

use (paired currently with its current bionenviro.com website).

No shareholder, sensitive or confidential information

was available to be breached which has limited damages from the hack/theft to date.

However, the Company’s email operations were

subject disruption and expenses were incurred related to the matter including legal fees.

The Company created ‘work-arounds’

These issues have been resolved and the Company has moved our website (and email) to a new domain:

bionenviro.com.

access is now www.bionenviro.com.

To send emails to Bion personnel, one uses the same name identifier previously used, but in the

address, substitute ‘bionenviro.com’ for “biontech.com’:

For example cscott@biontech.com (no longer functional)

is cscott@bionenviro.com and mas@biontech.com (no longer functional) is now mas@bionenviro.com.

Pennvest Loan and Dissolution of 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, 2021.

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.

The 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.

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 that date.

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 24, 2014.

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.

PA1 made 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.

We recommend 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.

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.

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.

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 Financial

Statements included therein.

The Company currently is not involved in any other material litigation

or similar events.

1) Convertible Bridge Loan/Default

On September 28, 2023, in order to partially mitigate

the problems discussed above, the Company entered into an agreement for a $1,500,000 bridge loan and executed documents including a convertible

promissory note (“Note”) and a binding subscription agreement (“Subscription”) (collectively the Note and the

Subscription are the “Bridge Loan Agreements”) with SEB LLC, a non-affiliated party (“Lender”).

The Bridge Loan

Agreements require the Lender to loan the Company $1,500,000 in six monthly tranches of $250,000 commencing October 2023.

All sums advanced

under the Bridge Loan Agreements (and accrued interest thereon) would due and payable (with interest accrued at 9% per annum) on October

1, 2024 if not previously converted into securities of the Company.

The Note is convertible at $1.00 per unit, at the sole election of

the Lender, into units consisting of one share of the Company’s common stock and a warrant to purchase one half share.

$250,000 tranche was received by the Company on October 5, 2023.

However, no further funds were received by the Company from the Lender.

During early November 2023 the Lender informed the Company verbally that it did not intend to fulfill its obligations pursuant to the

Bridge Loan Agreements and since such time the Lender has been in default (“Default”).

On May 10, 2024 the Company received

$150,000 from affiliates of the Bridge Loan Lender on terms not yet finalized and included in an agreement.

These funds were received

in the context of negotiations/discussions regarding a potential larger investment by affiliates and/or associates of the Lender but no

further funds were received and the larger transaction was never completed.

The funds were used primarily to re-initiate operations at

the Initial Project.

The Default (which is continuing) has created substantial problems for and materially damaged the Company and rendered

the Company unable to meet its current creditor obligations on a timely basis.

The Company is currently evaluating its rights regarding

the Default by the Lender.

This situation has contributed to the substantial increase in the Company’s ‘Current Liabilities’

including ‘accounts payable’ over recent periods.

See Consolidated Financial Statements and ‘Management’s Discussion

and Analysis’.

The Company has engaged in discussion/negotiation with its larger creditors (including its largest creditor--- the

primary contractor on the Initial Project) but has been unable to reach agreements regarding payments due to the uncertainty as to if,

when and how much funding the Company will be able to raise in future periods.

As a result, the Company’s largest creditor---the

general contractor for the Initial Project --- has filed a mechanics lien in Indiana (and its largest sub-contractor has sent notices

related to its intention to file a mechanics lien) and other creditors are threatening to commence litigation and other creditors are

threatening to commence litigation and/or repossess/remove leased equipment).

The Company is also facing litigation from the Lessor of

the land on which the Initial Project is located as it is in default on lease rental payments.

2) Creditor Matters

As is described in the Company’s Financial Statements

included herein and discussed in the Notes to the Financial Statements, the Company has had on-going difficulties raising needed funds

for its operations/activities over the past 2 years which has rendered the Company unable to meet its current creditor obligations on

a timely basis.

This situation includes a substantial increase in the Company’s ‘Current Liabilities’ including ‘accounts

payable’ over recent periods.

The Company has engaged in discussion/negotiation with its larger creditors (including its largest

creditor--- the primary contractor on the Initial Project) but has been unable to reach agreements regarding payments due to the uncertainty

as to if, when and how much funding the Company will be able to raise in future periods.

As a result, the Company’s largest creditor---the

general contractor for the Initial Project --- has filed a mechanics in Indiana (and its largest sub-contractor has sent notices related

to its intention to file a mechanics lien) and other creditors are threatening to commence litigation and/or repossess/remove leased equipment.

The Company is also facing litigation from the Lessor of the land on which the Initial Project is located as it is in default on lease

rental payments.

The Company currently is not involved in any other

material litigation or similar events.

MINE SAFETY DISCLOSURES.

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 3. Legal Proceedings