BION ENVIRONMENTAL TECHNOLOGIES INC 10-K

ITEM 3. LEGAL PROCEEDINGS (Litigation (and related matters). The Company is currently involved in no litigation matters except: 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. The initial $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. ITEM 4. MINE SAFETY DISCLOSURES. None. 27 PART II