Form 4: Bion Environmental Technologies COO Acquires Convertible Promissory Note Through Loan Group

Gregory Schoener, COO of Bion Environmental Technologies, acquired a Convertible Promissory Note through a loan group, Bion BLG, LLC, effective October 15, 2024.

Summary

• Gregory Schoener, the COO of Bion Environmental Technologies, participated in a transaction involving a Convertible Promissory Note.
• The transaction was effective as of October 15, 2024.
• Schoener is part of a loan group called Bion BLG, LLC, which purchased a Convertible Promissory Note with a principal amount of up to $500,000.
• Schoener and two other Bion directors collectively own 60% of the loan group, with each owning 20%.
• The Board of Directors ratified the agreement on October 22, 2024.
• The Convertible Promissory Note is secured by the company's Intellectual Property (IP)/patents.
• The note will convert into securities of the company upon a capital raise (or other source of funding) exceeding $3.0 million, which must be completed within six months (by April 15, 2025).
• The terms of the conversion are defined in the Note and Security Agreements, which are exhibits to Form 8-K filed on October 24, 2024.
• The amount of the note acquired by the loan group was $100,000.

Sentiment

Score: 6

Explanation: The sentiment is neutral. While securing funding is positive, the terms of the convertible note and the need for a significant capital raise introduce some uncertainty.

Positives

• The company has secured a loan of up to $500,000 through a Convertible Promissory Note.
• The note is secured by the company's Intellectual Property (IP)/patents, which could be seen as a positive for the lenders.
• The involvement of company directors in the loan group demonstrates their confidence in the company's future.

Negatives

• The Convertible Promissory Note is secured by the company's Intellectual Property (IP)/patents, which could be a negative if the company defaults.
• The note will convert into securities of the company upon a capital raise (or other source of funding) exceeding $3.0 million, which could dilute existing shareholders.
• The capital raise must be completed within six months (by April 15, 2025), which could put pressure on the company.

Risks

• Failure to secure a capital raise of over $3.0 million within six months (by April 15, 2025) could trigger adverse consequences related to the Convertible Promissory Note.
• The company's Intellectual Property (IP)/patents are used as security for the note, posing a risk of losing these assets in case of default.
• The conversion of the note into securities upon a capital raise could dilute existing shareholders' ownership.

Future Outlook

The company needs to secure a capital raise of over $3.0 million within six months (by April 15, 2025) to facilitate the conversion of the Convertible Promissory Note into securities.

Management Comments

• Bion's Board of Directors ratified an agreement with the Bion BLG, LLC, loan group, effective 10/15/2024, to purchase a Convertible Promissory Note in the principal amount of up to $500,000.

Industry Context

Companies often use convertible notes as a bridge financing solution, especially when seeking capital for growth or specific projects. The terms of the note, including the conversion triggers and security, are crucial in assessing the risk and potential return for both the company and the investors.

Comparison to Industry Standards

• Convertible notes are a common financing tool, particularly for smaller companies or those in the early stages of development.
• The interest rates and conversion terms of convertible notes vary widely depending on the company's financial health, growth prospects, and the overall market conditions.
• Securing the note with intellectual property is not uncommon, but it does increase the risk for the company if it is unable to meet its obligations.
• The $3 million capital raise threshold for conversion is a significant amount and suggests that the company is planning for substantial growth or investment in the near future.

Related Party Transactions

• Gregory Schoener, as COO and a director, is part of the loan group (Bion BLG, LLC) that purchased the Convertible Promissory Note, representing a related party transaction.

Stakeholder Impact

• Shareholders may experience dilution if the Convertible Promissory Note is converted into equity.
• Employees may be affected by the company's ability to secure funding and execute its business plan.
• Creditors may be impacted by the company's debt obligations and its ability to repay them.

Next Steps

• Bion Environmental Technologies needs to secure a capital raise of over $3.0 million within the next six months (by April 15, 2025).
• The company will need to negotiate the terms of the conversion with the noteholders during the capital raise.

Key Dates

Keywords

Convertible Promissory Note, Bion Environmental Technologies, Gregory Schoener, Bion BLG LLC, Capital Raise, Intellectual Property, Loan, Securities