BLUE SPHERE CORP. - FORM 10-Q/A

Attached files

file	filename
EX-32.2 - CERTIFICATION OF CHIEF FINANCIAL OFFICER - BLUE SPHERE CORP.	ex32-2.htm
EX-32.1 - CERTIFICATION OF CHIEF EXECUTIVE OFFICER - BLUE SPHERE CORP.	ex32-1.htm
EX-31.2 - CERTIFICATION OF CHIEF FINANCIAL OFFICER - BLUE SPHERE CORP.	ex31-2.htm
EX-31.1 - CERTIFICATION OF CHIEF EXECUTIVE OFFICER - BLUE SPHERE CORP.	ex31-1.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

(Amendment No. 2)

☐ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

☒ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE EXCHANGE ACT

For the transition period from October 1, 2015 to December 31, 2015

Commission File No. 000-55127

(BLUESPHERE LOGO)

Blue Sphere Corporation
(Exact name of registrant as specified in its charter)

Nevada	98-0550257
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

301 McCullough Drive, 4th Floor, Charlotte, North Carolina 28262
(Address of principal executive offices) (zip code)

704-909-2806
(Registrant’s telephone number, including area code)

Former Fiscal Year: September 30
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	☐		Accelerated filer	☐
Non-accelerated filer	☐	(Do not check if a smaller reporting company)	Smaller reporting company	☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

State the number of shares outstanding of each of the issuer’s classes of common equity as of the latest practicable date: As of February 19, 2016, there were 182,857,675 shares of common stock, par value $0.001 per share, outstanding.

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION		1
ITEM 1. FINANCIAL STATEMENTS		1
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		14
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		17
ITEM 4. CONTROLS AND PROCEDURES		17
PART II - OTHER INFORMATION		18
ITEM 1. LEGAL PROCEEDINGS		18
ITEM 1A. RISK FACTORS		18
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS		18
ITEM 3. DEFAULTS UPON SENIOR SECURITIES		18
ITEM 4. MINE SAFETY DISCLOSURES		18
ITEM 5. OTHER INFORMATION		18
ITEM 6. EXHIBITS		19
SIGNATURES		21

Our unaudited financial statements are stated in United States dollars (U.S. $) and are prepared in accordance with United States Generally Accepted Accounting Principles (“GAAP”). In this transition report on Form 10-Q (this “Transition Report”), unless otherwise specified, all dollar amounts are expressed in United States Dollars.

As used in this Transition Report, the terms “we”, “us”, “our”, “Blue Sphere” or the “Company” mean Blue Sphere Corporation and its wholly-owned subsidiaries, unless the context clearly requires otherwise.

EXPLANATORY NOTES

Explanatory Note 1

On May 18, 2015, Blue Sphere filed a Current Report on Form 8-K reporting that it had entered into an agreement to acquire one hundred percent (100%) of the share capital of four entities, Agricerere S.r.l., Agrielektra S.r.l., Agrisorse S.r.l. and Gefa S.r.l. (collectively, the “SPVs”), that own and operate anaerobic digestion biogas plants for the production of electricity located in Italy (the “May Form 8-K”). The closing of the acquisition of the SPVs was subject to certain conditions precedent, as more fully described in the May Form 8-K, but which included obtaining consent from the acquired parties’ creditor to the acquisition and the resulting change of control, and securing a mezzanine loan facility. Upon attainment of the conditions precedent, the Company closed the acquisition of the SPVs on December 14, 2015 and filed a Current Report on Form 8-K on December 17, 2015 reporting that it had consummated the acquisition of the SPVs.

On February 22, 2016, Blue Sphere filed a transition report on Form 10-Q for the transition period from October 1, 2015 to December 31, 2015 (the “Transition Report”). As explained in the Transition Report, the interim financial statements and notes thereto contained in the Transition Report were not reviewed by an independent registered public accounting firm in accordance with Statement of Auditing Standards No. 100 (“SAS 100”), as required by Rule 10-01(d) of Regulation S-X promulgated under the Securities and Exchange Act of 1934. On May 23, 2016 the Company filed Amendment No. 1 on Form 10-Q/A to (i) file interim financial statements for the transition period from October 1, 2015 to December 31, 2015 that have been reviewed in accordance with SAS 100 as required by Rule 10-01(d) and (ii) amend and restate Item 2 of Part 1, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, of the Transition Report based on the interim financial statements. In addition, the Company has updated the “Explanatory Notes,” the signature page, the certifications of its Chief Executive Officer and Chief Financial Officer in Exhibits 31.1 and 32.1 and Exhibits 31.2 and 32.2, respectively, and the Company’s financial statements formatted in Extensible Business Reporting Language (XBRL) in Exhibits 101. As explained in the Transitional Quarterly Report as amended, the interim financial statements and notes contained in the Amended Transitional Quarterly Report, the Company accounted for the acquisition of the SPVs using the purchase method of accounting. Under this method, the Company allocated the purchase price to tangible and intangible assets acquired and liabilities assumed based on estimated fair values at the date of acquisition, with the excess of the purchase price amount being allocated to goodwill.

The Company is filing this Amendment No. 2 (this “amendment”) on Form 10-Q/A to (i) file interim financial statements for the transition period from October 1, 2015 to December 31, 2015 to reflect the restatement of its consolidated financial statements for the transition period from October 1, 2015 to December 31, 2015 due to the application of the equity method of accounting for the investments in Agricerere S.r.l., Agrielektra S.r.l., Agrisorse S.r.l. and Gefa S.r.l. (each, an “SPV” and collectively, the “SPVs”). The Company applied the equity method because the Framework EBITDA Guarantee Agreement between the SPVs and Austep S.p.A. (“Austep”), whereby Austep operates, maintains and supervises each biogas plant, prevents the Company from exercising a controlling influence over operating policies of the plants. Under this method, our equity investment is reflected as an investment in non-consolidated subsidiaries on our Condensed Balance Sheets and the net earnings or losses of the investments is reflected as equity in net earnings of non-consolidated companies on our Consolidated Statements of Operations. The Company believes that, while the financial statements reflect substantial modifications, the revenues and expenses previously reported are now reflected in a line item for the Company’s non-consolidated wholly-owned subsidiaries and the modifications result in no impact to the Company's operational results. Therefore the modifications are substantially a matter of presentation.

In addition, this amendment includes modifications (i) to reclassify the proceeds from an offering which were previously recorded as current liability as proceeds on account of shares in Shareholders Deficiency, (ii) to reflect the effects of accounting and reporting errors in calculation of Share based compensation, shares for services and other expense, and (iii) to amend our disclosure in Part I, Item 4 “Controls and Procedures,” of the Original Report to change the conclusions of our principal executive officer and principal financial officer regarding the effectiveness of our disclosure controls and procedures as of the end of the transitional fiscal quarter ended December 31, 2015 in light of management’s conclusion that the Company’s internal control over financial reporting contained a material weakness at December 31, 2015 which will be remediated by the end of the fiscal year ending December 31, 2016. These accounting and reporting errors and the related adjustments resulted in an overstatement of net loss of $9 thousand for the transition period from October 1, 2015 to December 31, 2015 and an understatement of proceeds on account of shares of $145 thousand, an understatement of additional paid-in capital of $49 thousand and understatement of accumulated deficit of $9 thousand as of December 31,2015.

Except as described above, this Amendment No. 2 on Form 10-Q/A does not amend any other information set forth in the Transition Report. However, for the convenience of the reader, this Amendment No. 2 on Form 10-Q/A restates in its entirety, as amended, the Transition Report. This Amendment No. 2 on Form 10-Q/A is presented as of the filing date of the Transition Report and does not reflect events occurring after that date, or modify or update information in the Transition Report, except as described above.

This Amendment No. 2 on Form 10-Q/A is being filed concurrently with the Company’s Quarterly Report on Form 10-Q for the three-month period ended September 30, 2016, Amendment No. 2 on Form 10-Q/A for the there -month period ended March 31, 2016 and Amendment No. 1 on Form 10-Q/A for the there -month period ended June 30, 2016.

Explanatory Note 2

On January 24, 2016, the Board of Directors of Blue Sphere approved a change to the Company’s fiscal year end from September 30 to December 31. The registrant previously reported its change in fiscal year end on a Current Report on Form 8-K, dated January 26, 2016. As a result of this change, this Transition Report includes financial information for the three month transition period from October 1, 2015 to December 31, 2015. Prior to this Transition Report, the Company’s Annual Reports on Form 10-K cover the fiscal year from October 1 to September 30.

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

BLUE SPHERE CORPORATION

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2015

BLUE SPHERE CORPORATION

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2015

IN U.S. DOLLARS

UNAUDITED

TABLE OF CONTENTS

	Page
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:
Balance sheets as of December 31, 2015 and September 30, 2015	3
Statements of operations for the three months ended December 31, 2015 and 2014	4
Statements of changes in stockholders’ deficit for the period of three months ended December 31, 2015 and 2014	5
Statements of cash flows for the three months ended December 31, 2015 and 2014	6
Notes to interim financial statements	7- 13

BLUE SPHERE CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(U.S. dollars in thousands except share and per share data)

	December 31,			September 30,
	2015			2015
	Unaudited			Audited
Assets
CURRENT ASSETS:
Cash and cash equivalents	$	1,888		$	161
Other current assets		1,415			21
Total current assets		3,303			182

PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation		30			31
INVESTMENTS IN JOINT VENTURES		7,570			4,952
INVESTMENTS IN NON-CONSOLIDATED SUBSIDIARIES		4,993			—

Total assets	$	15,896		$	5,165
Liabilities and Stockholders’ Deficiency
CURRENT LIABILITIES:
Current maturities of long term loan	$	549		$	32
Accounts payables		124			58
Other accounts payable and liabilities		1,083			1,200

Deferred revenues from joint ventures		9,052			6,434
Total current liabilities		10,808			7,724

LONG TERM BANK LOANS		127			135

LONG TERM LOANS		5,543			—

DEBENTURES		2,360			—

WARRANTS TO ISSUE SHARES		544			—

STOCKHOLDERS’ DEFICIENCY:
Common shares of $0.001 par value each:
Authorized: 1,750,000,000 shares at December 31, 2015 and September 30, 2015. Issued and outstanding: 180,502,443 shares and 167,952,595 shares at December 31, 2015 and September 30, 2015, respectively		1,256			1,244
Proceeds on account of shares		165			20
Treasury shares		(28	)		(28	)
Additional paid-in capital		39,813			39,474
Accumulated deficit		(44,692	)		(43,404	)
Total Stockholders’ Deficiency		(3,486	)		(2,694	)
Total liabilities and Stockholders’ Deficiency	$	15,896		$	5,165

The accompanying notes are an integral part of the consolidated financial statements.

BLUE SPHERE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(U.S. dollars in thousands except share and per share data)

	Three months ended
	December 31
	2015			2014
	(Unaudited)			(Unaudited)

OPERATING EXPENSES
General and administrative expenses	$	1,106			827
Other losses					19
OPERATING LOSS		1,106			846
FINANCIAL EXPENSES, net		144			468
EQUITY LOSSES IN NON-CONSOLIDATED SUBSIDIARIES		38
NET LOSS FOR THE PERIOD	$	1,288		$	1,314

Net loss per common share - basic and diluted	$	(0.007	)	$	(0.026	)

Weighted average number of common shares outstanding during the period - basic and diluted		177,011,554			51,031,823

The accompanying notes are an integral part of the consolidated financial statements.

BLUE SPHERE CORPORATION

STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIENCY

(U.S. dollars in thousands, except share and per share data)


	Common Stock, $0.001 Par Value				Proceeds on account of Shares		Treasury Shares			Additional paid-in Capital		Accumulated deficit			Total Stockholders’ deficiency
	Shares		Amount		Proceeds on account of Shares		Treasury Shares			Additional paid-in Capital		Accumulated deficit			Total Stockholders’ deficiency

BALANCE AT SEPTEMBER 30, 2015 (audited)		167,952,595	$	1,244	$	20		(28	)	$	39,474	$	(43,404	)	$	(2,694	)
CHANGES DURING THE PERIOD OF THREE MONTHS ENDED DECEMBER 31, 2015 (Unaudited):
Issuance of shares for services		2,435,000		2							134					136
Issuance of common stock, net of issuance costs		10,114,848		10							205					215
Proceeds on account of shares		—		—		145		—			—		—			145
Net loss for the period													(1,288	)		(1,288	)
BALANCE AT DECEMBER 31, 2015 (Unaudited)		180,502,443	$	1,256	$	165	$	(28	)	$	39,813	$	(44,692	)	$	(3,486	)


	Common Stock, $0.001 Par Value				Proceeds on account of Shares		Additional paid-in Capital		Accumulated deficit			Total Stockholders deficiency
	Shares		Amount		Proceeds on account of Shares		Additional paid-in Capital		Accumulated deficit			Total Stockholders deficiency

BALANCE AT SEPTEMBER 30, 2014 (audited)		50,109,036	$	1,126	$	20	$	35,106	$	(35,942	)	$	310
CHANGES DURING THE PERIOD OF THREE MONTHS ENDED DECEMBER 31, 2014 (unaudited):
Share based compensation								97					97
Issuance of shares for services		544,041		1				93					94
Issuance of common stock in respect of issuance of convertible notes		471,967		—				44					44
Issuance of convertible debentures containing a beneficial conversion feature								322					322
Net loss for the period										(1,314	)		(1,314	)
BALANCE AT DECEMBER 31, 2014 (Unaudited)		51,125,044	$	1,127	$	20	$	35,662	$	(37,256	)	$	(447	)

The accompanying notes are an integral part of the consolidated financial statements.

BLUE SPHERE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(U.S. dollars in thousands)

	Three months ended December 31
	2015			2014
	(Unaudited)			(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss for the period	$	(1,288	)	$	(1,314	)
Adjustments required to reconcile net loss to net cash used in operating activities:
Share based compensation		—			97
Depreciation		1			1
Equity losses in nonconsolidated subsidiary		38			19
Expenses in respect of convertible notes and loans		26			422
Changes in Warrants to issue shares		219			—
Issuance of shares for services		136			94

Increase in other current assets		(1,394	)		(21	)
Increase (decrease) in accounts payables		66			(5	)
Increase (decrease) in other account payables		71			(3	)
Net cash used in operating activities		(2,125	)		(710	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in nonconsolidated subsidiary		(2,143	)		(24	)
Purchase of property and equipment		—			(36	)
Net cash used in investing activities		(2,143	)		(60	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Loans received		3,183			37
Proceeds from issuance of debenture and warrants		2,672			—
Loans repaid		(5	)		(7	)
Proceeds on account of shares		145
Proceeds from issuance of convertible debenture		—			560
Net cash provided by financing activities		5,995			590

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		1,727			(180	)

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		161			298

CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	1,888		$	118

NON-CASH TRANSACTION:
Deferred net equity in joint ventures		2,618			—
Loans exercised into equity		188			—
Increase Investment in nonconsolidated subsidiary in consideration of Long Term Loan.		4,236			—

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest	$	4		$	—

BLUE SPHERE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

NOTE 1 – BASIS OF PRESENTATION:

The accompanying unaudited condensed consolidated financial statements have been prepared on the same basis as the audited annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the financial position and results of operations of Blue Sphere Corporation (the “Company”). These condensed consolidated financial statements and notes thereto are unaudited and should be read in conjunction with the Company’s audited financial statements included in its Annual Report on Form 10-K for the year ended September 30, 2015, as filed with the U.S. Securities and Exchange Commission. The results of operations for the three months ended December 31, 2015 are not necessarily indicative of results that could be expected for the entire fiscal year.

NOTE 2 – GENERAL

Blue Sphere Corporation (“the Company”), together with its wholly-owned subsidiaries, Eastern Sphere Ltd. (“Eastern”), Binosphere Inc (“Binosphere”), Johnstonsphere LLC (“Johnstonsphere”), and Sustainable Energy Ltd. (“SEL”), is focused on project integration in the clean energy production and waste to energy markets.

The Company was incorporated in the state of Nevada on July 17, 2007 and was originally in the business of developing and promoting automotive internet sites. On February 17, 2010, the Company conducted a reverse merger, name change and forward split of its common stock, and in March 2010 current management took over operations, at which point the Company changed its business focus to become a project integrator in the clean energy production and waste to energy markets.

As of December 31, 2015, Johnstonsphere had not commenced operations.

On May 12, 2015 the Company formed Bluesphere Pavia (formerly called Bluesphere Italy S.r.l.). Italy S.r.l, a subsidiary of Eastern in order to acquire certain biogas plants located in Italy (see note 3 below).

The Company is currently focusing on (i) 10 projects related to the construction, acquisition or development of biogas facilities and (ii) a recently licensed fast charging battery technology.

BLUE SPHERE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

NOTE 3 – INVESTMENT IN BLUE SPHERE PAVIA

On December 14, 2015 (“Closing Date”), and pursuant to a Share Purchase Agreement, dated May 14, 2015 ( the “Share Purchase Agreement”), by and among the Company’s indirect wholly-owned subsidiary, Bluesphere Pavia, and Volteo Energie S.p.A., Agriholding S.r.l., and Overland S.r.l. (collectively, the “Sellers”), Bluesphere Pavia completed the acquisitions of one hundred percent (100%) of the share capital of Agricerere S.r.l., Agrielektra S.r.l., Agrisorse S.r.l. and Gefa S.r.l . (each, an “SPV” and collectively, the “SPVs”) from the Sellers. Each SPV owns and operates an anaerobic digestion biogas plant in Italy for the production and sale of electricity to Gestore del Servizi Energetici GSE, S.p.A., a state-owned company, pursuant to a power purchase agreement. Pursuant to the Italy Projects Agreement, the Company also issued a corporate guarantee to the Sellers, whereby the Company will secure the obligations of Bluesphere Pavia under the Italy Projects Agreement.

Pursuant to the Share Purchase Agreement, the Company to pay $5,646,628 (€5,200,000) (the “Purchase Price”), subject to certain post-closing adjustments, to acquire the share capital of the SPVs. The Purchase Price for each SPV was determined based on a Base Line EBITDA guaranteed by the Sellers and an Equity IRR Target calculated on the Purchase Price of no less than twenty-five percent (25%). Fifty percent (50%) of the Purchase Price, adjusted for certain post-closing adjustments and closing costs, in the amount of $2,143,181 (€1,952,858) was paid at closing, and the balance is due to the Sellers on the third anniversary of the closing date. The remaining fifty percent (50%) of the Purchase Price, prior to and after closing date, and any variation of EBITDA results in the 18 months following the closing date, will be promised by a note from each Seller, to be paid on the third anniversary of the closing, along with interest on the unpaid balance due at an annual rate of two percent (2%).

On August 18, 2015, the Company and two of its wholly-owned subsidiaries, Eastern and Bluesphere Pavia, entered into a Long Term Mezzanine Loan Agreement (the “Helios Loan Agreement”) with Helios Italy Bio-Gas 1 L.P. (“Helios”). Under the Helios Loan Agreement, Helios will make up to $5,646,628 (€5,000,000) available to Bluesphere Pavia (the “Helios Loan”) to finance (a) ninety percent (90%) of the total required investment of the first four SVPs acquired, (b) eighty percent (80%) of the total required investment of up to three SVPs subsequently acquired, (c) certain broker fees incurred in connection with the acquisitions, and (d) any taxes associated with registration of an equity pledge agreement (as described below). Each financing of an SVP acquisition will be subject to specified conditions precedent and will constitute a separate loan under the Helios Loan Agreement. Helios may, within 90 days of a closing, require repayment of ten percent (10%) of the relevant loan and broker fees. If no such repayment is required, Helios may reduce the amount of its commitment to finance the acquisitions of the three additional SVPs to seventy to eighty percent (70-80%) of the total required investment. Helios’s commitment to provide any loan under the Helios Loan Agreement that is not utilized by June 30, 2016 will automatically cancel, unless extended in writing by Helios.

BLUE SPHERE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

NOTE 3 – INVESTMENT IN BLUE SPHERE PAVIA

Subject to specified terms, representations and warranties, the Helios Loan Agreement provides that each loan thereunder will accrue interest at a rate of 14.5% per annum, paid quarterly. Helios will also be entitled to an annual operation fee, paid quarterly. The final payment for each loan will become due no later than the earlier of (a) thirteen and one half years from the date such loan was made available to Bluesphere Italy, and (b) the date that the Feed in Tariff license granted to the relevant SVP expires. Pursuant to the Helios Loan Agreement and an equity pledge agreement, Eastern Sphere pledged all its shares in Bluesphere Pavia to secure all loan amounts utilized under the Helios Loan Agreement.

The Company also entered into a no-interest bearing promissory note, dated December 8, 2015 (the “Palas Promissory Note”), with R.S. Palas Management Ltd. to finance a small portion of the Purchase Price. The Palas Promissory Note is for an amount of $129,146 (€118,000) and is due and payable, without interest or premium, on December 31, 2015. The payee under the Palas Promissory Note, R.S. Palas Management Ltd., is an entity owned and controlled by Shlomi Palas, the Company’s President and Chief Executive Officer and a member of its Board of Directors.

In accordance with a Framework EBITDA Guarantee Agreement, dated July 17, 2015 (the “EBITDA Agreement”), between the Company and Austep S.p.A. (“Austep”), Austep will operate, maintain and supervise each biogas plant owned by the SPVs. In addition, Austep will guarantee a monthly aggregate EBITDA of $204,147 (€188,000) from the four SPVs for the initial six months following the acquisition, and thereafter Austep will guarantee an annual aggregate EBITDA of $4,082,946 (€3,760,000) from the four SPVs. Pursuant to the terms of the agreements with Austep, the Company will receive the guaranteed levels of EBITDA and Austep will receive 90% of the revenue more than these levels.

The Company applied the equity method of accounting for those investments because the Framework EBITDA Guarantee Agreement between the Company and Austep whereas Austep operates, maintains and supervises each biogas plants prevents us from exercising a controlling influence over operating policies of the plants. Under this method, our equity investment is reflected as an investment in non-consolidated subsidiaries on our Condensed Balance Sheets and the net earnings or losses of the investments is reflected as equity in net earnings of non-consolidated companies on our Consolidated Statements of Operations.

BLUE SPHERE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

NOTE 4 – INTERIM FINANCIAL STATEMENTS

The accompanying unaudited interim consolidated financial statements as of December 31, 2015 and for the three months then ended, have been prepared in accordance with accounting principles generally accepted in the United States relating to the preparation of financial statements for interim periods. Accordingly, they do not include all the information and footnotes required for annual financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended December 31, 2015 are not necessarily indicative of the results that may be expected for the year ending December 31, 2016.

The September 30, 2015 Condensed Balance Sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America. These financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended September 30, 2015.

NOTE 5 – SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies applied in the annual financial statements of the Company as of September 30, 2015, are applied consistently in these financial statements except for the following:

Business combinations and Goodwill

The Company accounts for its business combinations using the purchase method of accounting. Under this method, the Company allocates the purchase price to tangible and intangible assets acquired and liabilities assumed based on estimated fair values at the date of acquisition, with the excess of the purchase price amount being allocated to goodwill.

Acquisition-related and integration costs associated to the business combination are expensed as incurred. Changes in estimates associated with future income tax assets after measurement period are recognized as income tax expense with prospective application to all business combinations regardless of the date of acquisition.

Goodwill for each reporting unit is assessed for impairment at least annually, or when an event or circumstance occurs that more likely than not reduces the fair value of a reporting unit below its carrying amount. An impairment charge is recorded when the carrying amount of the reporting unit exceeds its fair value and is determined as the difference between the goodwill’s carrying amount and its implied fair value.

Investment in non-consolidated and affiliated companies

Investments in non-consolidated and affiliated companies that are not controlled but over which the Company can exercise significant influence (generally, entities in which the Company holds approximately between 20% to 100% of the voting rights of the investee) are presented using the equity method of accounting. Profits on intercompany sales, not realized outside the Company, are eliminated. The Company discontinues applying the equity method when its investment (including advances and loans) is reduced to zero and the Company has not guaranteed obligations of the affiliate or otherwise committed to provide further financial support to the affiliate.

Investments in preferred shares, which are not in substance common stock, are recorded on a cost basis according to ASC 323-10-15-13, “Investments - Equity Method and Joint Ventures - In-substance Common Stock” and ASC 323-10-40-1, “Investment -Equity Method and Joint Ventures - Investee Capital Transactions”.

A change in the Company’s proportionate share of an investee’s equity, resulting from issuance of common or in-substance common shares by the investee to third parties, is recorded as a gain or loss in the consolidated income statements in accordance with ASC 323-10-40-1.

Investments in non-marketable equity securities of entities in which the Company does not have control or the ability to exercise significant influence over their operation and financial policies, are recorded at cost (generally when the Company holds less than 20% of the voting rights).

Management evaluates investments in affiliated companies, partnerships and other non-marketable equity securities for evidence of other-than-temporary declines in value. Such evaluation is dependent on the specific facts and circumstances. Accordingly, in determining whether other-than-temporary declines exist, management evaluates various indicators for other-than-temporary declines and evaluates financial information (e.g. budgets, business plans, financial statements, etc.). During 2015 and 2014, no material impairment was recognized.

Intangible Assets

The costs incurred internally to develop new services and platforms are considered intangible assets generated internally and are recognized as assets only if the following requirements are met:

the cost incurred for the development of the assets can be reliably measured;

BLUE SPHERE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

NOTE 5 – SIGNIFICANT ACCOUNTING POLICIES (continue)

the entity has the intention, the availability of financial resources, the ability to complete the assets and to use or sell them;

Capitalized development costs include only expenses incurred that can be directly attributed to the process of developing new products and services.

Intangible assets with a finite useful life are amortized on a straight-line basis over their useful lives and are tested for impairment when circumstances indicate that the carrying value may be impaired. The amortization period and the amortization method for intangible assets with a finite useful lives are reviewed at least at each reporting date.

Changes in expected useful lives, or in the way the future economic benefits will be generated by the assets, are either recognized through a change in the period or in the amortization method and are accounted for as changes in accounting estimates. The amortization charges for intangible assets with a finite useful life are classified in the statement of income, in the costs appropriate for the function of the related intangible assets.

Long-Lived Assets

When events or changes in circumstances indicate that the carrying amount of long-lived assets, such as capital assets and intangible assets, may not be recoverable, undiscounted estimated cash flows are projected over their remaining term and compared to the carrying amount. To the extent that such projections indicate that future undiscounted cash flows are not sufficient to recover the carrying amounts of related assets, a charge is recorded to reduce the carrying amount to the projected future discounted cash flows.

NOTE 6 – GOING CONCERN

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As of December 31, 2015, the Company had approximately $1,888 thousand in cash and cash equivalents, approximately $7,879 thousand in negative working capital, a stockholders’ deficit of approximately $3,486 thousand and an accumulated deficit of approximately $44,692 thousand. Management anticipates their business will require substantial additional investments that have not yet been secured. The Company anticipates that the existing cash will not be sufficient to continue its operations through the next 12 months. Management is continuing in the process of fund raising in the private equity markets as the Company will need to finance future activities and general and administrative expenses. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Company’s ability to continue as a going concern is dependent upon raising capital from financing transactions and revenue from operations.

These financial statements do not include any adjustments that may be necessary should the Company be unable to continue as a going concern. The Company’s continuation as a going concern is dependent on its ability to obtain additional financing as may be required and ultimately to attain profitability.

NOTE 7 – NEWLY ISSUED ACCOUNTING PRONOUNCEMENTS:

No new accounting standards have been adopted since the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2015 was filed.

NOTE 8 – COMMON SHARES:

On October 21, 2015 the Company issued 10,114,848 shares of common stock of the Company for the aggregate purchase price of $214,527. Such issuance was made pursuant to the April 15, 2015, Subscription Agreement with Dr. Borenstein Ltd. (the “April Borenstein Subscription Agreement”).

On October 12, 2015, the Company issued 375,000 shares of common stock to a consultant in respect of its general advisory services and strategic planning consulting agreement with the Company. The Company has estimated the fair value of such shares, and recorded an expense of $22,586.

On October 26, 2015, the Company issued 690,000 shares of common stock to a consultant in respect of his consulting agreements with the Company. The Company has estimated the fair value of such shares, and recorded an expense of $25,803.

On December 2, 2015, the Company issued 625,000 shares of common stock to a consultant in respect of his consulting agreements with the Company. The Company has estimated the fair value of such shares, and recorded an expense of $43,411.

On December 2, 2015, the Company issued 745,000 shares of common stock to a consultant in respect of his consulting agreements with the Company. The Company has estimated the fair value of such shares, and recorded an expense of $16,544.

In July 2015, the Company conducted a private placement of up to $250,000 of the company’s common stock at $0.0176 per share to certain accredited investors (the “July 2015 Offering”). On December 2, 2015, the Company closed on the July Offering, resulting in gross proceeds to the Company of $225,526, and agreed to issue 21,588,871 shares of our common stock at $0.0104 per share (the “July 2015 Shares”), pursuant to certain subscription agreements (the “July Offering Subscription Agreements”). All investors in the July Offering were part of group led by a member of our Board of Directors, and one of the investors included a company in which he is the chief executive officer, but has no equity interest. The proceeds to the Company of the July Offering were received in December 2015, and were used to finance a portion of the closing of the acquisitions of the purchase of the SPVs by Blueshpere Pavia.

BLUE SPHERE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

NOTE 9 – DEBENTURES AND NOTES:

Senior Debentures offering

Beginning in November 2015, the Company conducted an offering (the “Offering”) of up to $3,000,000 of the Company’s Senior Debentures (the “Debentures”) and Warrants (the “Warrants”, together with the “Debentures”, the “Securities”) to purchase up to 8,000,000 shares of common stock of the Company, par value $0.001 per share, in proportion pro rata to each Subscriber’s subscription amount relative to the total Offering amount, with 50% of the shares exercisable at a price per share of $0.05 and the other 50% of the shares exercisable at price per share of $0.075.

The Debentures bear interest at 11%, paid quarterly, and mature in two years. The Debentures are secured by a pledge agreement between the Company and each investor, whereby the Company pledged as collateral up to 49% of its shares of common stock in Eastern Sphere, Ltd., our wholly-owned subsidiary (the “Pledge Agreement”). The Pledge Agreement further provides that the Company’s obligations under the Debentures rank senior to all other indebtedness of Blue Sphere Corporation, but are subordinate to all indebtedness and liabilities of its subsidiaries and project-level operating entities. The Warrants are exercisable for 5 years from the date of issuance, with 50% exercisable at $0.05 per share and 50% exercisable at $0.075 per share

The warrants were accounted for as derivative liabilities. The Company has estimated the fair value of such warrants at a value of $208,597 at the date of issuance using the Black-Scholes option pricing model using the following assumptions:

	%
Dividend yield		0
Risk-free interest rate		1.74	%
Expected term (years)		5
Volatility		202	%

The Securities were offered pursuant to subscription agreements with each investor (the “Subscription Agreement”). Pursuant to the Subscription Agreements, the investors in the Offering shall have the right to collectively designate one observer or member to the Company’s Board of Directors.

On December 23, 2015, the Company completed the closing of the Offering and entered into Subscription Agreements with investors representing aggregate gross proceeds to the Company of $3,000,000.

The Company engaged Maxim Group LLC (“Maxim”) to assist in the Offering. Pursuant to the terms of an engagement letter between Maxim and the Company, Maxim received commissions equal to 7% of the gross proceeds raised by Maxim in the Offering, as well as common stock purchase warrants for a number of securities equal to 8% of the total amount of securities sold in the Offering, at a price per share equal to 110% of the price of the securities paid by investors in the Offering. Based on the agreement the Company granted Maxim 4,480,000 warrants at an average exercise price of $ 0.06875.

BLUE SPHERE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

NOTE 10 – SUBSEQUENT EVENTS:

On January 26, 2016 the Company issued 1,000,000 shares of Common Stock of the Company to a consultant in consideration of $20,000 for financial consulting services.

In February 2016, the Company conducted an offering (the “Offering”) consisting of (a) up to USD $1,925,000 of the Company’s shares of common stock, par value $0.001 per share (“Common Stock”), priced at the closing price for shares of Common Stock, as reported on the OTCQB Venture Marketplace, on the trading day prior to the closing of the Offering, and (b) 5-year warrants to purchase shares of Common Stock in an amount equal to 50% of the number of shares of Common Stock so purchased by the subscriber (the “Warrants”, together with the shares of Common Stock subscribed for, the “Securities”).

The Securities have been offered pursuant to subscription agreements with each investor (the “Subscription Agreement”). In addition to other customary provisions, each Subscription Agreement provides that the Company will use its reasonable commercial efforts to register all shares of Common Stock sold in the Offering, including all shares of Common Stock underlying the Warrants, within 60 days of the closing of the Offering. The Warrants are exercisable for 5 years from the date of issuance at $0.10 per share, include an option by which the holder may exercise the Warrant by means of a cashless exercise, and include customary weighted-average price adjustment and anti-dilution terms.

On February 15, 2016, the Company completed the only closing of the Offering, representing aggregate gross proceeds to the Company of USD $1,925,000. In connection with the closing, the Company and subscribers entered into (a) Subscription Agreements for, in the aggregate, 35,000,000 shares of Common Stock at $0.055 per share, and (b) Warrants to purchase, in the aggregate, up to 17,500,000 shares of Common Stock at an exercise price of $0.10 per share.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

You should read the following discussion and analysis in conjunction with our unaudited condensed consolidated financial statements and related notes contained in Part I, Item 1 of this Transition Report.

Note Regarding Forward-Looking Statements

This report contains forward-looking statements. Forward-looking statements are projections in respect of future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks set out below, any of which may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. These risks include, without limitation, (i) uncertainties regarding our ability to obtain adequate financing on a timely basis including financing for specific projects, (ii) the financial and operating performance of our projects, (iii) uncertainties regarding the market for and value of carbon credits, renewable energy credits and other environmental attributes, (iv) political and governmental risks associated with the countries in which we may operate, (v) unanticipated delays associated with project implementation including designing, constructing and equipping projects, as well as delays in obtaining required government permits and approvals, (vi) the development stage of our business and (vii) our lack of operating history.

This list is not an exhaustive list of the factors that may affect an of our forward-looking statements. These and other factors should be considered carefully and readers should not place undue reliance on our forward-looking statements.

Forward-looking statements are made based on management’s beliefs, estimates and opinions on the date the statements are made and we undertake no obligation to update forward-looking statements if these beliefs, estimates and opinions or other circumstances should change. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

Company Overview

Summary of Current Operations

We are an international Build, Own & Operate company (BOO) active around the world in the clean energy production and organics to energy markets. We aspire to become a key player in these global markets, working with enterprises with clean energy, organics to energy and related by-product potential to generate clean energy, soil amendments, compost and other by-products. We believe that these markets have tremendous potential insofar as there is a virtually endless supply of waste and organic material that can be used to generate power and valuable by-products. Not only is there a virtually endless supply of waste and organic material, but in most, if not all, cases, disposing of such waste and material in most parts of the world today is a costly problem with an environmentally-damaging solution, such as landfilling. We seek to offer a cost-effective, environmentally-safe alternative.

We are currently focusing on (i) 10 projects related to the construction, acquisition or development of biogas facilities, for which we have signed definitive agreements, letters of intent or memoranda of understanding to own and implement such projects, as well as pipeline of similar projects in a less mature phase, and (ii) our fast charging battery technology.

We are evaluating, developing or operating, as applicable, the following projects:

United States

	●	Charlotte, NC Waste to Energy Anaerobic Digester 5.2 MW Plant
	●	Johnston, RI Waste to Energy Anaerobic Digester 3.2 MW Plant

Italy

	●	Soc. agr. AGRICERERE srl – Tromello (Pavia) 999 KW Plant
	●	Soc. agr. AGRIELEKTRA srl – Alagna (Pavia) 999 KW Plant
	●	Soc. agr. AGRISORSE srl - Girls (Pavia) 999 KW Plant
	●	Soc. agr. GEFA srl – Dorno (Pavia) 999 KW Plant
	●	Soc. agr. SAMMARTEIN srl – San Martino in Rio (Reggio Emilia) 999 KW Plant
	●	Soc. agr. ER srl – Aprilia (Latina) 999 KW Plant
	●	Soc. agr. BIOENERGIE SRL – Aprilia (Latina) 999 KW Plant

Israel

●

Ramat Chovav Waste to Energy Anaerobic Digester 5.0 MW Plant

Results of Operations – For the Three Months Ended December 31, 2015 Compared to the Three Months Ended December 31, 2014

General

On December 14, 2015, our wholly-owned subsidiary, Bluesphere Pavia completed the acquisitions of one hundred percent (100%) of the share capital of Agricerere S.r.l., Agrielektra S.r.l., Agrisorse S.r.l. and Gefa S.r.l . (each, an “SPV” and collectively, the “SPVs”). Each SPV owns and operates an anaerobic digestion biogas plant in Italy for the production and sale of electricity to Gestore del Servizi Energetici GSE, S.p.A., a state-owned company, pursuant to a power purchase agreement. Our results of operation and have been significantly affected by this transaction. The Company applied the equity method of accounting for those investments because the Framework EBITDA Guarantee Agreement between the Company and Austep whereas Austep operates, maintains and supervises each biogas plants prevents us from exercising a controlling influence over operating policies of the plants. Under this method, our equity investment is reflected as an investment in non-consolidated subsidiaries on our Condensed Balance Sheets and the net earnings or losses of the investments is reflected as equity in net earnings of non-consolidated companies on our Consolidated Statements of Operations.

Deferred Revenue

$1,481,900 of development fees and reimbursements for the North Carolina and Rhode Island projects are recorded as deferred revenue. Upon successful completion of the projects, this amount will be recorded as revenue.

General and Administrative Expenses

General and administrative expenses for the three-month period ended December 31, 2015 were $1,106,000 as compared to $827,000 for the three-month period ended December 31, 2014.

Net Loss

We incurred a net loss of $1,288,000 for the three-month period ended December 31, 2015, as compared to a net loss of $1,314,000 for the three-month period ended December 31, 2014.

Inflation and Seasonality

In management’s opinion, our results of operations have not been materially affected by inflation or seasonality, and management does not expect that inflation risk or seasonality would cause material impact on our operations in the future.

Critical Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires our management to make assumptions, estimates and judgments that affect the amounts reported in the financial statements, including the notes thereto, and related disclosures of commitments and contingencies, if any. We consider our critical accounting policies to be those that require the more significant judgments and estimates in the preparation of financial statements. No new accounting standards have been adopted since the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2015 was filed. The significant accounting policies applied in the annual financial statements of the Company as of September 30, 2015 are applied consistently in these financial statements except, for the following:

a.	*Business combinations and Goodwill*

Investment in non-consolidated and affiliated companies

c.	*Intangible Assets*

Intangible assets consist of non-monetary and separately identifiable assets, which can be controlled and are expected to generate future economic benefits. Such assets are recognized at acquisition and/or production cost, including directly attributable expenses to make the asset ready for use, net of accumulated amortization charges and any impairment losses. Intangible assets with a finite useful life are amortized on a straight-line basis over their useful lives and are tested for impairment when circumstances indicate that the carrying value may be impaired. The amortization period and the amortization method for intangible assets with a finite useful lives are reviewed at least at each reporting date. (see Note 5 to the Financial Statements).

d.	*Long-Lived Assets*

Liquidity and Capital Resources

Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate on an ongoing basis. Significant factors in the management of liquidity are funds generated by operations, levels of accounts receivable and accounts payable and capital expenditures.

As of December 31, 2015, we had cash of $1,888,000, as compared to $161,000 as of September 30, 2015. As of December 31, 2015, we had a working capital deficit of $7,879,000 as compared to deficit of $7,542,000 as of September 30, 2015. The increase in our working capital deficit is mainly attributable the increase in our deferred revenues from joint ventures in the amount of $2,618,000 and increase in our current maturities of long term loans in the amount of $517,000. The increase in our working capital deficit was mitigated by increase in our current assets in the amount of $1,394,000 and increase in our cash in the amount of $1,727,000.

Net cash used in operating activities was $2,125,000 for the three-month period ended December 31, 2015, as compared to $710,000 for the three-month period ended December 31, 2014.

Net cash flows used in investing activities was $2,143,000 for the three-month period ended December 31, 2015, as compared to net cash flows used in investing activity of $60,000 for the three-month period ended December 31, 2014. The increase in cash used in investing activities is due to the acquisitions of one hundred percent (100%) of the share capital of Agricerere S.r.l., Agrielektra S.r.l., Agrisorse S.r.l. and Gefa S.r.l .

Net cash flows provided by financing activities was approximately $5,995,000 for the three-month period ended December 31, 2015, as compared to approximately $590,000 for the three-month period ended December 31, 2014. The increase in cash provided by financing activities was mainly attributable to our $3 million offering of senior debentures and warrants, as further described in our Form 8-K filed with the SEC on December 28, 2015, and loans received in connection with the acquisition of one hundred percent (100%) of the share capital of Agricerere S.r.l., Agrielektra S.r.l., Agrisorse S.r.l. and Gefa S.r.l.

In February 2016, we also conducted an offering of $1,925,000 of our shares of common stock, together with warrants to purchase our common stock, in a private placement, as further described in our Form 8-K filed with the SEC on February 17, 2016. We have principally financed our operations through the sale of our common stock and the issuance of convertible debt.

Off-Balance Sheet Arrangements

As at December 31, 2015, we had no off-balance sheet arrangements of any nature.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

As a smaller reporting company, we are not required to provide the information required by this item.

ITEM 4. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

Our management is responsible for establishing and maintaining a system of disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) that is designed to ensure that information required to be disclosed by the Company in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time specified in the Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Our management concluded that our internal control over financial reporting and our disclosure controls and procedures were ineffective as of December 31, 2015 as a result of material weaknesses we identified in our internal control over financial reporting relating to maintenance of effective controls over the completeness and accuracy of accounts payable, accrued expenses and other expenses. Specifically, controls over cut-off and completeness of accounts payable and accrued expenses were insufficient to ensure that invoices from certain vendors and service providers were recorded and properly evaluated at period end. This control deficiency resulted in audit adjustments to the transition report for transition period from October 1, 2015 to December 31, 2015. This control deficiency resulted in a misstatement of the Company’s accounts payables, accrued liabilities and General and Administration operating. Accordingly, management has determined that this control deficiency constitutes a material weakness. In response to the material weaknesses described above, we recruited a seasoned Chief Financial Officers and we began implementing and evaluating new internal controls over financial reporting and disclosure controls and procedures. Though management is still evaluating the design of these new controls and procedures, we believe that our improved processes and procedures will assist in the remediation of our material weaknesses. Once placed in operation for a sufficient period, we will subject these controls and procedures to appropriate tests in order to determine whether they are operating effectively. Management, with oversight from the Audit Committee, is committed to the remediation of known material weaknesses as expeditiously as possible.

Our management’s conclusion that the Company’s internal control over financial reporting contained a material weakness at December 31, 2015 which will be remediated by the end of the fiscal year ending December 31, 2016 and is in the process of determining how best to change our current system and implement a more effective system to insure that information required to be disclosed has been recorded, processed, summarized and reported accurately. Our management acknowledges the existence of this issue, and is developing procedures and controls to address it to the extent possible given limitations in financial and manpower resources.

Changes in Internal Controls

Our management, with the participation of our CEO and CFO, performed an evaluation to determine whether any change in our internal controls over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) occurred during the three month period ended December 31, 2015. Based on that evaluation, our CEO and our CFO concluded that no change occurred in the Company’s internal controls over financial reporting during the three month period ended December 31, 2015, that has materially affected, or is reasonably likely to materially affect, the Company’s internal controls over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

None.

ITEM 1A. RISK FACTORS.

As a smaller reporting company, we are not required to provide the information required by this item.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

On October 21, 2015, we issued 10,114,848 shares of common stock of the Company for the aggregate purchase price of $214,527. Such issuance was made pursuant to the April 15, 2015, Subscription Agreement with Dr. Borenstein Ltd. (the “April Borenstein Subscription Agreement”).

On October 12, 2015, we issued 375,000 shares of common stock to a consultant in respect of its general advisory services and strategic planning consulting agreement with the Company. The Company has estimated the fair value of such shares, and recorded an expense of $22,586.

On October 26, 2015, we issued 690,000 shares of common stock to a consultant in respect of his consulting agreements with the Company. The Company has estimated the fair value of such shares, and recorded an expense of $25,803.

On December 2, 2015, we issued 625,000 shares of common stock to a consultant in respect of his consulting agreements with the Company. The Company has estimated the fair value of such shares, and recorded an expense of $43,411.

On December 2, 2015, we issued 745,000 shares of common stock to a consultant in respect of his consulting agreements with the Company. The Company has estimated the fair value of such shares, and recorded an expense of $16,544.

The transactions described above were exempt from registration under the Securities Act of 1933, as amended, as transactions not involving a public offering.

Issuer Purchases of Equity Securities

On June 17, 2015, our Board approved a share repurchase program (the “Share Repurchase Program”). Under the Share Repurchase Program, we are authorized to repurchase up to $500,000 worth of our common stock. We may purchase shares of our common stock on the open market or through privately negotiated transactions from time-to-time and in accordance with applicable laws, rules and regulations. We are not obligated to make any purchases, including at any specific time or in any particular situation. The Share Repurchase Program may be limited or terminated at any time without prior notice.

Our share repurchase activity during the three months ended December 31, 2015 is presented in the table below.

Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Approximate Dollar Value of Shares that May Yet Be Purchased Under the Share Repurchase Program
October 1 to October 31		0		—		0	$	471,672
November 1 to November 30		0		—		0	$	471,672
December 1 to December 31		0		—		0	$	471,672
Total:		0		—		0	$	471,672

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

ITEM 5. OTHER INFORMATION.

The following information is being reported in Item 5 of this Quarterly Report on Form 10-Q, in satisfaction of Item 1.01 and Item 3.02 of a Current Report on Form 8-K, concerning entry into a material definitive agreement and an unregistered sale of equity securities, respectively.

In July 2015, we conducted a private placement of up to $250,000 of our common stock at $0.0176 per share to certain accredited investors (the “July Offering”). On December 2, 2015, we closed on the July Offering, resulting in gross proceeds to the Company of $225,526, and agreed to issue 21,588,871 shares of our common stock at $0.0104 per share (the “July 2015 Shares”), pursuant to certain subscription agreements (the “July Offering Subscription Agreements”). All investors in the July Offering were part of group led by a member of our Board of Directors, and one of the investors included a company in which he is the chief executive officer, but has no equity interest.

The proceeds to the Company of the July Offering were received in December 2015, and were used to finance a portion of the closing of the acquisitions of the purchase of the SPVs by Bluesphere Pavia (See Note 3 in Part I, Item 1).

On June 2, 2016, we issued 13,930,742 shares of our common stock pursuant to all but one of the July Offering Subscription Agreements dated December 2, 2015, with the issuance of the remaining 7,658,129 shares of our common stock currently in process. The Company did not utilize the services of, or pay any commissions to, a broker-dealer or third party in connection with the July Offering.

The foregoing description of the July Offering Subscription Agreements does not purport to be complete and is qualified in its entirety by reference to the full text of the form of July Offering Subscription Agreements filed as Exhibit 10.7 to this Quarterly Report, and incorporated herein by reference. The representations, warranties and covenants contained in the July Offering Subscription Agreements were made solely for the benefit of the parties to the agreement and may be subject to limitations agreed upon by the contracting parties. Accordingly, the form or July Offering Subscription Agreement is incorporated herein by reference only to provide investors with information regarding its terms and not to provide investors with any other factual information regarding the Company or its business, and should be read in conjunction with the disclosures in the Company’s periodic reports and other SEC filings.

The Company is providing this information in accordance with Rule 135c under the Securities Act of 1933, as amended (the “Securities Act”), and the notice contained herein does not constitute an offer to sell the Company’s securities, and is not a solicitation for an offer to purchase the Company’s securities. The Company has sold shares of common stock in a private placement in reliance on the exemption from registration afforded by Section 4(a)(2) of the Securities Act and Regulation D and/or Regulation S promulgated thereunder since, among other things, the above transaction did not involve a public offering. Additionally, the Company relied on similar exemptions under applicable state laws. The investor in the sale had access to information about the Company and its investments, took July 2015 Shares for investment and not resale, and the Company took appropriate measures to restrict the transfer of the July 2015 Shares. Upon issuance, the resale of the July 2015 Shares will not be registered under the Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.

ITEM 6. EXHIBITS.

No.		Description
3.1		Amended and Restated Articles of Incorporation dated November 22, 2013 (1)
3.2		Amended and Restated Bylaws dated June 17, 2015 (2)
10.1		Orbit Energy Rhode Island LLC Membership Interest Purchase Agreement, dated April 8, 2015 (3)
10.2		Rhode Island Energy Partners LLC Development and Indemnification Agreement, dated April 8, 2015 (3)
10.3		Amended and Restated Rhode Island Energy Partners LLC Agreement, dated April 8, 2015 (3)
10.4		Orbit Energy Charlotte, LLC Letter Agreement dated January 29, 2015 (4)
10.5		Orbit Energy Charlotte, LLC Membership Interest Purchase Agreement, dated January 30, 2015 (5)
10.6		Concord Energy Partners, LLC Development and Indemnification Agreement, dated January 30, 2015 (4)
10.7		Amended and Restated Concord Energy Partners LLC Agreement, dated January 30, 2015 (4)
10.8		Ori Ackerman Loan Agreement, dated March 15, 2015 (6)
10.9*		Global Share and Options Incentive Enhancement Plan (2014) (6)
10.10		Share Purchase Agreement by and among Bluesphere Italy S.r.l. and Volteo Energie S.p.A., Agriholding S.r.l. and Overland S.r.l., dated May 14, 2015 (5)
10.11		Framework EBITDA Guarantee Agreement dated July 17, 2015 (5)
10.12		Long Term Mezzanine Loan Agreement by and among Blue Sphere Corporation, Eastern Sphere Ltd., Bluesphere Italy S.r.l., and Helios Italy Bio-Gas 1 L.P., dated August 18, 2015 (8)
10.13		Form of Subscription Agreement (9)
10.14		Form of Senior Debenture (9)
10.15		Form of Warrants (9)
10.16		Form of Pledge Agreement (9)
10.17		Securities Subscription Agreement (10)
10.18		Form of Warrant (10)
10.19*		Service Agreement between Blue Sphere Corporation and Shlomo Palas, dated October 15, 2015 (11)
10.20*		Service Agreement by and among Blue Sphere Corporation, JLS Advanced Investment Holdings Limited, and Roy Amitzur, dated October 15, 2015 (11)
10.21*		Advisory Agreement between Blue Sphere Corporation and Joshua Shoham, dated October 15, 2015 (11)
10.22		License Agreement between Blue Sphere Corporation and Nanyang Technological University, dated October 30, 2014 (11)
10.23		Founders Agreement between Blue Sphere Corporation and Prof. Chen Xiaodong, dated January 8, 2015 (11)

31.1		Rule 13a-14(a) / 15d-14(a) Certification of Chief Executive Officer
31.2		Rule 13a-14(a) / 15d-14(a) Certification of Chief Financial Officer
32.1		Section 1350 Certification of Chief Executive Officer
32.2		Section 1350 Certification of Chief Financial Officer
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		XBRL Taxonomy Extension Label Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

(1) Incorporated by reference to our current report on Form 8-K filed with the SEC on December 3, 2013.

(2) Incorporated by reference to our current report on Form 8-K filed with the SEC on June 17, 2015.

(3) Incorporated by reference to our current report on Form 8-K filed with the SEC on April 14, 2015.

(4) Incorporated by reference to our current report on Form 8-K filed with the SEC on February 5, 2015.

(5) Incorporated by reference to our quarterly report on Form 10-Q filed with the SEC on August 14, 2015.

(6) Incorporated by reference to our quarterly report on Form 10-Q filed with the SEC on May 15, 2015.

(7) Incorporated by reference to our current report on Form 8-K filed with the SEC on May 18, 2015.

(8) Incorporated by reference to our current report on Form 8-K filed with the SEC on August 24, 2015.

(9) Incorporated by reference to our current report on Form 8-K filed with the SEC on December 28, 2015.

(10) Incorporated by reference to our current report on Form 8-K filed with the SEC on February 17, 2016.

(11) Incorporated by reference to our annual report on Form 10-K filed with the SEC on January 13, 2016.

* Indicates management contract or compensatory plan or arrangement.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this quarterly report to be signed on its behalf by the undersigned, thereunto duly authorized.

	BLUE SPHERE CORPORATION

	By:	/s/ Shlomi Palas
		President, Chief Executive Officer, Secretary and Director
		(Principal Executive Officer)
		Date: November 21, 2016

	By:	/s/ Ran Daniel
		Chief Financial Officer
		(Principal Accounting Officer and Principal Financial Officer)
		Date: November 21, 2016

Attached files

Stock widget

Investing forum

BLUE SPHERE CORP. Reports