In June and July 2016, we conducted an offering (the Offering) consisting of (a) up to USD $3,000,000 of our 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 each respective closing of the Offering, and (b) five-year warrants to purchase shares of Common Stock in an amount equal to one hundred percent (100%) of the number of shares of Common Stock so purchased by the subscriber, with an exercise price equal to the per share price of the Common Stock or $0.011 per share, whichever is greater (the Warrants, together with the shares of Common Stock subscribed for, the Securities). The Offering will consist of one or more closings, wit h the last closing to occur on or before July 22, 2016, or as extended by the Company in is sole discretion
The Securities have been offered pursuant to subscription agreements with each subscriber (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 twenty (20) days of the final closing of the Offering. Each Subscription Agreement also provides that if, during the period beginning on the date of the first closing of the Offering and ending on the six month anniversary thereof, the Company completes (a) a subsequent closing of the Offering or (b) a public or private offering and sale of USD $1,000,000 or more of Common Stock or warrants to purchase Common Stock, where such subsequent closing or offering, as applicable, provides for material deal terms and conditions more favorable than are contained in such Subscription Agreement, then the Subscription Agreement will be deemed modified to provide the applicable subscriber with the more favorable deal terms and conditions, and the Company will take all reasonable steps necessary to amend the Securities and/or issue new securities to the applicable subscriber reflecting such more favorable material deal terms and conditions.
The Warrants are exercisable for five years from the date of issuance, 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 July 7, 2016, the Company completed the first closing of the Offering, representing aggregate gross proceeds to the Company of USD $1,000,000. In connection with the closing, the Company and subscriber entered into (a) a Subscription Agreement for 12,500,000 shares of Common Stock at $0.08 per share, and (b) Warrants to purchase up to 12,500,000 shares of Common Stock at an exercise price of $0.11 per share.
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, in connection with the July 7, 2016 closing, Maxim received commissions equal to 3.5% of the gross proceeds raised in the first closing of the Offering, as well as common stock purchase warrants for a number of securities equal to 4% of the total amount of securities sold in the first closing of the Offering, at a price per share equal to 110% of the price of the securities paid by subscribers in the Offering.
The foregoing description of the Subscription Agreement and the Warrants do not purport to be complete and are qualified in their entirety by reference to the full text of the forms of Subscription Agreement and Warrant filed as Exhibits 10.1 and 10.2 to this Current Report on Form 8-K, respectively, and incorporated herein by reference.
The representations, warranties and covenants contained in the Subscription Agreement 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 of 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 Companys periodic reports and other U.S. Securities and Exchange Commission (SEC) filings.
The Company is providing this report 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 Companys securities, and is not a solicitation for an offer to purchase the Companys securities. The securities offered have not been registered under the Securities Act, as amended, and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements.
Unregistered Sales of Equity Securities
The information pertaining to the sales of the Securities pursuant to the Subscription Agreement in Item 1.01 is incorporated herein by reference in its entirety.
The Company has sold the Securities in a private placement in reliance on the exemption from registration afforded by Section 4(a)(2) of the Securities Act and Regulation D 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 subscribers in the Offering had access to information about the Company and their investments, took the Securities for investment and not resale, and the Company took appropriate measures to restrict the transfer of the Securities. Upon issuance, the resale of the Securities 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.
Financial Statements and Exhibits.
The following exhibits are furnished as part of this Current Report on Form 8-K:
10.1 Form of Securities Subscription Agreement.
10.2 Form of Warrant.
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Blue Sphere Corporation
July 8, 2016
/s/ Shlomi Palas
President and Chief Executive Officer
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