General form for registration of securities under the Securities Act of 1933

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As filed with the Securities and Exchange Commission on August 15 , 2016

Registration No. 333-213145

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM S-1

(Amendment No. 1)

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

BLUE SPHERE CORPORATION
(Exact name of registrant as specified in its charter)

Nevada 7370 98-0550257
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)

301 McCullough Drive
4th Floor, Charlotte, North Carolina 28262
(704) 909-2806

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Mr. Shlomi Palas
301 McCullough Drive
4th Floor, Charlotte, North Carolina 28262
(704) 909-2806

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:

Peter J. Gennuso, Esq.

Robin D. Powell, Esq.

Benjamin Walker, Esq.

Thompson Hine LLP

335 Madison Avenue, 12th Floor

New York, NY 10017

(212) 908-3958

Approximate date of commencement of proposed sale to the public: From time to time after the effective date of this registration statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box: þ

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.     ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.     ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering.     ☐

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 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 Smaller reporting company þ

CALCULATION OF REGISTRATION FEE

Title of Each Class of Securities to be Registered (1) Amount to be
Registered
Proposed
Maximum
Offering Price
Per Share (2)
Proposed
Maximum
Aggregate
Offering Price (2)
Amount of
Registration Fee
Common stock, no par value per share 53,266,668 $ 0.075 $ 3,995,000 $ 402.30
Warrants 35,766,669 $ 0.11 $ 3,934,334 $ 396.19
Total 89,033,337 $ 7,929,334 $ 798.48

(1) The shares of our common stock being registered hereunder are being registered for sale by the selling security holders named in the prospectus. Under Rule 416 of the Securities Act of 1933, as amended, the shares being registered include such indeterminate number of shares of common stock as may be issuable with respect to the shares being registered in this registration statement as a result of any stock splits, stock dividends or other similar event.

(2) The proposed maximum offering price per share and the proposed maximum aggregate offering price have been estimated solely for the purpose of calculating the amount of the registration fee in accordance with Rule 457 under the Securities Act of 1933, as amended.

The registrant hereby amends this registration statement on such date or date(s) as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, or until the registration statement shall become effective on such date as the Commission acting pursuant to said Section 8(a) may determine.

The information in this prospectus is not complete and may be changed. These securities may not be sold until the Registration Statement filed with the Securities and Exchange Commission of which this prospectus is a part becomes effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

Subject to Completion, Dated August 15, 2016

PROSPECTUS

BLUE SPHERE CORPORATION

(BLUE SPHERE LOGO)

89,033,337 Shares of Common Stock

This prospectus relates to the resale of up to 89,033,337 shares of our common stock, of which (1) 53,266,668 shares are issued and outstanding and (2) 35,766,669 shares are issuable upon the exercise of certain outstanding warrants (the “Offering Warrants”). We are not selling any shares of our common stock in this offering and will not receive any proceeds from this offering.

The selling security holders named in this prospectus are offering to sell shares of our common stock through this prospectus and they may be deemed “underwriters” as that term is defined in Section 2(a)(11) of the Securities Act of 1933, as amended (the “Securities Act”).

Shares of the Company’s common stock are quoted on the OTCQB® Venture Marketplace under the symbol “BLSP”. On August 12, 2016, the closing sale price of our common stock was $0.07 per share. The selling security holders will pay all brokerage commissions and discounts attributable to the sale of the shares, plus brokerage fees. The selling security holders will receive all of the net proceeds from the offering.

We qualify as an “emerging growth company” as defined in the Jumpstart our Business Startups Act (“JOBS Act”). For more information, see the sub-section titled “Emerging Growth Company Status” in the Prospectus Summary section of this prospectus.

The Company is currently in the development stage and has limited operations and revenues to date, and there can be no assurance that the Company will be successful in furthering its operations and/or revenues. Persons should not invest unless they can afford to lose their entire investment.

Investing in our securities involves a high degree of risk. You should purchase these securities only if you can afford a complete loss of your investment. For more information, please see the section of this prospectus titled “Risk Factors”.

Neither the SEC nor any state securities commission has approved or disapproved of these securities or determined whether this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The date of this prospectus is [________], 2016

TABLE OF CONTENTS

PROSPECTUS SUMMARY 2
THE OFFERING 4
SUMMARY FINANCIAL DATA 5
RISK FACTORS 6
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS 13
TAX CONSIDERATIONS 13
USE OF PROCEEDS 13
CAPITALIZATION 14
DETERMINATION OF THE OFFERING PRICE 14
MARKET FOR COMMON STOCK 14
DIVIDEND POLICY 15
THE STOCK OFFERING 15
SELLING SECURITY HOLDERS 17
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 19
BUSINESS 23
PROPERTIES 29
LITIGATION 29
MANAGEMENT 29
EXECUTIVE COMPENSATION 33
PRINCIPAL SHAREHOLDERS 37
RELATED PARTY TRANSACTIONS 39
DESCRIPTION OF SECURITIES 39
PLAN OF DISTRIBUTION 40
LEGAL MATTERS 41
EXPERTS 41
ADDITIONAL INFORMATION 42
FINANCIAL STATEMENTS F-1
FINANCIAL STATEMENTS (SEPTEMBER 30, 2015 ) F-2
FINANCIAL STATEMENTS (DECEMBER 31, 2015) F-1
FINANCIAL STATEMENTS (JUNE 30, 2016) F-1

You should rely only on information contained in this prospectus. We have not authorized anyone to provide you with information that is different from that contained in this prospectus. No selling security holder is offering to sell, or seeking offers to buy, shares of common stock in jurisdictions where such offers and sales are not permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of our common stock. We are responsible for updating this prospectus to ensure that all material information is included and will update this prospectus to the extent required by law.

PROSPECTUS SUMMARY

This summary highlights certain information appearing elsewhere in this prospectus. This summary is not complete and does not contain all of the information you should consider prior to investing in the securities offered hereby. After you read this summary, you should read and consider carefully the more detailed information and financial statements and related notes that we include in this prospectus, especially the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” If you invest in our securities, you are assuming a high degree of risk.

Unless we have indicated otherwise or the context otherwise requires, references in this prospectus to the “Company,” “we,” “us” and “our” or similar terms are to Blue Sphere Corporation and its subsidiaries.

Our Company

We are an international Independent Power Producer (IPP) that is globally active in the clean energy production and waste-to-energy markets. We are becoming a key player in these rapidly growing markets by developing or acquiring projects with clean energy technologies, including but not limited to waste-to-energy facilities that generate clean energy, such as electricity, natural gas, heat, compost and other by-products. These markets provide tremendous opportunity, insofar as there is a virtually endless supply of waste and organic material that can be used to generate power and valuable by-products. In particular, the disposal of organic material to landfills in most parts of the world is a costly problem with environmentally-damaging consequences. We seek to offer a cost-effective, environmentally-safe alternative.

Our Projects

We are 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 - Garlasco (Pavia) 999 KW Plant
· Soc. agr. GEFA srl – Dorno (Pavia) 999 KW Plant

We have also entered into nonbinding letters of intent to acquire additional biogas facilities in Italy and to construct and develop waste-to-energy facilities in the Netherlands and United Kingdom, and we continue to evaluate a pipeline of similar projects in a less mature phase.

Our Strategy

Our main focus is providing tailored solutions internationally to produce clean energy primarily out of waste. We are focused on waste-to-energy projects in the United States, Italy and Israel and are in the process of developing a pipeline of similar projects. We believe there is a virtually endless supply of waste suitable for such projects and the demand for energy (particularly from such projects) is growing every year.

Our model in respect of waste-to-energy is to acquire or build, own and operate. We select projects with signed, long-term Power Purchase Agreements (“PPAs”) with waste producers or waste haulers in respect of feedstock, with national governments or electricity corporations in respect of the energy output and with private entities in respect of other project by-products (such as renewable energy credits, heat, compost and fertilizer). We are currently focused on several types of projects: (i) anaerobic digestion to electricity, (ii) landfill gas to energy, (iii) anaerobic digestion to renewable natural gas, (iv) biomass and (v) energy crop to electricity.

Another component of the clean energy and waste-to-energy business in the United States is renewable energy credits (“RECs”). An REC represents a MWh or KWh of clean energy. Many states, including North Carolina and Rhode Island, the sites of our two United States projects, require their utilities to prove that a portion of the energy they sell is produced from clean or renewable sources. An REC is used to demonstrate that the relevant unit of energy has a clean or renewable source. Consequently, utilities purchase RECs from producers of clean and renewable energy. Our agreements with Duke Energy and National Grid provide for “bundled” pricing for the sale of electricity and RECs.

We expect to generate revenue through sales of thermal and electrical energy, energy efficiency technologies and RECs, and by-products, project development services, and tipping fees from accepting waste. As of June 30, 2016, we have recorded deferred revenue in respect of our projects in the United States (which will be recognized as revenue upon successful completion of those projects) and revenue in respect of our four SPVs in Italy.

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Our strategy is to integrate all activities and components that make up a project, providing a turnkey, one-stop shop solution for waste-to-energy projects. We are also active in seeking to purchase already operational facilities. We work with and outsource key components of projects to engineering, procurement and construction (“EPC”) and technology providers and other project participants that provide the most economically viable solution for each individual project. We believe this provides us the flexibility and freedom to tailor the best solution for each project. We expect that we will remain involved in managing and financing all aspects of our projects for their lifetimes or until they are sold. We believe this assures all of the involved parties, including waste producers, financing parties, EPC and technology providers, and customers, that there is long-term continuity and responsibility for each project.

We aim to be distinctive and successful in the waste-to-energy market by:

· providing a one-stop, turn-key/build, own and operate/transfer solution that is unique in the market today;
· identifying and obtaining the rights to lucrative projects without incurring material expense;
· delivering seamless and professional project implementation through a combination of our own expertise and the use of third-party experts with a track-record of success;
· using mature and well-known technologies when necessary to tailor make cost-efficient and effective solutions for our projects;
· leveraging our management’s more than 30 years of experience in successful implementation of large and complex projects in the developing world;
· building local and international teams to support each project;
· obtaining political, property, non-performance and insolvency insurance for our projects; and
· receiving almost all of our revenue in United States dollars or euros, whether operating in the United States, Europe or the developing world.

Our Corporate Information

We are a Nevada corporation. Our principal executive offices are located at 301 McCullough Drive, 4th Floor, Charlotte, North Carolina 28262 and our telephone number is (704) 909-2806. Our web address is http://www.bluespherecorporate.com . The information on our website does not form a part of this prospectus.

Emerging Growth Company

We are an “emerging growth company,” as defined in the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies.

Section 107(b) of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have irrevocably opted out of the extended transition period for complying with new or revised accounting standards pursuant to Section 107(b) of the JOBS Act.

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THE OFFERING

Securities offered Up to 89,033,337 shares of our common stock by the selling security holders.
Terms of offering The selling security holders will offer their shares at prevailing market or privately negotiated prices, in one or more transactions that may take place by ordinary broker’s transactions, privately-negotiated transactions or through sales to one or more dealers for resale.

Common stock issued and outstanding before this offering

261,776,552 shares.
Common stock issued and outstanding after this offering 297,143,221 shares, if all shares are sold (and therefore, all shares underlying the Offering Warrants included in this offering are exercised).
Use of proceeds We will not receive any proceeds from this offering.
Dividend policy We have not declared or paid any dividends on our common stock since our inception, and we do not anticipate paying any such dividends for the foreseeable future.
Risk factors See the prospectus section titled “Risk Factors” and the other information set forth in this prospectus for a discussion of factors you should consider before deciding to invest in our securities.
Market for common stock Shares of the Company’s common stock are quoted on the OTCQB® Venture Marketplace under the symbol “BLSP”. On August 12, 2016, the closing sale price of our common stock was $0.07 per share.

The number of shares of our common stock issued and outstanding is based on 261,776,552 shares of our common stock issued and outstanding before this offering, which does not include 35,766,669 shares of our common stock issuable upon exercise of the Offering Warrants. In addition, the number of shares of our common stock outstanding before this offering also excludes 8,214,676 shares of our common stock, vested and unvested, that are outstanding pursuant to stock grants or upon the exercise of options under our Equity Incentive Plan, options to purchase up to 3,175,000 shares of our common stock that have been granted under our 2014 Incentive Plan but not issued, and 23,223,498 shares of our common stock that are issuable upon exercise of our currently outstanding convertible notes and warrants.

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SUMMARY FINANCIAL DATA

The following summary of our financial data should be read in conjunction with, and is qualified in its entirety by reference to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements, appearing elsewhere in this prospectus.

Statements of Operations Data*

For the year ended
September 30, 2015
(audited)
For the six-months ended
June 30, 2016
(unaudited)
Revenue $ 2,706,000
Loss from Operations $ (5,317,000 ) (4,105,000 )
Finance Expense $ (2,415,000 ) (3,110,000 )
Net Loss $ (7,462,000 ) (7,215,000 )

Balance Sheet Data*

As of
September 30, 2015
(audited)
As of
June 30, 2016
(unaudited)
Current Assets $ 182,000 2,666,000
Total Assets $ 5,165,000 39,635,000
Total Current Liabilities $ 7,859,000 17,122,000
Total Stockholders’ Deficit $ (2,694,000 ) (8,287,000 )

* The Company changed its fiscal year to end on December 31st each year, effective January 1, 2016. The Company has filed an Annual Report on Form 10-K for the fiscal year ending September 30, 2015, a Quarterly Transitional Report on Form 10-Q for the quarter ending December 31, 2015, and Amendment No. 1 to the Quarterly Transitional Report on Form 10-Q for the quarter ending December 31, 2015.

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RISK FACTORS

Investing in our common stock involves a high degree of risk.  You should carefully consider the following risk factors before deciding whether to invest in the Company. If any of the events discussed in the risk factors below occur, our business, financial condition, results of operations or prospects could be materially and adversely affected.  In such case, the value and marketability of the common stock could decline. Additional risks and uncertainties that we do not presently know or that we currently deem immaterial may also impair our business, financial condition, operating results and prospects.

Risks Relating to Financial Position and Need for Additional Capital

We have a limited operating history which makes it difficult to evaluate our business and prospects.

The Company has a limited operating history upon which you can base an evaluation of its business and prospects. Currently none of our United States projects have commenced commercial operations, and we recently acquired four biogas plants in Italy pursuant to the Italy Projects Agreement. We have entered into certain agreements for the acquisition or development of other projects, but there is no assurance that we will successfully acquire or develop such projects. Accordingly, our business is subject to substantial risks, uncertainties and expenses that are difficult to evaluate. Our ability to generate revenue and become and remain profitable will depend on, among other things:

· our ability to satisfy the conditions for obtaining ownership of our projects for those projects we have entered into definitive signed agreements for;
· our ability to enter into definitive signed agreements for the acquisition of our projects for which we have entered into term sheets, letter of intent or memoranda of understanding;
· our ability to obtain adequate financing for our projects on terms and upon timing consistent with our expectations;
· our ability to develop and construct our projects at our projected cost and within our projected timetables;
· our ability to effectively manage the operations at our projects;
· our ability to develop and maintain an effective internal corporate organization; and
· our ability to attract, hire and retain qualified and experienced management as well as technical and operations personnel.

There can be no assurance that we will generate sufficient revenue or that we will have adequate working capital to meet our obligations as they become due. Readers should consider the risks and difficulties frequently encountered by companies like Blue Sphere, particularly in rapidly evolving markets. We cannot be certain that our business strategy will be successful or that we will successfully address these risks. In the event that we do not successfully address these risks, our business, prospects, financial condition, and results of operations could be materially and adversely affected.

We have a history of losses and can provide no assurance of our future operating results.

As of September 30, 2014 and 2015, we had working capital deficit of $55,000 and $7,542,000 respectively, and shareholders’ equity (deficit) of $310,000 and ($2,694,000), respectively. As of September 30, 2015, we had an aggregate accumulated deficit of $43,404,000. As of June 30, 2016, we had working capital deficit of $14,456,000, shareholders’ deficit of approximately $8,287,000, and an accumulated deficit of approximately $51,916,000. For the years ended September 30, 2014 and 2015, we incurred net losses of $7,376,000 and $7,462,000. For the six months ended June 30, 2016, we incurred a net loss of $7,215,000. There is a substantial risk that we will incur additional substantial operating losses for the foreseeable future, and we may never achieve or maintain profitability. We anticipate that our expenses increase as we continue to implement our project development and construction plan and expand our general and administrative operations. As a result, we will need to generate significant revenues in order to achieve and maintain profitability. We may not be able to generate these revenues or achieve profitability in the future. Our failure to achieve or maintain profitability could negatively impact the value of our common stock.

Any delay in, or failure to, accomplish our acquisition, financing and development plans could adversely affect our ability to generate revenues and become profitable.

Because of the numerous uncertainties associated with the acquisition, financing, and development of our projects, we are unable to predict the timing of when we will become profitable, if ever. No assurances can be given about if and when our North Carolina and Rhode Island projects will commence commercial operations, if we will close acquisitions of additional biogas plants in Italy, or if we will be able to continue to develop a pipeline of projects. We may fail to satisfy the conditions in our acquisition, financing and development agreements, and project construction may not be completed on the schedule or within the budget that we intend, or at all. The foregoing could materially and adversely affect our ability to generate revenue and become profitable. Even if we do achieve profitability, we may be unable to sustain or increase our profitability in the future.

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Our independent auditors’ report states that there is substantial doubt that we will be able to continue as a going concern.

Our independent registered public accounting firm, Brightman Almagor Zohar & Co., a member firm of Deloitte Touche Tohmatsu Limited, state in their audit report, dated January 13, 2016, that our recurring losses from operations raise substantial doubt about our ability to continue as a going concern. There is a risk that we will continue to incur expenses without generating significant revenue into the future. Our source of funds to date has been the sale of our common stock, debt financing and certain development fees and reimbursements in connection with our North Carolina and Rhode Island projects. Because we cannot ensure that any of our projects will become operational or that we will be able to generate any significant revenue, obtaining new sources of equity or debt financing will be difficult.

We will require additional funding, and our future access to capital is uncertain. Insufficient capital may limit our ability to pursue our projects.

All of our current and future projects will require significant amounts of financing from us and/or our partners. We also may seek additional capital due to favorable market conditions or strategic considerations, even if we believe we have sufficient funds for our current or future operating plans. There can be no assurance that additional funds will be available on acceptable terms or at all. We may be required to pursue sources of additional capital through various means, including debt or equity financings. Future financings through equity financings are likely to be dilutive to existing stockholders. Newly issued securities may include preferences, voting rights, warrants or other derivative securities, which may have additional dilutive effects to existing stockholders. Further, we may incur substantial costs to obtain additional funding, including investment banking fees, legal fees, accounting fees, printing and distribution expenses and other costs. We may also be required to recognize non-cash expenses in connection with certain securities we issue, such as convertible notes and warrants, which will adversely impact our financial condition. Our ability to obtain additional funding may be impaired by general market conditions and/or our financial condition, which could impact the availability or cost of future financings. If the amount of capital we are able to raise from financing activities, together with our future revenue from operations, if any, is not sufficient to satisfy our capital needs, we may not be able to pursue our projects and our business, financial condition and results of operations may be materially and adversely affected.

We have incurred substantial indebtedness.

As of June 30, 2016, we had indebtedness of approximately $34,866,000. Our level of indebtedness increases the possibility that we may not have sufficient cash to pay, when due, the principal, interest or other amounts due in respect of such indebtedness. Our level of indebtedness, combined with other financial obligations and contractual commitments, could:

· make it difficult for us to satisfy our obligations with respect to such indebtedness, which could result in events of default under the loan agreements and instruments governing the indebtedness;
· require us to dedicate a substantial portion of our cash flow from operations to payments on indebtedness, thereby reducing funds available for working capital, capital expenditures, and other corporate purposes;
· increase our vulnerability to adverse economic and industry conditions, which could place us at a competitive disadvantage compared to competitors that have relatively less indebtedness;
· limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; and
· limit our ability to borrow additional funds, or to dispose of assets to raise funds, if needed, for working capital, capital expenditures, and other corporate purposes.

We may incur additional indebtedness in the future, including through the issuance of convertible notes. If we incur a substantial amount of additional indebtedness, the related risks that we face could become more significant. Additionally, the terms of any future debt that we incur may impose requirements or restrictions that further affect our financial and operating flexibility.

Risks Relating to Business and Industry

Project construction and development requires significant outlays of capital and is subject to numerous risks.

The construction and development of our projects involves numerous risks. We are required to outlay significant capital for preliminary engineering, permitting, legal, and other expenses before we can determine whether a project is feasible or economically attractive. In order to successfully construct and develop our projects, we need to negotiate satisfactory engineering, procurement and construction agreements and feedstock supply and power purchase agreements, receive all required governmental permits and approvals, obtain financing, and timely implement construction and development. Successful completion of a particular project may be adversely affected by numerous factors, including: (i) failure or delay in obtaining required government permits and approvals with acceptable conditions; (ii) unavailability of financing; (iii) uncertainties relating to land costs for projects; (iv) engineering problems; (v) construction delays and contractor performance shortfalls; (vi) work stoppages; (vii) cost over-runs; (viii) failure of equipment and materials supply; (ix) adverse weather conditions; and (x) environmental and geological conditions.

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Our power purchase agreements, which we expect to be the primary source of future revenue, require us to meet certain milestones and other performance criteria.

Power purchase agreements typically require us to meet certain milestones and other performance criteria, including the commencement of a project’s commercial operations by a certain date. Our failure to meet these milestones and other criteria may result in termination of these contracts, in which case we would lose any future cash flow from the relevant project and may be required to pay fees and penalties to our counterparty. We cannot assure you that we will be able to perform our obligations under such contracts or that we will have sufficient funds to pay any fees or penalties thereunder. In the past we have had to pay fees under the Duke PPA and National Grid PPA to extend certain milestones. The Duke PPA and National Grid PPA required us to commence commercial operations of the North Carolina and Rhode Island projects, respectively, by December 31, 2015. Because commercial operations of the North Carolina project were not commenced within 60 days of December 31, 2015, OEC was required to pay $500,000 of liquidated damages to Duke Energy pursuant to the Duke PPA during the first quarter of 2016; York was responsible for contributing these funds to OEC. Because commercial operations of the Rhode Island project were not commenced by December 31, 2015, OERI paid an additional “Development Period Security” of $22,500 pursuant to the National Grid PPA; York was responsible for contributing these funds to OERI. Although York was responsible for these amounts, we are heavily dependent on the Duke PPA and National Grid PPA as our expected primary source of future revenue.

Our business model depends on performance by third parties under contractual arrangements.

Our businesses depend on a limited number of third parties to, among other things, own and operate our projects, purchase energy produced by our projects, and supply and deliver the goods and services necessary for the construction and operation of our projects. The viability of our projects depends significantly upon the performance of these third parties in accordance with long-term contracts. If these third parties cannot or will not perform their contractual obligations, whether due to their financial condition, force majeure events, changes in laws or regulations, or otherwise, we may not be able to secure alternate arrangements on substantially the same terms or at all for the goods and services provided under such contracts. In addition, some of the owners and operators of our projects may be smaller companies that are more likely to experience financial and operational difficulties than relatively larger, well-established companies, which could result in interruptions or delays in the operation of our projects. Any of the foregoing could have a material adverse effect on our business, financial condition and results of operations.

We may not be able to obtain feedstock or other inputs at acceptable prices, which could increase our operating costs significantly and harm our financial condition and results of operations.

Although we can obtain certain project inputs pursuant to fixed price arrangements, we are vulnerable to the availability and price fluctuations of certain raw materials and utilities, such as feedstock and electricity. Our ability to operate our projects is dependent upon the availability of feedstock and utilities at reasonable prices. Market conditions can impact the availability and price of these inputs, and our suppliers may be unable to deliver our requirements for these inputs at acceptable prices or at all. During periods when availability of these inputs decreases or their prices increase, we may incur significant increases in our operating costs without being able to increase the selling price of our projects’ energy output under fixed price power purchase agreements. This could have a material adverse effect on our financial condition and results of operations.

Our operations in foreign markets could cause us to incur additional costs and risks associated with doing business internationally.

Our operations in markets outside the United States subject us to additional costs and risks, including:

· compliance with foreign requirements regulating the environment and the waste-to-energy market;
· difficulties in establishing, staffing and managing international operations;
· U.S. laws and regulations related to foreign operations, including tax and anti-corruption laws and regulations;
· differing intellectual property laws;
· differing contract laws that impact the enforceability of agreements among energy suppliers and energy consumers;
· imposition of special taxes;
· strong national and international competitors;
· currency exchange rate fluctuations; and
· political and economic instability in the countries in which we operate.

In addition, although our principal executive office is in the United States, a substantial part of our business and management is based in Israel. Therefore, our business, financial condition and results of operations could be adversely affected by political, economic and military instability in Israel. Since the establishment of the State of Israel in 1948, a number of armed conflicts have taken place between Israel and its Arab neighbors. Any hostilities involving Israel or the interruption or curtailment of trade within Israel or between Israel and its trading partners could adversely affect our operations and could make it more difficult for us to raise capital.

Our failure to manage the risks associated with international operations could limit the future growth of our business and adversely affect our business, financial condition and results of operations. We may be required to make a substantial financial investment and expend significant management efforts in connection with our international operations.

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Our planned operations in the developing world could cause us to incur additional costs and risks associated with doing business in developing markets.

We are seeking to operate in the developing world (such as, e.g., countries in Eastern Europe), which would make us vulnerable to political, economic and social instability in such areas. Many areas of the developing world have experienced political, economic and social uncertainty in recent years, including an economic crisis characterized in some cases by increased inflation, high domestic interest rates, negative economic growth, reduced consumer purchasing power and high unemployment. Currently, many of the countries in the developing world where we have projects have been pursuing economic stabilization policies, including the encouragement of foreign trade and investment and other reforms, but there is no guarantee these policies will be successful or stay in place. Political, economic and social instability in these countries may have an adverse effect on our business, financial condition and results of operations.

Acquisition, financing, construction and development of new projects and project expansions may not commence as anticipated or at all.

Our strategy is to continue to expand in the future, including through acquisition of additional projects. The acquisition, financing, construction and development of new projects involves numerous risks, including:

· difficulties in identifying, obtaining and permitting suitable sites for new projects;
· assumptions with respect to the cost and schedule for completing construction;
· the ability to obtain financing for a project on acceptable terms;
· delays in deliveries of, or increases in the prices of, equipment;
· the unavailability of sufficient quantities of waste or other fuels for startup;
· permitting and other regulatory issues, license revocation and changes in legal requirements;
· labor disputes and work stoppages;
· unforeseen engineering and environmental problems;
· cost overruns; and
· weather conditions and certain force majeure events.

In addition, new projects have no operating history and may employ recently developed technology and equipment. A new project may be unable to fund principal and interest payments under its debt service obligations or may operate at a loss. In certain situations, if a project fails to achieve commercial operation, at certain levels or at all, termination rights in the agreements governing the project financing may be triggered, rendering all of the project’s debt immediately due and payable. As a result, the project may be rendered insolvent and we may lose our interest in the project.

Changes in climate conditions could materially affect our business and prospects.

Significant changes in weather patterns and volatility could have a positive or negative influence on our existing business and our prospects for growth. Such changes may cause episodic events (such as floods or storms) that are difficult to predict or prepare for, or longer-term trends (such as droughts or sea-level rise). These or other meteorological changes could lead to increased operating costs, capital expenses, disruptions in facility operations or supply chains, changes in waste generation and interruptions in waste deliveries, and changes in energy pricing, among other effects.

We may face intense competition and may not be able to successfully compete.

There are a number of other companies operating in the renewable energy and waste-to-energy markets. These include service or equipment providers, consultants, managers, buyers and/or investors. In contrast to the standard market approach in these markets, we seek to provide a one-stop shop, turn-key solution to project owners.

We may not have the resources to compete with our existing competitors or with any new competitors. Most of our competitors have significantly greater personnel, financial and managerial resources than we have, and we may fail to maintain or expand our business. Moreover, as the demand for renewable energy increases, new companies may enter the market, and the influx of added competition will pose an increased risk to us. Increased competition could harm our business, prospects, financial condition and results of operations.

We rely on key personnel, and if we are unable to retain or hire qualified personnel, we may not be able to maintain or expand our business.

The development of our business will continue to place a significant strain on our limited personnel, management, and other resources. Our future success depends upon the continued services of our executive officers and the engagement of key employees and contractors who have critical industry experience and relationships that we will rely on to implement our business plan. The loss of the services of any of our officers or the lack of availability of other skilled personnel would negatively impact our ability to maintain or expand our business, which could adversely affect our business, prospects, financial condition and results of operations. In order to support our projected growth, we will be required to effectively recruit, hire, train and retain additional qualified management personnel. Our inability to attract and retain the necessary personnel could have a material adverse effect on us. We have no “key man” insurance on any of our key employees.

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If we fail to establish and maintain a system of disclosure controls and procedures and an effective system of internal control over financial reporting, we may not be able to accurately and timely disclose information and financial results of the Company or prevent fraud. Any inability to accurately and timely disclose information and financial results could harm our business and reputation and cause the price of our common stock to decline.

A system of disclosure controls and procedures is necessary to ensure that information required to be disclosed by the Company in the reports that we file under the Exchange Act is recorded, processed, summarized and reported, within the time specified in the Securities and Exchange Commission’s rules and forms. Effective internal control over financial reporting is necessary for us to provide reliable financial reports and prevent fraud. If we cannot disclose required information or provide reliable financial reports, we may not be able to manage our business as effectively as we would if an effective control environment existed, and our business and reputation with investors may be harmed. Due to lack of segregation of duties, limited resources, and lack of a formal audit committee and financial expert on our Board, we concluded that our internal controls over financial reporting were not effective as of September 30, 2015. In addition, our management concluded that our disclosure controls and procedures were not effective as of June 30, 2016 due to our limited internal resources and lack of ability to have multiple levels of transaction review. We have taken certain steps, including the creation of an audit committee, to address these deficiencies, but we continue to determine how best to change our current system and implement a more effective system. There can be no assurance that implementation of any changes will be completed in a timely manner or that they will be adequate once implemented.

Volatility in foreign exchange currency rates could adversely affect our financial condition and results of operations.

Foreign currency exchange rate movements between the U.S. dollar and the currencies of the jurisdictions in which we operate or receive payment (including the Euro) could make doing business more expensive or revenue in foreign currencies less valuable, which could have a material adverse effect on our financial condition and results of operations.

If our strategy is unsuccessful, we will not be profitable and our stockholders could lose their investment.

We do not believe there is a track record for companies pursuing our specific strategy, and there is no guarantee that our strategy will be successful or profitable. If our strategy is unsuccessful and we do not generate revenue or profit, the value of the Company could decrease and our stockholders could lose their investments in the Company.

Risks Relating to Regulation

We may be unable to obtain, modify, or maintain the regulatory permits, approvals and consents required to construct and operate our projects.

In order to construct and operate our projects, we must obtain and modify numerous environmental and other regulatory permits and certifications from federal, state and local agencies and authorities, including air permits and wastewater discharge permits. A number of these permits and certifications must be obtained prior to the start of construction of a project, while other permits are required to be obtained at or prior to the time of first commercial operation or within prescribed time frames following commencement of commercial operations. Any failure to obtain or modify the necessary environmental and other regulatory permits and certifications on a timely basis could delay the construction or commercial operation of our projects. In addition, once a permit or certification has been issued for a project, we must take steps to comply with each permit’s or certification’s conditions, which can include conditions as to timely construction and commencement of the project. Failure to comply with these conditions could result in revocation or suspension of the permit or certification and/or the imposition of penalties or other consequences. We also may need to modify existing permits to reflect changes in project design or requirements, which could trigger a legal or regulatory review under a standard that may be more stringent than when the permits were originally granted.

Obtaining and modifying necessary permits and certifications is a time-consuming and expensive process, and we may not be able to obtain or modify them on a timely basis or at all. In the event that we fail to obtain or modify all necessary permits and certifications, we may be forced to delay construction or operation of a project or abandon the project altogether, which could have a material adverse effect on our business, financial condition and results of operations. In addition, we may be required to make capital expenditures on an ongoing basis to comply with increasingly stringent federal, state, provincial and local environmental, health and safety laws, regulations and permits.

We are subject to environmental laws and potential exposure to environmental liabilities.

Because of the nature of our projects, we are subject to various federal, state and local environmental laws and regulations that govern our operations, including the import, handling and disposal of non-hazardous and hazardous wastes, and emissions and discharges into the environment. Failure to comply with these laws and regulations could result in costs for corrective action, penalties or the imposition of other liabilities. We also are subject to laws and regulations that impose liability and clean-up responsibility for releases of hazardous substances into the environment. Under certain of these laws and regulations, a current or previous owner or operator of property may be liable for the costs of remediating the release or spill of hazardous substances or petroleum products on or from its property, without regard to whether the owner or operator knew of, or caused, the contamination, and such owner or operator may incur liability to third parties impacted by such contamination. Failure to comply with applicable environmental laws and regulations and the imposition of environmental liability could have a material adverse effect on our business, financial condition and results of operations.

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Changes in applicable laws and regulations can adversely affect our business, financial condition and results of operations.

Governmental entities that regulate our operations or projects may adopt new laws, regulations or policies, or amend or change the interpretation of existing laws, regulations or policies, at any time. We have no control over these changes, which could potentially have an adverse effect on our business, prospects, financial condition and results of operations.

Our business and reputation could be adversely affected if we or third parties with whom we have a relationship fail to comply with United States or foreign anti-corruption laws or regulations.

Our business and operations may be conducted in countries where corruption has historically penetrated the economy to a greater extent than in the United States. It is our policy to comply, and to require our local partners and those with whom we do business to comply, with all applicable anti-corruption laws, such as the U.S. Foreign Corrupt Practices Act, and with applicable local laws of the foreign countries in which we operate. Our business and reputation may be adversely affected if we or our local partners fail to comply with such laws.

Risk Relating to Common Stock

Future sales of our common stock by existing stockholders could cause our stock price to decline.

If our existing stockholders sell substantial amounts of our common stock in the public market, or if there is a perception that our stockholders might sell shares of our common stock, the price of our common stock could decrease significantly. If we issue convertible notes or warrants, the conversion of these securities into our common stock could also decrease the price of our common stock. A decline in the price of our common stock might impede our ability to raise capital through the issuance of additional shares of our common stock or other securities.

There is a limited public market for our common stock.

Trading in our common stock continues to be conducted on the electronic bulletin board in the over-the-counter market. As a result, a holder of our common stock may find it difficult to dispose of or to obtain accurate quotations as to the market value of our common stock, and our common stock may be less attractive for margin loans, investment by financial institutions, as consideration in future capital raising transactions or for other purposes.

Our common stock is thinly traded, the price of our common stock may not reflect the value of the Company, and there can be no assurance that there will be an active market for our common stock either now or in the future.

Our common stock is thinly traded and the price of our common stock may not reflect the actual or perceived value of the Company. There can be no assurance that there will be an active market for our common stock either now or in the future. Consequently, holders of our common stock may not be able to liquidate their investment in the Company at an acceptable price to them or at all.

The market liquidity of our common stock depends, in part, on the perception of our business. We may take certain steps, including utilizing investor awareness campaigns and firms, press releases, road shows and conferences, to increase awareness of our business, which may require us to compensate consultants with cash and/or common stock. There can be no assurance that these steps will result in any impact on the trading volume or price of our common stock.

Holders of our common stock may incur dilution.

We may issue additional shares of common stock or securities convertible into or exchangeable for share of our common stock in order to raise additional capital, which could dilute existing stockholders’ percentage ownership of the Company.

The market price of our common stock could be highly volatile.

Because there is currently a low price for our common stock, many brokerage and clearing firms are not willing to effect transactions in our common stock or accept our shares for deposit in an account. Many lending institutions will not permit the use of low priced common stock as collateral for loans. If a more active market for our common stock develops, the price of our common stock could be highly volatile. The low and/or volatile price of our common stock may make it difficult for holders to sell our common stock at an acceptable price to them or at all.

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Our common stock is a “penny stock”, as defined in the Exchange Act. Trading of our common stock may be restricted by the Securities and Exchange Commission’s “penny stock” regulations, which may limit a stockholder’s ability to buy and sell our stock.

Our common stock is subject to the regulations of the Securities and Exchange Commission promulgated under the Exchange Act that require additional disclosure for trading in penny stocks. The Securities and Exchange Commission regulations generally define penny stocks to be any equity security that is not listed on a national securities exchange and has a market price of less than $5.00 per share, subject to certain exceptions. Unless an exception is available, those regulations require broker-dealers to (i) approve the customer for the specific penny stock transaction and receive from the customer a written agreement to the transaction; (ii) furnish the customer a disclosure document describing the risks of investing in penny stocks; (iii) disclose to the customer the current market quotation, if any, for the penny stock; and (iv) disclose to the customer the amount of compensation the firm and its broker will receive for the trade. In addition, after executing the sale, a broker-dealer must send to its customer monthly account statements showing the market value of each penny stock held in the customer’s account. These disclosure requirements may have the effect of reducing the level of trading activity, if any, in the secondary market for a stock that becomes subject to the penny stock rules. Consequently, these penny stock rules may adversely affect the ability of broker-dealers and stockholders to trade our common stock.

As an issuer of “penny stock,” the safe harbor provided by the federal securities laws relating to forward-looking statements does not apply to the Company.

Although federal securities laws provide a safe harbor for forward-looking statements made by a public company that files reports under the federal securities laws, this safe harbor is not available to issuers of penny stocks. As a result, we will not have the benefit of this safe harbor in the event of a private legal action against us based on a claim that any forward-looking statement in our reports contained a material misstatement of fact or omitted a material fact necessary to make the statement not misleading. Such an action, whether successful or not, could have a material adverse effect on our business.

We have no intention to pay dividends at the present time.

We have never paid dividends or made other cash distributions on our common stock, and we do not expect to declare or pay any dividends in the foreseeable future. We intend to retain future earnings, if any, for working capital and to finance current operations and expansion of our business.

We are classified as an “emerging growth company” as well as a “smaller reporting company” and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies and smaller reporting companies will make our common stock less attractive to investors.

We are an “emerging growth company,” as defined in the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.

Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have irrevocably opted out of the extended transition period for complying with new or revised accounting standards pursuant to Section 107(b) of the JOBS Act.

We could remain an “emerging growth company” for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our annual gross revenues exceed $1 billion, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, and (iii) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three-year period.

Notwithstanding the above, we are also currently a “smaller reporting company.” Specifically, similar to “emerging growth companies,” “smaller reporting companies” are able to provide simplified executive compensation disclosures in their filings; are exempt from the provisions of Section 404(b) of the Sarbanes-Oxley Act requiring that independent registered public accounting firms provide an attestation report on the effectiveness of internal control over financial reporting; and have certain other decreased disclosure obligations in their SEC filings. Decreased disclosures in our SEC filings due to our status as an “emerging growth company” or “smaller reporting company” may make it harder for investors to analyze our results of operations and financial prospects.

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements, within the meaning of Section 27A of the Securities Act and the Exchange Act, that involve risk and uncertainties. Any statements contained in this prospectus that are not statements of historical fact may be forward-looking statements. When we use the words such as “may,” “will,” “should,” “estimates,” “predicts,” “potential,” “continue,” “strategy,” “believes,” “anticipates,” “plans,” “expects,” “intends” and similar expressions are intended to identify forward-looking statements. Forward-looking statements include, but are not limited to, statements that express our intentions, beliefs, expectations, strategies, predictions or any other statements relating to our future activities or other future events or conditions:

These statements are based on current expectations, estimates and projections about our business based, in part, on assumptions made by management. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may, and are likely to, differ materially from what is expressed or forecasted in the forward-looking statements due to those risks discussed from time to time in this registration statement, of which this prospectus is a part, including the risks described under “Risk Factors”, and due to numerous factors, including:

· current or future financial performance;
· management’s plans and objectives for future operations;
· uncertainties associated with product research and development;
· uncertainties associated with dependence upon the actions of government regulatory agencies;
· product plans and performance;
· management’s assessment of market factors; and
· statements regarding our strategy and plans.

Any forward-looking statements speak only as of the date on which they are made, and we do not undertake any obligation to update any forward-looking statement to reflect events or circumstances that occur in the future. If one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may vary materially from what we may have projected. Any forward-looking statements you read in this prospectus reflects our current views with respect to future events and are subject to these and other risks, uncertainties and assumptions relating to our operations, results of operations, financial condition, growth strategy and liquidity. You should specifically consider the factors identified in this prospectus that could cause actual results to differ before making an investment decision.

TAX CONSIDERATIONS

We are not providing any tax advice as to the acquisition, holding or disposition of the securities offered herein. In making an investment decision, investors are strongly encouraged to consult their own tax advisor to determine the U.S. federal, state and any applicable foreign tax consequences relating to their investment in our securities.

USE OF PROCEEDS

We will not receive any proceeds from the sale of the common stock by the selling security holders pursuant to this prospectus. The selling security holders named herein will receive all proceeds from the sale of the shares of our common stock in this offering. Please see the prospectus section titled “Selling Security Holders”. We will pay all expenses (other than transfer taxes) of the selling security holders in connection with this offering.

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CAPITALIZATION

The following table sets forth our capitalization as of September 30, 2015 and June 30, 2016. The table should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this prospectus:

Stockholders’ Deficit

As of

September 30, 2015

(audited)

As of

June 30, 2016

(unaudited)

Common stock, $0.001 per share par value; $ 1,244,000 $ 1,318,000
Proceeds on account of shares 20,000
Treasury Shares (28,000 ) (28,000 )
Accumulated other comprehensive income 46,000
Additional paid-in capital 39,474,000 42,293,000
Accumulated/Retained deficit (43,404,000 ) (51,916,000 )
Total Stockholders’ Deficit $ (2,694,000 ) $ (8,287,000 )

DETERMINATION OF THE OFFERING PRICE

The selling security holders will offer their shares at prevailing market or privately negotiated prices, in one or more transactions that may take place by ordinary broker’s transactions, privately-negotiated transactions or through sales to one or more dealers for resale. The selling security holders will receive all proceeds from the sale of the common stock. However, we may receive up to $3,759,333 in gross proceeds from the exercise of the outstanding Offering Warrants. Our common stock is currently listed for quotation on the OTCQB® Venture Marketplace under the symbol “BLSP.”

MARKET FOR COMMON STOCK

Our common stock is quoted on the OTCQB® Venture Marketplace under the symbol “BLSP”. Trading in our common stock has historically lacked consistent volume, and the market price has been volatile.

The following table presents, for the periods indicated, the high and low sales prices of the Company’s common stock, and is based upon information provided by the OTCQB® Venture Marketplace. These quotations below reflect inter-dealer prices, without retail mark-up, mark-down, or commission, and may not necessarily represent actual transactions.

HIGH LOW
Quarter Ended:
30-Jun-16 $ 0.09 $ 0.06
31-Mar-16 $ 0.10 $ 0.04
31-Dec-15 $ 0.05 $ 0.01
Quarter Ended:
30-Sep-15 $ 0.04 $ 0.01
30-Jun-15 $ 0.07 $ 0.02
31-Mar-15 $ 0.21 $ 0.04
31-Dec-14 $ 0.20 $ 0.12
Quarter Ended:
30-Sep-14 $ 0.32 $ 0.17
30-Jun-14 $ 0.32 $ 0.06
31-Mar-14 $ 0.37 $ 0.09
31-Dec-13 $ 0.49 $ 0.05

The last reported sale price of the Company’s common stock as of August 12, 2016 was $0.07 per share.

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As of August 12, 2016, 1,750,000,000 shares of common stock, par value $0.001 per share, and 500,000,000 shares of preferred stock, $0.001 par value, in one or more series and with such rights, preferences and privileges as our Board of Directors may determine, have been authorized. As of August 12, 2016, there were 261,776,552 shares of our common stock issued and outstanding, and no shares of our preferred stock were issued and outstanding.

As of August 12, 2016, there were 140 holders of record of the Company’s common stock, per the listing of shareholders maintained by the Company’s transfer agent. This number does not include beneficial owners whose shares are held in the names of various security brokers, dealers, and registered clearing agencies.

As of August 12, 2016, there were 261,776,552 shares of our common stock issued and outstanding and 35,766,669 shares of common stock issuable upon the exercise of the Offering Warrants. In addition, on the same date, 8,214,676 shares of our common stock, vested and unvested, are outstanding pursuant to stock grants or upon the exercise of options under our Equity Incentive Plan, options to purchase up to 3,175,000 shares of our common stock have been granted under our 2014 Incentive Plan but not issued, and 23,223,498 shares of our common stock are issuable upon exercise of our currently outstanding convertible notes and warrants, which are not included in this offering.

Including the Offering Warrants, our outstanding warrants have an average exercise price of $0.070 per share and expire on dates ranging from January 30, 2019 to July 25, 2021. All issued options which were issued under our 2010 Equity Incentive Plan referenced above have an exercise price of $0.576 per share and expire on April 30, 2018. All options granted under our 2014 Incentive Plan but not issued will have an exercise price of $0.14 per share and expire on February 24, 2020, if issued.

DIVIDEND POLICY

We have never paid any cash dividends on our common stock and do not anticipate paying any cash dividends on our common stock in the foreseeable future. We intend to retain future earnings, if any, to fund ongoing operations and the future capital requirements of our business. Any future determination to pay cash dividends will be at the discretion of the Board of Directors and will be dependent upon our financial condition, results of operations, capital requirements and such other factors as the Board of Directors deems relevant.

THE STOCK OFFERINGS

February 2016 Stock Offering

In February 2016, we conducted an offering (the “February Stock Offering”) consisting of (a) up to USD $1,925,000 of our shares of common stock, priced at the closing price for shares of our common stock, as reported on the OTCQB® Venture Marketplace on the trading day prior to the closing of the February Stock Offering, and (b) 5-year warrants to purchase shares of our common stock in an amount equal to 50% of the number of shares of our common stock so purchased by the subscriber (the “February Offering Warrants”).

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

On February 15, 2016, the Company completed the only closing of the February Stock 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) February Subscription Agreements for, in the aggregate, 35,000,000 shares of our common stock at $0.055 per share, and (b) February Offering Warrants to purchase, in the aggregate, up to 17,500,001 shares of our common stock at an exercise price of $0.10 per share.

June 2016 Stock Offering

In June and July 2016, we conducted an offering (the “June Stock Offering”) consisting of (a) up to USD $3,000,000 of our shares of 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 June Stock 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 “June Offering Warrants”). The June Stock Offering consisted of two closings, with the last closing occurring on July 22, 2016.

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The securities in the June Stock Offering were offered pursuant to subscription agreements with each subscriber (the “June Subscription Agreement”). In addition to other customary provisions, each June Subscription Agreement provides that the Company will use its reasonable commercial efforts to register all shares of common stock sold in the June Stock Offering (the “June Offering Shares”), including all shares of common stock underlying the June Offering Warrants, within twenty (20) days of the final closing of the June Stock Offering. Each June Subscription Agreement also provides that if, during the period beginning on the date of the first closing of the June Stock Offering and ending on the six month anniversary thereof, the Company completes (a) a subsequent closing of the June Stock 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 June Subscription Agreement, then the June 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 June Offering Warrants are exercisable for five years from the date of issuance, include an option by which the holder may exercise the June Offering Warrant by means of a cashless exercise, and include customary weighted-average price adjustment and anti-dilution terms.

In connection with closings on July 7, 2016 and July 26, 2016, the Company received aggregate gross proceeds of USD $1,370,000 and subscribers entered into (a) June Subscription Agreements for an aggregate of 18,266,668 shares of our common stock at $0.075 per share, and (b) June Offering Warrants to purchase up to an aggregate of 18,266,668 shares of our common stock at an exercise price of $0.11 per share.

The Stock Offerings

Any reference herein to the “Stock Offerings” shall be to, collectively, the February Stock Offering and the June Stock Offering. This prospectus covers the registration of the February Offering Shares, the February Offering Warrants, the common stock underlying the February Offering Warrants, the June Offering Shares, the June Offering Warrants, and the common stock underlying the June Offering Warrants (collectively, the “Registered Securities”).

Net proceeds received by the Company from the Stock Offerings were used for the Company’s general working capital. Additional information concerning the use of proceeds from the Stock Offerings can be found in the subsection titled “Liquidity and Capital Resources” found in the section “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, which is incorporated by reference into this section.

The foregoing is only a brief description of the material terms of the February Subscription Agreements, February Offering Warrants, June Subscription Agreements, and June Offering Warrants, each of which are filed as an exhibit hereto, and does not purport to be a complete description of the rights and obligations of the parties thereunder; such descriptions are qualified in their entirety by reference to such exhibits. The representations, warranties and covenants contained in the February Subscription Agreements and June 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 February Subscription Agreements and June Subscription Agreements are referenced herein 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 this prospectus, the Company’s periodic reports and other SEC filings.

Other Related Unregistered Issuances

In December 2015, we closed on a private placement (the “Debenture Placement”) of $3,000,000 of our senior debentures (the “Debentures”) and warrants to purchase up to 8,000,000 shares of common stock of the Company, in proportion pro rata to each Subscriber’s subscription amount relative to the total Debenture Placement 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 “Debenture Warrants”).

The Company engaged Maxim Group LLC (“Maxim”) to assist in the Stock Offerings and Debenture Placement. Pursuant to the terms of an engagement letter, as amended, between Maxim and the Company, Maxim received (a) commissions equal to (i) 7% of the gross proceeds raised from Maxim investors and (ii) 3.5% of the gross proceeds raised from Company directed investors, and (b) common stock purchase warrants for a number of securities equal to (i) 8% of the total amount of securities sold to Maxim investors and (ii) 4% of the total amount of securities sold to Company directed investors, at a price per share equal to 110% of the price of the securities paid by investors (the “Maxim Warrants”). Pursuant to the letter of engagement between Maxim and the Company, Maxim was entitled to, and did, elect to have the Maxim Warrants issued into the names of its wholly-owned subsidiaries. Pursuant to the Debenture Placement, the Company issued Maxim Warrants to purchase 4,480,000 shares of our common stock at $0.06875 per share. Pursuant to the February Stock Offering, the Company issued Maxim Warrants to purchase (a) 2,800,000 shares of our common stock at $0.0605 per share and (b) 1,400,000 shares of our common stock at $0.11 per share. Pursuant to the June Stock Offering, the Company issued Maxim Warrants to purchase (a) 928,000 shares of our common stock at $0.0825 per share and (b) 928,000 shares of our common stock at $0.121 per share.

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SELLING SECURITY HOLDERS

The following table provides information about each selling security holder including how many shares of our common stock they owned as of August 12, 2016, how many shares are offered for sale by this prospectus, and the number and percentage of outstanding shares each selling security holder will own after this offering, assuming all shares covered by this prospectus are sold.  Except as disclosed in this prospectus, none of the selling security holders have had any position, office, or material relationship with us or our affiliates within the past three years. The information concerning beneficial ownership has been taken from our stock transfer records and information provided by the selling security holders.  Information concerning the selling security holders may change from time to time, and any changed information will be set forth if and when required in prospectus supplements or other appropriate forms permitted to be used by the SEC.

We do not know when or in what amounts a selling security holder may offer shares for sale. The selling security holders may not sell any or all of the shares offered by this prospectus. Because the selling security holders may offer all or some of the shares, and because there are currently no agreements, arrangements or understandings with respect to the sale of any of the shares, we cannot estimate the number of the shares that will be held by the selling security holders after completion of this offering.  However, for purposes of this table, we have assumed that, after completion of this offering, all of the shares covered by this prospectus will be sold by the selling security holder.

Unless otherwise indicated, the selling security holders have sole voting and investment power with respect to their shares of common stock.  All of the information contained in the table below is based upon information provided to us by the selling security holders, and we have not independently verified this information.  The selling security holders may have sold, transferred or otherwise disposed of, or may sell, transfer or otherwise dispose of, at any time or from time to time since the date on which it provided the information regarding the shares beneficially owned, all or a portion of the shares beneficially owned in transactions exempt from the registration requirements of the Securities Act.

The number of shares outstanding and the percentages of beneficial ownership are based on 261,776,552 shares of our common stock issued and outstanding as of August 12, 2016.  For the purposes of the following table, the number of shares common stock beneficially owned has been determined in accordance with Rule 13d-3 under the Exchange Act, and such information is not necessarily indicative of beneficial ownership for any other purpose.  Under Rule 13d-3, beneficial ownership includes any shares as to which a selling security holder has sole or shared voting power or investment power and also any shares which that selling security holder has the right to acquire within 60 days of the date of this prospectus through the exercise of any stock option, warrant or other rights.

Name (a) Note

Number of
shares of
common stock
owned before
the Offering

(b)

Number of
securities to
be offered
(b)
Number
of
securities
owned
after the
Offering
(c)
Percentage of
securities
owned after the
Offering (c)
Lazarus Investment Partners LLLP (1) 11,073,204 6,818,183 4,255,021 1.63 %
Lazarus Israel Opportunities Fund LLLP (2) 54,718,018 37,500,000 17,218,018 6.58 %
Lazarus Israel Opportunities Fund II LLLP (3) 15,113,674 8,181,818 6,931,856 2.65 %
Auto Transtech Inc. (4) 26,666,668 26,666,668 *
Gary Haseley (5) 6,666,667 5,333,334 1,333,333 *
EMBR Capital, LLC (6) 3,200,000 3,200,000 *
R. Alfred Brand III (7) 1,481,667 1,333,334 148,333 *

* Less than 1%.

(a)

The selling securities holders listed in this prospectus are neither registered broker-dealers, nor are they affiliates of registered broker-dealers. All selling security holders acquired the securities offered in this prospectus in the ordinary course of their business, and at the time of such acquisition, none were a party to any agreements, understandings or arrangements with any other persons, either directly or indirectly, to dispose of the securities offered hereby.

(b) Based on the information provided by the selling security holders and/or our stock transfer records as of August 12, 2016, and assumes that all shares offered under this prospectus have not been sold or otherwise transferred by the selling security holders.

(c) Assumes the selling security holder sells all of their shares offered in this offering, including shares underlying the Offering Warrants.

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(1) Lazarus Management Company LLC, as the investment advisor and general partner of Lazarus Investment Partners LLLP, has voting power and dispositive control over these shares. The 11,073,204 shares of our common stock consists of (i) 8,800,476 shares of our common stock, which includes 4,545,455 February Offering Shares, and (ii) 2,272,728 shares of common stock issuable upon exercise of the February Offering Warrants.

(2) Lazarus Management Company LLC, as the investment advisor and general partner of Lazarus Israel Opportunities Fund LLLP, has voting power and dispositive control over these shares. The 54,718,018 shares of our common stock consists of (i) 42,218,018 shares of our common stock, which includes 25,000,000 February Offering Shares, and (ii) 12,500,000 shares of common stock issuable upon exercise of the February Offering Warrants.

(3) Lazarus Management Company LLC, as the investment advisor and general partner of Lazarus Israel Opportunities Fund II LLLP, has voting power and dispositive control over these shares. The 15,113,674 shares of our common stock consists of (i) 12,386,401 shares of our common stock, which includes 5,454,545 February Offering Shares, and (ii) 2,727,273 shares of common stock issuable upon exercise of the February Offering Warrants.

(4) Messrs. Simyon Loshak and Mikhail Shakhnovich, as the owners of Auto Transtech Inc., have shared voting power and dispositive control over these shares. The 26,666,668 shares of our common stock consists of (i) 13,333,334 June Offering Shares, and (ii) 13,333,334 shares of common stock issuable upon exercise of the June Offering Warrants.

(5) The 6,666,667 shares of our common stock consists of (i) 2,666,667 June Offering Shares, (ii) 2,666,667 shares of common stock issuable upon exercise of the June Offering Warrants, and (iii) 1,333,333 shares of common stock issuable upon exercise of the Debenture Warrants.

(6) Mr. Ryan M. Brucato, as sole owner and principal of EMBR Capital, LLC, has sole voting power and dispositive control over these shares. The 3,200,000 shares of our common stock consists of (i) 1,600,000 June Offering Shares, and (ii) 1,600,000 shares of common stock issuable upon exercise of the June Offering Warrants.

(7) The 1,481,667 shares of our common stock consists of (i) 681,667 shares of our common stock, which includes 666,667 June Offering Shares, (ii) 666,667 shares of common stock issuable upon exercise of the June Offering Warrants, and (iii) 133,333 shares of common stock issuable upon exercise of the Debenture Warrants.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the consolidated unaudited interim and audited financial statements and notes thereto included in this prospectus. The following discussion contains forward-looking statements. Forward-looking statements are not guarantees of future performance and our actual results may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such differences include, but are not limited to, those discussed in the section “Cautionary Note Regarding Forward-Looking Statements” contained in this prospectus. We assume no obligation to revise or update any forward-looking statements for any reason, except as required by law.

Company Overview and Summary of Operations

We are an international Independent Power Producer (IPP) that is globally active in the clean energy production and waste-to-energy markets. We are becoming a key player in these rapidly growing markets by developing or acquiring projects with clean energy technologies, including but not limited to waste-to-energy facilities that generate clean energy, such as electricity, natural gas, heat, compost and other by-products. These markets provide tremendous opportunity, insofar as there is a virtually endless supply of waste and organic material that can be used to generate power and valuable by-products. In particular, the disposal of organic material to landfills in most parts of the world is a costly problem with environmentally-damaging consequences. We seek to offer a cost-effective, environmentally-safe alternative.

We are currently developing or operating, as applicable, six projects located in the Unites States and Italy. We have also entered into nonbinding letters of intent to acquire additional biogas facilities in Italy and construct and develop waste-to-energy facilities in the Netherlands and the United Kingdom, and we continue to evaluate a pipeline of similar projects in a less mature phase.

As from December 14, 2015, we consolidated our indirect wholly-owned subsidiary, Bluesphere Pavia. 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.

Results of Operations – For the Three Months Ended June 30, 2016 Compared to the Three Months Ended June 30, 2015

Revenues

Revenues for the three-month period ended June 30, 2016 were $1,303,000, as compared to $0 for the three-month period ended June 30, 2015. The increase is attributable to the acquisition of the SPVs by our wholly-owned subsidiary, Bluesphere Pavia.

Cost of Revenues

Cost of revenues for the three-month period ended June 30, 2016 were $1,007,000, as compared to $0 for the three-month period ended June 30, 2015. The increase is attributable to the acquisition of the SPVs by our wholly-owned subsidiary, Bluesphere Pavia.

General and Administrative Expenses

General and administrative expenses for the three-month period ended June 30, 2016 were $2,809,000, as compared to $2,439,000 for the three-month period ended June 30, 2015. The increase is mainly attributable to direct expenses related to the acquisition of the SPVs by our wholly-owned subsidiary, Bluesphere Pavia, and general and administrative expenses of Bluesphere Pavia.

Net Loss

We incurred a net loss of $3,644,000 for the three-month period ended June 30, 2016, as compared to a net loss of $3,133,000 for the three-month period ended June 30, 2015. The increase in net loss is mainly attributable to the results of operations of Blueshpere Pavia, increase in financial expenses and increase of our general and administrative expenses as detailed above.

Results of Operations – For the Six Months Ended June 30, 2016 Compared to the Six Months Ended June 30, 2015

Revenues

Revenues for the six-month period ended June 30, 2016 were $2,706,000, as compared to $0 for the six-month period ended June 30, 2015. The increase is attributable to the acquisition of the SPVs by our wholly-owned subsidiary, Bluesphere Pavia.

Cost of Revenues

Cost of revenues for the six-month period ended June 30, 2016 were $2,323,000, as compared to $0 for the six-month period ended June 30, 2015. The increase is attributable to the acquisition of the SPVs by our wholly-owned subsidiary, Bluesphere Pavia.

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General and Administrative Expenses

General and administrative expenses for the six-month period ended June 30, 2016 were $4,590,000, as compared to $3,450,000 for the six-month period ended June 30, 2015. The increase is mainly attributable to direct expenses related to the acquisition of the SPVs by our wholly-owned subsidiary, Bluesphere Pavia, and general and administrative expenses of Bluesphere Pavia.

Net Loss

We incurred a net loss of $7,215,000 for the six-month period ended June 30, 2016, as compared to a net loss of $4,944,000 for the six-month period ended June 30, 2015. The increase in net loss is mainly attributable to the results of operations of Blueshpere Pavia, increase in financial expenses and increase of our general and administrative expenses as detailed above.

Results of Operations for the Transition Period of Three-Months Ended December 31, 2015 Compared to the Three-Months Ended December 31, 2014

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.

Revenues

Revenues for the three-month period ended December 31, 2015 were $400,000, as compared to $0 for the three-month period ended December 31, 2014. The increase is attributable to the acquisition of our wholly-owned subsidiary, Blueshpere Pavia, and represents the revenues generated for the period of 17 days commencing December 14, 2015.

Cost of Revenues

Cost of Revenues for the three-month period ended December 31, 2015 were $360,000, as compared to $0 for the three-month period ended December 31, 2014. The increase is attributable to the acquisition of our wholly-owned subsidiary, Blueshpere Pavia, and represents the cost of revenues incurred in the period of 17 days commencing December 14, 2015.

General and Administrative Expenses

General and administrative expenses for the three-month period ended December 31, 2015 were $1,005,000 as compared to $827,000 for the three-month period ended December 31, 2014. The increase is mainly attributable to the acquisition of our wholly-owned subsidiary, Blueshpere Pavia and general and administrative expenses of Blueshpere Pavia.

Net Loss

We incurred a net loss of $1,297,000 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. The decrease in net loss is mainly attributable to the decrease in financial expenses, partially offset by the increase of our general and administrative expenses as detailed above.

Results of Operations for the Year Ended September 30, 2015 Compared to the Year Ended September 30, 2014

Deferred Revenue

$1,481,900 of development fees for the Rhode Island project is recorded as deferred revenue. Upon successful completion of the project, this amount will be recorded as revenue. We have recorded no revenue since inception of the Company.

General and Administrative Expenses

General and administrative expenses for the year ended September 30, 2015 were $5,331,000 as compared to $7,120,000 for the year ended September 30, 2014. The decrease is mainly attributable to the decrease in share-based compensation expenses to employees and service providers.

Net Loss

We incurred a net loss of $7,462,000 for the year ended September 30, 2015, as compared to a net loss of $7,376,000 for the year ended September 30, 2014. The increase in net loss is mainly attributable to an increase in financial expenses, partially offset by a decrease in share-based compensation expenses to employees and service providers.

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.

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.

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As of June 30, 2016, we had cash and cash equivalents of $1,280,000, as compared to $161,000 as of September 30, 2015. As of June 30, 2016, we had a working capital deficit of $14,456,000, as compared to $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 $3,975,000, increase in our current maturities of long term loans in the amount of $1,679,000, increase in our accounts payables in the amount of $3,417,000 and increase in our other accounts payable and liabilities in the amount of $762,000.

Net cash used in operating activities was $2,266,000 for the six-month period ended June 30, 2016, as compared to cash provided by operating activities of $198,000 for the six-month period ended June 30, 2015.

Net cash used in investing activities was $18,000 for the six-month period ended June 30, 2016, as compared to net cash used in investing activities of $1,000 for the six-month period ended June 30, 2015.

Net cash provided by financing activities was approximately $821,000 for the six-month period ended June 30, 2016, as compared to approximately $48,000 used in financing activities for the six-month period ended June 30, 2015.

We have principally financed our operations through the sale of our common stock and warrants and the issuance of convertible debt, including the Debenture Placement, February Stock Offering and June Stock Offering described in the notes to the condensed consolidated financial statements attached hereto.

Off-Balance Sheet Arrangements

As of June 30, 2016, we had no off-balance sheet arrangements of any nature.

Related Party Transactions

We are currently party to certain services and employment agreements with our executives and a non-executive member of our Board of Directors, which are specifically described under the headings “Narrative Disclosure to Executive Summary Compensation Table” and “Narrative Disclosure to Director Compensation Table” in the “Executive Compensation” section of this prospectus.

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:

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.

Intangible Assets

Intangible assets consist of allocated acquisition costs of power purchase agreements, which are amortized using the straight-line method over the 15 year terms of the agreements (see Note 3 to our Condensed Consolidated Financial Statements for the period ending June 30, 2016).

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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.

Revenue recognition

Revenues related to the sale of electricity are recorded based upon output delivered and capacity provided at rates specified under relevant contract terms.

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BUSINESS

Company Overview

We are an international Independent Power Producer (IPP) that is globally active in the clean energy production and waste-to-energy markets. We are becoming a key player in these rapidly growing markets by developing or acquiring projects with clean energy technologies, including but not limited to waste-to-energy facilities that generate clean energy, such as electricity, natural gas, heat, compost and other by-products. These markets provide tremendous opportunity, insofar as there is a virtually endless supply of waste and organic material that can be used to generate power and valuable by-products. In particular, the disposal of organic material to landfills in most parts of the world is a costly problem with environmentally-damaging consequences. We seek to offer a cost-effective, environmentally-safe alternative.

Our Projects

We are 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 - Garlasco (Pavia) 999 KW Plant

· Soc. agr. GEFA srl – Dorno (Pavia) 999 KW Plant

We have also entered into nonbinding letters of intent to acquire additional biogas facilities in Italy and to construct and develop waste-to-energy facilities in the Netherlands and United Kingdom, and we continue to evaluate a pipeline of similar projects in a less mature phase.

United States Projects

On October 19, 2012, we signed definitive project agreements in respect of both the North Carolina and Rhode Island sites with Orbit Energy, Inc. (“Orbit”), pursuant to which we would be entitled to full ownership of each of the entities that owns the rights to implement the respective projects (Orbit Energy Charlotte, LLC in the case of the North Carolina project (“OEC”) and Orbit Energy Rhode Island, LLC in the case of the Rhode Island project (“OERI”)), subject to the satisfaction of certain conditions.

North Carolina Project

On November 19, 2014, we signed an amended and restated purchase agreement with Orbit for the North Carolina project (the “Amended OEC Purchase Agreement”). Subject to the terms of the Amended OEC Purchase Agreement, Orbit transferred ownership of OEC to us in exchange for a development fee of $900,000, reimbursement of $17,764 and an amount equal to 30% of the distributable cash flow from the North Carolina project after the project achieves a post-recoupment 30% internal rate of return computed on the basis of any and all benefits from tax credits, depreciation and other incentives of any nature. We also agreed to use high solid anaerobic digester units designed by Orbit (the “HSAD Units”) and to retain Orbit to implement and operate the HSAD Units for an annual management fee of $187,500 (the “OEC Management Fee”), subject to certain conditions. The Amended OEC Purchase Agreement provided that we had until December 15, 2014 to pay Orbit the development fee and reimbursement amount, which was extended to January 15, 2015 upon payment of $75,000. We did not pay Orbit the development fee and reimbursement amount and, pursuant to the terms of the Amended OEC Purchase Agreement, ownership of OEC reverted back to Orbit on January 15, 2015.

On January 30, 2015, we entered into the Orbit Energy Charlotte, LLC Membership Interest Purchase Agreement by and among the Company, Orbit, Concord Energy Partners, LLC, a Delaware limited liability company (“Concord”), and OEC (the “New OEC Purchase Agreement”), pursuant to which (i) Concord purchased all of Orbit’s right, title and interest in and to the membership interests of OEC (the “OEC Interests”), (ii) Orbit abandoned all economic and ownership interest in the OEC Interests in favor of Concord, (iii) Orbit ceased to be a member of OEC and (iv) Concord was admitted as the sole member of OEC.

Subject to the satisfaction of certain conditions by Orbit, we agreed to be responsible for all costs of evaluating and incorporating into the North Carolina project (i) Orbit’s high solids anaerobic digestion technology, consisting of a proprietary process that uses an anaerobic digester design developed by the U.S. Department of Energy and subsequently modified by Orbit in combination with the proprietary bacteria supplied by Orbit (the “Orbit Technology”), and (ii) two HSAD Units designed by Orbit with up to a total maximum capacity of 100 tons per day. We are responsible for both direct and indirect costs, all payments to be made to Orbit and all increased costs, expenses and any damages incurred in connection with the design, installation, integration, operation and maintenance of the Orbit Technology incorporated into the project. We also agreed to enter into an operations agreement with Orbit in respect of the HSAD Units to be integrated into the North Carolina project, and to pay Orbit the OEC Management Fee.

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In a letter agreement executed in connection with the New OEC Purchase Agreement, we agreed to pay Orbit an amount equal to thirty percent (30%) of the North Carolina project’s distributable cash flow after we and the other equity investors in the North Carolina project fully recoup their respective investments in the North Carolina project (such investments to be calculated solely as amounts expended in and for the construction of the North Carolina project) and the North Carolina project achieves a thirty percent (30%) internal rate of return. The calculation of the project’s internal rate of return would take into account and be computed on the basis of any and all benefits from tax credits, depreciation and other incentives of any nature, as well as the OEC Management Fee.

On the same date as the New OEC Purchase Agreement, (i) the Company, Concord and York Renewable Energy Partners LLC (“York”) entered into a development and indemnification agreement (the “Concord Development and Indemnification Agreement”), pursuant to which Concord paid us $1,250,000, issued us 250 Series B units of Concord (“Concord Series B Units”) and issued 750 Series A units of Concord (“Concord Series A Units”) to York, and (ii) we and York entered into an amended and restated limited liability company operating agreement (the “Concord LLC Agreement”) to establish the Concord Series A Units and Concord Series B Units and admit us and York as 25% and 75% members of Concord, respectively. Purs uant to the foregoing agreements, York also agreed to pay us two equal installments of $587,500 upon (a) mechanical completion of the North Carolina project and (b) commercial operation of the North Carolina project. Our right to receive distributions from Concord are subject to certain priorities in favor of York.

Pursuant to the Concord LLC Agreement, Concord is managed by a board of managers initially consisting of three managers (the “Concord Board”). So long as York owns more than 50% of the membership interests of Concord, York is entitled to appoint two of the Concord Board’s three managers. So long as we own no less than 12.5% of the membership interests of Concord, we are entitled to appoint one manager of the Concord Board. In the event that the Concord Board determines in good faith that additional equity capital is needed by Concord and is in the best interests of the North Carolina project, the Concord Board may determine the amount of additional capital needed and issue new units to raise the necessary funds. In this case, our percentage interest in Concord would be reduced accordingly. The Concord LLC Agreement also contains certain restrictions on our right to transfer our membership interests in Concord to third parties.

In connection with the foregoing, on January 30, 2015, we terminated our amended and restated construction finance agreement, dated June 6, 2014, with Caterpillar Financial Services Corporation.

OEC and Duke Energy Carolinas, LLC (“Duke Energy”) are parties to an Amended and Restated Renewable Energy Purchase Agreement, dated October 12, 2012 and amended on April 25, 2013, January 31, 2014 and January 20, 2015 (as amended, the “Duke PPA”), pursuant to which OEC has agreed to sell, and Duke has agreed to purchase, the energy output of OEC’s facility, subject to the terms and conditions of the Duke PPA. Among other things, the Duke PPA requires OEC to commence commercial operations by December 31, 2015 or, if not operational within 60 days of such date, pay Duke Energy $500,000 of liquidated damages, which would extend the deadline for commercial operation to March 30, 2016. The Duke PPA is effective until December 31, 2029. The loss of Duke Energy as a customer of OEC could have a material adverse effect on the Company.

OEC and ARC Development are parties to an Organic Waste Delivery Agreement, dated February 4, 2014, in respect of the North Carolina project, which upon commencement of operations will provide 100 tons a day of organic feedstock to OEC’s facility. The Organic Waste Delivery Agreement has a ten year term beginning on the date of the first supply of organic feedstock. In addition, OEC is party to a Substrates Supply and Transportation Agreement with CP Bio Energy LLC, which upon commencement of operations will provide approximately 220 tons a day of substrate to OEC’s facility, increasing to 320 tons a day of substrate by the second year of commercial operation. The Substrates Supply and Transportation Agreement has a ten year term (with an automatic five year renewal) beginning on the date OEC’s facility commences commercial operations. OEC is projected to require about 432 tons of organic feedstock on a daily basis and is working with other organic waste suppliers to arrange for additional supplies of feedstock.

Although no assurances can be given, we expect the North Carolina project to commence commercial operations in the third quarter of 2016. Nevertheless, since the commercial operations were not been commenced within 60 days of December 31, 2015, OEC was required to pay $500,000 of liquidated damages to Duke Energy pursuant to the Duke PPA during the first quarter of 2016. York was responsible for contributing these funds to OEC.

Rhode Island Project

On January 7, 2015, we signed an amended and restated purchase agreement with Orbit for the Rhode Island project (the “Amended OERI Purchase Agreement”). Subject to the terms of the Amended OERI Purchase Agreement, Orbit transferred full ownership of OERI to us in exchange for a development fee of $300,000, reimbursement of $86,432 and an amount equal to 30% of the distributable cash flow from the Rhode Island project after the project achieves a post-recoupment 30% internal rate of return computed on the basis of any and all benefits from tax credits, depreciation and other incentives of any nature. We also agreed to use HSAD Units designed by Orbit and to retain Orbit to implement and operate the HSAD Units for an annual management fee of $187,500 (the “OERI Management Fee”), subject to certain conditions. The Amended OERI Purchase Agreement provided that we had until January 22, 2015 to pay Orbit the development fee and reimbursement amount, which was extended to February 28, 2015 upon payment of $31,000. We did not pay the development fee and reimbursement amount and, pursuant to the terms of the Amended OERI Purchase Agreement, ownership of OERI reverted back to Orbit.

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On April 8, 2015, we entered into the Orbit Energy Rhode Island, LLC Membership Interest Purchase Agreement by and among the Company, Orbit, Rhode Island Energy Partners, LLC, a Delaware limited liability company (“Rhode Island”) and OERI (the “New OERI Purchase Agreement”), pursuant to which (i) Rhode Island purchased all of Orbit’s right, title and interest in and to the membership interests of OERI (the “OERI Interests”), (ii) Orbit abandoned all economic and ownership interest in the OERI Interests in favor of Rhode Island, (iii) Orbit ceased to me a member of OERI and (iv) Rhode Island was admitted as the sole member of OERI.

Subject to the satisfaction of certain conditions by Orbit, we agreed to be responsible for all costs of evaluating and incorporating into the Rhode Island project (i) the Orbit Technology and (ii) two HSAD Units designed by Orbit with up to a total maximum capacity of 75 tons per day. We are responsible for both direct and indirect costs, all payments to be made to Orbit and all increased costs, expenses and any damages incurred in connection with the design, installation, integration, operation and maintenance of the Orbit Technology incorporated into the project. We also agreed to enter into an operations agreement with Orbit in respect of the HSAD Units to be integrated into the Rhode Island project and to pay Orbit the OERI Management Fee.

We also acknowledged in the New OERI Purchase Agreement our continuing responsibility to pay Orbit an amount equal to thirty percent (30%) of the Rhode Island project’s distributable cash flow after we and the other equity investors in the Rhode Island project fully recoup our respective investments in the Rhode Island project (such investments to be calculated solely as amounts expended in and for the construction of the Rhode Island project) and the Rhode Island project achieves a thirty percent (30%) internal rate of return. The calculation of the project’s internal rate of return would take into account and be computed on the basis of any and all benefits from tax credits, depreciation and other incentives of any nature, as well as the OERI Management Fee.

On the same date as the New OERI Purchase Agreement, (i) the Company, Rhode Island and York entered into a development and indemnification agreement (the “Rhode Island Development and Indemnification Agreement”), pursuant to which Rhode Island agreed to pay us $1,481,900, issue us 2,275 Series B units of Rhode Island (“Rhode Island Series B Units), and issue 7,725 Series A units of Rhode Island (“Rhode Island Series A Units”) to York, and (ii) we and York entered into an amended and restated limited liability company operating agreement (the “Rhode Island LLC Agreement”) to establish the Rhode Island Series A Units and Rhode Island Series B Units and admit us and York as 22.75% and 77.25% members of Rhode Island, respectively. Pursuant to the foregoing agreements, York also agreed to pay us three equal installments of $562,500 upon (a) signing of the Rhode Island Development and Indemnification Agreement, (b) the later of (x) the date of mechanical completion of the Rhode Island project and (y) the date on which an executed interconnection agreement between OERI and National Grid, including receipt of any regulatory approvals from the Rhode Island Public Utility Commission, is delivered by OERI, and (c) commercial operation of the Rhode Island project.

Pursuant to the Rhode Island LLC Agreement, Rhode Island is managed by a board of managers initially consisting of three managers (the “Rhode Island Board”). So long as York owns more than 50% of the membership interests of Rhode Island, York is entitled to appoint two of the Rhode Island Board’s three managers. So long as we own no less than 11.375% of the membership interests of Rhode Island, we are entitled to appoint one manager of the Rhode Island Board. In the event that the Rhode Island Board determines in good faith that additional equity capital is needed by Rhode Island and is in the best interests of the Rhode Island project, the Rhode Island Board may determine the amount of additional capital needed and issue new units to raise the necessary funds. In this case, our percentage interest in Rhode Island would be reduced accordingly. The Rhode Island LLC Agreement also contains certain restrictions on our right to transfer our membership interests in Rhode Island to third parties.

OERI and The Narragansett Electric Company d/b/a National Grid (“National Grid”) are parties to a Power Purchase Agreement, dated May 26, 2011 and amended on April 11, 2013, December 9, 2013 and January 9, 2015 (as amended, the “National Grid PPA”), pursuant to which OERI has agreed to sell, and National Grid has agreed to purchase, the energy output of OERI’s facility, subject to the terms and conditions of the National Grid PPA. Among other things, the National Grid PPA requires OERI to commence commercial operations by December 31, 2015, which may be extended up to six months by OERI upon deposit of $22,500 of collateral. The National Grid PPA is effective for 15 years from the date commercial operations are commenced, which may be extended by 6 years at the option of National Grid. The loss of National Grid as a customer of OERI could have a material adverse effect on the Company.

OERI and Organic Waste Management, LLC are parties to an Organic Waste Delivery Agreement, dated February 27, 2015, in respect of 1100 to 1400 tons a week of organic feedstock, and OERI and E.L. Harvey & Sons are parties to a feedstock supply agreement, dated August 5, 2013, in respect of 50 to 100 tons a day of organic feedstock. Both agreements have ten year terms with certain provisions for renewal. Feedstock will be supplied to the Rhode Island project upon commencement of operations. OERI is projected to require 220 tons of organic feedstock on a daily basis and is working with other organic waste suppliers to arrange for additional supplies of feedstock.

Although no assurances can be given, we expect the Rhode Island project to commence commercial operations in the third quarter of 2016. Since commercial operations were not commenced by December 31, 2015, OERI paid an additional “Development Period Security” of $22,500 pursuant to the National Grid PPA. York was responsible for contributing these funds to OERI.

Both the Rhode Island and North Carolina projects previously entered into ten year compost off-take agreements, dated May 15, 2013, with McGill Environmental Systems (“McGill”), a market leader in the compost industry. The compost to be purchased by McGill will comprise the digestate that is a by-product from the anaerobic digestion process at each plant. The agreement between OEC and McGill never became effective, as the OEC facility was not operating by May 15, 2015. The agreement between OERI and McGill will become effective once the OERI facility is steadily producing 30 tons per day of compost. In general, we are currently seeking to diversify sales of the plants’ by-products among several buyers on more attractive terms.

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Italy Projects

In September 2014, we entered into a letter of intent to acquire Kinexia S.p.A.’s right, interest and title in, to and under four biogas projects in the Vigevano area in Italy. The letter of intent also provides for the purchase of three additional biogas projects in the Emillia-Romagna and Lazio regions upon the same principals set forth in the letter of intent and subject to definitive agreements.

On May 14, 2015, we entered into a Share Purchase Agreement (the “Italy Projects Agreement”) with Volteo Energie S.p.A., Agriholding S.r.l., and Overland S.r.l. (each, a “Seller” and collectively, the “Sellers”) through our indirect, wholly-owned subsidiary, Bluesphere Italy S.r.l. (we subsequently changed the name of Bluesphere Italy S.r.l to Bluesphere Pavia, which is the name we use herein). Pursuant to the Italy Projects Agreement, we agreed to purchase 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, who collectively hold all of the outstanding share capital of each SPV, Each SPV is engaged in the owning and operating of an anaerobic digestion biogas plant 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, we 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 Italy Projects Agreement, we agreed to pay an aggregate purchase price of five million six hundred thousand euros (€5,600,000) for all of the SPVs, consisting of a purchase price for each SPV of one million four hundred thousand euros (€1,400,000) (the “Purchase Price”). 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%). The Purchase Price is subject to certain adjustments prior to and after closing of the acquisitions, and any variation of EBITDA results in the 18 months following a closing will trigger an adjustment to the Purchase Price for the relevant SPV, as further set forth in the Italy Projects Agreement. Fifty-percent (50%) of the Purchase Price for each SPV will be paid at the relevant closing, and the remaining fifty percent (50%) of the Purchase Price, subject to specified adjustments, will be promised by a note from each Seller, to be paid on the third anniversary of the date of the relevant closing, along with interest on the balance due at an annual rate of five percent (5%). In addition, the Sellers granted us credit of one hundred thousand euros (€100,000) per SPV, half of which is allocable to each such payment.

The closing in relation to each SPV will occur independently of closings of the sale of the other SPVs, and any such closing is subject to certain conditions precedent including, but not limited to, obtaining consent to the proposed sale and resulting change of control from the SPVs’ lender in connection with a certain Financing Agreement, dated February 25, 2013, between the SPVs, Banca IMI S.p.A. and Intesa San Paolo S.p.A, as well as from other counterparties to certain agreements to which the SPVs are a party. We have agreed to pay fifty percent (50%) of any fees and expenses charged by the lenders in connection with obtaining these consents. On July 31, 2015, Banca IMI S.p.A. consented to the changes of control, subject to certain conditions precedent, including payment of a waiver fee equal to one hundred thousand euros (€100,000).

On July 17, 2015, we entered into a Framework EBITDA Guarantee Agreement (the “EBITDA Agreement”) with Austep S.p.A. (“Austep”), an Italian corporation. Austep specializes in the design, construction, operation and servicing of anaerobic digestion plants. The EBITDA Agreement provides a framework pursuant to which Austep will perform technical analyses of operating anaerobic digestion plants in Italy that we identify as potential acquisition targets. If and when we acquire such anaerobic digestion plants in Italy, subject to the terms of the EBITDA Agreement, we and Austep have agreed to negotiate individual agreements pursuant to which Austep will operate, maintain and supervise each plant and guarantee agreed-upon levels of EBITDA for a specified period. The EBITDA Agreement will apply to the first fifteen anaerobic digestion plants that we may acquire in Italy, including the plants subject to the Italy Projects Agreement.

On August 18, 2015, we and two of our wholly-owned subsidiaries, Eastern Sphere Ltd. (“Eastern Sphere”) and BlueSphere Pavia, entered into a Long Term Mezzanine Loan Agreement (the “Helios Loan Agreement”) with Helios Italy Bio-Gas 1 L.P. (“Helios”) to finance the Italy Projects Agreement. Under the Helios Loan Agreement, Helios will make up to five million euros (€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 SPVs acquired, (b) eighty percent (80%) of the total required investment of up to three SPVs 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 SPV 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 SPVs 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.

Subject to specified terms, representations and warranties, the Helios Loan Agreement provides that each loan thereunder will accrue interest at a rate of fourteen and one-half percent (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 Pavia, and (b) the date that the Feed in Tariff license granted to the relevant SPV 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.

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On December 14, 2015, pursuant to the Italy Projects Agreement, we completed the acquisitions of the four SPVs. We paid an aggregate purchase price of five million two hundred thousand euros (€5,200,000), subject to certain post-closing adjustments, to acquire the share capital of the SPVs. Fifty percent (50%) of this adjusted Purchase Price was paid at closing, and the balance is due to the Sellers on the third anniversary of the closing date. The portion of the Purchase Price and closing costs paid at closing was primarily financed by a loan of two million nine hundred thousand euros (€2,900,000) pursuant to the Helios Loan Agreement. In accordance with the EBITDA Agreement, Austep will operate, maintain and supervise the biogas plants owned by the SPVs. In addition, Austep will guarantee a monthly aggregate EBITDA of one hundred eighty-eight thousand euros (€188,000) from the four SPVs for the initial six months following the acquisition, and thereafter Austep will guarantee an annual aggregate EBITDA of three million seven hundred sixty thousand euros (€3,760,000) from the four SPVs. Pursuant to the terms of the agreements with Austep, we will receive the guaranteed levels of EBITDA and Austep will receive any revenue in excess of these levels.

Strategy

Our main focus is providing tailored solutions internationally to produce clean energy primarily out of waste. We are focused on waste-to-energy projects in the United States and Europe and are in the process of developing a pipeline of similar projects. We believe there is a virtually endless supply of waste suitable for such projects and the demand for energy (particularly from such projects) is growing every year.

Our model in respect of waste-to-energy is to acquire or build, own and operate. We select projects with signed, long-term agreements with waste producers or waste haulers in respect of feedstock, with national governments or electricity corporations in respect of the energy output and with private entities in respect of other project by-products (such as renewable energy credits, heat, compost and fertilizer). We are currently focused on several types of projects: (i) anaerobic digestion to electricity, (ii) landfill gas to energy, (iii) anaerobic digestion to renewable natural gas, (iv) biomass and (v) energy crop to electricity.

Another component of the clean energy and waste-to-energy business in the United States is renewable energy credits (“RECs”). An REC represents a MWh or KWh of clean energy. Many states, including North Carolina and Rhode Island, the sites of our two United States projects, require their utilities to prove that a portion of the energy they sell is produced from clean or renewable sources. An REC is used to demonstrate that the relevant unit of energy has a clean or renewable source. Consequently, utilities purchase RECs from producers of clean and renewable energy. Our agreements with Duke Energy and National Grid provide for “bundled” pricing for the sale of electricity and RECs.

We expect to generate revenue through sales of thermal and electrical energy, energy efficiency technologies and RECs, and by-products, project development services, and tipping fees from accepting waste. As of September 30, 2015, we have recorded deferred revenue in respect of our projects in the United States (which will be recorded as revenue upon successful completion of those projects), but we have not otherwise received any revenues from our projects.

Our strategy is to integrate all activities and components that make up a project, providing a turnkey, one-stop shop solution for waste-to-energy projects. We are also active in seeking to purchase already operational facilities. We work with and outsource key components of projects to engineering, procurement and construction (“EPC”) and technology providers and other project participants that provide the most economically viable solution for each individual project. We believe this provides us the flexibility and freedom to tailor the best solution for each project. We expect that we will remain involved in managing and financing all aspects of our projects for their lifetimes or until they are sold. We believe this assures all of the involved parties, including waste producers, financing parties, EPC and technology providers, and customers, that there is long-term continuity and responsibility for each project.

We aim to be distinctive and successful in the waste-to-energy market by:

· providing a one-stop, turn-key/build, own and operate/transfer solution that is unique in the market today;

· identifying and obtaining the rights to lucrative projects without incurring material expense;

· delivering seamless and professional project implementation through a combination of our own expertise and the use of third-party experts with a track-record of success;

· using mature and well-known technologies when necessary to tailor make cost-efficient and effective solutions for our projects;

· leveraging our management’s more than 30 years of experience in successful implementation of large and complex projects in the developing world;

· building local and international teams to support each project;

· obtaining political, property, non-performance and insolvency insurance for our projects; and

· receiving almost all of our revenue in United States dollars or euros, whether operating in the United States, Europe or the developing world.

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Competition

There are a number of other companies operating in the clean energy and waste-to-energy space, ranging from other project developers to service or equipment providers, buyers and/or investors. Unlike the standard market approach in this space (i.e., being solely a project developer, service or equipment provider or a buyer or investor), we seek to provide a one-stop shop, turn-key solution to project owners. As described above, our business model is to acquire or initiate, finance, develop, and manage all aspects of project implementation and sales of the project’s clean energy and by-products. We believe this one-stop shop approach is attractive to project owners and will differentiate us in a positive manner from our competition. We are aware of several competitors in the United States that have a similar model to us – Harvest Power, Neo Energy, Anaergia, Quasar, CH4 and others. We value these companies, as they are helping to create awareness and credibility for the waste-to-energy space. We are not aware of competitors with a similar business model in Italy or Israel.

The clean energy and waste-to-energy space is intensely competitive and subject to rapid and significant technological change. Many of our competitors and other companies operating in this space have greater financial and other resources than we have. As a result, these companies may be more effective in developing and implementing a business model similar to ours and/or competing with us in any aspect of project implementation and clean energy sales.

Government Regulation

Permitting

Each of our projects in development requires certain government approvals. In the United States, the standard required environmental permits relate to solid waste composting and air quality. All construction and operational permits for our North Carolina and Rhode Island projects have been obtained.

In Italy, all permits for operation of the projects have been received since these projects are operational.

Effect of Existing or Probable Government Regulations on Our Business

Our business is affected by numerous laws and regulations on the international, federal, state and local levels, including energy, environmental, conservation, tax and other laws and regulations relating to our industry. Failure to comply with any laws and regulations may result in the assessment of administrative, civil and criminal penalties, the imposition of injunctive relief or both. Moreover, changes in any of these laws and regulations could have a material adverse effect on our business. In view of the many uncertainties with respect to current and future laws and regulations, including their applicability to us, we cannot predict the overall effect of such laws and regulations on our future operations.

We believe that our operations comply in all material respects with applicable laws and regulations and that the existence and enforcement of such laws and regulations have no more restrictive an effect on our operations than on other similar companies in our industry. We do not anticipate any material capital expenditures to comply with international, federal and state environmental requirements.

Employees

We have nine full-time basis professionals: our non-executive chairman, chief executive officer, executive vice-president, chief technical officer, chief financial officer, controller for European operations, vice president of strategy and business development, vice president investor relations and vice president of business development for the United States market.  We also employ one part-time office manager. Our subsidiary, Eastern Sphere, has two full-time employees, our vice president of business development for the European market and our executive vice president of mergers and acquisitions.

Segments and Geographic Information

We have one reporting segment. For information regarding revenue and other information regarding our results of operations for each of our last two fiscal years, please refer to our financial statements included in this prospectus and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in this prospectus.

Corporate History

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

In 2013, we amended and restated our Articles of Incorporation to (a) authorize the issuance of 500,000,000 shares of preferred stock, $0.001 par value, in one or more series and with such rights, preferences and privileges as our Board of Directors may determine and (b) effect a 1 for 113 reverse stock split of our outstanding common stock.

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Our direct and indirect wholly-owned subsidiaries are Eastern Sphere, Binosphere Inc (“Binosphere”), Johnstonsphere LLC (“Johnstonsphere”), Sustainable Energy Ltd. (“SEL”) and Bluesphere Pavia. As of the date of this prospectus, Johnstonsphere had not commenced operations. We formed Bluesphere Pavia, a subsidiary of Eastern, on May 12, 2015, which acquired the four biogas plants located in Italy, as described above. We also own a 25% interest in Concord (which owns OEC) and a 22.75% interest in Rhode Island (which owns OERI).

Our Corporate Information

Our principal executive offices are located at 301 McCullough Drive, 4th Floor, Charlotte, North Carolina 28262 and our telephone number is (704) 909-2806. Our web address is http:// www.bluespherecorporate.com . The information on our website does not form a part of this prospectus.

Available Information

Copies of our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other documents that we will file with or furnish to the SEC will be available free of charge by sending a written request to our Chief Executive Officer at our corporate headquarters.  Additionally, the documents we file with the SEC is or will be available free of charge at the SEC’s Public Reference Room at 100 F Street, NE, Washington D.C. 20549. Other information on the operation of the Public Reference Room is or will be available by calling the SEC at (800) SEC-0330.

PROPERTIES

Our principal executive office is located in North Carolina at 301 McCullough Drive, 4th Floor, Charlotte, NC 28262. We lease office space at this site for $179 per month. We also have office space located at 35 Asuta St. Even Yehuda, Israel 40500, for which we pay the operating expenses but do not pay any rent. We intend to obtain additional working space near our projects if and when we believe this is necessary for the development and operation of the projects. Until such time, we believe that our property is adequate for the conduct of our business.

LITIGATION

From time to time we and our subsidiaries may be parties to legal proceedings arising in the normal course of our business. We and our subsidiaries are currently not a party to any pending legal proceeding, nor is our property the subject of a pending legal proceeding, and to our knowledge, no such proceedings are threatened. None of our directors, officers, affiliates, or any owner of record or beneficially of more than five percent of our common stock, is involved in a material proceeding adverse to us or our subsidiaries or has a material interest adverse to us or our subsidiaries.

MANAGEMENT

Executive Officers and Directors

The following table sets forth the names and ages of the members of our Board of Directors and our executive officers and the positions held by each. There are no family relationships among any of our directors and executive officers. The officers are elected by our Board.

Name Age Position
Joshua Shoham 65 Chairman of the Board
Shlomo Palas 54 Chief Executive Officer and Director
Yigal Brosh 53 Director
Shimon Erlichman 65 Director
Itai Haboucha 37 Director
Lyron Bentovim 47 Director
Roy Amitzur 54 Executive Vice President
Ran Daniel 48 Chief Financial Officer
Elad Kerner 48 Executive Vice President

Joshua Shoham – Chairman of the Board Mr. Shoham became our Chairman on March 2, 2012. Mr. Shoham has extensive experience in senior executive management and in international business development in the United States, Europe and China. He has held several General Manager positions and is co-founder of several high-tech startups. Mr. Shoham was also a strategic market development consultant responsible for a range of transactions in the Israeli and Chinese traditional and high-tech industries. He previously served as a director on the board of Bio-Cell (TASE: BCEL), which merged its activities into Protalix Biotherapeutics (AMEX: PLX). Mr. Shoham holds an MBA and a B.A. in Economics, both from the Hebrew University of Jerusalem, and an LL. B degree from the Faculty of Law of Tel-Aviv University. The Board has determined that Mr. Shoham is qualified to serve on the Board as a result of his extensive experience in senior management and international business development.

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Shlomo Palas – Chief Executive Officer and Director Mr. Palas became our Chief Executive Officer and a director on March 3, 2010. Mr. Palas is a highly experienced entrepreneur who has held executive positions at a number of leading Israeli firms. From 2005 to 2010, he served as an entrepreneur advising companies in the biodiesel industry. Prior to that he was a senior consultant with Mitzuv, a leading management consulting firm, and has served in a variety of marketing roles. Since 2010, Mr. Palas has specialized in the renewable and clean tech industries. He has gained significant experience in renewable and clean tech manufacturing, off-take contracts with leading petrol companies, legal/financial structuring, and fundraising for these industries. He has also developed a large network in private and government sectors in many cities across China. Mr. Palas previously served as Chief Executive Officer of Becco Biofuels China Ltd., which was a company active in the biofuel industry. Mr. Palas participated in the establishment of the largest commercial algae farm in China together with one of China’s largest electrical utilities. Mr. Palas holds a B.A. in Statistics and Management from Haifa University and an M.S. from Baruch College. The Board has determined that Mr. Palas is qualified to serve on the Board as a result of his significant experience in renewable and clean tech manufacturing and his management and entrepreneurial experience.

Yigal Brosh – Director Mr. Brosh is a director at Abroker Trading & Securities LTD. and Chairman of the Board at Environmental Services Company Ltd. Environmental Services Company is a government-owned national infrastructure company, established for the purpose of handling all the hazardous waste produced in Israel. The company owns the Ramat Hovav plant for the treatment of hazardous waste, which handles a wide variety of organic, inorganic and solid materials. Mr. Brosh previously served as a director at Analyst Portfolio Management Ltd. and is former CEO, director and partner of Millennium Mutual Funds. Mr. Brosh holds a B.A. in Economics and M.B.A (Hebrew University of Jerusalem) and an investment portfolio management license from the Israel Securities Authority (ISA).

Shimon Erlichman – Director – Mr. Erlichman previously served as CFO of two Israeli companies traded on the Israeli Stock Exchange and established his own company in 1980, which provides services to local and foreign companies in Israel. Mr. Erlichman holds a B.A. in Accounting and Economics from Bar Ilan University and is a member of the Israeli Institute of Certified Public Accountants.

Lyron Bentovim – Director – Mr. Bentovim has been a member of the Board since August 2016. Mr. Bentovim presently serves as President and CEO of Glimpse Group and is the founder and Managing Partner of DarkLight Partners, a strategic advisor to small and mid-cap companies. Prior to founding DarkLight Partners, from 2014 to 2015, Mr. Bentovim served as Chief Operating Officer and Chief Financial Officer of Top Image Systems (NASDAQ: TISA). Prior to this position he served as Chief Operating Officer and Chief Financial Officer of NIT Health from 2013 to 2014. From 2009 until 2012, Mr. Bentovim served as the Chief Operating Officer and the Chief Financial Officer of Sunrise Telecom Inc. Prior to joining Sunrise Telecom Inc., from 2001 until 2009, Mr. Bentovim was a Managing Director for Skiritai Capital LLC. Mr. Bentovim has over 20 years of industry experience, including his experience as a member of the board of directors for public and private companies, including Manhattan Bridge Capital, Inc., RTW Inc., Ault Inc., Top Image Systems, Three-Five Systems Inc., Sunrise Telecom Incorporated, and Argonaut Technologies Inc. Mr. Bentovim has also served in senior and executive positions with WebBrix Inc., USWeb/CKS, the Mitchell Madison Group LLC and McKinsey & Company Inc. Mr. Bentovim has an MBA from Yale School of Management and a Law degree from the Hebrew University. Mr. Bentovim’s professional experiences provide our Board with valuable expertise.

Itai Haboucha – Director – Mr. Haboucha is a corporate finance expert and has held various roles in his diversified career. Mr. Haboucha has served as an attorney, financial advisor, strategic advisor, credit rating specialist and underwriter with various public and private corporations, totaling over 100 clients worldwide. In 2010, Mr. Haboucha joined the GSE group, the leading financial consulting firm in Israel, where he provided the firm’s clients with financial advisory, credit rating advisory, underwriting, and M&A services. Currently, Mr. Haboucha serves as Head of M&A at GSE, leads GSE’s relations with overseas clients, and serves on the board of directors of several public and private companies. Mr. Haboucha holds an LL B and MBA (specializing in finance) from TAU.

Roy Amitzur – Executive Vice President – Mr. Amitzur has served as our Executive Vice President since August 2011. Since 2008, Mr. Amitzur has served as President of Clean Technologies Group Ltd, a holding and integration company specializing in investment in water technologies and water and waste water project execution. In addition, Mr. Amitzur has managed a number of start-up companies, including Bio Pure Technology Ltd., Proxy Aviation Systems, Inc., and Aquarius Technologies Inc. Mr. Amitzur has significant experience in implementing BOT and turn-key projects in water technologies and water and waste water execution around the world.

Ran Daniel - Since May 1, 2016, Mr. Daniel has served as the Company’s Chief Financial Officer. From August 2014 to March 2016, Mr. Daniel served as General Counsel and Head of the Family Office of Elie Tahari Ltd., and from December 2012 to August 2014, he served as Executive Vice President of IDH Properties LLC. Mr. Daniel served as Principal of Daniel Capital Management Inc. from 2009 through December 2012. Mr. Daniel has more than 20 years of financial and business management experience in the US, Europe and Israel. He has worked with real estate, fashion and high-tech companies as well as high net worth individuals. He was involved with financing, project management, M&A and real estate transactions. Mr. Daniel is licensed as a Certified Public Accountant (CPA) in the United States and Israel, admitted to practice law in the State of New York, licensed as a Real Estate Broker in the State of New York and a Chartered Financial Analyst (CFA). Mr. Daniel is a member of the CFA Institute, the New York Society of Security Analysts and the New York State Bar Association. Mr. Daniel holds a Bachelor of Economics, a Bachelor of Accounting and an MBA in Finance from the Hebrew University, as well as a Graduate Degree in Law from the University of Bar-Ilan. Our Board of Directors believes Mr. Daniel’s qualifications to serve as our Chief Financial Officer include his extensive chief financial executive experience, his expertise in reporting and finance-related activities for international operations, and his experience in M&A and real estate activities.

Dr. Elad Kerner –Executive Vice President Dr. Kerner has a PhD in law from Bar-Ilan University and brings wealth of knowledge in economics, finance and management. Dr. Kerner is an expert in commercial transactions, international investment, mergers & acquisitions, corporate finance and corporate governance. Before joining Blue Sphere, Dr. Kerner was General Counsel for Israel Aerospace Industries, Ltd, was the CEO of Toptrio Group and was a Partner in the law firm of Shugol, Ketzef, Ehrlich, Kerner & Co. Dr. Kerner was a Lieutenant Colonel and Military Judge in the Israeli Defense Forces.

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Corporate Governance

Board of Directors

We currently have five directors serving on our Board of Directors. A majority of the authorized number of directors constitutes a quorum of the Board for the transaction of business. The directors must be present at the meeting to constitute a quorum. However, any action required or permitted to be taken by the Board may be taken without a meeting if all members of the Board consent in writing to the action.

We are not a listed issuer, as such term is defined in Rule 10A-3 of the Exchange Act, and are therefore not subject to director independence standards. However, using the definition of “independent director” from Section 803 of the rules of the NYSE MKT, the following directors would be considered independent: Yigal Brosh, Shimon Erlichman and Itai Haboucha.

Our directors are elected by the vote of a majority in interest of the holders of our common stock and hold office until the earlier of his or her death, resignation, removal or expiration of the term for which he or she was elected and until a successor has been elected and qualified. The Board may also appoint directors to fill vacancies on the Board created by the death, resignation or removal of any director.

On June 17, 2015, our Board approved an amendment to the Company’s bylaws, effective as of such date, (i) to require any stockholder intending to propose business to be conducted at the annual meeting or to nominate any candidate for election to the Board to notify the Company not later than the close of business on the ninetieth (90th) day, nor earlier than the close of business on the one hundred twentieth (120th) day, in advance of the first anniversary of the preceding year’s annual meeting (provided, however, that in the event that the date of the annual meeting is more than thirty (30) days before or more than seventy (70) days after such anniversary date, notice by the stockholder must be so delivered by the tenth (10th) day following the day on which public announcement of the date of such meeting is first made by the Company) and (ii) to require any such stockholder to provide specified information and representations and, if applicable, require director nominees to provide specified information and representations in order to be eligible to be elected as a director.

Committees of the Board of Directors

On October 12, 2015, our Board designated the following three committees of the Board: an Audit Committee, a Finance Committee and an Administration and Management Committee. We do not have compensation or nominating committees.

The members of the Audit Committee are Yigal Brosh and Shimon Erlichman CPA. The Audit Committee is responsible for, among other things, overseeing the financial reporting and audit process and evaluating our internal controls over financial reporting. The Board has determined that both Yigal Brosh and Shimon Erlichman would be considered “independent directors” and “Audit Committee financial experts” within the meaning of the NYSE MKT and Exchange Act rules. A current copy of the charter of the Audit Committee is available on our corporate website at http://www.bluespherecorporate.com.

The members of the Finance Committee are Shlomi Palas, Yigal Brosh and Itai Haboucha. The Finance Committee is responsible for, among other things, reviewing our investment policy, annual financing plan and financial structure. A current copy of the charter of the Finance Committee is available on our corporate website at http://www.bluespherecorporate.com.

The members of the Administration and Management Committee are Shlomi Palas and Joshua Shoham. The Administration and Management Committee is responsible for, among other things, managing and overseeing daily operations and transactions in the ordinary course of our business.

Code of Ethics

On April 27, 2016, our Board of Directors approved and adopted a code of ethics (the “Code of Ethics”). The Code of Ethics is applicable to all directors, officers and employees of the Company, including the Company’s principal executive officer and principal financial officer. The Code of Ethics addresses such individuals’ conduct with respect to, among other things, conflicts of interests; compliance with applicable laws, rules and regulations; rules to promote full, fair, accurate, timely and understandable disclosure; use of Company assets and corporate opportunities; confidentiality; fair dealing; and reporting and enforcement. A current copy of the Code of Ethics is available on our corporate website at http://www.bluespherecorporate.com.

Anti-Harassment Policy

On April 27, 2016, our Board of Directors approved and adopted an anti-harassment policy (the “Anti-Harassment Policy”). The Anti-Harassment Policy is applicable to all directors, officers and employees of the Company and addresses, among other things, fair treatment of individuals in the workplace.

Involvement in Legal Proceedings

We know of no pending proceedings to which any director, member of senior management, or affiliate is either a party adverse to us, or our subsidiaries, or has a material interest adverse to us or our subsidiaries.

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During the past ten years, none of the following events have occurred with respect to our directors and executive officers which would be material to an evaluation of their ability or integrity:

(1) A petition under the federal bankruptcy laws or any state insolvency law was filed by or against, or a receiver, fiscal agent or similar officer was appointed by a court for the business or property of such person, or any partnership in which he was a general partner at or within two years before the time of such filing, or any corporation or business association of which he was an executive officer at or within two years before the time of such filing;

(2) Such person was convicted in a criminal proceeding or is a named subject of a pending criminal proceeding (not including minor offenses);

(3) Such person was subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; and

(4) Such person was found by a court of competent jurisdiction (in a civil action), the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.

Shareholder Communications

Although we do not have a formal policy regarding communications with the Board, shareholders may communicate with the Board by writing to us at 301 McCullough Drive, 4th Floor, Charlotte, North Carolina 28262, Attention: Shareholder Communication. Shareholders who would like their submission directed to a member of the Board may so specify, and the communication will be forwarded, as appropriate.

Certain Relationships and Related Transactions

We are currently party to certain services and employment agreements with our executives and a non-executive member of our Board of Directors, which are specifically described under the headings “Narrative Disclosure to Executive Summary Compensation Table” and “Narrative Disclosure to Director Compensation Table” in the “Executive Compensation” section of this prospectus.

Unless otherwise stated in this prospectus, none of the following parties has, in our fiscal years ended 2014 and 2015, had any material interest, direct or indirect, in any transaction with us or in any presently proposed transaction that has or will materially affect us:

· any of our directors or officers;

· any person who beneficially owns, directly or indirectly, shares carrying more than 10% of the voting rights attached to our outstanding shares of common stock; or

· any member of the immediate family (including spouse, parents, children, siblings and in-laws) of any of the above persons.

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EXECUTIVE COMPENSATION

Executive Summary Compensation Table for Fiscal Years 2014 and 2015

The table below sets forth, for our last two fiscal years, the compensation earned by our named executive officers, Shlomo Palas, our Chief Executive Officer, Ran Daniel, our Chief Financial Officer, Shlomo Zakai and Steven Paulik, our former Chief Financial Officers, and Roy Amitzur, our Executive Vice President.

Name and Principal Position Year Salary ($) Bonus
($)
Stock awards ($) (1) Option awards ($) (1) Non-equity incentive plan compensation ($) Non-qualified deferred compensation earnings
($)
All other compensation ($) Total
($)
Shlomo Palas (2) 2015 180,000 72,250 67,093 319,843
(CEO) 2014 120,000 265,350 65,000 450,350
Ran Daniel 2015
(CFO) 2014
Roy Amitzur 2015 180,000 67,750 50,400 278,150
(EVP) 2014 120,000 217,591 47,500 385,091
Steven Paulik 2015 122,168 10,750 5,673 138,591
(Former CFO) 2014
Shlomo Zakai 2015 33,820 8,562 5,673 48,055
(Former CFO) 2014 22,500 22,500

(1) For assumptions made in the valuation of stock awards and option awards, see Note 7 to our Audited Consolidated Financial Statements for the fiscal year ended September 30, 2015.

(2) Shlomo Palas is also a director of the Company. Mr. Palas receives no compensation as a director.

Narrative Disclosure to Executive Summary Compensation Table

Shlomi Palas

On October 11, 2015, we entered into a service agreement with Mr. Palas to retain him as the Company’s Chief Executive Officer. The service agreement, which was intended to extend the term of a previous service agreement with Mr. Palas, will expire on October 10, 2020, subject to a five year extension at the option of the Company and Mr. Palas. As CEO, Mr. Palas, among other duties, is responsible for setting our overall corporate direction, including establishing and maintaining budgets and ensuring we have adequate capital for our operations, marketing and general corporate activities. Under the terms of his service agreement, Mr. Palas will receive $204,000 in annual base compensation during the first year of the agreement, subject to an annual increase review, as well as stock option grants each year of the agreement to purchase 950,000 shares of the Company’s common stock at an exercise price and on such other terms as provided in the grants. Mr. Palas will also be entitled to participate in any bonus, incentive compensation, savings and retirement and insurance plans of the Company. Mr. Palas’ employment may be terminated with or without cause by the Company, subject to the terms of his service agreement.

On February 24, 2015, Mr. Palas was issued 750,000 shares of our common stock under the 2010 Incentive Plan. In addition, on February 24, 2015 the Company granted 3,600,000 shares of the Company’s common stock and 900,000 options to purchase shares of the Company’s common stock to Mr. Palas under its 2014 Incentive Plan. The shares vest on a quarterly basis over a two-year period and will be issued in annual installments, with the first installment of 1,500,000 shares vested through December 31, 2015 having been issued by the Company on June 13, 2016. The options, which have not been issued by the Company, if issued will vest on a quarterly basis over a two-year period, with an exercise price of $0.14 per share.

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Roy Amitzur

On October 15, 2015, we entered into a service agreement with Roy Amitzur and JLS Advanced Investment Holdings Limited (“JLS”), a company owned by Mr. Amtizur, to retain Mr. Amitzur as the Company’s Executive Vice President. The service agreement, which was intended to extend the term of a previous service agreement with Mr. Amitzur, will expire on October 14, 2020, subject to a five year extension at the option of the Company and Mr. Palas. As Executive Vice President, Mr. Amitzur, among other duties, is responsible for developing and managing the Company’s projects and sourcing the required capital for such projects. Under the terms of his service agreement, Mr. Amitzur will receive $180,000 in annual base compensation during the first year of the agreement, subject to an annual increase review, as well as stock option grants each year of the agreement to purchase 850,000 shares of the Company’s common stock at an exercise price of $0.01 and on such other terms as provided in the grants. Mr. Amitzur will also be entitled to participate in any bonus, incentive compensation, savings and retirement and insurance plans of the Company. Mr. Amitzur’s employment may be terminated with or without cause by the Company, subject to the terms of his service agreement.

On February 24, 2015, Mr. Amitzur was issued 675,000 shares of our common stock under the 2010 Incentive Plan. In addition, on February 24, 2015 the Company granted 3,500,000 shares of the Company’s common stock and 700,000 options to purchase shares of the Company’s common stock to Mr. Amitzur under its 2014 Incentive Plan. The shares vest on a quarterly basis over a two-year period and will be issued in annual installments, with the first installment of 1,458,333 shares vested through December 31, 2015 having been issued by the Company on June 13, 2016. The options, which have not been issued by the Company, if issued will vest on a quarterly basis over a two-year period, with an exercise price of $0.14 per share.

Shlomo Zakai

On January 9, 2012, we entered into a service agreement with Shlomo Zakai engaging Mr. Zakai to perform services as its Chief Financial Officer (Israel). Beginning January 1, 2014, Mr. Zakai began to receive base compensation at a variable monthly rate of $1,500 to $3,500, subject to the terms of the service agreement. Both we and Mr. Zakai have the right to terminate the service agreement for any reason with prior notice of thirty days. On May 1, 2016, Ran Daniel was appointed as the Company’s Chief Financial Officer; Mr. Zakai continues to provide accounting services to the Company.

On May 28, 2014, our Board of Directors made a one-time award of 200,000 fully-vested shares of the Company’s common stock to Mr. Zakai, for services rendered, such shares having been issued. On February 24, 2015 the Company granted 350,000 shares of the Company’s common stock and 175,000 options to purchase shares of the Company’s common stock to Mr. Zakai under its 2014 Incentive Plan. The shares vest on a quarterly basis over a two-year period and will be issued in annual installments, with the first installment of 145,833 shares vested through December 31, 2015 having been issued by the Company on June 13, 2016. The options, which have not been issued by the Company, if issued will vest on a quarterly basis over a two-year period, with an exercise price of $0.14 per share.

Ran Daniel

The Company entered into a Services Agreement dated May 1, 2016 (the “CFO Agreement”) with Mr. Daniel to serve as its Chief Financial Officer (U.S.). The CFO Agreement provides that Mr. Daniel will serve for an initial term beginning May 1, 2016 and ending on May 1, 2017 (the “Initial Term”), which may be renewed by the mutual agreement of Mr. Daniel and the Company for additional one (1) year periods following the Initial Term. Mr. Daniel’s responsibilities under the CFO Agreement will include those customarily associated with such position, and may, upon the Company’s request and Mr. Daniel’s acceptance, be expanded to include all reporting responsibilities under applicable federal, state and local laws and regulations.

The CFO Agreement provides that Mr. Daniel will receive an initial base salary of $12,000 per month, which shall increase to $15,000 per month at such time that Mr. Daniel’s responsibilities are expanded to include all reporting responsibilities. Mr. Daniel’s base salary will be subject to adjustment each year following the Initial Term, upon mutual agreement of the parties. The base salary is Mr. Daniel’s sole compensation under the CFO Agreement; however, the Company may, in its sole discretion, award bonuses or other compensation to Mr. Daniel from time to time. On June 13, 2016, the Company issued Mr. Daniel 50,000 shares of the Company’s stock as compensation. Further, Mr. Daniel is entitled to receive incentive compensation in the form of stock or option awards under the Company’s Global Share and Options Incentive Enhancement Plan (2014), or any successor plan which may be adopted by the Company’s Board of Directors.

Steven Paulik

Steven Paulik served as our Chief Financial Officer (U.S.) until May 1, 2016. We entered into an agreement on or around August 1, 2013 with Steven Paulik to provide services to the Company as its Chief Financial Officer (United States) for a base salary, in the last year at $138,591 and other such compensation as determined by the Company in its discretion.

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Outstanding Equity Awards at Fiscal Year-End

As of September 30, 2015, the following named executive officers had the following unexercised options, stock that has not vested, and equity incentive plan awards:

Option Awards (1) Stock Awards
Name Number of securities underlying unexercised options (#) exercisable Number of securities underlying unexercised options (#)
un-exercisable
Option
exercise
price
Option
expiration
date
Number of
shares or
units of stock
that have not
vested
Market
value of
shares or
units of
stock that
have not
vested ($)
Equity
incentive plan
awards:
Number of
unearned
shares, units
or other
rights that
have not
vested (#)
Equity incentive
plan awards:
Market or
payout value of
unearned
shares, units or
other rights that
have not vested
($)

Shlomo Palas (2)

(CEO)

455,088 675,000 0.14
-0.5763
04/30/2018
–02/24/2020
2,700,000 81,000

Shlomo Zakai (3)

(Former CFO)

43,750 131,250 0.14 02/24/2020 262,500 7,875

Roy Amitzur (4)

(EVP)

343,142 525,000 0.14
-0.5763
04/30/2018
–02/24/2020
2,625,000 78,750

Steven Paulik (5)

(Former CFO)

43,750 131,250 0.14 02/24/2020 450,000 13,500

(1) All options granted under the 2014 Incentive Plan and referenced herein have not yet been issued in the form of an option agreement to the grantees. Upon receipt of an outstanding regulatory approval, the Company will issue the granted option agreements; therefore, the Company has disclosed the number of options and underlying shares granted, as if such options are outstanding.

(2) On April 30, 2013, under to the 2010 Incentive Plan, Mr. Palas was granted 230,089 shares of our common stock and options to purchase 230,089 shares of common stock, each of which vested over a two-year period with 1/8 of the total amount of the shares and options vesting at the end of each quarter from the date of the grant. The options are exercisable for 5 years at an exercise price of $0.5763 per share. On February 24, 2015, Mr. Palas was issued 750,000 shares of common stock under the 2010 Incentive Plan. In addition, on February 24, 2015, pursuant to the 2014 Incentive Plan, Mr. Palas was issued 3,600,000 shares of common stock and 900,000 options to purchase shares of common stock. The shares vest on a quarterly basis over a two-year period, and the options vest on a quarterly basis over a two-year period with an exercise price of $0.14 per share.

(3) On February 24, 2015, Mr. Zakai was issued 350,000 shares of common stock and 175,000 options to purchase shares of common stock under the 2014 Incentive Plan. The shares vest on a quarterly basis over a two-year period, and the options vest on a quarterly basis over a two-year period with an exercise price of $0.14 per share.

(4) On April 30, 2013, pursuant to the 2010 Incentive Plan, Mr. Amitzur was granted 168,142 shares of our common stock and options to purchase 168,142 shares of common stock, each of which vested over a two-year period with 1/8 of the total amount of the shares and options vesting at the end of each quarter from the date of the grant. The options are exercisable for 5 years at an exercise price of $0.5763 per share. On February 24, 2015, pursuant to the 2014 Incentive Plan, Mr. Amitzur was issued 3,500,000 shares of common stock and 700,000 options to purchase shares of common stock. The shares vest on a quarterly basis over a two-year period, and the options vest on a quarterly basis over a two-year period with an exercise price of $0.14 per share.

(5) On February 24, 2015, pursuant to the 2014 Incentive Plan, Mr. Paulik was issued 600,000 shares of common stock and 175,000 options to purchase shares of common stock. The shares vest on a quarterly basis over a two-year period, and the options vest on a quarterly basis over a two-year period with an exercise price of $0.14 per share.

Equity Compensation Plan Information

On February 24, 2015, our Board approved and adopted the Global Share and Options Incentive Enhancement Plan (2014) (the “2014 Incentive Plan”), pursuant to which the Company may award shares of its common stock, options to purchase shares of its common stock and other equity-based awards to eligible participants. The 2014 Incentive Plan replaced the Company’s Global Share Incentive Plan (2010) (the “2010 Incentive Plan”). All options granted under the 2014 Incentive Plan and referenced herein have not yet been issued in the form of an option agreement to the grantees. Upon receipt of an outstanding regulatory approval, the Company will issue the granted option agreements; therefore, the Company has disclosed the number of options and underlying shares granted, as if such options are outstanding.

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On August 8, 2016, our Board approved and adopted the Company’s 2016 Stock Incentive Plan (the “2016 Incentive Plan”), pursuant to which the Company may award shares of its common stock, options to purchase shares of its common stock and other equity-based awards to eligible participants. The 2016 Incentive Plan replaced the 2014 Incentive Plan.

The 2010 Incentive Plan, 2014 Incentive Plan and 2016 Incentive Plan are collectively referred to as our “Equity Incentive Plan”.

The following table summarizes information as of the close of business on September 30, 2015 concerning our Equity Incentive Plan:

Number of securities to be
issued upon exercise of
outstanding options, warrants
and rights
Weighted-average exercise
price of outstanding options,
warrants and rights
Securities remaining available
for future issuance under
equity compensation plans
(excluding securities reflected
in column (a))
Plan category (a) (b) (c)
Equity compensation plans approved by security holders
Equity compensation plans not approved by security holders 4,303,761 $ 0.222 3,221,239
Total 4,303,761 $ 0.222 3,221,239

Director Compensation Table

The table below sets forth, for our fiscal year ended September 30, 2015, the compensation earned by each of our directors.

Name Fees earned or
paid in cash
($)
Stock awards
($) (1)
Options
awards
($) (2)
Non-equity
incentive plan
compensation
($)
Nonqualified
deferred
compensation
earnings
($)
All other
compensation
($)
Total ($)
Shlomi Palas
Joshua Shoham 180,000 30,625 56,234 266,859
Yigal Brosh 3,062 5,673 8,735
Shimon Erlichman
Itai Haboucha

(1) As of September 30, 2015, the aggregate number of stock awards outstanding was 14,578,761.

(2) As of September 30, 2015, the aggregate number of option awards outstanding was 4,303,761. All options granted under the 2014 Incentive Plan and referenced herein have not yet been issued in the form of an option agreement to the grantees. Upon receipt of an outstanding regulatory approval, the Company will issue the granted option agreements; therefore, the Company has disclosed the number of options and underlying shares granted, as if such options are outstanding.

Director Compensation Policy

On April 27, 2016, our Board approved the Company’s Non-Employee Director Compensation Policy (the “Director Compensation Policy”) applicable to members of the Board who are not employees of the Company (each, an “Eligible Director”). Under the Director Compensation Policy, each Eligible Director shall be entitled to an annual cash retainer of USD $20,000 and an annual stock award equal to USD $50,000, based on the closing price of a share of the Company’s common stock on the trading day immediately preceding the date of such grant, as reported on the OTCQB® Venture Marketplace. Eligible Director’s shall also receive a fee of USD $500 in cash for each meeting of a committee or of the Board of Directors that he or she attends. If the Eligible Director attends more than one meeting in a day, the maximum meeting fee will be USD $750.

Narrative Disclosure to Director Compensation Table

Shimon Erlichman and Itai Haboucha did not earn compensation during our last fiscal year, since they joined the Board on September 29, 2015. All of the compensation received by Shlomi Palas was attributable to his role as Chief Executive Officer of the Company, as described above under the heading “Executive Summary Compensation Table”. The compensation received by our other directors was individually negotiated, as described below.

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On October 15, 2015, we entered into an advisory agreement with Joshua Shoham to retain Mr. Shoham as a strategic and business advisor to the Company, in addition to his role as Chairman of the Board. The agreement, which was intended to extend the term of a previous advisory agreement with Mr. Shoham, will expire on October 14, 2020, subject to a five year extension at the option of the Company and Mr. Shoham. Under the terms of his advisory agreement, Mr. Shoham will receive $180,000 in annual base compensation during the first year of the agreement, subject to an annual increase review, as well as stock option grants each year of the agreement to purchase 850,000 shares of the Company’s common stock at an exercise price of $0.01 and on such other terms as provided in the grants. Mr. Shoham will also be entitled to participate in any bonus, incentive compensation, savings and retirement and insurance plans of the Company. Mr. Shoham’s employment may be terminated with or without cause by the Company, subject to the terms of his advisory agreement.

On February 24, 2015, our Board granted 600,000 shares of our common stock to Mr. Shoham under the 2010 Incentive Plan, and on June 13, 2016 the shares were issued. In addition, on February 24, 2015 the Company granted 3,500,000 shares of the Company’s common stock and 700,000 options to purchase shares of the Company’s common stock to Mr. Shoham under its 2014 Incentive Plan. The shares vest on a quarterly basis over a two-year period and will be issued in annual installments, with the first installment of 1,458,333 shares vested through December 31, 2015 having been issued by the Company on June 13, 2016. The options, which have not been issued by the Company, if issued will vest on a quarterly basis over a two-year period, with an exercise price of $0.14 per share.

On February 24, 2015, our Board granted 100,000 shares of our common stock to Mr. Brosh under the 2010 Incentive Plan, and on June 13, 2016 the shares were issued. In addition, on February 24, 2015 the Company granted 350,000 shares of the Company’s common stock and 175,000 options to purchase shares of the Company’s common stock to Mr. Brosh under its 2014 Incentive Plan. The shares vest on a quarterly basis over a two-year period and will be issued in annual installments, with the first installment of 145,333 shares vested through December 31, 2015 having been issued by the Company on June 13, 2016. The options, which have not been issued by the Company, if issued will vest on a quarterly basis over a two-year period, with an exercise price of $0.14 per share.

Indemnification of Officers and Directors

Our bylaws provide that we shall indemnify, to the fullest extent permitted by applicable law, our officers, directors, employees and agents against expenses incurred in connection with actions or proceedings brought against them by reason of their serving or having served as officers, directors, employees, agents or in other capacities.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors and officers pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.

PRINCIPAL SHAREHOLDERS

The following table sets forth certain information with respect to the beneficial ownership of common stock by: (i) each director, (ii) each of the executive officers of the Company, (iii) all current directors and executive officers as a group, and (iv) each stockholder known to the Company to be the beneficial owner of more than 5% of the outstanding shares of the Company’s common stock. Unless otherwise indicated in the footnotes to the table, all information set forth in the table is as of August 12, 2016.

Directors and Named Executive Officers

Title of Class Directors and Named Executive Officers Amount and Nature of Beneficial Ownership (1)(2) Percent of Class (1)(2)
common stock Shlomo Palas (3) 5,845,579 2.21 %
common stock Joshua Shoham (4) 5,200,041 1.97 %
common stock Yigal Brosh (5) 552,083 0.21 %
common stock Shimon Erlichman 1,127,051 0.43 %
common stock Itai Haboucha 0.00 %
common stock Roy Amitzur (6) 5,419,156 2.05 %
common stock Ran Daniel 50,000 0.02 %
common stock Elad Kerner 850,000 0.32 %
common stock Directors and Officers as a Group (8 persons) 19,043,910 7.08 %

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Stockholders with 5% Beneficial Ownership

Title of Class Name and Address of Beneficial Owner Amount and Nature of Beneficial Ownership (1)(2) Percent of Class (1)(2)
common stock

Dr. Amiram Borenstein Ltd.

18 Reines Street

Tel Aviv, Israel

14,171,610 5.41 %
common stock

Lazarus Management Company LLC (7)(8)

3200 Cherry Creek South Drive, Suite 670

Denver, Colorado 80209

80,904,896 29.86 %
common stock

Auto Transtech Inc. (9)

8155 N. 76th Street

Milwaukee, WI 53223

26,666,668 9.69 %

(1) Applicable percentages are based on 261,776,552 shares outstanding, adjusted as required by rules of the SEC. Beneficial ownership is determined under the rules of the SEC and generally includes voting or investment power with respect to securities. Shares of common stock subject to options, warrants and convertible notes currently exercisable or convertible, or exercisable or convertible within 60 days are deemed outstanding for computing the percentage of the person holding such securities but are not deemed outstanding for computing the percentage of any other person. Unless otherwise indicated in the footnotes to this table, the Company believes that each of the shareholders named in the table has sole voting and investment power with respect to the shares of common stock indicated as beneficially owned by them.

(2) All options granted under the 2014 Incentive Plan and referenced herein have not yet been issued in the form of an option agreement to the grantees. Upon receipt of an outstanding regulatory approval, the Company will issue the granted option agreements; therefore, the Company has disclosed the number of options and underlying shares granted as if such options are outstanding.

(3) The 5,845,579 shares of the Company’s common stock include (i) 3,365,491 shares currently owned, (ii) 1,350,000 shares awarded pursuant to a stock award under the Equity Incentive Plan which have not been issued but which have vested or will vest within 60 days, (iii) 230,088 shares exercisable pursuant to options awarded under the Company’s 2010 Incentive Plan, and (iv) 900,000 shares exercisable pursuant to options awarded under the Company’s 2014 Incentive Plan.

(4) The 5,200,041 shares of the Company’s common stock include (i) 2,984,001 shares currently owned, (ii) 1,312,500 shares awarded pursuant to a stock award under the Equity Incentive Plan which have not been issued but which have vested or will vest within 60 days, (iii) 203,540 shares exercisable pursuant to options awarded under the Company’s 2010 Incentive Plan, and (iv) 700,000 shares exercisable pursuant to options awarded under the Company’s 2014 Incentive Plan.

(5) The 552,083 shares of the Company’s common stock include (i) 245,833 shares currently owned, (ii) 131,250 shares awarded pursuant to a stock award under the Equity Incentive Plan which have not been issued but which have vested or will vest within 60 days, and (iii) 175,000 shares exercisable pursuant to options awarded under the Company’s 2014 Incentive Plan.

(6) The 5,419,156 shares of the Company’s common stock include (i) 3,238,514 shares currently owned, (ii) 1,312,500 shares awarded pursuant to a stock award under the Equity Incentive Plan which have not been issued but which have vested or will vest within 60 days, (iii) 168,142 shares exercisable pursuant to options awarded under the Company’s 2010 Incentive Plan, and (iv) 700,000 shares exercisable pursuant to options awarded under the Company’s 2014 Incentive Plan.

(7) Lazarus Management Company LLC beneficially owns 80,904,896 shares of our common stock as the investment advisor and general partner of Lazarus Investment Partners LLLP, Lazarus Israel Opportunities Fund LLLP and Lazarus Israel Opportunities Fund II LLLP. Lazarus Investment Partners LLLP beneficially owns 11,073,204 shares of our common stock, consisting of 8,800,476 shares of our common stock, which includes 4,545,455 Offering Shares, and 2,272,728 shares of common stock issuable upon exercise of the Offering Warrants. Lazarus Israel Opportunities Fund LLLP beneficially owns 54,718,018 shares of our common stock, consisting of 42,218,018 shares of our common stock, which includes 25,000,000 Offering Shares, and 12,500,000 shares of common stock issuable upon exercise of the Offering Warrants. Lazarus Israel Opportunities Fund II LLLP beneficially owns 15,113,674 shares of our common stock, consisting of 12,386,401 shares of our common stock, which includes 5,454,545 Offering Shares, and 2,727,273 shares of common stock issuable upon exercise of the Offering Warrants.

(8) Shares beneficially owned by Lazarus Management Company LLC are aggregated without regard to the “9.99% Blocker”, a provision contained in its Offering Warrants which prevents the Company from effecting a conversion or exercise thereof, to the extent that, as a result of such conversion or exercise, the holder or its affiliates beneficially owns more than 9.99%, in the aggregate, of the issued and outstanding shares of the Company’s common stock calculated immediately after giving effect to the issuance of shares of common stock upon the conversion or exercise of such Offering Warrants.

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(9) The 26,666,668 shares of our common stock consists of (i) 13,333,334 June Offering Shares, and (ii) 13,333,334 shares of common stock issuable upon exercise of the June Offering Warrants.

RELATED PARTY TRANSACTIONS

In the last two fiscal years, there has not been any transaction, and currently there is no proposed transaction, in which we were or are going to be a participant and the amount involved exceeds $120,000, in which any related person had or will have a direct or indirect material interest, except as set forth below. A related person is any person who is a director or executive officer of the Company, a holder of 5% or more of our common stock, and any immediate family member of the foregoing.

We are currently party to certain services and employment agreements with our executives and a non-executive member of our Board of Directors, which are specifically described under the headings “Narrative Disclosure to Executive Summary Compensation Table” and “Narrative Disclosure to Director Compensation Table” in the “Executive Compensation” section of this prospectus.

In July 2015, in order to finance a portion of the fund necessary to complete the acquisitions of the SPVs by Bluesphere Pavia, 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, pursuant to certain subscription agreements. All investors in the July Offering were part of a group led by a member of our Board of Directors, Itai Haboucha. Mr. Haboucha was not paid any commissions and received no other compensation in connection with the July Offering.

On December 18, 2015, we entered into a no-interest bearing €118,000 promissory note with R.S. Palas Management Ltd., an entity owned and controlled by Shlomi Palas. The loan under the promissory note was used to finance a portion of the acquisition of the four SPVs in Italy pursuant to the Italy Projects Agreement. We have since paid back the loan under the promissory note with proceeds from our $3 million Debenture Placement.

DESCRIPTION OF SECURITIES

We are authorized to issue 1,750,000,000 shares of common stock, par value $0.001 per share, and 500,000,000 shares of preferred stock, $0.001 par value, in one or more series and with such rights, preferences and privileges as our Board of Directors may determine, have been authorized. As of August 12, 2016, there were 261,776,552 shares of our common stock issued and outstanding, and no shares of our preferred stock were issued and outstanding and 35,766,669 shares of common stock issuable upon the exercise of the Offering Warrants. In addition, on the same date, 8,214,676 shares of our common stock, vested and unvested, are outstanding pursuant to stock grants or upon the exercise of options under our Equity Incentive Plan, options to purchase up to 3,175,000 shares of our common stock have been granted under our 2014 Incentive Plan but not issued, and 23,223,498 shares of our common stock are issuable upon exercise of our currently outstanding convertible notes and warrants, which are not included in this offering.

Common Stock

The holders of common stock are entitled to one vote per share on all matters submitted to a vote of shareholders, including the election of directors. There is no cumulative voting in the election of directors. The holders of common stock are entitled to any dividends that may be declared by the Board of Directors out of funds legally available for payment of dividends subject to the prior rights of holders of preferred stock and any contractual restrictions we have against the payment of dividends on common stock. In the event of our liquidation or dissolution, holders of common stock are entitled to share ratably in all assets remaining after payment of liabilities and the liquidation preferences of any outstanding shares of preferred stock. Holders of common stock have no preemptive rights and have no right to convert their common stock into any other securities.

39

Registration Rights

Each February Subscription Agreement entered into by the Company in the February Stock Offering provides that the Company will use its reasonable commercial efforts to register all February Offering Shares, including all shares of our common stock underlying the February Offering Warrants, within 60 days of the closing of the February Stock Offering. The subscriber in the February Stock Offering agreed to extend the date for filing. The Company shall use its reasonable commercial efforts to cause the registration statement to be declared effective as promptly as possible after filing.

Each June Subscription Agreement entered into by the Company in the June Stock Offering provides that the Company will use its reasonable commercial efforts to register all June Offering Shares, including all shares of our common stock underlying the June Offering Warrants, within 20 days of the final closing of the June Stock Offering. The Company shall use its reasonable commercial efforts to cause the registration statement to be declared effective as promptly as possible after filing.

Each Maxim Warrant issued by the Company provides that the Company may, in its discretion, file a registration statement covering the shares of common stock underlying the Maxim Warrants. However, if the Company does not timely file all reports and other documents with the SEC, and as a result Rule 144 is unavailable to the holder, then the holder is entitled to one “demand” registration right at the Company’s expense, and an additional “demand” registration right at the holder’s expense.

Dividends

We have not paid dividends on our common stock since inception and do not plan to pay dividends on our common stock in the foreseeable future.

Transfer Agent

Clear Trust, LLC is acting as our transfer agent.  The address information for Clear Trust, LLC is 16540 Pointe Village Drive, Suite 210, Lutz, Florida 33558, the phone number is (813) 235-4490 and the facsimile is (813) 388-4549.

Share Eligible for Future Sale

We are registering up to 89,033,337 shares of our common stock, of which (1) 53,266,668 shares are issued and outstanding and (2) 35,766,669 shares are issuable upon the exercise of the outstanding Offering Warrants. We are not selling any shares of our common stock in this offering and will not receive any proceeds from this offering.

PLAN OF DISTRIBUTION

Shares of the Company’s common stock are quoted on the OTCQB® under the symbol “BLSP”. The selling security holders may offer their shares at prevailing market prices or privately negotiated prices. We will not receive proceeds from the sale of shares from the selling security holders.

The securities offered by this prospectus will be sold by the selling security holders from time to time, in one or more transactions. The distribution of the securities by the selling security holders may be effected in one or more transactions that may take place in the over-the-counter market, including broker’s transactions or privately negotiated transactions.

40

The selling security holders may pledge all or a portion of the securities owned as collateral for margin accounts or in loan transactions, and the securities may be resold pursuant to the terms of such pledges, margin accounts or loan transactions. Upon default by such selling security holders, the pledge in such loan transaction would have the same rights of sale as the selling security holders under this prospectus. The selling security holders may also enter into exchange traded listed option transactions, which require the delivery of the securities listed under this prospectus. After our securities are qualified for quotation on the over the counter bulletin board, the selling security holders may also transfer securities owned in other ways not involving market makers or established trading markets, including directly by gift, distribution, or other transfer without consideration, and upon any such transfer the transferee would have the same rights of sale as such selling security holders under this prospectus.

In addition to the above, each of the selling security holders will be affected by the applicable provisions of the Exchange Act, including, without limitation, Regulation M, which may limit the timing of purchases and sales of any of the securities by the selling security holders or any such other person. Unless granted an exemption by the SEC from Regulation M under the Exchange Act, or unless otherwise permitted under Regulation M, the selling security holder will not engage in any stabilization activity in connection with our common stock, will furnish each broker or dealer engaged by the selling security holder and each other participating broker or dealer the number of copies of this prospectus required by such broker or dealer, and will not bid for or purchase any of our common stock or attempt to induce any person to purchase any of our common stock other than as permitted under the Exchange Act.

Following the effectiveness of this Registration Statement, of which this prospectus forms a part, the selling security holders may, from time to time on a continuous basis, offer and sell their shares registered under this Registration Statement.

There can be no assurances that the selling security holders will sell any or all of the securities. In various states, the securities may not be sold unless these securities have been registered or qualified for sale in such state or an exemption from registration or qualification is available and is complied with.

All of the foregoing may affect the marketability of our securities. Pursuant to oral promises we made to the selling security holders, we will pay all the fees and expenses incident to the registration of the securities.

Should any substantial change occur regarding the status or other matters concerning the selling security holders or us, we will file a post-effective amendment to the Registration Statement, of which this prospectus forms a part, disclosing such matters.

OTCQB® Considerations

The OTCQB® is separate and distinct from the NASDAQ stock market. NASDAQ has no business relationship with issuers of securities quoted on the OTCQB®. The SEC’s order handling rules, which apply to NASDAQ-listed securities, do not apply to securities quoted on the OTCQB®.

Although the NASDAQ stock market has rigorous listing standards to ensure the high quality of its issuers, and can delist issuers for not meeting those standards, the OTCQB® has no listing standards. Rather, it is the market maker who chooses to quote a security on the system, files the application, and is obligated to comply with keeping information about the issuer in its files. FINRA cannot deny an application by a market maker to quote the stock of a company. The only requirement for inclusion in the bulletin board is that the issuer be current in its reporting requirements with the SEC.

Investors must contact a broker-dealer to trade OTCQB® securities. Investors do not have direct access to the bulletin board service. For bulletin board securities, there only has to be one market maker.

Bulletin board transactions are conducted almost entirely manually. Because there are no automated systems for negotiating trades on the bulletin board, they are conducted via telephone. In times of heavy market volume, the limitations of this process may result in a significant increase in the time it takes to execute investor orders. Therefore, when investors place market orders - an order to buy or sell a specific number of shares at the current market price - it is possible for the price of a stock to go up or down significantly during the lapse of time between placing a market order and getting execution. Because bulletin board stocks are usually not followed by analysts, there may be lower trading volume than for NASDAQ-listed securities.

LEGAL MATTERS

The validity of the securities offered hereby will be passed upon for us by Thompson Hine LLP, New York, New York.

EXPERTS

The audited consolidated financial statements appearing in this prospectus and Registration Statement for the years ended September 30, 2015 and 2014, have been audited by Brightman Almagor Zohar & Co., a member firm of Deloitte Touche Tohmatsu Limited, an independent registered public accounting firm, as set forth in their report appearing elsewhere herein, and are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing.

41

ADDITIONAL INFORMATION

We have filed this Registration Statement on Form S-1 under the Securities Act with the SEC with respect to the shares of common stock to be sold in this offering. This prospectus, which is part of the Registration Statement, does not contain all the information set forth in the Registration Statement.  For further information with respect to us and the shares of our common stock to be sold in this offering, we make reference to the Registration Statement.  Whenever we make reference in this prospectus to any of our contracts, agreements or other documents, the references are not necessarily complete, and you should refer to the exhibits filed with the Registration Statement for copies of the actual contract, agreement or other document.

We are required to file annual, quarterly and current reports and other information with the SEC. You can read and copy any of this information at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549 on official business days during the hours of 10:00 a.m. to 3:00 p.m. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. This information is also available from the SEC’s website at http://www.sec.gov.

42

FINANCIAL STATEMENTS

F- 1

BLUE SPHERE CORP.

CONSOLIDATED FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 2015

F- 2

BLUE SPHERE CORP.

CONSOLIDATED FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 2015

IN U.S. DOLLARS

TABLE OF CONTENTS

Page
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM F-4
CONSOLIDATED FINANCIAL STATEMENTS:
Balance sheets as of September 30, 2015 and 2014 F-5
Statements of operations for the three years ended September 30, 2015, 2014 and 2013 F-6
Statements of changes in stockholders’ equity (deficit) for the three years ended September 30, 2015, F-7
2014 and 2013
Statements of cash flows for the three years ended September 30, 2015, 2014 and 2013 F-8
Notes to financial statements F-9-38

F- 3

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
Blue Sphere Corp.

We have audited the accompanying consolidated balance sheets of Blue Sphere Corp. and its subsidiaries as of September 30, 2015 and 2014, the related consolidated statements of operations, stockholders' equity (deficiency), and cash flows for each of the three years in the period ended September 30, 2015. These financial statements are the responsibility of the Company's Board of Directors and management. Our responsibility is to express an opinion on the financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Blue Sphere Corp. and its subsidiaries as of September 30, 2015 and 2014 and the results of their operations and their cash flows for each of the three years in the period ended September 30, 2015, in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1b to the financial statements, the Company has incurred recurring losses from operations that raises substantial doubt about its ability to continue as a going concern. Management's plans concerning these matters are also described in Note lb. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Brightman Almagor Zohar & Co.

Brightman Almagor Zohar & Co.

Certified Public Accountants

A Member Firm of Deloitte Touche Tohmatsu Limited

Tel Aviv, Israel
January 13, 2016

F- 4

BLUE SPHERE CORP.

CONSOLIDATED BALANCE SHEETS

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

September 30, September 30,

2015

2014

Assets
CURRENT ASSETS:
Cash and cash equivalents $ 161 $ 298
Other current assets 21 265
Total current assets 182 563
PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation 31
INVESTMENTS IN JOINT VENTURES (note 1b) 4,952 469
Total assets $ 5,165 $ 1,032
Liabilities and Stockholders’ Equity (Deficiency)
CURRENT LIABILITIES:
Current maturities of long term loan $ 32 $ 32
Accounts payables 58 12
Other accounts payable 681 343
Debentures, notes and loans 519 231
Deferred revenues from joint ventures 6,434
Total current liabilities 7,724 618
LONG TERM BANK LOAN 135 104
STOCKHOLDERS’ EQUITY (DEFICIENCY) :
Common shares of $0.001 par value each:
Authorized: 1,750,000,000 shares at September 30, 2015 and 2014, respectively. Issued and outstanding: 167,952,595 shares and 50,109,036 shares at September 30, 2015 and September 30, 2014, respectively
1,244 1,126
Proceeds on account of shares 20 20
Treasury shares (28 )
Additional paid-in capital 39,474 35,106
Accumulated deficit (43,404 ) (35,942 )
Total Stockholders’ Equity (Deficiency) (2,694 ) 310
Total liabilities and Stockholders’ Equity (Deficiency) $ 5,165 $ 1,032

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

F- 5

BLUE SPHERE CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS

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

Year ended
September 30
2015 2014 2013
OPERATING EXPENSES -
General and administrative expenses $ 5,331 $ 7,120 $ 1,831
Other losses (incomes) (14 ) 20
Financial expenses , net 2,145 256 119
NET LOSS FOR THE YEAR $ 7,462 $ 7,376 $ 1,970
Net loss per common share - basic and diluted $ (0.088 ) $ (0.334 ) $ (0.345 )
Weighted average number of common shares outstanding during the period - basic and diluted 85,135,631 22,077,519 5,705,471

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

F- 6

BLUE SPHERE CORP.

STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (DEFICIENCY)

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

Common Stock,
$0.001 Par Value

Proceeds on account of

Treasury

Additional paid-in Accumulated deficit Total
Stockholders’ Equity

Shares

Amount

shares

Shares

Capital

stage

(deficiency)

BALANCE AT OCTOBER 1, 2012 1,634,478 $ 184 $ $ $ 25,744 $ (26,596 ) $ (668 )
CHANGES DURING THE YEAR ENDED SEPTEMBER 30, 2013 :
Share based compensation 203 203
Issuance of common stock, net of issuance expenses 3,593,579 406 485 891
Issuance of common stock in respect of issuance of convertible notes 2,558,224 289 15 304
Issuance of shares for services 1,834,929 207 551 758
Net loss for the period (1,970 ) (1,970 )
BALANCE AT SEPTEMBER 30, 2013 9,621,210 $ 1,086 $ $ $ 26,998 $ (28,566 ) $ (482 )
CHANGES DURING THE YEAR ENDED SEPTEMBER 30, 2014 :
Share based compensation 1,711 1,711
Issuance of common stock, net of issuance expenses 9,054,967 9 891 900
Issuance of common stock in respect of issuance of convertible notes 13,946,727 14 1,262 1,276
Issuance of shares for services 17,486,132 17 3,203 3,220
Issuance of convertible debentures containing a beneficial conversion feature 1,041 1,041
Proceeds on account of shares 20 20
Net loss for the period (7,376 ) (7,376 )
BALANCE AT SEPTEMBER 30, 2014 50,109,036 $ 1,126 $ 20 $ $ 35,106 $ (35,942 ) $ 310
CHANGES DURING THE YEAR ENDED SEPTEMBER 30, 2015 :
Share based compensation 558 558
Issuance of common stock, net of issuance expenses 9,338,682 9 338 347
Issuance of common stock in respect of issuance of convertible notes 75,532,381 76 1,449 1,525
Issuance of shares for services 33,116,550 33 1,541 1,574
Issuance of convertible debentures containing a beneficial conversion feature 482 482
Treasury shares (144,054 ) (28 ) (28 )
Net loss for the period (7,462 ) (7,462 )
BALANCE AT SEPTEMBER 30, 2015 167,952,595 $ 1,244 $ 20 (28 ) $ 39,474 $ (43,404 ) $ (2,694 )

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

F- 7

BLUE SPHERE CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(U.S. dollars in thousands)

Year ended
September 30
2015 2014 2013
CASH FLOWS FROM OPERATING ACTIVITIES:
Profit (Net loss) for the period $ (7,462 ) $ (7,376 ) $ (1,970 )
Adjustments required to reconcile net loss
to net cash used in operating activities:
Share based compensation expenses 558 1,711 203
Depreciation 6 3 3
Expenses in respect of Convertible notes and loans 1,949 684 99
Issuance of shares for services 1,574 3,220 758
Amortization of projects costs 469
Impairment of investment (22 )
Increase (decrease) in other current assets 244 39 (78 )
Increase in deferred revenues 1,482
Increase in accounts payables 46 20 5
Increase (decrease) in other account payables 338 (103 ) (62 )
Net cash used in operating activities (818 ) (1,802 ) (1,042 )
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments on account of project (198 ) (271 )
Short term investments (7 )
Purchase of property and equipment (37 )
Net cash used in investing activities (61 ) (198 ) (278 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from options exercise 20
Loan origination fee (178 )
Proceeds from issuance of convertible debenture 625 1,041
Loans received 859 764 666
Payment of loans and convertible debentures (1,081 ) (473 ) (183 )
Issuance of shares, net 315 900 1,039
Net cash provided by financing activities 718 2,252 1,344
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (137 ) 252 24
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 298 46 22
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 161 $ 298 $ 46
NON-CASH TRANSACTION:
Deferred revenues against joint ventures investments 4,952
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest 172 34 48
Income taxes

The accompanying notes are an integral part of the consolidated financial statement

F- 8

BLUE SPHERE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – GENERAL

a. General

Blue Sphere Corp. (“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.

As of September 30, 2015, Tipping LLC and Charlottesphere LLC, two former subsidiaries of the Company, had been dissolved and Johnstonsphere had not commenced operations.

On May 12, 2015 the Company formed Bluesphere Pavia (formerly called Bluesphere Italy S.r.l.), a subsidiary of Eastern in order to acquire certain biogas plants located in Italy (see note 2 below).

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.

On October 2, 2014, the Company, together with certain third parties, established Permanent Energy Ltd (“Permanent Energy”) in Israel. Permanent Energy was focused on Build-Own-Operate projects and project integration in the clean energy production and waste to energy markets, primarily in Israel. The Company held a 50% interest in Permanent Energy. Permanent Energy ceased its operations in February 2015 and is in the process of dissolution.

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.

On November 26, 2013, the Company amended and restated its Articles of Incorporation to authorize the issuance of 500,000,000 shares of preferred stock, $0.001 par value, in one or more series and with such rights, preferences and privileges as its Board of Directors may determine and to effect a 1 for 113 reverse stock split of the Company’s outstanding common stock. In addition, the Amended and Restated Articles of Incorporation provide, among other things, for indemnification and limitations to the liability of the Company’s officers and directors.

As a result of the reverse stock split, which became effective on December 4, 2013, every 113 shares of the Company’s outstanding common stock prior to the effect of that amendment was combined and reclassified into one share of the Company’s common stock, and the number of outstanding shares of the Company’s common stock was reduced from 1,292,103,309 to 11,434,611 shares.

All share, stock option and per share information in these consolidated financial statements have been adjusted to reflect the stock split on a retroactive basis.

F- 9

BLUE SPHERE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – GENERAL (continue)

b. Going concern consideration

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As of September 30, 2015, the Company had approximately $161 thousand in cash, a negative working capital of approximately $7,542 thousand, a stockholders’ deficiency of approximately $2,694 thousand and an accumulated deficit of approximately $43,404 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 2 – INVESTMENTS IN JOINT VENTURES

On October 19, 2012, the Company signed definitive project agreements in respect of both the North Carolina and Rhode Island sites with Orbit Energy, Inc. (“Orbit”), pursuant to which the Company would be entitled to full ownership of each of the entities that owns the rights to implement the respective projects (Orbit Energy Charlotte, LLC in the case of the North Carolina project (“OEC”) and Orbit Energy Rhode Island, LLC in the case of the Rhode Island project (“OERI”)), subject to the satisfaction of certain conditions.

North Carolina Project

On November 19, 2014, The Company signed an amended and restated purchase agreement with Orbit for the North Carolina project (the “Amended OEC Purchase Agreement”). Subject to the terms of the Amended OEC Purchase Agreement, Orbit transferred ownership of OEC to the Company in exchange for a development fee of $900,000, reimbursement of $17,764 and an amount equal to 30% of the distributable cash flow from the North Carolina project after the project achieves a post-recoupment 30% internal rate of return computed on the basis of any and all benefits from tax credits, depreciation and other incentives of any nature. The Company also agreed to use high solid anaerobic digester units designed by Orbit (the “HSAD Units”) and to retain Orbit to implement and operate the HSAD Units for an annual management fee of $187,500 (the “OEC Management Fee”), subject to certain conditions. The Amended OEC Purchase Agreement provided that the Company had until December 15, 2014 to pay Orbit the development fee and reimbursement amount, which was extended to January 15, 2015 upon payment of $75,000. The Company did not pay Orbit the development fee and reimbursement amount and, pursuant to the terms of the Amended OEC Purchase Agreement, ownership of OEC reverted back to Orbit on January 15, 2015.

F- 10

BLUE SPHERE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 – INVESTMENTS IN JOINT VENTURES (continue)

On January 30, 2015, The Company entered into the Orbit Energy Charlotte, LLC Membership Interest Purchase Agreement by and among the Company, Orbit, Concord Energy Partners, LLC, a Delaware limited liability company (“Concord”), and OEC (the “New OEC Purchase Agreement”), pursuant to which (i) Concord purchased all of Orbit’s right, title and interest in and to the membership interests of OEC (the “OEC Interests”), (ii) Orbit abandoned all economic and ownership interest in the OEC Interests in favor of Concord, (iii) Orbit ceased to be a member of OEC and (iv) Concord was admitted as the sole member of OEC.

Subject to the satisfaction of certain conditions by Orbit, The Company agreed to be responsible for all costs of evaluating and incorporating into the North Carolina project (i) Orbit’s high solids anaerobic digestion technology, consisting of a proprietary process that uses an anaerobic digester design developed by the U.S. Department of Energy and subsequently modified by Orbit in combination with the proprietary bacteria supplied by Orbit (the “Orbit Technology”), and (ii) two HSAD Units designed by Orbit with up to a total maximum capacity of 100 tons per day. The Company are responsible for both direct and indirect costs, all payments to be made to Orbit and all increased costs, expenses and any damages incurred in connection with the design, installation, integration, operation and maintenance of the Orbit Technology incorporated into the project. The Company also agreed to enter into an operations agreement with Orbit in respect of the HSAD Units to be integrated into the North Carolina project and to pay Orbit the OEC Management Fee.

In a letter agreement executed in connection with the New OEC Purchase Agreement, The Company agreed to pay Orbit an amount equal to thirty percent (30%) of the North Carolina project’s distributable cash flow after The Company and the other equity investors in the North Carolina project fully recoup their respective investments in the North Carolina project (such investments to be calculated solely as amounts expended in and for the construction of the North Carolina project) and the North Carolina project achieves a thirty percent (30%) internal rate of return. The calculation of the project’s internal rate of return would take into account and be computed on the basis of any and all benefits from tax credits, depreciation and other incentives of any nature, as well as the OEC Management Fee.

On the same date as the New OEC Purchase Agreement, (i) the Company, Concord and York Renewable Energy Partners LLC (“York”) entered into a development and indemnification agreement (the “Concord Development and Indemnification Agreement”), pursuant to which Concord paid the Company $1,250,000, issued the Company 250 Series B units of Concord (“Concord Series B Units”) and issued 750 Series A units of Concord (“Concord Series A Units”) to York, and (ii) The Company and York entered into an amended and restated limited liability company operating agreement (the “Concord LLC Agreement”) to establish the Concord Series A Units and Concord Series B Units and admit the Company and York as 25% and 75% members of Concord, respectively. Pursuant to the foregoing agreements, York also agreed to pay the Company two equal installments of $587,500 upon (a) mechanical completion of the North Carolina project and (b) commercial operation of the North Carolina project Company’s rights to receive distributions from Concord are subject to certain priorities in favor of York.

F- 11

BLUE SPHERE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 – INVESTMENTS IN JOINT VENTURES (continue)

In connection with the foregoing, on January 30 2015, the Company terminated its amended and restated construction finance agreement, dated June 6, 2014, with Caterpillar Financial Services Corporation. In February 2015, The Company received $1,586,000 for development fees and reimbursements in connection with the North Carolina project.

If commercial operations are not commenced within 60 days of December 31, 2015, OEC will be required to pay $500,000 of liquidated damages to Duke Energy pursuant to the Duke PPA. If applicable, York will be responsible for contributing these funds to OEC. Although no assurances can be given, the Company expects the North Carolina project to commence commercial operations in the first quarter of 2016.

Based on the investments made by York as of September 30, 2015, the Company’s portion of net equity in Concord amounted to a total of $3,616,978. Such amount was presented as an asset in the balance sheet and as deferred revenues from equity in subsidiaries. Such deferred revenues will be recorded to the profit and loss statement upon completion of the plants and fulfillment of all the Company’s obligation under the above agreements.

Rhode Island Project

On January 7, 2015, the Company signed an amended and restated purchase agreement with Orbit for the Rhode Island project (the “Amended OERI Purchase Agreement”). Subject to the terms of the Amended OERI Purchase Agreement, Orbit transferred full ownership of OERI to the Company in exchange for a development fee of $300,000, reimbursement of $86,432 and an amount equal to 30% of the distributable cash flow from the Rhode Island project after the project achieves a post-recoupment 30% internal rate of return computed on the basis of any and all benefits from tax credits, depreciation and other incentives of any nature. The Company also agreed to use HSAD Units designed by Orbit and to retain Orbit to implement and operate the HSAD Units for an annual management fee of $187,500 (the “OERI Management Fee”), subject to certain conditions. The Amended OERI Purchase Agreement provided that the Company had until January 22, 2015 to pay Orbit the development fee and reimbursement amount, which was extended to February 28, 2015 upon payment of $31,000. The Company did not pay the development fee and reimbursement amount and, pursuant to the terms of the Amended OERI Purchase Agreement, ownership of OERI reverted back to Orbit.

On April 8, 2015, the Company entered into the Orbit Energy Rhode Island, LLC Membership Interest Purchase Agreement by and among the Company, Orbit, Rhode Island Energy Partners, LLC, a Delaware limited liability company (“Rhode Island”) and OERI (the “New OERI Purchase Agreement”), pursuant to which (i) Rhode Island purchased all of Orbit’s right, title and interest in and to the membership interests of OERI (the “OERI Interests”), (ii) Orbit abandoned all economic and ownership interest in the OERI Interests in favor of Rhode Island, (iii) Orbit ceased to me a member of OERI and (iv) Rhode Island was admitted as the sole member of OERI.

Subject to the satisfaction of certain conditions by Orbit, the Company agreed to be responsible for all costs of evaluating and incorporating into the Rhode Island project (i) the Orbit Technology and (ii) two HSAD Units designed by Orbit with up to a total maximum capacity of 75 tons per day. The Company are responsible for both direct and indirect costs, all payments to be made to Orbit and all increased costs, expenses and any damages incurred in connection with the design, installation, integration, operation and maintenance of the Orbit Technology incorporated into the project. The Company also agreed to enter into an operations agreement with Orbit in respect of the HSAD Units to be integrated into the Rhode Island project and to pay Orbit the OERI Management Fee.

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BLUE SPHERE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 – INVESTMENTS IN JOINT VENTURES (continue)

The Company also acknowledged in the New OERI Purchase Agreement its continuing responsibility to pay Orbit an amount equal to thirty percent (30%) of the Rhode Island project’s distributable cash flow after the Company and the other equity investors in the Rhode Island project fully recoup Company’s respective investments in the Rhode Island project (such investments to be calculated solely as amounts expended in and for the construction of the Rhode Island project) and the Rhode Island project achieves a thirty percent (30%) internal rate of return. The calculation of the project’s internal rate of return would take into account and be computed on the basis of any and all benefits from tax credits, depreciation and other incentives of any nature, as well as the OERI Management Fee.

On the same date as the New OERI Purchase Agreement, (i) the Company, Rhode Island and York entered into a development and indemnification agreement (the “Rhode Island Development and Indemnification Agreement”), pursuant to which Rhode Island agreed to pay the Company $1,481,900, issue the Company 2,275 Series B units of Rhode Island (“Rhode Island Series B Units), and issue 7,725 Series A units of Rhode Island (“Rhode Island Series A Units”) to York, and (ii) the Company and York entered into an amended and restated limited liability company operating agreement (the “Rhode Island LLC Agreement”) to establish the Rhode Island Series A Units and Rhode Island Series B Units and admit the Company and York as 22.75% and 77.25% members of Rhode Island, respectively. Pursuant to the foregoing agreements, York also agreed to pay the Company three equal installments of $562,500 upon (a) signing of the Rhode Island Development and Indemnification Agreement, (b) the later of (i) the date of mechanical completion of the Rhode Island project and (ii) the date on which an executed interconnection agreement between OERI and National Grid, including receipt of any regulatory approvals from the Rhode Island Public Utility Commission, is delivered by OERI, and (c) commercial operation of the Rhode Island project.

Based on the investments made by York as of September 30, 2015, the Company’s portion of net equity in Rhode Island amounted to a total of $1,335,377. Such amount was presented as an asset in the balance sheet and as deferred revenues from equity in subsidiaries. Such deferred revenues will be recorded to the profit and loss statement upon completion of the plants and fulfillment of all the Company’s obligation under the above agreements.

F- 13

BLUE SPHERE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 – SIGNIFICANT ACCOUNTING POLICIES

a.

Functional currency

The currency of the primary economic environment in which the operations of the Company are conducted is the U.S dollar (“$” or “dollar”).

Most of the Company’s expenses are incurred in dollars. Most of the Company’s external financing is in dollars. The Company holds most of its cash and cash equivalents in dollars. Thus, the functional currency of the Company is the dollar.

Since the dollar is the primary currency in the economic environment in which the Company operates, monetary accounts maintained in currencies other than the dollar are re-measured using the representative foreign exchange rate at the balance sheet date. Operational accounts and non-monetary balance sheet accounts are measured and recorded at the rate in effect at the date of transaction. The effects of foreign currency re-measurement are reported in current operations (as “financial expenses - net) and have not been material to date.

b.

Principles of consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries.

Inter-company balances and transactions have been eliminated upon consolidation.

c.

Cash equivalents

Cash equivalents are short-term highly liquid investments which include short term bank deposit (up to three months from date of deposit), that are not restricted as to withdrawals or use that are readily convertible to cash with maturities of three months or less as of the date acquired.

d.

Property, plant and equipment

Property, plant and equipment are stated at cost, less accumulated depreciation. Assets are depreciated using the straight-line method over their estimated useful lives.

Computers, software and electronic equipment are depreciated over three years. Tools and equipment are depreciated over five years. Furniture is depreciated over fourteen years.

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BLUE SPHERE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 – SIGNIFICANT ACCOUNTING POLICIES (continue)

e.

Investment in affiliated companies

Investments in 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 50% 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.

f.

Use of estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results may differ from those estimates

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BLUE SPHERE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 – SIGNIFICANT ACCOUNTING POLICIES (continue)

g.

Share-base payments

Share-based payments to employees are measured at the fair value of the options issued and amortized over the vesting periods. Share-based payments to non-employees are measured at the fair value of the goods or services received or the fair value of the equity instruments issued if it is determined the fair value of the goods or services cannot be reliably measured, and are recorded at the date the goods or services are received. The amount recognized as an expense is adjusted to reflect the number of awards expected to vest. The offset to the recorded cost is to share-based payments reserve. Consideration received on the exercise of stock options is recorded as capital stock and the related share-based payments reserve is transferred to share capital.

h.

Loss per share

Net loss per share, basic and diluted, is computed on the basis of the net loss for the period divided by the weighted average number of common shares outstanding during the period. Diluted net loss per share is based upon the weighted average number of common shares and of common shares equivalents outstanding when dilutive. Common share equivalents include: (i) outstanding stock options under the Company’s share incentive plan and warrants which are included under the treasury share method when dilutive, and (ii) common shares to be issued under the assumed conversion of the Company’s outstanding convertible notes, which are included under the if-converted method when dilutive. The computation of diluted net loss per share for the years ended September 30, 2015, 2014, and 2013, does not include common share equivalents, since such inclusion would be anti-dilutive.

i.

Deferred income taxes

Deferred taxes are determined utilizing the asset and liability method based on the estimated future tax effects of differences between the financial accounting and tax bases of assets and liabilities under the applicable tax laws. Deferred tax balances are computed using the tax rates expected to be in effect when those differences reverse. A valuation allowance in respect of deferred tax assets is provided if, based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The Company has provided a full valuation allowance with respect to its deferred tax assets.

j.

Comprehensive loss

The Company has no component of comprehensive income loss other than net loss.

k.

Revenue recognition

The Company recognizes revenues from services rendered in accordance with ASC Topic 605-20 Revenue Recognition from Services. The Company records services to be supplied under contractual agreements as deferred revenue until such related services are provided.

F- 16

BLUE SPHERE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 – SIGNIFICANT ACCOUNTING POLICIES (continue)

l.

Newly issued accounting pronouncements

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in Accounting Standards Codification (“ASC”) 605, Revenue Recognition. The new revenue recognition standard requires entities to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. In August 2015, the FASB issued Accounting Standards Update No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, or ASU 2015-14. This amendment defers the effective date of the previously issued Accounting Standards Update ASU 2014-09, until the interim and annual reporting periods beginning after December 15, 2017. Earlier application is permitted for interim and annual reporting periods beginning after December 15, 2016. If the Company begins generating revenue prior to the effective date of ASU 2015-14, the Company will evaluate the effect that ASU 2014-09 will have on the results of operations and financial position.

In August 2015, the FASB has issued Accounting Standards Update (ASU) No. 2015-15, Interest - Imputation of Interest (Subtopic 835-30): Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements - Amendments to SEC Paragraphs Pursuant to Staff Announcement at June 18, 2015 EITF Meeting . This ASU adds SEC paragraphs pursuant to the SEC Staff Announcement at the June 18, 2015, Emerging Issues Task Force meeting about the presentation and subsequent measurement of debt issuance costs associated with line-of-credit arrangements. Given the absence of authoritative guidance within ASU 2015-03 for debt issuance costs related to line-of-credit arrangements, the SEC staff would not object to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. The Company does not expect this update will have a material impact on the presentation of the Company’s consolidated financial position, results of operations and cash flows.

In September 2015, the FASB issued ASU 2015-16, Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments, which eliminates the requirement to retrospectively account for changes to provisional amounts initially recorded in a business acquisition opening balance sheet. Prior to the issuance of ASU 2015-16, an acquirer was required to restate prior period financial statements as of the acquisition date for adjustments to provisional amounts. This guidance is effective for fiscal years beginning after December 15, 2015, including interim periods within fiscal years. The Company is evaluating the effect, if any, this update will have on the Company’s consolidated financial position, results of operations and cash flows.

In November 2015, the FASB has issued Accounting Standards Update (ASU) No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes, which changes how deferred taxes are classified on organizations’ balance sheets. The ASU eliminates the current requirement for organizations to present deferred tax liabilities and assets as current and noncurrent in a classified balance sheet. Instead, organizations will be required to classify all deferred tax assets and liabilities as noncurrent. The amendments apply to all organizations that present a classified balance sheet. For public companies, the amendments are effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The Company does not expect this update will have a material impact on the presentation of the Company’s consolidated financial position, results of operations and cash flows.

F- 17

BLUE SPHERE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4 – DEBENTURES, NOTES AND LOANS

Convertible Promissory Notes

Between August 4, 2014 and September 30, 2014, the Company issued convertible promissory notes (the “Notes”) to accredited investors in an aggregate principal amount of $1,408,150 for an aggregate purchase price of $1,201,414, net of expenses incurred in connection of such notes.

Between October 1, 2014 and January 20, 2015, the Company issued convertible promissory notes (the “Notes”) to accredited investors in an aggregate principal amount of $504,250 for an aggregate purchase price of $464,970, net of expenses incurred in connection of such notes.

The Notes were generally mature one-year from the date of issuance and accrue interest at rates ranging from 8% to 18% per annum and in an event of default, the Notes bear interest at rates ranging from 12% to 24% per annum. The Notes may generally be converted into shares of the Company’s common stock at conversion prices ranging from 37% to 45% discounts to lowest trade or closing prices during periods in proximity to the time of conversion subject to further discounts in the case of certain events of default.

In accordance with ASC 470-20, the Company allocated to additional paid-in capital a portion of the proceeds of the notes equal to the intrinsic value of the beneficial conversion feature embedded in the debentures and recorded a corresponding discount on such debentures. The amounts allocated to additional paid-in capital were $1,040,919 and $482,485 as of September 30, 2014 and September 30, 2015, respectively. As of September 30, 2015 the notes were converted or repaid in full. During the year ended September 30, 2015, the Company recorded amortization expenses in the amounts of $1,523,404, in respect of the discounts recorded on the debentures.

From February through September 2015, convertible promissory notes holders representing an aggregate principal amount of $1,480,716 converted their notes into 75,060,414 shares of the Company’s common stock.

F- 18

BLUE SPHERE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4 – DEBENTURES, NOTES AND LOANS (continue)

The Notes include customary default provisions related to payment of principal and interest and bankruptcy or creditor assignment.  In addition, it shall constitute an event of default under certain of the Notes if the Company is delinquent in its filings with the Securities and Exchange Commission, ceases to be quoted on the OTCQB, its common stock is not DWAC eligible or if it has to restate its financial statements in any material respect. In the event of an event of default the Notes may become immediately due and payable at premiums to the outstanding principal. The Notes also provide that if shares issuable upon conversion of the Notes are not timely delivered in accordance with the terms of the Notes then the Company shall be subject to certain cash or share penalties that increase proportionally to the duration of the delinquency up to certain maximums.

The Company paid aggregate commissions of $7,500 to MD Global Partners, LLC and $46,000 to Carter Terry & Company (“Carter Terry”), registered broker-dealers, in connection with the issuance of some of Notes in the aggregate principal of up to $480,000. In addition, Carter Terry is entitled to receive 100,000 shares of the Company’s common stock and a further amount of shares of the Company’s common stock equal to 4% of capital raised by them divided by the closing price of the Company common stock on the date of close. On December 8, 2014 the Company issued 209,041 shares of the Company’s common stock, see note 6 below.

Loans

On March 7, 2012, the Company entered into a loan agreement with Eli Weinberg, pursuant to which Mr. Weinberg loaned the Company $135,000. The full principal amount of the loan remains outstanding. Mr. Weinberg has the option to convert any or all of the principal amount of the loan to common stock of the Company.

On March 15, 2015, the Company entered into a loan agreement with Ori Ackerman (the “Ackerman Loan Agreement”), pursuant to which the Company agreed to borrow $220,000 and issue 3,000,000 shares to Ori Ackerman. The Company received $200,000 under the Ackerman Loan Agreement, as $20,000 was deducted from the original amount of the loan and considered payment of interest in advance. The loan bears no additional interest, and is payable in full within three business days of the date the Company receives revenue from any of its Charlotte, Rhode Island or Italian projects. The Company’s obligations under the loan are personally guaranteed by Shlomi Palas, the Company’s Chief Executive Officer.

On March 25, 2015, the Company entered into a loan agreement with Valter Team, Ltd. (the “Valter Team Loan Agreement”), pursuant to which the Company agreed to borrow $68,750 and issue 250,000 shares to Valter Team Ltd. The Company received $62,500 under the Valter Team Loan Agreement, as $6,250 was deducted from the original amount of the loan. This loan bears no interest and is payable in full on the earlier of the date the Company receives cash proceeds from any of its Charlotte, Rhode Island or Italian projects and December 25, 2015. The Company’s obligations under the loan are personally guaranteed by Shlomi Palas, the Company’s Chief Executive Officer. As of September 30, 2015, the Company repaid the loan in full and issued the 250,000 shares.

F- 19

BLUE SPHERE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5 – RELATED PARTY TRANSACTIONS

On July 25, 2011, the Company, JLS and Roy Amitzur entered into a Management Services Agreement according to which JLS, and Mr. Amitzur are engaged to provide management services to the Company devoting at least 75% of this time to the Company, with Mr. Amitzur serving as Executive Vice President. The term of the agreement was originally for two years and in July 2013, was extended for a further eight months. Since the agreement expired in May 2014, Mr. Amitzur’s agreement was further extended on the same terms on an oral basis. For services rendered under the agreement, JLS is entitled to a monthly fee of US$10,000 + VAT subject to the Company raising an aggregate amount of at least $450,000.  Subsequently, such fee increases to a monthly fee of $15,000 + VAT after the Company raises an aggregate equity investment of $2,000,000. Notwithstanding the raise of more than an aggregate of $2,000,000, payment of Mr. Amitzur monthly fee of US $10,000 + VAT has continued to-date. In addition, the Company issued to JLS 110,620 shares of common stock vesting in equal amounts quarterly over 24 months, all of which have fully vested.  JLS and Mr. Amitzur are entitled to participate on similar terms as the other executives of the Company in bonus plans or incentive compensation plans for its employees.

On February 29, 2012, the Company entered into an employment agreement with Mr. Palas to serve as the Company’s Chief Executive Officer for an indefinite term. This agreement was intended to extend the term of a previously entered into employment agreement with Mr. Palas whose term was expiring. Under the agreement, Mr. Palas receives monthly remuneration at a gross rate of USD$15,000 + VAT. Mr. Palas will be entitled to participate in any bonus plan or incentive compensation plan for its employees adopted by the Company.

On November 5, 2012, the Board of Directors of the Company approved the issuance of 53,098 shares of the Company to its Chief Executive officer, 44,248 shares to the Chairman of the Board, 44,248 shares to the Executive Vice-President and 35,399 shares to the Chief Carbon Officer and general counsel of the Company.

On March 18, 2013, the Board of Directors of the Company approved the issuance of 53,098 shares of the Company to its Chief Executive Officer, 44,248 shares to the Chairman of the Board, 44,248 shares to the Executive Vice-President and 35,399 shares to the Chief Carbon Officer and general counsel of the Company.

F- 20

BLUE SPHERE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5 – RELATED PARTY TRANSACTIONS (continue)

On April 30, 2013, the Board of Directors of the Company approved the issuance of 230,089 shares of the Company and options to purchase 230,089 shares of common stock to its Chief Executive Officer, 203,540 shares and options to purchase 203,540 shares of common stock to the Chairman of the Board, 168,142 shares and options to purchase 168,142 shares of common stock to the Executive Vice-President and 88,496 shares and options to purchase 88,496 shares of common stock to both the Chief Carbon Officer and general counsel of the Company and for the CTO of Company. The shares and options will vest over a two year period with 1/8 of the total amount of the shares and options vesting at the end of each quarter from the date of the grant.

On June 19, 2013 the Board of Directors of the Company approved the issuance of 53,098 shares of the Company to its Chief Executive officer, 44,248 shares to the Chairman of the Board, 44,248 shares to the Executive Vice-President and 35,399 shares to the Chief Carbon Officer and general counsel of the Company.

On January 26, 2014, the Company signed a subscription agreement with Talya Levy-Tytiun (“Talya”) pursuant to which Talya agreed to invest an aggregate of $400,000 into the Company for the sale of 1,739,130 shares of common stock. The Company was obligated to issue Talya additional shares of the Company, if, six months from the date of the agreement her ownership in the Company would be reduced below 12.3%. In addition, the Company guaranteed that if on the first anniversary of the agreement, the share price of the Company common stock was 0.23$ per share or less, the Company shall transfer Talya such amount necessary to make Talya whole and reimburse her for any loss due to her investment. On September 17, 2014 the Company issued Talya 2,866,194, shares of common stock as a reimbursement under the above agreement.

On December 13, 2013 the Board of Directors of the Company approved the issuance of 424,779 shares of the Company to its Chief Executive Officer, 353,982 shares to the Chairman of the Board, 353,982 shares to the Executive Vice-President and 283,186 shares to the Chief Carbon Officer and general counsel of the Company. Such shares were issued at January 9, 2014.

On March 10, 2014 the Board of Directors of the Company approved the issuance of 250,000 shares of the Company to its Chief Executive Officer, 220,000 shares to the Chairman of the Board, 200,000 shares to the Executive Vice-President and 180,000 shares to the Chief Carbon Officer and general counsel of the Company.

On May 27, 2014 the Company appointed Mr. Yigal Brosh as a member of the Board of Directors of the Company. Mr. Brosh was granted 200,000 options to purchase shares of common stock of the Company at an exercise price of $0.01 per share. The Options vets over a period of two years with a pro-rata portion vesting each three month period.

On February 24, 2015, the Board of Directors approved a grant of up to 1,450,000 shares of common stock to certain of its directors under the 2010 Plan. In addition, on February 24, 2015 the Company granted under its 2014 Option Plan 7,450,000 shares of common stock and to 1,775,000 options to purchase shares of common stock to certain of its directors. The shares will vest on a quarterly basis over a two-year period, and the options will vest on a quarterly basis over a two-year period with an exercise price of $0.14 per share.

F- 21

BLUE SPHERE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6 – COMMON SHARES

On October 25, 2012 the Company entered into a Subscription Agreement with a non-US investor for the sale of 88,496 shares of common stock for an aggregated amount of $20,000.

On October 25, 2012 the Company entered into an agreement with a non-US investor to sell 380,531 shares of common stock for an aggregated amount of $50,000.

On November 5, 2012 the Company entered into an agreement with a non-US investor to sell 265,487 shares of common stock at December 25, 2012 for an aggregated amount of $70,000.

On November 5, 2012 the Board of Directors of the Company approved the issuance of 53,098 shares of the Company to its Chief Executive officer, 44,248 shares to the Chairman of the Board, 44,248 shares to the Executive Vice-President and 35,399 shares to the Chief Carbon Officer and general counsel of the Company.

On November 20, 2012, the Company agreed to issue 331,859 shares of the Company. Such shares have been issued on January 11, 2013 and were valued based on the share price of the Company to be $101 thousands.

On December 20 2012, the Company entered into an agreement with a non-US investor to sell 309,735 shares of common stock at a price of $0.32286 per share for $100,000 and to purchase another 154,868 shares of common stock for $50,000 in January 2013 and another 154,868 shares of common stock for $50,000 in February 2013. Additionally, the Company was (i) obligated to issue such investor 88,496 shares of common stock in February 2013 at no additional cost and (ii) issue to such investor an option to purchase 66,372 shares of common stock for one year for 2.26 per share and to purchase 66,372 shares of common stock for two years at a price per share of $4.52.

The Company has estimated the aggregate fair value of such options granted using the Black-Scholes option pricing to be approximately $76,000.

On January 3, 2013, the Company signed a consulting agreement with Emerging Market Consulting, LLC (the “EMC”). According to the agreement, EMC would assist the Company with the design, development and dissemination of corporate information for a period of three month with an option to extend the agreement for an additional nine months. The Company paid EMC $11,000 and issued 39,824 restricted shares of the Company common stock, for the first period. The Company evaluated the cost of such issuance based on the share price of the Company to be $11 thousand. The Company elected not to renew the agreement and the agreement expired on April 3, 2013.

F- 22

BLUE SPHERE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6 – COMMON SHARES (continue)

On February 2, 2013 the Company issued 451,328 shares of common stock to an investor for an aggregate amount of $50,000.

On February 19, 2013, the Company signed a subscription agreement with a non-US investor pursuant to which such investor agreed to invest an aggregate of $75,000 into the Company in three installments: (i) $25,000 on March 10, 2013, (ii) $25,000 on April 10, 2013 and (iii) $25,000 on May 10, 2013. For each $25,000 invested, the Company was obligated to issue 88,496 shares of common stock to the investor. As of September 30, 2013 the investor transferred to the Company all three installments and the Company issued to the investor 265,487 shares. In addition, the non-US investor invested an additional $25,000 for an additional 88,496 shares of common stock of the Company.

On February 20, 2013, the Company signed a subscription agreement with a non-US investor pursuant to which such investor agreed to invest an aggregate of $50,000 into the Company in three installments: (i) $16,600 on March 10, 2013, (ii) $16,600 on April 10, 2013 and (iii) $16,700 on May 10, 2013. Upon receipt of each installment, the Company was obligated to issue 146,903 shares of common stock to the investor. As of September 30, 2013, the Company received all three installments totaling $50,000 and issued 440,708 shares. Additionally, on May 23, 2013 the Company issued 35,399 shares of the Company for $4,000 to the non-US investor under the same terms of the agreement above.

On March 18, 2013 the Board of Directors of the Company approved the issuance of 53,098 shares of the Company to its Chief Executive Officer, 44,248 shares to the Chairman of the Board, 44,248 shares to the Executive Vice-President and 35,399 shares to the Chief Carbon Officer and general counsel of the Company.

On April 30, 2013 the Board of Directors of the Company approved the issuance of 230,089 shares of the Company and 203,089 options to its Chief Executive officer, 203,540 shares and 203,540 options to the Chairman of the Board, 168,142 shares and 168,142 options to the Executive Vice-President and 88,496 shares and 88,496 options to both the Chief Carbon Officer and general counsel of the Company and for the CTO of Company. The shares and options will vest over a two year period with 1/8 of the total amount of the shares and options vesting at the end of each quarter from the date of the grant.

In May and July 2013, the Company issued 495,576 shares of common stock to an investor for an aggregate amount of $49,315.

On June 19, 2013 the Board of Directors of the Company approved the issuance of 53,098 shares of the Company to its Chief Executive officer, 44,248 shares to the Chairman of the Board, 44,248 shares to the Executive Vice-President and 35,399 shares to the Chief Carbon Officer and general counsel of the Company.

On June 19, 2013 the Company entered into an agreement with a third party. In exchange for his services the Company issued the third party 176,992 shares of common stock of the Company. On June 23, 2013, the Company signed an additional agreement with the third party according to which the Company issued additional 156,611 shares of common stock of the Company.

F- 23

BLUE SPHERE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6 – COMMON SHARES (continue)

On June 19, 2013 the Company entered into an agreement with a non-US investor to sell 132,744 shares of common stock for an aggregate amount of $50,000.

On June 19, 2013 the Company entered into an agreement with a non-US investor to sell 53,634 shares of common stock for an aggregate amount of $20,000.

On June 26, 2013 the Company entered into an agreement with a non-US investor to sell 53,098 shares of common stock for an aggregate amount of $20,000.

On June 26, 2013 the Company signed a Capital Markets Advisory Consulting Agreement with Incline Partners, LLC (“Incline”). According to the agreement, Incline agreed to provide the Company with capital market advisory and monthly distribution of articles and media for a period between June 15, 2013 through August 15, 2013. In consideration for the above services, the Company paid Incline a cash payment of $28,000 and issued 88,496 restricted shares of the Company common stock.

On July 22, 2013 the Company entered into an agreement with a non-US investor to sell 268,169 shares of common stock for an aggregate amount of $100,000.

On September 3, 2013 the Company entered into an agreement with a non-US investor to sell 268,169 shares of common stock for an aggregate amount of $100,000.

On October 13, 2013 a non-US investor converted $87,000 principal loan for 384,956 shares of the Company’s common stock.

On October 13, 2013, a non-US investor converted $37,000 principal loan for 163,717 shares of the Company’s common stock.

During October 2013, holders of $47,878 of principal amount of Asher convertible notes converted their notes into 402,276 shares of the Company’s common stock.

On October 8, 2013, the Company issued 88,496 shares of common stock for consulting services.

On November 5, 2013, the Company’s subsidiary, Eastern Sphere, Ltd., entered into an agreement with an investor providing for the issuance of 491,642 shares of the Company’s common stock in consideration for $100,000.

On November 14, 2013, the Company’s subsidiary, Eastern Sphere, Ltd., entered into an agreement with an investor providing for the issuance of 146,016 shares of the Company’s common stock in consideration for $29,107.

F- 24

BLUE SPHERE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6 – COMMON SHARES (continue)

On December 4, 2013, the Company entered into an agreement with an investor that agreed to provide collateral in the amount of $480,000 (€353,200) to enable the Company to receive a letter of credit in respect of the Company’s North Carolina project. In consideration for providing the collateral, the investor shall be entitled to a 4% ownership stake in the North Carolina project companies and was issued 44,248 shares of the Company’s common stock. Mr. Shlomi Palas personally guaranteed the Company’s obligations under the agreement with the investor. In addition, in accordance with the agreement, the Company issued to the investor a convertible note due on March 4, 2014 in the principal amount of $480,000 (€353,200) bearing interest at 1% per month, payable on a monthly basis. On or after March 4, 2014, any outstanding and unpaid principal under the convertible note is convertible into the Company’s shares of common stock based on the then applicable market price of the Company’s shares. The Company and the investor have verbally agreed to extend the maturity of such convertible note indefinitely and, in the meantime, the Company continues to make 1% interest payments on a monthly basis.

On December 13, 2013 the Board of Directors of the Company approved the issuance of 424,779 shares of the Company to its Chief Executive Officer, 353,982 shares to the Chairman of the Board, 353,982 shares to the Executive Vice-President and 283,186 shares to the Chief Carbon Officer and general counsel of the Company. Such shares were issued at January 9, 2014.

On December 15, 2013, the Company agreed to issue 600,000 shares of common stock to a consultant providing investor relation services. The shares are to be issued in three tranches of 200,000 each, the first within 10 days of entering into the agreement, the second on the four month anniversary of the agreement and the final on the eight month anniversary of the agreement. The first tranche of 200,000 shares was issued on January 9, 2014. During October 2014, the Company terminated the investor relation service agreement.

On January 9, 2014, the Company issued 265,486 shares of common stock to an investor for $25,000 in cash.

On January 9, 2014, the Company issued 345,132 shares of common stock for consulting services. The Company has estimated the fair value of such shares and recorded an expense of $89,734.

On January 9, 2014, the Company issued 17,700 shares of common stock for consulting services. The Company has estimated the fair value of such shares and recorded an expense of $4,602.

On January 26, 2014, the Company signed a subscription agreement with Talya Levy-Tytiun (“Talya”) pursuant to which Talya agreed to invest an aggregate of $400,000 into the Company for the sale of 1,739,130 shares of common stock. The Company was obligated to issue Talya additional shares of the Company, if, six months from the date of the agreement her ownership in the Company would be reduced below 12.3%. In addition, the Company guaranteed that if on the first anniversary of the agreement, the share price of the Company common stock was 0.23$ per share or less, the Company shall transfer Talya such amount necessary to make Talya whole and reimburse her for any loss due to her investment. On September 17, 2014 the Company issued Talya 2,866,194, shares of common stock as a reimbursement under the above agreement.

On February 7, 2014, the Company issued an aggregate of 1,200,000 shares of its common stock to CTW – Changing the World Technologies, Ltd. (“CTW”) in exchange for (i) an investment of $77,000 (for which CTW received 385,000 shares of common stock) and (ii) the provision of financial engineering services (for which CTW received 815,000 shares of common stock).

F- 25

BLUE SPHERE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6 – COMMON SHARES (continue)

On March 5, 2014 Eastern Institutional Funding, LLC purchased $68,750 of the Company’s 20% notes due one year from such date that are convertible into shares of the Company’s common stock at a discount of 50% from the lowest trade price over the last 20 days from the date of conversion. On March 21, 2014, Capitoline Ventures II, LLC purchased $68,750 of the Company’s 20% notes due one year from such date that are convertible into shares of the Company’s common stock at a discount of 50% from the lowest trade price over the last 20 days from the date of conversion. As of June 30, 2014, the Company issued 5,114,073 shares of common stock in respect of the above notes and the remaining 1,320,000 shares were issued on July 2014.

On March 10, 2014 the Board of Directors of the Company approved the issuance of 250,000 shares of the Company to its Chief Executive Officer, 220,000 shares to the Chairman of the Board, 200,000 shares to the Executive Vice-President and 180,000 shares to the Chief Carbon Officer and general counsel of the Company.

On April 22, 2014 the Company signed a Consulting Services Agreement with a non-US person pursuant to which, the Company agreed to issue 4,000,000 shares of its common stock in exchange for consulting services to include, but not be limited to, advice on investor relations, public relations, transaction structuring, ongoing introductions to investors and strategic initiatives. The agreement is effective for one year commencing September 1, 2013. During the third quarter of 2014, the Company issued 3,350,000 shares of common stock in the Company. The Company has estimated the fair value of such shares and recorded an expense of $612,700.

During the third quarter of 2014, the Company signed several investment agreements according to which the Company issued 880,000 shares of common stock the Company for total consideration of $109,721 in cash. In addition, the investors received options to purchase 822,500 shares of common stock of the Company for an exercise price of 0.10 cent per share.

During the third quarter of 2014, the Company signed several investment agreements according to which the Company issued 759,041 shares of common stock the Company for total consideration of $77,127 in cash. In addition, the investors received options to purchase 759,041 shares of common stock of the Company for an exercise price of 0.10 cent per share and 759,041 shares of common stock of the Company for an exercise price of 0.13 cent per share.

During the third quarter of 2014, the Company signed several investment agreements according to which the Company issued 352,805 shares of common stock the Company for total consideration of $98,784 in cash. In addition, the investors received options to purchase 352,805 shares of common stock of the Company for an exercise price of 0.60 cent per share.

F- 26

BLUE SPHERE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6 – COMMON SHARES (continue)

On May 1, 2014, the Company signed a consulting agreement with an investor according to which the company shall issue 2,819,000 shares of common stock of the Company and warrants to purchase 1,193,000 shares of common stock of the Company at an exercise price of $0.10 for one year commencing May 1, 2014. On September 22, 2014 the Company issued the consultant, 2,484,000 shares of common stock of the Company under the above agreement. In addition, on September 22, 2014 the Company issued 963,000 shares of common stock the Company to the consultant, for total cash consideration of $52,708. In addition, on May 1, 2014 the Company signed an agreement with the consultant according to which the consultant would provide investor relations services for a period of 12 months. Based on the agreement the Company issued the consultant 300,000 shares of the Company and 1,500,000 options to purchase shares of the Company at an exercise price of 0.10 cent per share. The options expire after 5 years. In addition, the Company agreed to issue 500,000 additional shares upon fulfillment of other conditions set in the agreement. The Company evaluated the fair value of the 300,000 shares and 1,500,000 options issued at $90,000 and $151,434, respectively.

On May 2, 2014 the Company signed an agreement with a consultant according to which the consultant would provide investor relations services for a period of 12 months. Based on the agreement the Company issued the consultant 211,084 shares of the Company. The Company evaluated the fair value of the 211,084 shares and recorded an expense of $41,518.

On May 25, 2014 the Company signed an agreement with a consultant according to which the consultant would provide investor relations services for a period of 6 months. Based on the agreement the Company issued the consultant 350,000 shares of the Company and 350,000 warrants to purchase shares of the Company at an exercise price of 0.20 cent per share. The options expire after 6 month. In addition, the Company agreed to issue 150,000 additional shares after 6 month from the date of the agreement and additional 150,000 shares for $0.20 per share, and pay the consultant NIS 18,000 per month during the agreement term. The Company evaluated the fair value of the 300,000 shares at $54,600. In addition the company recorded an expense related to the warrants issued of $28,310.

On June 1, 2014 the Company signed an investment agreement with a third party according to which the Company issued 179,856 shares of common stock the Company for total consideration of $28,874 in cash. In addition, the investor received options to purchase 179,856 shares of common stock of the Company for an exercise price of 0.25 cent per share.

During the third quarter of 2014, the Company signed several investment agreements according to which the Company issued 199,039 shares of common stock the Company for total consideration of $19,904 in cash. In addition, the investors received options to purchase 199,039 shares of common stock of the Company for an exercise price of 0.13 cent per share and 199,039 shares of common stock of the Company for an exercise price of 0.16 cent per share.

F- 27

BLUE SPHERE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6 – COMMON SHARES (continue)

On June 18, 2014 the Company signed an advisory board agreement with an accredited investor according to which the investor will serve on the Company’s advisory board for a period of one year from the date of the agreement unless otherwise extended by the parties. For his services, the advisor is entitled to 150,000 shares of the Company’s common stock of which75,000 vest on the date of the agreement and the remaining amount in three quarterly 25,000 shares, beginning 90 days from the date of the agreement. In addition the advisor is entitled to receive 150,000 warrants of the Company’s common stock. The warrants vest in 4 equal amounts over a period of twelve (12) months, the initial amount vesting on the agreement date. The warrants will allow the director to purchase the common stock of the Company for a period of 3 years from the agreement date. The warrants shall be exercisable in the following amounts: 1/3 at $0.30 a share, 1/3 at $0.40 a share, and 1/3 at $0.50 a share. In the event the advisor ceases to be a member of Board at any time during the vesting period for any reason, then any unvested warrants or unvested shares shall be irrefutably forfeited. On July 10, 2014 the Company issued 75,000 shares on account of such agreement. The Company evaluated the fair value of the shares and warrants and recorded an expense of $52,800.

At April and June 2014 the Company signed three agreements with a non-US investor who provided the Company with several loans amounted to $78,400, according to which the investor converted his balance of loans into 800,892 shares of common stock of the Company. In addition, the Company issued the non-US investor invested 380,435 shares of common stock of the Company for total cash consideration of $69,000.

On July 3, 2014 the Company issued 1,250,000 shares of common stock the Company to an investor for total cash consideration of $75,000.

On July 29, 2014 the Company issued 144,054 shares of common stock the Company to an investor for total cash consideration of $34,522. In addition, the investor received options to purchase 144,054 shares of common stock of the Company for an exercise price of 0.10 cent per share. During April 2015 the investor exercised his option and the Company issued additional 144,054 shares.

During April 2015, a non-US investor exercised his warrants to purchase shares of common stock of the Company for total consideration of $48,549.

On May 27, 2015 the Company issued consultant 180,000 shares of common stock of the Company in respect of his 2014 consulting agreement with the Company. The Company has estimated the fair value of such shares and recorded an expense of $7,560.

During July 2014, the Company issued a non-US investor 190,000 shares of common stock pursuant to a convertible loan agreement dated June 2013.

During July and August 2014, the Company issued a non-US investor 3,969,133 shares of common stock of the Company, of which 650,000 were issued pursuant to the April 22, 2014 Consulting Services Agreement signed with the non-US person and the remaining were issued pursuant to the August 21, 2014 consulting agreement. The Company has estimated the fair value of such shares and recorded an expense of $970,573.

On July 10, 2014 a loan in the amount of $24 thousand amount was converted into 115,000 shares of the Company. In addition, the Company granted the investor additional 75,000 shares for granting the loan.

F- 28

BLUE SPHERE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6 – COMMON SHARES (continue)

During July through September, 2014 the Company issued a consultant, 2,177,000 shares of common stock of the Company under his September 10, 2013 and April 22, 2014 consulting agreements. The Company has estimated the fair value of such shares and recorded an expense of $481,810.

On September 21, 2014, the Company issued 280,592 shares of common stock of the Company for total cash consideration of $59,000.

On September 21, 2014 the Company issued 48,183 shares of common stock the Company for total cash consideration of $11,557. In addition, the investor received options to purchase 48,183 shares of common stock of the Company for an exercise price of 0.32 cent per share.

On October 28, 2014 the Company issued 335,000 shares of the Company’s common stock, in connection with the May 1, 2014 service agreement.

During October, 2014, Asher converted $42,500 principal amount out of the April 11, 2014 notes for 471,967 shares of the Company’s common stock.

On December 8, 2014 the Company issued 209,041 shares of the Company’s common stock to Carter Terry, in connection with the issuance of as detailed in note 4 above.

On October 3, 2014 the Company signed a consulting agreement with a non-US citizen according to which the consultant would provide investor relation and public relations services for a period of one year. The Company agreed to grant the consultant 2,000,000 shares of the Company and additional 500,000 options to purchase Company’s shares at an exercise price of $0.001 per shares. Such shares were issued on March 19, 2015. In addition, on the same date the Company issued the consultant 500,000 shares of the Company for the exercised of the options granted. The Company has estimated the fair value of such shares and options, and recorded an expense of $216,828.

On January 5, 2015 the Company signed a consulting agreement with Dr. Borenstein Ltd according to which the company issued the consultant 1,000,000 options to purchase 1,000,000 shares of common stock of the Company at an exercise price of $0.001 for one year commencing the date of the agreement. The Consultant exercised such options at May 27, 2015. The Company has estimated the fair value of such options, and recorded an expense of $158,024.

On February 28, 2015 and March 19, 2015 the Company issued 6,114,867 shares of the Company the consultant in respect of his September 2014 consulting investor relation and public relations services agreement with the Company. The Company has estimated the fair value of such shares, and recorded an expense of $738,353.

On March 12, 2015 the Company issued 109,039 shares of the Company for an investor pursuant to the exercise of his options granted at May 2014. The Company has estimated the fair value of such shares, and recorded an expense of $14,103.

In May and June 2015, the Company issued 3,765,000 shares of the Company to a consultant in respect of his investor relations and public relations services pursuant to a consulting agreement with the Company. The Company has estimated the fair value of such shares, and recorded an expense of $150,118.

F- 29

BLUE SPHERE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6 – COMMON SHARES (continue)

In May 2015, the Company issued 3,250,000 shares of the Company to a consultant in respect of his investor relations and public relations services pursuant to a consulting agreement with the Company. The Company has estimated the fair value of such shares, and recorded an expense of $136,500.

On June 15, 2015 the Company issued consultant 1,500,000 shares of common stock of the Company in mutual agreement for termination of his June 2014 consulting agreement. The Company has estimated the fair value of such shares, and recorded an expense of $34,500.

From July through September 2015, the Company issued 8,035,000 shares of common stock to a consultant in respect of his investor relations and public relations services consulting agreement with the Company. The Company has estimated the fair value of such shares, and recorded an expense of $198,614.

In August 2015, the Company issued 3,474,405 shares of the Company to Maxim Group LLC in respect of its financial advisor and investment banker agreement with the Company. The shares have been valued at $34,397.

In August 2015, the Company issued 1,128,237 shares of the Company to a non-U.S. person in respect of its financial advisor and investment banker settlement agreement with the Company. The Company has estimated the fair value of such shares, and recorded an expense of $13,088.

On April 13, 2015, the Company entered into a subscription agreement with a non-U.S. person pursuant to which the Company issued 416,667 shares of common stock in exchange for $25,000.

On April 15, 2015, the Company entered into a Subscription Agreement with Dr. Borenstein Ltd. (the “April Borenstein Subscription Agreement”) pursuant to which the Company agreed to sell 1,630,000 shares of common stock of the Company for the aggregate purchase price of $48,000. Such shares have been issued after the balance sheet date.

On June 12, 2015, the Company entered into a Subscription Agreement with Dr. Borenstein Ltd. (the “June Borenstein Subscription Agreement”) pursuant to which the Company agreed to sell 8,484,848 shares of common stock of the Company for the aggregate purchase price of $140,000. Such shares have been issued after the balance sheet date.

On July 1, 2015, the Company entered into a subscription agreement with a non-U.S. person pursuant to which the Company issued 2,000,000 shares of common stock in exchange for $32,000.

On July 6, 2015, the Company entered into a subscription agreement with several non-U.S. entity pursuant to which the Company issued 2,428,571 shares of common stock in exchange for $51,000.

On July 17, 2015, the Company entered into a subscription agreement with several non-U.S. personnel pursuant to which the Company issued 2,318,183 shares of common stock in exchange for $39,394.

From February through August 2015, convertible promissory notes holders representing an aggregate principal amount of $1,480,716 converted their notes into 75,060,414 shares of the Company’s common stock.

F- 30

BLUE SPHERE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6 – COMMON SHARES (continue)

Share Repurchase Program

On June 17, 2015, the Company’s Board of Directors approved a share repurchase program (the “Share Repurchase Program”). Under the Share Repurchase Program, the Company is authorized to repurchase up to $500,000 worth of its common stock, which, based on the value of the Company’s common stock on September 30, 2015, equates to approximately 16,666,667 shares of common stock. However, the total number of shares could differ based on the ultimate price per share paid by the Company. Further, the Company’s shares of common stock may be purchased on the open market or through privately negotiated transactions from time-to-time and in accordance with applicable laws, rules and regulations. The Company is not obligated to make any purchases, including at any specific time or in any particular situation. The program may be limited or terminated at any time without prior notice. As of September 30, 2015, the Company had not repurchased any shares under the Share Repurchase Program. On June 23, 2015, the Company repurchased 144,054 shares from a shareholder for $28,328 as part of a settlement with such shareholder. This repurchase was not pursuant to the Share Repurchase Program.

Reverse stock split

On November 26, 2013, the Company amended and restated its Articles of Incorporation to authorize the issuance of 500,000,000 shares of preferred stock, $0.001 par value, in one or more series and with such rights, preferences and privileges as its Board of Directors may determine and to effect a 1 for 113 reverse stock split of the Company’s outstanding common stock. In addition, the Amended and Restated Articles of Incorporation provide, among other things, for indemnification and limitations to the liability of the Company’s officers and directors.

As a result of the reverse stock split, which became effective on December 4, 2013, every 113 shares of the Company’s outstanding common stock prior to the effect of that amendment was combined and reclassified into one share of the Company’s common stock, and the number of outstanding shares of the Company’s common stock was reduced from 1,292,103,309 to 11,434,611 shares.

All share, stock option and per share information in these consolidated financial statements have been adjusted to reflect the stock split on a retroactive basis.

NOTE 7 – STOCK OPTIONS

The 2010 share option plan was established on March 3, 2010.

On February 24, 2015, the Company’s Board of Directors approved and adopted the Global Share and Options Incentive Enhancement Plan (2014) (the “2014 Plan”), pursuant to which the Company may award shares of its common stock, options to purchase shares of its common stock and other equity-based awards to eligible participants. The 2014 Plan replaced the Company’s Global Share Incentive Plan (2010) (the “2010 Plan”). Subject to the terms and conditions of the 2014 Plan, the Board of Directors has full authority in its discretion, from time to time and at any time, to determine (i) eligible participants in the 2014 Plan, (ii) the number of options or shares to be covered by an award, (iii) the time or times at which an award shall be granted, (iv) the vesting schedule and other terms and conditions of an award, (v) the form(s) of written agreements applicable to an award, and (vi) any other matter which is necessary or desirable for, or incidental to, the administration of the 2014 Plan and the granting of awards thereunder.

F- 31

BLUE SPHERE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7 – STOCK OPTIONS (continue)

The 2014 Plan permits the grant of up to 13,100,000 shares of common stock and up to 3,175,000 options to purchase shares of common stock to certain of its managers, directors and key employees. The shares will vest on a quarterly basis over a two-year period, and the options will vest on a quarterly basis over a two-year period with an exercise price of $0.14 per share.

Prior to approving the 2014 Plan, on February 24, 2015, the Board of Directors approved a grant of up to 2,575,000 shares of common stock to certain of its managers, directors and key employees under the 2010 Plan, of which 1,875,000 shares were issued as of September 30, 2015.

The following table presents the Company’s stock option activity for employees and directors of the Company for the years ended September 30, 2013 through 2015:

Number of
Options

Weighted Average Exercise Price

Outstanding at September 30, 2012 778,761 0.5763
Granted
Exercised
Forfeited or expired
Outstanding at September 30, 2013 778,761 0.5763
Granted 350,000 0.1770
Exercised
Forfeited or expired
Outstanding at September 30,2014 1,128,761 0.4530
Granted 3,175,000 0.1400
Exercised
Forfeited or expired
Outstanding at September 30,2015 4,303,761 0.2220
Number of options exercisable at September 30, 2015 1,847,511 0.3362
Number of options exercisable at  September 30, 2014 684,071 0.5363

The fair value of the stock options granted in 2013 was estimated using the Black-Scholes option valuation model that used the following assumptions:

%

Dividend yield 0
Risk-free interest rate 0.32 %
Expected term (years) 5
Volatility 390 %

The fair value of the options granted above using the Black-Scholes model is $0.565 per option.

F- 32

BLUE SPHERE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7 – STOCK OPTIONS (continue)

The fair value of the stock options granted in 2014 was estimated using the Black-Scholes option valuation model that used the following assumptions:

%

Dividend yield 0
Risk-free interest rate 0.88 %
Expected term (years) 3
Volatility 123%-157 %

The fair value of the options granted above using the Black-Scholes model is between $0.190 to $0.214 per option.

The fair value of the stock options granted in 2015 was estimated using the Black-Scholes option valuation model that used the following assumptions:

%

Dividend yield 0
Risk-free interest rate 1.47 %
Expected term (years) 5
Volatility 147 %

The fair value of the options granted above using the Black-Scholes model is $0.111 per option.

Costs incurred in respect of stock based compensation for employees and directors, for the year ended September 30, 2015, 2014 and 2013 were $231, $1,711 and $203 thousands respectively.

The following table summarizes information about options and warrants to employees, officers and directors outstanding at September 30, 2015 under the plans:

Options and Warrants Outstanding Vested and Exercisable

Exercise Price

Number of Option

Weighted Average Remaining Contractual Life (Years)

Number of Option

weighted Average Exercise Price

0.01 200,000 1.65 125,000 0.01
0.14 3,175,000 4.41 793,750 0.14
0.3 50,000 1.72 50,000 0.30
0.4 50,000 1.72 50,000 0.40
0.5 50,000 1.72 50,000 0.50
0.5763 778,761 2.58 778,761 0.5763
4,303,761 3.78 1,847,511 0.3362

As of September 30, 2015 the aggregated intrinsic value for the options vested and exercisable was $2.5 thousands with a weighted average remaining contractual life of 1.65 years.

The unrecognized compensation expense calculated under the fair value method for the stock options expected to vest as of September 30, 2015 is $249,962 and is expected to be recognized over a weighted average period of 1.5 years.

The weighted average grant date fair value of the options granted in 2015, 2014 and 2013 was $0.111, $0.192, $0.565 respectively.

F- 33

BLUE SPHERE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 – INCOME TAXES

US resident companies are taxed on their worldwide income for corporate income tax purposes at a statutory rate of 35%. No further taxes are payable on this profit unless that profit is distributed. If certain conditions are met, income derived from foreign subsidiaries is tax exempt in the US under applicable tax treaties to avoid double taxation.

Taxable income of Israeli companies is subject to tax at the rate of 25% in 2013, 26.5% in the year 2014 and 25% in the year 2015 and onwards.

The Company accounts for income taxes using the liability method, which requires the determination of deferred tax assets and liabilities based on the differences between the financial and tax bases of assets and liabilities using enacted tax rates in effect for the year in which differences are expected to reverse. Deferred tax assets are adjusted by a valuation allowance, if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

Deferred income taxes reflect the net effects of temporary differences between the amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The breakdown of the deferred tax asset as of September 30 2015, 2014 and 2013 is as follows:

2015

2014

2013

U.S. dollars in thousands

Deferred tax assets:
Net operating loss carry-forward $ 6,331 $ 3,267 $ 2,502
Valuation allowance (6,331 ) (3,267 ) (2,502 )
$ 0 $ 0 $ 0

A valuation allowance is provided when it is more likely than not that some portion of the deferred tax asset will not be realized. Management has determined, based on its recurring net losses, lack of a commercially viable product and limitations under current tax rules, that a full valuation allowance is appropriate.

U.S. dollars

in thousands

Valuation allowance, September 30, 2014 $ 3,267
Increase 3,064
Valuation allowance, September 30, 2015 $ 6,331

Carry forward losses of the Company are approximately $14,130 thousand at September 30, 2015 and available throughout 2035.

Carry forward losses of the Israeli subsidiary are approximately $3,138 thousand at September 30, 2015 and have no expiration date.

F- 34

BLUE SPHERE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 – INCOME TAXES (continue)

Reconciliation between the theoretical tax expense, assuming all income is taxed at the statutory tax rate applicable to income of the Company and the actual tax expense as reported in the Statement of Operations, is as follows:

Year ended December 31,
2015 2014 2013
Loss before taxes, as reported in the
consolidated statements of operations $ 7,462 $ 7,376 $ 1,970
Federal statutory rate 35 % 35 % 35 %
Theoretical tax benefit on the above
amount at federal statutory tax rate 2,612 2,582 690
Losses and other items for which a valuation allowance
Was provided or benefit from loss carry forward (2,612 ) (2,582 ) (690 )
Actual tax expense

NOTE 9 – NET LOSS PER SHARE DATA

The shares issuable upon the exercise of options, and conversion of convertible notes and warrants, which have been excluded from the diluted per share amounts because their effect would have been anti-dilutive, include the following:

September 30, 2015

September 30, 2014

September 30, 2013

Options:
weighted average number 1,847,511 684,071 194,690
weighted average exercise price $ 0.3362 $ 0.5363 $ 0.5763

NOTE 10 – OTHER LOSS (INCOMES)

On January 31, 2012, the Company lent an Israeli company, CTG Clean Technology Group Limited (the “Borrower”), U.S. $30,000 at an annual rate of interest of eight percent (8%). The purpose of this loan was to provide the borrower capital to continue its operations while the Company considered acquiring such company. On February 8, 2012, the Company received the cash to make such loan to the borrower from a Cyprus company (JLS Investment Holding). As of December 30, 2012 such loan had been written-off in whole. In May 2015, CTG had repaid the loan in full and the company recorded incomes in the amount of $38 thousands.

F- 35

BLUE SPHERE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11 – SUBSEQUENT EVENTS

On October 21, 2015 the Company issued 1,630,000 and 8,484,848 shares of common stock of the Company in respect of the April Borenstein Subscription Agreement and June Borenstein Subscription Agreement, respectively.

Italy Projects

In September 2014, the Company entered into a letter of intent to acquire Kinexia S.p.A.’s right, interest and title in, to and under four biogas projects in the Vigevano area in Italy. The letter of intent also provides for the purchase of three additional biogas projects in the Emillia-Romagna and Lazio regions upon the same principals set forth in the letter of intent and subject to definitive agreements.

After balance sheet date, on December 14, 2015, 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 (formerly called Bluesphere Italy S.r.l.) (“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 paid an aggregate purchase price of $5,837,308 (€5,200,000) (the “Purchase Price”), subject to certain post-closing adjustments, to acquire the share capital of the SPVs. Fifty percent (50%) of the Purchase Price, adjusted for certain closing costs, was paid at closing, and the balance is due to the Sellers on the third anniversary of the closing date. The portion of the Purchase Price paid at closing was primarily financed by a loan of $3,255,422 (€2,900,000) pursuant to a Long Term Mezzanine Loan Agreement, dated August 18, 2015 (the “Loan Agreement”), by and among the Company, its wholly-owned subsidiary, Eastern Sphere Ltd. (“Eastern Sphere”), Eastern Sphere’s wholly-owned subsidiary, Bluesphere Italy, and Helios Italy Bio-Gas 1 L.P.

On August 18, 2015, the Company and two of its wholly-owned subsidiaries, Eastern Sphere Ltd. (“Eastern Sphere”) and BlueSphere Italy, 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 $5,612,796 (€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.

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BLUE SPHERE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11 – SUBSEQUENT EVENTS (continue)

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 $132,462 (€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 $211,041 (€188,000) from the four SPVs for the initial six months following the acquisition, and thereafter Austep will guarantee an annual aggregate EBITDA of $4,220,823 (€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 any revenue in excess of these levels.

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 will bear interest at 11%, paid quarterly, and will 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 Securities are being 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.

F- 37

BLUE SPHERE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11 – SUBSEQUENT EVENTS (continue)

On December 23, 2015, the Company completed the only 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.

F- 38

BLUE SPHERE CORP.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2015

F- 1

BLUE SPHERE CORP.

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 6-7
Notes to interim financial statements 8 - 14

F- 2

BLUE SPHERE CORP.

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 $ 2,732 $ 161
Trade account receivables 1,434
Other current assets 508 21
Total current assets 4,674 182
PROPERTY, PLANT AND EQUIPMENT , net of accumulated depreciation 18,139 31
OTHER LONG TERM ASSETS 5,920
INVESTMENTS IN JOINT VENTURES 7,434 4,952
INTANGIBLE ASSETS 3 ,930
Total assets $ 40,097 $ 5,165
Liabilities and Stockholders’ Deficiency
CURRENT LIABILITIES:
Current maturities of long term loan $ 1,763 $ 32
Accounts payables 1,144 58
Other accounts payable and liabilities 2,679 681
Debentures, notes and loans 7,363 519
Deferred revenues from joint ventures 8,916 6,434
Total current liabilities 21,865 7,724
LONG TERM BANK LOANS 19,016 135
DEBENTURES 2,361
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 20 20
Treasury shares (28 ) (28 )
Additional paid-in capital 39,764 39,474
Accumulated deficit (44,701 ) (43,404 )
Total Stockholders’ Deficiency (3,689 ) (2,694 )
Total liabilities and Stockholders’ Deficiency $ 40,097 $ 5,165

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

F- 3

BLUE SPHERE CORP.

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)
REVENUES $ 400
COST OF REVENUES (360 )
GROSS INCOME 40
OPERATING EXPENSES
General and administrative expenses 1,005 $ 827
Other losses 19
OPERATING LOSS 965 846
FINANCIAL EXPENSES, net 332 468
NET LOSS FOR THE PERIOD $ 1,297 $ 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 177,155,607 51,031,823


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

F- 4

BLUE SPHERE CORP.

STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (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
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):



























Share based compensation 65 65
Issuance of shares for services 2,435,000 2 47 49
Issuance of common stock, net of issuance costs 10,114,848 10 178 188
Net loss for the period (1,297 ) (1,297 )
BALANCE AT DECEMBER 31, 2015 (Unaudited) 180,502,443 $ 1,256 $ 20 $ (28 ) $ 39,764 $ (44,701 ) $ (3,689 )

Common Stock, $0.001 Par Value Proceeds
on account
of Shares
Additional paid-in Capital
Accumulated deficit
Total Stockholders
deficiency
Shares Amount
BALANCE AT SEPTEMBER 30, 2014 (audited) 50,109,036 $ 1,126 $