0001387131-16-008125.txt : 20161122 0001387131-16-008125.hdr.sgml : 20161122 20161121173225 ACCESSION NUMBER: 0001387131-16-008125 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 51 CONFORMED PERIOD OF REPORT: 20160630 FILED AS OF DATE: 20161122 DATE AS OF CHANGE: 20161121 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BLUE SPHERE CORP. CENTRAL INDEX KEY: 0001419582 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROGRAMMING, DATA PROCESSING, ETC. [7370] IRS NUMBER: 980550257 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-55127 FILM NUMBER: 162011236 BUSINESS ADDRESS: STREET 1: 301 MCCULLOUGH DRIVE STREET 2: 4TH FLOOR CITY: CHARLOTTE STATE: NC ZIP: 28262 BUSINESS PHONE: 704-909-2806 MAIL ADDRESS: STREET 1: 301 MCCULLOUGH DRIVE STREET 2: 4TH FLOOR CITY: CHARLOTTE STATE: NC ZIP: 28262 FORMER COMPANY: FORMER CONFORMED NAME: Blue Sphere Corp DATE OF NAME CHANGE: 20100219 FORMER COMPANY: FORMER CONFORMED NAME: Jin Jie Corp. DATE OF NAME CHANGE: 20071128 10-Q/A 1 blsp-10qa_063016.htm AMENDMENT TO FORM 10-Q
 

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

FORM 10-Q/A

(Amendment No. 1)

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

For the quarterly period ended June 30, 2016

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

For the transition period from _________ to ________

Commission File No. 000-55127

Description: C:\Users\Finservices\Desktop\blsp_10q-063016img001.jpg

 

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

 

Nevada

98-0550257

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

 

301 McCullough Drive, 4th Floor, Charlotte, North Carolina 28262

(Address of principal executive offices) (zip code)
 

704-909-2806

(Registrant’s telephone number, including area code)
 
 
(Former name, former address and former fiscal year, if changed since last report)

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

Yes      No  

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

Yes      No  

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

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

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

Yes      No  

State the number of shares outstanding of each of the issuer’s classes of common equity as of the latest practicable date: As of August 1, 2016, there were 242,966,884 shares of common stock, par value $0.001 per share, issued and outstanding.

 
 

 

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION   2
  ITEM 1. FINANCIAL STATEMENTS   2
  ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS   16
  ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK   19
  ITEM 4. CONTROLS AND PROCEDURES   20
PART II - OTHER INFORMATION   21
  ITEM 1. LEGAL PROCEEDINGS   21
  ITEM 1A. RISK FACTORS   21
  ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS   21
  ITEM 3. DEFAULTS UPON SENIOR SECURITIES   22
  ITEM 4. MINE SAFETY DISCLOSURES   22
  ITEM 5. OTHER INFORMATION   22
  ITEM 6. EXHIBITS   23
SIGNATURES   24

 

 
 

 

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

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

EXPLANATORY NOTE

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

On August 8, 2016, the Company filed a Quarterly Report on Form 10-Q for the period from April 1, 2016 to June 30, 2016, 2016 (the “Quarterly Report”). As explained in the Quarterly Report, the interim financial statements and notes thereto contained in the Quarterly Report (the “Quarterly Report Financial Statements”), the Company accounted for the acquisition of the SPVs using the purchase method of accounting. Under this method, the Company allocated the purchase price to tangible and intangible assets acquired and liabilities assumed based on estimated fair values at the date of acquisition, with the excess of the purchase price amount being allocated to goodwill.

The Company is filing this Amendment No. 1 (this “amendment”) on Form 10-Q/A to (i) file interim financial statements for the period from April 1, 2016 to June 30, 2016 to reflect the restatement of its consolidated financial statements for the period from April 1, 2016 to June 30, 2016 due to the application of the equity method of accounting for the investments in Agricerere S.r.l., Agrielektra S.r.l., Agrisorse S.r.l. and Gefa S.r.l. The Company applied the equity method because the Framework EBITDA Guarantee Agreement between the SPVs and Austep whereby Austep operates, maintains and supervises each biogas plant, prevents the Company from exercising a controlling influence over operating policies of the plants. Under this method, our equity investment is reflected as an investment in non-consolidated subsidiaries on our Condensed Balance Sheets and the net earnings or losses of the investments is reflected as equity in net earnings of non-consolidated companies on our Consolidated Statements of Operations. The Company believes that, while the financial statements reflect substantial modifications, the revenues and expenses previously reported are now reflected in a line item for the Company’s non-consolidated wholly-owned subsidiaries and the modifications result in no impact to the Company’s operational results. Therefore the modifications are substantially a matter of presentation.

In addition, this amendment includes modifications (i) to reflect the interest expense on the unpaid balance of the Purchase Price due the acquisition of the SPVs, (ii) to reclassify the proceeds from an offering which were previously recorded as current liability as proceeds on account of shares in Shareholders Deficiency, (iii)  to reflect the effects of accounting and reporting errors in calculation of issuance of shares and issuance of shares for services, and (iv) to amend our disclosure in Part I, Item 4 “Controls and Procedures,” of the Original Report to change the conclusions of our principal executive officer and principal financial officer regarding the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter ended June  30, 2016 in light of management’s conclusion that the Company’s internal control over financial reporting contained a material weakness at June  30, 2016 which will be remediated by the end of the fiscal year ending December 31, 2016. These accounting and reporting errors and the related adjustments resulted in an overstatement of net loss of $522 thousand for the period from January 1, 2016 to March 31, 2016 and an understatement of additional paid-in capital of $527 thousand, an overstatement of accumulated other comprehensive income of $38 thousand and overstatement of accumulated deficit of $531 thousand as of June 31, 2016. 

 Except as described above, this Amendment No. 2 on Form 10-Q/A does not amend any other information set forth in the Quarterly Report. However, for the convenience of the reader, this Amendment No. 1 on Form 10-Q/A restates in its entirety, as amended, the Quarterly Report. This Amendment No. 1 on Form 10-Q/A is presented as of the filing date of the Quarterly Report and does not reflect events occurring after that date, or modify or update information in the Quarterly Report, except as described above.

1 
 

 

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

BLUE SPHERE CORPORATION

INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF JUNE 30, 2016

TABLE OF CONTENTS

    Page
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:    
Balance Sheets as of June 30, 2016 and September 30, 2015   3
Statements of Operations for the six and three months ended June 30, 2016 and 2015   4
Statements of Comprehensive Loss for the period six and of three months ended June 30, 2016 and 2015   5
Statements of Changes in Shareholders’ Deficiency for the period of six months ended June 30, 2016 and 2015   6
Statements of Cash Flows for the six months ended June 30, 2016 and 2015   7
Notes to Condensed Consolidated Financial Statements   8-15

 

2 
 

 

BLUE SPHERE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(U.S. dollars in thousands except share and per share data)

 

   June 30, 2016  September 30,
2015
   Unaudited  Audited
Assets      
CURRENT ASSETS:      
Cash and cash equivalents  $533   $161 
Other current assets   1,642    21 
Total current assets   2,175    182 
           
PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation   82    31 
OTHER LONG TERM ASSETS   18    —   
INVESTMENTS IN JOINT VENTURES   8,927    4,952 
INVESTMENTS IN NON CONSOLIDATED SUBSIDIARIES   3,978    —   
           
Total assets  $15,180   $5,165 
Liabilities and Stockholders’ Deficiency          
CURRENT LIABILITIES:          
Current maturities of long term loan  $352   $32 
Accounts payables   594    58 
Other accounts payable and liabilities   1,345    1,200 
Deferred revenues from joint ventures   10,409    6,434 
Total current liabilities   12,700    7,724 
           
LONG TERM BANK LOANS   148    135 
           
LONG TERM LOANS AND LIABILITIES   5,595    —   
           
DEBENTURES   2,410    —   
           
WARRANTS TO ISSUE SHARES   2,647    —   
STOCKHOLDERS’ DEFICIENCY:          
Common shares of $0.001 par value each:          
Authorized: 1,750,000,000 shares at June 30, 2016 and September 30, 2015. Issued and outstanding: 243,051,884 shares and 167,952,595 shares at June 30, 2016 and September 30, 2015, respectively   1,319    1,244 
Proceeds on account of shares   —      20 
Treasury shares   (28)   (28)
Accumulated other comprehensive income   8    —   
Additional paid-in capital   41,766    39,474 
Accumulated deficit   (51,385)   (43,404)
Total Stockholders’ Deficiency   (8,320)   (2,694)
Total liabilities and Stockholders’ Deficiency  $15,180   $5,165 

 

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

 

3 
 

 

BLUE SPHERE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(U.S. dollars in thousands except share and per share data)

   Six months ended
June 30
  Three months ended
June 30
   2016  2015  2016  2015
   (Unaudited)  (Unaudited)  (Unaudited)  (Unaudited)
OPERATING EXPENSES                    
General and administrative expenses   4,505    3,450    2,423    2,439 
Other income   (102)   (57)   —      (38)
OPERATING LOSS   4,403    3,393    2,423    2,401 
FINANCIAL EXPENSES (INCOME), net   1,145    1,551    (86)   732 
EQUITY LOSSES IN NON CONSOLIDATED SUBSIDIARIES   1,145    —      475    —   
NET LOSS FOR THE PERIOD  $6,693   $4,944   $2,812   $3,133 
                     
Net loss per common share - basic and diluted  $(0.032)  $(0.068)  $(0.012)  $(0.040)
                     
Weighted average number of common shares outstanding during the period - basic and diluted   210,663,024    72,482,628    225,772,114    79,543,760 

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

 

4 
 

 

BLUE SPHERE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(U.S. dollars in thousands except share and per share data)

   Six months ended
June 30
  Three months ended
June 30
   2016  2015  2016  2015
   (Unaudited)  (Unaudited)  (Unaudited)  (Unaudited)
NET LOSS  $6,693   $4,944   $2,812   $3,133 
Other comprehensive income loss, net of tax:                    
Currency translation adjustments   (8)   —      (3)   —   
TOTAL COMPREHENSIVE LOSS  $6,685   $4,944   $2,809   $3,133 

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

 

5 
 

 

BLUE SPHERE CORPORATION
STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIENCY (UNAUDITED)
(U.S. dollars in thousands, except share and per share data)

   Common Stock,
$0.001 Par Value
  Proceeds
on
account of
  Treasury  Accumulated
other
comprehensive
  Additional
paid-in
  Accumulated  Total
Stockholders’
   Shares  Amount  Shares  Shares  income  Capital  deficit  deficiency
BALANCE AT DECEMBER 31, 2015 (Unaudited)   180,502,443   $1,256   $165    (28)   —     $39,813   $(44,692)  $(3,486)
CHANGES DURING THE PERIOD OF SIX MONTHS ENDED JUNE 30, 2016 (Unaudited):                                        
Extinguish of liability upon shares issuance   7,103,467    7                   625         632 
Issuance of shares for services   3,500,000    4                   579         583 
Issuance of common stock, net of issuance costs   37,315,232    37    (20)             578         595 
Issuance of common stock in respect of issuance of convertible notes   13,930,742    14    (145)             131         —   
Exercise of warrants   700,000    1                   40         41 
Comprehensive loss                       8         (6,693)   (6,685)
BALANCE AT JUNE 30, 2016 (Unaudited)   243,051,884   $1,319   $—     $(28)  $8   $41,766   $(51,385)  $(8,320)

 

 

   Common Stock,
$0.001 Par Value
  Proceeds on
account of
  Additional
paid-in
  Accumulated  Total
Stockholders’
   Shares  Amount  Shares  Capital  deficit  deficiency
BALANCE AT DECEMBER 31, 2014 (Unaudited)    51,125,044   $1,127   $20   $35,662   $(37,256)  $(447)
CHANGES DURING THE PERIOD OF SIX MONTHS ENDED JUNE 30, 2015 (Unaudited):                              
Share based compensation                   158         158 
Issuance of common stock, net of issuance expenses    2,169,760    2         249         251 
Issuance of shares for services    20,357,035    20         1,316         1,336 
Issuance of common stock in respect of issuance of convertible notes    39,962,236    40         1,196         1,236 
Issuance of convertible debentures containing a beneficial conversion feature                   181         181 
Net loss for the period                        (4,944)   (4,944)
BALANCE AT JUNE 30, 2015 (Unaudited)    113,614,075   $1,189   $20   $38,762   $(42,200)  $(2,229)

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

 

6 
 

 

BLUE SPHERE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(U.S. dollars in thousands)

   Six months ended
June 30
   2016  2015
   (Unaudited)  (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:      
Net loss for the period  $(6,693)  $(4,944)
Adjustments required to reconcile net loss to net cash provided by (used in) operating activities:          
Share based compensation   367    158 
Depreciation   8    3 
           
Equity losses on nonconsolidated subsidiaries   1,145    (19)
Expense in respect of convertible notes and loans   93    1,421 
           
Changes in Warrants to issue shares   946    —   
Issuance of shares for services   583    1,336 
Projects costs expensed   —      469 
           
Decrease (increase) in other current assets   (191)   107 
Increase in other long term assets   (18)   —   
Decrease in accounts payables   469    60 
Increase in other account payables   449    54 
Increase in Deferred revenues   —      1,553 
Net cash provided by (used in) operating activities   (2,842)   198 
CASH FLOWS FROM INVESTING ACTIVITIES:          
Purchase of property and equipment   (60)   (1)
Net cash used in investing activities   (60)   (1)
CASH FLOWS FROM FINANCING ACTIVITIES:          
Loans received   50    461 
Payment of loans and convertible debentures   (295)   (963)
Proceeds from issuance of shares and warrants   1,752    242 
Proceeds from exercise of warrants   41    —   
Proceeds from issuance of convertible debenture   —      212 
Net cash provided by financing activities   1,548    (48)
           
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS   (1,354)   149 
           
EFFECT OF CHANGES IN EXCHANGE RATES ON CASH BALANCES IN FOREIGN CURRENCIES   1    —   
           
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD   1,888    118 
           
CASH AND CASH EQUIVALENTS AT END OF PERIOD  $533   $267 
NON-CASH TRANSACTION:          
Extinguish of debt upon shares issuance   411       
Deferred net equity in joint ventures   1,357    3,256 
Issuance expense paid through warrants issuance   225    —  
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:          
Cash paid during the period for:          
Interest  $240   $—   

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

 

7 
 

 

BLUE SPHERE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

NOTE 1 – BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been prepared on the same basis as the audited annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the financial position and results of operations of Blue Sphere Corporation (the “Company”). These condensed consolidated financial statements and notes thereto are unaudited and should be read in conjunction with the Company’s audited financial statements included in its Annual Report on Form 10-K for the year ended September 30, 2015, as filed with the U.S. Securities and Exchange Commission. The results of operations for the six and three months ended June 30, 2016 are not necessarily indicative of results that could be expected for the entire fiscal year.

NOTE 2 – GENERAL

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

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

As of June 30, 2016, Johnstonsphere had not commenced operations.

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

NOTE 3 – INVESTMENT IN BLUE SPHERE PAVIA

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

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

8 
 

 

BLUE SPHERE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

NOTE 3 – INVESTMENT IN BLUE SPHERE PAVIA (continued)

Pursuant to the Share Purchase Agreement, the Company to pay $5,646,628 (€5,200,000) (the “Purchase Price”), subject to certain post-closing adjustments, to acquire the share capital of the SPVs. The Purchase Price for each SPV was determined based on a Base Line EBITDA guaranteed by the Sellers and an Equity IRR Target calculated on the Purchase Price of no less than twenty-five percent (25%). Fifty percent (50%) of the Purchase Price, adjusted for certain post-closing adjustments and closing costs, in the amount of $2,143,181 (€1,952,858) was paid at closing, and the balance is due to the Sellers on the third anniversary of the closing date. The remaining fifty percent (50%) of the Purchase Price, prior to and after closing date, and any variation of EBITDA results in the 18 months following the closing date , will be promised by a note from each Seller, to be paid on the third anniversary of the closing, along with interest on the unpaid balance due at an annual rate of two percent (2%). The portion of the Purchase Price paid at closing was primarily financed by a loan of $3,149,081 (€2,900,000) pursuant to the Helios Loan Agreement whereas the Company repaid $342,192 (€310,204) during the six months ended June 30, 2016.

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

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

NOTE 4 – CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The accompanying unaudited condensed consolidated financial statements as of June 30, 2016 and for the six and three months then ended have been prepared in accordance with accounting principles generally accepted in the United States relating to the preparation of financial statements for interim periods. Accordingly, they do not include all the information and footnotes required for annual financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six and three months ended June 30, 2016 are not necessarily indicative of the results that may be expected for the year ending December 31, 2016.

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

NOTE 5 – SIGNIFICANT ACCOUNTING POLICIES

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

a.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.

9 
 

 

BLUE SPHERE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

NOTE 5 – SIGNIFICANT ACCOUNTING POLICIES (continued)

b. Investment in non-consolidated and affiliated companies

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

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

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

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

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

c. Intangible Assets

Intangible assets consist of non-monetary and separately identifiable assets, which can be controlled and are expected to generate future economic benefits. Such assets are recognized at acquisition and/or production cost, including directly attributable expenses to make the asset ready for use, net of accumulated amortization charges and any impairment losses. The costs incurred internally to develop new services and platforms are considered intangible assets generated internally and are recognized as assets only if the following requirements are met:

1.the cost incurred for the development of the assets can be reliably measured;
2.the entity has the intention, the availability of financial resources, the ability to complete the assets and to use or sell them;

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

10 
 

 

BLUE SPHERE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

NOTE 5 – SIGNIFICANT ACCOUNTING POLICIES (continued)

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

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

d. Long-Lived Assets

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

NOTE 6 – GOING CONCERN

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As of June 30, 2016, the Company had approximately $533,000 in cash and cash equivalents, approximately $10,525,000 in negative working capital, a stockholders’ deficit of approximately $8,320,000 and an accumulated deficit of approximately $51,385,000. Management anticipates their business will require substantial additional investments that have not yet been secured. Management is continuing in the process of fund raising in the private equity markets as the Company will need to finance future activities. The Company’s ability to continue as a going concern is dependent upon raising capital from financing transactions and revenue from operations. These unaudited financial statements do not include any adjustments that may be necessary should the Company be unable to continue as a going concern. The Company’s continuation as a going concern is dependent on its ability to obtain additional financing as may be required and ultimately to attain profitability.

NOTE 7 – NEWLY ISSUED ACCOUNTING PRONOUNCEMENTS

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

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BLUE SPHERE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

NOTE 8 – COMMON SHARES

On January 26, 2016, the Company issued 1,000,000 shares of common stock pursuant to a subscription agreement dated June 12, 2015.

On February 1, 2016 the Company issued 540,000 shares of common stock to a consultant in respect of his consulting services for the Company. The Company has estimated the fair value of such shares, and recorded an expense of $108,327.

In February 2016, the Company conducted an offering (the “February Offering”) consisting of (a) up to USD $1,925,000 of the Company’s shares of common stock, par value $0.001 per share (“Common Stock”), priced at the closing price for shares of Common Stock, as reported on the OTCQB Venture Marketplace, on the trading day prior to the closing of the February Offering, and (b) 5-year warrants to purchase shares of Common Stock in an amount equal to 50% of the number of shares of Common Stock so purchased by the subscriber (the “February Warrants”, together with the shares of Common Stock subscribed for, the “February Securities”). The February Securities have been offered pursuant to subscription agreements with each investor (the “February Subscription Agreement”). 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 Common Stock sold in the February Offering, including all shares of Common Stock underlying the February Warrants, within 60 days of the closing of the February Offering. The February Warrants are exercisable for 5 years from the date of issuance at $0.10 per share, include an option by which the holder may exercise the February Warrant by means of a cashless exercise, and include customary weighted-average price adjustment and anti-dilution terms. On February 15, 2016, the Company completed the only closing of the February Offering, representing aggregate gross proceeds to the Company of $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 Common Stock at $0.055 per share, and (b) February Warrants to purchase, in the aggregate, up to 17,500,000 shares of Common Stock at an exercise price of $0.10 per share. The warrants were accounted for as derivative liabilities. The Company has estimated the fair value of such warrants at a value of $933,358 at the date of issuance and using the Black-Scholes option pricing model using the following assumptions:

    %  
Dividend yield     0  
Risk-free interest rate     1.20 %
Expected term (years)     5  
Volatility     203 %

The Company engaged Maxim Group LLC (“Maxim”) to assist in the February 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 February Offering, warrants to purchase, in the aggregate, up to 2,800,000 shares of Common Stock at an exercise price of $0.0605 per share and to purchase, in the aggregate, up to 1,400,000 shares of Common Stock at an exercise price of $0.11 per share. The Company has estimated the fair value of such warrants at a value of $224,413 at the date of issuance and using the Black-Scholes option pricing model using the following assumptions:

    %  
Dividend yield     0  
Risk-free interest rate     1.20 %
Expected term (years)     5  
Volatility     203 %

On March 15, 2016, the Company issued 85,000 shares of Common Stock to a consultant in respect of his consulting services for the Company. The Company has estimated the fair value of such shares, and recorded an expense of $5,685.

On April 13, 2016, the Company issued 1,000,000 shares of Common Stock of the Company to a consultant in consideration for corporate finance, investor communications and financial and investor public relations services. The Company has estimated the fair value of such shares, and recorded an expense of $72,733.

On June 13, 2016 and per the consulting agreement the Company issued an additional 1,000,000 shares of Common Stock as a service bonus since the agreement was not terminated prior to June 9, 2016. The Company has estimated the fair value of such shares, and recorded an expense of $89,000.

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BLUE SPHERE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

NOTE 8 – COMMON SHARES (continued)

On April 13, 2016, we issued an aggregate of 875,000 shares of our Common Stock to a consultant, pursuant to consulting agreements dated September 1, 2015 and March 1, 2016, in consideration for investor relations and communications services. The Company has estimated the fair value of such shares, and recorded an expense of $42,467.

On May 18, 2016, a 1.5-year warrant to purchase shares of Common Stock, dated May 4, 2015, was exercised into 700,000 shares of common stock at an exercise price of $0.058 per share, for total consideration of $40,235.

On June 2, 2016, we issued 13,930,742 shares of our Common Stock in consideration of $145,525 pursuant to all but one of the July 2015 Offering Subscription Agreements, with the issuance of the remaining 7,658,129 shares of our Common Stock currently in process.

On June 13, 2016, the Company issued 7,103,467 shares of Common Stock to several officers, directors, employees and/or consultants of the Company. All shares were issued pursuant to the Company’s Global Share and Options Incentive Enhancement Plan (2014) (the “2014 Incentive Plan”) and the Company’s Global Share Incentive Plan (2010). The Company has estimated and recorded the fair value of such shares as an expense of $632,208 which was recorded through the vesting periods.

On June 26, 2016, the Company issued 500,000 shares of Common Stock in order to complete its obligations under the Share Purchase Agreement from 2014.

NOTE 9 – WARRANTS, DEBENTURES AND NOTES

Senior Debentures Offering

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

The Debentures bear interest at 11%, paid quarterly, and mature in two years. The Debentures are secured by a pledge agreement between the Company and each investor, whereby the Company pledged as collateral up to 49% of its shares of common stock in Eastern Sphere, Ltd., our wholly-owned subsidiary (the “Pledge Agreement”). The Pledge Agreement further provides that the Company’s obligations under the Debentures rank senior to all other indebtedness of Blue Sphere Corporation, but are subordinate to all indebtedness and liabilities of its subsidiaries and project-level operating entities. The Debenture Offering 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 November 2015 Warrants were accounted for as derivative liabilities. The Company has estimated the fair value of such warrants at a value of $208,597 at the date of issuance using the Black-Scholes option pricing model using the following assumptions:

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

 

13 
 

 

BLUE SPHERE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

NOTE 9 – WARRANTS, DEBENTURES AND NOTES (continued)

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

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

The Company engaged Maxim Group LLC to assist in the Debenture 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 Debenture Offering and warrants to purchase, in the aggregate, up to 4,480,000 shares of Common Stock at an exercise price of $0.06875 per share. The Company has estimated the fair value of such warrants at a value of $116,599 at the date of issuance using the Black-Scholes option pricing model using the following assumptions:

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

On February 3, 2016, the Company issued 3-year warrants to purchase up to 1,500,000 shares of Company’s common stock at an exercise price of $0.06 per share, in full satisfaction of certain obligations of the Company.

The Company has estimated the fair value of such warrants at a value of $87,331 at the date of issuance using the Black-Scholes option pricing model using the following assumptions:

    %  
Dividend yield     0  
Risk-free interest rate     1.2 %
Expected term (years)     3  
Volatility     203 %

Changes in the fair value of the warrants are recorded as interest expenses

14 
 

 

BLUE SPHERE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

NOTE 10 – SUBSEQUENT EVENTS

In June and July 2016, we conducted an offering (the “June 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 Offering, and (b) five-year warrants (the “June Warrants”, together with the shares of Common Stock subscribed for, the “June Securities”) 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 consisted of one or more closings, with the last closing to occur on or before July 26, 2016, or as extended by the Company in is sole discretion. The June Securities 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 Offering, including all shares of Common Stock underlying the June Warrants, within twenty (20) days of the final closing of the June Offering. Each June Subscription Agreement also provides that if, during the period beginning on the date of the first closing of the June Offering and ending on the six month anniversary thereof, the Company completes (a) a subsequent closing of the June 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 June Securities and/or issue new securities to the applicable subscriber reflecting such more favorable material deal terms and conditions (the “June MFN Rights”). The June Warrants are exercisable for five years from the date of issuance, include an option by which the holder may exercise the June Warrant by means of a cashless exercise, and include customary weighted-average price adjustment and anti-dilution terms.

On July 26, 2016, the Company completed closings of the June Offering, both such closings representing aggregate gross proceeds to the Company of USD $1,370,000. In connection with both closings, the Company and subscribers entered into (a) June Subscription Agreements for 18,266,668 shares of Common Stock at $0.075 per share, and (b) June Warrants to purchase up to 18,266,668 shares of Common Stock at an exercise price of $0.11 per share. The subscriber in the July 7, 2016 closing received an adjustment to its June Securities pursuant to its June MFN Rights. The June Offering ended on July 26, 2016.

The Company engaged Maxim Group LLC to assist in the June Offering. Pursuant to the terms of an engagement letter between Maxim and the Company, in connection with both closings, Maxim received commissions equal to 4.44% of the gross proceeds raised, warrants to purchase up to 928,000 shares of Common Stock at an exercise price of $0.0825 per share, and warrants to purchase up to 928,000 shares of Common Stock at an exercise price of $0.121 per share. 

15 
 

 

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

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

Note Regarding Forward-Looking Statements

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

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

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

Company Overview

Summary of Current Operations

We are an international 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, 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 construct and develop waste-to-energy facilities in the Netherlands, and we continue to evaluate a pipeline of similar projects in a less mature phase.

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Results of Operations

General

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

Deferred Revenue

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

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

General and Administrative Expenses

General and administrative expenses for the three-month period ended June 30, 2016 were $2,423,000, as compared to $2,439,000 for the three-month period ended June 30, 2015.

Net Loss

We incurred a net loss of $2,812,000 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 decrease in net loss is mainly attributable to decrease in our finance expense.

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

General and Administrative Expenses

General and administrative expenses for the six-month period ended June 30, 2016 were $4,505,000, as compared to $3,450,000 for the six-month period ended June 30, 2015.

Net Loss

We incurred a net loss of $6,693,000 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 increase in Equity losses in non-consolidated subsidiaries due to the acquisition of the SPVs by our wholly-owned subsidiary, Bluesphere Pavia.

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.

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Critical Accounting Policies

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

a.Business Combinations and Goodwill

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 with 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.

b.       Investment in non-consolidated and affiliated companies

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

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

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

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

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

18 
 

c.       Intangible Assets

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

d.       Long-Lived Assets

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.

Liquidity and Capital Resources

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

As of June 30, 2016, we had cash and cash equivalents of $533,000, as compared to $161,000 as of September 30, 2015. As of June 30, 2016, we had a working capital deficit of $10,525,000, as compared to $7,542,000 as of September 30, 2015. The increase in our working capital deficit is mainly attributable to 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 $320,000 and increase in our accounts payables in the amount of $533,000. The increase in our working capital deficit was mitigated by an increase in our other current assets in the amount of $1,621,000.

Net cash used in operating activities was $2,842,000 for the six-month period ended June 30, 2016, as compared to cash from operating activities of $198,000 for the six-month period ended June 30, 2015.

Net cash used in investing activities was $60,000 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 $1,408,000 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 Offering, February Offering and June Offering described in the notes to the condensed consolidated financial statements included in this quarterly report.

Off-Balance Sheet Arrangements

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

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

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

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ITEM 4. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

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

Pursuant to Rule 13a-15(b) under the Exchange Act, the Company carried out an evaluation with the participation of the Company’s management, including the Company’s Chief Executive Officer (“CEO”) and the Company’s Chief Financial Officer (“CFO”), of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15 (e) under the Exchange Act) as of the three months ended June 30, 2016. Based upon that evaluation, the Company’s CEO and CFO concluded that, as of the end of such period, the Company’s disclosure controls and procedures were not effective in ensuring that (i) information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

 

Our management management’s conclusion that the Company’s internal control over financial reporting contained a material weakness at June  30, 2015 which will be remediated by the end of the fiscal year ending December 31, 2016 and is in the process of determining how best to change our current system and implement a more effective system to insure that information required to be disclosed has been recorded, processed, summarized and reported accurately. Our management acknowledges the existence of this issue, and is developing procedures and controls to address it to the extent possible given limitations in financial and manpower resources.

 

Changes in Internal Controls

 

Our management, with the participation of our CEO and CFO, performed an evaluation to determine whether any change in our internal controls over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) occurred during the three-month period ended June 30, 2016. Based on that evaluation, our CEO and our CFO concluded that no change occurred in the Company’s internal controls over financial reporting during the three-month period ended June 30, 2016 that has materially affected, or is reasonably likely to materially affect, the Company’s internal controls over financial reporting.

 

 

20 
 

 

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

None.

ITEM 1A. RISK FACTORS.

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

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

Unregistered sales of equity securities

On April 13, 2016, we issued 1,000,000 shares of common stock of the Company to a consultant in consideration for corporate finance, investor communications and financial and investor public relations services. On June 13, 2016, pursuant to the consulting agreement, we issued an additional 1,000,000 shares of common stock as a service bonus since the agreement was not terminated prior to June 9, 2016.

On April 13, 2016, we issued an aggregate of 875,000 shares of our common stock to a consultant, pursuant to consulting agreements dated September 1, 2015 and March 1, 2016, in consideration for investor relations and communications services.

On May 18, 2016, a 1.5-year warrant to purchase shares of common stock, dated May 4, 2015, was exercised into 700,000 shares of common stock at an exercise price of $0.058 per share, for total consideration of $40,235.

On June 2, 2016, we issued 13,930,742 shares of common stock in connection with an offering of common stock and pursuant to subscription agreements dated December 2, 2015, the proceeds of which were used to finance a portion of the acquisitions of one hundred percent (100%) of the SPVs.

On June 13, 2016, we issued 7,103,467 shares of common stock of the Company to several officers, directors, employees and/or consultants of the Company. All shares were issued pursuant to the Company’s Global Share and Options Incentive Enhancement Plan (2014) and the Company’s Global Share Incentive Plan (2010).

On June 26, 2016, we issued 500,000 shares of common stock of the Company in full satisfaction of certain obligations under a subscription agreement.

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

Issuer Purchases of Equity Securities

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

Our share repurchase activity during the three months ended June 30, 2016 is presented in the table below.

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

 

21 
 

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

ITEM 5. OTHER INFORMATION.

On July 26, 2016, the Company completed a closing of the June Offering, representing aggregate gross proceeds to the Company of USD $370,000. In connection with the closing, the Company and subscribers entered into (a) June Subscription Agreements for an aggregate of 4,933,334 shares of common stock at $0.075 per share, and (b) June Warrants to purchase up to 4,933,334 shares of common stock at an exercise price of $0.11 per share. The subscriber in the July 7, 2016 closing also received an adjustment to its June Securities pursuant to its June MFN Rights, in the amount of 833,334 additional shares of our common stock and June Warrants to purchase up to an additional 833,334 shares of our common stock.

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

The Company engaged Maxim Group LLC to assist in the June Offering. Pursuant to the terms of an engagement letter between Maxim and the Company, in connection with both closings, Maxim received commissions equal to 4.44% of the gross proceeds raised, warrants to purchase up to 928,000 shares of Common Stock at an exercise price of $0.0825 per share, and warrants to purchase up to 928,000 shares of Common Stock at an exercise price of $0.121 per share.

The foregoing description of the June Subscription Agreements and the June Warrants do not purport to be complete and are qualified in their entirety by reference to the full text of the forms of the June Subscription Agreement and June Warrant filed as Exhibits 10.1 and 10.2 to this quarterly report, respectively, and incorporated herein by reference.

The representations, warranties and covenants contained in the June Subscription Agreement were made solely for the benefit of the parties to the agreement and may be subject to limitations agreed upon by the contracting parties. Accordingly, the form of June Subscription Agreement is incorporated herein by reference only to provide investors with information regarding its terms and not to provide investors with any other factual information regarding the Company or its business, and should be read in conjunction with the disclosures in the Company’s periodic reports and other U.S. Securities and Exchange Commission (“SEC”) filings.

22 
 

 

ITEM 6. EXHIBITS.

No.   Description
     
3.1   Amended and Restated Articles of Incorporation, dated November 22, 2013 (1)
     
3.2   Amended and Restated Bylaws, dated June 17, 2015 (2)
     
10.1   Form of June Subscription Agreement (3)
     
10.2   Form of June Warrant (3)
     
10.3*   Services Agreement, effective as of May 1, 2016, between Blue Sphere Corporation and Mr. Ran Daniel (4)
     
31.1   Rule 13a-14(a) / 15d-14(a) Certification of Chief Executive Officer
     
31.2   Rule 13a-14(a) / 15d-14(a) Certification of Chief Financial Officer
     
32.1   Section 1350 Certification of Chief Executive Officer
     
32.2   Section 1350 Certification of Chief Financial Officer
     
101.INS   XBRL Instance Document
     
101.SCH   XBRL Taxonomy Extension Schema Document
     
101.CAL   XBRL Taxonomy Extension Calculation Linkbase Document
     
101.DEF   XBRL Taxonomy Extension Definition Linkbase Document
     
101.LAB   XBRL Taxonomy Extension Label Linkbase Document
     
101.PRE   XBRL Taxonomy Extension Presentation Linkbase Document

 

(1) Incorporated by reference to our current report on Form 8-K filed with the SEC on December 3, 2013.
(2) Incorporated by reference to our current report on Form 8-K filed with the SEC on June 17, 2015.
(3) Incorporated by reference to our current report on Form 8-K filed with the SEC on July 8, 2016.
(4) Incorporated by reference to our current report on Form 8-K filed with the SEC on May 4, 2016.

* Indicates management contract or compensatory plan or arrangement.

23 
 

 

SIGNATURES

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

  BLUE SPHERE CORPORATION
     
  By: /s/ Shlomi Palas
    President, Chief Executive Officer, Secretary and Director
    (Principal Executive Officer)
    Date: November 21, 2016
     
  By: /s/ Ran Daniel
    Chief Financial Officer
    (Principal Accounting Officer and Principal Financial Officer)
    Date: November 21, 2016

 

24 
EX-31.1 2 ex31-1.htm CERTIFICATION OF CHIEF EXECUTIVE OFFICER
 

Blue Sphere Corporation 10-Q/A 

Exhibit 31.1

CERTIFICATION OF
CHIEF EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002

I, Shlomi Palas, certify that:

1.I have reviewed this Form 10-Q of Blue Sphere Corporation;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods present in this report;
4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)disclosed in this report any change in the registrant’s internal control over financing reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)any fraud, whether or not material, that involved management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: November 21, 2016  
   
/s/ Shlomi Palas  
Shlomi Palas  
Chief Executive Officer  

 

 
EX-31.2 3 ex31-2.htm CERTIFICATION OF CHIEF FINANCIAL OFFICER
 

Blue Sphere Corporation 10-Q/A 

Exhibit 31.2

CERTIFICATION OF
CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002

I, Ran Daniel, certify that:

1.I have reviewed this Form 10-Q of Blue Sphere Corporation;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods present in this report;
4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)disclosed in this report any change in the registrant’s internal control over financing reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)any fraud, whether or not material, that involved management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: November 21, 2016  
   
/s/ Ran Daniel  
Ran Daniel  
Chief Financial Officer  

 

 
EX-32.1 4 ex32-1.htm CERTIFICATION OF CHIEF EXECUTIVE OFFICER
 

Blue Sphere Corporation 10-Q/A 

Exhibit 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with this Quarterly Report on Form 10-Q of Blue Sphere Corporation (the “Company”) for the three months ended June 30, 2016, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Shlomi Palas, Chief Executive Officer of the Company, hereby certifies, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Dated: November 21, 2016 By: /s/ Shlomi Palas
    Shlomi Palas
    Chief Executive Officer

This certification accompanies each Report pursuant to §906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of §18 of the Securities Exchange Act of 1934, as amended.

A signed original of this written statement required by §906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

 
EX-32.2 5 ex32-2.htm CERTIFICATION OF CHIEF FINANCIAL OFFICER
 

Blue Sphere Corporation 10-Q/A 

Exhibit 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with this Quarterly Report on Form 10-Q of Blue Sphere Corporation (the “Company”) for the three months ended June 30, 2016, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Ran Daniel, Chief Financial Officer of the Company, hereby certifies, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Dated: November 21, 2016 By: /s/ Ran Daniel
    Ran Daniel
    Chief Financial Officer

This certification accompanies each Report pursuant to §906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of §18 of the Securities Exchange Act of 1934, as amended.

A signed original of this written statement required by §906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

 

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GENERAL</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 7pt 0 0 0.75in; text-align: justify">Blue Sphere Corporation (&#8220;the Company&#8221;), together with its wholly-owned subsidiaries, Eastern Sphere Ltd. 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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.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 7pt 0 0 0.75in; text-align: justify">As of June 30, 2016, Johnstonsphere had not commenced operations.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 7pt 0 0 0.75in; text-align: justify">On May 12, 2015 the Company formed Bluesphere Pavia (formerly called Bluesphere Italy S.r.l.). Italy S.r.l, a subsidiary of Eastern in order to acquire certain biogas plants located in Italy (see note 3 below).</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0"><b>NOTE 8 &#8211; COMMON SHARES</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 7pt 0 0 0.75in; text-align: justify">On January 26, 2016, the Company issued 1,000,000 shares of common stock pursuant to a subscription agreement dated June 12, 2015.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 7pt 0 0 0.75in; text-align: justify">On February 1, 2016 the Company issued 540,000 shares of common stock to a consultant in respect of his consulting services for the Company. 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The February Securities have been offered pursuant to subscription agreements with each investor (the &#8220;February Subscription Agreement&#8221;). 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 Common Stock sold in the February Offering, including all shares of Common Stock underlying the February Warrants, within 60 days of the closing of the February Offering. The February Warrants are exercisable for 5 years from the date of issuance at $0.10 per share, include an option by which the holder may exercise the February Warrant by means of a cashless exercise, and include customary weighted-average price adjustment and anti-dilution terms. On February 15, 2016, the Company completed the only closing of the February Offering, representing aggregate gross proceeds to the Company of $1,925,000. 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Each June Subscription Agreement also provides that if, during the period beginning on the date of the first closing of the June Offering and ending on the six month anniversary thereof, the Company completes (a) a subsequent closing of the June 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 June Securities and/or issue new securities to the applicable subscriber reflecting such more favorable material deal terms and conditions (the &#8220;June MFN Rights&#8221;). 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The closing of the acquisition of the SPVs was subject to certain conditions precedent, as more fully described in the May Form 8-K, but which included obtaining consent from the acquired parties&#8217; creditor to the acquisition and the resulting change of control, and securing a mezzanine loan facility. Upon attainment of the conditions precedent, the Company closed the acquisition of the SPVs on December 14, 2015 and filed a Current Report on Form 8-K on December 17, 2015 reporting that it had consummated the acquisition of the SPVs.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 8pt; text-align: justify">On August 8, 2016, the Company filed a Quarterly Report on Form 10-Q for the period from April 1, 2016 to June 30, 2016, 2016 (the &#8220;Quarterly Report&#8221;). As explained in the Quarterly Report, the interim financial statements and notes thereto contained in the Quarterly Report (the &#8220;Quarterly Report Financial Statements&#8221;), the Company accounted for the acquisition of the SPVs using the purchase method of accounting. Under this method, the Company allocated the purchase price to tangible and intangible assets acquired and liabilities assumed based on estimated fair values at the date of acquisition, with the excess of the purchase price amount being allocated to goodwill.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 8pt; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">The Company is filing this Amendment No. 1 (this &#8220;amendment&#8221;) on Form 10-Q/A to (i) file interim financial statements for the period from April 1, 2016 to June 30, 2016 to reflect the restatement of its consolidated financial statements for the period from April 1, 2016 to June 30, 2016 due to the application of the equity method of accounting for the investments in Agricerere S.r.l., Agrielektra S.r.l., Agrisorse S.r.l. and Gefa S.r.l. The Company applied the equity method because the Framework EBITDA Guarantee Agreement between the SPVs and Austep, whereby Austep operates, maintains and supervises each biogas plants prevents the Company from exercising a controlling influence over operating policies of the plants. Under this method, our equity investment is reflected as an investment in non-consolidated subsidiaries on our Condensed Balance Sheets and the net earnings or losses of the investments is reflected as equity in net earnings of non-consolidated companies on our Consolidated Statements of Operations. The Company believes that, while the financial statements reflect substantial modifications, the revenues and expenses previously reported are now reflected in a line item for the Company&#8217;s non-consolidated wholly-owned subsidiaries and the modifications result in no impact to the Company's operational results. Therefore the modifications are substantially a matter of presentation.</font>&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 8pt; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">In addition, this amendment includes modifications (i) to reflect the interest expense on the unpaid balance of the Purchase Price due the acquisition of the SPVs, (ii) to reclassify the proceeds from an offering which were previously recorded as current liability as proceeds on account of shares in Shareholders Deficiency, (iii) &#160;to reflect the effects of accounting and reporting errors in calculation of issuance of shares and issuance of shares for services, and (iv) to amend our disclosure in Part I, Item&#160;4 &#8220;Controls and Procedures,&#8221; of the Original Report to change the conclusions of our principal executive officer and principal financial officer regarding the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter ended June &#160;30, 2016 in light of management&#8217;s conclusion that the Company&#8217;s internal control over financial reporting contained a material weakness at June &#160;30, 2016 which will be remediated by the end of the fiscal year ending December&#160;31, 2016. These accounting and reporting errors and the related adjustments resulted in an overstatement of net loss of $522 thousand for the period from January 1, 2016 to March 31, 2016 and an understatement of additional paid-in capital of $527 thousand, an overstatement of accumulated other comprehensive income of $38 thousand and overstatement of accumulated deficit of $531 thousand as of June 31, 2016.&#160;</font></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 8pt; text-align: justify">&#160;Except as described above, this Amendment No. 2 on Form 10-Q/A does not amend any other information set forth in the Quarterly Report. However, for the convenience of the reader, this Amendment No. 1 on Form 10-Q/A restates in its entirety, as amended, the Quarterly Report. This Amendment No. 1 on Form 10-Q/A is presented as of the filing date of the Quarterly Report and does not reflect events occurring after that date, or modify or update information in the Quarterly Report, except as described above.</p> 0.50 .25 0.50 <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0"><b>NOTE 6 &#8211; GOING CONCERN</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 8pt 0 0 0.75in; text-align: justify">The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As of June 30, 2016, the Company had approximately $533,000 in cash and cash equivalents, approximately $10,525,000 in negative working capital, a stockholders&#8217; deficit of approximately $8,320,000 and an accumulated deficit of approximately $51,385,000. Management anticipates their business will require substantial additional investments that have not yet been secured. Management is continuing in the process of fund raising in the private equity markets as the Company will need to finance future activities. The Company&#8217;s ability to continue as a going concern is dependent upon raising capital from financing transactions and revenue from operations. These unaudited financial statements do not include any adjustments that may be necessary should the Company be unable to continue as a going concern. The Company&#8217;s continuation as a going concern is dependent on its ability to obtain additional financing as may be required and ultimately to attain profitability.</p> -6693000 -4944000 -2812000 -3133000 225000 <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0"><b>NOTE 1 &#8211; BASIS OF PRESENTATION</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 7pt 0 0 0.75in; text-align: justify">The accompanying unaudited condensed consolidated financial statements have been prepared on the same basis as the audited annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the financial position and results of operations of Blue Sphere Corporation (the &#8220;Company&#8221;). These condensed consolidated financial statements and notes thereto are unaudited and should be read in conjunction with the Company&#8217;s audited financial statements included in its Annual Report on Form 10-K for the year ended September 30, 2015, as filed with the U.S. Securities and Exchange Commission. The results of operations for the six and three months ended June 30, 2016 are not necessarily indicative of results that could be expected for the entire fiscal year.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0"><b>NOTE 3 &#8211; INVESTMENT IN BLUE SPHERE PAVIA</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 7pt 0 8pt 0.75in; text-align: justify">On August 18, 2015, the Company and two of its wholly-owned subsidiaries, Eastern and Bluesphere Pavia, entered into a Long Term Mezzanine Loan Agreement (the &#8220;Helios Loan Agreement&#8221;) with Helios Italy Bio-Gas 1 L.P. (&#8220;Helios&#8221;). Under the Helios Loan Agreement, Helios will make up to $5,646,628 (&#8364;5,000,000) available to Bluesphere Pavia (the &#8220;Helios Loan&#8221;) 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&#8217;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 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 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.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 8pt 0.75in; text-align: justify">On December 14, 2015 (&#8220;Closing Date&#8221;), and pursuant to a Share Purchase Agreement, dated May 14, 2015 (the &#8220;Share Purchase Agreement&#8221;), by and among the Company&#8217;s indirect wholly-owned subsidiary, Bluesphere Pavia, and Volteo Energie S.p.A., Agriholding S.r.l., and Overland S.r.l. (collectively, the &#8220;Sellers&#8221;), 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 &#8220;SPV&#8221; and collectively, the &#8220;SPVs&#8221;) 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.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 8pt 0 0 0.75in; text-align: justify">Pursuant to the Share Purchase Agreement, the Company to pay $5,646,628 (&#8364;5,200,000) (the &#8220;Purchase Price&#8221;), subject to certain post-closing adjustments, to acquire the share capital of the SPVs. The Purchase Price for each SPV was determined based on a Base Line EBITDA guaranteed by the Sellers and an Equity IRR Target calculated on the Purchase Price of no less than twenty-five percent (25%). Fifty percent (50%) of the Purchase Price, adjusted for certain post-closing adjustments and closing costs, in the amount of $2,143,181 (&#8364;1,952,858) was paid at closing, and the balance is due to the Sellers on the third anniversary of the closing date. The remaining fifty percent (50%) of the Purchase Price, prior to and after closing date, and any variation of EBITDA results in the 18 months following the closing date , will be promised by a note from each Seller, to be paid on the third anniversary of the closing, along with interest on the unpaid balance due at an annual rate of two percent (2%). The portion of the Purchase Price paid at closing was primarily financed by a loan of $3,149,081 (&#8364;2,900,000) pursuant to the Helios Loan Agreement whereas the Company repaid $342,192 (&#8364;310,204) during the six months ended June 30, 2016.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 8pt 0 8pt 0.75in; text-align: justify">In accordance with a Framework EBITDA Guarantee Agreement, dated July 17, 2015 (the &#8220;EBITDA Agreement&#8221;), between the Company and Austep S.p.A. (&#8220;Austep&#8221;), Austep will operate, maintain and supervise each biogas plant owned by the SPVs. In addition, Austep will guarantee a monthly aggregate EBITDA of $204,147 (&#8364;188,000) from the four SPVs for the initial six months following the acquisition, and thereafter Austep will guarantee an annual aggregate EBITDA of $4,082,946 (&#8364;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 ninety (90%) of the revenue in excess of these levels.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 8pt 0.75in; text-align: justify">The Company applied the equity method of accounting for those investments because the Framework EBITDA Guarantee Agreement between the Company and Austep S.p.A. (&#8220;Austep&#8221;) whereas Austep operates, maintains and supervises each biogas plants prevents us from exercising a controlling influence over operating policies of the plants. Under this method, our equity investment is reflected as an investment in non-consolidated subsidiaries on our Condensed Balance Sheets and the net earnings or losses of the investments is reflected as equity in net earnings of non-consolidated companies on our Consolidated Statements of Operations.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>NOTE 4 &#8211; CONDENSED CONSOLIDATED FINANCIAL STATEMENTS</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 8pt 0 0 0.75in; text-align: justify">The accompanying unaudited condensed consolidated financial statements as of June 30, 2016 and for the six and three months then ended have been prepared in accordance with accounting principles generally accepted in the United States relating to the preparation of financial statements for interim periods. Accordingly, they do not include all the information and footnotes required for annual financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six and three months ended June 30, 2016 are not necessarily indicative of the results that may be expected for the year ending December 31, 2016.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 8pt 0 0 0.75in; text-align: justify">The September 30, 2015 Condensed Balance Sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America. These financial statements should be read in conjunction with the audited financial statements and notes thereto contained in the Company&#8217;s Annual Report on Form 10-K for the year ended September 30, 2015.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0"><b>NOTE 5 &#8211; SIGNIFICANT ACCOUNTING POLICIES</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 8pt 0 0 0.75in; text-align: justify">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:</p> <table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 8pt; margin-bottom: 8pt"><tr style="vertical-align: top"> <td style="width: 0.5in"></td><td style="width: 0.25in"><b><i>a.</i></b></td><td style="text-align: justify"><b><i>Business combinations and Goodwill </i></b></td></tr></table> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 8pt 0.75in; text-align: justify">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&#8217;s carrying amount and its implied fair value.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"></p> <table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 8pt"><tr style="vertical-align: top"> <td style="width: 36pt"></td><td style="width: 22.5pt"><b><i>b.</i></b></td><td style="text-align: justify"><b><i>Investment in non-consolidated and affiliated companies</i></b></td></tr></table> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0 3.3pt 8pt 56.7pt; text-align: justify"></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0 3.3pt 8pt 56.7pt; text-align: justify">Investments in non-consolidated and affiliated companies that are not controlled but over which the Company can exercise significant influence (generally, entities in which the Company holds approximately between 20% to 100% of the voting rights of the investee) are presented using the equity method of accounting. Profits on intercompany sales, not realized outside the Company, are eliminated. The Company discontinues applying the equity method when its investment (including advances and loans) is reduced to zero and the Company has not guaranteed obligations of the affiliate or otherwise committed to provide further financial support to the affiliate.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0 3.3pt 8pt 56.7pt; text-align: justify">Investments in preferred shares, which are not in substance common stock, are recorded on a cost basis according to ASC 323-10-15-13, &#8220;Investments - Equity Method and Joint Ventures - In-substance Common Stock&#8221; and ASC 323-10-40-1, &#8220;Investment -Equity Method and Joint Ventures - Investee Capital Transactions&#8221;.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0 3.3pt 8pt 56.7pt; text-align: justify">A change in the Company&#8217;s proportionate share of an investee&#8217;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.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0 3.3pt 8pt 56.7pt; text-align: justify">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).</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0 3.3pt 8pt 56.7pt; text-align: justify">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.</p> <table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 8pt; margin-bottom: 0"><tr style="vertical-align: top"> <td style="width: 0.5in"></td><td style="width: 0.25in"><b><i>c.</i></b></td><td style="text-align: justify"><b><i>Intangible Assets</i></b></td></tr></table> <p style="font: 10pt Times New Roman, Times, Serif; margin: 8pt 0 0 0.75in; text-align: justify">Intangible assets consist of non-monetary and separately identifiable assets, which can be controlled and are expected to generate future economic benefits. Such assets are recognized at acquisition and/or production cost, including directly attributable expenses to make the asset ready for use, net of accumulated amortization charges and any impairment losses. The costs incurred internally to develop new services and platforms are considered intangible assets generated internally and are recognized as assets only if the following requirements are met:</p> <table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 8pt; margin-bottom: 0"><tr style="vertical-align: top"> <td style="width: 0.75in"></td><td style="width: 0.25in">1.</td><td style="text-align: justify">the cost incurred for the development of the assets can be reliably measured;</td></tr></table> <table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 8pt; margin-bottom: 0"><tr style="vertical-align: top"> <td style="width: 0.75in"></td><td style="width: 0.25in">2.</td><td style="text-align: justify">the entity has the intention, the availability of financial resources, the ability to complete the assets and to use or sell them;</td></tr></table> <p style="font: 10pt Times New Roman, Times, Serif; margin: 8pt 0 8pt 0.75in; text-align: justify">Capitalized development costs include only expenses incurred that can be directly attributed to the process of developing new products and services.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 8pt 0 0 0.75in; text-align: justify">Intangible assets with a finite useful life are amortized on a straight-line basis over their useful lives and are tested for impairment when circumstances indicate that the carrying value may be impaired. The amortization period and the amortization method for intangible assets with a finite useful lives are reviewed at least at each reporting date.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 8pt 0 0 0.75in; text-align: justify">Changes in expected useful lives, or in the way the future economic benefits will be generated by the assets, are either recognized through a change in the period or in the amortization method and are accounted for as changes in accounting estimates. The amortization charges for intangible assets with a finite useful life are classified in the statement of income, in the costs appropriate for the function of the related intangible assets.</p> <table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 8pt; margin-bottom: 0"><tr style="vertical-align: top"> <td style="width: 0.5in"></td><td style="width: 0.25in"><b><i>d.</i></b></td><td><b><i>Long-Lived Assets</i></b></td></tr></table> <p style="font: 10pt Times New Roman, Times, Serif; margin: 8pt 0 0 0.75in; text-align: justify">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.</p> <table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 8pt"><tr style="vertical-align: top"><td style="width: 0.5in"></td><td style="width: 0.25in"><b><i>a.</i></b></td><td style="text-align: justify"><b><i>Business combinations and Goodwill </i></b></td></tr></table> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0pt 0.75in; text-align: justify">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&#8217;s carrying amount and its implied fair value.</p> <table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 8pt"><tr style="vertical-align: top"><td style="width: 36pt"></td><td style="width: 22.5pt"><b><i>b.</i></b></td><td style="text-align: justify"><b><i>Investment in non-consolidated and affiliated companies</i></b></td></tr></table> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0 3.3pt 8pt 56.7pt; text-align: justify"></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0 3.3pt 8pt 56.7pt; text-align: justify">Investments in non-consolidated and affiliated companies that are not controlled but over which the Company can exercise significant influence (generally, entities in which the Company holds approximately between 20% to 100% of the voting rights of the investee) are presented using the equity method of accounting. Profits on intercompany sales, not realized outside the Company, are eliminated. The Company discontinues applying the equity method when its investment (including advances and loans) is reduced to zero and the Company has not guaranteed obligations of the affiliate or otherwise committed to provide further financial support to the affiliate.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0 3.3pt 8pt 56.7pt; text-align: justify">Investments in preferred shares, which are not in substance common stock, are recorded on a cost basis according to ASC 323-10-15-13, &#8220;Investments - Equity Method and Joint Ventures - In-substance Common Stock&#8221; and ASC 323-10-40-1, &#8220;Investment -Equity Method and Joint Ventures - Investee Capital Transactions&#8221;.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0 3.3pt 8pt 56.7pt; text-align: justify">A change in the Company&#8217;s proportionate share of an investee&#8217;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.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0 3.3pt 8pt 56.7pt; text-align: justify">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).</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0 3.3pt 8pt 56.7pt; text-align: justify">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.</p> <table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0"><tr style="vertical-align: top"><td style="width: 0.5in"></td><td style="width: 0.25in"><b><i>c.</i></b></td><td style="text-align: justify"><b><i>Intangible Assets</i></b></td></tr></table> <p style="font: 10pt Times New Roman, Times, Serif; margin: 8pt 0 0 0.75in; text-align: justify">Intangible assets consist of non-monetary and separately identifiable assets, which can be controlled and are expected to generate future economic benefits. Such assets are recognized at acquisition and/or production cost, including directly attributable expenses to make the asset ready for use, net of accumulated amortization charges and any impairment losses. The costs incurred internally to develop new services and platforms are considered intangible assets generated internally and are recognized as assets only if the following requirements are met:</p> <table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 8pt; margin-bottom: 0"><tr style="vertical-align: top"> <td style="width: 0.75in"></td><td style="width: 0.25in">1.</td><td style="text-align: justify">the cost incurred for the development of the assets can be reliably measured;</td></tr></table> <table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 8pt; margin-bottom: 0"><tr style="vertical-align: top"> <td style="width: 0.75in"></td><td style="width: 0.25in">2.</td><td style="text-align: justify">the entity has the intention, the availability of financial resources, the ability to complete the assets and to use or sell them;</td></tr></table> <p style="font: 10pt Times New Roman, Times, Serif; margin: 8pt 0 8pt 0.75in; text-align: justify">Capitalized development costs include only expenses incurred that can be directly attributed to the process of developing new products and services.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 8pt 0 0 0.75in; text-align: justify">Intangible assets with a finite useful life are amortized on a straight-line basis over their useful lives and are tested for impairment when circumstances indicate that the carrying value may be impaired. 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Document and Entity Information - shares
6 Months Ended
Jun. 30, 2016
Aug. 01, 2016
Document And Entity Information    
Entity Registrant Name BLUE SPHERE CORP.  
Entity Central Index Key 0001419582  
Document Type 10-Q/A  
Trading Symbol BLSP  
Document Period End Date Jun. 30, 2016  
Amendment Flag true  
Amendment Description

EXPLANATORY NOTE

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

On August 8, 2016, the Company filed a Quarterly Report on Form 10-Q for the period from April 1, 2016 to June 30, 2016, 2016 (the “Quarterly Report”). As explained in the Quarterly Report, the interim financial statements and notes thereto contained in the Quarterly Report (the “Quarterly Report Financial Statements”), the Company accounted for the acquisition of the SPVs using the purchase method of accounting. Under this method, the Company allocated the purchase price to tangible and intangible assets acquired and liabilities assumed based on estimated fair values at the date of acquisition, with the excess of the purchase price amount being allocated to goodwill.

The Company is filing this Amendment No. 1 (this “amendment”) on Form 10-Q/A to (i) file interim financial statements for the period from April 1, 2016 to June 30, 2016 to reflect the restatement of its consolidated financial statements for the period from April 1, 2016 to June 30, 2016 due to the application of the equity method of accounting for the investments in Agricerere S.r.l., Agrielektra S.r.l., Agrisorse S.r.l. and Gefa S.r.l. The Company applied the equity method because the Framework EBITDA Guarantee Agreement between the SPVs and Austep, whereby Austep operates, maintains and supervises each biogas plants prevents the Company from exercising a controlling influence over operating policies of the plants. Under this method, our equity investment is reflected as an investment in non-consolidated subsidiaries on our Condensed Balance Sheets and the net earnings or losses of the investments is reflected as equity in net earnings of non-consolidated companies on our Consolidated Statements of Operations. The Company believes that, while the financial statements reflect substantial modifications, the revenues and expenses previously reported are now reflected in a line item for the Company’s non-consolidated wholly-owned subsidiaries and the modifications result in no impact to the Company's operational results. Therefore the modifications are substantially a matter of presentation. 

In addition, this amendment includes modifications (i) to reflect the interest expense on the unpaid balance of the Purchase Price due the acquisition of the SPVs, (ii) to reclassify the proceeds from an offering which were previously recorded as current liability as proceeds on account of shares in Shareholders Deficiency, (iii)  to reflect the effects of accounting and reporting errors in calculation of issuance of shares and issuance of shares for services, and (iv) to amend our disclosure in Part I, Item 4 “Controls and Procedures,” of the Original Report to change the conclusions of our principal executive officer and principal financial officer regarding the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter ended June  30, 2016 in light of management’s conclusion that the Company’s internal control over financial reporting contained a material weakness at June  30, 2016 which will be remediated by the end of the fiscal year ending December 31, 2016. These accounting and reporting errors and the related adjustments resulted in an overstatement of net loss of $522 thousand for the period from January 1, 2016 to March 31, 2016 and an understatement of additional paid-in capital of $527 thousand, an overstatement of accumulated other comprehensive income of $38 thousand and overstatement of accumulated deficit of $531 thousand as of June 31, 2016. 

 Except as described above, this Amendment No. 2 on Form 10-Q/A does not amend any other information set forth in the Quarterly Report. However, for the convenience of the reader, this Amendment No. 1 on Form 10-Q/A restates in its entirety, as amended, the Quarterly Report. This Amendment No. 1 on Form 10-Q/A is presented as of the filing date of the Quarterly Report and does not reflect events occurring after that date, or modify or update information in the Quarterly Report, except as described above.

 
Current Fiscal Year End Date --12-31  
Entity a Well-known Seasoned Issuer No  
Entity a Voluntary Filer No  
Entity's Reporting Status Current Yes  
Entity Filer Category Smaller Reporting Company  
Entity Common Stock, Shares Outstanding   242,966,884
Document Fiscal Period Focus Q2  
Document Fiscal Year Focus 2016  
XML 14 R2.htm IDEA: XBRL DOCUMENT v3.5.0.2
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($)
$ in Thousands
Jun. 30, 2016
Sep. 30, 2015
CURRENT ASSETS:    
Cash and cash equivalents $ 533 $ 161
Other current assets 1,642 21
Total current assets 2,175 182
PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation 82 31
OTHER LONG TERM ASSETS 18  
INVESTMENTS IN JOINT VENTURES 8,927 4,952
INVESTMENTS IN NON-CONSOLIDATED SUBSIDIARIES 3,978  
Total assets 15,180 5,165
CURRENT LIABILITIES:    
Current maturities of long term loan 352 32
Accounts payables 594 58
Other accounts payable and liabilities 1,345 1,200
Deferred revenues from joint ventures 10,409 6,434
Total current liabilities 12,700 7,724
LONG TERM BANK LOANS 148 135
LONG TERM LOANS AND LIABILITIES 5,595  
DEBENTURES 2,410  
WARRANTS TO ISSUE SHARES 2,647  
STOCKHOLDERS' DEFICIENCY:    
Common shares of $0.001 par value each: Authorized: 1,750,000,000 shares at June 30, 2016 and September 30, 2015. Issued and outstanding: 243,051,884 shares and 167,952,595 shares at June 30, 2016 and September 30, 2015, respectively 1,319 1,244
Proceeds on account of shares   20
Treasury shares (28) (28)
Accumulated other comprehensive income 8  
Additional paid-in capital 41,766 39,474
Accumulated deficit (51,385) (43,404)
Total Stockholders' Deficiency (8,320) (2,694)
Total liabilities and Stockholders' Deficiency $ 15,180 $ 5,165
XML 15 R3.htm IDEA: XBRL DOCUMENT v3.5.0.2
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - $ / shares
Jun. 30, 2016
Sep. 30, 2015
Condensed Consolidated Balance Sheets    
Common shares, par value (in dollars per share) $ 0.001 $ 0.001
Common shares, shares authorized 1,750,000,000 1,750,000,000
Common shares, shares issued 243,051,884 167,952,595
Common shares, shares outstanding 243,051,884 167,952,595
XML 16 R4.htm IDEA: XBRL DOCUMENT v3.5.0.2
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2016
Jun. 30, 2015
Jun. 30, 2016
Jun. 30, 2015
OPERATING EXPENSES        
General and administrative expenses $ 2,423 $ 2,439 $ 4,505 $ 3,450
Other income   (38) (102) (57)
OPERATING LOSS 2,423 2,401 4,403 3,393
FINANCIAL EXPENSES (INCOME), net (86) 732 1,145 1,551
EQUITY LOSSES IN NON CONSOLIDATED SUBSIDIARIES 475   1,145  
NET LOSS FOR THE PERIOD $ 2,812 $ 3,133 $ 6,693 $ 4,944
Net loss per common share - basic and diluted (in dollars per share) $ (0.012) $ (.04) $ (.032) $ (.068)
Weighted average number of common shares outstanding during the period - basic and diluted (in shares) 225,772,114 79,543,760 210,663,024 72,842,628
XML 17 R5.htm IDEA: XBRL DOCUMENT v3.5.0.2
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Unaudited) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2016
Jun. 30, 2015
Jun. 30, 2016
Jun. 30, 2015
Income Statement [Abstract]        
NET LOSS $ 2,812 $ 3,133 $ 6,693 $ 4,944
Other comprehensive income (loss), net of tax:        
Currency translation adjustments (3) (8)
TOTAL COMPREHENSIVE LOSS $ 2,809 $ 3,133 $ 6,685 $ 4,944
XML 18 R6.htm IDEA: XBRL DOCUMENT v3.5.0.2
STATEMENTS OF CHANGES IN SHAREHOLDERS' DEFICIT (Unaudited) - USD ($)
$ in Thousands
Common Stock, $0.001 Par Value [Member]
Proceeds on account of shares [Member]
Treasury shares [Member]
Accumulated other comprehensive income [Member]
Additional paid-in Capital [Member]
Accumulated deficit [Member]
Total
Balance at beginning at Dec. 31, 2014 $ 1,127 $ 20     $ 35,662 $ (37,256) $ (447)
Balance at beginning (shares) at Dec. 31, 2014 51,125,044            
Increase (Decrease) in Stockholders' Deficiency [Roll Forward]              
Share based compensation         158   158
Issuance of common stock, net of issuance costs $ 2       249   251
Issuance of common stock, net of issuance costs (shares) 2,169,760            
Issuance of shares for services $ 20       1,316   1,336
Issuance of shares for services (shares) 20,357,035            
Issuance of common stock in respect of issuance of convertible notes $ 40       1,196   1,236
Issuance of common stock in respect of issuance of convertible notes (shares) 39,962,236            
Issuance of convertible debentures containing a beneficial conversion feature         181   181
Comprehensive loss           (4,944) (4,944)
Balance at ending at Jun. 30, 2015 $ 1,189 20     38,762 (42,200) (2,229)
Balance at ending (shares) at Jun. 30, 2015 113,614,075            
Balance at beginning at Dec. 31, 2015 $ 1,256 20 $ (28)   39,813 (44,692) (3,486)
Balance at beginning (shares) at Dec. 31, 2015 180,502,443            
Increase (Decrease) in Stockholders' Deficiency [Roll Forward]              
Extinguish of liability upon shares issuance $ 7       625   632
Extinguish of liability upon shares issuance (shares) 7,103,467            
Issuance of common stock, net of issuance costs $ 37 (20)     578   595
Issuance of common stock, net of issuance costs (shares) 37,315,232            
Issuance of shares for services $ 4       579   583
Issuance of shares for services (shares) 3,500,000            
Issuance of common stock in respect of issuance of convertible notes $ 14 $ (145)     131    
Issuance of common stock in respect of issuance of convertible notes (shares) 13,930,742            
Exercise of warrants $ 1       40   41
Exercise of warrants (shares) 700,000            
Comprehensive loss       $ 8   (6,693) (6,685)
Balance at ending at Jun. 30, 2016 $ 1,319   $ (28) $ 8 $ 41,766 $ (51,385) $ (8,320)
Balance at ending (shares) at Jun. 30, 2016 243,051,884           243,051,884
XML 19 R7.htm IDEA: XBRL DOCUMENT v3.5.0.2
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($)
6 Months Ended
Jun. 30, 2016
Jun. 30, 2015
CASH FLOWS FROM OPERATING ACTIVITIES:    
Net loss for the period $ (6,693,000) $ (4,944,000)
Adjustments required to reconcile net loss to net cash provided by (used in) operating activities:    
Share based compensation 367,000 158,000
Depreciation 8,000 3,000
Equity losses in nonconsolidated subsidiary 1,145,000 (19,000)
Expense in respect of convertible notes and loans 93,000 1,421,000
Changes in Warrants to issue shares 946,000  
Issuance of shares for services 583,000 1,336,000
Projects costs expensed   469,000
Decrease (increase) in other current assets (192,000) 107,000
Increase in other long term assets (18,000)  
Increase (decrease) in accounts payables 469,000 60,000
Increase in other account payables 449,000 54,000
Increase in Deferred revenues   1,553,000
Net cash provided by (used in) operating activities (2,842,000) 198,000
CASH FLOWS FROM INVESTING ACTIVITIES:    
Purchase of property and equipment (60,000) (1,000)
Net cash used in investing activities (60,000) (1,000)
CASH FLOWS FROM FINANCING ACTIVITIES:    
Loans received 50,000 461,000
Payment of loans and convertible debentures (295,000) (963,000)
Proceeds from issuance of shares and warrants 1,752,000 242,000
Proceeds from exercise of warrants 41,000  
Proceeds from issuance of convertible debenture   212,000
Net cash provided by financing activities 1,548,000 (48,000)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (1,354,000) 149,000
EFFECT OF CHANGES IN EXCHANGE RATES ON CASH BALANCES IN FOREIGN CURRENCIES 1,000  
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,888,000 118,000
CASH AND CASH EQUIVALENTS AT END OF PERIOD 533,000 267,000
NON-CASH TRANSACTION:    
Extinguish of debt upon shares issuance 416,000  
Deferred net equity in joint ventures 1,357,000 $ 3,256,000
Issuance expense paid through warrants issuance 225,000  
Cash paid during the period for:    
Interest $ 240,000  
XML 20 R8.htm IDEA: XBRL DOCUMENT v3.5.0.2
BASIS OF PRESENTATION
6 Months Ended
Jun. 30, 2016
Basis Of Presentation  
BASIS OF PRESENTATION

NOTE 1 – BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been prepared on the same basis as the audited annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the financial position and results of operations of Blue Sphere Corporation (the “Company”). These condensed consolidated financial statements and notes thereto are unaudited and should be read in conjunction with the Company’s audited financial statements included in its Annual Report on Form 10-K for the year ended September 30, 2015, as filed with the U.S. Securities and Exchange Commission. The results of operations for the six and three months ended June 30, 2016 are not necessarily indicative of results that could be expected for the entire fiscal year.

XML 21 R9.htm IDEA: XBRL DOCUMENT v3.5.0.2
GENERAL
6 Months Ended
Jun. 30, 2016
General  
GENERAL

NOTE 2 – GENERAL

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

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

As of June 30, 2016, Johnstonsphere had not commenced operations.

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

XML 22 R10.htm IDEA: XBRL DOCUMENT v3.5.0.2
INVESTMENT IN BLUE SPHERE PAVIA
6 Months Ended
Jun. 30, 2016
Investment In Blue Sphere Pavia  
INVESTMENT IN BLUE SPHERE PAVIA

NOTE 3 – INVESTMENT IN BLUE SPHERE PAVIA

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

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

Pursuant to the Share Purchase Agreement, the Company to pay $5,646,628 (€5,200,000) (the “Purchase Price”), subject to certain post-closing adjustments, to acquire the share capital of the SPVs. The Purchase Price for each SPV was determined based on a Base Line EBITDA guaranteed by the Sellers and an Equity IRR Target calculated on the Purchase Price of no less than twenty-five percent (25%). Fifty percent (50%) of the Purchase Price, adjusted for certain post-closing adjustments and closing costs, in the amount of $2,143,181 (€1,952,858) was paid at closing, and the balance is due to the Sellers on the third anniversary of the closing date. The remaining fifty percent (50%) of the Purchase Price, prior to and after closing date, and any variation of EBITDA results in the 18 months following the closing date , will be promised by a note from each Seller, to be paid on the third anniversary of the closing, along with interest on the unpaid balance due at an annual rate of two percent (2%). The portion of the Purchase Price paid at closing was primarily financed by a loan of $3,149,081 (€2,900,000) pursuant to the Helios Loan Agreement whereas the Company repaid $342,192 (€310,204) during the six months ended June 30, 2016.

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

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

XML 23 R11.htm IDEA: XBRL DOCUMENT v3.5.0.2
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
6 Months Ended
Jun. 30, 2016
Condensed Consolidated Financial Statements  
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4 – CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The accompanying unaudited condensed consolidated financial statements as of June 30, 2016 and for the six and three months then ended have been prepared in accordance with accounting principles generally accepted in the United States relating to the preparation of financial statements for interim periods. Accordingly, they do not include all the information and footnotes required for annual financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six and three months ended June 30, 2016 are not necessarily indicative of the results that may be expected for the year ending December 31, 2016.

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

XML 24 R12.htm IDEA: XBRL DOCUMENT v3.5.0.2
SIGNIFICANT ACCOUNTING POLICIES
6 Months Ended
Jun. 30, 2016
Accounting Policies [Abstract]  
SIGNIFICANT ACCOUNTING POLICIES

NOTE 5 – SIGNIFICANT ACCOUNTING POLICIES

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

a.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.

b.Investment in non-consolidated and affiliated companies

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

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

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

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

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

c.Intangible Assets

Intangible assets consist of non-monetary and separately identifiable assets, which can be controlled and are expected to generate future economic benefits. Such assets are recognized at acquisition and/or production cost, including directly attributable expenses to make the asset ready for use, net of accumulated amortization charges and any impairment losses. The costs incurred internally to develop new services and platforms are considered intangible assets generated internally and are recognized as assets only if the following requirements are met:

1.the cost incurred for the development of the assets can be reliably measured;
2.the entity has the intention, the availability of financial resources, the ability to complete the assets and to use or sell them;

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

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

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

d.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.

XML 25 R13.htm IDEA: XBRL DOCUMENT v3.5.0.2
GOING CONCERN
6 Months Ended
Jun. 30, 2016
Going Concern [Abstract]  
GOING CONCERN

NOTE 6 – GOING CONCERN

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As of June 30, 2016, the Company had approximately $533,000 in cash and cash equivalents, approximately $10,525,000 in negative working capital, a stockholders’ deficit of approximately $8,320,000 and an accumulated deficit of approximately $51,385,000. Management anticipates their business will require substantial additional investments that have not yet been secured. Management is continuing in the process of fund raising in the private equity markets as the Company will need to finance future activities. The Company’s ability to continue as a going concern is dependent upon raising capital from financing transactions and revenue from operations. These unaudited 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.

XML 26 R14.htm IDEA: XBRL DOCUMENT v3.5.0.2
NEWLY ISSUED ACCOUNTING PRONOUNCEMENTS
6 Months Ended
Jun. 30, 2016
New Accounting Pronouncements and Changes in Accounting Principles [Abstract]  
NEWLY ISSUED ACCOUNTING PRONOUNCEMENTS

NOTE 7 – NEWLY ISSUED ACCOUNTING PRONOUNCEMENTS

 

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

XML 27 R15.htm IDEA: XBRL DOCUMENT v3.5.0.2
COMMON SHARES
6 Months Ended
Jun. 30, 2016
Stockholders' Equity Note [Abstract]  
COMMON SHARES

NOTE 8 – COMMON SHARES

On January 26, 2016, the Company issued 1,000,000 shares of common stock pursuant to a subscription agreement dated June 12, 2015.

On February 1, 2016 the Company issued 540,000 shares of common stock to a consultant in respect of his consulting services for the Company. The Company has estimated the fair value of such shares, and recorded an expense of $108,327.

In February 2016, the Company conducted an offering (the “February Offering”) consisting of (a) up to USD $1,925,000 of the Company’s shares of common stock, par value $0.001 per share (“Common Stock”), priced at the closing price for shares of Common Stock, as reported on the OTCQB Venture Marketplace, on the trading day prior to the closing of the February Offering, and (b) 5-year warrants to purchase shares of Common Stock in an amount equal to 50% of the number of shares of Common Stock so purchased by the subscriber (the “February Warrants”, together with the shares of Common Stock subscribed for, the “February Securities”). The February Securities have been offered pursuant to subscription agreements with each investor (the “February Subscription Agreement”). 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 Common Stock sold in the February Offering, including all shares of Common Stock underlying the February Warrants, within 60 days of the closing of the February Offering. The February Warrants are exercisable for 5 years from the date of issuance at $0.10 per share, include an option by which the holder may exercise the February Warrant by means of a cashless exercise, and include customary weighted-average price adjustment and anti-dilution terms. On February 15, 2016, the Company completed the only closing of the February Offering, representing aggregate gross proceeds to the Company of $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 Common Stock at $0.055 per share, and (b) February Warrants to purchase, in the aggregate, up to 17,500,000 shares of Common Stock at an exercise price of $0.10 per share. The warrants were accounted for as derivative liabilities. The Company has estimated the fair value of such warrants at a value of $933,358 at the date of issuance and using the Black-Scholes option pricing model using the following assumptions:

    %  
Dividend yield     0  
Risk-free interest rate     1.20 %
Expected term (years)     5  
Volatility     203 %

The Company engaged Maxim Group LLC (“Maxim”) to assist in the February 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 February Offering, warrants to purchase, in the aggregate, up to 2,800,000 shares of Common Stock at an exercise price of $0.0605 per share and to purchase, in the aggregate, up to 1,400,000 shares of Common Stock at an exercise price of $0.11 per share. The Company has estimated the fair value of such warrants at a value of $224,413 at the date of issuance and using the Black-Scholes option pricing model using the following assumptions:

    %  
Dividend yield     0  
Risk-free interest rate     1.20 %
Expected term (years)     5  
Volatility     203 %

On March 15, 2016, the Company issued 85,000 shares of Common Stock to a consultant in respect of his consulting services for the Company. The Company has estimated the fair value of such shares, and recorded an expense of $5,685.

On April 13, 2016, the Company issued 1,000,000 shares of Common Stock of the Company to a consultant in consideration for corporate finance, investor communications and financial and investor public relations services. The Company has estimated the fair value of such shares, and recorded an expense of $72,733.

On June 13, 2016 and per the consulting agreement the Company issued an additional 1,000,000 shares of Common Stock as a service bonus since the agreement was not terminated prior to June 9, 2016. The Company has estimated the fair value of such shares, and recorded an expense of $89,000.

On April 13, 2016, we issued an aggregate of 875,000 shares of our Common Stock to a consultant, pursuant to consulting agreements dated September 1, 2015 and March 1, 2016, in consideration for investor relations and communications services. The Company has estimated the fair value of such shares, and recorded an expense of $42,467.

On May 18, 2016, a 1.5-year warrant to purchase shares of Common Stock, dated May 4, 2015, was exercised into 700,000 shares of common stock at an exercise price of $0.058 per share, for total consideration of $40,235.

On June 2, 2016, we issued 13,930,742 shares of our Common Stock in consideration of $145,525 pursuant to all but one of the July 2015 Offering Subscription Agreements, with the issuance of the remaining 7,658,129 shares of our Common Stock currently in process.

On June 13, 2016, the Company issued 7,103,467 shares of Common Stock to several officers, directors, employees and/or consultants of the Company. All shares were issued pursuant to the Company’s Global Share and Options Incentive Enhancement Plan (2014) (the “2014 Incentive Plan”) and the Company’s Global Share Incentive Plan (2010). The Company has estimated and recorded the fair value of such shares as an expense of $632,208 which was recorded through the vesting periods.

On June 26, 2016, the Company issued 500,000 shares of Common Stock in order to complete its obligations under the Share Purchase Agreement from 2014.

XML 28 R16.htm IDEA: XBRL DOCUMENT v3.5.0.2
WARRANTS, DEBENTURES AND NOTES
6 Months Ended
Jun. 30, 2016
Debt Disclosure [Abstract]  
WARRANTS, DEBENTURES AND NOTES

NOTE 9 – WARRANTS, DEBENTURES AND NOTES

Senior Debentures Offering

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

The Debentures bear interest at 11%, paid quarterly, and mature in two years. The Debentures are secured by a pledge agreement between the Company and each investor, whereby the Company pledged as collateral up to 49% of its shares of common stock in Eastern Sphere, Ltd., our wholly-owned subsidiary (the “Pledge Agreement”). The Pledge Agreement further provides that the Company’s obligations under the Debentures rank senior to all other indebtedness of Blue Sphere Corporation, but are subordinate to all indebtedness and liabilities of its subsidiaries and project-level operating entities. The Debenture Offering 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 November 2015 Warrants were accounted for as derivative liabilities. The Company has estimated the fair value of such warrants at a value of $208,597 at the date of issuance using the Black-Scholes option pricing model using the following assumptions:

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

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

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

The Company engaged Maxim Group LLC to assist in the Debenture 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 Debenture Offering and warrants to purchase, in the aggregate, up to 4,480,000 shares of Common Stock at an exercise price of $0.06875 per share. The Company has estimated the fair value of such warrants at a value of $116,599 at the date of issuance using the Black-Scholes option pricing model using the following assumptions:

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

On February 3, 2016, the Company issued 3-year warrants to purchase up to 1,500,000 shares of Company’s common stock at an exercise price of $0.06 per share, in full satisfaction of certain obligations of the Company.

The Company has estimated the fair value of such warrants at a value of $87,331 at the date of issuance using the Black-Scholes option pricing model using the following assumptions:

    %  
Dividend yield     0  
Risk-free interest rate     1.2 %
Expected term (years)     3  
Volatility     203 %

Changes in the fair value of the warrants are recorded as interest expenses

XML 29 R17.htm IDEA: XBRL DOCUMENT v3.5.0.2
SUBSEQUENT EVENTS
6 Months Ended
Jun. 30, 2016
Subsequent Events [Abstract]  
SUBSEQUENT EVENTS

NOTE 10 – SUBSEQUENT EVENTS

In June and July 2016, we conducted an offering (the “June 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 Offering, and (b) five-year warrants (the “June Warrants”, together with the shares of Common Stock subscribed for, the “June Securities”) 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 consisted of one or more closings, with the last closing to occur on or before July 26, 2016, or as extended by the Company in is sole discretion. The June Securities 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 Offering, including all shares of Common Stock underlying the June Warrants, within twenty (20) days of the final closing of the June Offering. Each June Subscription Agreement also provides that if, during the period beginning on the date of the first closing of the June Offering and ending on the six month anniversary thereof, the Company completes (a) a subsequent closing of the June 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 June Securities and/or issue new securities to the applicable subscriber reflecting such more favorable material deal terms and conditions (the “June MFN Rights”). The June Warrants are exercisable for five years from the date of issuance, include an option by which the holder may exercise the June Warrant by means of a cashless exercise, and include customary weighted-average price adjustment and anti-dilution terms.

On July 26, 2016, the Company completed closings of the June Offering, both such closings representing aggregate gross proceeds to the Company of USD $1,370,000. In connection with both closings, the Company and subscribers entered into (a) June Subscription Agreements for 18,266,668 shares of Common Stock at $0.075 per share, and (b) June Warrants to purchase up to 18,266,668 shares of Common Stock at an exercise price of $0.11 per share. The subscriber in the July 7, 2016 closing received an adjustment to its June Securities pursuant to its June MFN Rights. The June Offering ended on July 26, 2016.

The Company engaged Maxim Group LLC to assist in the June Offering. Pursuant to the terms of an engagement letter between Maxim and the Company, in connection with both closings, Maxim received commissions equal to 4.44% of the gross proceeds raised, warrants to purchase up to 928,000 shares of Common Stock at an exercise price of $0.0825 per share, and warrants to purchase up to 928,000 shares of Common Stock at an exercise price of $0.121 per share. 

XML 30 R18.htm IDEA: XBRL DOCUMENT v3.5.0.2
SIGNIFICANT ACCOUNTING POLICIES (Policies)
6 Months Ended
Jun. 30, 2016
Significant Accounting Policies Policies  
Business Combinations and Goodwill
a.Business combinations and Goodwill

The Company accounts for its business combinations using the purchase method of accounting. Under this method, the Company allocates the purchase price to tangible and intangible assets acquired and liabilities assumed based on estimated fair values at the date of acquisition, with the excess of the purchase price amount being allocated to goodwill. Acquisition-related and integration costs associated to the business combination are expensed as incurred. Changes in estimates associated with future income tax assets after measurement period are recognized as income tax expense with prospective application to all business combinations regardless of the date of acquisition. Goodwill for each reporting unit is assessed for impairment at least annually, or when an event or circumstance occurs that more likely than not reduces the fair value of a reporting unit below its carrying amount. An impairment charge is recorded when the carrying amount of the reporting unit exceeds its fair value and is determined as the difference between the goodwill’s carrying amount and its implied fair value.

Investment in non-consolidated and affiliated companies
b.Investment in non-consolidated and affiliated companies

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

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

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

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

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

Intangible Assets
c.Intangible Assets

Intangible assets consist of non-monetary and separately identifiable assets, which can be controlled and are expected to generate future economic benefits. Such assets are recognized at acquisition and/or production cost, including directly attributable expenses to make the asset ready for use, net of accumulated amortization charges and any impairment losses. The costs incurred internally to develop new services and platforms are considered intangible assets generated internally and are recognized as assets only if the following requirements are met:

1.the cost incurred for the development of the assets can be reliably measured;
2.the entity has the intention, the availability of financial resources, the ability to complete the assets and to use or sell them;

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

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

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

Long-Lived Assets
d.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.

XML 31 R19.htm IDEA: XBRL DOCUMENT v3.5.0.2
COMMON SHARES (Tables)
6 Months Ended
Jun. 30, 2016
Stockholders' Equity Note [Abstract]  
Schedule of assumptions in the Black-Scholes warrant pricing model

The Company has estimated the fair value of such warrants at a value of $933,358 at the date of issuance and using the Black-Scholes option pricing model using the following assumptions:

    %  
Dividend yield     0  
Risk-free interest rate     1.20 %
Expected term (years)     5  
Volatility     203 %

The Company has estimated the fair value of such warrants at a value of $224,413 at the date of issuance and using the Black-Scholes option pricing model using the following assumptions:

    %  
Dividend yield     0  
Risk-free interest rate     1.20 %
Expected term (years)     5  
Volatility     203 %
XML 32 R20.htm IDEA: XBRL DOCUMENT v3.5.0.2
WARRANTS, DEBENTURES AND NOTES (Tables)
6 Months Ended
Jun. 30, 2016
Debt Disclosure [Abstract]  
Schedule of assumptions used for fair value

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

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

The Company has estimated the fair value of such warrants at a value of $116,599 at the date of issuance using the Black-Scholes option pricing model using the following assumptions:

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

The Company has estimated the fair value of such warrants at a value of $87,331 at the date of issuance using the Black-Scholes option pricing model using the following assumptions:

    %  
Dividend yield     0  
Risk-free interest rate     1.2 %
Expected term (years)     3  
Volatility     203 %

XML 33 R21.htm IDEA: XBRL DOCUMENT v3.5.0.2
INVESTMENT IN BLUE SPHERE PAVIA (Details Narrative)
6 Months Ended 7 Months Ended
Jul. 17, 2015
USD ($)
Jul. 17, 2015
EUR (€)
Jun. 30, 2016
USD ($)
Jun. 30, 2016
EUR (€)
Jun. 30, 2015
USD ($)
Dec. 14, 2015
USD ($)
Dec. 14, 2015
EUR (€)
Dec. 14, 2015
EUR (€)
Aug. 14, 2015
USD ($)
Aug. 14, 2015
EUR (€)
Repayment of debt     $ 295,000   $ 963,000          
Performance EBITDA Guarantee [Member]                    
Monthly EBITDA $ 204,147                  
Annual EBITDA $ 4,082,946                  
Percentage of excess revenue to be received 90.00% 90.00%                
Minimum [Member]                    
Ownership percentage     20.00% 20.00%            
Maximum [Member]                    
Ownership percentage     100.00% 100.00%            
Euro | Performance EBITDA Guarantee [Member]                    
Monthly EBITDA | €   € 188,000                
Annual EBITDA | €   € 3,760,000                
Share Purchase Agreement [Member]                    
Ownership percentage           100.00%   100.00%    
Purchase price           $ 5,646,628        
Amount paid at closing           $ 2,143,181        
Equity IRR target           25.00%   25.00%    
Percentage of purchase price paid at closing           50.00%   50.00%    
Percentage of purchase price to be paid by issue of note           50.00%   50.00%    
Share Purchase Agreement [Member] | Euro                    
Purchase price | €             € 5,200,000      
Amount paid at closing | €             € 1,952,858      
Share Purchase Agreement [Member] | Helios Loan Agreement [Member]                    
Amount available under loan agreement                 $ 5,646,628  
Financed investment intial SPVS (percent)                 90.00% 90.00%
Financed investment subsequentled acquired SPVs (percent)                 80.00% 80.00%
Required repayment of loan andd broker fees (percent)                 10.00% 10.00%
Debt interest rate                 14.50% 14.50%
Share Purchase Agreement [Member] | Helios Loan Agreement [Member] | Minimum [Member]                    
Financed investment SPVS, no repayment (percent)                 70.00% 70.00%
Share Purchase Agreement [Member] | Helios Loan Agreement [Member] | Maximum [Member]                    
Financed investment SPVS, no repayment (percent)                 80.00% 80.00%
Share Purchase Agreement [Member] | Helios Loan Agreement [Member] | Euro                    
Amount available under loan agreement | €                   € 5,200,000
Share Purchase Agreement [Member] | Long Term Mezzanine Loan Agreement [Member]                    
Debt amount           $ 3,149,081        
Repayment of debt     $ 342,192              
Share Purchase Agreement [Member] | Long Term Mezzanine Loan Agreement [Member] | Euro                    
Debt amount | €               € 2,900,000    
Repayment of debt | €       € 310,204            
Debt interest rate           2.00%   2.00%    
XML 34 R22.htm IDEA: XBRL DOCUMENT v3.5.0.2
SIGNIFICANT ACCOUNTING POLICIES (Details Narrative)
Jun. 30, 2016
Minimum [Member]  
Ownership percentage 20.00%
Maximum [Member]  
Ownership percentage 100.00%
XML 35 R23.htm IDEA: XBRL DOCUMENT v3.5.0.2
GOING CONCERN (Details Narrative) - USD ($)
$ in Thousands
Jun. 30, 2016
Dec. 31, 2015
Sep. 30, 2015
Jun. 30, 2015
Dec. 31, 2014
Going Concern Details Narrative          
Cash and Cash Equivalents, At Carrying Value $ 533 $ 1,888 $ 161 $ 267 $ 118
Working Capital Deficit 10,525        
Stockholders' Deficit (8,320) $ (3,486) (2,694) $ (2,229) $ (447)
Accumulated deficit $ (51,385)   $ (43,404)    
XML 36 R24.htm IDEA: XBRL DOCUMENT v3.5.0.2
COMMON SHARES (Details Narrative) - USD ($)
6 Months Ended
Jun. 26, 2016
Jun. 13, 2016
Jun. 02, 2016
May 18, 2016
Apr. 13, 2016
Mar. 15, 2016
Feb. 15, 2016
Feb. 03, 2016
Feb. 01, 2016
Jan. 26, 2016
Jun. 30, 2016
Jun. 30, 2015
Feb. 29, 2016
Issuance of shares for services (shares)         875,000 85,000     540,000        
Issuance of shares for services         $ 42,467 $ 5,685     $ 108,327   $ 583,000 $ 1,336,000  
Warrant exercise term       1 year 6 months                  
Warrant exercise price       $ 0.058                  
Issuance of common stock (shares)                   1,000,000      
Issuance of common stock upon exercise of warrants       $ 40,235             $ 41,000    
Issuance of common stock upon exercise of warrants (shares)       700,000                  
Share Purchase Agreement [Member]                          
Issuance of common stock (shares) 500,000                        
Consultant [Member]                          
Issuance of shares for services (shares)   1,000,000     1,000,000                
Issuance of shares for services   $ 89,000     $ 72,733                
Warrant [Member]                          
Warrant exercise term               3 years          
Warrant exercise price               $ 0.06          
Number of shares called by warrant               1,500,000          
Fair value of warrants               $ 87,331          
Offering [Member]                          
Warrant exercise price             $ 0.10            
Gross proceeds from subscription agreement             $ 1,925,000            
Number of shares called by warrant             17,500,000            
Stock shares subscribed     7,658,129       35,000,000            
Stock price             $ 0.055            
Securities sold in offering (percent)             50.00%            
Issuance of common stock (shares)     13,930,742                    
Offering [Member] | Maxim Group LLC [Member]                          
Warrant exercise price             $ 0.0605            
Number of shares called by warrant             2,800,000            
Stock shares subscribed             1,400,000            
Stock price             $ 0.11            
Fair value of warrants             $ 224,413            
Offering [Member] | Warrant [Member]                          
Warrant exercise term             5 years            
Warrant exercise price             $ 0.10           $ 0.10
Fair value of warrants             $ 933,358            
Offering [Member] | Warrant [Member] | Maxim Group LLC [Member]                          
Commision rate (percent)             7.00%            
XML 37 R25.htm IDEA: XBRL DOCUMENT v3.5.0.2
COMMON SHARES (Details Narrative 1) - USD ($)
$ in Thousands
6 Months Ended
Jun. 13, 2016
Jun. 02, 2016
Jan. 26, 2016
Jun. 30, 2016
Jun. 30, 2015
Feb. 15, 2016
Issuance of common stock (shares)     1,000,000      
Value of common stock issued upon new issue       $ 595 $ 251  
Stock issued under plan       $ 632    
2014 Incentive plan [Member]            
Value of common stock issued upon new issue $ 145,525          
Stock issued under plan (shares) 7,103,467          
Stock issued under plan $ 632,208          
Offering [Member]            
Number of shares subscribed per offering   7,658,129       35,000,000
Issuance of common stock (shares)   13,930,742        
XML 38 R26.htm IDEA: XBRL DOCUMENT v3.5.0.2
COMMON SHARES (Details) - Warrant [Member]
Feb. 15, 2016
Feb. 03, 2016
Dividend yield   0.00%
Risk-free interest rate   1.20%
Expected term (years)   3 years
Volatility   203.00%
Offering [Member]    
Dividend yield 0.00%  
Risk-free interest rate 1.20%  
Expected term (years) 5 years  
Volatility 203.00%  
XML 39 R27.htm IDEA: XBRL DOCUMENT v3.5.0.2
COMMON SHARES (Details 1) - Warrant [Member]
Feb. 15, 2016
Feb. 03, 2016
Dividend yield   0.00%
Risk-free interest rate   1.20%
Expected term (years)   3 years
Volatility   203.00%
Offering [Member]    
Dividend yield 0.00%  
Risk-free interest rate 1.20%  
Expected term (years) 5 years  
Volatility 203.00%  
Offering [Member] | Maxim Group LLC [Member]    
Dividend yield 0.00%  
Risk-free interest rate 1.20%  
Expected term (years) 5 years  
Volatility 203.00%  
XML 40 R28.htm IDEA: XBRL DOCUMENT v3.5.0.2
COMMON SHARES (Details 2) - Warrant [Member]
Jul. 26, 2016
Feb. 03, 2016
Dividend yield   0.00%
Risk-free interest rate   1.20%
Expected term (years)   3 years
Volatility   203.00%
June Offering [Member]    
Dividend yield 0.00%  
Risk-free interest rate 1.00%  
Expected term (years) 5 years  
Volatility 147.00%  
XML 41 R29.htm IDEA: XBRL DOCUMENT v3.5.0.2
COMMON SHARES (Details 3) - June Offering [Member] - Maxim Group LLC [Member]
Jul. 07, 2016
Dividend yield 0.00%
Risk-free interest rate 1.00%
Expected term (years) 5 years
Volatility 147.00%
XML 42 R30.htm IDEA: XBRL DOCUMENT v3.5.0.2
WARRANTS, DEBENTURES AND NOTES (Details Narrative) - USD ($)
12 Months Ended
May 18, 2016
Feb. 03, 2016
Dec. 23, 2015
Nov. 01, 2016
Nov. 01, 2015
Warrant exercise price $ 0.058        
Warrant exercise term 1 year 6 months        
Senior Debentures [Member]          
Offering amount         $ 3,000,000
Number of shares called by warrant         8,000,000
Warrant exercise term       5 years  
Fair value of warrants         $ 208,597
Percent exercisable at different pricing         50.00%
Debt interest rate         11.00%
Debt term       2 years  
Pledged collateral - common stock         49.00%
Gross proceeds from debenture offering subscription agreement     $ 3,000,000    
Senior Debentures [Member] | Maxim Group LLC [Member]          
Warrant exercise price     $ 0.06875    
Fair value of warrants     $ 116,599    
Commision rate (percent)     7.00%    
Issuance of warrants for services (shares)     4,848,000    
Senior Debentures [Member] | First 50% [Member]          
Warrant exercise price         $ 0.05
Senior Debentures [Member] | Second 50% [Member]          
Warrant exercise price         $ 0.075
Percent exercisable at different pricing         50.00%
Warrant [Member]          
Number of shares called by warrant   1,500,000      
Warrant exercise price   $ 0.06      
Warrant exercise term   3 years      
Fair value of warrants   $ 87,331      
XML 43 R31.htm IDEA: XBRL DOCUMENT v3.5.0.2
WARRANTS, DEBENTURES AND NOTES (Details) - Senior Debentures - Warrants [Member]
Dec. 23, 2015
Dividend yield 0.00%
Risk-free interest rate 1.74%
Expected term 5 years
Volatility 202.00%
XML 44 R32.htm IDEA: XBRL DOCUMENT v3.5.0.2
WARRANTS, DEBENTURES AND NOTES (Details 1) - Senior Debentures - Warrants [Member]
Dec. 23, 2015
Dividend yield 0.00%
Risk-free interest rate 1.74%
Expected term 5 years
Volatility 202.00%
Maxim Group LLC [Member]  
Dividend yield 0.00%
Risk-free interest rate 1.74%
Expected term 5 years
Volatility 202.00%
XML 45 R33.htm IDEA: XBRL DOCUMENT v3.5.0.2
WARRANTS, DEBENTURES AND NOTES (Details 2) - Warrant [Member]
Feb. 03, 2016
Dividend yield 0.00%
Risk-free interest rate 1.20%
Expected term 3 years
Volatility 203.00%
XML 46 R34.htm IDEA: XBRL DOCUMENT v3.5.0.2
SUBSEQUENT EVENTS (Details Narrative) - USD ($)
2 Months Ended
Jul. 26, 2016
May 18, 2016
Feb. 03, 2016
Jul. 31, 2016
Warrant exercise price   $ 0.058    
Warrant exercise term   1 year 6 months    
Warrant [Member]        
Number of shares called by warrant     1,500,000  
Warrant exercise price     $ 0.06  
Warrant exercise term     3 years  
Subsequent Event [Member] | June Offering [Member]        
Offering amount       $ 3,000,000
Number of shares subscribed per offering 18,266,668      
Share price $ 0.075      
Number of shares called by warrant 18,266,668      
Warrant exercise price $ 0.11     $ 0.011
Warrant exercise term       5 years
Number of days to register common stock       20 days
Aggregate gross proceeds from closings of offerings $ 1,370,000      
Subsequent Event [Member] | June Offering [Member] | Maxim Group LLC [Member]        
Warrant exercise price $ 0.0121      
Commision rate (percent) 4.40%      
Issuance of warrants for services (shares) 928,000      
Subsequent Event [Member] | June Offering [Member] | Maxim Group LLC [Member] | Warrant [Member]        
Warrant exercise price $ 0.0825      
Issuance of warrants for services (shares) 928,000      
Subsequent Event [Member] | June Offering [Member] | Minimum [Member]        
Minimum subsequent offerings       $ 1,000,000
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