10-Q

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

FORM 10-Q

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

For the quarterly period ended September 30, 2017

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

For the transition period from _________ to ________ 

Commission File No. 000-55127

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, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerate filer	☐	Accelerated Filer	☐
Non-accelerated filer	☐	Smaller reporting company	☒
Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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 November 20, 2017, there were 3,725,980 shares of common stock, par value $0.001 per share, issued and outstanding.

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
	ITEM 1. Consolidated Financial Statements	1
	ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
	ITEM 3. Quantitative & Qualitative Disclosures about Market Risks	24
	ITEM 4. Controls and Procedures	24
PART II OTHER INFORMATION		25
	ITEM 1. Legal Proceedings	25
	ITEM 1A. Risk Factors	26
	ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds	26
	ITEM 3. Defaults upon Senior Securities	26
	ITEM 4. Mine Safety Disclosures	26
	ITEM 5. Other Information	26
	ITEM 6. Exhibits	30

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.

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

BLUE SPHERE CORPORATION

INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 2017

TABLE OF CONTENTS

		Page
INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:
	Balance Sheets as of September 30, 2017 and December 31, 2016	2
	Statements of Operations for the nine and three-months ended September 30, 2017 and 2016	3
	Statements of Comprehensive Income (Loss) for the period of nine-months and three-months ended September 30, 2017 and 2016	4
	Statements of Changes in Shareholders’ Equity (Deficiency) for the period of nine-months ended September 30, 2017 and 2016	5-6
	Statements of Cash Flows for the nine months ended September 30, 2017 and 2016	7
	Notes to Interim Condensed Consolidated Financial Statements	8-18

BLUE SPHERE CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS 

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

	September 30, 2017			December 31, 2016
		Unaudited			Audited
Assets
CURRENT ASSETS:
Cash and cash equivalents	$	1,947		$	416
Inventory		2,215			—
Trade account receivables		459			—
Related Parties		83			1,408
Other current assets		8,121			81
Total current assets		12,825			1,905
PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation		15,640			50
INVESTMENTS IN NON-CONSOLIDATED AFFILIATES		10,822			10,137
INVESTMENTS IN NON-CONSOLIDATED SUBSIDIARIES		3,176			4,429
OTHER LONG-TERM ASSETS		3,308			—
Total assets	$	45,771		$	16,521
Liabilities and Stockholders’ Equity (deficiency)
CURRENT LIABILITIES:
Current maturities of Debentures and long-term bank loan	$	5,784		$	2,988
Short Term Loans		5,612			280
Accounts payables		3,911			557
Other accounts payable and liabilities		6,862			2,091
Deferred revenues from joint ventures		—			5,658
Total current liabilities		22,169			11,574
ACCRUED SEVERANCE PAY		17			11
LONG TERM BANK LOANS		14,391			112
LONG TERM LOANS AND LIABILITIES		6,489			5,003
WARRANTS LIABILITY		523			2,045
STOCKHOLDERS’ EQUITY:
Common shares of $0.001 par value each:
Authorized: 1,750,000,000 shares at September 30, 2017 and December 31, 2016. Issued and outstanding: 3,682,764 shares and 2,147,383 shares at September 30, 2017 and December 31, 2016, respectively		4			2
Treasury shares		(28	)		(28	)
Accumulated other comprehensive income (loss)		(85	)		33
Additional paid-in capital		48,922			44,262
Accumulated deficit		(46,631	)		(46,493	)
Total Stockholders’ Equity (deficiency)		2,182			(2,224	)
Total Liabilities and Stockholders’ Equity (deficiency)	$	45,771		$	16,521

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

2

BLUE SPHERE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS 

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

	Nine-months ended September 30						Three-months ended September 30
	2017			2016			2017			2016
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
REVENUES
Revenue from sales	$	721		$	—		$	721		$	—
Development services		563			—			563			—
TOTAL REVENUES		1,284						1,284			—
COST OF REVENUES		809			—			809			—
GROSS PROFIT		475			—			475			—
OPERATING EXPENSES
General and administrative expenses		3,886			6,287			1,506			1,782
Loss from obtaining control in a former non-consolidated subsidiary		2,109			—			2,109			—
Other losses(income)		—			(97	)		—			5
OPERATING LOSS		(5,520	)		(6,190	)		(3,140	)		(1,787	)
FINANCIAL EXPENSES (INCOME), net		2,535			609			884			428
LOSS FROM EXTINGUISHMENT OF DEBENTURE		615			—			—			—
GAIN FROM CHANGE IN FAIR VALUE OF WARRANTS LIABILITY		(1,921	)		(432	)		(203	)		(1,396	)
NET LOSS BEFORE INCOME TAXES		(6,749	)		(6,367	)		(3,821	)		(819	)
INCOME TAXES		(32	)		—			(77	)		—
NET LOSS BEFORE EQUITY INCOME (LOSSES)		(6,717	)		(6,367	)		(3,744	)		(819	)
EQUITY INCOME (LOSS) IN NON-CONSOLIDATED AFFILIATES		6,343			—			(465	)		—
EQUITY INCOME (LOSSES) IN NON-CONSOLIDATED SUBSIDIARIES		236			(1,055	)		(24	)		90
NET LOSS FOR THE PERIOD	$	(138	)	$	(7,422	)	$	(4,233	)	$	(729	)
Net loss per common share - basic and diluted	$	(0.05	)	$	(4.26	)	$	(1.15	)	$	(0.38	)
Weighted average number of common shares outstanding during the period - basic and diluted		3,083,383			1,739,172	*		3,681,067			1,904,967	*

* Retrospectively adjusted to reflect the 130-for-1 reverse stock split.

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

3

BLUE SPHERE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS 

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

	Nine-months ended September 30						Three-months ended September 30
	2017			2016			2017			2016
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
NET LOSS	$	(138	)	$	(7,422	)	$	(4,233	)	$	(729	)
Other comprehensive income loss, net of tax:
Currency translation adjustments		(118	)		6			(133	)		2
TOTAL COMPREHENSIVE LOSS	$	(256	)	$	(7,416	)	$	(4,366	)	$	(727	)

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

4

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**
	Shares		Amount		Treasury Shares			Accumulated other comprehensive income			Additional paid-in Capital		Accumulated deficit			Total Stockholders’ deficiency
BALANCE AT DECEMBER 31, 2016 (Audited)		2,147,382	$	2	$	(28	)	$	33		$	44,262	$	(46,493	)	$	(2,224	)
CHANGES DURING THE PERIOD OF NINE-MONTHS ENDED SEPTEMBER 30, 2017 (Unaudited):
Issuance of common stock and warrants, net of issuance costs ***		1,440,000		2		—			—			4,121		—			4,123
Issuance of shares for services		27,598		*		—			—			132		—			132
Extinguish of liability upon shares issuance		7,406		*		—			—			47		—			47
Share based compensation		60,376		*		—			—			360		—			360
Comprehensive loss		—		—		—			(118	)		—		(138	)		(256	)
BALANCE AT SEPTEMBER 30, 2017 (Unaudited)		3,682,762	$	4	$	(28	)	$	(85	)	$	48,922	$	(46,631	)	$	2,182

*** Issuance cost during the period were of $377

5

	Common Stock, $0.001 Par Value
	Shares		Amount			Proceeds on account of Shares			Treasury Shares			Accumulated other comprehensive income		Additional paid-in Capital		Accumulated deficit			Total Stockholders’ deficiency
BALANCE AT DECEMBER 31, 2015 (Unaudited)		1,388,481	$	1		$	165		$	(28	)	$	—	$	41,068	$	(44,692	)	$	(3,486	)
CHANGES DURING THE PERIOD OF NINE MONTHS ENDED SEPTEMBER 30, 2016 (Unaudited):
Extinguish of liability upon shares issuance		57,719		—	*										660					660
Issuance of shares for services		35,062		—	*										641					641
Issuance of common stock, net of issuance costs ***		427,553		1			(20	)							630					611
Issuance of common stock in respect of issuance of convertible notes		107,160		—	*		(145	)							145					—
Exercise of warrants		5,385		—	*										41					41
Comprehensive loss													6				(7,422	)		(7,416	)
BALANCE AT SEPTEMBER 30, 2016 (Unaudited)		2,021,360	$	2		$	—		$	(28	)	$	6	$	43,185	$	(52,114	)	$	(8,949	)

*	less than $1.
**	Retrospectively adjusted to reflect the 130-for-1 reverse stock split.
***	Issuance cost during the period were of $264

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)

	Nine-months ended September 30
	2017			2016
	(Unaudited)			(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss for the period	$	(138	)	$	(7,422	)
Adjustments required to reconcile net loss to net cash used in operating activities:
Share based payments		360			371
Extinguish of liability upon shares issuance		47			—
Depreciation		400			12
Capital loss from disposal of property, plant and equipment		—			5
Loss from obtaining control in a former non-consolidated subsidiary		2,109			—
Equity losses (income) in non-consolidated subsidiaries		(236	)		1,055
Equity income in non-consolidated affiliates		(6,343	)		—
Expense in respect of convertible notes and loans		1,366			163
Loss from extinguishment of debenture		615			—
Changes in warrants liability		(1,921	)		(432	)
Expenses in respect of severance pay		6			—
Issuance of shares for services		132			641
Increase in inventory		(2,201	)		—
Decrease (increase) in trade accounts receivables		726			—
Increase in related parties and other current assets		(1,772	)		(193	)
Decrease (increase) in other long-term assets		1,222			(22	)
Increase (decrease) in accounts payables		1,152			4,499
Increase in other account payables		2,329			1,142
Net cash used in operating activities		(2,147	)		(4,181	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment		(290	)		(60	)
Investment in nonconsolidated subsidiary		(3,040	)		—
Consolidation of a former non-consolidated subsidiaries (see note a)		872			—
Net cash used in investing activities		(2,458	)		(60	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short term loans		1,937			50
Repayment of short term loans		(1,200	)		—
Repayment of loans		(274	)		(364	)
Proceeds from exercise of warrants		—			41
Proceeds from long term loans		1,557			—
Proceeds from issuance of shares and warrants, net of issuance cost		4,123			3,001
Net cash provided by financing activities		6,143			2,728
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		1,538			(1,513	)
EFFECT OF CHANGES IN EXCHANGE RATES ON CASH BALANCES IN FOREIGN CURRENCIES		(7	)		—
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		416			1,888
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	1947		$	375
NON-CASH TRANSACTION:
Extinguish of debt upon shares issuance		360			435
Deferred net equity in joint ventures		230			255
Issuance expense paid through warrants issuance		225			1,684
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest	$	619		$	554

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

7

BLUE SPHERE CORPORATION

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Amounts in thousands, except share and per share data)

(a) 2017 Consolidation of Non-Consolidated subsidiaries

On July 1, 2017, the Company consolidated Agricerere S.r.l., Agrielektra S.r.l., Agrisorse S.r.l. and Gefa S.r.l. non-consolidated subsidiaries. The consolidation was recorded by allocating the cost of the acquisitions to the assets consolidated, including other intangible assets, based on their estimated fair values at the consolidation date.  Based on the consolidation date valuations, the preliminary purchase price allocations for as the following:

Accounts Receivable	$	(1,149	)
Prepaid expenses and other current assets		(4,493	)
Property, plant and equipment		(15,144	)
Other noncurrent assets		(4,382	)
Short term loans		3,969
Accounts payable and accrued liabilities		3,847
Bank loans		15,244
Total net assets, net of cash consolidated		(2,108	)
Less:  Capital loss from obtaining control in a former non-consolidated subsidiary		(2,109	)
Add: Investment in non-consolidated Subsidiaries		5,089
Net cash consolidated:	$	872

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 December 31, 2016, as filed with the U.S. Securities and Exchange Commission. The results of operations for the nine-months and three-months ended September 30, 2017 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 direct and indirect wholly-owned subsidiaries, Eastern Sphere Ltd. (“Eastern”), BinoSphere LLC (“Binosphere”), Bluesphere Pavia S.r.l (“Bluesphere Pavia”), Bluesphere Italy S.r.l., and Blue Sphere Brabant B.V. (“BSB”), 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. On May 12, 2015, the Company formed Bluesphere Pavia, a subsidiary of Eastern, in order to acquire certain biogas plants located in Italy (see note 5 below). On September 19, 2016, the Company formed BSB in order to commence operations in the Netherlands. On January 31, 2017, the Company dissolved Johnstonsphere LLC, which had no operations since inception. On April 30, 2017, the Company dissolved Sustainable Energy Ltd.

Change in Operator in Blue Sphere Pavia’s facilities and Transfer of North Carolina and Rhode Island Project Agreements

On July 18, 2017, the Company terminated its four Plant EBITDA Guarantee Agreements dated December 15, 2015 (collectively, the “Plant EBITDA Agreements”) with Austep S.p.A. an Italian corporation (“Austep”), the Company’s former operator in Italy that operated, maintained, and supervised the Company’s four facilities in Italy (the “SPV Facilities”) owned by the Company through its indirect, wholly-owned subsidiaries,Agricerere S.r.l., Agrielektra S.r.l., Agrisorse S.r.l. and Gefa S.r.l (each, an “SPV” and collectively, the “SPVs”). Also as fully described herein, we understand that the agreements relating to the development and operation of our facilities in North Carolina and Rhode Island will be transferred by Austep to its affiliated entity, Andion Italy S.r.l. (“Andion”). Presently, the agreements are validly in force and the parties continue to develop, operate, maintain, and supervise the facilities in North Carolina and Rhode Island.

From the Official Records of the Companies’ Register (the “Official Records”), the Company learned that on June 20, 2017, Austep was put in voluntary liquidation by shareholders’ resolution pursuant to Article 2484 of the Italian Civil Code. Furthermore, the Official Records show that on June 30, 2017, Austep filed a petition in the Bankruptcy Court of Milan (the “Milan Court”) for a creditor’ settlement procedure pursuant to Article 161, paragraph 6 of the Italian Bankruptcy Law, seeking permission to submit a restructuring plan to the court contemplating a partial continuity of its operations, which will then need to be approved by a majority of Austep’s creditors and by the court.

According to the Official Records, on June 29, 2017, Austep entered into a Business Unit Lease Agreement (“BULA”) with Andion, with the intent of assuring the regular operation of certain operations and agreements by Andion. Andion is wholly owned by Arcus Holdings Sa, a Luxembourg entity owned by White Cloud Capital II SCSp, which controls Austep Holdings S.p.A. Austep Holdings S.p.A. wholly-owns Austep and Austep USA, and Austep USA wholly-owns Auspark LLC and Austep Rhode Island LLC. Andion is not subject to the liquidation/restructuring of Austep. The BULA provides for, among other things, the transfer of Austep’s entire United States operations and, accordingly, the agreements relating to the delivery and operation of our North Carolina and Rhode Island facilities. The term of the BULA is three (3) months from the effective date of the BULA, and will automatically renew if not terminated by one of the parties with at least thirty (30) days’ written notice. The BULA will become effective upon execution by all parties, and is subject to finalization of negotiations with unions regarding all employees who will not be transferred with the BULA. Presently, the agreements relating to the delivery and operation of our North Carolina and Rhode Island facilities are validly in force, and the parties continue to develop, operate, maintain, and supervise the North Carolina and Rhode Island facilities in accordance with the terms of such agreements. If and when the BULA becomes effective, we anticipate that Andion will continue to operate, maintain, and supervise the North Carolina and Rhode Island facilities for the foreseeable future unless the Italian receiver will sell the Austep US operation to another operator. Through the process of Austep’s liquidation/restructuring, the Italian liquidator will compare competitive offers to acquire the operations and agreements that are the subject of the BULA; therefore, the acquirer of the agreements relating to the operation of the Company’s North Carolina Facility and Rhode Island Facility may be Andion, or potentially another purchaser.

8

BLUE SPHERE CORPORATION

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Amounts in thousands, except share and per share data)

On July 12, 2017, Austep personnel shut down the engines at all of the SPV Facilities, and exited all four sites. The Company immediately notified Banca IMI S.p.A. (“Banca IMI”), the SPVs’ lender, and began coordinating with Banca IMA on its remedial action plan.

On July 14, 2017, the Company notified Austep’s liquidator, in accordance with the Plant EBITDA Agreements, that because (i) Austep had neglected specified contractual obligations concerning maintenance of the SPV Facilities, which each SPV had notified Austep of on June 21, 2017, and (ii) Austep, without notice, abandoned the SPV Facilities, the Company had taken over direct management and supervision of the SPV Facilities to ensure their proper operation, safety and security. The Company reserved all rights to claim any and all damages arising as a consequence of Austep’s conduct, including costs incurred by the Company in its intervention. On the same date, the Company entered into a Biogas Plants’ Ordinary Management Proposal with Società Agricola Burnigaia Società Semplice d/b/a La Fenice (“La Fenice”), an Italian company experienced in the operation of biogas plants, pursuant to which La Fenice will immediately operate and supervise the SPV Facilities (the “Interim Operation Agreement”). The Interim Operation Agreement provides that we will pay La Fenice €10,000 per facility per month. The Interim Operation Agreement renews automatically each month, unless terminated by either party. The Company and La Fenice are operating pursuant to the Interim Operation Agreement, and are presently negotiating a definitive agreement. Pursuant to the Interim Operation Agreement, La Fenice personnel were on-site at the SPV Facilities on July 14, 2017 and began start-up of the engines at each facility.

On July 17, 2017, the Company received a copy of the decree issued by the Milan Court dated July 6, 2017, whereby the Milan Court approved Austep’s petition for a creditors’ settlement procedure and declared that Austep shall, by November 3, 2017, submit (i) the final debt restructuring plan and a request for certification of the restructuring agreement’s debts. The Milan Court appointed a judicial commissioner to supervise Austep’s activities through November 3, 2017 and report to the Court every fact constituting a breach of Austep’s obligations under the relevant provisions of the Italian Bankruptcy Law. In addition, the Milan Court declared that Austep shall not, without the Milan Court’s authorization, (i) perform any extraordinary operation, (ii) repay any receivable accrued before the opening of the judicial procedure, or (iii) suspend any pending agreement or enter into any new loan agreement.

On July 18, 2017, the SPVs delivered to Austep a notice of termination of the Plant EBITDA Agreements due to several breaches of Austep’s obligations, representations and warranties thereunder including without limitation those outlined in the notice provided to Austep’s liquidator on July 14, 2017. The Company further notified Austep that, as a consequence of early termination, (i) it is obligated to pay to a penalty of €85,000 to each SPV, and (ii) that Austep will be deemed liable to hold the SPVs harmless and indemnified for any direct and indirect losses (including loss of business), damages, costs of engaging replacement contractors and suppliers, costs relating to the supply of feedstock for years 2017 through 2018, insurance premium costs, costs incurred in connection with the financing facility agreement with Banca IMI, and any other expenses or other liabilities incurred or to be incurred by the SPVs as a consequence of or in connection with Austep’s breaches, actions and/or omissions under the Plant EBITDA Agreements. The notice was prepared in coordination with Banca IMI.

On November 7, 2017, the Company entered with an operator into agreement for a full-service operation, maintenance, and supervision of the SPV Facilities, and supply feedstock to the SPV Facilities. The agreement is effective from October 1, 2017.

9

BLUE SPHERE CORPORATION

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Amounts in thousands, except share and per share data)

Until June 30, 2017 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 Consolidated 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. However, since the Framework EBITDA Guarantee Agreement between the Company and Austep was terminated the Company did not apply the equity method of accounting for those investments from July 1. 2017 and consolidate the assets and liabilities of those investments in its Condensed Consolidated Balance Sheet and consolidate the results of operations of those subsidiaries in its Condensed Consolidated Statement of Operations.

2017 Consolidation of Non-Consolidated Subsidiaries

On July 1, 2017, the Company consolidated Agricerere S.r.l., Agrielektra S.r.l., Agrisorse S.r.l. and Gefa S.r.l. non-consolidated subsidiaries. Commencing July 1, 2017, the Company does not apply 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. because the Company operates, maintains and supervises each biogas plant. Furthermore, the Company reigned influence over the operating policies of the plants. Prior to June 30, 2017, 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, prevented us from exercising a controlling influence over operating policies of the plants. Under this method, the Company’s equity investment was reflected as an investment in non-consolidated subsidiaries on its Condensed Balance Sheets and the net earnings or losses of the investments was reflected as an equity in net earnings of non-consolidated companies on its Consolidated Statements of Operations. On July 18, 2017, the Company terminated its four Plant EBITDA Guarantee Agreements dated December 15, 2015 with Austep since on June 20, 2017 the Company learned from the Official Records of the Companies’ Register that Austep was put in voluntary liquidation and it filed a petition for a creditor’s settlement in the Bankruptcy Court of Milan. Further, On July 12, 2017, Austep personnel shut down the engines at all of the SPV Facilities, and exited all four sites. Therefore, on July 18, 2017 the Company terminated the Framework EBITDA Guarantee Agreement between the non-consolidated subsidiaries and Austep and regained a controlling influence over operating policies of the operating policies of the facilities and ceased applying the equity method.

The consolidation was recorded by allocating the cost of the acquisitions to the assets consolidated, including other intangible assets, based on their estimated fair values at the consolidation date.    Based on the consolidation date valuations, the preliminary purchase price allocations for as the following:

Cash and cash equivalents	$	872
Accounts Receivable		1,149
Prepaid expenses and other current assets		4,493
Property, plant and equipment		15,144
Other noncurrent assets		4,382
Short term loans		(3,969	)
Accounts payable and accrued liabilities		(3,847	)
Bank loans		(15,244	)
Total net assets consolidated:	$	2,980

The fair values of property, plant and equipment associated with the acquisitions were determined to be Level 3 under the fair value hierarchy. Property, plant and equipment values were estimated using either the cost or market approach, if a secondhand market existed.

Pro forma results  

The following unaudited pro forma financial information for the three months ended September 30, 2017 and 2016 presents the condensed consolidated and combined statements of operations of the Company and the acquisitions described above, as if the acquisitions had occurred as of January 1 of the year prior to the acquisitions.

The unaudited pro forma financial information is not intended to represent or be indicative of the Company’s condensed consolidated and combined statements of operations that would have been reported had these acquisitions been completed as of the beginning of the period presented and should not be taken as indicative of the Company’s future condensed consolidated statements of operations.

	Nine Months Ended						Three Months Ended
	September 30						September 30
	2017			2016			2017			2016
Revenues	$	4,373		$	4,556		$	1,284		$	1,850
Net (loss) income		(138	)		(7,422	)		(4,233	)		(729	)
Net (loss) earnings per common share
Basic and diluted	$	(0.05	)	$	(4.26	)	$	(1.15	)	$	(0.38	)

10

BLUE SPHERE CORPORATION

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Amounts in thousands, except share and per share data)

The Udine, Italy Acquisition

On June 29, 2017, the Company entered into a Share Purchase Agreement (the “Udine SPA”) with PRONTO VERDE A.G. (the “Seller”), relating to the purchase of one hundred percent (100%) of the share capital of FUTURIS PAPIA S.r.l., a limited liability company organized under the laws of Italy (the “Udine SPV”), which owns and operates a 0.995 Kw plant for the production of electricity from vegetal oil located in Udine, Italy. On September 4, 2017, the Company completed the acquisition of the Udine SPV. The total purchase price of the Udine SPV was approximately €2,706 (approximately $3,236), which included the initial purchase price in the amount of two million three hundred fifty-eight thousand euros (€2,358) (approximately $2,784), transaction costs and certain post-closing adjustments based on net financial position, net working capital, and certain net receivables as of the closing date.

The Helios Mezzanine Loan Facility

On August 30, 2017, the Company and Blue Sphere Italy entered into a Long Term Mezzanine Loan Agreement (the “Second Helios Loan Agreement”) with Helios 3 Italy Bio-Gas 2 L.P. (“Helios 3”), pursuant to which Helios 3 agreed to provide a mezzanine loan facility (the “Second Helios Loan”) of up to €1,600 (approximately $1,912) to finance (a) a portion of the total purchase price of the Udine SPV, (b) certain broker fees incurred in connection with the acquisition of the Udine SPV, and (c) taxes associated with registration of a pledge agreement. The Company’s liabilities and obligations under the Second Helios Loan Agreement are secured by a pledge of all of the Company’s shares of Blue Sphere Italy. In addition, any loan granted to Blue Sphere Italy by the Company shall rank subordinate to the Second Helios Loan.

The Second Helios Loan accrues interest at a rate of fourteen and one-half percent (14.5%) per annum, paid quarterly, beginning six (6) months following the closing of the Second Helios Loan. In addition, Helios 3 is entitled to an annual operation fee, paid quarterly in the amount of one-half percent (1.5%) per annum of the outstanding balance of the Loan. The final payment for the Second Helios Loan will become due no later than the earlier of (i) seven (7) years from the date the funds were made available to Blue Sphere Italy or (ii) the date of expiration of certain licenses granted to the Udine SPV. The Second Helios Loan may not be prepaid by the Company, but after payment by the Company of eight (8) quarterly payments, Helios 3 is entitled to demand repayment of the amount of the Second Helios Loan outstanding, provided that the amount shall not exceed the maximum distributable proceeds of the Udine SPV, by providing notice at least twenty-one (21) days prior to such demand. At such time the Company shall be entitled to refinance and prepay the entire amount outstanding under the Second Helios Loan, including the expected interest and operation fee due for the remaining period of the Second Helios Loan, less fifteen percent (15%) of the aggregate sum of such amounts. If the Company intends to refinance the Second Helios Loan, Helios shall have a right of first refusal to make a loan on the same terms.

Operations of the Udine SPV

In accordance with a Guarantee Plant Operation Management Agreement, dated September 4, 2017 (the “GPOMA”), between Pronto Verde and the Udine SPV, Pronto Verde satisfied its guarantee to procure the services of CC Engineering S.r.l., a limited liability company duly incorporated and existing under the laws of Italy, to perform “all-inclusive” services for the operation and maintenance of the facilities, and ISG Sviluppo SA, a company duly incorporated and existing under the laws of Switzerland, to supply to the vegetal oil necessary for the regular functioning of the Udine SPV. In accordance with the GPOMA, Pronto Verde guaranteed a monthly EBITDA of €91 (approximately $110) from the for the completion of the acquisition.

Applying the Equity method of account for this investment 

The Company applied the equity method of accounting for this investment because the GOMA between the Company and Pronto Verde whereas Pronto Verde 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.

The Cantu, Italy Acquisition

On June 29, 2017, the Company entered into a Share Purchase Agreement (the “Cantu SPA”) with the Seller, relating to the purchase of one hundred percent (100%) of the share capital of ENERGYECO S.r.l., a limited liability company organized under the laws of Italy (the “Cantu SPV”), which owns and operates a 0.990 Kw plant for the production of electricity from vegetal oil located in Cantù, Italy. The closing in relation to the Cantu SPV is subject to specified conditions precedent including, but not limited to, consummation of an acquisition of all the minority share capital of the Cantu SPV by the Seller from the minority shareholders of the Cantu SPV, delivery of audited closing financial statements of the Cantu SPV by Seller, and receipt of consent from the lenders and confirmation to accept repayment of certain of Cantu SPV’s Loans. The agreed purchase price of the Cantu SPV is two million two hundred thousand euros (€2,200) (approximately $2,490). The purchase price is subject to post-closing adjustment based on net financial position, net working capital, and certain net receivables, to be calculated on the basis of the Cantu SPV’s final closing audited financial statements. The purchase price will be paid to the Seller at closing, less (a) an amount of one hundred fifty thousand euros (€150) (approximately $179) to be paid on or before July 13, 2017 and held in escrow until closing; (b) one million ten thousand two hundred and eighty euros (€1,010) (approximately $1,145) to repay the balance of two loans payable of the Cantu SPV; (c) a brokerage fee payable by the Seller in the amount of sixty thousand euros (€60) (approximately $68); and (d) one hundred thousand euros (€100) (approximately $113) to be held in escrow.

11

BLUE SPHERE CORPORATION

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Amounts in thousands, except share and per share data)

In connection with Company’s purchase of the Cantu SPV, on September 11, 2017, the Company entered into an agreement (the “Gain Agreement”) with Gain Solutions, S.R.O., a company incorporated under the laws of the Czech Republic (“Gain”), pursuant to which Gain will purchase thirty-eight and one-half percent (38.5%) of the capital stock of the Cantu SPV (the “Gain SPV Shares”) from the Company for a purchase price of €1,100 (approximately $1,320), which included a €200 (approximately $240) down payment paid by Gain (the “Gain Down Payment”). The Gain Agreement is subject to Gain’s completion of due diligence and entry into definitive agreements to consummate the purchase and sale of the Gain SPV Shares.

The Gain Down Payment will be applied toward the Cantu Purchase Price, or in the event Gain does not proceed following due diligence, the parties do not enter into definitive agreements or the Company does not ultimately acquire the Cantu SPV, the Down Payment will become repayable by the Company with ten percent (10%) interest no later than December 13, 2017. Any amount of the Down Payment (including interest) that is not timely paid by December 24, 2017 and through March 13, 2018 shall be subject to penalty interest equal to twenty percent (20%) per annum, and any amounts (including penalty interest) not paid by March 13, 2018 shall be subject to penalty interest equal to twenty-five percent (25%) per annum. The Company provided to Gain an irrevocable guarantee to repay the Gain Down Payment and any interest or penalty interest that accrues thereon. Also in connection with the secured Gain Down Payment, the Company entered into a Security Agreement to register a lien and security interest equal to 15% of the Company’s equity ownership of the Cantu SPV and all products and proceeds thereof pertaining from the Company’s rights according to the closing of the Cantu SPA.

The closing in relation to the Cantu SPV will probably occur sometime during the fourth quarter of 2017, and any such closing is subject to specified conditions precedent including, but not limited to, consummation of an acquisition of all share capital of the Cantu SPV by Pronto Verde from the owners of the Cantu SPV, delivery of audited closing financial statements of the Cantu SPV by Seller, and receipt of consent from the lenders and confirmation to accept repayment of the Cantu Loans.

NOTE 3 – CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The accompanying unaudited condensed consolidated financial statements as of September 30, 2017 and for the nine-months 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 nine-months and three-months ended September 30, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017.

The September 30, 2017 Condensed Balance Sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America. These financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.

12

BLUE SPHERE CORPORATION

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Amounts in thousands, except share and per share data)

NOTE 4 – SIGNIFICANT ACCOUNTING POLICIES

A. Unaudited Interim Financial Statements

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of U.S. Securities and Exchange Commission Regulation S-X. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included (consisting only of normal recurring adjustments except as otherwise discussed).

For further information, reference is made to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.

Operating results for the nine- months and three-months ended September 30, 2017, are not necessarily indicative of the results that may be expected for the year ended December 31, 2017.

B. Significant Accounting Policies

The significant accounting policies followed in the preparation of these unaudited interim condensed consolidated financial statements are identical to those applied in the preparation of the latest annual financial statements.

C. Recent Accounting Standards

In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. This guidance narrows the definition of a business. This standard provides guidance to assist entities with evaluating when a set of transferred assets and activities is a business. This guidance is effective for interim and annual reporting periods beginning after December 15, 2017, and early adoption is permitted. This guidance must be applied prospectively to transactions occurring within the period of adoption. The Company expects to adopt this guidance effective January 1, 2018. The Company does not expect the adoption of this guidance to have a material impact on its financial position, results of operations or cash flows.

In January 2017, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This guidance eliminates Step 2 from the goodwill impairment test, instead requiring an entity to recognize a goodwill impairment charge for the amount by which the goodwill carrying amount exceeds the reporting unit’s fair value. This guidance is effective for interim and annual goodwill impairment tests in fiscal years beginning after December 15, 2019, and early adoption is permitted. This guidance must be applied on a prospective basis. The Company expects to adopt this guidance for interim and annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company does not expect the adoption of this guidance to have a material impact on its financial position, results of operations or cash flows.

In May 2017, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, 2017-9, Stock Compensation (Topic 718): Scope of Modification Accounting. The ASU limits the circumstances in which an entity applies modification accounting. When an award is modified, an entity does not apply the guidance in ASC 718-20-35-3 through 35-9 if it meets all of the following criteria: (i) The fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the modified award is the same as the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the original award immediately before the original award is modified. (ii) The vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified. (iii) The classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified. The ASU also removes the guidance in ASC 718 stating that modification accounting is not required when an entity adds an antidilution provision as long as that modification is not made in contemplation of an equity restructuring.

In July 2017, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, 2017-11, Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral. The ASU applies to issuers of financial instruments with down-round features. It amends (1) the classification of such instruments as liabilities or equity by revising the guidance in ASC 815 on the evaluation of whether instruments or embedded features with down-round provisions must be accounted for as derivative instruments and (2) the guidance on recognition and measurement of the value transferred upon the trigger of a down-round feature for equity-classified instruments by revising ASC 260. The ASU is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. For all other organizations, the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted.

In August 2017, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update 2017-12, or ASU, 2017-815, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. This ASU amends ASC 815 to “better align an entity’s risk management activities and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results.” to (1) improve the transparency of information about an entity’s risk management activities and (2) simplify the application of hedge accounting. The ASU is effective for public business entities for fiscal years beginning after December 15, 2018, and interim periods therein. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods beginning after December 15, 2020. Early adoption is permitted. 

D. Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

13

BLUE SPHERE CORPORATION

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Amounts in thousands, except share and per share data)

NOTE 5 – FAIR VALUE MEASUREMENT

The Company’s financial assets and liabilities that are measured at fair value on a recurring basis by level within the fair value hierarchy are as follows (in thousands):

	Balance as of September 30, 2017
	Level 1		Level 2		Level 3		Total
Liabilities:
Obligation to issue shares of Common Stock	$	500	$	—	$	—	$	500
Deferred payment due to the acquisition of the SPVs	$	—	$	—	$	3,105	$	3,105
Warrants liability	$	—	$	—	$	523	$	523
Total liabilities	$	500	$	—	$	3,628	$	4,128

	As of December 31, 2016,
	Level 1		Level 2		Level 3		Total
Liabilities:
Obligation to issue shares of Common Stock	$	187	$	—	$	—	$	187
Deferred payment due to the acquisition of the SPVs	$	—	$	—	$	2,685	$	2,685
Warrants Liability	$	—	$	—	$	2,045	$	2,045
Total liabilities	$	187	$	—	$	4,730	$	4,917

Per the Share Purchase Agreement (the “Italy Projects Agreement”) with Volteo Energie S.p.A., Agriholding S.r.l., and Overland S.r.l. (“the Sellers”) the Company agreed to pay the remaining balance of fifty percent (50%) of the purchase price along with annual interest rate of two percent (2%), less certain credits that is due to the sellers on the third anniversary of the closing date (the “Deferred Payment”). The Purchase Price is subject to certain adjustments and to an adjustment based on the actual EBITDA results in the 18 months following the Closing Date, per the following mechanism:

(a) If the actual EBITDA in the 18 months following the Closing Date divided by 1.5 is greater than € 934, then the deferred payment shall be increased by the amount equal to fifty percent (50%) of the difference.

(b) If the actual EBITDA in the 18 months following the Closing Date divided by 1.5 is lesser than € 934, then the deferred payment shall be reduced by the amount of the amount necessary to maintain a Purchase Price that yields an Equity IRR of twenty-five percent (25%), but not more than 35% of the remaining balance.

On July 21, 2017, the Company notified the sellers its current deferred payment estimates pursuant to Article 3.03 of the Italy Projects Agreement regulating the “Deferred payment adjustment mechanism”. On July 28, 2017, the Sellers notified the Company that they do not agree with the Company’s estimate.

The fair value measurement of the fair market value of the Deferred Payment is based on significant inputs not observed in the market and thus represents a Level 3 measurement, which reflects the Company’s own assumptions in measuring fair value. The Company estimated the fair value of the Deferred Payment using the discounted cash flow model. Key assumptions include the level and timing of the expected future payment and discount rate consistent with the level of risk and economy in general. The Deferred Payment due to the acquisition of the SPVs is included in long term loans and Liabilities in the consolidated Balance Sheets and the change in fair value of remaining balance is included in interest expenses in the consolidated statements of income.

	Deferred payment due to the acquisition of the SPVs
Balance at December 31, 2016	$	2,685
Changes in fair value, interest expense and translation adjustments		420
Balance at September 30, 2017	$	3,105

14

BLUE SPHERE CORPORATION

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Amounts in thousands, except share and per share data)

Warrant Liability - the estimated fair values of outstanding warrant liability were measured using Black-Scholes valuation models. These valuation models involved using such inputs as the estimated fair value of the underlying stock at the measurement date, risk-free interest rates, expected dividends on stock and expected volatility of the price of the underlying stock. Due to the nature of these inputs, the valuation of the warrants was considered a Level 3 measurement.

As of September 30, 2017, and December 31, 2016, the Level 3 liabilities consisted of the Company’s warrant liability.

	Warrants Liability
Balance at December 31, 2016	$	2,045
Issuance of warrants		399
Changes in fair value		(1,921	)
Balance at September 30, 2017	$	523

NOTE 6 – GOING CONCERN

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As of September 30, 2017, the Company had approximately $1,947 in cash and cash equivalents, approximately $9,344 in negative working capital, a stockholders’ equity of approximately $2,182 and an accumulated deficit of approximately $46,631. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Company’s ability to continue as a going concern is dependent upon raising capital from financing transactions and revenue from operations. 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 and capital markets as the Company will need to finance future activities. Company’s ability to continue as a going concern is dependent upon raising capital from financing transactions and revenue from operations. These financial statements do not include any adjustments that may be necessary should the Company be unable to continue as a going concern. The Company’s continuation as a going concern is dependent on its ability to obtain additional financing as may be required and ultimately to attain profitability.

NOTE 7 – NEWLY ISSUED ACCOUNTING PRONOUNCEMENTS

No new accounting standards have been adopted since the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016 was filed.

NOTE 8 – SHORT TERM LOAN AND DEBENTURES

On February 7, 2017, the Company entered into a 90-day Loan Agreement with Viskoben Limited to borrow $200 at a quarterly interest rate of ten percent (10.0%), or thirty percent (30.0%) if calculated annually (the “Viskoben Note”). On June 27, 2017, the Loan was fully paid by the Company.

On February 14, 2017, the Company received an additional $250 under its private placement of securities closed on October 25, 2016 (the “October Financing”) and issued warrants to purchase up to 25,642 shares of its common stock at an exercise price equal to the lesser of (i) 80% of the per share price of the Company’s common stock in a public offering of up to $15 million of its securities (the “Public Offering”), (ii) $9.75 per share (the deemed aggregate exercise price), (iii) 80% of the unit price offering price in the Public Offering, or (iv) the exercise price of any warrants issued in the Public Offering, pursuant to the amendment of the October Financing. On March 14, 2017, the Company amended the terms of the October Financing, thereby agreeing to issue to the investor shares of the Company’s common stock, notes and warrants, in exchange for up to $1,500 (an increase of $500). On the same date, the Company received an additional $250 and issued warrants to purchase up to 25,642 shares of its common stock at an exercise price equal to the lesser of (i) 80% of the per share price of its common stock in the Public Offering, (ii) $9.75 per share (the deemed aggregate exercise price), (iii) 80% of the unit price offering price in the Public Offering, or (iv) the exercise price of any warrants issued in the Public Offering, pursuant to the amendment of the October Financing. On April 13, 2017 the Company received an additional $250 and issued warrants to purchase up to 25,642 shares of its common stock at an exercise price equal to the lesser of (i) 80% of the per share price of its common stock in the Public Offering, (ii) $9.75 per share (the deemed aggregate exercise price), (iii) 80% of the unit price offering price in the Public Offering, or (iv) the exercise price of any warrants issued in the Public Offering, pursuant to the amendment of the October Financing. On April 28, 2017, the Company extended the maturity date from the earlier of May 1, 2017 or the third business day after the closing of a public offering to the earlier of May 19, 2017 or the third business day after the closing of a public offering. On May 10, 2017, the Company amended the terms of the October Financing, thereby agreeing to issue to the investor shares of the Company’s common stock, notes and warrants, in exchange for up to $2,000 (an increase of $500). On May 11,2017 the Company received an additional $250 and issued warrants to purchase up to 25,642 shares of its common stock at an exercise price equal to the lesser of (i) 80% of the per share price of the Company’s common stock in the Public Offering, (ii) $9.75 per share (the deemed aggregate exercise price), (iii) 80% of the unit price offering price in the Public Offering, or (iv) the exercise price of any warrants issued in the Public Offering, pursuant to the amendment of the October Financing. On June 7, 2017, the Company received an additional $250 and issued warrants to purchase up to 25,642 shares of its common stock at an exercise price equal to the lesser of (i) 80% of the per share price of its common stock in the Public Offering, (ii) $9.75 per share (the deemed aggregate exercise price), (iii) 80% of the unit price offering price in the Public Offering, or (iv) the exercise price of any warrants issued in the Public Offering, pursuant to the amendment of the October Financing. On June 29, 2017, the Company extended the maturity date from the earlier of July 25, 2017 or the third business day after the closing of a public offering to the earlier of July 25, 2017 or the third business day after the closing of a public offering. On June 30, 2017, the Company repaid $1,000 of the outstanding balance of the October 2016 Note. On September 21, 2017, the Company extended the maturity date from the earlier of July 25, 2017 or the third business day after the closing of a public offering to the earlier of October 6, 2017 or the third business day after the closing of a public offering. As of September 30, 2017, the amortized outstanding balance is $1,065.

15

BLUE SPHERE CORPORATION

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Amounts in thousands, except share and per share data)

On March 24, 2017, the Company and five of the six holders of the Debentures, representing an aggregate principal balance of $2,000, entered into a First Amendment to Senior Debenture (the “Debenture Amendment”), thereby amending the Debentures to provide that some or all of the principal balance, and accrued but unpaid interest thereon, is convertible into shares of the Company’s common stock at the holders’ election, with such right to convert beginning on the six (6) month anniversary of the Debenture Amendment and ending ten (10) days prior to the date the Debenture matures. The conversion price shall be (a) equal to 80% of the average reported closing price of the Company’s common stock on The NASDAQ Capital Market, calculated using the five (5) trading days immediately following the up-list to The NASDAQ Capital Market, or (b) if the up-list has not occurred, equal to 80% of the average reported closing price of the Company’s common stock on the OTCQB Venture Marketplace, calculated using the five (5) trading days immediately preceding the date of the conversion notice.

On August 20, 2017, the Company entered into a 90-day Loan Agreement with a private investor to borrow $200 at a quarterly interest rate of ten percent (10.0%). As of September 30, 2017, this note was not paid.

NOTE 9 – CONTINGENT

From time to time the Company may be a party to commercial and litigation matters involving claims against the Company. None of the Company’s directors, officers, nonconsolidated affiliates, or any owner of record or beneficially of more than five percent of the Company’s Common Stock, is involved in a material proceeding adverse to the Company and its subsidiaries or has a material interest adverse to the Company or its subsidiaries. The Company accrues a liability for such matters when it is probable that future expenditures will be made and such expenditures can be reasonably estimated. In management’s opinion, there are no current matters that would have a material effect on the Company’s financial position or results of operations and no contingent liabilities requiring accrual as of June 30, 2017.

On October 22, 2016, the law firm of JS Barkats PLLC filed a complaint against the Company and its Chief Executive Officer, seeking allegedly unpaid legal fees for services rendered from June 9, 2011 through April 23, 2012 in the amount of $428 thousands, plus interest for a total of $652 thousands. This Litigation was filed as JS Barkats PLLC v. Blue Sphere Corporation and Shlomo Palas with the Supreme Court of the State of New York for the County of New York, Index No. 655600/2016. On October 26, 2016, without notice to the Company or its Chief Executive Officer or an opportunity to be heard, the New York Court issued a Temporary Restraining Order (the “TRO”) in favor JS Barkats PLLC, prohibiting the Company and Mr. Palas from transferring or dissipating any assets up to $652. On October 31, 2016, the Company removed the Barkats Litigation to federal court, filed as JS Barkats PLLC v. Blue Sphere Corporation and Shlomo Palas with the United Stated District Court, Southern District Court of New York, Docket No. 1:16-cv-08404, and on December 6, 2016, Mr. Barkats filed a motion to remand to the New York Court and request for oral argument. The Company terminated the services of JS Barkats LLC in 2012 and management believe the claims brought by JS Barkats PLLC are without merit, that the TRO was improvidently granted, and that JS Barkats PLLC misrepresented, mischaracterized and omitted material facts and the law in seeking the TRO.

16

BLUE SPHERE CORPORATION

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Amounts in thousands, except share and per share data)

On July 10, 2017, the Federal Court granted JS Barkats PLLC’s motion to remand the action to the New York Court, but denied JS Barkats PLLC’s request for costs and fees in bringing its remand petition. The Federal Court did not rule upon whether plaintiff’s complaint should be dismissed and/or the matter compelled to arbitration and did not rule upon Plaintiff’s motion to hold the Company and Mr. Palas in contempt for allegedly violating the TRO. The Federal Court has since remanded the case back to the New York Court where it is currently pending.

The Company terminated the services of JS Barkats LLC in 2012 and believe the claims brought by JS Barkats PLLC are without merit, that the TRO was improvidently granted, and that JS Barkats PLLC misrepresented, mischaracterized and omitted material facts and the law in seeking the TRO. The Company intend to vigorously defend against this Litigation, the TRO and any other attempts to attach the assets of the Company.

On March 15, 2017, Prassas Capital, LLC, an Arizona limited liability company, filed a complaint against the Company alleging breach of contract and seeking (a) unpaid fees in the amount of $1,601 plus interest, (b) issuance of an order of prejudgment attachment and garnishment on the Company’s bank accounts, other property held by the Company and all payments owed to the Company from third parties, (c) an injunction restraining the Company from transferring funds or property outside of the court’s jurisdiction or alternatively that the court appoint a receiver to manage, operate, control and take possession of the Company’s assets, and (d) a declaration that Prassas Capital, LLC has been granted a contractual right to purchase 53,847 shares of the Company’s common stock at a price of $6.50 per share (after giving effect to the reverse stock split described below). This litigation was filed as Prassas Capital, LLC v. Blue Sphere Corporation with the United States District Court for the Western District of North Carolina, Civil Action No. 3:17-CV-00131. The Company disputes the allegations and claims, and intends to rigorously defend against this litigation.

On April 10, 2017, the Company filed its answer in the Prassas Litigation, denying the underlying factual allegations contained in the complaint and denying the contention that Prassas is entitled to any relief. In addition to filing its answer, the Company (1) moved for the court to dismiss the Prassas Litigation, because of Prassas’ failure to plead one or more essential elements of its claims, and (2) brought against Prassas claims of fraud, breach of fiduciary duty, constructive fraud, negligence, unjust enrichment and punitive damages. The Company seeks reimbursement of amounts fraudulently or negligently billed by Prassas and paid by the Company of not less than $833, pre and post judgement interest, attorney’s fees and costs actually incurred in defending the Prassas Litigation.

On May 10, 2017, Prassas filed its answer to the Company’s response, whereby Prassas moved for the court to dismiss the Company’s counterclaims alleging that, among other things, the Company did not plead one or more essential elements of its claims.

On June 2, 2017, the Company responded by filing with the court its memorandum in opposition to Prassas’ motion dismiss the Company’s counterclaims, and further to motion for a partial judgement on the pleadings of the Company’s counterclaims in the amount of $833, plus pre-judgment and post-judgment interest.

The Company intend to vigorously defend against this Litigation, the TRO and any other attempts to attach the assets of the Company.

On August 22, 2017, the Company received a letter from the Division of Enforcement, U.S. Securities & Exchange Commission (the “SEC”). The letter requested that the Company voluntarily provide documents and other information relating to whether the unaudited interim financial statements included in the Company’s quarterly reports on Form 10-Q filed on February 22, 2016 and May 23, 2016 were reviewed by an independent public accounting firm in accordance with the Statement of Auditing Standards No. 100, as required by Rule 10-01(d) and 8-03 of SEC Regulation S-X.  The Financial Statements were not reviewed, which was disclosed in detailed explanatory notes included with the Non-Reviewed Filings at the time of filing.  The inability of the Company’s independent registered public accounting firm to complete a review of the Financial Statements was the result of obstacles to obtaining records from four facilities in Italy acquired by Bluesphere Pavia S.r.l., the Company wholly-owned Italian subsidiary, on December 14, 2015.  The Company thereafter amended the Non-Reviewed Filings on May 23, 2016 and June 13, 2016, respectively, to file its interim financial statements following review by the Company’s independent auditors. 

NOTE 10 – COMMON SHARES

On March 24, 2017, the Company completed a reverse stock split of its common stock. As a result of the reverse stock split, the following changes have occurred (i) every one hundred and thirty shares of common stock have been combined into one share of common stock; (ii) the number of shares of common stock underlying each common stock option or common stock warrant have been proportionately decreased on a 130-for-1 basis, and the exercise price of each such outstanding stock option and common warrant has been proportionately increased on a 130-for-1 basis. Accordingly, all option numbers, share numbers, warrant numbers, share prices, warrant prices, exercise prices and losses per share have been adjusted within these consolidated financial statements, on a retroactive basis, to reflect this 130-for-1 reverse stock split.

On January 31, 2017, the Company issued 3,109 shares of its common stock to the Former Chief Financial Officer (Israel) of the Company and 2,692 shares of its common stock to Former Chief Financial Officer (U.S.) of the Company under their departure settlement agreements with the Company. The fair market value of the shares at grant date was $41.

17

BLUE SPHERE CORPORATION

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Amounts in thousands, except share and per share data)

On February 14, 2017 and March 14, 2017, the Company issued warrants in connection with two (2) separate installments of $250,000 each under the October Financing, with each such five-year warrant providing its holder with the right to purchase up to 25,642 shares of its common stock. (See Note 7).

On February 21, 2017, the Company issued 19,576 shares of its common stock to four Directors of the Company and a former Director of the Company for services that were rendered in 2016 and pursuant to the Company’s Amended and Restated Non-Employee Directors Compensation Plan. The fair market value of the shares at grant date was $170.

On March 2, 2017, the Company issued 17,949 shares of its common stock to a former consultant pursuant to a letter agreement dated August 8, 2014, whereby the Company had agreed to issue $350 of common stock, determined based on the closing price per share on the OTCQB Venture Marketplace on November 25, 2014, which was $19.50 per share. The letter agreement evidenced a bonus granted by the Company for investor relation and advisory services provided in 2014. In connection with the issuance, on March 1, 2017, the consultant provided to the Company a release and waiver of any and all claims. The fair market value of the shares at grant date was $87.

On March 13, 2017, the Company issued 3,847 shares of its common stock to a consultant, pursuant to a consulting agreement dated September 1, 2016, in consideration for financial advisory and consulting services. The fair market value of the shares at grant date was $6.

On March 31, 2017, the Company issued 7,406 shares of its common stock to several officers, directors, employees and/or consultants of the Company. All shares issued vested on March 31, 2017 pursuant to grants dated February 24, 2015 under the Company’s Global Share and Options Incentive Enhancement Plan (2014). The fair market value of the shares at grant date was $47.

On April 17, 2017, the Company issued 7,840 shares of its common stock to four Directors of the Company for services that were rendered in the first quarter of 2017, pursuant to the Company’s Amended and Restated Non-Employee Directors Compensation Plan. The fair market value of the shares at grant date was $50.

On June 22, 2017, the Company raised $4,500 in gross proceeds and $4,123 in net proceeds from the sale of 1,440,000 shares of its common stock together with warrants with one warrant entitling the holder thereof to purchase one share of Common Stock at a price equal to $3.30 per share in a self-underwritten “best efforts” offering to certain investors. The purchase price paid by the investors was $3.125 for one share of common stock and one warrant. The warrants are immediately exercisable and expire five years from the date of issuance. The shares of common stock and warrants were immediately separable and were issued separately. The shares of common stock and the shares of common stock underlying the warrants were registered by the Company with the U.S. Securities and Exchange Commission, and were offered and sold pursuant to a final prospectus, Registration No. 333-21869, filed on June 19, 2017, which became effective on the same date.

On July 5, 2017, the Company issued 18,520 shares of its common stock to four Directors of the Company for services that were rendered in the first quarter of 2017, pursuant to the Company’s Amended and Restated Non-Employee Directors Compensation Plan. The fair market value of the shares at grant date was $50. On the same date, the Company issued 6,539 shares of its common stock to the its Chief Financial Officer under his service agreements with the Company. The fair market value of the shares at grant date was $21.

On July 11, 2017, the Company issued 6,539 shares of its common stock to its Executive Vice President pursuant the Personal Employment Agreement between the Company and him, dated January 1, 2016, for services rendered to the Company thereunder. The fair market value of the shares at grant date was $17.

NOTE 11 – SUBSEQUENT EVENTS

On October 2, 2017, the Company issued 22,832 shares of its common stock to four Directors of the Company for services that were rendered in the first quarter of 2017, pursuant to the Company’s Amended and Restated Non-Employee Directors Compensation Plan. The fair market value of the shares at grant date was $50.

On October 14, 2017, the Company issued 7,308 shares of its common stock to its Chief Executive Officer, 6,539 shares of its common stock to its Chairman of the Board of Directors and 6,539 shares of its common stock to its Executive Vice- President pursuant to their respective service agreements with the Company. The Company has estimated and recorded such shares as an expense of $61 which was recorded through the vesting periods.

On November 7, 2017, the Company issued convertible promissory notes, dated October 30, 2017, to two investors for $228, in the aggregate, which are convertible into shares of the Company's common stock beginning on April 28, 2018 and ending on the date such November 2017 Notes have been repaid in full. The convertible notes bear interest at a rate of 12% per annum, mature on August 10, 2018 and become payable on maturity. All principal and any accrued but unpaid interest due under the convertible Notes will become convertible into shares of the Company’s common stock on April 28, 2018 and until the later of maturity or, in the case of a default, full repayment of the convertible note and all default interest due. The convertible notes will be convertible at a price that is sixty-five percent (65%) of the market price as defined in those notes.

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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

We are an international Independent Power Producer (“IPP”) that is active in the global clean energy production and waste-to-energy markets. We aspire to become a key player in these global markets, working with enterprises with clean energy, waste-to-energy and related by-product capabilities to generate clean energy, as well as soil amendment, compost and other by-products. We are currently focusing on projects related to the construction, acquisition or development of biogas and waste-to-energy facilities in the United States, Italy, the Netherlands, the United Kingdom.

Our business model is based on two main activities: we are a Build, Own & Operate (BOO) company, and we are a strategic acquirer of already constructed and operational facilities. In 2016, we continued to execute on our BOO business model by integrating the construction, financing and management of the North Carolina and Rhode Island projects. The North Carolina facility commenced commercial operations on or about November 18, 2016 and the Rhode Island facility commenced commercial operations on June 23, 2017, and the combined projects will have a collective capacity of 8.4 MW. We are the owner of 25% of the North Carolina project and 22.75% of the Rhode Island project. Our share of any net earnings (losses) generated by the North Carolina and Rhode Island projects are recognized as equity earnings (loss) in nonconsolidated affiliates.

Our equity investment in the North Carolina and Rhode Island projects is reflected in our financial statements as an investment in nonconsolidated affiliates. We also executed on our acquisition strategy in 2015 by acquiring four SPVs in Italy, each of which owns an operational anaerobic digester with approximately 1 MW of capacity. We have applied the equity method of accounting for the investments in the SPVs because our former Plant EBITDA Agreements between the SPVs and the former operator of the SPV facilities prevented us from exercising a controlling influence over operating policies of the facilities. Under this method, our equity investment is reflected in our financial statements as an investment in nonconsolidated subsidiaries and the net earnings or losses of the investments is reflected as equity earnings (loss) in nonconsolidated subsidiaries. The foregoing achievements have put a tremendous burden on our human and financial resources. We plan to expand our BOO and strategic acquisition activities in the coming years, which will require adding members to our team and additional capital investments.

On July 18, 2017, we terminated the Plant EBITDA Agreements. For more information concerning the termination of the Plant EBITDA Agreements, see Part II, Item 5 of this quarterly report.

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Results of Operations – For the Three-months Ended September 30, 2017 Compared to the Three-months Ended September 30, 2016

Revenues

Revenues for the three-month period ended September 30, 2017 were $1,284,000, as compared to $0 for the three-month period ended September 30, 2016. The increase is attributable to the consolidation of the SPVs by our wholly-owned subsidiary, Bluesphere Pavia and the development fee in the amount of $562,500 which was received during the third quarter of 2017 due to the commercial completion of our Rhode Island facility.

Cost of Revenues

Cost of revenues for the three-month period ended September 30, 2017 were $809,000, as compared to $0 for the three-month period ended September 30, 2016. The increase is attributable to the consolidation of the SPVs by our wholly-owned subsidiary, Bluesphere Pavia.

Gross Profit

Gross profit for the three-month period ended September 30, 2017 were $475,000, as compared to $0 for the three-month period ended September 30, 2016. The increase is attributable to the consolidation of the SPVs by our wholly-owned subsidiary, Bluesphere Pavia.

General and Administrative Expenses

General and administrative expenses for the three-month period ended September 30, 2017 were $1,506,000, as compared to $1,782,000 for the three-month period ended September 30, 2016. The increase in general and administrative expenses is mainly attributable to the consolidation of the SPVs by our wholly-owned subsidiary, BlueSphere Pavia.

Equity Loss in Nonconsolidated Affiliates

Equity loss in Nonconsolidated Affiliates for the three-month period ended September 30, 2017 was $465,000 as compared to $0 for the three-month period ended September 30, 2016. The decrease is attributable to revaluation of the North Carolina and Rhode Island projects due to a postmortems in the completion of our North Carolina the North Carolina and Rhode Island projects.

Equity Income in Nonconsolidated Subsidiaries

Equity losses in Nonconsolidated Subsidiaries for the three-month period ended September 30, 2017 was $24,000, as compared to an income of $90,000 for the three-month period ended September 30, 2016. Our income for the three-month period ended September 30, 2017 is attributable only to our share of the net loss generated by our Udine SPV since we have completed its acquisition.

Gain from Change in Fair Value of Warrants Liability

Gain from Change in Fair Value of Warrants Liability for the three-month period ended September 30, 2017 was $203,000, as compared to a gain of $1,396,500 for the three-month period ended September 30, 2016. The gain is attributable to the decrease in the Fair Value of our Warrants Liability mainly due to the decrease in the price of share of our common stock. The estimated fair value of our outstanding warrants liability was measured using Black-Scholes valuation models. These valuation models involved using such inputs as the estimated fair value of the underlying stock at the measurement date, risk-free interest rates, expected dividends on stock and expected volatility of the price of the underlying stock. The table bellows explains the changes in the Fair Value of Warrants Liability during the three-month period ended September 30, 2017.

	Warrants Liability
Balance at June 30, 2017	$	726
Changes in fair value		(203	)
Balance at June 30, 2017	$	523

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Net Loss

We incurred a net loss of $4,233,000 for the three-month period ended September 30, 2017, as compared to a net loss of $729,000 for the three-month period ended September 30, 2016. The increase in net loss is mainly attributable to increase in General and Administrative Expenses, decrease in Gain from Change in Fair Value of Warrants Liability and decrease in Equity Income in Nonconsolidated subsidiaries and Affiliates.

Results of Operations – For the Nine-months Ended September 30, 2017 Compared to the Nine-months Ended September 30, 2016

Revenues

Revenues for the nine-month period ended September 30, 2017 were $1,284,000, as compared to $0 for the nine-month period ended September 30, 2016. The increase is attributable to the consolidation of the SPVs by our wholly-owned subsidiary, Bluesphere Pavia and the development fee in the amount of $562,500 which was received during the third quarter of 2017 due to the commercial completion of our Rhode Island facility.

Cost of Revenues

Cost of revenues for the nine-month period ended September 30, 2017 were $809,000, as compared to $0 for the nine-month period ended September 30, 2016. The increase is attributable to the consolidation of the SPVs by our wholly-owned subsidiary, Bluesphere Pavia.

Gross Profit

Gross profit for the nine-month period ended September 30, 2017 were $475,000, as compared to $0 for the nine-month period ended September 30, 2016. The increase is attributable to the consolidation of the SPVs by our wholly-owned subsidiary, Bluesphere Pavia.

General and Administrative Expenses

General and administrative expenses for the nine -month period ended September 30, 2017 were $3,886,000 as compared to $6,287,000 for the nine -month period ended September 30, 2016. The decrease in general and administrative expenses is mainly attributable to decrease in share based compensation, professional fees and commissions.

Equity Earnings in Nonconsolidated Affiliates

Equity Earnings in Nonconsolidated Affiliates for the nine-month period ended September 30, 2017 was $6,343,000 as compared to $0 for the nine-month period ended September 30, 2016. The increase is attributable to commencement of the commercial operation of our North Carolina project, which commenced its commercial operations and began providing output to Duke Energy pursuant to a power purchase agreement on November 18, 2016, and commencement of the commercial operation of our Rhode Island project, which commenced its commercial operations and began providing output to National Grid Energy pursuant to a power purchase agreement on June 23, 2017. Until commencement of the commercial operations, we had not recorded our share of net earnings generated by the North Carolina and Rhode Island projects as equity earnings, but rather, had recorded them as deferred revenue in our current liabilities.

Equity Income in Nonconsolidated Subsidiaries

Equity Income in Nonconsolidated Subsidiaries for the nine-month period ended September 30, 2017 was $236,000, as compared to a loss of $1,055,000 for the nine-month period ended September 30, 2016. Our income for the nine-month period ended September 30, 2017 is attributable to our share of the net loss generated by our Udine SPV since we have completed its acquisition and the income from Agricerere S.r.l., Agrielektra S.r.l., Agrisorse S.r.l. and Gefa S.r.l during the six-month period ended June 30, 2017. Commencing July 1, 2017, we do not apply 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. because we operate, maintain and supervise each biogas plant. Furthermore, we reigned influence over the operating policies of the plants. Prior to June 30, 2016, we applied the equity method because the Framework EBITDA Guarantee Agreement between the SPVs and Austep whereby Austep operates, maintains and supervises each biogas plant, prevented us from exercising a controlling influence over operating policies of the plants. Under this method, our equity investment was reflected as an investment in non-consolidated subsidiaries on our Condensed Balance Sheets and the net earnings or losses of the investments was reflected as equity in net earnings of non-consolidated companies on our Consolidated Statements of Operations. We stopped applying the equity method because on July 18, 2017 we terminated the Framework EBITDA Guarantee Agreement between the SPVs and Austep and we regained a controlling influence over operating policies of the operating policies of the facilities. For more information concerning the termination of the Plant EBITDA Agreements, see Part II, Item 5 of this quarterly report.

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Gain from Change in Fair Value of Warrants Liability

Gain from Change in Fair Value of Warrants Liability for the nine-month period ended September 30, 2017 was $1,921,000, as compared to a gain of $ 432,000 for the nine-month period ended September 30, 2016. The gain is attributable to the decrease in the Fair Value of our Warrants Liability mainly due to the decrease in the price of share of our common stock. The estimated fair value of our outstanding warrants liability was measured using Black-Scholes valuation models. These valuation models involved using such inputs as the estimated fair value of the underlying stock at the measurement date, risk-free interest rates, expected dividends on stock and expected volatility of the price of the underlying stock. The table bellows explains the changes in the Fair Value of Warrants Liability during the nine-month period ended September 30, 2017.

	Warrants Liability
Balance at December 31, 2016	$	2,045
Issuance of warrants		399
Changes in fair value		(1,921	)
Balance at September 30, 2017	$	523

Net Loss

We incurred a net loss of $133,000 for the nine-month period ended September 30, 2017, as compared to a net loss of $7,422,000 for the nine-month period ended September 30, 2016. The increase in net loss is mainly attributable to decrease in General and Administrative Expenses, Gain from Change in Fair Value of Warrants Liability and increase in Equity Income in Nonconsolidated Subsidiaries and Affiliates.

Inflation and Seasonality

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

Liquidity and Capital Resources

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

As of September 30, 2017, we had cash and cash equivalents of $1,947,000, as compared to $416,000 as of December 31, 2016. As of September 30, 2017, we had a working capital deficit of $9,344,000, as compared to $9,669,000 as of December 31, 2016. The increase in our working capital deficit was mainly attributable to the consolidation of the SPVs by our wholly-owned subsidiary, BlueSphere Pavia, which was mitigated by the raise of $4,500,000 in gross proceeds and $4,123,000 in net proceeds from the sale of 1,440,000 shares of our common stock and warrants and decrease in our deferred revenues in the amount of $5,658,000 from joint ventures due to the commencement of the commercial operation of our Rhode Island project.

Net cash used in operating activities was $2,147,000 for the nine-month period ended September 30, 2017, as compared to cash used in operating activities of $4,181,000 for the nine-month period ended September 30, 2016. The decrease is mainly attributable to the decrease in equity losses in nonconsolidated subsidiaries, increase in equity income in nonconsolidated affiliates and increase in changes in warrants to issue shares.

Net cash used in investing activities was $2,458,000 for the nine-month period ended September 30, 2017, as compared to net cash used in investing activities of $60,000 for the nine-month period ended September 30, 2016. The increase was mainly due to the acquisition our Udine SPV and purchases on machinery and equipment.

Net cash provided by financing activities was approximately $6,143,000 for the nine-month period ended September 30, 2017, as compared to approximately $2,728,000 for the nine-month period ended September 30, 2016. We have principally financed our operations through the sale of our common stock, the issuance of debt, our operations in Italy and development fees received for the North Carolina and Rhode Island projects. The opinion of our independent registered public accounting firm on our audited financial statements as of and for the year ended December 31, 2016 contains an explanatory paragraph regarding substantial doubt about our ability to continue as a going concern. Although management anticipates that cash resources will be available to the Company through distributions from the Italians operations, the North Carolina project and Rhode Island project, it believes existing cash will not be sufficient to fund planned operations and projects investments through the next 12 months. Therefore, we are still seeking to raise additional funds for future operations and possible project investment, and any meaningful equity or debt financing will likely result in significant dilution to our existing stockholders. There is no assurance that additional funds will be available on terms acceptable to us, or at all.

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Off-Balance Sheet Arrangements

As at September 30, 2017, we had no off-balance sheet arrangements of any nature.

Critical Accounting Policies

The preparation of financial statements in conformity with GAAP 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. Note 2 to our consolidated audited financial statements filed with the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016 describes the significant accounting policies and methods used in the preparation of our financial statements. We consider our critical accounting policies to be those related to share-based payments because they are both important to the portrayal of our financial condition and require management to make judgments and estimates about uncertain matters.

In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. This guidance narrows the definition of a business. This standard provides guidance to assist entities with evaluating when a set of transferred assets and activities is a business. This guidance is effective for interim and annual reporting periods beginning after December 15, 2017, and early adoption is permitted. This guidance must be applied prospectively to transactions occurring within the period of adoption. The Company expects to adopt this guidance effective January 1, 2018. The Company does not expect the adoption of this guidance to have a material impact on its financial position, results of operations or cash flows.

In January 2017, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This guidance eliminates Step 2 from the goodwill impairment test, instead requiring an entity to recognize a goodwill impairment charge for the amount by which the goodwill carrying amount exceeds the reporting unit’s fair value. This guidance is effective for interim and annual goodwill impairment tests in fiscal years beginning after December 15, 2019, and early adoption is permitted. This guidance must be applied on a prospective basis. The Company expects to adopt this guidance for interim and annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company does not expect the adoption of this guidance to have a material impact on its financial position, results of operations or cash flows.

In May 2017, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, 2017-9, Stock Compensation (Topic 718): Scope of Modification Accounting. The ASU limits the circumstances in which an entity applies modification accounting. When an award is modified, an entity does not apply the guidance in ASC 718-20-35-3 through 35-9 if it meets all of the following criteria: (i) The fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the modified award is the same as the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the original award immediately before the original award is modified. (ii) The vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified. (iii) The classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified. The ASU also removes the guidance in ASC 718 stating that modification accounting is not required when an entity adds an antidilution provision as long as that modification is not made in contemplation of an equity restructuring.

In July 2017, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, 2017-11, Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral. The ASU applies to issuers of financial instruments with down-round features. It amends (1) the classification of such instruments as liabilities or equity by revising the guidance in ASC 815 on the evaluation of whether instruments or embedded features with down-round provisions must be accounted for as derivative instruments and (2) the guidance on recognition and measurement of the value transferred upon the trigger of a down-round feature for equity-classified instruments by revising ASC 260. The ASU is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. For all other organizations, the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted.

The significant accounting policies applied in the annual financial statements of the Company as of December 31, 2016 are applied consistently in these financial statements.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

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

ITEM 4. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

Our management is responsible for establishing and maintaining a system of disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) that is designed to ensure that information required to be disclosed by the Company in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time 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-month period ended September 30, 2017. 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.

Management is in the process of determining how best to change our current system and implement a more effective system to ensure that information required to be disclosed has been recorded, processed, summarized and reported accurately. Our management acknowledges the existence of this issue, and intends to develop procedures to address it to the extent possible given limitations in financial and human resources in and to remediate all the material weaknesses by the end of the fiscal quarter ending March 31, 2018.

Changes in Internal Controls over Financial Reporting

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 September 30, 2017. 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 September 30, 2017 that has materially affected, or is reasonably likely to materially affect, the Company’s internal controls over financial reporting.

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PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

From time to time, we and our subsidiaries may be parties to legal proceedings arising in the normal course of our business. Except as noted below, we and our subsidiaries are currently not a party, nor is our property subject, to any material pending legal proceedings. None of our directors, officers, affiliates, or any owner of record or beneficially of more than five percent of our common stock, is involved in a material proceeding adverse to us or our subsidiaries or has a material interest adverse to us or our subsidiaries.

Barkats Litigation

As previously reported in our quarterly reports on Form 10-Q filed on May 15, 2017 and August 7, 2017, on October 22, 2016, the law firm of JS Barkats PLLC filed a complaint against us and Shlomo Palas, our Chief Executive Officer, seeking allegedly unpaid legal fees for services rendered from June 9, 2011 through April 23, 2012 in the amount of $428,964.70, plus interest for a total of $652,000 (the “Barkats Litigation”). The Barkats Litigation was filed as JS Barkats PLLC v. Blue Sphere Corporation and Shlomo Palas with the Supreme Court of the State of New York for the County of New York (the “New York Court”), Index No. 655600/2016. On October 26, 2016, without notice to us or Mr. Palas or an opportunity to be heard, the New York Court issued a Temporary Restraining Order (the “TRO”) in favor of JS Barkats PLLC, prohibiting us and Mr. Palas from “transferring or dissipating their assets … to the extent of $652,000”, pending the return date of JS Barkats PLLC’s asset attachment motion, due November 17, 2016. On October 31, 2016, we removed the Barkats Litigation to federal court, filed as JS Barkats PLLC v. Blue Sphere Corporation and Shlomo Palas with the United Stated District Court, Southern District Court of New York (the “Federal Court”), Docket No. 1:16-cv-08404.

It is the Company’s position that by operation of law, the TRO expired no later than November 15, 2016. On November 18, 2016, the Company and Mr. Palas moved to compel mediation and arbitration of the dispute. Subsequently, on December 6, 2016, JS Barkats PLLC filed a motion to remand the action to the New York Court and also filed a motion to hold the Company and Mr. Palas in contempt for allegedly violating the TRO, which the Company opposed. On July 10, 2017, the Federal Court granted JS Barkats PLLC’s motion to remand the action to the New York Court, but denied JS Barkats PLLC’s request for costs and fees in bringing its remand petition. The Federal Court did not rule upon whether plaintiff’s complaint should be dismissed and/or the matter compelled to arbitration and did not rule upon Plaintiff’s motion to hold the Company and Mr. Palas in contempt for allegedly violating the TRO. The Federal Court has since remanded the case back to the New York Court where it is currently pending.

We terminated the services of JS Barkats LLC in 2012 and believe the claims brought by JS Barkats PLLC are without merit, that the TRO was improvidently granted, and that JS Barkats PLLC misrepresented, mischaracterized and omitted material facts and the law in seeking the TRO. We intend to vigorously defend against the Barkats Litigation, the TRO and any other attempts to attach the assets of the Company. 

Prassas Litigation

As previously reported in our quarterly reports on Form 10-Q filed on May 15, 2017 and August 7, 2017, we are a party to litigation entitled “Prassas Capital, LLC v. Blue Sphere Corporation”, filed with the United States District Court for the Western District of North Carolina, Civil Action No. 3:17-CV-00131.  There were no material developments in the litigation during the period presented by this quarterly report, as reported in the Company’s last quarterly report on Form 10-Q filed on August 7, 2017.

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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 July 5, 2017, the Company issued 18,520 shares of its common stock to four non-employee Directors of the Company for services that were rendered in the second quarter of 2017, pursuant to the Company’s Amended and Restated Non-Employee Directors Compensation Plan.

On July 5, 2017, the Company issued 6,539 shares of its common stock to its Chief Financial Officer pursuant to the Company’s 2016 Stock Incentive Plan and the Services Agreement between the Company and Mr. Daniel, dated May 1, 2016, for services rendered to the Company thereunder.

On July 11, 2017, the Company issued 6,539 shares of its common stock to its Executive Vice President pursuant the Personal Employment Agreement between the Company and Mr. Kerner, dated January 1, 2016, for services rendered to the Company thereunder.

On October 17, 2017, the Company issued 22,832 shares of its common stock to four non-employee Directors of the Company for services that were rendered in the third quarter of 2017, pursuant to the Company’s Amended and Restated Non-Employee Directors Compensation Plan.

On October 24, 2017, the Company issued 7,308 shares of its common stock to its Chief Executive Officer, 6,539 shares of its common stock to its Chairman of the Board of Directors and 6,539 shares of its common stock to its Executive Vice-President pursuant to their respective service agreements with the Company.

On November 7, 2017, the Company issued November 2017 Notes (as defined below), dated October 30, 2017, to two investors for $228,000, in the aggregate, which are convertible into shares of the Company's common stock beginning on April 28, 2018 and ending on the date such November 2017 Notes have been repaid in full. The description of the November 2017 Notes in Part II, Item 5 of this quarterly report are incorporated herein by reference in its entirety.

Each of the transactions described above give effect to the Company’s reverse stock split effectuated on March 24, 2017, and were exempt from the registration requirements of the Securities Act of 1933, as amended (“Securities Act”), in reliance upon Section 4(a)(2) of the Securities Act, Regulation D promulgated under the Securities Act and, in the case of sales to investors who are non-US persons, Regulation S promulgated under the Securities Act.

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. We had no share repurchase activity during the three-months ended September 30, 2017.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

ITEM 5. OTHER INFORMATION.

SEC Inquiry

On August 22, 2017, the Company received a letter from the Division of Enforcement, U.S. Securities & Exchange Commission (the “SEC”). The letter requested that the Company voluntarily provide documents and other information relating to whether the unaudited interim financial statements (the “Financial Statements”) included in the Company’s quarterly reports on Form 10-Q filed on February 22, 2016 and May 23, 2016 (the “Non-Reviewed Filings”) were reviewed by an independent public accounting firm in accordance with the Statement of Auditing Standards No. 100, as required by Rule 10-01(d) and 8-03 of SEC Regulation S-X.  The Financial Statements were not reviewed, which was disclosed in detailed explanatory notes included with the Non-Reviewed Filings at the time of filing.  The inability of the Company’s independent registered public accounting firm to complete a review of the Financial Statements was the result of obstacles to obtaining records from four facilities in Italy acquired by Bluesphere Pavia S.r.l., the Company wholly-owned Italian subsidiary, on December 14, 2015.  The Company thereafter amended the Non-Reviewed Filings on May 23, 2016 and June 13, 2016, respectively, to file its interim financial statements following review by the Company’s independent auditors.  The Company has been and intends to continue to be fully cooperative with the SEC’s inquiry into the Non-Reviewed Filings.

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Change in Operator in Italy

The following events occurred in connection with certain events affecting Austep S.p.A., an Italian corporation (“Austep”), the Company’s former partner in Italy that operated, maintained, and supervised the Company’s four operating facilities in Italy acquired on December 15, 2015 (the “SPV Facilities”).  Specifically, on June 20, 2017, Austep was put in voluntary liquidation by shareholders’ resolution and on July 6, 2017, the Bankruptcy Court of Milan approved Austep’s petition for a creditors’ settlement procedure.

On July 12, 2017, Austep personnel shut down the engines at all of the SPV Facilities, and exited all four sites. On July 14, 2017, the Company notified Austep’s liquidator that the Company had taken over direct management and supervision of the SPV Facilities to ensure their proper operation, safety and security, and on July 18, 2017, the Company terminated its four Plant EBITDA Guarantee Agreements dated December 15, 2015 with Austep.

On July 14, 2017, the Company entered into a month-to-month Biogas Plants’ Ordinary Management Proposal with Società Agricola Burnigaia Società Semplice d/b/a La Fenice, an Italian company experienced in the operation of biogas plants, pursuant to which it operated and supervised the SPV Facilities through September 30, 2017.  On November 7, 2017, the Company and a new operator, Biogaservizi S.r.l., entered into an agreement for a full-service operation, maintenance, and supervision of the SPV Facilities, and supply of feedstock to the SPV Facilities, effective as of October 1, 2017. The SPV Facilities are presently transmitting electricity to the grid, and we anticipate that during the fourth quarter of 2017, all SPV Facilities will be generating at full capacity. 

For additional information, please see our current report on Form 8-K filed with the SEC on July 19, 2017 and our Amendment No. 6 to Registration Statement on Form S-1/A filed with the SEC on August 17, 2017.

Transfer of North Carolina and Rhode Island Project Agreements

In connection with the restructuring of Austep, Austep entered into a Business Unit Lease Agreement (“BULA”) with Andion Italy S.r.l. (“Andion”), with the intent of assuring the regular operation of certain operations and agreements by Andion, an affiliate of Austep which is not subject to the liquidation/restructuring of Austep.  The BULA provides for, among other things, the transfer of Austep’s entire United States operations and, accordingly, the agreements relating to the operation of our North Carolina Facility and Rhode Island Facility (the “US Project Agreements”).  The BULA will not become effective until execution by all parties.

Through the process of Austep’s liquidation/restructuring, we anticipate that the liquidator will compare competitive offers to acquire Austep’s operations and agreements that are the subject of the BULA. Therefore, the acquirer of the business relating to Austep’s operation of our North Carolina Facility and Rhode Island Facility may be Andion, or potentially another third-party purchaser. Presently, the US Project Agreements are validly in force, and the parties continue to develop, operate, maintain, and supervise the North Carolina Facility and the Rhode Island Facility in accordance with the terms of such agreements. If and when the BULA becomes effective, we anticipate that Andion will continue to operate, maintain, and supervise the North Carolina Facility and the Rhode Island Facility unless a different purchaser ultimately acquires Austep’s business relating to the operation of our North Carolina Facility and Rhode Island Facility. 

For additional information, please see our current report on Form 8-K filed with the SEC on July 19, 2017 and our Amendment No. 6 to Registration Statement on Form S-1/A filed with the SEC on August 17, 2017.

27

The Cantu, Italy Acquisition

On June 29, 2017, we entered into a Share Purchase Agreement with Pronto Verde A.G., relating to the purchase of one hundred percent (100%) of the share capital of Energyeco S.r.l., a limited liability company organized under the laws of Italy (the “Cantu SPV”), which owns and operates a 990 Kw plant for the production of electricity from vegetal oil located in Cantù, Italy.  We agreed to pay an aggregate purchase price of €2,200,000 (USD $2,490,000) for the Cantu SPV (the “Cantu Purchase Price”), subject to an adjustment formula accounting for the Cantu SPV’s net financial position, net working capital, and certain net receivables, to be calculated on the basis of the Cantu SPV’s audited closing financial statement at the closing.  

In connection with Company’s purchase of the Cantu SPV, on September 11, 2017, the Company entered into an agreement (the “Gain Agreement”) with Gain Solutions, S.R.O., a company incorporated under the laws of the Czech Republic (“Gain”), pursuant to which Gain will purchase thirty-eight and one-half percent (38.5%) of the capital stock of the Cantu SPV (the “Gain SPV Shares”) from the Company for a purchase price of €1,100,000 (approximately USD $1,320,000), which included a €200,000 (approximately USD $240,000) down payment paid by Gain (the “Gain Down Payment”). The Gain Agreement is subject to Gain’s completion of due diligence and entry into definitive agreements to consummate the purchase and sale of the Gain SPV Shares.  The Gain Down Payment will be applied toward the Cantu Purchase Price, or in the event Gain does not proceed following due diligence, the parties do not enter into definitive agreements or the Company does not ultimately acquire the Cantu SPV, the Down Payment will become repayable by the Company with ten percent (10%) interest no later than December 13, 2017. Also in connection with the secured Gain Down Payment, the Company entered into a Security Agreement to register a lien and security interest equal to 15% of the Company’s equity ownership of the Cantu SPV.

The closing in relation to the Cantu SPV was scheduled to take place by September 27, 2017; however, as a condition precedent to closing, the facility must operate for 30 consecutive days and that has not yet occurred. We anticipate that the closing in relation to the Cantu SPV will occur during the fourth quarter of 2017. The closing is subject to other specified conditions precedent.

For additional information, please see our current reports on Form 8-K filed with the U.S. Securities and Exchange Commission on July 6, 2017 and September 14, 2017.

Amendment to the October 2016 Financing

On October 25, 2016, the Company completed a private placement of its securities (the “October 2016 Financing”) to JMJ Financial, an accredited investor (the “October 2016 Investor”).  Pursuant to the October 2016 Financing, the Company entered into a Securities Purchase Agreement, as amended (the “October 2016 SPA”) with the October 2016 Investor thereby agreeing to issue to the October 2016 Investor shares of the Company’s common stock, notes and warrants, in exchange for up to USD $1,000,000 in specified installments (the “October 2016 Principal”).  The October 2016 Principal was increased to USD $2,000,000 by amendments made on March 14, 2017 and May 10, 2017.  All installments under the October 2016 SPA were made, and as of the date hereof, the Company has repaid USD $1,000,000 of the October 2016 Principal.

Pursuant to the terms of the October 2016 Financing, as amended, the Company has issued, or has agreed to issue, to the October 2016 Investor (i) restricted shares of Company’s common stock equal to twenty-five percent (25%) of the October 2016 Note Principal paid to the Company (the “October 2016 Shares”), which have not yet been issued; (ii) a non-interest bearing six (6) month promissory note in the amount of the October 2016 Note Principal plus an amount equal to approximately five percent (5%) of the actual October 2016 Note Principal (the “October 2016 Note”), and (iii) seven (7) five-year warrants to purchase shares of common stock in accordance with the October 2016 SPA (collectively, the “October 2016 SPA Warrants”).

On September 21, 2017, the Company and the October 2016 Investor entered into Amendment No. 9 to the October 2016 SPA, October 2016 Note and the October 2016 SPA Warrants, thereby extending (i) the maturity date of the October 2016 Note; (ii) the date the October 2016 Shares are issuable; (iii) the date the pricing of the October 2016 Shares shall reset; and (iv) the date to receive conditional approval from The NASDAQ Capital Market, in all cases, to October 6, 2017.  On November 14, 2017, the Company and the October 2016 Investor entered into Amendment No. 10 to the October 2016 SPA, October 2016 Note and the October 2016 SPA Warrants, thereby extending (i) the maturity date of the October 2016 Note; (ii) the date the October 2016 Shares are issuable; (iii) the date the pricing of the October 2016 Shares shall reset; and (iv) the date to receive conditional approval from The NASDAQ Capital Market, in all cases, to November 22, 2017. In addition, in connection with both amendments, the October 2016 Investor conditionally agreed to waive any default in connection with the original dates, except to the extent of damages, fees, penalties, liquidated damages, or other amounts or remedies otherwise resulting from such a default, if we trigger an event of default or breach any terms of the October 2016 SPA, October 2016 Note and the October 2016 SPA Warrants, as the case may be, subsequent to the letter agreement or amendment.  Prior to the foregoing, by letter agreement or amendment, the Company and the October 2016 Investor agreed to extend certain milestones and the maturity of the October 2016 Note on seven (7) separate occasions. 

28  

November 2017 Financing

On November 7, 2017, the Company completed a private placement (the “November 2017 Financing”) of its convertible promissory notes (each, a “November 2017 Note”) to two accredited investors (the “November 2017 Investors”) for a purchase price of USD $228,000, in the aggregate. The Company entered into a Securities Purchase Agreement with Jabro Funding Corp. in exchange for a November 2017 Note for USD $75,000 (the “Jabro SPA” and “Jabro Note”, respectively), and entered into a Securities Purchase Agreement with Power Up Lending Group Ltd. in exchange for a November 2017 Note for USD $153,000 (the “Power Up SPA” and the “Power Up Note”, respectively). The November 2017 Notes and the Jabro SPA and Power Up SPA are dated October 30, 2017, and funds were received November 7, 2017 and were used for the development of the Company’s projects. No placement agent was used in the November 2017 Financing, and no commissions were paid in connection therewith. All funds were used to support our subsidiary’s project-level costs and expenses.

The Jabro SPA and Power Up SPA contain substantially the same terms. In addition to other customary terms, the Jabro SPA and Power Up SPA provide the November 2017 Investors with a right of first refusal to participate in any proposed future offerings of equity (or debt with an equity component) for an amount less than $150,000. The right of first refusal began on the closing date and will expire on the nine (9) month anniversary thereof.

Except as noted, the Jabro Note and Power Up Note contain substantially the same terms. The November 2017 Notes bear interest at a rate of twelve percent (12%) per annum, mature on August 10, 2018 and become payable on maturity. If not paid in full at maturity, the interest rate will increase to twenty-two percent (22%). All principal and any accrued but unpaid interest due under the November 2017 Notes will become convertible into shares of the Company’s common stock on April 28, 2018 and until the later of maturity or, in the case of a default, full repayment of the November 2017 Note and all default interest due. The November 2017 Notes will be convertible at a price that is sixty-five percent (65%) of the “market price”. The Jabro SPA defines the “market price” as the lowest closing bid price as quoted on the applicable OTC trading markets, or such other exchange as applicable, during the ten (10) trading days preceding the date of conversion. The Power Up SPA defines the “market price” as the average of the lowest two (2) closing bid prices as quoted on the applicable OTC trading markets, or such other exchange as applicable, during the ten (10) trading days preceding the date of conversion. The November 2017 Notes may be prepaid, subject to a premium percentage scale starting at one hundred and twelve percent (112%) of the principal, and increasing every thirty (30) days up to a premium of one hundred and thirty percent (130%). In addition to other customary provisions, the November 2017 Notes contain several events of default, including but not limited to, (a) the failure to pay all amounts due at maturity, (b) the failure to properly and timely issue shares of the Company’s common stock upon a valid conversion of the November 2017 Notes, (c) the delisting of the Company’s common stock on the OTC market or other relevant national exchange, and (d) the restatement of the Company’s financial statements, as filed with the SEC, at any time that is one hundred and eighty (180) days after the date of issuance and as long as the November 2017 Note is outstanding, if the result has a material adverse effect on the rights of the October 2017 Investors. The Power Up Note further provides that its terms will be amended consistent with any preferable terms in a future financing transaction with a third party investor, if any amounts are outstanding under the Power Up Note.

The foregoing descriptions of the Jabro SPA, Jabro Note, Power Up SPA and Power Up Note do not purport to be complete and are qualified in their entirety by reference to the full text of the Jabro SPA, Jabro Note, Power Up SPA and Power Up Note filed as Exhibit 10.16, 10.17, 10.18 and 10.19 hereto, respectively, and incorporated herein by reference.

The representations, warranties and covenants contained in the Jabro SPA and Power Up SPA 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 SPA is incorporated herein by reference only to provide investors with information regarding its terms and not to provide investors with any other factual information regarding the Company or its business, and should be read in conjunction with the disclosures in the Company’s periodic reports and other SEC filings.

The Company is providing this report in accordance with Rule 135c under the Securities Act, and the notice contained herein does not constitute an offer to sell the Company’s securities, and is not a solicitation for an offer to purchase the Company’s securities. The securities offered have not been registered under the Securities Act, as amended, and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements. The Company has sold the securities in a private placement in reliance on the exemption from registration afforded by Section 4(a)(2) of the Securities Act and Regulation D promulgated thereunder since, among other things, the above transaction did not involve a public offering. Additionally, the Company relied on similar exemptions under applicable state laws. The subscribers in the November 2017 Financing had access to information about the Company and their investments, took the securities for investment and not resale, and the Company took appropriate measures to restrict the transfer of the securities. Upon issuance, the resale of the securities will not be registered under the Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.

29  

ITEM 6. EXHIBITS.

No.	Description	Note
3.1	Amended and Restated Articles of Incorporation, dated November 22, 2013.	(1)
3.2	Certificate of Amendment No. 2 to our Amended and Restated Articles of Incorporation.	(3)
3.3	Amended and Restated Bylaws, dated June 17, 2015.	(2)
10.1	Share Purchase Agreement relating to the purchase of 100% of the share capital of FUTURIS PAPIA S.r.l., dated June 29, 2017, by and between Blue Sphere Corporation and Pronto Verde A.G.	(4)
10.2	Share Purchase Agreement relating to the purchase of 100% of the share capital of ENERGYECO S.r.l., dated June 29, 2017, by and between Blue Sphere Corporation and Pronto Verde A.G.	(4)
10.3	Amendment Agreement relating to the Share Purchase Agreement for the purchase of 100% of the share capital of FUTURIS PAPIA S.r.l., dated July 12, 2017, by and between Blue Sphere Corporation and Pronto Verde A.G.	(5)
10.4	Biogas Plants’ Ordinary Management Proposal, dated July 14, 2017, between the Company and Società Agricola Burnigaia Società Semplice d/b/a La Fenice (as translated from Italian into English).	(6)
10.5	Second Amendment Agreement relating to the Share Purchase Agreement for the purchase of 100% of the share capital of FUTURIS PAPIA S.r.l., dated July 31, 2017, between Blue Sphere Corporation and Pronto Verde A.G.	(7)
10.6	Third Amendment Agreement relating to the Share Purchase Agreement for the purchase of 100% of the share capital of FUTURIS PAPIA S.r.l., dated July 31, 2017, between Blue Sphere Corporation and Pronto Verde A.G.	(7)
10.7	Long Term Mezzanine Loan Agreement, dated August 30, 2017, between Blue Sphere Corporation, Bluesphere Italy S.r.l. and Helios 3 Italy Bio-Gas 2 L.P.	(8)
10.8	Equity Pledge Agreement, dated August 30, 2017, between Blue Sphere Corporation and Helios 3 Italy Bio-Gas 2 L.P.	(8)
10.9	Subordination Agreement, dated August 30, 2017, between Blue Sphere Corporation, Bluesphere Italy S.r.l. and Helios 3 Italy Bio-Gas 2 L.P.	(8)
10.10	Guarantee Plant Operation Management Agreement, dated September 4, 2017, between Pronto Verde A.G. and FUTURIS PAPIA S.p.A.	(8)
10.11	Agreement, dated September 11, 2017, between Blue Sphere Corporation and Gain Solutions, S.R.O.	(9)
10.12	Letter from Blue Sphere Corporation to Gain Solutions, S.R.O. concerning an Irrevocable Guaranty of Down Payment, Interest and Penalty Interest, dated September 11, 2017.	(9)
10.13	Security Agreement, dated September 11, 2017, between Blue Sphere Corporation and Gain Solutions, S.R.O.	(9)
10.14	Agreement for the Purchase and Supply of Green Gas 2019, dated September 15, 2017, between Blue Sphere Brabant B.V. and GasTerra B.V. (English - Translation)	(10)
10.15	Amendment #9 to the Securities Purchase Agreement, to the Promissory Note, and to the Common Stock Purchase Warrants, dated September 21, 2017, by and between Blue Sphere Corporation and JMJ Financial.	*
10.16	Securities Purchase Agreement, dated October 30, 2017, between Blue Sphere Corporation and Jabro Funding Corp.	*
10.17	Convertible Promissory Note, dated October 30, 2017, in the amount of $75,000, issued by Blue Sphere Corporation to Jabro Funding Corp.	*
10.18	Securities Purchase Agreement, dated October 30, 2017, between Blue Sphere Corporation and Power Up Lending Group Ltd.	*
10.19	Convertible Promissory Note, dated October 30, 2017, in the amount of $153,000, issued by Blue Sphere Corporation to Power Up Lending Group Ltd.	*
10.20	Amendment #10 to the Securities Purchase Agreement, to the Promissory Note, and to the Common Stock Purchase Warrants, dated November 14, 2017, by and between Blue Sphere Corporation and JMJ Financial.	*
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	*

30  

101.DEF	XBRL Taxonomy Extension Definition Linkbase Document	*
101.LAB	XBRL Taxonomy Extension Label Linkbase Document	*
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document	*

*	Filed herewith.
(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 Amendment No. 2 to Registration Statement on Form S-1 filed with the SEC on March 7, 2017.
(4)	Incorporated by reference to our Current Report on Form 8-K filed with the SEC on July 6, 2017.
(5)	Incorporated by reference to our Current Report on Form 8-K filed with the SEC on July 14, 2017.
(6)	Incorporated by reference to our Current Report on Form 8-K filed with the SEC on July 19, 2017.
(7)	Incorporated by reference to our Amendment to Current Report on Form 8-K/A filed with the SEC on August 4, 2017.
(8)	Incorporated by reference to our Current Report on Form 8-K filed with the SEC on September 6, 2017.
(9)	Incorporated by reference to our Amendment to Current Report on Form 8-K/A filed with the SEC on September 14, 2017.
(10)	Incorporated by reference to our Current Report on Form 8-K filed with the SEC on September 19, 2017.

31  

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 20, 2017
By:	/s/ Ran Daniel
	Chief Financial Officer
	(Principal Accounting Officer and Principal Financial Officer)
	Date: November 20, 2017

32  

EX-10.15

Blue Sphere Corporation 10-Q

Exhibit 10.15

AMENDMENT #9

TO THE SECURITIES PURCHASE AGREEMENT
TO THE PROMISSORY NOTE

AND TO THE COMMON STOCK PURCHASE WARRANTS

This Amendment #9, dated September 21, 2017 (this “Amendment”), is by and between Blue Sphere Corporation, a Nevada corporation (the “Issuer”) and JMJ Financial (the “Investor”) (referred to collectively herein as the “Parties”)

WHEREAS, the Issuer and the Investor entered into a Securities Purchase Agreement Document SPA-10212016 (the “SPA”) dated as of October 24, 2016, pursuant to which the Issuer issued to the Investor a $1,053,000 Promissory Note (the “Note”), a Warrant, and Origination Shares (All capitalized terms not otherwise defined herein shall have the meanings given such terms in the SPA);

WHEREAS, the Issuer issued additional common stock purchase warrants to the Investor on December 20, 2016, February 14, 2017, March 14, 2017, April 13, 2017, May 11, 2017, and June 7, 2017 (such warrants, plus the Warrant, all as previously amended, the “Warrants”);

WHEREAS, the Issuer and the Investor previously entered into Amendment #1 to the SPA dated February 15, 2017 adding an Origination Share beneficial ownership limit;

WHEREAS, the Issuer and the Investor previously entered into a Letter Agreement dated March 1, 2017 extending certain deadlines in the Note and in the Warrants issued under the SPA;

WHEREAS, the Issuer and the Investor previously entered into Amendment #2 to the SPA and the Note dated March 14, 2017 increasing the dollar amount of the Note;

WHEREAS, the Issuer and the Investor previously entered into a second Letter Agreement dated April 4, 2017 further extending certain deadlines in the Note and in the Warrants issued under the SPA;

WHEREAS, the Issuer and the Investor previously entered into Amendment #3 to the SPA and the Note dated April 13, 2017 extending the Maturity Date of the Note and the date for delivery of the Origination Shares;

WHEREAS, the Issuer and the Investor previously entered into Amendment #4 to the SPA, the Note, and the Warrants dated April 28, 2017 further extending the Maturity Date of the Note and the date for delivery of the Origination Shares and further extending certain deadlines in the Note and in the Warrants issued under the SPA;

WHEREAS, the Issuer and the Investor previously entered into Amendment #5 to the SPA and the Note dated May 10, 2017 further increasing the dollar amount of the Note;

WHEREAS, the Issuer and the Investor previously entered into Amendment #6 to the SPA, the Note, and the Warrants dated May 18, 2017 further extending the Maturity Date of the Note and the date for delivery of the Origination Shares and further extending certain deadlines in the Note and in the Warrants issued under the SPA;

WHEREAS, the Issuer and the Investor previously entered into Amendment #7 to the SPA, the Note, and the Warrants dated June 6, 2017 further extending the Maturity Date of the Note and the date for delivery of the Origination Shares and further extending certain deadlines in the Note and in the Warrants issued under the SPA; and

WHEREAS, the Issuer and the Investor previously entered into Amendment #8 to the SPA, the Note, and the Warrants dated June 29, 2017 providing for a partial repayment of the Note and further extending the Maturity Date of the balance of the Note and the date for delivery of the Origination Shares and further extending certain deadlines in the Note and in the Warrants issued under the SPA.

NOW, THEREFORE, the Issuer and the Investor agree to amend the SPA, the Note, and the Warrants as follows:

1.       Extension of Maturity Date. In the sentence in the Note (as previously amended) that states “The Maturity Date is the earlier of July 25, 2017 or the third business day after the closing of the Public Offering,” the date of July 25, 2017 shall be replaced with the date of October 6, 2017.

2.       Extension of Origination Shares Dates. The references to the date of July 25, 2017 in Sections 1.3.1 and 1.3.2 of the SPA (as previously amended) shall be replaced with the date of October 6, 2017.

3.       Extension of Nasdaq Approval Date Section 6(xxiii) of the Note and Section 1.11(xxiii) of the Warrants shall hereinafter be deleted and replaced with the following text: “(xxiii) the Issuer fails to obtain from Nasdaq or NYSE by October 6, 2017 conditional approval of the listing of the Issuer’s common stock on The Nasdaq Capital Market or NYSE-MKT subject only to completion of the Public Offering pursuant to the Registration Statement and to the Issuer’s common stock maintaining the minimum price requirements prior to uplisting;”.

4.       Conditional Waiver of Default. The Investor conditionally waives the defaults for the Issuer's failure to meet the previously amended Maturity Date of the Note, delivery date for the Origination Shares, and Nasdaq approval deadlines, but the Investor does not waive any damages, fees, penalties, liquidated damages, or other amounts or remedies otherwise resulting from such defaults (which damages, fees, penalties, liquidated damages, or other amounts or remedies the Investor may choose in the future to assess, apply or pursue in its sole discretion) and the Investor's conditional waiver is conditioned on the Issuer's not being in default of and not breaching any term of the Note or the SPA or any other Transaction Documents at any time subsequent to the date of this Amendment (if the Issuer triggers an event of default or breaches any term of the Note, the SPA, or the Transaction Documents at any time subsequent to the date of this Amendment, the Investor may issue a notice of default for the Issuer's failure to meet the original Maturity Date of the Note, delivery date of the Origination Shares, or Nasdaq approval deadlines.

ALL OTHER TERMS AND CONDITIONS OF THE SPA, THE NOTE, AND THE WARRANTS, AS PREVIOUSLY AMENDED, REMAIN IN FULL FORCE AND EFFECT.

Please indicate acceptance and approval of this Amendment by signing below:

/s/ Shlomi Palas	/s/ JMJ Financial
Shlomi Palas	JMJ Financial
Blue Sphere Corporation	Its Principal
Chief Executive Officer

[Amendment #9 Signature Page]

EX-10.16

Blue Sphere Corporation 10-Q

Exhibit 10.16

SECURITIES PURCHASE AGREEMENT

This SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated as of October 30, 2017, by and between Blue Sphere Corporation, a Nevada corporation, with its address at 301 McCullough Drive, 4th Floor, Charlotte, North Carolina 28262 (the “Company”), and JABRO FUNDING CORP., a New York corporation, with its address at 1 Cedar Lane, Glen Cove, New York 11542 (the “Buyer”).

WHEREAS:

A.       

The Company and the Buyer are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by the rules and regulations as promulgated by the United States Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended (the “1933 Act”); and

B.       

Buyer desires to purchase and the Company desires to issue and sell, upon the terms and conditions set forth in this Agreement a convertible note of the Company, in the form attached hereto as Exhibit A, in the aggregate principal amount of $75,000.00 (together with any note(s) issued in replacement thereof or as a dividend thereon or otherwise with respect thereto in accordance with the terms thereof, the “Note”), convertible into shares of common stock, $0.001 par value per share, of the Company (the “Common Stock”), upon the terms and subject to the limitations and conditions set forth in such Note.

NOW THEREFORE, the Company and the Buyer severally (and not jointly) hereby agree as follows:

1.       

Purchase and Sale of Note.

a.       

Purchase of Note. On the Closing Date (as defined below), the Company shall issue and sell to the Buyer and the Buyer agrees to purchase from the Company such principal amount of Note as is set forth immediately below the Buyer’s name on the signature pages hereto.

b.       

Form of Payment. On the Closing Date (as defined below), (i) the Buyer shall pay the purchase price for the Note to be issued and sold to it at the Closing (as defined below) (the “Purchase Price”) by wire transfer of immediately available funds to the Company, in accordance with the Company’s written wiring instructions, against delivery of the Note in the principal amount equal to the Purchase Price as is set forth immediately below the Buyer’s name on the signature pages hereto, and (ii) the Company shall deliver such duly executed Note on behalf of the Company, to the Buyer, against delivery of such Purchase Price.

c.       

Closing Date. Subject to the satisfaction (or written waiver) of the conditions thereto set forth in Section 6 and Section 7 below, the date and time of the issuance and sale of the Note pursuant to this Agreement (the “Closing Date”) shall be 12:00 noon, Eastern Standard Time on or about October 31, 2017, or such other mutually agreed upon time. The closing of the transactions contemplated by this Agreement (the “Closing”) shall occur on the Closing Date at such location as may be agreed to by the parties.

2.       

Buyer’s Representations and Warranties. The Buyer represents and warrants to the Company that:

a.       

Investment Purpose. As of the date hereof, the Buyer is purchasing the Note and the shares of Common Stock issuable upon conversion of or otherwise pursuant to the Note (such shares of Common Stock being collectively referred to herein as the “Conversion Shares” and, collectively with the Note, the “Securities”) for its own account and not with a present view towards the public sale or distribution thereof, except pursuant to sales registered or exempted from registration under the 1933 Act.

b.       

Accredited Investor Status. The Buyer is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D (an “Accredited Investor”).

c.       

Reliance on Exemptions. The Buyer understands that the Securities are being offered and sold to it in reliance upon specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying upon the truth and accuracy of, and the Buyer’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of the Buyer set forth herein in order to determine the availability of such exemptions and the eligibility of the Buyer to acquire the Securities.

d.       

Information. The Company has not disclosed to the Buyer any material nonpublic information and will not disclose such information unless such information is disclosed to the public prior to or promptly following such disclosure to the Buyer.

e.       

Legends. The Buyer understands that the Note and, until such time as the Conversion Shares have been registered under the 1933 Act; or may be sold pursuant to an applicable exemption from registration, the Conversion Shares may bear a restrictive legend in substantially the following form:

“THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR UNDER ANY STATE SECURITIES LAWS, AND MAY NOT BE PLEDGED, SOLD, ASSIGNED, HYPOTHECATED OR OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR (2) THE ISSUER OF SUCH SECURITIES RECEIVES AN OPINION OF COUNSEL TO THE HOLDER OF SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE REASONABLY ACCEPTABLE TO THE ISSUER’S TRANSFER AGENT, THAT SUCH SECURITIES MAY BE PLEDGED, SOLD, ASSIGNED, HYPOTHECATED OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS.”

2 

The legend set forth above shall be removed and the Company shall issue a certificate without such legend to the holder of any Security upon which it is stamped, if, unless otherwise required by applicable state securities laws, (a) such Security is registered for sale under an effective registration statement filed under the 1933 Act or otherwise may be sold pursuant to an exemption from registration without any restriction as to the number of securities as of a particular date that can then be immediately sold, or (b) such holder provides the Company with an opinion of counsel, in form, substance and scope customary for opinions of counsel in comparable transactions, to the effect that a public sale or transfer of such Security may be made without registration under the 1933 Act, which opinion shall be accepted by the Company so that the sale or transfer is effected. The Buyer agrees to sell all Securities, including those represented by a certificate(s) from which the legend has been removed, in compliance with applicable prospectus delivery requirements, if any. In the event that the Company does not accept the opinion of counsel provided by the Buyer with respect to the transfer of Securities pursuant to an exemption from registration, such as Rule 144, at the Deadline, it will be considered an Event of Default pursuant to Section 3.2 of the Note.

f.       

Authorization; Enforcement. This Agreement has been duly and validly authorized. This Agreement has been duly executed and delivered on behalf of the Buyer, and this Agreement constitutes a valid and binding agreement of the Buyer enforceable in accordance with its terms.

3.       

Representations and Warranties of the Company. The Company represents and warrants to the Buyer that:

a.       

Organization and Qualification. The Company and each of its Subsidiaries (as defined below), if any, is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is incorporated, with full power and authority (corporate and other) to own, lease, use and operate its properties and to carry on its business as and where now owned, leased, used, operated and conducted. “Subsidiaries” means any corporation or other organization, whether incorporated or unincorporated, in which the Company owns, directly or indirectly, any equity or other ownership interest.

3 

b.       

Authorization; Enforcement. (i) The Company has all requisite corporate power and authority to enter into and perform this Agreement, the Note and to consummate the transactions contemplated hereby and thereby and to issue the Securities, in accordance with the terms hereof and thereof, (ii) the execution and delivery of this Agreement, the Note by the Company and the consummation by it of the transactions contemplated hereby and thereby (including without limitation, the issuance of the Note and the issuance and reservation for issuance of the Conversion Shares issuable upon conversion or exercise thereof) have been duly authorized by the Company’s Board of Directors and no further consent or authorization of the Company, its Board of Directors, or its shareholders is required, (iii) this Agreement has been duly executed and delivered by the Company by its authorized representative, and such authorized representative is the true and official representative with authority to sign this Agreement and the other documents executed in connection herewith and bind the Company accordingly, and (iv) this Agreement constitutes, and upon execution and delivery by the Company of the Note, each of such instruments will constitute, a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms.

c.       

Capitalization. As of the date hereof, the authorized common stock of the Company consists of 1,750,000,000 authorized shares of Common Stock, $0.001 par value per share, of which 3,682,762 shares are issued and outstanding; and 403,677 shares shall be reserved for issuance upon conversion of the Note immediately upon an increase in the authorized Common Stock or reverse stock split of the Common Stock which shall occur within 60 days of the date hereof. All of such outstanding shares of capital stock are, or upon issuance will be, duly authorized, validly issued, fully paid and non-assessable. .

d.       

Issuance of Shares. The Conversion Shares are duly authorized and reserved for issuance and, upon conversion of the Note in accordance with its respective terms, will be validly issued, fully paid and non-assessable, and free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders of the Company and will not impose personal liability upon the holder thereof.

e.       

No Conflicts. The execution, delivery and performance of this Agreement, the Note by the Company and the consummation by the Company of the transactions contemplated hereby and thereby (including, without limitation, the issuance and reservation for issuance of the Conversion Shares) will not (i) conflict with or result in a violation of any provision of the Certificate of Incorporation or By-laws, or (ii) violate or conflict with, or result in a breach of any provision of, or constitute a default (or an event which with notice or lapse of time or both could become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture, patent, patent license or instrument to which the Company or any of its Subsidiaries is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations and regulations of any self-regulatory organizations to which the Company or its securities are subject) applicable to the Company or any of its Subsidiaries or by which any property or asset of the Company or any of its Subsidiaries is bound or affected (except for such conflicts, defaults, terminations, amendments, accelerations, cancellations and violations as would not, individually or in the aggregate, have a Material Adverse Effect). The businesses of the Company and its Subsidiaries, if any, are not being conducted, and shall not be conducted so long as the Buyer owns any of the Securities, in violation of any law, ordinance or regulation of any governmental entity. “Material Adverse Effect” means any material adverse effect on the business, operations, assets, financial condition or prospects of the Company or its Subsidiaries, if any, taken as a whole, or on the transactions contemplated hereby or by the agreements or instruments to be entered into in connection herewith.

4 

f.       

SEC Documents; Financial Statements. The Company has filed all reports, schedules, forms, statements and other documents required to be filed by it with the SEC pursuant to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “1934 Act”) (all of the foregoing filed prior to the date hereof and all exhibits included therein and financial statements and schedules thereto and documents (other than exhibits to such documents) incorporated by reference therein, being hereinafter referred to herein as the “SEC Documents”). Upon written request the Company will deliver to the Buyer true and complete copies of the SEC Documents, except for such exhibits and incorporated documents. As of their respective dates or if amended, as of the dates of the amendments, the SEC Documents complied in all material respects with the requirements of the 1934 Act and the rules and regulations of the SEC promulgated thereunder applicable to the SEC Documents, and none of the SEC Documents, at the time they were filed with the SEC, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. None of the statements made in any such SEC Documents is, or has been, required to be amended or updated under applicable law (except for such statements as have been amended or updated in subsequent filings prior the date hereof). As of their respective dates or if amended, as of the dates of the amendments, the financial statements of the Company included in the SEC Documents complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto. Such financial statements have been prepared in accordance with United States generally accepted accounting principles, consistently applied, during the periods involved and fairly present in all material respects the consolidated financial position of the Company and its consolidated Subsidiaries as of the dates thereof and the consolidated results of their operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments). The Company is subject to the reporting requirements of the 1934 Act.

g.       

Absence of Certain Changes. Since June 30, 2017, except as set forth in the SEC Documents, there has been no material adverse change and no material adverse development in the assets, liabilities, business, properties, operations, financial condition, results of operations, prospects or 1934 Act reporting status of the Company or any of its Subsidiaries.

h.       

Absence of Litigation. Except as set forth in the SEC Documents, there is no action, suit, claim, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the Company or any of its Subsidiaries, threatened against or affecting the Company or any of its Subsidiaries, or their officers or directors in their capacity as such, that could have a Material Adverse Effect. The Company and its Subsidiaries are unaware of any facts or circumstances which might give rise to any of the foregoing. Nevertheless, the SEC requested information from the Company information (on a voluntary basis) regarding two past non- reviewed 10Qs that were filed by the Company during the first half of 2016.

5 

i.       

No Integrated Offering. Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf, has directly or indirectly made any offers or sales in any security or solicited any offers to buy any security under circumstances that would require registration under the 1933 Act of the issuance of the Securities to the Buyer. The issuance of the Securities to the Buyer will not be integrated with any other issuance of the Company’s securities (past, current or future) for purposes of any shareholder approval provisions applicable to the Company or its securities.

j.       

No Brokers. The Company has taken no action which would give rise to any claim by any person for brokerage commissions, transaction fees or similar payments relating to this Agreement or the transactions contemplated hereby.

k.       

No Investment Company. The Company is not, and upon the issuance and sale of the Securities as contemplated by this Agreement will not be an “investment company” required to be registered under the Investment Company Act of 1940 (an “Investment Company”). The Company is not controlled by an Investment Company.

l.       

Breach of Representations and Warranties by the Company. If the Company breaches any of the representations or warranties set forth in this Section 3, and in addition to any other remedies available to the Buyer pursuant to this Agreement, it will be considered an Event of default under Section 3.4 of the Note.

4.       

COVENANTS.

a.       

Best Efforts. The Company shall use its best efforts to satisfy timely each of the conditions described in Section 7 of this Agreement.

b.       

Form D; Blue Sky Laws. The Company agrees to timely make any filings required by federal and state laws as a result of the closing of the transactions contemplated by this Agreement.

c.       

Use of Proceeds. The Company shall use the proceeds to support its project development in Holland and USA.

d.       

Corporate Existence. So long as the Buyer beneficially owns any Note, the Company shall maintain its corporate existence and shall not sell all or substantially all of the Company’s assets, except with the prior written consent of the Buyer.

e.       

Breach of Covenants. If the Company breaches any of the covenants set forth in this Section 4, and in addition to any other remedies available to the Buyer pursuant to this Agreement, it will be considered an event of default under Section 3.4 of the Note.

f.       

Failure to Comply with the 1934 Act. So long as the Buyer beneficially owns the Note, the Company shall comply with the reporting requirements of the 1934 Act; and the Company shall continue to be subject to the reporting requirements of the 1934 Act.

6 

g.       

Trading Activities. Neither the Buyer nor its affiliates has an open short position in the common stock of the Company and the Buyer agrees that it shall not, and that it will cause its affiliates not to, engage in any short sales of or hedging transactions with respect to the common stock of the Company.

h.       

Right of First Refusal. Unless it shall have first delivered to the Buyer, at least forty eight (48) hours prior to the closing of such Future Offering (as defined herein), written notice describing the proposed Future Offering (“ROFR Notice”), including the terms and conditions thereof, identity of the proposed purchaser and proposed definitive documentation to be entered into in connection therewith, and providing the Buyer an option during the forty eight (48) hour period following delivery of such notice to purchase the securities being offered in the Future Offering on the same terms as contemplated by such Future Offering (the limitations referred to in this sentence and the preceding sentence are collectively referred to as the “Right of First Refusal”), the Company will not conduct any equity (or debt with an equity component) financing in an amount less than $150,000 (“Future Offering(s)”) during the period beginning on the Closing Date and ending nine (9) months following the Closing Date. In the event the terms and conditions of a proposed Future Offering are amended in any respect after delivery of the notice to the Buyer concerning the proposed Future Offering, the Company shall deliver a new notice to the Buyer describing the amended terms and conditions of the proposed Future Offering and the Buyer thereafter shall have an option during the forty eight (48) hour period following delivery of such new notice to purchase its pro rata share of the securities being offered on the same terms as contemplated by such proposed Future Offering, as amended. Notwithstanding anything contained herein to the contrary, any subsequent offer by an investor, or an affiliate of such investor, identified on an ROFR Notice is subject to this Section 4(h) and the Right of First Refusal.

7 

5.       

Transfer Agent Instructions. Immediately upon an increase in the authorized Common Stock or reverse stock split of the Common Stock which shall occur within 60 days of the date hereof, the Company shall issue irrevocable instructions to its transfer agent to issue certificates, registered in the name of the Buyer or its nominee, for the Conversion Shares in such amounts as specified from time to time by the Buyer to the Company upon conversion of the Note in accordance with the terms thereof (the “Irrevocable Transfer Agent Instructions”).  In the event that the Company proposes to replace its transfer agent, the Company shall provide, prior to the effective date of such replacement, a fully executed Irrevocable Transfer Agent Instructions in a form as initially delivered pursuant to this Agreement (including but not limited to the provision to irrevocably reserve shares of Common Stock in the Reserved Amount as such term is defined in the Note) signed by the successor transfer agent to Company and the Company. Prior to registration of the Conversion Shares under the 1933 Act or the date on which the Conversion Shares may be sold pursuant to an exemption from registration, all such certificates shall bear the restrictive legend specified in Section 2(e) of this Agreement.  The Company warrants that: (i) no instruction other than the Irrevocable Transfer Agent Instructions referred to in this Section 5, will be given by the Company to its transfer agent and that the Securities shall otherwise be freely transferable on the books and records of the Company as and to the extent provided in this Agreement and the Note; (ii) it will not direct its transfer agent not to transfer or delay, impair, and/or hinder its transfer agent in transferring (or issuing)(electronically or in certificated form) any certificate for Conversion Shares to be issued to the Buyer upon conversion of or otherwise pursuant to the Note as and when required by the Note and this Agreement; and (iii) it will not fail to remove (or directs its transfer agent not to remove or impairs, delays, and/or hinders its transfer agent from removing) any restrictive legend (or to withdraw any stop transfer instructions in respect thereof) on any certificate for any Conversion Shares issued to the Buyer upon conversion of or otherwise pursuant to the Note as and when required by the Note and/or this Agreement.  If the Buyer provides the Company and the Company’s transfer, at the cost of the Buyer, with an opinion of counsel in form, substance and scope customary for opinions in comparable transactions, to the effect that a public sale or transfer of such Securities may be made without registration under the 1933 Act, the Company shall permit the transfer, and, in the case of the Conversion Shares, promptly instruct its transfer agent to issue one or more certificates, free from restrictive legend, in such name and in such denominations as specified by the Buyer.  The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Buyer, by vitiating the intent and purpose of the transactions contemplated hereby.  Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Section 5 may be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Section, that the Buyer shall be entitled, in addition to all other available remedies, to an injunction restraining any breach and requiring immediate transfer, without the necessity of showing economic loss and without any bond or other security being required.

6.       

Conditions to the Company’s Obligation to Sell. The obligation of the Company hereunder to issue and sell the Note to the Buyer at the Closing is subject to the satisfaction, at or before the Closing Date of each of the following conditions thereto, provided that these conditions are for the Company’s sole benefit and may be waived by the Company at any time in its sole discretion:

a.       

The Buyer shall have executed this Agreement and delivered the same to the Company.

b.       

The Buyer shall have delivered the Purchase Price in accordance with Section 1(b) above.

c.       

The representations and warranties of the Buyer shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made at that time (except for representations and warranties that speak as of a specific date), and the Buyer shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Buyer at or prior to the Closing Date.

d.       

No litigation, statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by or in any court or governmental authority of competent jurisdiction or any self-regulatory organization having authority over the matters contemplated hereby which prohibits the consummation of any of the transactions contemplated by this Agreement.

8 

7.       

Conditions to The Buyer’s Obligation to Purchase. The obligation of the Buyer hereunder to purchase the Note at the Closing is subject to the satisfaction, at or before the Closing Date of each of the following conditions, provided that these conditions are for the Buyer’s sole benefit and may be waived by the Buyer at any time in its sole discretion:

a.       

The Company shall have executed this Agreement and delivered the same to the Buyer.

b.       

The Company shall have delivered to the Buyer the duly executed Note (in such denominations as the Buyer shall request) in accordance with Section 1(b) above.

c.       

Immediately upon an increase in the authorized Common Stock or reverse stock split of the Common Stock which shall occur within 60 days of the date hereof, the Irrevocable Transfer Agent Instructions, in form and substance satisfactory to the Buyer, shall have been delivered to and acknowledged in writing by the Company’s Transfer Agent.

d.       

The representations and warranties of the Company shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made at such time (except for representations and warranties that speak as of a specific date) and the Company shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Company at or prior to the Closing Date. The Buyer shall have received a certificate or certificates, executed by the chief executive officer of the Company, dated as of the Closing Date, to the foregoing effect and as to such other matters as may be reasonably requested by the Buyer including, but not limited to certificates with respect to the Board of Directors’ resolutions relating to the transactions contemplated hereby.

e.       

No litigation, statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by or in any court or governmental authority of competent jurisdiction or any self-regulatory organization having authority over the matters contemplated hereby which prohibits the consummation of any of the transactions contemplated by this Agreement.

f.       

No event shall have occurred which could reasonably be expected to have a Material Adverse Effect on the Company including but not limited to a change in the 1934 Act reporting status of the Company or the failure of the Company to be timely in its 1934 Act reporting obligations.

9 

g.       

The Conversion Shares shall have been authorized for quotation on an exchange or electronic quotation system and trading in the Common Stock on such exchange or electronic quotation system shall not have been suspended by the SEC or an exchange or electronic quotation system.

h.       

The Buyer shall have received an officer’s certificate described in Section 3(d) above, dated as of the Closing Date.

8.       

Governing Law; Miscellaneous.

a.       

Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Agreement shall be brought only in the state courts of New York or in the federal courts located in the state and county of Nassau. The parties to this Agreement hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. The Company and Buyer waive trial by jury. The prevailing party shall be entitled to recover from the other party its reasonable attorney’s fees and costs. In the event that any provision of this Agreement or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement. Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Agreement, the Note or any related document or agreement by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.

b.       

Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which shall constitute one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party.

c.       

Headings. The headings of this Agreement are for convenience of reference only and shall not form part of, or affect the interpretation of, this Agreement.

d.       

Severability. In the event that any provision of this Agreement is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any provision hereof which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision hereof.

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e.       

Entire Agreement; Amendments. This Agreement and the instruments referenced herein contain the entire understanding of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither the Company nor the Buyer makes any representation, warranty, covenant or undertaking with respect to such matters. No provision of this Agreement may be waived or amended other than by an instrument in writing signed by the majority in interest of the Buyer.

f.       

Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be as set forth in the heading of this Agreement with a copy by fax only to (which copy shall not constitute notice) to Naidich Wurman LLP, 111 Great Neck Road, Suite 214, Great Neck, NY 11021, Attn: Allison Naidich, facsimile: 516-466-3555, e-mail: allison@nwlaw.com. Each party shall provide notice to the other party of any change in address.

g.       

Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and assigns. Neither the Company nor the Buyer shall assign this Agreement or any rights or obligations hereunder without the prior written consent of the other. Notwithstanding the foregoing, the Buyer may assign its rights hereunder to any person that purchases Securities in a private transaction from the Buyer or to any of its “affiliates,” as that term is defined under the 1934 Act, without the consent of the Company.

h.       

Survival. The representations and warranties of the Company and the agreements and covenants set forth in this Agreement shall survive the closing hereunder notwithstanding any due diligence investigation conducted by or on behalf of the Buyer. The Company agrees to indemnify and hold harmless the Buyer and all their officers, directors, employees and agents for loss or damage arising as a result of or related to any breach or alleged breach by the Company of any of its representations, warranties and covenants set forth in this Agreement or any of its covenants and obligations under this Agreement, including advancement of expenses as they are incurred.

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i.       

Further Assurances. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.

j.       

No Strict Construction. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party.

k.       

Remedies. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Buyer by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Agreement will be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Agreement, that the Buyer shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing any breach of this Agreement and to enforce specifically the terms and provisions hereof, without the necessity of showing economic loss and without any bond or other security being required.

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IN WITNESS WHEREOF, the undersigned Buyer and the Company have caused this Agreement to be duly executed as of the date first above written.

Blue Sphere Corporation

By:	/s/ Shlomi Palas
	Shlomi Palas
	President and Chief Executive Officer
JABRO FUNDING CORP.
By:	/s/ Lawrence Rothberg
Name:	Lawrence Rothberg
Title:	President
1 Cedar Lane, Glen Cove, New York 11542

AGGREGATE SUBSCRIPTION AMOUNT:

Aggregate Principal Amount of Note:	$75,000.00
Aggregate Purchase Price:	$75,000.00

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EX-10.17

Blue Sphere Corporation 10-Q

Exhibit 10.17

NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

Principal Amount: $75,000.00	Issue Date: October 30, 2017
Purchase Price:  $75,000.00

CONVERTIBLE PROMISSORY NOTE

FOR VALUE RECEIVED, Blue Sphere Corporation, a Nevada corporation (hereinafter called the “Borrower”), hereby promises to pay to the order of JABRO FUNDING CORP., a New York corporation, or registered assigns (the “Holder”) the sum of $75,000.00 together with any interest as set forth herein, on August 10, 2018 (the “Maturity Date”), and to pay interest on the unpaid principal balance hereof at the rate of twelve percent (12%)(the “Interest Rate”) per annum from the date hereof (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. This Note may not be prepaid in whole or in part except as otherwise explicitly set forth herein. Any amount of principal or interest on this Note which is not paid when due shall bear interest at the rate of twenty two percent (22%) per annum from the due date thereof until the same is paid (“Default Interest”). Interest shall be computed on the basis of a 365 day year and the actual number of days elapsed. Interest shall commence accruing on the Issue Date but shall not be payable until the Note becomes payable (whether at Maturity Date or upon acceleration or by prepayment). All payments due hereunder (to the extent not converted into common stock, $0.001 par value per share (the “Common Stock”) in accordance with the terms hereof) shall be made in lawful money of the United States of America. All payments shall be made at such address as the Holder shall hereafter give to the Borrower by written notice made in accordance with the provisions of this Note. Each capitalized term used herein, and not otherwise defined, shall have the meaning ascribed thereto in that certain Securities Purchase Agreement dated the date hereof, pursuant to which this Note was originally issued (the “Purchase Agreement”).

This Note is free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders of the Borrower and will not impose personal liability upon the holder thereof.

The following terms shall apply to this Note:

Article I. CONVERSION RIGHTS

1.1       

Conversion Right. The Holder shall have the right from time to time, and at any time during the period beginning on the date which is one hundred eighty (180) days following the date of this Note and ending on the later of: (i) the Maturity Date and (ii) the date of payment of the Default Amount (as defined in Article III), each in respect of the remaining outstanding principal amount of this Note to convert all or any part of the outstanding and unpaid principal amount of this Note into fully paid and non-assessable shares of Common Stock, as such Common Stock exists on the Issue Date, or any shares of capital stock or other securities of the Borrower into which such Common Stock shall hereafter be changed or reclassified at the conversion price (the “Conversion Price”) determined as provided herein (a “Conversion”); provided, however, that in no event shall the Holder be entitled to convert any portion of this Note in excess of that portion of this Note upon conversion of which the sum of (1) the number of shares of Common Stock beneficially owned by the Holder and its affiliates (other than shares of Common Stock which may be deemed beneficially owned through the ownership of the unconverted portion of the Notes or the unexercised or unconverted portion of any other security of the Borrower subject to a limitation on conversion or exercise analogous to the limitations contained herein) and (2) the number of shares of Common Stock issuable upon the conversion of the portion of this Note with respect to which the determination of this proviso is being made, would result in beneficial ownership by the Holder and its affiliates of more than 4.99% of the outstanding shares of Common Stock. For purposes of the proviso to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Regulations 13D-G thereunder, except as otherwise provided in clause (1) of such proviso. The beneficial ownership limitations on conversion as set forth in the section may NOT be waived by the Holder. The number of shares of Common Stock to be issued upon each conversion of this Note shall be determined by dividing the Conversion Amount (as defined below) by the applicable Conversion Price then in effect on the date specified in the notice of conversion, in the form attached hereto as Exhibit A (the “Notice of Conversion”), delivered to the Borrower by the Holder in accordance with Section 1.4 below; provided that the Notice of Conversion is submitted by facsimile or e-mail (or by other means resulting in, or reasonably expected to result in, notice) to the Borrower before 6:00 p.m., New York, New York time on such conversion date (the “Conversion Date”); however, if the Notice of Conversion is sent after 6:00pm, New York, New York time the Conversion Date shall be the next business day. The term “Conversion Amount” means, with respect to any conversion of this Note, the sum of (1) the principal amount of this Note to be converted in such conversion plus (2) at the Holder’s option, accrued and unpaid interest, if any, on such principal amount at the interest rates provided in this Note to the Conversion Date, plus (3) at the Holder’s option, Default Interest, if any, on the amounts referred to in the immediately preceding clauses (1) and/or (2) plus (4) at the Holder’s option, any amounts owed to the Holder pursuant to Sections 1.4 hereof.

1.2       

Conversion Price. The conversion price (the “Conversion Price”) shall equal the Variable Conversion Price (as defined herein) (subject to equitable adjustments by the Borrower relating to the Borrower’s securities or the securities of any subsidiary of the Borrower, combinations, recapitalization, reclassifications, extraordinary distributions and similar events). The “Variable Conversion Price” shall mean 65% multiplied by the Market Price (as defined herein) (representing a discount rate of 35%). “Market Price” means the average of the lowest Trading Price (as defined below) for the Common Stock during the ten (10) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date. “Trading Price” means, for any security as of any date, the closing bid price on the OTCQB, OTCQX, Pink Sheets electronic quotation system or applicable trading market (the “OTC”) as reported by a reliable reporting service (“Reporting Service”) designated by the Holder (i.e. Bloomberg) or, if the OTC is not the principal trading market for such security, the closing bid price of such security on the principal securities exchange or trading market where such security is listed or traded or, if no closing bid price of such security is available in any of the foregoing manners, the average of the closing bid prices of any market makers for such security that are listed in the “pink sheets”. If the Trading Price cannot be calculated for such security on such date in the manner provided above, the Trading Price shall be the fair market value as reasonably determined by the Borrower. “Trading Day” shall mean any day on which the Common Stock is tradable for any period on the OTC, or on the principal securities exchange or other securities market on which the Common Stock is then being traded.

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1.3       

Authorized Shares. Immediately upon an increase in the authorized Common Stock or reverse stock split of the Common Stock which shall occur within 60 days of the date hereof, the Borrower covenants that during the period the conversion right exists, the Borrower will reserve from its authorized and unissued Common Stock a sufficient number of shares, free from preemptive rights, to provide for the issuance of Common Stock upon the full conversion of this Note issued pursuant to the Purchase Agreement. The Borrower is required at all times to have authorized and reserved six times the number of shares that would be issuable upon full conversion of the Note (assuming that the 4.99% limitation set forth in Section 1.1 is not in effect)(based on the respective Conversion Price of the Note (as defined in Section 1.2) in effect from time to time, initially 403,677; provided however that as the Borrower does not have sufficient shares to fund the reserve, the Borrower hereby agrees to increase the the authorized Common Stock or effect a reverse stock split of the Common Stock within 60 days of the date hereof; and immediately upon such event, cause the share reserve to be effective)(the “Reserved Amount”). The Reserved Amount shall be increased (or decreased with the written consent of the Holder) from time to time in accordance with the Borrower’s obligations hereunder. The Borrower represents that upon issuance, such shares will be duly and validly issued, fully paid and non-assessable. In addition, if the Borrower shall issue any securities or make any change to its capital structure which would change the number of shares of Common Stock into which the Notes shall be convertible at the then current Conversion Price, the Borrower shall at the same time make proper provision so that thereafter there shall be a sufficient number of shares of Common Stock authorized and reserved, free from preemptive rights, for conversion of the outstanding Note. The Borrower (i) acknowledges that it has irrevocably instructed its transfer agent to issue certificates for the Common Stock issuable upon conversion of this Note, and (ii) agrees that its issuance of this Note shall constitute full authority to its officers and agents who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for shares of Common Stock in accordance with the terms and conditions of this Note.

If, at any time the Borrower does not maintain the Reserved Amount it will be considered an Event of Default under Section 3.2 of the Note.

1.4       

Method of Conversion.

(a)       

Mechanics of Conversion. As set forth in Section 1.1 hereof, from time to time, and at any time during the period beginning on the date which is one hundred eighty (180) days following the date of this Note and ending on the later of: (i) the Maturity Date and (ii) the date of payment of the Default Amount, this Note may be converted by the Holder in whole or in part at any time from time to time after the Issue Date, by (A) submitting to the Borrower a Notice of Conversion (by facsimile, e-mail or other reasonable means of communication dispatched on the Conversion Date prior to 6:00 p.m., New York, New York time) and (B) subject to Section 1.4(b), surrendering this Note at the principal office of the Borrower (upon payment in full of any amounts owed hereunder).

(b)       

Surrender of Note Upon Conversion. Notwithstanding anything to the contrary set forth herein, upon conversion of this Note in accordance with the terms hereof, the Holder shall not be required to physically surrender this Note to the Borrower unless the entire unpaid principal amount of this Note is so converted. The Holder and the Borrower shall maintain records showing the principal amount so converted and the dates of such conversions or shall use such other method, reasonably satisfactory to the Holder and the Borrower, so as not to require physical surrender of this Note upon each such conversion.

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(c)       

Delivery of Common Stock Upon Conversion. Upon receipt by the Borrower from the Holder of a facsimile transmission or e-mail (or other reasonable means of communication) of a Notice of Conversion meeting the requirements for conversion as provided in this Section 1.4, the Borrower shall issue and deliver or cause to be issued and delivered to or upon the order of the Holder certificates for the Common Stock issuable upon such conversion within three (3) business days after such receipt (the “Deadline”) (and, solely in the case of conversion of the entire unpaid principal amount hereof, surrender of this Note) in accordance with the terms hereof and the Purchase Agreement. Upon receipt by the Borrower of a Notice of Conversion, the Holder shall be deemed to be the holder of record of the Common Stock issuable upon such conversion, the outstanding principal amount and the amount of accrued and unpaid interest on this Note shall be reduced to reflect such conversion, and, unless the Borrower defaults on its obligations hereunder, all rights with respect to the portion of this Note being so converted shall forthwith terminate except the right to receive the Common Stock or other securities, cash or other assets, as herein provided, on such conversion. If the Holder shall have given a Notice of Conversion as provided herein, the Borrower’s obligation to issue and deliver the certificates for Common Stock shall be absolute and unconditional, irrespective of the absence of any action by the Holder to enforce the same, any waiver or consent with respect to any provision thereof, the recovery of any judgment against any person or any action to enforce the same, any failure or delay in the enforcement of any other obligation of the Borrower to the holder of record, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder of any obligation to the Borrower, and irrespective of any other circumstance which might otherwise limit such obligation of the Borrower to the Holder in connection with such conversion.

(d)       

Delivery of Common Stock by Electronic Transfer. In lieu of delivering physical certificates representing the Common Stock issuable upon conversion, provided the Borrower is participating in the Depository Trust Company (“DTC”) Fast Automated Securities Transfer (“FAST”) program, upon request of the Holder and its compliance with the provisions set forth herein, the Borrower shall use its best efforts to cause its transfer agent to electronically transmit the Common Stock issuable upon conversion to the Holder by crediting the account of Holder’s Prime Broker with DTC through its Deposit Withdrawal Agent Commission (“DWAC”) system.

(e)       

Failure to Deliver Common Stock Prior to Deadline. Without in any way limiting the Holder’s right to pursue other remedies, including actual damages and/or equitable relief, the parties agree that if delivery of the Common Stock issuable upon conversion of this Note is not delivered by the Deadline due to action and/or inaction of the Borrower, the Borrower shall pay to the Holder $2,000 per day in cash, for each day beyond the Deadline that the Borrower fails to deliver such Common Stock (the “Fail to Deliver Fee”); provided; however that the Fail to Deliver Fee shall not be due if the failure is a result of a third party (i.e., transfer agent; and not the result of any failure to pay such transfer agent) despite the best efforts of the Borrower to effect delivery of such Common Stock. Such cash amount shall be paid to Holder by the fifth day of the month following the month in which it has accrued or, at the option of the Holder (by written notice to the Borrower by the first day of the month following the month in which it has accrued), shall be added to the principal amount of this Note, in which event interest shall accrue thereon in accordance with the terms of this Note and such additional principal amount shall be convertible into Common Stock in accordance with the terms of this Note. The Borrower agrees that the right to convert is a valuable right to the Holder. The damages resulting from a failure, attempt to frustrate, interference with such conversion right are difficult if not impossible to qualify. Accordingly, the parties acknowledge that the liquidated damages provision contained in this Section 1.4(e) are justified.

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1.5       

Concerning the Shares. The shares of Common Stock issuable upon conversion of this Note may not be sold or transferred unless: (i) such shares are sold pursuant to an effective registration statement under the Act or (ii) the Borrower or its transfer agent shall have been furnished with an opinion of counsel (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions) to the effect that the shares to be sold or transferred may be sold or transferred pursuant to an exemption from such registration (such as Rule 144 or a successor rule) (“Rule 144”); or (iii) such shares are transferred to an “affiliate” (as defined in Rule 144) of the Borrower who agrees to sell or otherwise transfer the shares only in accordance with this Section 1.5 and who is an Accredited Investor (as defined in the Purchase Agreement).

Any restrictive legend on certificates representing shares of Common Stock issuable upon conversion of this Note shall be removed and the Borrower shall issue to the Holder a new certificate therefore free of any transfer legend if the Borrower or its transfer agent shall have received an opinion of counsel from Holder’s counsel, in form, substance and scope customary for opinions of counsel in comparable transactions, to the effect that (i) a public sale or transfer of such Common Stock may be made without registration under the Act, which opinion shall be accepted by the Company so that the sale or transfer is effected; or (ii) in the case of the Common Stock issuable upon conversion of this Note, such security is registered for sale by the Holder under an effective registration statement filed under the Act; or otherwise may be sold pursuant to an exemption from registration. In the event that the Company does not reasonably accept the opinion of counsel provided by the Holder with respect to the transfer of Securities pursuant to an exemption from registration (such as Rule 144), at the Deadline, it will be considered an Event of Default pursuant to Section 3.2 of the Note.

1.6       

Effect of Certain Events.

(a)       

Effect of Merger, Consolidation, Etc. At the option of the Holder, the sale, conveyance or disposition of all or substantially all of the assets of the Borrower, the effectuation by the Borrower of a transaction or series of related transactions in which more than 50% of the voting power of the Borrower is disposed of, or the consolidation, merger or other business combination of the Borrower with or into any other Person (as defined below) or Persons when the Borrower is not the survivor shall be deemed to be an Event of Default (as defined in Article III) pursuant to which the Borrower shall be required to pay to the Holder upon the consummation of and as a condition to such transaction an amount equal to the Default Amount (as defined in Article III). “Person” shall mean any individual, corporation, limited liability company, partnership, association, trust or other entity or organization.

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(b)       

Adjustment Due to Merger, Consolidation, Etc. If, at any time when this Note is issued and outstanding and prior to conversion of all of the Note, there shall be any merger, consolidation, exchange of shares, recapitalization, reorganization, or other similar event, as a result of which shares of Common Stock of the Borrower shall be changed into the same or a different number of shares of another class or classes of stock or securities of the Borrower or another entity, or in case of any sale or conveyance of all or substantially all of the assets of the Borrower other than in connection with a plan of complete liquidation of the Borrower, then the Holder of this Note shall thereafter have the right to receive upon conversion of this Note, upon the basis and upon the terms and conditions specified herein and in lieu of the shares of Common Stock immediately theretofore issuable upon conversion, such stock, securities or assets which the Holder would have been entitled to receive in such transaction had this Note been converted in full immediately prior to such transaction (without regard to any limitations on conversion set forth herein), and in any such case appropriate provisions shall be made with respect to the rights and interests of the Holder of this Note to the end that the provisions hereof (including, without limitation, provisions for adjustment of the Conversion Price and of the number of shares issuable upon conversion of the Note) shall thereafter be applicable, as nearly as may be practicable in relation to any securities or assets thereafter deliverable upon the conversion hereof. The Borrower shall not affect any transaction described in this Section 1.6(b) unless (a) it first gives, to the extent practicable, ten (10) days prior written notice (but in any event at least five (5) days prior written notice) of the record date of the special meeting of shareholders to approve, or if there is no such record date, the consummation of, such merger, consolidation, exchange of shares, recapitalization, reorganization or other similar event or sale of assets (during which time the Holder shall be entitled to convert this Note) and (b) the resulting successor or acquiring entity (if not the Borrower) assumes by written instrument the obligations of this Note. The above provisions shall similarly apply to successive consolidations, mergers, sales, transfers or share exchanges.

(c)       

Adjustment Due to Distribution. If the Borrower shall declare or make any distribution of its assets (or rights to acquire its assets) to holders of Common Stock as a dividend, stock repurchase, by way of return of capital or otherwise (including any dividend or distribution to the Borrower’s shareholders in cash or shares (or rights to acquire shares) of capital stock of a subsidiary (i.e., a spin-off)) (a “Distribution”), then the Holder of this Note shall be entitled, upon any conversion of this Note after the date of record for determining shareholders entitled to such Distribution, to receive the amount of such assets which would have been payable to the Holder with respect to the shares of Common Stock issuable upon such conversion had such Holder been the holder of such shares of Common Stock on the record date for the determination of shareholders entitled to such Distribution.

1.7       

Prepayment. Notwithstanding anything to the contrary contained in this Note, at any time during the periods set forth on the table immediately following this paragraph (the “Prepayment Periods”), the Borrower shall have the right, exercisable on not more than three (3) Trading Days prior written notice to the Holder of the Note to prepay the outstanding Note (principal and accrued interest), in full, in accordance with this Section 1.7. Any notice of prepayment hereunder (an “Optional Prepayment Notice”) shall be delivered to the Holder of the Note at its registered addresses and shall state: (1) that the Borrower is exercising its right to prepay the Note, and (2) the date of prepayment which shall be not more than three (3) Trading Days from the date of the Optional Prepayment Notice. On the date fixed for prepayment (the “Optional Prepayment Date”), the Borrower shall make payment of the Optional Prepayment Amount (as defined below) to Holder, or upon the direction of the Holder as specified by the Holder in a writing to the Borrower (which direction shall to be sent to Borrower by the Holder at least one (1) business day prior to the Optional Prepayment Date). If the Borrower exercises its right to prepay the Note, the Borrower shall make payment to the Holder of an amount in cash equal to the percentage (“Prepayment Percentage”) as set forth in the table immediately following this paragraph opposite the applicable Prepayment Period, multiplied by the sum of: (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note to the Optional Prepayment Date plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and (x) plus (z) any amounts owed to the Holder pursuant to Section 1.4 hereof (the “Optional Prepayment Amount”). If the Borrower delivers an Optional Prepayment Notice and fails to pay the Optional Prepayment Amount due to the Holder of the Note within two (2) business days following the Optional Prepayment Date, the Borrower shall forever forfeit its right to prepay the Note pursuant to this Section 1.7.

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Prepayment Period	Prepayment Percentage
1.    The period beginning on the Issue Date and ending on the date which is thirty (30) days following the Issue Date.	112%
2.      The period beginning on the date which is thirty-one (31) days following the Issue Date and ending on the date which is sixty (60) days following the Issue Date.	117%
3.     The period beginning on the date which is sixty-one (61) days following the Issue Date and ending on the date which is ninety (90) days following the Issue Date.	120%
4.    The period beginning on the date that is ninety-one (91) day from the Issue Date and ending one hundred twenty (120) days following the Issue Date.	123%
5.     The period beginning on the date that is one hundred twenty-one (121) day from the Issue Date and ending one hundred fifty (150) days following the Issue Date.	127%
6.     The period beginning on the date that is one hundred fifty-one (151) day from the Issue Date and ending one hundred eighty (180) days following the Issue Date.	130%

After the expiration of one hundred eighty (180) days following the Issue Date, the Borrower shall have no right of prepayment.

Article II. CERTAIN COVENANTS

2.1       

Sale of Assets. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, sell, lease or otherwise dispose of any significant portion of its assets outside the ordinary course of business. Any consent to the disposition of any assets may be conditioned on a specified use of the proceeds of disposition.

Article III. EVENTS OF DEFAULT

If any of the following events of default (each, an “Event of Default”) shall occur:

3.1       

Failure to Pay Principal and Interest. The Borrower fails to pay the principal hereof or interest thereon when due on this Note, whether at maturity or upon acceleration and such breach continues for a period of five (5) days after written notice from the Holder.

3.2       

Conversion and the Shares. The Borrower fails to issue shares of Common Stock to the Holder (or announces or threatens in writing that it will not honor its obligation to do so) upon exercise by the Holder of the conversion rights of the Holder in accordance with the terms of this Note, fails to transfer or cause its transfer agent to transfer (issue) (electronically or in certificated form) any certificate for shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, the Borrower directs its transfer agent not to transfer or delays, impairs, and/or hinders its transfer agent in transferring (or issuing) (electronically or in certificated form) any certificate for shares of Common Stock to be issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, or fails to remove (or directs its transfer agent not to remove or impairs, delays, and/or hinders its transfer agent from removing) any restrictive legend (or to withdraw any stop transfer instructions in respect thereof) on any certificate for any shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note (or makes any written announcement, statement or threat that it does not intend to honor the obligations described in this paragraph) and any such failure shall continue uncured (or any written announcement, statement or threat not to honor its obligations shall not be rescinded in writing) for three (3) business days after the Holder shall have delivered a Notice of Conversion. It is an obligation of the Borrower to remain current in its obligations to its transfer agent. It shall be an event of default of this Note, if a conversion of this Note is delayed, hindered or frustrated due to a balance owed by the Borrower to its transfer agent. If at the option of the Holder, the Holder advances any funds to the Borrower’s transfer agent in order to process a conversion, such advanced funds shall be paid by the Borrower to the Holder within forty-eight (48) hours of a demand from the Holder.

7 

3.3       

Breach of Covenants. The Borrower breaches any material covenant or other material term or condition contained in this Note and any collateral documents including but not limited to the Purchase Agreement and such breach continues for a period of twenty (20) days after written notice thereof to the Borrower from the Holder.

3.4       

Breach of Representations and Warranties. Any representation or warranty of the Borrower made herein or in any agreement, statement or certificate given in writing pursuant hereto or in connection herewith (including, without limitation, the Purchase Agreement), shall be false or misleading in any material respect when made and the breach of which has (or with the passage of time will have) a material adverse effect on the rights of the Holder with respect to this Note or the Purchase Agreement.

3.5       

Receiver or Trustee. The Borrower or any subsidiary of the Borrower shall make an assignment for the benefit of creditors, or apply for or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business, or such a receiver or trustee shall otherwise be appointed.

3.6       

Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings, voluntary or involuntary, for relief under any bankruptcy law or any law for the relief of debtors shall be instituted by or against the Borrower or any subsidiary of the Borrower.

3.7       

Delisting of Common Stock. The Borrower shall fail to maintain the listing of the Common Stock on at least one of the OTC (which specifically includes the quotation platforms maintained by the OTC Markets Group) or an equivalent replacement exchange, the Nasdaq National Market, the Nasdaq SmallCap Market, the New York Stock Exchange, or the American Stock Exchange.

3.8       

Failure to Comply with the Exchange Act. The Borrower shall fail to comply with the reporting requirements of the Exchange Act; and/or the Borrower shall cease to be subject to the reporting requirements of the Exchange Act.

3.9       

Liquidation. Any dissolution, liquidation, or winding up of Borrower or any substantial portion of its business.

3.10       

Cessation of Operations. Any cessation of operations by Borrower or Borrower admits it is otherwise generally unable to pay its debts as such debts become due, provided, however, that any disclosure of the Borrower’s ability to continue as a “going concern” shall not be an admission that the Borrower cannot pay its debts as they become due.

8 

3.11       

Financial Statement Restatement. The restatement of any financial statements filed by the Borrower with the SEC at any time after 180 days after the Issuance Date for any date or period until this Note is no longer outstanding, if the result of such restatement would, by comparison to the un-restated financial statement, have constituted a material adverse effect on the rights of the Holder with respect to this Note or the Purchase Agreement.

3.12       

Replacement of Transfer Agent. In the event that the Borrower proposes to replace its transfer agent, the Borrower fails to provide, prior to the effective date of such replacement, a fully executed Irrevocable Transfer Agent Instructions in a form as initially delivered pursuant to the Purchase Agreement (including but not limited to the provision to irrevocably reserve shares of Common Stock in the Reserved Amount) signed by the successor transfer agent to Borrower and the Borrower.

3.13       

Cross-Default.  Notwithstanding anything to the contrary contained in this Note or the other related or companion documents, a breach or default by the Borrower of any covenant or other term or condition contained in any of the Other Agreements, after the passage of all applicable notice and cure or grace periods, shall, at the option of the Holder, be considered a default under this Note and the Other Agreements, in which event the Holder shall be entitled (but in no event required) to apply all rights and remedies of the Holder under the terms of this Note and the Other Agreements by reason of a default under said Other Agreement or hereunder. “Other Agreements” means, collectively, all agreements and instruments between, among or by: (1) the Borrower, and, or for the benefit of, (2) the Holder and any affiliate of the Holder, including, without limitation, promissory notes; provided, however, the term “Other Agreements” shall not include the related or companion documents to this Note. Each of the loan transactions will be cross-defaulted with each other loan transaction and with all other existing and future debt of Borrower to the Holder.

Upon the occurrence and during the continuation of any Event of Default specified in Section 3.1 (solely with respect to failure to pay the principal hereof or interest thereon when due at the Maturity Date), the Note shall become immediately due and payable and the Borrower shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to the Default Sum (as defined herein).  UPON THE OCCURRENCE AND DURING THE CONTINUATION OF ANY EVENT OF DEFAULT SPECIFIED IN SECTION 3.2, THE NOTE SHALL BECOME IMMEDIATELY DUE AND PAYABLE AND THE BORROWER SHALL PAY TO THE HOLDER, IN FULL SATISFACTION OF ITS OBLIGATIONS HEREUNDER, AN AMOUNT EQUAL TO: (Y) THE DEFAULT SUM (AS DEFINED HEREIN); MULTIPLIED BY (Z) TWO (2). Upon the occurrence and during the continuation of any Event of Default specified in Sections 3.1 (solely with respect to failure to pay the principal hereof or interest thereon when due on this Note or upon acceleration), 3.3, 3.4, 3.7, 3.8, 3.10, 3.11, 3.12, 3.13, and/or 3.14 exercisable through the delivery of written notice to the Borrower by such Holders (the “Default Notice”), and upon the occurrence of an Event of Default specified the remaining sections of Articles III (other than failure to pay the principal hereof or interest thereon at the Maturity Date specified in Section 3,1 hereof), the Note shall become immediately due and payable and the Borrower shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to the greater of (i) 150% times the sum of (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note to the date of payment (the “Mandatory Prepayment Date”) plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and/or (x) plus (z) any amounts owed to the Holder pursuant to Section 1.4(e) hereof (the then outstanding principal amount of this Note to the date of payment plus the amounts referred to in clauses (x), (y) and (z) shall collectively be known as the “Default Amount”) and all other amounts payable hereunder shall immediately become due and payable, all without demand, presentment or notice, all of which hereby are expressly waived, together with all costs, including, without limitation, legal fees and expenses, of collection, and the Holder shall be entitled to exercise all other rights and remedies available at law or in equity. 

9 

If the Borrower fails to pay the Default Amount within five (5) business days of written notice that such amount is due and payable, then the Holder shall have the right at any time, so long as the Borrower remains in default (and so long and to the extent that there are sufficient authorized shares), to require the Borrower, upon written notice, to immediately issue, in lieu of the Default Amount, the number of shares of Common Stock of the Borrower equal to the Default Amount divided by the Conversion Price then in effect.

Article IV. MISCELLANEOUS

4.1       

Failure or Indulgence Not Waiver. No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privileges. All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available.

4.2       

Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be:

[  ]

4.3       

Amendments. This Note and any provision hereof may only be amended by an instrument in writing signed by the Borrower and the Holder. The term “Note” and all reference thereto, as used throughout this instrument, shall mean this instrument (and the other Notes issued pursuant to the Purchase Agreement) as originally executed, or if later amended or supplemented, then as so amended or supplemented.

4.4       

Assignability. This Note shall be binding upon the Borrower and its successors and assigns, and shall inure to be the benefit of the Holder and its successors and assigns. Each transferee of this Note must be an “accredited investor” (as defined in Rule 501(a) of the Securities and Exchange Commission). Notwithstanding anything in this Note to the contrary, this Note may be pledged as collateral in connection with a bona fide margin account or other lending arrangement; and may be assigned by the Holder without the consent of the Borrower.

10 

4.5       

Cost of Collection. If default is made in the payment of this Note, the Borrower shall pay the Holder hereof costs of collection, including reasonable attorneys’ fees.

4.6       

Governing Law. This Note shall be governed by and construed in accordance with the laws of the State of New York without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Note shall be brought only in the state courts of New York or in the federal courts located in the state and county of Nassau. The parties to this Note hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. The Borrower and Holder waive trial by jury. The prevailing party shall be entitled to recover from the other party its reasonable attorney’s fees and costs. In the event that any provision of this Note or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement. Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Note, any agreement or any other document delivered in connection with this Note by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Note and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.

4.7       

Purchase Agreement. By its acceptance of this Note, each party agrees to be bound by the applicable terms of the Purchase Agreement.

4.8       

Remedies. The Borrower acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder, by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Borrower acknowledges that the remedy at law for a breach of its obligations under this Note will be inadequate and agrees, in the event of a breach or threatened breach by the Borrower of the provisions of this Note, that the Holder shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing any breach of this Note and to enforce specifically the terms and provisions thereof, without the necessity of showing economic loss and without any bond or other security being required.

11 

IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its name by its duly authorized officer this on October 30, 2017

Blue Sphere Corporation

By:	/s/ Shlomi Palas
	Shlomi Palas
	President and Chief Executive Officer

12 

EXHIBIT A -- NOTICE OF CONVERSION

The undersigned hereby elects to convert $________________ principal amount of the Note (defined below) into that number of shares of Common Stock to be issued pursuant to the conversion of the Note (“Common Stock”) as set forth below, of Blue Sphere Corporation, a Nevada corporation (the “Borrower”) according to the conditions of the convertible note of the Borrower dated as of October 30, 2017 (the “Note”), as of the date written below. No fee will be charged to the Holder for any conversion, except for transfer taxes, if any.

Box Checked as to applicable instructions:

[ ]

The Borrower shall electronically transmit the Common Stock issuable pursuant to this Notice of Conversion to the account of the undersigned or its nominee with DTC through its Deposit Withdrawal Agent Commission system (“DWAC Transfer”).

Name of DTC Prime Broker:

Account Number:

[ ]

The undersigned hereby requests that the Borrower issue a certificate or certificates for the number of shares of Common Stock set forth below (which numbers are based on the Holder’s calculation attached hereto) in the name(s) specified immediately below or, if additional space is necessary, on an attachment hereto:

JABRO FUNDING CORP.

1 Cedar Lane, Glen Cove,

New York 11542

Attn: Lawrence Rothberg, President

Date of conversion:
Applicable Conversion Price:	$
Number of shares of common stock to be issued
pursuant to conversion of the Notes:
Amount of Principal Balance due remaining
under the Note after this conversion:
JABRO FUNDING CORP.
By:_____________________________
Name:  Lawrence Rothberg
Title:     President
Date: __________________

13 

EX-10.18

Blue Sphere Corporation 10-Q

Exhibit 10.18

SECURITIES PURCHASE AGREEMENT

This SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated as of October 30, 2017, by and between Blue Sphere Corporation, a Nevada corporation, with its address at 301 McCullough Drive, 4th Floor, Charlotte, North Carolina 28262 (the “Company”), and POWER UP LENDING GROUP LTD., a Virginia corporation, with its address at 111 Great Neck Road, Suite 216, Great Neck, NY 11021 (the “Buyer”).

WHEREAS:

A.       

The Company and the Buyer are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by the rules and regulations as promulgated by the United States Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended (the “1933 Act”); and

B.       

Buyer desires to purchase and the Company desires to issue and sell, upon the terms and conditions set forth in this Agreement a convertible note of the Company, in the form attached hereto as Exhibit A, in the aggregate principal amount of $153,000.00 (together with any note(s) issued in replacement thereof or as a dividend thereon or otherwise with respect thereto in accordance with the terms thereof, the “Note”), convertible into shares of common stock, $0.001 par value per share, of the Company (the “Common Stock”), upon the terms and subject to the limitations and conditions set forth in such Note.

NOW THEREFORE, the Company and the Buyer severally (and not jointly) hereby agree as follows:

1.       

Purchase and Sale of Note.

a.       

Purchase of Note. On the Closing Date (as defined below), the Company shall issue and sell to the Buyer and the Buyer agrees to purchase from the Company such principal amount of Note as is set forth immediately below the Buyer’s name on the signature pages hereto.

b.       

Form of Payment. On the Closing Date (as defined below), (i) the Buyer shall pay the purchase price for the Note to be issued and sold to it at the Closing (as defined below) (the “Purchase Price”) by wire transfer of immediately available funds to the Company, in accordance with the Company’s written wiring instructions, against delivery of the Note in the principal amount equal to the Purchase Price as is set forth immediately below the Buyer’s name on the signature pages hereto, and (ii) the Company shall deliver such duly executed Note on behalf of the Company, to the Buyer, against delivery of such Purchase Price.

c.       

Closing Date. Subject to the satisfaction (or written waiver) of the conditions thereto set forth in Section 6 and Section 7 below, the date and time of the issuance and sale of the Note pursuant to this Agreement (the “Closing Date”) shall be 12:00 noon, Eastern Standard Time on or about October 31, 2017, or such other mutually agreed upon time. The closing of the transactions contemplated by this Agreement (the “Closing”) shall occur on the Closing Date at such location as may be agreed to by the parties.

2.       

Buyer’s Representations and Warranties. The Buyer represents and warrants to the Company that:

a.       

Investment Purpose. As of the date hereof, the Buyer is purchasing the Note and the shares of Common Stock issuable upon conversion of or otherwise pursuant to the Note (such shares of Common Stock being collectively referred to herein as the “Conversion Shares” and, collectively with the Note, the “Securities”) for its own account and not with a present view towards the public sale or distribution thereof, except pursuant to sales registered or exempted from registration under the 1933 Act.

b.       

Accredited Investor Status. The Buyer is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D (an “Accredited Investor”).

c.       

Reliance on Exemptions. The Buyer understands that the Securities are being offered and sold to it in reliance upon specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying upon the truth and accuracy of, and the Buyer’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of the Buyer set forth herein in order to determine the availability of such exemptions and the eligibility of the Buyer to acquire the Securities.

d.       

Information. The Company has not disclosed to the Buyer any material nonpublic information and will not disclose such information unless such information is disclosed to the public prior to or promptly following such disclosure to the Buyer.

e.       

Legends. The Buyer understands that the Note and, until such time as the Conversion Shares have been registered under the 1933 Act; or may be sold pursuant to an applicable exemption from registration, the Conversion Shares may bear a restrictive legend in substantially the following form:

“THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR UNDER ANY STATE SECURITIES LAWS, AND MAY NOT BE PLEDGED, SOLD, ASSIGNED, HYPOTHECATED OR OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR (2) THE ISSUER OF SUCH SECURITIES RECEIVES AN OPINION OF COUNSEL TO THE HOLDER OF SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE REASONABLY ACCEPTABLE TO THE ISSUER’S TRANSFER AGENT, THAT SUCH SECURITIES MAY BE PLEDGED, SOLD, ASSIGNED, HYPOTHECATED OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS.”

2 

The legend set forth above shall be removed and the Company shall issue a certificate without such legend to the holder of any Security upon which it is stamped, if, unless otherwise required by applicable state securities laws, (a) such Security is registered for sale under an effective registration statement filed under the 1933 Act or otherwise may be sold pursuant to an exemption from registration without any restriction as to the number of securities as of a particular date that can then be immediately sold, or (b) such holder provides the Company with an opinion of counsel, in form, substance and scope customary for opinions of counsel in comparable transactions, to the effect that a public sale or transfer of such Security may be made without registration under the 1933 Act, which opinion shall be accepted by the Company so that the sale or transfer is effected. The Buyer agrees to sell all Securities, including those represented by a certificate(s) from which the legend has been removed, in compliance with applicable prospectus delivery requirements, if any. In the event that the Company does not accept the opinion of counsel provided by the Buyer with respect to the transfer of Securities pursuant to an exemption from registration, such as Rule 144, at the Deadline, it will be considered an Event of Default pursuant to Section 3.2 of the Note.

f.       

Authorization; Enforcement. This Agreement has been duly and validly authorized. This Agreement has been duly executed and delivered on behalf of the Buyer, and this Agreement constitutes a valid and binding agreement of the Buyer enforceable in accordance with its terms.

3.       

Representations and Warranties of the Company. The Company represents and warrants to the Buyer that:

a.       

Organization and Qualification. The Company and each of its Subsidiaries (as defined below), if any, is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is incorporated, with full power and authority (corporate and other) to own, lease, use and operate its properties and to carry on its business as and where now owned, leased, used, operated and conducted. “Subsidiaries” means any corporation or other organization, whether incorporated or unincorporated, in which the Company owns, directly or indirectly, any equity or other ownership interest.

3 

b.       

Authorization; Enforcement. (i) The Company has all requisite corporate power and authority to enter into and perform this Agreement, the Note and to consummate the transactions contemplated hereby and thereby and to issue the Securities, in accordance with the terms hereof and thereof, (ii) the execution and delivery of this Agreement, the Note by the Company and the consummation by it of the transactions contemplated hereby and thereby (including without limitation, the issuance of the Note and the issuance and reservation for issuance of the Conversion Shares issuable upon conversion or exercise thereof) have been duly authorized by the Company’s Board of Directors and no further consent or authorization of the Company, its Board of Directors, or its shareholders is required, (iii) this Agreement has been duly executed and delivered by the Company by its authorized representative, and such authorized representative is the true and official representative with authority to sign this Agreement and the other documents executed in connection herewith and bind the Company accordingly, and (iv) this Agreement constitutes, and upon execution and delivery by the Company of the Note, each of such instruments will constitute, a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms.

c.       

Capitalization. As of the date hereof, the authorized common stock of the Company consists of 1,750,000,000 authorized shares of Common Stock, $0.001 par value per share, of which 3,682,762 shares are issued and outstanding; and 823,503 shares are reserved for issuance upon conversion of the Note. All of such outstanding shares of capital stock are, or upon issuance will be, duly authorized, validly issued, fully paid and non-assessable. .

d.       

Issuance of Shares. The Conversion Shares are duly authorized and reserved for issuance and, upon conversion of the Note in accordance with its respective terms, will be validly issued, fully paid and non-assessable, and free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders of the Company and will not impose personal liability upon the holder thereof.

e.       

No Conflicts. The execution, delivery and performance of this Agreement, the Note by the Company and the consummation by the Company of the transactions contemplated hereby and thereby (including, without limitation, the issuance and reservation for issuance of the Conversion Shares) will not (i) conflict with or result in a violation of any provision of the Certificate of Incorporation or By-laws, or (ii) violate or conflict with, or result in a breach of any provision of, or constitute a default (or an event which with notice or lapse of time or both could become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture, patent, patent license or instrument to which the Company or any of its Subsidiaries is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations and regulations of any self-regulatory organizations to which the Company or its securities are subject) applicable to the Company or any of its Subsidiaries or by which any property or asset of the Company or any of its Subsidiaries is bound or affected (except for such conflicts, defaults, terminations, amendments, accelerations, cancellations and violations as would not, individually or in the aggregate, have a Material Adverse Effect). The businesses of the Company and its Subsidiaries, if any, are not being conducted, and shall not be conducted so long as the Buyer owns any of the Securities, in violation of any law, ordinance or regulation of any governmental entity. “Material Adverse Effect” means any material adverse effect on the business, operations, assets, financial condition or prospects of the Company or its Subsidiaries, if any, taken as a whole, or on the transactions contemplated hereby or by the agreements or instruments to be entered into in connection herewith.

4 

f.       

SEC Documents; Financial Statements. The Company has filed all reports, schedules, forms, statements and other documents required to be filed by it with the SEC pursuant to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “1934 Act”) (all of the foregoing filed prior to the date hereof and all exhibits included therein and financial statements and schedules thereto and documents (other than exhibits to such documents) incorporated by reference therein, being hereinafter referred to herein as the “SEC Documents”). Upon written request the Company will deliver to the Buyer true and complete copies of the SEC Documents, except for such exhibits and incorporated documents. As of their respective dates or if amended, as of the dates of the amendments, the SEC Documents complied in all material respects with the requirements of the 1934 Act and the rules and regulations of the SEC promulgated thereunder applicable to the SEC Documents, and none of the SEC Documents, at the time they were filed with the SEC, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. None of the statements made in any such SEC Documents is, or has been, required to be amended or updated under applicable law (except for such statements as have been amended or updated in subsequent filings prior the date hereof). As of their respective dates or if amended, as of the dates of the amendments, the financial statements of the Company included in the SEC Documents complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto. Such financial statements have been prepared in accordance with United States generally accepted accounting principles, consistently applied, during the periods involved and fairly present in all material respects the consolidated financial position of the Company and its consolidated Subsidiaries as of the dates thereof and the consolidated results of their operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments). The Company is subject to the reporting requirements of the 1934 Act.

g.       

Absence of Certain Changes. Since June 30, 2017, except as set forth in the SEC Documents, there has been no material adverse change and no material adverse development in the assets, liabilities, business, properties, operations, financial condition, results of operations, prospects or 1934 Act reporting status of the Company or any of its Subsidiaries.

h.       

Absence of Litigation. Except as set forth in the SEC Documents, there is no action, suit, claim, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the Company or any of its Subsidiaries, threatened against or affecting the Company or any of its Subsidiaries, or their officers or directors in their capacity as such, that could have a Material Adverse Effect. The Company and its Subsidiaries are unaware of any facts or circumstances which might give rise to any of the foregoing.. Nevertheless, the SEC requested information from the Company information (on a voluntary basis) regarding two past non- reviewed 10Qs that were filed by the Company during the first half of 2016.

5 

i.       

No Integrated Offering. Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf, has directly or indirectly made any offers or sales in any security or solicited any offers to buy any security under circumstances that would require registration under the 1933 Act of the issuance of the Securities to the Buyer. The issuance of the Securities to the Buyer will not be integrated with any other issuance of the Company’s securities (past, current or future) for purposes of any shareholder approval provisions applicable to the Company or its securities.

j.       

No Brokers. The Company has taken no action which would give rise to any claim by any person for brokerage commissions, transaction fees or similar payments relating to this Agreement or the transactions contemplated hereby.

k.       

No Investment Company. The Company is not, and upon the issuance and sale of the Securities as contemplated by this Agreement will not be an “investment company” required to be registered under the Investment Company Act of 1940 (an “Investment Company”). The Company is not controlled by an Investment Company.

l.       

Breach of Representations and Warranties by the Company. If the Company breaches any of the representations or warranties set forth in this Section 3, and in addition to any other remedies available to the Buyer pursuant to this Agreement, it will be considered an Event of default under Section 3.4 of the Note.

4.       

COVENANTS.

a.       

Best Efforts. The Company shall use its best efforts to satisfy timely each of the conditions described in Section 7 of this Agreement.

b.       

Form D; Blue Sky Laws. The Company agrees to timely make any filings required by federal and state laws as a result of the closing of the transactions contemplated by this Agreement.

c.       

Use of Proceeds. The Company shall use the proceeds to support its project development in Holland and USA.

d.       

Expenses. At the Closing, the Company’s obligation with respect to the transactions contemplated by this Agreement is to reimburse Buyer’ expenses shall be $3,000.00 for Buyer’s legal fees and due diligence fee.

e.       

Corporate Existence. So long as the Buyer beneficially owns any Note, the Company shall maintain its corporate existence and shall not sell all or substantially all of the Company’s assets, except with the prior written consent of the Buyer.

f.       

Breach of Covenants. If the Company breaches any of the covenants set forth in this Section 4, and in addition to any other remedies available to the Buyer pursuant to this Agreement, it will be considered an event of default under Section 3.4 of the Note.

6 

g.       

Failure to Comply with the 1934 Act. So long as the Buyer beneficially owns the Note, the Company shall comply with the reporting requirements of the 1934 Act; and the Company shall continue to be subject to the reporting requirements of the 1934 Act.

h.       

Trading Activities. Neither the Buyer nor its affiliates has an open short position in the common stock of the Company and the Buyer agrees that it shall not, and that it will cause its affiliates not to, engage in any short sales of or hedging transactions with respect to the common stock of the Company.

i.       

Right of First Refusal. Unless it shall have first delivered to the Buyer, at least forty eight (48) hours prior to the closing of such Future Offering (as defined herein), written notice describing the proposed Future Offering (“ROFR Notice”), including the terms and conditions thereof, identity of the proposed purchaser and proposed definitive documentation to be entered into in connection therewith, and providing the Buyer an option during the forty eight (48) hour period following delivery of such notice to purchase the securities being offered in the Future Offering on the same terms as contemplated by such Future Offering (the limitations referred to in this sentence and the preceding sentence are collectively referred to as the “Right of First Refusal”), the Company will not conduct any equity (or debt with an equity component) financing in an amount less than $150,000 (“Future Offering(s)”) during the period beginning on the Closing Date and ending nine (9) months following the Closing Date. In the event the terms and conditions of a proposed Future Offering are amended in any respect after delivery of the notice to the Buyer concerning the proposed Future Offering, the Company shall deliver a new notice to the Buyer describing the amended terms and conditions of the proposed Future Offering and the Buyer thereafter shall have an option during the forty eight (48) hour period following delivery of such new notice to purchase its pro rata share of the securities being offered on the same terms as contemplated by such proposed Future Offering, as amended. Notwithstanding anything contained herein to the contrary, any subsequent offer by an investor, or an affiliate of such investor, identified on an ROFR Notice is subject to this Section 4(h) and the Right of First Refusal.

7 

5.       

Transfer Agent Instructions. The Company shall issue irrevocable instructions to its transfer agent to issue certificates, registered in the name of the Buyer or its nominee, for the Conversion Shares in such amounts as specified from time to time by the Buyer to the Company upon conversion of the Note in accordance with the terms thereof (the “Irrevocable Transfer Agent Instructions”).  In the event that the Company proposes to replace its transfer agent, the Company shall provide, prior to the effective date of such replacement, a fully executed Irrevocable Transfer Agent Instructions in a form as initially delivered pursuant to this Agreement (including but not limited to the provision to irrevocably reserve shares of Common Stock in the Reserved Amount as such term is defined in the Note) signed by the successor transfer agent to Company and the Company. Prior to registration of the Conversion Shares under the 1933 Act or the date on which the Conversion Shares may be sold pursuant to an exemption from registration, all such certificates shall bear the restrictive legend specified in Section 2(e) of this Agreement.  The Company warrants that: (i) no instruction other than the Irrevocable Transfer Agent Instructions referred to in this Section 5, will be given by the Company to its transfer agent and that the Securities shall otherwise be freely transferable on the books and records of the Company as and to the extent provided in this Agreement and the Note; (ii) it will not direct its transfer agent not to transfer or delay, impair, and/or hinder its transfer agent in transferring (or issuing)(electronically or in certificated form) any certificate for Conversion Shares to be issued to the Buyer upon conversion of or otherwise pursuant to the Note as and when required by the Note and this Agreement; and (iii) it will not fail to remove (or directs its transfer agent not to remove or impairs, delays, and/or hinders its transfer agent from removing) any restrictive legend (or to withdraw any stop transfer instructions in respect thereof) on any certificate for any Conversion Shares issued to the Buyer upon conversion of or otherwise pursuant to the Note as and when required by the Note and/or this Agreement.  If the Buyer provides the Company and the Company’s transfer, at the cost of the Buyer, with an opinion of counsel in form, substance and scope customary for opinions in comparable transactions, to the effect that a public sale or transfer of such Securities may be made without registration under the 1933 Act, the Company shall permit the transfer, and, in the case of the Conversion Shares, promptly instruct its transfer agent to issue one or more certificates, free from restrictive legend, in such name and in such denominations as specified by the Buyer.  The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Buyer, by vitiating the intent and purpose of the transactions contemplated hereby.  Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Section 5 may be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Section, that the Buyer shall be entitled, in addition to all other available remedies, to an injunction restraining any breach and requiring immediate transfer, without the necessity of showing economic loss and without any bond or other security being required.

6.       

Conditions to the Company’s Obligation to Sell. The obligation of the Company hereunder to issue and sell the Note to the Buyer at the Closing is subject to the satisfaction, at or before the Closing Date of each of the following conditions thereto, provided that these conditions are for the Company’s sole benefit and may be waived by the Company at any time in its sole discretion:

a.       

The Buyer shall have executed this Agreement and delivered the same to the Company.

b.       

The Buyer shall have delivered the Purchase Price in accordance with Section 1(b) above.

c.       

The representations and warranties of the Buyer shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made at that time (except for representations and warranties that speak as of a specific date), and the Buyer shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Buyer at or prior to the Closing Date.

8 

d.       

No litigation, statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by or in any court or governmental authority of competent jurisdiction or any self-regulatory organization having authority over the matters contemplated hereby which prohibits the consummation of any of the transactions contemplated by this Agreement.

7.       

Conditions to The Buyer’s Obligation to Purchase. The obligation of the Buyer hereunder to purchase the Note at the Closing is subject to the satisfaction, at or before the Closing Date of each of the following conditions, provided that these conditions are for the Buyer’s sole benefit and may be waived by the Buyer at any time in its sole discretion:

a.       

The Company shall have executed this Agreement and delivered the same to the Buyer.

b.       

The Company shall have delivered to the Buyer the duly executed Note (in such denominations as the Buyer shall request) in accordance with Section 1(b) above.

c.       

The Irrevocable Transfer Agent Instructions, in form and substance satisfactory to the Buyer, shall have been delivered to and acknowledged in writing by the Company’s Transfer Agent.

d.       

The representations and warranties of the Company shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made at such time (except for representations and warranties that speak as of a specific date) and the Company shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Company at or prior to the Closing Date. The Buyer shall have received a certificate or certificates, executed by the chief executive officer of the Company, dated as of the Closing Date, to the foregoing effect and as to such other matters as may be reasonably requested by the Buyer including, but not limited to certificates with respect to the Board of Directors’ resolutions relating to the transactions contemplated hereby.

e.       

No litigation, statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by or in any court or governmental authority of competent jurisdiction or any self-regulatory organization having authority over the matters contemplated hereby which prohibits the consummation of any of the transactions contemplated by this Agreement.

f.       

No event shall have occurred which could reasonably be expected to have a Material Adverse Effect on the Company including but not limited to a change in the 1934 Act reporting status of the Company or the failure of the Company to be timely in its 1934 Act reporting obligations.

9 

g.       

The Conversion Shares shall have been authorized for quotation on an exchange or electronic quotation system and trading in the Common Stock on such exchange or electronic quotation system shall not have been suspended by the SEC or an exchange or electronic quotation system.

8.       

Governing Law; Miscellaneous.

a.       

Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Virginia without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Agreement shall be brought only in the state courts of New York or in the federal courts located in the Eastern District of New York. The parties to this Agreement hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. The Company and Buyer waive trial by jury. The prevailing party shall be entitled to recover from the other party its reasonable attorney’s fees and costs. In the event that any provision of this Agreement or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement. Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Agreement, the Note or any related document or agreement by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.

b.       

Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which shall constitute one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party.

c.       

Headings. The headings of this Agreement are for convenience of reference only and shall not form part of, or affect the interpretation of, this Agreement.

d.       

Severability. In the event that any provision of this Agreement is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any provision hereof which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision hereof.

10 

e.       

Entire Agreement; Amendments. This Agreement and the instruments referenced herein contain the entire understanding of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither the Company nor the Buyer makes any representation, warranty, covenant or undertaking with respect to such matters. No provision of this Agreement may be waived or amended other than by an instrument in writing signed by the majority in interest of the Buyer.

f.       

Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be as set forth in the heading of this Agreement with a copy by fax only to (which copy shall not constitute notice) to Naidich Wurman LLP, 111 Great Neck Road, Suite 214, Great Neck, NY 11021, Attn: Allison Naidich, facsimile: 516-466-3555, e-mail: allison@nwlaw.com. Each party shall provide notice to the other party of any change in address.

g.       

Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and assigns. Neither the Company nor the Buyer shall assign this Agreement or any rights or obligations hereunder without the prior written consent of the other. Notwithstanding the foregoing, the Buyer may assign its rights hereunder to any person that purchases Securities in a private transaction from the Buyer or to any of its “affiliates,” as that term is defined under the 1934 Act, without the consent of the Company.

h.       

Survival. The representations and warranties of the Company and the agreements and covenants set forth in this Agreement shall survive the closing hereunder notwithstanding any due diligence investigation conducted by or on behalf of the Buyer. The Company agrees to indemnify and hold harmless the Buyer and all their officers, directors, employees and agents for loss or damage arising as a result of or related to any breach or alleged breach by the Company of any of its representations, warranties and covenants set forth in this Agreement or any of its covenants and obligations under this Agreement, including advancement of expenses as they are incurred.

i.       

Further Assurances. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.

11 

j.       

No Strict Construction. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party.

k.       

Remedies. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Buyer by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Agreement will be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Agreement, that the Buyer shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing any breach of this Agreement and to enforce specifically the terms and provisions hereof, without the necessity of showing economic loss and without any bond or other security being required.

[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]

12 

IN WITNESS WHEREOF, the undersigned Buyer and the Company have caused this Agreement to be duly executed as of the date first above written.

Blue Sphere Corporation

By:	/s/ Shlomi Palas
	Shlomi Palas
	President and Chief Executive Officer
POWER UP LENDING GROUP LTD.
By:	/s/ Curt Kramer
Name:	Curt Kramer
Title:	Chief Executive Officer
111 Great Neck Road, Suite 216
Great Neck, NY  11021

AGGREGATE SUBSCRIPTION AMOUNT:

Aggregate Principal Amount of Note:	$153,000.00
Aggregate Purchase Price:	$153,000.00

13 

EX-10.19

Blue Sphere Corporation 10-Q

Exhibit 10.19

NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

Principal Amount: $153,000.00	Issue Date: October 30, 2017
Purchase Price:  $153,000.00

CONVERTIBLE PROMISSORY NOTE

FOR VALUE RECEIVED, Blue Sphere Corporation, a Nevada corporation (hereinafter called the “Borrower”), hereby promises to pay to the order of POWER UP LENDING GROUP LTD., a Virginia corporation, or registered assigns (the “Holder”) the sum of $153,000.00 together with any interest as set forth herein, on August 10, 2018 (the “Maturity Date”), and to pay interest on the unpaid principal balance hereof at the rate of twelve percent (12%)(the “Interest Rate”) per annum from the date hereof (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. This Note may not be prepaid in whole or in part except as otherwise explicitly set forth herein. Any amount of principal or interest on this Note which is not paid when due shall bear interest at the rate of twenty two percent (22%) per annum from the due date thereof until the same is paid (“Default Interest”). Interest shall be computed on the basis of a 365 day year and the actual number of days elapsed. Interest shall commence accruing on the Issue Date but shall not be payable until the Note becomes payable (whether at Maturity Date or upon acceleration or by prepayment). All payments due hereunder (to the extent not converted into common stock, $0.001 par value per share (the “Common Stock”) in accordance with the terms hereof) shall be made in lawful money of the United States of America. All payments shall be made at such address as the Holder shall hereafter give to the Borrower by written notice made in accordance with the provisions of this Note. Each capitalized term used herein, and not otherwise defined, shall have the meaning ascribed thereto in that certain Securities Purchase Agreement dated the date hereof, pursuant to which this Note was originally issued (the “Purchase Agreement”).

This Note is free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders of the Borrower and will not impose personal liability upon the holder thereof.

The following terms shall apply to this Note:

Article I. CONVERSION RIGHTS

1.1       

Conversion Right. The Holder shall have the right from time to time, and at any time during the period beginning on the date which is one hundred eighty (180) days following the date of this Note and ending on the later of: (i) the Maturity Date and (ii) the date of payment of the Default Amount (as defined in Article III), each in respect of the remaining outstanding principal amount of this Note to convert all or any part of the outstanding and unpaid principal amount of this Note into fully paid and non-assessable shares of Common Stock, as such Common Stock exists on the Issue Date, or any shares of capital stock or other securities of the Borrower into which such Common Stock shall hereafter be changed or reclassified at the conversion price (the “Conversion Price”) determined as provided herein (a “Conversion”); provided, however, that in no event shall the Holder be entitled to convert any portion of this Note in excess of that portion of this Note upon conversion of which the sum of (1) the number of shares of Common Stock beneficially owned by the Holder and its affiliates (other than shares of Common Stock which may be deemed beneficially owned through the ownership of the unconverted portion of the Notes or the unexercised or unconverted portion of any other security of the Borrower subject to a limitation on conversion or exercise analogous to the limitations contained herein) and (2) the number of shares of Common Stock issuable upon the conversion of the portion of this Note with respect to which the determination of this proviso is being made, would result in beneficial ownership by the Holder and its affiliates of more than 4.99% of the outstanding shares of Common Stock. For purposes of the proviso to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Regulations 13D-G thereunder, except as otherwise provided in clause (1) of such proviso. The beneficial ownership limitations on conversion as set forth in the section may NOT be waived by the Holder. The number of shares of Common Stock to be issued upon each conversion of this Note shall be determined by dividing the Conversion Amount (as defined below) by the applicable Conversion Price then in effect on the date specified in the notice of conversion, in the form attached hereto as Exhibit A (the “Notice of Conversion”), delivered to the Borrower by the Holder in accordance with Section 1.4 below; provided that the Notice of Conversion is submitted by facsimile or e-mail (or by other means resulting in, or reasonably expected to result in, notice) to the Borrower before 6:00 p.m., New York, New York time on such conversion date (the “Conversion Date”); however, if the Notice of Conversion is sent after 6:00pm, New York, New York time the Conversion Date shall be the next business day. The term “Conversion Amount” means, with respect to any conversion of this Note, the sum of (1) the principal amount of this Note to be converted in such conversion plus (2) at the Holder’s option, accrued and unpaid interest, if any, on such principal amount at the interest rates provided in this Note to the Conversion Date, plus (3) at the Holder’s option, Default Interest, if any, on the amounts referred to in the immediately preceding clauses (1) and/or (2) plus (4) at the Holder’s option, any amounts owed to the Holder pursuant to Sections 1.4 hereof.

1.2       

Conversion Price. The conversion price (the “Conversion Price”) shall equal the Variable Conversion Price (as defined herein) (subject to equitable adjustments by the Borrower relating to the Borrower’s securities or the securities of any subsidiary of the Borrower, combinations, recapitalization, reclassifications, extraordinary distributions and similar events). The “Variable Conversion Price” shall mean 65% multiplied by the Market Price (as defined herein) (representing a discount rate of 35%). “Market Price” means the average of the lowest two (2) Trading Prices (as defined below) for the Common Stock during the ten (10) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date. “Trading Price” means, for any security as of any date, the closing bid price on the OTCQB, OTCQX, Pink Sheets electronic quotation system or applicable trading market (the “OTC”) as reported by a reliable reporting service (“Reporting Service”) designated by the Holder (i.e. Bloomberg) or, if the OTC is not the principal trading market for such security, the closing bid price of such security on the principal securities exchange or trading market where such security is listed or traded or, if no closing bid price of such security is available in any of the foregoing manners, the average of the closing bid prices of any market makers for such security that are listed in the “pink sheets”. If the Trading Price cannot be calculated for such security on such date in the manner provided above, the Trading Price shall be the fair market value as reasonably determined by the Borrower. “Trading Day” shall mean any day on which the Common Stock is tradable for any period on the OTC, or on the principal securities exchange or other securities market on which the Common Stock is then being traded.

2 

1.3       

Authorized Shares. The Borrower covenants that during the period the conversion right exists, the Borrower will reserve from its authorized and unissued Common Stock a sufficient number of shares, free from preemptive rights, to provide for the issuance of Common Stock upon the full conversion of this Note issued pursuant to the Purchase Agreement. The Borrower is required at all times to have authorized and reserved six times the number of shares that would be issuable upon full conversion of the Note (assuming that the 4.99% limitation set forth in Section 1.1 is not in effect)(based on the respective Conversion Price of the Note (as defined in Section 1.2) in effect from time to time, initially 823,503)(the “Reserved Amount”). The Reserved Amount shall be increased (or decreased with the written consent of the Holder) from time to time in accordance with the Borrower’s obligations hereunder. The Borrower represents that upon issuance, such shares will be duly and validly issued, fully paid and non-assessable. In addition, if the Borrower shall issue any securities or make any change to its capital structure which would change the number of shares of Common Stock into which the Notes shall be convertible at the then current Conversion Price, the Borrower shall at the same time make proper provision so that thereafter there shall be a sufficient number of shares of Common Stock authorized and reserved, free from preemptive rights, for conversion of the outstanding Note. The Borrower (i) acknowledges that it has irrevocably instructed its transfer agent to issue certificates for the Common Stock issuable upon conversion of this Note, and (ii) agrees that its issuance of this Note shall constitute full authority to its officers and agents who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for shares of Common Stock in accordance with the terms and conditions of this Note.

If, at any time the Borrower does not maintain the Reserved Amount it will be considered an Event of Default under Section 3.2 of the Note.

1.4       

Method of Conversion.

(a)       

Mechanics of Conversion. As set forth in Section 1.1 hereof, from time to time, and at any time during the period beginning on the date which is one hundred eighty (180) days following the date of this Note and ending on the later of: (i) the Maturity Date and (ii) the date of payment of the Default Amount, this Note may be converted by the Holder in whole or in part at any time from time to time after the Issue Date, by (A) submitting to the Borrower a Notice of Conversion (by facsimile, e-mail or other reasonable means of communication dispatched on the Conversion Date prior to 6:00 p.m., New York, New York time) and (B) subject to Section 1.4(b), surrendering this Note at the principal office of the Borrower (upon payment in full of any amounts owed hereunder).

(b)       

Surrender of Note Upon Conversion. Notwithstanding anything to the contrary set forth herein, upon conversion of this Note in accordance with the terms hereof, the Holder shall not be required to physically surrender this Note to the Borrower unless the entire unpaid principal amount of this Note is so converted. The Holder and the Borrower shall maintain records showing the principal amount so converted and the dates of such conversions or shall use such other method, reasonably satisfactory to the Holder and the Borrower, so as not to require physical surrender of this Note upon each such conversion.

3 

(c)       

Delivery of Common Stock Upon Conversion. Upon receipt by the Borrower from the Holder of a facsimile transmission or e-mail (or other reasonable means of communication) of a Notice of Conversion meeting the requirements for conversion as provided in this Section 1.4, the Borrower shall issue and deliver or cause to be issued and delivered to or upon the order of the Holder certificates for the Common Stock issuable upon such conversion within two (2) business days after such receipt (the “Deadline”) (and, solely in the case of conversion of the entire unpaid principal amount hereof, surrender of this Note) in accordance with the terms hereof and the Purchase Agreement. Upon receipt by the Borrower of a Notice of Conversion, the Holder shall be deemed to be the holder of record of the Common Stock issuable upon such conversion, the outstanding principal amount and the amount of accrued and unpaid interest on this Note shall be reduced to reflect such conversion, and, unless the Borrower defaults on its obligations hereunder, all rights with respect to the portion of this Note being so converted shall forthwith terminate except the right to receive the Common Stock or other securities, cash or other assets, as herein provided, on such conversion. If the Holder shall have given a Notice of Conversion as provided herein, the Borrower’s obligation to issue and deliver the certificates for Common Stock shall be absolute and unconditional, irrespective of the absence of any action by the Holder to enforce the same, any waiver or consent with respect to any provision thereof, the recovery of any judgment against any person or any action to enforce the same, any failure or delay in the enforcement of any other obligation of the Borrower to the holder of record, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder of any obligation to the Borrower, and irrespective of any other circumstance which might otherwise limit such obligation of the Borrower to the Holder in connection with such conversion.

(d)       

Delivery of Common Stock by Electronic Transfer. In lieu of delivering physical certificates representing the Common Stock issuable upon conversion, provided the Borrower is participating in the Depository Trust Company (“DTC”) Fast Automated Securities Transfer (“FAST”) program, upon request of the Holder and its compliance with the provisions set forth herein, the Borrower shall use its best efforts to cause its transfer agent to electronically transmit the Common Stock issuable upon conversion to the Holder by crediting the account of Holder’s Prime Broker with DTC through its Deposit and Withdrawal at Custodian (“DWAC”) system.

(e)       

Failure to Deliver Common Stock Prior to Deadline. Without in any way limiting the Holder’s right to pursue other remedies, including actual damages and/or equitable relief, the parties agree that if delivery of the Common Stock issuable upon conversion of this Note is not delivered by the Deadline due to action and/or inaction of the Borrower, the Borrower shall pay to the Holder $2,000 per day in cash, for each day beyond the Deadline that the Borrower fails to deliver such Common Stock (the “Fail to Deliver Fee”); provided; however that the Fail to Deliver Fee shall not be due if the failure is a result of a third party (i.e., transfer agent; and not the result of any failure to pay such transfer agent) despite the best efforts of the Borrower to effect delivery of such Common Stock. Such cash amount shall be paid to Holder by the fifth day of the month following the month in which it has accrued or, at the option of the Holder (by written notice to the Borrower by the first day of the month following the month in which it has accrued), shall be added to the principal amount of this Note, in which event interest shall accrue thereon in accordance with the terms of this Note and such additional principal amount shall be convertible into Common Stock in accordance with the terms of this Note. The Borrower agrees that the right to convert is a valuable right to the Holder. The damages resulting from a failure, attempt to frustrate, interference with such conversion right are difficult if not impossible to qualify. Accordingly, the parties acknowledge that the liquidated damages provision contained in this Section 1.4(e) are justified.

4 

1.5       

Concerning the Shares. The shares of Common Stock issuable upon conversion of this Note may not be sold or transferred unless: (i) such shares are sold pursuant to an effective registration statement under the Act or (ii) the Borrower or its transfer agent shall have been furnished with an opinion of counsel (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions) to the effect that the shares to be sold or transferred may be sold or transferred pursuant to an exemption from such registration (such as Rule 144 or a successor rule) (“Rule 144”); or (iii) such shares are transferred to an “affiliate” (as defined in Rule 144) of the Borrower who agrees to sell or otherwise transfer the shares only in accordance with this Section 1.5 and who is an Accredited Investor (as defined in the Purchase Agreement).

Any restrictive legend on certificates representing shares of Common Stock issuable upon conversion of this Note shall be removed and the Borrower shall issue to the Holder a new certificate therefore free of any transfer legend if the Borrower or its transfer agent shall have received an opinion of counsel from Holder’s counsel, in form, substance and scope customary for opinions of counsel in comparable transactions, to the effect that (i) a public sale or transfer of such Common Stock may be made without registration under the Act, which opinion shall be accepted by the Company so that the sale or transfer is effected; or (ii) in the case of the Common Stock issuable upon conversion of this Note, such security is registered for sale by the Holder under an effective registration statement filed under the Act; or otherwise may be sold pursuant to an exemption from registration. In the event that the Company does not reasonably accept the opinion of counsel provided by the Holder with respect to the transfer of Securities pursuant to an exemption from registration (such as Rule 144), at the Deadline, it will be considered an Event of Default pursuant to Section 3.2 of the Note.

1.6       

Effect of Certain Events.

(a)       

Effect of Merger, Consolidation, Etc. At the option of the Holder, the sale, conveyance or disposition of all or substantially all of the assets of the Borrower, the effectuation by the Borrower of a transaction or series of related transactions in which more than 50% of the voting power of the Borrower is disposed of, or the consolidation, merger or other business combination of the Borrower with or into any other Person (as defined below) or Persons when the Borrower is not the survivor shall be deemed to be an Event of Default (as defined in Article III) pursuant to which the Borrower shall be required to pay to the Holder upon the consummation of and as a condition to such transaction an amount equal to the Default Amount (as defined in Article III). “Person” shall mean any individual, corporation, limited liability company, partnership, association, trust or other entity or organization.

(b)       

Adjustment Due to Merger, Consolidation, Etc. If, at any time when this Note is issued and outstanding and prior to conversion of all of the Note, there shall be any merger, consolidation, exchange of shares, recapitalization, reorganization, or other similar event, as a result of which shares of Common Stock of the Borrower shall be changed into the same or a different number of shares of another class or classes of stock or securities of the Borrower or another entity, or in case of any sale or conveyance of all or substantially all of the assets of the Borrower other than in connection with a plan of complete liquidation of the Borrower, then the Holder of this Note shall thereafter have the right to receive upon conversion of this Note, upon the basis and upon the terms and conditions specified herein and in lieu of the shares of Common Stock immediately theretofore issuable upon conversion, such stock, securities or assets which the Holder would have been entitled to receive in such transaction had this Note been converted in full immediately prior to such transaction (without regard to any limitations on conversion set forth herein), and in any such case appropriate provisions shall be made with respect to the rights and interests of the Holder of this Note to the end that the provisions hereof (including, without limitation, provisions for adjustment of the Conversion Price and of the number of shares issuable upon conversion of the Note) shall thereafter be applicable, as nearly as may be practicable in relation to any securities or assets thereafter deliverable upon the conversion hereof. The Borrower shall not affect any transaction described in this Section 1.6(b) unless (a) it first gives, to the extent practicable, ten (10) days prior written notice (but in any event at least five (5) days prior written notice) of the record date of the special meeting of shareholders to approve, or if there is no such record date, the consummation of, such merger, consolidation, exchange of shares, recapitalization, reorganization or other similar event or sale of assets (during which time the Holder shall be entitled to convert this Note) and (b) the resulting successor or acquiring entity (if not the Borrower) assumes by written instrument the obligations of this Note. The above provisions shall similarly apply to successive consolidations, mergers, sales, transfers or share exchanges.

5 

(c)       

Adjustment Due to Distribution. If the Borrower shall declare or make any distribution of its assets (or rights to acquire its assets) to holders of Common Stock as a dividend, stock repurchase, by way of return of capital or otherwise (including any dividend or distribution to the Borrower’s shareholders in cash or shares (or rights to acquire shares) of capital stock of a subsidiary (i.e., a spin-off)) (a “Distribution”), then the Holder of this Note shall be entitled, upon any conversion of this Note after the date of record for determining shareholders entitled to such Distribution, to receive the amount of such assets which would have been payable to the Holder with respect to the shares of Common Stock issuable upon such conversion had such Holder been the holder of such shares of Common Stock on the record date for the determination of shareholders entitled to such Distribution.

1.7       

Prepayment. Notwithstanding anything to the contrary contained in this Note, at any time during the periods set forth on the table immediately following this paragraph (the “Prepayment Periods”), the Borrower shall have the right, exercisable on not more than three (3) Trading Days prior written notice to the Holder of the Note to prepay the outstanding Note (principal and accrued interest), in full, in accordance with this Section 1.7. Any notice of prepayment hereunder (an “Optional Prepayment Notice”) shall be delivered to the Holder of the Note at its registered addresses and shall state: (1) that the Borrower is exercising its right to prepay the Note, and (2) the date of prepayment which shall be not more than three (3) Trading Days from the date of the Optional Prepayment Notice. On the date fixed for prepayment (the “Optional Prepayment Date”), the Borrower shall make payment of the Optional Prepayment Amount (as defined below) to Holder, or upon the direction of the Holder as specified by the Holder in a writing to the Borrower (which direction shall to be sent to Borrower by the Holder at least one (1) business day prior to the Optional Prepayment Date). If the Borrower exercises its right to prepay the Note, the Borrower shall make payment to the Holder of an amount in cash equal to the percentage (“Prepayment Percentage”) as set forth in the table immediately following this paragraph opposite the applicable Prepayment Period, multiplied by the sum of: (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note to the Optional Prepayment Date plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and (x) plus (z) any amounts owed to the Holder pursuant to Section 1.4 hereof (the “Optional Prepayment Amount”). If the Borrower delivers an Optional Prepayment Notice and fails to pay the Optional Prepayment Amount due to the Holder of the Note within two (2) business days following the Optional Prepayment Date, the Borrower shall forever forfeit its right to prepay the Note pursuant to this Section 1.7.

6 

Prepayment Period	Prepayment Percentage
1.    The period beginning on the Issue Date and ending on the date which is thirty (30) days following the Issue Date.	112%
2.      The period beginning on the date which is thirty-one (31) days following the Issue Date and ending on the date which is sixty (60) days following the Issue Date.	117%
3.     The period beginning on the date which is sixty-one (61) days following the Issue Date and ending on the date which is ninety (90) days following the Issue Date.	120%
4.    The period beginning on the date that is ninety-one (91) day from the Issue Date and ending one hundred twenty (120) days following the Issue Date.	123%
5.     The period beginning on the date that is one hundred twenty-one (121) day from the Issue Date and ending one hundred fifty (150) days following the Issue Date.	127%
6.     The period beginning on the date that is one hundred fifty-one (151) day from the Issue Date and ending one hundred eighty (180) days following the Issue Date.	130%

After the expiration of one hundred eighty (180) days following the Issue Date, the Borrower shall have no right of prepayment.

Article II. CERTAIN COVENANTS

2.1       

Sale of Assets. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, sell, lease or otherwise dispose of any significant portion of its assets outside the ordinary course of business. Any consent to the disposition of any assets may be conditioned on a specified use of the proceeds of disposition.

Article III. EVENTS OF DEFAULT

If any of the following events of default (each, an “Event of Default”) shall occur:

3.1       

Failure to Pay Principal and Interest. The Borrower fails to pay the principal hereof or interest thereon when due on this Note, whether at maturity or upon acceleration and such breach continues for a period of five (5) days after written notice from the Holder.

3.2       

Conversion and the Shares. The Borrower fails to issue shares of Common Stock to the Holder (or announces or threatens in writing that it will not honor its obligation to do so) upon exercise by the Holder of the conversion rights of the Holder in accordance with the terms of this Note, fails to transfer or cause its transfer agent to transfer (issue) (electronically or in certificated form) any certificate for shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, the Borrower directs its transfer agent not to transfer or delays, impairs, and/or hinders its transfer agent in transferring (or issuing) (electronically or in certificated form) any certificate for shares of Common Stock to be issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, or fails to remove (or directs its transfer agent not to remove or impairs, delays, and/or hinders its transfer agent from removing) any restrictive legend (or to withdraw any stop transfer instructions in respect thereof) on any certificate for any shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note (or makes any written announcement, statement or threat that it does not intend to honor the obligations described in this paragraph) and any such failure shall continue uncured (or any written announcement, statement or threat not to honor its obligations shall not be rescinded in writing) for two (2) business days after the Holder shall have delivered a Notice of Conversion. It is an obligation of the Borrower to remain current in its obligations to its transfer agent. It shall be an event of default of this Note, if a conversion of this Note is delayed, hindered or frustrated due to a balance owed by the Borrower to its transfer agent. If at the option of the Holder, the Holder advances any funds to the Borrower’s transfer agent in order to process a conversion, such advanced funds shall be paid by the Borrower to the Holder within forty-eight (48) hours of a demand from the Holder.

7 

3.3       

Breach of Covenants. The Borrower breaches any material covenant or other material term or condition contained in this Note and any collateral documents including but not limited to the Purchase Agreement and such breach continues for a period of twenty (20) days after written notice thereof to the Borrower from the Holder.

3.4       

Breach of Representations and Warranties. Any representation or warranty of the Borrower made herein or in any agreement, statement or certificate given in writing pursuant hereto or in connection herewith (including, without limitation, the Purchase Agreement), shall be false or misleading in any material respect when made and the breach of which has (or with the passage of time will have) a material adverse effect on the rights of the Holder with respect to this Note or the Purchase Agreement.

3.5       

Receiver or Trustee. The Borrower or any subsidiary of the Borrower shall make an assignment for the benefit of creditors, or apply for or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business, or such a receiver or trustee shall otherwise be appointed.

3.6       

Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings, voluntary or involuntary, for relief under any bankruptcy law or any law for the relief of debtors shall be instituted by or against the Borrower or any subsidiary of the Borrower.

3.7       

Delisting of Common Stock. The Borrower shall fail to maintain the listing of the Common Stock on at least one of the OTC (which specifically includes the quotation platforms maintained by the OTC Markets Group) or an equivalent replacement exchange, the Nasdaq National Market, the Nasdaq SmallCap Market, the New York Stock Exchange, or the American Stock Exchange.

3.8       

Failure to Comply with the Exchange Act. The Borrower shall fail to comply with the reporting requirements of the Exchange Act; and/or the Borrower shall cease to be subject to the reporting requirements of the Exchange Act.

3.9       

Liquidation. Any dissolution, liquidation, or winding up of Borrower or any substantial portion of its business.

3.10       

Cessation of Operations. Any cessation of operations by Borrower or Borrower admits it is otherwise generally unable to pay its debts as such debts become due, provided, however, that any disclosure of the Borrower’s ability to continue as a “going concern” shall not be an admission that the Borrower cannot pay its debts as they become due.

3.11       

Financial Statement Restatement. The restatement of any financial statements filed by the Borrower with the SEC at any time after 180 days after the Issuance Date for any date or period until this Note is no longer outstanding, if the result of such restatement would, by comparison to the un-restated financial statement, have constituted a material adverse effect on the rights of the Holder with respect to this Note or the Purchase Agreement.

8 

3.12       

Replacement of Transfer Agent. In the event that the Borrower proposes to replace its transfer agent, the Borrower fails to provide, prior to the effective date of such replacement, a fully executed Irrevocable Transfer Agent Instructions in a form as initially delivered pursuant to the Purchase Agreement (including but not limited to the provision to irrevocably reserve shares of Common Stock in the Reserved Amount) signed by the successor transfer agent to Borrower and the Borrower.

3.13       

Cross-Default.  Notwithstanding anything to the contrary contained in this Note or the other related or companion documents, a breach or default by the Borrower of any covenant or other term or condition contained in any of the Other Agreements, after the passage of all applicable notice and cure or grace periods, shall, at the option of the Holder, be considered a default under this Note and the Other Agreements, in which event the Holder shall be entitled (but in no event required) to apply all rights and remedies of the Holder under the terms of this Note and the Other Agreements by reason of a default under said Other Agreement or hereunder. “Other Agreements” means, collectively, all agreements and instruments between, among or by: (1) the Borrower, and, or for the benefit of, (2) the Holder and any affiliate of the Holder, including, without limitation, promissory notes; provided, however, the term “Other Agreements” shall not include the related or companion documents to this Note. Each of the loan transactions will be cross-defaulted with each other loan transaction and with all other existing and future debt of Borrower to the Holder.

Upon the occurrence and during the continuation of any Event of Default specified in Section 3.1 (solely with respect to failure to pay the principal hereof or interest thereon when due at the Maturity Date), the Note shall become immediately due and payable and the Borrower shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to the Default Amount (as defined herein).  UPON THE OCCURRENCE AND DURING THE CONTINUATION OF ANY EVENT OF DEFAULT SPECIFIED IN SECTION 3.2, THE NOTE SHALL BECOME IMMEDIATELY DUE AND PAYABLE AND THE BORROWER SHALL PAY TO THE HOLDER, IN FULL SATISFACTION OF ITS OBLIGATIONS HEREUNDER, AN AMOUNT EQUAL TO: (Y) THE DEFAULT AMOUNT (AS DEFINED HEREIN); MULTIPLIED BY (Z) TWO (2). Upon the occurrence and during the continuation of any Event of Default specified in Sections 3.1 (solely with respect to failure to pay the principal hereof or interest thereon when due on this Note or upon acceleration), 3.3, 3.4, 3.7, 3.8, 3.10, 3.11, 3.12, 3.13, and/or 3.14 exercisable through the delivery of written notice to the Borrower by such Holders (the “Default Notice”), and upon the occurrence of an Event of Default specified the remaining sections of Articles III (other than failure to pay the principal hereof or interest thereon at the Maturity Date specified in Section 3,1 hereof), the Note shall become immediately due and payable and the Borrower shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to the greater of (i) 150% times the sum of (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note to the date of payment (the “Mandatory Prepayment Date”) plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and/or (x) plus (z) any amounts owed to the Holder pursuant to Section 1.4(e) hereof (the then outstanding principal amount of this Note to the date of payment plus the amounts referred to in clauses (x), (y) and (z) shall collectively be known as the “Default Amount”) and all other amounts payable hereunder shall immediately become due and payable, all without demand, presentment or notice, all of which hereby are expressly waived, together with all costs, including, without limitation, legal fees and expenses, of collection, and the Holder shall be entitled to exercise all other rights and remedies available at law or in equity. 

9 

If the Borrower fails to pay the Default Amount within five (5) business days of written notice that such amount is due and payable, then the Holder shall have the right at any time, so long as the Borrower remains in default (and so long and to the extent that there are sufficient authorized shares), to require the Borrower, upon written notice, to immediately issue, in lieu of the Default Amount, the number of shares of Common Stock of the Borrower equal to the Default Amount divided by the Conversion Price then in effect.

Article IV. MISCELLANEOUS

4.1       

Failure or Indulgence Not Waiver. No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privileges. All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available.

4.2       

Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be:

[  ]

4.3       

Amendments. This Note and any provision hereof may only be amended by an instrument in writing signed by the Borrower and the Holder. The term “Note” and all reference thereto, as used throughout this instrument, shall mean this instrument (and the other Notes issued pursuant to the Purchase Agreement) as originally executed, or if later amended or supplemented, then as so amended or supplemented.

4.4       

Most Favored Nation. During the period where any monies are owed to the Holder pursuant to this Note, if the Borrower engages in any future financing transactions with a third party investor, the Borrower will provide the Holder with written notice (the “MFN Notice”) thereof promptly but in no event less than 10 days prior to closing any financing transactions. Included with the MFN Notice shall be a copy of all documentation relating to such financing transaction and shall include, upon written request of the Holder, any additional information related to such subsequent investment as may be reasonably requested by the Holder. In the event the Holder determines that the terms of the subsequent investment are preferable to the terms of the securities of the Borrower issued to the Holder pursuant to the terms of the Purchase Agreement, the Holder will notify the Borrower in writing. Promptly after receipt of such written notice from the Holder, the Borrower agrees to amend and restate the Securities (which may include the conversion terms of this Note), to be identical to the instruments evidencing the subsequent investment. Notwithstanding the foregoing, this Section 4.4 shall not apply in respect of (i) an Exempt Issuance, or (ii) an underwritten public offering of Common Stock. “Exempt Issuance” means the issuance of: (a) shares of Common Stock or options to employees, officers, consultants, advisors or directors of the Borrower pursuant to any stock or option plan duly adopted for such purpose by a majority of the members of the Board of Directors or a majority of the members of a committee of directors established for such purpose, (b) securities upon the exercise or exchange of or conversion of this Note and/or other securities exercisable or exchangeable for or convertible into shares of Common Stock issued and outstanding on the date hereof, and (c) securities issued pursuant to acquisitions or strategic transactions approved by a majority of the disinterested directors of the Borrower, provided that any such issuance shall only be to a Person which is, itself or through its subsidiaries, an operating company in a business synergistic with the business of the Borrower and in which the Borrower receives benefits in addition to the investment of funds, but shall not include a transaction in which the Borrower is issuing securities primarily for the purpose of raising capital or to an entity whose primary business is investing in securities.

10 

4.5       

Assignability. This Note shall be binding upon the Borrower and its successors and assigns, and shall inure to be the benefit of the Holder and its successors and assigns. Each transferee of this Note must be an “accredited investor” (as defined in Rule 501(a) of the Securities and Exchange Commission). Notwithstanding anything in this Note to the contrary, this Note may be pledged as collateral in connection with a bona fide margin account or other lending arrangement; and may be assigned by the Holder without the consent of the Borrower.

4.6       

Cost of Collection. If default is made in the payment of this Note, the Borrower shall pay the Holder hereof costs of collection, including reasonable attorneys’ fees.

4.7       

Governing Law. This Note shall be governed by and construed in accordance with the laws of the State of Virginia without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Note shall be brought only in the state courts of New York or in the federal courts located in the Eastern District of New York. The parties to this Note hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. The Borrower and Holder waive trial by jury. The prevailing party shall be entitled to recover from the other party its reasonable attorney’s fees and costs. In the event that any provision of this Note or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement. Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Note, any agreement or any other document delivered in connection with this Note by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Note and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.

4.8       

Purchase Agreement. By its acceptance of this Note, each party agrees to be bound by the applicable terms of the Purchase Agreement.

11 

4.9       

Remedies. The Borrower acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder, by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Borrower acknowledges that the remedy at law for a breach of its obligations under this Note will be inadequate and agrees, in the event of a breach or threatened breach by the Borrower of the provisions of this Note, that the Holder shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing any breach of this Note and to enforce specifically the terms and provisions thereof, without the necessity of showing economic loss and without any bond or other security being required.

IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its name by its duly authorized officer this on October 30, 2017

Blue Sphere Corporation

By:	/s/ Shlomi Palas
	Shlomi Palas
	President and Chief Executive Officer

12 

EXHIBIT A -- NOTICE OF CONVERSION

The undersigned hereby elects to convert $_________________ principal amount of the Note (defined below) into that number of shares of Common Stock to be issued pursuant to the conversion of the Note (“Common Stock”) as set forth below, of Blue Sphere Corporation, a Nevada corporation (the “Borrower”) according to the conditions of the convertible note of the Borrower dated as of October 30, 2017 (the “Note”), as of the date written below. No fee will be charged to the Holder for any conversion, except for transfer taxes, if any.

Box Checked as to applicable instructions:

[ ]

The Borrower shall electronically transmit the Common Stock issuable pursuant to this Notice of Conversion to the account of the undersigned or its nominee with DTC through its Deposit Withdrawal Agent Commission system (“DWAC Transfer”).

Name of DTC Prime Broker:

Account Number:

[ ]

The undersigned hereby requests that the Borrower issue a certificate or certificates for the number of shares of Common Stock set forth below (which numbers are based on the Holder’s calculation attached hereto) in the name(s) specified immediately below or, if additional space is necessary, on an attachment hereto:

POWER UP LENDING GROUP LTD.

111 Great Neck Road, Suite 214

Great Neck, NY 11021

Attention: Certificate Delivery

Date of conversion:
Applicable Conversion Price:	$
Number of shares of common stock to be issued
pursuant to conversion of the Notes:
Amount of Principal Balance due remaining
under the Note after this conversion:
POWER UP LENDING GROUP LTD.
By:_____________________________
Name:  Curt Kramer
Title:     Chief Executive Officer
Date: __________________

13 

EX-10.20

Blue Sphere Corporation 10-Q

Exhibit 10.20

AMENDMENT #10
TO THE SECURITIES PURCHASE AGREEMENT
TO THE PROMISSORY NOTE
AND TO THE COMMON STOCK PURCHASE WARRANTS

This Amendment #10, dated November 14, 2017 (this “Amendment”), is by and between Blue Sphere Corporation, a Nevada corporation (the “Issuer”) and JMJ Financial (the “Investor”) (referred to collectively herein as the “Parties”)

WHEREAS, the Issuer and the Investor entered into a Securities Purchase Agreement Document SPA-10212016 (the “SPA”) dated as of October 24, 2016, pursuant to which the Issuer issued to the Investor a $1,053,000 Promissory Note (the “Note”), a Warrant, and Origination Shares (All capitalized terms not otherwise defined herein shall have the meanings given such terms in the SPA);

WHEREAS, the Issuer issued additional common stock purchase warrants to the Investor on December 20, 2016, February 14, 2017, March 14, 2017, April 13, 2017, May 11, 2017, and June 7, 2017 (such warrants, plus the Warrant, all as previously amended, the “Warrants”);

WHEREAS, the Issuer and the Investor previously entered into Amendment #1 to the SPA dated February 15, 2017 adding an Origination Share beneficial ownership limit;

WHEREAS, the Issuer and the Investor previously entered into a Letter Agreement dated March 1, 2017 extending certain deadlines in the Note and in the Warrants issued under the SPA;

WHEREAS, the Issuer and the Investor previously entered into Amendment #2 to the SPA and the Note dated March 14, 2017 increasing the dollar amount of the Note;

WHEREAS, the Issuer and the Investor previously entered into a second Letter Agreement dated April 4, 2017 further extending certain deadlines in the Note and in the Warrants issued under the SPA;

WHEREAS, the Issuer and the Investor previously entered into Amendment #3 to the SPA and the Note dated April 13, 2017 extending the Maturity Date of the Note and the date for delivery of the Origination Shares;

WHEREAS, the Issuer and the Investor previously entered into Amendment #4 to the SPA, the Note, and the Warrants dated April 28, 2017 further extending the Maturity Date of the Note and the date for delivery of the Origination Shares and further extending certain deadlines in the Note and in the Warrants issued under the SPA;

WHEREAS, the Issuer and the Investor previously entered into Amendment #5 to the SPA and the Note dated May 10, 2017 further increasing the dollar amount of the Note;

WHEREAS, the Issuer and the Investor previously entered into Amendment #6 to the SPA, the Note, and the Warrants dated May 18, 2017 further extending the Maturity Date of the Note and the date for delivery of the Origination Shares and further extending certain deadlines in the Note and in the Warrants issued under the SPA;

WHEREAS, the Issuer and the Investor previously entered into Amendment #7 to the SPA, the Note, and the Warrants dated June 6, 2017 further extending the Maturity Date of the Note and the date for delivery of the Origination Shares and further extending certain deadlines in the Note and in the Warrants issued under the SPA;

WHEREAS, the Issuer and the Investor previously entered into Amendment #8 to the SPA, the Note, and the Warrants dated June 29, 2017 providing for a partial repayment of the Note and further extending the Maturity Date of the balance of the Note and the date for delivery of the Origination Shares and further extending certain deadlines in the Note and in the Warrants issued under the SPA; and

WHEREAS, the Issuer and the Investor previously entered into Amendment #9 to the SPA, the Note, and the Warrants dated September 21, 2017 providing for a partial repayment of the Note and further extending the Maturity Date of the balance of the Note and the date for delivery of the Origination Shares and further extending certain deadlines in the Note and in the Warrants issued under the SPA.

NOW, THEREFORE, the Issuer and the Investor agree to amend the SPA, the Note, and the Warrants as follows:

1.       

Extension of Maturity Date. In the sentence in the Note (as previously amended) that states “The Maturity Date is the earlier of October 6, 2017 or the third business day after the closing of the Public Offering,” the date of October 6, 2017 shall be replaced with the date of November 22, 2017.

2.       

Extension of Origination Shares Dates. The references to the date of October 6, 2017 in Sections 1.3.1 and 1.3.2 of the SPA (as previously amended) shall be replaced with the date of November 22, 2017.

3.       

Extension of Nasdaq Approval Date Section 6(xxiii) of the Note and Section 1.11(xxiii) of the Warrants shall hereinafter be deleted and replaced with the following text: “(xxiii) the Issuer fails to obtain from Nasdaq or NYSE by November 22, 2017 conditional approval of the listing of the Issuer’s common stock on The Nasdaq Capital Market or NYSE-MKT subject only to completion of the Public Offering pursuant to the Registration Statement and to the Issuer’s common stock maintaining the minimum price requirements prior to uplisting;”.

4.       

Conditional Waiver of Default. The Investor conditionally waives the defaults for the Issuer’s failure to meet the previously amended Maturity Date of the Note, delivery date for the Origination Shares, and Nasdaq approval deadlines, but the Investor does not waive any damages, fees, penalties, liquidated damages, or other amounts or remedies otherwise resulting from such defaults (which damages, fees, penalties, liquidated damages, or other amounts or remedies the Investor may choose in the future to assess, apply or pursue in its sole discretion) and the Investor’s conditional waiver is conditioned on the Issuer’s not being in default of and not breaching any term of the Note or the SPA or any other Transaction Documents at any time subsequent to the date of this Amendment (if the Issuer triggers an event of default or breaches any term of the Note, the SPA, or the Transaction Documents at any time subsequent to the date of this Amendment, the Investor may issue a notice of default for the Issuer’s failure to meet the original Maturity Date of the Note, delivery date of the Origination Shares, or Nasdaq approval deadlines.

ALL OTHER TERMS AND CONDITIONS OF THE SPA, THE NOTE, AND THE WARRANTS, AS PREVIOUSLY AMENDED, REMAIN IN FULL FORCE AND EFFECT.

Please indicate acceptance and approval of this Amendment by signing below:

/s/ Shlomi Palas	/s/ JMJ Financial
Shlomi Palas	JMJ Financial
Blue Sphere Corporation	Its Principal
Chief Executive Officer

[Amendment #10 Signature Page]

EX-31.1

Blue Sphere Corporation 10-Q

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 20, 2017	/s/ Shlomi Palas
	Shlomi Palas
	Chief Executive Officer

EX-31.2

Blue Sphere Corporation 10-Q

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 20, 2017	/s/ Ran Daniel
	Ran Daniel
	Chief Financial Officer

EX-32.1

Blue Sphere Corporation 10-Q

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 September 30, 2017, 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 20, 2017	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

Blue Sphere Corporation 10-Q

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 September 30, 2017, 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 20, 2017	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.

XML

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2017	Nov. 20, 2017
Document And Entity Information
Entity Registrant Name	BLUE SPHERE CORP.
Entity Central Index Key	0001419582
Document Type	10-Q
Trading Symbol	BLSP
Document Period End Date	Sep. 30, 2017
Amendment Flag	false
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		3,725,980
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2017

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
CURRENT ASSETS:
Cash and cash equivalents	$ 1,947	$ 416
Inventory	2,215
Trade account receivables	459
Related Parties	83	1,408
Other current assets	8,121	81
Total current assets	12,825	1,905
PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation	15,640	50
INVESTMENTS IN NON-CONSOLIDATED AFFILIATES	10,822	10,137
INVESTMENTS IN NON-CONSOLIDATED SUBSIDIARIES	3,176	4,429
OTHER LONG-TERM ASSETS	3,308
Total assets	45,771	16,521
CURRENT LIABILITIES:
Current maturities of Debentures and long-term bank loan	5,784	2,988
Short Term Loans	5,612	280
Accounts payables	3,911	557
Other accounts payable and liabilities	6,862	2,091
Deferred revenues from joint ventures		5,658
Total current liabilities	22,169	11,574
ACCRUED SEVERANCE PAY	17	11
LONG TERM BANK LOANS	14,391	112
LONG TERM LOANS AND LIABILITIES	6,489	5,003
WARRANTS LIABILITY	523	2,045
STOCKHOLDERS' EQUITY:
Common shares of $0.001 par value each: Authorized: 1,750,000,000 shares at September 30, 2017 and December 31, 2016. Issued and outstanding: 3,682,764 shares and 2,147,383 shares at September 30, 2017 and December 31, 2016, respectively	4	2
Treasury shares	(28)	(28)
Accumulated other comprehensive income (loss)	(135)	33
Additional paid-in capital	48,922	44,262
Accumulated deficit	(46,581)	(46,493)
Total Stockholders' Equity (deficiency)	2,182	(2,224)
Total Liabilities and Stockholders' Equity (deficiency)	$ 45,771	$ 16,521

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - $ / shares	Sep. 30, 2017	Dec. 31, 2016
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	3,682,764	2,147,383
Common shares, shares outstanding	3,682,764	2,147,383

XML

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) $ in Thousands	3 Months Ended			9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016		Sep. 30, 2017	Sep. 30, 2016
REVENUES
Sale of electricity	$ 721			$ 721
Development fees	563			563
TOTAL REVENUES	1,284			1,284
COST OF REVENUES	809			809
GROSS PROFIT	475			475
OPERATING EXPENSES
General and administrative expenses	1,506	$ 1,782		3,886	$ 6,287
Loss from obtaining control in a former non-consilidated subsidiary	2,109			2,109
Other losses (income)		5			(97)
OPERATING LOSS	(3,140)	(1,787)		(5,520)	(6,190)
FINANCIAL EXPENSES (INCOME), net	884	428		2,535	609
LOSS FROM EXTINGUISHMENT OF DEBENTURE				(615)
LOSS (GAIN) FROM CHANGE IN FAIR VALUE OF WARRANTS LIABILITY	(203)	(1,396)		(1,921)	(432)
NET LOSS BEFORE INCOME TAXES AND EQUITY EARNINGS (LOSSES)	(3,821)	(819)		(6,749)	(6,367)
INCOME TAXES	(77)			(32)
NET LOSS BEFORE EQUITY INCOME (LOSSES)	(3,744)	(819)		(6,717)	(6,367)
EQUITY INCOME (LOSS) IN NON-CONSOLIDATED AFFILIATES	(465)			6,343
EQUITY INCOME (LOSSES) IN NON-CONSOLIDATED SUBSIDIARIES	(24)	90		236	(1,055)
NET INCOME (LOSS) FOR THE PERIOD	$ (4,233)	$ (729)		$ (138)	$ (7,422)
Net loss per common share - basic and diluted (in dollars per share)	$ (1.15)	$ (0.38)		$ (0.05)	$ (4.26)
Weighted average number of common shares outstanding during the period - basic and diluted (in shares)	3,681,067	1,904,967	[1]	3,083,383	1,739,172	[1]

[1] Retrospectively adjusted to reflect the 130 - for - 1 reverse stock split

XML

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (Parenthetical)		9 Months Ended
	Mar. 24, 2017	Sep. 30, 2016
Condensed Consolidated Statements Of Operations
Reverse stock split ratio	130	130

XML

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Income Statement [Abstract]
NET INCOME (LOSS)	$ (4,233)	$ (729)	$ (138)	$ (7,422)
Other comprehensive income loss, net of tax:
Currency translation adjustments	(133)	2	(118)	6
TOTAL COMPREHENSIVE LOSS	$ (4,366)	$ (727)	$ (256)	$ (7,416)

XML

STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED) - USD ($) $ in Thousands		Common Stock [Member]		Proceeds on amount of Shares [Member]	Treasury Shares [Member]	Accumulated Other Comprehensive Income [Member]	Additional paid-in Capital [Member]	Accumulated deficit [Member]	Total
Balance beginning at Dec. 31, 2015		$ 1		$ 165	$ (28)		$ 41,068	$ (44,692)	$ (3,486)
Balance beginning (in shares) at Dec. 31, 2015		1,388,481
Increase (Decrease) in Stockholders' Deficiency [Roll Forward]
Issuance of common stock, net of issuance costs	[1]	$ 1		(20)			$ 630		$ 611
Issuance of common stock, net of issuance costs (in shares)	[1]	427,553
Issuance of shares for services	[2]
Issuance of shares for services (in shares)		35,062					641		641
Extinguish of liability upon shares issuance	[2]
Extinguish of liability upon shares issuance (in shares)		57,719					660		660
Issuance of common stock in respect of issuance of convertible notes			[2]	$ (145)			$ 145
Issuance of common stock in respect of issuance of convertible notes (in shares)		107,160
Exercise of warrants			[2]				41		$ 41
Exercise of warrants (in shares)		5,385
Comprehensive loss						$ 6		(7,422)	(7,416)
Balance ending at Sep. 30, 2016		$ 2			(28)	6	43,185	(52,114)	(8,949)
Balance ending (in shares) at Sep. 30, 2016		2,021,360
Balance beginning at Dec. 31, 2016		$ 2			(28)	33	44,262	(46,493)	$ (2,224)
Balance beginning (in shares) at Dec. 31, 2016		2,147,382	[3]						2,147,383
Increase (Decrease) in Stockholders' Deficiency [Roll Forward]
Issuance of common stock and warrants, net of issuance costs	[4]	$ 2					4,121		$ 4,123
Issuance of common stock and warrants, net of issuance costs (in shares)	[3],[4]	1,440,000
Issuance of shares for services							132		132
Issuance of shares for services (in shares)	[3]	27,598
Extinguish of liability upon shares issuance							47		47
Extinguish of liability upon shares issuance (in shares)	[3]	7,406
Share based compensation							360		360
Share based compensation (in shares)	[3]	60,376
Comprehensive loss						(118)		(138)	(256)
Balance ending at Sep. 30, 2017		$ 4			$ (28)	$ (85)	$ 48,922	$ (46,631)	$ 2,182
Balance ending (in shares) at Sep. 30, 2017		3,682,762	[3]						3,682,764

[1] Issuance cost during the period were of $264

[2] less than $1.

[3] Retrospectively adjusted to reflect the 130 - for - 1 reverse stock split

[4] Issuance cost during the period were of $377

XML

STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Parenthetical) $ in Thousands	9 Months Ended
	Sep. 30, 2017 USD ($)	Sep. 30, 2016 USD ($)
Reverse stock split ratio		130
Stock and warrant issuance costs	$ 377	$ 264
Issuance of shares for services	132
Extinguish of liability upon shares issuance	$ 47
Exercise of warrants		41
Maximum [Member]
Issuance of shares for services		1
Extinguish of liability upon shares issuance		1
Issuance of common stock in respect of issuance of convertible notes		1
Exercise of warrants		$ 1

XML

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands		9 Months Ended
		Sep. 30, 2017	Sep. 30, 2016
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss for the period		$ (138)	$ (7,422)
Adjustments required to reconcile net loss to net cash used in operating activities:
Share based payments		360	371
Extinguish of liability upon shares issuance		47
Depreciation		400	12
Capital loss from disposal of property, plant and equipment			5
Loss from obtaining control in a former non-consilidated subsidiary		2,109
Equity income (loss) in non-consolidated affiliates		(236)	1,055
Equity income in non-consolidated subsidiaries		(6,343)
Expense in respect of convertible notes and loans		1,366	163
Loss from extinguishment of debenture		615
Changes in warrants liability		(1,921)	(432)
Expenses in respect of severance pay		6
Issuance of shares for services		132	641
Increase in inventory		(2,201)
Decrease (increase) in trade accounts receivables		726
Increase in related parties and other current assets		(1,772)	(193)
Decrease (increase) in other long-term assets		1,222	(22)
Increase (decrease) in accounts payables		1,152	499
Increase in other account payables		2,329	1,142
Net cash used in operating activities		(2,147)	(4,181)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment		(290)	(60)
Investment in nonconsolidated subsidiary		(3,040)
Consolidation of a former non-consolidated subsidiaries (see note a)	[1]	872
Net cash used in investing activities		(2,458)	(60)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short term loans		1,937	50
Repayment of short term loans		(1,200)
Repayment of loans		(274)	(364)
Proceeds from exercise of warrants			41
Proceeds from long term loans		1,557
Proceeds from issuance of shares and warrants, net of issuance cost		4,123	3,001
Net cash provided by financing activities		6,143	2,728
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		1,538	(1,513)
EFFECT OF CHANGES IN EXCHANGE RATES ON CASH BALANCES IN FOREIGN CURRENCIES		(7)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		416	1,888
CASH AND CASH EQUIVALENTS AT END OF PERIOD		1,947	375
NON-CASH TRANSACTION:
Extinguish of debt upon shares issuance		360	435
Deferred net equity in joint ventures		230	255
Issuance expense paid through warrants issuance		225	1,684
Cash paid during the period for:
Interest		$ 619	$ 554

[1] (a) 2017 Consolidation of Non-Consolidated subsidiarie On July 1, 2017, the Company consolidated Agricerere S.r.l., Agrielektra S.r.l., Agrisorse S.r.l. and Gefa S.r.l. non-consolidated subsidiaries. The consolidation was recorded by allocating the cost of the acquisitions to the assets consolidated, including other intangible assets, based on their estimated fair values at the consolidation date. Based on the consolidation date valuations, the preliminary purchase price allocations for as the following:

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Parenthetical) - Consolidated Entities [Member] $ in Thousands	Jul. 02, 2017 USD ($)
Accounts Receivable	$ (1,149)
Prepaid expenses and other current assets	(4,493)
Property, plant and equipment	(15,144)
Other noncurrent assets	(4,382)
Short term loans	3,969
Accounts payable and accrued liabilities	3,847
Bank loans	15,244
Total net assets, net of cash consolidated	(2,108)
Less: Capital loss from obtaining control in a former non-consilidated subsidiary	(2,109)
Add: Investment in non-consolidated Subsidiaries	5,089
Net cash consolidated:	$ 872

XML

BASIS OF PRESENTATION

9 Months Ended

Sep. 30, 2017

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 December 31, 2016, as filed with the U.S. Securities and Exchange Commission. The results of operations for the nine-months and three-months ended September 30, 2017 are not necessarily indicative of results that could be expected for the entire fiscal year.

XML

GENERAL

9 Months Ended

Sep. 30, 2017

General

GENERAL

NOTE 2 – GENERAL

Blue Sphere Corporation (the “Company”), together with its direct and indirect wholly-owned subsidiaries, Eastern Sphere Ltd. (“Eastern”), BinoSphere LLC (“Binosphere”), Bluesphere Pavia S.r.l (“Bluesphere Pavia”), Bluesphere Italy S.r.l., and Blue Sphere Brabant B.V. (“BSB”), 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. On May 12, 2015, the Company formed Bluesphere Pavia, a subsidiary of Eastern, in order to acquire certain biogas plants located in Italy (see note 5 below). On September 19, 2016, the Company formed BSB in order to commence operations in the Netherlands. On January 31, 2017, the Company dissolved Johnstonsphere LLC, which had no operations since inception. On April 30, 2017, the Company dissolved Sustainable Energy Ltd.

Change in Operator in Blue Sphere Pavia’s facilities and Transfer of North Carolina and Rhode Island Project Agreements

On July 18, 2017, the Company terminated its four Plant EBITDA Guarantee Agreements dated December 15, 2015 (collectively, the “Plant EBITDA Agreements”) with Austep S.p.A. an Italian corporation (“Austep”), the Company’s former operator in Italy that operated, maintained, and supervised the Company’s four facilities in Italy (the “SPV Facilities”) owned by the Company through its indirect, wholly-owned subsidiaries,Agricerere S.r.l., Agrielektra S.r.l., Agrisorse S.r.l. and Gefa S.r.l (each, an “SPV” and collectively, the “SPVs”). Also as fully described herein, we understand that the agreements relating to the development and operation of our facilities in North Carolina and Rhode Island will be transferred by Austep to its affiliated entity, Andion Italy S.r.l. (“Andion”). Presently, the agreements are validly in force and the parties continue to develop, operate, maintain, and supervise the facilities in North Carolina and Rhode Island.

From the Official Records of the Companies’ Register (the “Official Records”), the Company learned that on June 20, 2017, Austep was put in voluntary liquidation by shareholders’ resolution pursuant to Article 2484 of the Italian Civil Code. Furthermore, the Official Records show that on June 30, 2017, Austep filed a petition in the Bankruptcy Court of Milan (the “Milan Court”) for a creditor’ settlement procedure pursuant to Article 161, paragraph 6 of the Italian Bankruptcy Law, seeking permission to submit a restructuring plan to the court contemplating a partial continuity of its operations, which will then need to be approved by a majority of Austep’s creditors and by the court.

According to the Official Records, on June 29, 2017, Austep entered into a Business Unit Lease Agreement (“BULA”) with Andion, with the intent of assuring the regular operation of certain operations and agreements by Andion. Andion is wholly owned by Arcus Holdings Sa, a Luxembourg entity owned by White Cloud Capital II SCSp, which controls Austep Holdings S.p.A. Austep Holdings S.p.A. wholly-owns Austep and Austep USA, and Austep USA wholly-owns Auspark LLC and Austep Rhode Island LLC. Andion is not subject to the liquidation/restructuring of Austep. The BULA provides for, among other things, the transfer of Austep’s entire United States operations and, accordingly, the agreements relating to the delivery and operation of our North Carolina and Rhode Island facilities. The term of the BULA is three (3) months from the effective date of the BULA, and will automatically renew if not terminated by one of the parties with at least thirty (30) days’ written notice. The BULA will become effective upon execution by all parties, and is subject to finalization of negotiations with unions regarding all employees who will not be transferred with the BULA. Presently, the agreements relating to the delivery and operation of our North Carolina and Rhode Island facilities are validly in force, and the parties continue to develop, operate, maintain, and supervise the North Carolina and Rhode Island facilities in accordance with the terms of such agreements. If and when the BULA becomes effective, we anticipate that Andion will continue to operate, maintain, and supervise the North Carolina and Rhode Island facilities for the foreseeable future unless the Italian receiver will sell the Austep US operation to another operator. Through the process of Austep’s liquidation/restructuring, the Italian liquidator will compare competitive offers to acquire the operations and agreements that are the subject of the BULA; therefore, the acquirer of the agreements relating to the operation of the Company’s North Carolina Facility and Rhode Island Facility may be Andion, or potentially another purchaser.

On July 12, 2017, Austep personnel shut down the engines at all of the SPV Facilities, and exited all four sites. The Company immediately notified Banca IMI S.p.A. (“Banca IMI”), the SPVs’ lender, and began coordinating with Banca IMA on its remedial action plan.

On July 14, 2017, the Company notified Austep’s liquidator, in accordance with the Plant EBITDA Agreements, that because (i) Austep had neglected specified contractual obligations concerning maintenance of the SPV Facilities, which each SPV had notified Austep of on June 21, 2017, and (ii) Austep, without notice, abandoned the SPV Facilities, the Company had taken over direct management and supervision of the SPV Facilities to ensure their proper operation, safety and security. The Company reserved all rights to claim any and all damages arising as a consequence of Austep’s conduct, including costs incurred by the Company in its intervention. On the same date, the Company entered into a Biogas Plants’ Ordinary Management Proposal with Società Agricola Burnigaia Società Semplice d/b/a La Fenice (“La Fenice”), an Italian company experienced in the operation of biogas plants, pursuant to which La Fenice will immediately operate and supervise the SPV Facilities (the “Interim Operation Agreement”). The Interim Operation Agreement provides that we will pay La Fenice €10,000 per facility per month. The Interim Operation Agreement renews automatically each month, unless terminated by either party. The Company and La Fenice are operating pursuant to the Interim Operation Agreement, and are presently negotiating a definitive agreement. Pursuant to the Interim Operation Agreement, La Fenice personnel were on-site at the SPV Facilities on July 14, 2017 and began start-up of the engines at each facility.

On July 17, 2017, the Company received a copy of the decree issued by the Milan Court dated July 6, 2017, whereby the Milan Court approved Austep’s petition for a creditors’ settlement procedure and declared that Austep shall, by November 3, 2017, submit (i) the final debt restructuring plan and a request for certification of the restructuring agreement’s debts. The Milan Court appointed a judicial commissioner to supervise Austep’s activities through November 3, 2017 and report to the Court every fact constituting a breach of Austep’s obligations under the relevant provisions of the Italian Bankruptcy Law. In addition, the Milan Court declared that Austep shall not, without the Milan Court’s authorization, (i) perform any extraordinary operation, (ii) repay any receivable accrued before the opening of the judicial procedure, or (iii) suspend any pending agreement or enter into any new loan agreement.

On July 18, 2017, the SPVs delivered to Austep a notice of termination of the Plant EBITDA Agreements due to several breaches of Austep’s obligations, representations and warranties thereunder including without limitation those outlined in the notice provided to Austep’s liquidator on July 14, 2017. The Company further notified Austep that, as a consequence of early termination, (i) it is obligated to pay to a penalty of €85,000 to each SPV, and (ii) that Austep will be deemed liable to hold the SPVs harmless and indemnified for any direct and indirect losses (including loss of business), damages, costs of engaging replacement contractors and suppliers, costs relating to the supply of feedstock for years 2017 through 2018, insurance premium costs, costs incurred in connection with the financing facility agreement with Banca IMI, and any other expenses or other liabilities incurred or to be incurred by the SPVs as a consequence of or in connection with Austep’s breaches, actions and/or omissions under the Plant EBITDA Agreements. The notice was prepared in coordination with Banca IMI.

On November 7, 2017, the Company entered with an operator into agreement for a full-service operation, maintenance, and supervision of the SPV Facilities, and supply feedstock to the SPV Facilities. The agreement is effective from October 1, 2017.

Until June 30, 2017 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 Consolidated 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. However, since the Framework EBITDA Guarantee Agreement between the Company and Austep was terminated the Company did not apply the equity method of accounting for those investments from July 1. 2017 and consolidate the assets and liabilities of those investments in its Condensed Consolidated Balance Sheet and consolidate the results of operations of those subsidiaries in its Condensed Consolidated Statement of Operations.

2017 Consolidation of Non-Consolidated Subsidiaries

On July 1, 2017, the Company consolidated Agricerere S.r.l., Agrielektra S.r.l., Agrisorse S.r.l. and Gefa S.r.l. non-consolidated subsidiaries. Commencing July 1, 2017, the Company does not apply 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. because the Company operates, maintains and supervises each biogas plant. Furthermore, the Company reigned influence over the operating policies of the plants. Prior to June 30, 2017, 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, prevented us from exercising a controlling influence over operating policies of the plants. Under this method, the Company’s equity investment was reflected as an investment in non-consolidated subsidiaries on its Condensed Balance Sheets and the net earnings or losses of the investments was reflected as an equity in net earnings of non-consolidated companies on its Consolidated Statements of Operations. On July 18, 2017, the Company terminated its four Plant EBITDA Guarantee Agreements dated December 15, 2015 with Austep since on June 20, 2017 the Company learned from the Official Records of the Companies’ Register that Austep was put in voluntary liquidation and it filed a petition for a creditor’s settlement in the Bankruptcy Court of Milan. Further, On July 12, 2017, Austep personnel shut down the engines at all of the SPV Facilities, and exited all four sites. Therefore, on July 18, 2017 the Company terminated the Framework EBITDA Guarantee Agreement between the non-consolidated subsidiaries and Austep and regained a controlling influence over operating policies of the operating policies of the facilities and ceased applying the equity method..

The consolidation was recorded by allocating the cost of the acquisitions to the assets consolidated, including other intangible assets, based on their estimated fair values at the consolidation date.    Based on the consolidation date valuations, the preliminary purchase price allocations for as the following:

Cash and cash equivalents	$	872
Accounts Receivable		1,149
Prepaid expenses and other current assets		4,493
Property, plant and equipment		15,144
Other noncurrent assets		4,382
Short term loans		(3,969	)
Accounts payable and accrued liabilities		(3,847	)
Bank loans		(15,244	)
Total net assets consolidated:	$	2,980

The fair values of property, plant and equipment associated with the acquisitions were determined to be Level 3 under the fair value hierarchy. Property, plant and equipment values were estimated using either the cost or market approach, if a secondhand market existed.

Pro forma results  

The following unaudited pro forma financial information for the three months ended September 30, 2017 and 2016 presents the condensed consolidated and combined statements of operations of the Company and the acquisitions described above, as if the acquisitions had occurred as of January 1 of the year prior to the acquisitions.

The unaudited pro forma financial information is not intended to represent or be indicative of the Company’s condensed consolidated and combined statements of operations that would have been reported had these acquisitions been completed as of the beginning of the period presented and should not be taken as indicative of the Company’s future condensed consolidated statements of operations.

	Nine Months Ended						Three Months Ended
	September 30						September 30
	2017			2016			2017			2016
Revenues	$	4,373		$	4,556		$	1,284		$	1,850
Net (loss) income		(138	)		(7,422	)		(4,233	)		(729	)
Net (loss) earnings per common share
Basic and diluted	$	(0.05	)	$	(4.26	)	$	(1.15	)	$	(0.38	)

The Udine, Italy Acquisition

On June 29, 2017, the Company entered into a Share Purchase Agreement (the “Udine SPA”) with PRONTO VERDE A.G. (the “Seller”), relating to the purchase of one hundred percent (100%) of the share capital of FUTURIS PAPIA S.r.l., a limited liability company organized under the laws of Italy (the “Udine SPV”), which owns and operates a 0.995 Kw plant for the production of electricity from vegetal oil located in Udine, Italy. On September 4, 2017, the Company completed the acquisition of the Udine SPV. The total purchase price of the Udine SPV was approximately €2,706 (approximately $3,236), which included the initial purchase price in the amount of two million three hundred fifty-eight thousand euros (€2,358) (approximately $2,784), transaction costs and certain post-closing adjustments based on net financial position, net working capital, and certain net receivables as of the closing date.

The Helios Mezzanine Loan Facility

On August 30, 2017, the Company and Blue Sphere Italy entered into a Long Term Mezzanine Loan Agreement (the “Second Helios Loan Agreement”) with Helios 3 Italy Bio-Gas 2 L.P. (“Helios 3”), pursuant to which Helios 3 agreed to provide a mezzanine loan facility (the “Second Helios Loan”) of up to €1,600 (approximately $1,912) to finance (a) a portion of the total purchase price of the Udine SPV, (b) certain broker fees incurred in connection with the acquisition of the Udine SPV, and (c) taxes associated with registration of a pledge agreement. The Company’s liabilities and obligations under the Second Helios Loan Agreement are secured by a pledge of all of the Company’s shares of Blue Sphere Italy. In addition, any loan granted to Blue Sphere Italy by the Company shall rank subordinate to the Second Helios Loan.

The Second Helios Loan accrues interest at a rate of fourteen and one-half percent (14.5%) per annum, paid quarterly, beginning six (6) months following the closing of the Second Helios Loan. In addition, Helios 3 is entitled to an annual operation fee, paid quarterly in the amount of one-half percent (1.5%) per annum of the outstanding balance of the Loan. The final payment for the Second Helios Loan will become due no later than the earlier of (i) seven (7) years from the date the funds were made available to Blue Sphere Italy or (ii) the date of expiration of certain licenses granted to the Udine SPV. The Second Helios Loan may not be prepaid by the Company, but after payment by the Company of eight (8) quarterly payments, Helios 3 is entitled to demand repayment of the amount of the Second Helios Loan outstanding, provided that the amount shall not exceed the maximum distributable proceeds of the Udine SPV, by providing notice at least twenty-one (21) days prior to such demand. At such time the Company shall be entitled to refinance and prepay the entire amount outstanding under the Second Helios Loan, including the expected interest and operation fee due for the remaining period of the Second Helios Loan, less fifteen percent (15%) of the aggregate sum of such amounts. If the Company intends to refinance the Second Helios Loan, Helios shall have a right of first refusal to make a loan on the same terms.

Operations of the Udine SPV

In accordance with a Guarantee Plant Operation Management Agreement, dated September 4, 2017 (the “GPOMA”), between Pronto Verde and the Udine SPV, Pronto Verde satisfied its guarantee to procure the services of CC Engineering S.r.l., a limited liability company duly incorporated and existing under the laws of Italy, to perform “all-inclusive” services for the operation and maintenance of the facilities, and ISG Sviluppo SA, a company duly incorporated and existing under the laws of Switzerland, to supply to the vegetal oil necessary for the regular functioning of the Udine SPV. In accordance with the GPOMA, Pronto Verde guaranteed a monthly EBITDA of €91 (approximately $110) from the for the completion of the acquisition.

Applying the Equity method of account for this investment 

The Company applied the equity method of accounting for this investment because the GOMA between the Company and Pronto Verde whereas Pronto Verde 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.

The Cantu, Italy Acquisition

On June 29, 2017, the Company entered into a Share Purchase Agreement (the “Cantu SPA”) with the Seller, relating to the purchase of one hundred percent (100%) of the share capital of ENERGYECO S.r.l., a limited liability company organized under the laws of Italy (the “Cantu SPV”), which owns and operates a 0.990 Kw plant for the production of electricity from vegetal oil located in Cantù, Italy. The closing in relation to the Cantu SPV is subject to specified conditions precedent including, but not limited to, consummation of an acquisition of all the minority share capital of the Cantu SPV by the Seller from the minority shareholders of the Cantu SPV, delivery of audited closing financial statements of the Cantu SPV by Seller, and receipt of consent from the lenders and confirmation to accept repayment of certain of Cantu SPV’s Loans. The agreed purchase price of the Cantu SPV is two million two hundred thousand euros (€2,200) (approximately $2,490). The purchase price is subject to post-closing adjustment based on net financial position, net working capital, and certain net receivables, to be calculated on the basis of the Cantu SPV’s final closing audited financial statements. The purchase price will be paid to the Seller at closing, less (a) an amount of one hundred fifty thousand euros (€150) (approximately $179) to be paid on or before July 13, 2017 and held in escrow until closing; (b) one million ten thousand two hundred and eighty euros (€1,010) (approximately $1,145) to repay the balance of two loans payable of the Cantu SPV; (c) a brokerage fee payable by the Seller in the amount of sixty thousand euros (€60) (approximately $68); and (d) one hundred thousand euros (€100) (approximately $113) to be held in escrow.

In connection with Company’s purchase of the Cantu SPV, on September 11, 2017, the Company entered into an agreement (the “Gain Agreement”) with Gain Solutions, S.R.O., a company incorporated under the laws of the Czech Republic (“Gain”), pursuant to which Gain will purchase thirty-eight and one-half percent (38.5%) of the capital stock of the Cantu SPV (the “Gain SPV Shares”) from the Company for a purchase price of €1,100 (approximately $1,320), which included a €200 (approximately $240) down payment paid by Gain (the “Gain Down Payment”). The Gain Agreement is subject to Gain’s completion of due diligence and entry into definitive agreements to consummate the purchase and sale of the Gain SPV Shares.

The Gain Down Payment will be applied toward the Cantu Purchase Price, or in the event Gain does not proceed following due diligence, the parties do not enter into definitive agreements or the Company does not ultimately acquire the Cantu SPV, the Down Payment will become repayable by the Company with ten percent (10%) interest no later than December 13, 2017. Any amount of the Down Payment (including interest) that is not timely paid by December 24, 2017 and through March 13, 2018 shall be subject to penalty interest equal to twenty percent (20%) per annum, and any amounts (including penalty interest) not paid by March 13, 2018 shall be subject to penalty interest equal to twenty-five percent (25%) per annum. The Company provided to Gain an irrevocable guarantee to repay the Gain Down Payment and any interest or penalty interest that accrues thereon. Also in connection with the secured Gain Down Payment, the Company entered into a Security Agreement to register a lien and security interest equal to 15% of the Company’s equity ownership of the Cantu SPV and all products and proceeds thereof pertaining from the Company’s rights according to the closing of the Cantu SPA.

The closing in relation to the Cantu SPV will probably occur sometime during the fourth quarter of 2017, and any such closing is subject to specified conditions precedent including, but not limited to, consummation of an acquisition of all share capital of the Cantu SPV by Pronto Verde from the owners of the Cantu SPV, delivery of audited closing financial statements of the Cantu SPV by Seller, and receipt of consent from the lenders and confirmation to accept repayment of the Cantu Loans.

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CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

9 Months Ended

Sep. 30, 2017

Condensed Consolidated Financial Statements

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 – CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The accompanying unaudited condensed consolidated financial statements as of September 30, 2017 and for the nine-months 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 nine-months and three-months ended September 30, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017.

The September 30, 2017 Condensed Balance Sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America. These financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.

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SIGNIFICANT ACCOUNTING POLICIES

9 Months Ended

Sep. 30, 2017

Accounting Policies [Abstract]

SIGNIFICANT ACCOUNTING POLICIES

NOTE 4 – SIGNIFICANT ACCOUNTING POLICIES

A. Unaudited Interim Financial Statements

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of U.S. Securities and Exchange Commission Regulation S-X. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included (consisting only of normal recurring adjustments except as otherwise discussed).

For further information, reference is made to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.

Operating results for the nine- months and three-months ended September 30, 2017, are not necessarily indicative of the results that may be expected for the year ended December 31, 2017.

B. Significant Accounting Policies

The significant accounting policies followed in the preparation of these unaudited interim condensed consolidated financial statements are identical to those applied in the preparation of the latest annual financial statements.

C. Recent Accounting Standards

In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. This guidance narrows the definition of a business. This standard provides guidance to assist entities with evaluating when a set of transferred assets and activities is a business. This guidance is effective for interim and annual reporting periods beginning after December 15, 2017, and early adoption is permitted. This guidance must be applied prospectively to transactions occurring within the period of adoption. The Company expects to adopt this guidance effective January 1, 2018. The Company does not expect the adoption of this guidance to have a material impact on its financial position, results of operations or cash flows.

In January 2017, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This guidance eliminates Step 2 from the goodwill impairment test, instead requiring an entity to recognize a goodwill impairment charge for the amount by which the goodwill carrying amount exceeds the reporting unit’s fair value. This guidance is effective for interim and annual goodwill impairment tests in fiscal years beginning after December 15, 2019, and early adoption is permitted. This guidance must be applied on a prospective basis. The Company expects to adopt this guidance for interim and annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company does not expect the adoption of this guidance to have a material impact on its financial position, results of operations or cash flows.

In May 2017, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, 2017-9, Stock Compensation (Topic 718): Scope of Modification Accounting. The ASU limits the circumstances in which an entity applies modification accounting. When an award is modified, an entity does not apply the guidance in ASC 718-20-35-3 through 35-9 if it meets all of the following criteria: (i) The fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the modified award is the same as the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the original award immediately before the original award is modified. (ii) The vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified. (iii) The classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified. The ASU also removes the guidance in ASC 718 stating that modification accounting is not required when an entity adds an antidilution provision as long as that modification is not made in contemplation of an equity restructuring.

In July 2017, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, 2017-11, Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral. The ASU applies to issuers of financial instruments with down-round features. It amends (1) the classification of such instruments as liabilities or equity by revising the guidance in ASC 815 on the evaluation of whether instruments or embedded features with down-round provisions must be accounted for as derivative instruments and (2) the guidance on recognition and measurement of the value transferred upon the trigger of a down-round feature for equity-classified instruments by revising ASC 260. The ASU is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. For all other organizations, the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted.

In August 2017, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update 2017-12, or ASU, 2017-815, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. This ASU amends ASC 815 to “better align an entity’s risk management activities and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results.” to (1) improve the transparency of information about an entity’s risk management activities and (2) simplify the application of hedge accounting. The ASU is effective for public business entities for fiscal years beginning after December 15, 2018, and interim periods therein. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods beginning after December 15, 2020. Early adoption is permitted. 

D. Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

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FAIR VALUE MEASUREMENT

9 Months Ended

Sep. 30, 2017

Fair Value Disclosures [Abstract]

FAIR VALUE MEASUREMENT

NOTE 5 – FAIR VALUE MEASUREMENT

The Company’s financial assets and liabilities that are measured at fair value on a recurring basis by level within the fair value hierarchy are as follows (in thousands):

	Balance as of September 30, 2017
	Level 1		Level 2		Level 3		Total
Liabilities:
Obligation to issue shares of Common Stock	$	500	$	—	$	—	$	500
Deferred payment due to the acquisition of the SPVs	$	—	$	—	$	3,105	$	3,105
Warrants liability	$	—	$	—	$	523	$	523
Total liabilities	$	500	$	—	$	3,628	$	4,128

	As of December 31, 2016,
	Level 1		Level 2		Level 3		Total
Liabilities:
Obligation to issue shares of Common Stock	$	187	$	—	$	—	$	187
Deferred payment due to the acquisition of the SPVs	$	—	$	—	$	2,685	$	2,685
Warrants Liability	$	—	$	—	$	2,045	$	2,045
Total liabilities	$	187	$	—	$	4,730	$	4,917

Per the Share Purchase Agreement (the “Italy Projects Agreement”) with Volteo Energie S.p.A., Agriholding S.r.l., and Overland S.r.l. (“the Sellers”) the Company agreed to pay the remaining balance of fifty percent (50%) of the purchase price along with annual interest rate of two percent (2%), less certain credits that is due to the sellers on the third anniversary of the closing date (the “Deferred Payment”). The Purchase Price is subject to certain adjustments and to an adjustment based on the actual EBITDA results in the 18 months following the Closing Date, per the following mechanism:

(a) If the actual EBITDA in the 18 months following the Closing Date divided by 1.5 is greater than € 934, then the deferred payment shall be increased by the amount equal to fifty percent (50%) of the difference.

(b) If the actual EBITDA in the 18 months following the Closing Date divided by 1.5 is lesser than € 934, then the deferred payment shall be reduced by the amount of the amount necessary to maintain a Purchase Price that yields an Equity IRR of twenty-five percent (25%), but not more than 35% of the remaining balance.

On July 21, 2017, the Company notified the sellers its current deferred payment estimates pursuant to Article 3.03 of the Italy Projects Agreement regulating the “Deferred payment adjustment mechanism”. On July 28, 2017, the Sellers notified the Company that they do not agree with the Company’s estimate.

The fair value measurement of the fair market value of the Deferred Payment is based on significant inputs not observed in the market and thus represents a Level 3 measurement, which reflects the Company’s own assumptions in measuring fair value. The Company estimated the fair value of the Deferred Payment using the discounted cash flow model. Key assumptions include the level and timing of the expected future payment and discount rate consistent with the level of risk and economy in general. The Deferred Payment due to the acquisition of the SPVs is included in long term loans and Liabilities in the consolidated Balance Sheets and the change in fair value of remaining balance is included in interest expenses in the consolidated statements of income.

	Deferred payment due to the acquisition of the SPVs
Balance at December 31, 2016	$	2,685
Changes in fair value, interest expense and translation adjustments		420
Balance at September 30, 2017	$	3,105

Warrant Liability - the estimated fair values of outstanding warrant liability were measured using Black-Scholes valuation models. These valuation models involved using such inputs as the estimated fair value of the underlying stock at the measurement date, risk-free interest rates, expected dividends on stock and expected volatility of the price of the underlying stock. Due to the nature of these inputs, the valuation of the warrants was considered a Level 3 measurement.

As of September 30, 2017, and December 31, 2016, the Level 3 liabilities consisted of the Company’s warrant liability.

	Warrants Liability
Balance at December 31, 2016	$	2,045
Issuance of warrants		399
Changes in fair value		(1,921	)
Balance at September 30, 2017	$	523

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GOING CONCERN

9 Months Ended

Sep. 30, 2017

Going Concern

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 September 30, 2017, the Company had approximately $1,947 in cash and cash equivalents, approximately $9,344 in negative working capital, a stockholders’ equity of approximately $2,182 and an accumulated deficit of approximately $46,631. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Company’s ability to continue as a going concern is dependent upon raising capital from financing transactions and revenue from operations. 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 and capital markets as the Company will need to finance future activities. Company’s ability to continue as a going concern is dependent upon raising capital from financing transactions and revenue from operations. These financial statements do not include any adjustments that may be necessary should the Company be unable to continue as a going concern. The Company’s continuation as a going concern is dependent on its ability to obtain additional financing as may be required and ultimately to attain profitability.

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NEWLY ISSUED ACCOUNTING PRONOUNCEMENTS

9 Months Ended

Sep. 30, 2017

Accounting Changes and Error Corrections [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 December 31, 2016 was filed.

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SHORT TERM LOAN AND DEBENTURES

9 Months Ended

Sep. 30, 2017

Debt Disclosure [Abstract]

SHORT TERM LOAN AND DEBENTURES

NOTE 8 – SHORT TERM LOAN AND DEBENTURES

On February 7, 2017, the Company entered into a 90-day Loan Agreement with Viskoben Limited to borrow $200 at a quarterly interest rate of ten percent (10.0%), or thirty percent (30.0%) if calculated annually (the “Viskoben Note”). On June 27, 2017, the Loan was fully paid by the Company.

On February 14, 2017, the Company received an additional $250 under its private placement of securities closed on October 25, 2016 (the “October Financing”) and issued warrants to purchase up to 25,642 shares of its common stock at an exercise price equal to the lesser of (i) 80% of the per share price of the Company’s common stock in a public offering of up to $15 million of its securities (the “Public Offering”), (ii) $9.75 per share (the deemed aggregate exercise price), (iii) 80% of the unit price offering price in the Public Offering, or (iv) the exercise price of any warrants issued in the Public Offering, pursuant to the amendment of the October Financing. On March 14, 2017, the Company amended the terms of the October Financing, thereby agreeing to issue to the investor shares of the Company’s common stock, notes and warrants, in exchange for up to $1,500 (an increase of $500). On the same date, the Company received an additional $250 and issued warrants to purchase up to 25,642 shares of its common stock at an exercise price equal to the lesser of (i) 80% of the per share price of its common stock in the Public Offering, (ii) $9.75 per share (the deemed aggregate exercise price), (iii) 80% of the unit price offering price in the Public Offering, or (iv) the exercise price of any warrants issued in the Public Offering, pursuant to the amendment of the October Financing. On April 13, 2017 the Company received an additional $250 and issued warrants to purchase up to 25,642 shares of its common stock at an exercise price equal to the lesser of (i) 80% of the per share price of its common stock in the Public Offering, (ii) $9.75 per share (the deemed aggregate exercise price), (iii) 80% of the unit price offering price in the Public Offering, or (iv) the exercise price of any warrants issued in the Public Offering, pursuant to the amendment of the October Financing. On April 28, 2017, the Company extended the maturity date from the earlier of May 1, 2017 or the third business day after the closing of a public offering to the earlier of May 19, 2017 or the third business day after the closing of a public offering. On May 10, 2017, the Company amended the terms of the October Financing, thereby agreeing to issue to the investor shares of the Company’s common stock, notes and warrants, in exchange for up to $2,000 (an increase of $500). On May 11,2017 the Company received an additional $250 and issued warrants to purchase up to 25,642 shares of its common stock at an exercise price equal to the lesser of (i) 80% of the per share price of the Company’s common stock in the Public Offering, (ii) $9.75 per share (the deemed aggregate exercise price), (iii) 80% of the unit price offering price in the Public Offering, or (iv) the exercise price of any warrants issued in the Public Offering, pursuant to the amendment of the October Financing. On June 7, 2017, the Company received an additional $250 and issued warrants to purchase up to 25,642 shares of its common stock at an exercise price equal to the lesser of (i) 80% of the per share price of its common stock in the Public Offering, (ii) $9.75 per share (the deemed aggregate exercise price), (iii) 80% of the unit price offering price in the Public Offering, or (iv) the exercise price of any warrants issued in the Public Offering, pursuant to the amendment of the October Financing. On June 29, 2017, the Company extended the maturity date from the earlier of July 25, 2017 or the third business day after the closing of a public offering to the earlier of July 25, 2017 or the third business day after the closing of a public offering. On June 30, 2017, the Company repaid $1,000 of the outstanding balance of the October 2016 Note. On September 21, 2017, the Company extended the maturity date from the earlier of July 25, 2017 or the third business day after the closing of a public offering to the earlier of October 6, 2017 or the third business day after the closing of a public offering. As of September 30, 2017, the amortized outstanding balance is $1,065.

On March 24, 2017, the Company and five of the six holders of the Debentures, representing an aggregate principal balance of $2,000, entered into a First Amendment to Senior Debenture (the “Debenture Amendment”), thereby amending the Debentures to provide that some or all of the principal balance, and accrued but unpaid interest thereon, is convertible into shares of the Company’s common stock at the holders’ election, with such right to convert beginning on the six (6) month anniversary of the Debenture Amendment and ending ten (10) days prior to the date the Debenture matures. The conversion price shall be (a) equal to 80% of the average reported closing price of the Company’s common stock on The NASDAQ Capital Market, calculated using the five (5) trading days immediately following the up-list to The NASDAQ Capital Market, or (b) if the up-list has not occurred, equal to 80% of the average reported closing price of the Company’s common stock on the OTCQB Venture Marketplace, calculated using the five (5) trading days immediately preceding the date of the conversion notice.

On August 20, 2017, the Company entered into a 90-day Loan Agreement with a private investor to borrow $200 at a quarterly interest rate of ten percent (10.0%). As of September 30, 2017, this note was not paid.

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CONTINGENT

9 Months Ended

Sep. 30, 2017

Commitments and Contingencies Disclosure [Abstract]

CONTINGENT

NOTE 9 – CONTINGENT

From time to time the Company may be a party to commercial and litigation matters involving claims against the Company. None of the Company’s directors, officers, nonconsolidated affiliates, or any owner of record or beneficially of more than five percent of the Company’s Common Stock, is involved in a material proceeding adverse to the Company and its subsidiaries or has a material interest adverse to the Company or its subsidiaries. The Company accrues a liability for such matters when it is probable that future expenditures will be made and such expenditures can be reasonably estimated. In management’s opinion, there are no current matters that would have a material effect on the Company’s financial position or results of operations and no contingent liabilities requiring accrual as of June 30, 2017.

On October 22, 2016, the law firm of JS Barkats PLLC filed a complaint against the Company and its Chief Executive Officer, seeking allegedly unpaid legal fees for services rendered from June 9, 2011 through April 23, 2012 in the amount of $428 thousands, plus interest for a total of $652 thousands. This Litigation was filed as JS Barkats PLLC v. Blue Sphere Corporation and Shlomo Palas with the Supreme Court of the State of New York for the County of New York, Index No. 655600/2016. On October 26, 2016, without notice to the Company or its Chief Executive Officer or an opportunity to be heard, the New York Court issued a Temporary Restraining Order (the “TRO”) in favor JS Barkats PLLC, prohibiting the Company and Mr. Palas from transferring or dissipating any assets up to $652. On October 31, 2016, the Company removed the Barkats Litigation to federal court, filed as JS Barkats PLLC v. Blue Sphere Corporation and Shlomo Palas with the United Stated District Court, Southern District Court of New York, Docket No. 1:16-cv-08404, and on December 6, 2016, Mr. Barkats filed a motion to remand to the New York Court and request for oral argument. The Company terminated the services of JS Barkats LLC in 2012 and management believe the claims brought by JS Barkats PLLC are without merit, that the TRO was improvidently granted, and that JS Barkats PLLC misrepresented, mischaracterized and omitted material facts and the law in seeking the TRO.

On July 10, 2017, the Federal Court granted JS Barkats PLLC’s motion to remand the action to the New York Court, but denied JS Barkats PLLC’s request for costs and fees in bringing its remand petition. The Federal Court did not rule upon whether plaintiff’s complaint should be dismissed and/or the matter compelled to arbitration and did not rule upon Plaintiff’s motion to hold the Company and Mr. Palas in contempt for allegedly violating the TRO. The Federal Court has since remanded the case back to the New York Court where it is currently pending.

The Company terminated the services of JS Barkats LLC in 2012 and believe the claims brought by JS Barkats PLLC are without merit, that the TRO was improvidently granted, and that JS Barkats PLLC misrepresented, mischaracterized and omitted material facts and the law in seeking the TRO. The Company intend to vigorously defend against this Litigation, the TRO and any other attempts to attach the assets of the Company.

On March 15, 2017, Prassas Capital, LLC, an Arizona limited liability company, filed a complaint against the Company alleging breach of contract and seeking (a) unpaid fees in the amount of $1,601 plus interest, (b) issuance of an order of prejudgment attachment and garnishment on the Company’s bank accounts, other property held by the Company and all payments owed to the Company from third parties, (c) an injunction restraining the Company from transferring funds or property outside of the court’s jurisdiction or alternatively that the court appoint a receiver to manage, operate, control and take possession of the Company’s assets, and (d) a declaration that Prassas Capital, LLC has been granted a contractual right to purchase 53,847 shares of the Company’s common stock at a price of $6.50 per share (after giving effect to the reverse stock split described below). This litigation was filed as Prassas Capital, LLC v. Blue Sphere Corporation with the United States District Court for the Western District of North Carolina, Civil Action No. 3:17-CV-00131. The Company disputes the allegations and claims, and intends to rigorously defend against this litigation.

On April 10, 2017, the Company filed its answer in the Prassas Litigation, denying the underlying factual allegations contained in the complaint and denying the contention that Prassas is entitled to any relief. In addition to filing its answer, the Company (1) moved for the court to dismiss the Prassas Litigation, because of Prassas’ failure to plead one or more essential elements of its claims, and (2) brought against Prassas claims of fraud, breach of fiduciary duty, constructive fraud, negligence, unjust enrichment and punitive damages. The Company seeks reimbursement of amounts fraudulently or negligently billed by Prassas and paid by the Company of not less than $833, pre and post judgement interest, attorney’s fees and costs actually incurred in defending the Prassas Litigation.

On May 10, 2017, Prassas filed its answer to the Company’s response, whereby Prassas moved for the court to dismiss the Company’s counterclaims alleging that, among other things, the Company did not plead one or more essential elements of its claims.

On June 2, 2017, the Company responded by filing with the court its memorandum in opposition to Prassas’ motion dismiss the Company’s counterclaims, and further to motion for a partial judgement on the pleadings of the Company’s counterclaims in the amount of $833, plus pre-judgment and post-judgment interest.

The Company intend to vigorously defend against this Litigation, the TRO and any other attempts to attach the assets of the Company.

On August 22, 2017, the Company received a letter from the Division of Enforcement, U.S. Securities & Exchange Commission (the “SEC”). The letter requested that the Company voluntarily provide documents and other information relating to whether the unaudited interim financial statements included in the Company’s quarterly reports on Form 10-Q filed on February 22, 2016 and May 23, 2016 were reviewed by an independent public accounting firm in accordance with the Statement of Auditing Standards No. 100, as required by Rule 10-01(d) and 8-03 of SEC Regulation S-X.  The Financial Statements were not reviewed, which was disclosed in detailed explanatory notes included with the Non-Reviewed Filings at the time of filing.  The inability of the Company’s independent registered public accounting firm to complete a review of the Financial Statements was the result of obstacles to obtaining records from four facilities in Italy acquired by Bluesphere Pavia S.r.l., the Company wholly-owned Italian subsidiary, on December 14, 2015.  The Company thereafter amended the Non-Reviewed Filings on May 23, 2016 and June 13, 2016, respectively, to file its interim financial statements following review by the Company’s independent auditors. 

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COMMON SHARES

9 Months Ended

Sep. 30, 2017

Stockholders' Equity Note [Abstract]

COMMON SHARES

NOTE 10 – COMMON SHARES

On March 24, 2017, the Company completed a reverse stock split of its common stock. As a result of the reverse stock split, the following changes have occurred (i) every one hundred and thirty shares of common stock have been combined into one share of common stock; (ii) the number of shares of common stock underlying each common stock option or common stock warrant have been proportionately decreased on a 130-for-1 basis, and the exercise price of each such outstanding stock option and common warrant has been proportionately increased on a 130-for-1 basis. Accordingly, all option numbers, share numbers, warrant numbers, share prices, warrant prices, exercise prices and losses per share have been adjusted within these consolidated financial statements, on a retroactive basis, to reflect this 130-for-1 reverse stock split.

On January 31, 2017, the Company issued 3,109 shares of its common stock to the Former Chief Financial Officer (Israel) of the Company and 2,692 shares of its common stock to Former Chief Financial Officer (U.S.) of the Company under their departure settlement agreements with the Company. The fair market value of the shares at grant date was $41.

On February 14, 2017 and March 14, 2017, the Company issued warrants in connection with two (2) separate installments of $250,000 each under the October Financing, with each such five-year warrant providing its holder with the right to purchase up to 25,642 shares of its common stock. (See Note 7).

On February 21, 2017, the Company issued 19,576 shares of its common stock to four Directors of the Company and a former Director of the Company for services that were rendered in 2016 and pursuant to the Company’s Amended and Restated Non-Employee Directors Compensation Plan. The fair market value of the shares at grant date was $170.

On March 2, 2017, the Company issued 17,949 shares of its common stock to a former consultant pursuant to a letter agreement dated August 8, 2014, whereby the Company had agreed to issue $350 of common stock, determined based on the closing price per share on the OTCQB Venture Marketplace on November 25, 2014, which was $19.50 per share. The letter agreement evidenced a bonus granted by the Company for investor relation and advisory services provided in 2014. In connection with the issuance, on March 1, 2017, the consultant provided to the Company a release and waiver of any and all claims. The fair market value of the shares at grant date was $87.

On March 13, 2017, the Company issued 3,847 shares of its common stock to a consultant, pursuant to a consulting agreement dated September 1, 2016, in consideration for financial advisory and consulting services. The fair market value of the shares at grant date was $6.

On March 31, 2017, the Company issued 7,406 shares of its common stock to several officers, directors, employees and/or consultants of the Company. All shares issued vested on March 31, 2017 pursuant to grants dated February 24, 2015 under the Company’s Global Share and Options Incentive Enhancement Plan (2014). The fair market value of the shares at grant date was $47.

On April 17, 2017, the Company issued 7,840 shares of its common stock to four Directors of the Company for services that were rendered in the first quarter of 2017, pursuant to the Company’s Amended and Restated Non-Employee Directors Compensation Plan. The fair market value of the shares at grant date was $50.

On June 22, 2017, the Company raised $4,500 in gross proceeds and $4,123 in net proceeds from the sale of 1,440,000 shares of its common stock together with warrants with one warrant entitling the holder thereof to purchase one share of Common Stock at a price equal to $3.30 per share in a self-underwritten “best efforts” offering to certain investors. The purchase price paid by the investors was $3.125 for one share of common stock and one warrant. The warrants are immediately exercisable and expire five years from the date of issuance. The shares of common stock and warrants were immediately separable and were issued separately. The shares of common stock and the shares of common stock underlying the warrants were registered by the Company with the U.S. Securities and Exchange Commission, and were offered and sold pursuant to a final prospectus, Registration No. 333-21869, filed on June 19, 2017, which became effective on the same date.

On July 5, 2017, the Company issued 18,520 shares of its common stock to four Directors of the Company for services that were rendered in the first quarter of 2017, pursuant to the Company’s Amended and Restated Non-Employee Directors Compensation Plan. The fair market value of the shares at grant date was $50. On the same date, the Company issued 6,539 shares of its common stock to the its Chief Financial Officer under his service agreements with the Company. The fair market value of the shares at grant date was $21.

On July 11, 2017, the Company issued 6,539 shares of its common stock to its Executive Vice President pursuant the Personal Employment Agreement between the Company and him, dated January 1, 2016, for services rendered to the Company thereunder. The fair market value of the shares at grant date was $17.

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SUBSEQUENT EVENTS

9 Months Ended

Sep. 30, 2017

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

NOTE 11 – SUBSEQUENT EVENTS

On October 2, 2017, the Company issued 22,832 shares of its common stock to four Directors of the Company for services that were rendered in the first quarter of 2017, pursuant to the Company’s Amended and Restated Non-Employee Directors Compensation Plan. The fair market value of the shares at grant date was $50.

On October 14, 2017, the Company issued 7,308 shares of its common stock to its Chief Executive Officer, 6,539 shares of its common stock to its Chairman of the Board of Directors and 6,539 shares of its common stock to its Executive Vice- President pursuant to their respective service agreements with the Company. The Company has estimated and recorded such shares as an expense of $61 which was recorded through the vesting periods.

On November 7, 2017, the Company issued convertible promissory notes, dated October 30, 2017, to two investors for $228, in the aggregate, which are convertible into shares of the Company's common stock beginning on April 28, 2018 and ending on the date such November 2017 Notes have been repaid in full. The convertible notes bear interest at a rate of 12% per annum, mature on August 10, 2018 and become payable on maturity. All principal and any accrued but unpaid interest due under the convertible Notes will become convertible into shares of the Company’s common stock on April 28, 2018 and until the later of maturity or, in the case of a default, full repayment of the convertible note and all default interest due. The convertible notes will be convertible at a price that is sixty-five percent (65%) of the market price as defined in those notes.

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SIGNIFICANT ACCOUNTING POLICIES (Policies)

9 Months Ended

Sep. 30, 2017

Accounting Policies [Abstract]

Recent Accounting Standards

C. Recent Accounting Standards

In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. This guidance narrows the definition of a business. This standard provides guidance to assist entities with evaluating when a set of transferred assets and activities is a business. This guidance is effective for interim and annual reporting periods beginning after December 15, 2017, and early adoption is permitted. This guidance must be applied prospectively to transactions occurring within the period of adoption. The Company expects to adopt this guidance effective January 1, 2018. The Company does not expect the adoption of this guidance to have a material impact on its financial position, results of operations or cash flows.

In January 2017, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This guidance eliminates Step 2 from the goodwill impairment test, instead requiring an entity to recognize a goodwill impairment charge for the amount by which the goodwill carrying amount exceeds the reporting unit’s fair value. This guidance is effective for interim and annual goodwill impairment tests in fiscal years beginning after December 15, 2019, and early adoption is permitted. This guidance must be applied on a prospective basis. The Company expects to adopt this guidance for interim and annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company does not expect the adoption of this guidance to have a material impact on its financial position, results of operations or cash flows.

In May 2017, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, 2017-9, Stock Compensation (Topic 718): Scope of Modification Accounting. The ASU limits the circumstances in which an entity applies modification accounting. When an award is modified, an entity does not apply the guidance in ASC 718-20-35-3 through 35-9 if it meets all of the following criteria: (i) The fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the modified award is the same as the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the original award immediately before the original award is modified. (ii) The vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified. (iii) The classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified. The ASU also removes the guidance in ASC 718 stating that modification accounting is not required when an entity adds an antidilution provision as long as that modification is not made in contemplation of an equity restructuring.

In July 2017, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, 2017-11, Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral. The ASU applies to issuers of financial instruments with down-round features. It amends (1) the classification of such instruments as liabilities or equity by revising the guidance in ASC 815 on the evaluation of whether instruments or embedded features with down-round provisions must be accounted for as derivative instruments and (2) the guidance on recognition and measurement of the value transferred upon the trigger of a down-round feature for equity-classified instruments by revising ASC 260. The ASU is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. For all other organizations, the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted.

In August 2017, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update 2017-12, or ASU, 2017-815, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. This ASU amends ASC 815 to “better align an entity’s risk management activities and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results.” to (1) improve the transparency of information about an entity’s risk management activities and (2) simplify the application of hedge accounting. The ASU is effective for public business entities for fiscal years beginning after December 15, 2018, and interim periods therein. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods beginning after December 15, 2020. Early adoption is permitted. 

Use of Estimates

D. Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

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GENERAL (Tables)

9 Months Ended

Sep. 30, 2017

General Tables

Schedule of the preliminary purchase price allocations

The consolidation was recorded by allocating the cost of the acquisitions to the assets consolidated, including other intangible assets, based on their estimated fair values at the consolidation date.    Based on the consolidation date valuations, the preliminary purchase price allocations for as the following:

Cash and cash equivalents	$	872
Accounts Receivable		1,149
Prepaid expenses and other current assets		4,493
Property, plant and equipment		15,144
Other noncurrent assets		4,382
Short term loans		(3,969	)
Accounts payable and accrued liabilities		(3,847	)
Bank loans		(15,244	)
Total net assets consolidated:	$	2,980

Schedule of pro-forma results

The unaudited pro forma financial information is not intended to represent or be indicative of the Company’s condensed consolidated and combined statements of operations that would have been reported had these acquisitions been completed as of the beginning of the period presented and should not be taken as indicative of the Company’s future condensed consolidated statements of operations.

	Nine Months Ended						Three Months Ended
	September 30						September 30
	2017			2016			2017			2016
Revenues	$	4,373		$	4,556		$	1,284		$	1,850
Net (loss) income		(138	)		(7,422	)		(4,233	)		(729	)
Net (loss) earnings per common share
Basic and diluted	$	(0.05	)	$	(4.26	)	$	(1.15	)	$	(0.38	)

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FAIR VALUE MEASUREMENT (Tables)

9 Months Ended

Sep. 30, 2017

Fair Value Disclosures [Abstract]

Schedule of financial assets and liabilities that measured at fair value on a recurring basis by level

The Company’s financial assets and liabilities that are measured at fair value on a recurring basis by level within the fair value hierarchy are as follows (in thousands):

	Balance as of September 30, 2017
	Level 1		Level 2		Level 3		Total
Liabilities:
Obligation to issue shares of Common Stock	$	500	$	—	$	—	$	500
Deferred payment due to the acquisition of the SPVs	$	—	$	—	$	3,105	$	3,105
Warrants liability	$	—	$	—	$	523	$	523
Total liabilities	$	500	$	—	$	3,628	$	4,128

	As of December 31, 2016,
	Level 1		Level 2		Level 3		Total
Liabilities:
Obligation to issue shares of Common Stock	$	187	$	—	$	—	$	187
Deferred payment due to the acquisition of the SPVs	$	—	$	—	$	2,685	$	2,685
Warrants Liability	$	—	$	—	$	2,045	$	2,045
Total liabilities	$	187	$	—	$	4,730	$	4,917

Schedule of deferred payment due to the acquisition of the SPVs

The fair value measurement of the fair market value of the Deferred Payment is based on significant inputs not observed in the market and thus represents a Level 3 measurement, which reflects the Company’s own assumptions in measuring fair value. The Company estimated the fair value of the Deferred Payment using the discounted cash flow model. Key assumptions include the level and timing of the expected future payment and discount rate consistent with the level of risk and economy in general. The Deferred Payment due to the acquisition of the SPVs is included in long term loans and Liabilities in the consolidated Balance Sheets and the change in fair value of remaining balance is included in interest expenses in the consolidated statements of income.

	Deferred payment due to the acquisition of the SPVs
Balance at December 31, 2016	$	2,685
Changes in fair value, interest expense and translation adjustments		420
Balance at September 30, 2017	$	3,105

Schedule of level 3 liabilities

As of September 30, 2017, and December 31, 2016, the Level 3 liabilities consisted of the Company’s warrant liability.

	Warrants Liability
Balance at December 31, 2016	$	2,045
Issuance of warrants		399
Changes in fair value		(1,921	)
Balance at September 30, 2017	$	523

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GENERAL (Details Narrative) € in Thousands, $ in Thousands	Sep. 30, 2017 USD ($)	Sep. 30, 2017 EUR (€)	Sep. 11, 2017 EUR (€)	Sep. 04, 2017 USD ($)	Sep. 04, 2017 EUR (€)	Sep. 11, 2017 USD ($)	Sep. 11, 2017 EUR (€)	Aug. 30, 2017 USD ($)	Aug. 30, 2017 EUR (€)	Jul. 14, 2017 EUR (€)	Jun. 29, 2017 USD ($)	Jun. 29, 2017 EUR (€)
Euro [Member]
Facility fee per month per facility										€ 10
Penalty payment due to each SPV										€ 85
Helios 3 Italy Bio-Gas 2 L.P. [Member]
Long term loan faciliy | $								$ 1,912
Interest rate								14.50%	14.50%
Annual operation fee (percent)								1.50%	1.50%
Discount for refinancing loan								15.00%	15.00%
Helios 3 Italy Bio-Gas 2 L.P. [Member] | Euro [Member]
Long term loan faciliy									€ 1,600
Cantu SPA [Member]
Ownership interest acquired											100.00%	100.00%
Purchase price of acquisition | $	$ 2,490
Purchase price to be paid and held in escrow | $											$ 179
Balance of loans to be paid by buyer | $											1,145
Brokerage fee payable by seller | $											68
Amount to be held in escrow | $											$ 113
Cantu SPA [Member] | Euro [Member]
Purchase price of acquisition		€ 2,200
Purchase price to be paid and held in escrow												€ 150
Balance of loans to be paid by buyer												1,010
Brokerage fee payable by seller												60
Amount to be held in escrow												€ 100
Udine SPA [Member]
Effective date of acqusition				Sep. 04, 2017	Sep. 04, 2017
Ownership interest acquired											100.00%	100.00%
Purchase price of acquisition, net | $				$ 2,784
Purchase price of acquisition | $				3,236
Guaranteed monthly EBITDA | $				$ 110
Udine SPA [Member] | Euro [Member]
Purchase price of acquisition, net					€ 2,358
Purchase price of acquisition					2,706
Guaranteed monthly EBITDA					€ 91
Gain Solutions, S.R.O. [Member]
Interest rate						10.00%	10.00%
Penalty Interest rate - payment before March 13, 2018						20.00%	20.00%
Penalty Interest rate - payment later March 13, 2018						25.00%	25.00%
Security interest of equity						15.00%	15.00%
Ownership interest sold						38.50%	38.50%
Purchase price of stock sale			€ 1,320
Downpayment payable to purchaser | $						$ 240
Gain Solutions, S.R.O. [Member] | Euro [Member]
Purchase price of stock sale			€ 1,100
Downpayment payable to purchaser							€ 200

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GENERAL (Details) - Consolidated Entities [Member] $ in Thousands	Jul. 02, 2017 USD ($)
Cash and Cash equivalents	$ 872
Accounts Receivable	1,149
Prepaid expenses and other current assets	4,493
Property, plant and equipment	15,144
Other noncurrent assets	4,382
Short term loans	(3,969)
Accounts payable and accrued liabilities	(3,847)
Bank loans	(15,244)
Total net assets, consolidated	$ 2,980

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GENERAL (Details 1) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
General Tables
Revenues	$ 1,284	$ 1,850	$ 4,373	$ 4,556
Net (loss) Income	$ (4,233)	$ (729)	$ (138)	$ (7,422)
Net (loss) earnings per common share
Basic and diluted	$ (1.15)	$ (0.38)	$ (0.05)	$ (4.26)

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FAIR VALUE MEASUREMENT (Details) - Fair Value, Measurements, Recurring [Member] - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Liabilities:
Obligation to issue restricted shares of Common Stock	$ 500	$ 187
Deferred payment due to the acquisition of the SPVs	3,105	2,685
Warrants Liability	523	2,045
Total liabilities	4,128	4,917
Fair Value, Level 1 [Member]
Liabilities:
Obligation to issue restricted shares of Common Stock	500	187
Total liabilities	500	187
Fair Value, Level 3 [Member]
Liabilities:
Deferred payment due to the acquisition of the SPVs	3,105	2,685
Warrants Liability	523	2,045
Total liabilities	$ 3,628	$ 4,730

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FAIR VALUE MEASUREMENT (Details 1) $ in Thousands	9 Months Ended
	Sep. 30, 2017 USD ($)
Balance at beginning	$ 2,045
Balance at end	523
Deferred payment due to the acquisition of the SPVs [Member]
Balance at beginning	2,685
Changes in fair value, interest expense and translation adjustments	420
Balance at end	$ 3,105

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FAIR VALUE MEASUREMENT (Details 2) $ in Thousands	9 Months Ended
	Sep. 30, 2017 USD ($)
Unobservable Input Reconciliation
Balance at beginning	$ 2,045
Issuance of warrants	399
Changes in fair value	(1,921)
Balance at end	$ 523

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FAIR VALUE MEASUREMENT (Details Narrative) - Italy Projects Agreement [Member] € in Thousands	9 Months Ended
	Sep. 30, 2017 EUR (€)
Interest rate	2.00%
Period of adjustments after closing date	18 months
Actual EBITDA divisor	1.5
Percentage balance of acquisition adjustment added to deferred payment	50.00%
Equity IRR	25.00%
Percentage balance of acquisition adjustment deducted from deferred payment	35.00%
Minimum [Member] | Euro [Member]
Computed threshold of EBITDA	€ 934
Maximum [Member] | Euro [Member]
Computed threshold of EBITDA	€ 934

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GOING CONCERN (Details Narrative) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016	Sep. 30, 2016	Dec. 31, 2015
Going Concern Details Narrative
Cash and cash equivalents	$ 1,947	$ 416	$ 375	$ 1,888
Working capital	(9,338)
Stockholders' deficit	2,182	(2,224)	$ (8,949)	$ (3,486)
Accumulated deficit	$ (46,581)	$ (46,493)

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SHORT TERM LOAN AND DEBENTURES (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands											9 Months Ended
	Aug. 22, 2017	Jun. 30, 2017	Jun. 07, 2017	May 11, 2017	May 10, 2017	Apr. 13, 2017	Mar. 24, 2017	Mar. 14, 2017	Feb. 14, 2017	Feb. 07, 2017	Sep. 30, 2017	Sep. 30, 2016	Jun. 22, 2017	Dec. 31, 2016
Short Term Loans											$ 5,612			$ 280
Proceeds from short term loans											1,937	$ 50
Warrant exercise price													$ 3.30
First Amendment to Senior Debentures [Member]
Principal balance							$ 2,000
Percentage of average reported closing price							80.00%
Number of trading days							5 days
Start of conversion period of debentures							6 months
End of conversion period of debentues							10 days
Viskoben Loan Agreement [Member]
Debt face amount	$ 200									$ 200
Interest rate - annual	30.00%									30.00%
Interest rate - quarterly	10.00%									10.00%
Debt term	90 days									90 days
October Financing [Member]
Debt face amount					$ 2,000			$ 1,500
Short Term Loans											1,065
Principal balance											$ 0
Increase in debt amount					$ 500			500
Proceeds from short term loans			$ 250	$ 250		$ 250		$ 250	$ 250
Number of shares called by warrants			25,642	25,642		25,642		25,642	25,642
Warrant exercise price			$ 9.75	$ 9.75		$ 9.75		$ 9.75	$ 9.75
Percentage of per share price of common stock in public offering			80.00%	80.00%		80.00%		80.00%	80.00%
Public offering amount									$ 15,000
Repayment of note		$ 1,000

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CONTINGENT (Details Narrative) - USD ($)
$ / shares in Units, $ in Thousands

Apr. 10, 2017

Mar. 15, 2017

Oct. 22, 2016

Barkats Litigation [Member]

Loss Contingencies [Line Items]

Date of complaint

Oct. 22, 2016

Name of complainant

JS Barkats PLLC

Description of complaint

Allegedly unpaid legal fees for services rendered from June 9, 2011 through April 23, 2012

Domicile of litigation

Supreme Court of the State of New York for the County of New York

Damages sought

$ 428

Damages sought with accrued interest

$ 652

Prassas Litigation [Member]

Loss Contingencies [Line Items]

Date of complaint

Mar. 15, 2017

Name of complainant

Prassas Capital, LLC

Description of complaint

Alleging breach of contract

Domicile of litigation

Western District of North Carolina

Damages sought

$ 1,601

Damages sought shares of common stock

53,847

Damages sought price per share

$ 6.50

Counterclaims sought

$ 833

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COMMON SHARES (Details Narrative) $ / shares in Units, $ in Thousands												9 Months Ended
	Jul. 11, 2017 USD ($) shares	Jul. 05, 2017 USD ($) shares	Jun. 22, 2017 USD ($) $ / shares shares	Apr. 17, 2017 USD ($) shares	Mar. 31, 2017 USD ($) shares	Mar. 24, 2017	Mar. 14, 2017 USD ($) $ / shares shares	Mar. 13, 2017 USD ($) shares	Mar. 02, 2017 USD ($) shares	Feb. 21, 2017 USD ($) shares	Jan. 31, 2017 USD ($) shares	Sep. 30, 2017 USD ($)	Sep. 30, 2016 USD ($) shares	Jun. 07, 2017 $ / shares shares	May 11, 2017 $ / shares shares	Apr. 13, 2017 $ / shares shares	Feb. 14, 2017 $ / shares shares	Aug. 08, 2014 USD ($) $ / shares
Reverse stock split ratio						130							130
Issuance of shares for services (in shares)													641
Fair value of shares issued for services | $											$ 41	$ 132	$ 641
Warrant exercise price | $ / shares			$ 3.30
Proceeds from issuance of stock and warrants | $			$ 4,500
Proceeds from issuance of shares and warrants, net of issuance costs | $			$ 4,123									$ 4,123	$ 3,001
Issuance of common stock, net of issuance costs (in shares)			1,440,000
Purchase share price paid | $ / shares			$ 3.125
Warrant expiration term			5 years
Number of common shares issued for warrant			1
Executive Vice President [Member]
Share based compensation (in shares)	6,539
Fair value of shares issued as share based compensation | $	$ 17
Chief Financial Officer [Member]
Issuance of shares for services (in shares)		6,539
Fair value of shares issued for services | $		$ 21
Consultant One [Member]
Issuance of shares for services (in shares)									17,949
Fair value of shares issued for services | $									$ 87
Amount of shares to be issued, per letter agreement | $																		$ 350
Price per share, per letter agreement | $ / shares																		$ 19.50
Consultant Two [Member]
Issuance of shares for services (in shares)								3,847
Fair value of shares issued for services | $								$ 6
Global Share and Options Incentive Enhancement Plan (2014) [Member]
Issuance of shares for services (in shares)					7,406
Fair value of shares issued for services | $					$ 47
Amemded and Restated Non-Employee Directors Compensation Plan [Member]
Share based compensation (in shares)		18,250		7,840
Fair value of shares issued as share based compensation | $		$ 50		$ 50
October Financing [Member]
Proceeds from private placement | $							$ 250
Number of shares called by warrants							25,642							25,642	25,642	25,642	25,642
Warrant exercise price | $ / shares							$ 9.75							$ 9.75	$ 9.75	$ 9.75	$ 9.75
October Financing [Member] | Warrant [Member]
Number of shares called by warrants							25,642
Warrant expiration term							5 years
Chief Financial Officer [Member]
Issuance of shares for services (in shares)											3,109
Former Chief Financial Officer [Member]
Issuance of shares for services (in shares)											2,692
Directors [Member] | Global Share and Options Incentive Enhancement Plan (2014) [Member]
Share based compensation (in shares)										19,576
Fair value of shares issued as share based compensation | $										$ 170

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SUBSEQUENT EVENTS (Details Narrative) - USD ($) $ in Thousands							9 Months Ended
	Nov. 07, 2017	Oct. 14, 2017	Oct. 02, 2017	Jul. 11, 2017	Jul. 05, 2017	Apr. 17, 2017	Sep. 30, 2017	Sep. 30, 2016
Sharebased compensation							$ 360	$ 371
Executive Vice President [Member]
Share based compensation (in shares)				6,539
Fair value of shares issued as share based compensation				$ 17
Amemded and Restated Non-Employee Directors Compensation Plan [Member]
Share based compensation (in shares)					18,250	7,840
Fair value of shares issued as share based compensation					$ 50	$ 50
Subsequent Event [Member]
Sharebased compensation		$ 61
Subsequent Event [Member] | Convertible Promissory Notes [Member]
Debt face amount	$ 228,000
Interest rate - annual	12.00%
Matuirty date of debt	Aug. 10, 2018
Conversion price discount	65.00%
Subsequent Event [Member] | Chief Executive Officer [Member]
Share based compensation (in shares)		7,308
Subsequent Event [Member] | Board of Directors Chairman [Member]
Share based compensation (in shares)		6,539
Subsequent Event [Member] | Executive Vice President [Member]
Share based compensation (in shares)		6,539
Subsequent Event [Member] | Amemded and Restated Non-Employee Directors Compensation Plan [Member]
Share based compensation (in shares)			22,832
Fair value of shares issued as share based compensation			$ 50