UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

☒	ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, ~~2016~~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)

Securities registered pursuant to Section 12(b) of the Exchange Act of 1934: None.

Securities registered pursuant to Section 12(g) of the Exchange Act of 1934: Common Stock, $0.001 per share.

Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act of 1933.

Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act of 1934.

Yes ☐ No ☒

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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐

Yes ☐ No ☐

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

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

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

Yes ☐ No ☒

The aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was approximately $89,~~670~~739,~~232~~348.20, based on the closing sales price of the registrant’s common stock as of the last business day of its most recently completed second fiscal quarter. For purposes of calculating the aggregate market value of shares of our ~~common~~Common ~~stock~~Stock held by non-affiliates as set forth on the cover page of this Annual Report on Form 10-K, we have assumed that all outstanding shares are held by non-affiliates, except for shares held by each of our executive officers, directors and 10% or greater stockholders. These assumptions should not be deemed to constitute an admission that all executive officers, directors and 10% or greater stockholders are, in fact, affiliates of our company, or that there are ~~not~~no other persons who may be deemed to be affiliates of our company. Further information concerning shareholdings of our officers, directors and principal stockholders is included or incorporated by reference in Part III, Item 12 of this Annual Report on Form 10-K.

As of ~~February~~April 1416, ~~2017~~2018, there were ~~279~~3,~~913~~977,~~848~~755 shares of the Registrant’s common stock, par value $0.001 per share (“Common Stock”), issued and outstanding.

TABLE OF CONTENTS

PART I		2	2
	Item 1. Business	2	2
	Item 1A. Risk Factors	11	19
	Item 1B. Unresolved Staff Comments	12	20
	Item 2. Properties	12	20
	Item 3. Legal Proceedings	12	20
	Item 4. Mine Safety Disclosures	12	21
PART II		13	22
	Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	13	22
	Item 6. Selected Financial Data	16	24
	Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations	16	24
	Item 7A. Quantitative and Qualitative Disclosures about Market Risk	18	27
	Item 8. Financial Statements and Supplementary Data	18	27
	Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	18	27
	Item 9A. Controls and Procedures	18	27
	Item 9B. Other Information	18	27
PART III		19	28
	Item 10. Directors, Executive Officers and Corporate Governance	19	28
	Item 11. Executive Compensation	23	32
	Item 12. Security Ownership of Certain Beneficial Owners and Management	30	39
	Item 13. Certain Relationships, Related Transactions and Director Independence	32	41
	Item 14. Principal Accounting Fees and Services	33	41
	Item 15. Exhibits and Financial Statement Schedules	34	42
APPENDIX A – FINANCIAL STATEMENTS		~~F-1~~	F-1

Our audited financial statements are stated in United States ~~dollars~~Dollars (“U.S. $”, “$” or “USD”) and are prepared in accordance with United States Generally Accepted Accounting Principles (“GAAP”). In this ~~annual report~~Annual Report, unless otherwise specified, all dollar amounts are expressed in United States Dollars. Any reference to a United States Dollar equivalent is approximate and based on the exchange rate at the time of the referenced transaction.

As used in this ~~report~~Annual Report, the terms “we”, “us”, “our”, “Blue Sphere” or the “Company” mean Blue Sphere ~~Corp.~~Corporation and its subsidiaries, unless the context clearly requires otherwise.

Note Regarding Forward-Looking Statements

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

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

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

PART I

Item 1. Business

Company Overview

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

~~We are currently developing, constructing or operating, as applicable, fourteen (14) projects related to our strategy of acquisition, development or operations of waste~~Waste-to-~~energy~~Energy ~~facilities, which includes developing projects for which we have entered into nonbinding letters of intent to acquire additional biogas facilities in Italy~~ and toClean develop and construct waste-to-energy facilities in the United States, the Netherlands, the United Kingdom and Israel. We continue to evaluate a pipeline of similar projects in the pre-development phase in the above listed countries and we are also evaluating projects in other countries such as the Czech Republic, Poland, Canada and Mexico.Energy

We ~~are~~ Waste-to-Energy ~~currently~~is ~~developing~~the process of generating energy in the form of electricity, ~~constructing~~natural gas and/or ~~operating~~heat from the treatment of various forms of waste. Most waste-to-energy processes produce electricity and/or heat directly through combustion, or produce a combustible fuel commodity, such as ~~indicated~~methane, ~~below~~methanol or ethanol. Generally, waste-to-energy technology includes the following ~~projects~~:

~~United States (under construction)~~Incineration

●Incineration ~~Johnston~~is the combustion of organic material such as waste with energy recovery, RIand ~~Waste~~is the most common waste-to-energy ~~Energy~~implementation. ~~Anaerobic~~All ~~Digester~~new waste-to-energy 3plants in OECD countries (member and partner countries with the Organization for Economic Co-operation and Development) incinerating waste must meet strict emission standards, including those on nitrogen oxides, sulphur dioxide, heavy metals and dioxins.2 MWHence, ~~Plant~~modern incineration plants are vastly different from the old types of plants, some of which recovered neither energy nor materials. Modern incinerators reduce the volume of the original waste by up to 96%, depending upon composition and degree of recovery of materials, such as metals from the ash for recycling.

Anaerobic Digestion

Anaerobic digestion is a collection of processes by which microorganisms break down biodegradable material in the absence of oxygen. The process is used for industrial or domestic purposes to manage waste or to produce fuels. The digestion process begins with bacterial hydrolysis of the input materials. Insoluble organic polymers, such as carbohydrates, are broken down to soluble derivatives that become available for other bacteria. Acidogenic bacteria then convert the sugars and amino acids into carbon dioxide, hydrogen, ammonia, and organic acids. These bacteria convert these resulting organic acids into acetic acid, along with additional ammonia, hydrogen, and carbon dioxide. Finally, methanogens convert these products to methane and carbon dioxide. The methanogenic archaea populations play an indispensable role in anaerobic wastewater treatments. Anaerobic digesters can also be fed with purpose-grown energy crops, such as maize. Anaerobic digestion is widely used as a source of renewable energy. The process produces a biogas, consisting of methane, carbon dioxide and traces of other ‘contaminant’ gases. This biogas can be used directly as fuel, in combined heat and power gas engines or upgraded to natural gas-quality biomethane. The nutrient-rich digestate also produced can be used as fertilizer.

Gasification

Gasification is a process that converts organic or fossil fuel based carbonaceous materials into carbon monoxide, hydrogen and carbon dioxide. This is achieved by reacting the material at high temperatures (>700 °C), without combustion, with a controlled amount of oxygen and/or steam. The resulting gas mixture is called syngas (from synthesis gas or synthetic gas) or producer gas and is itself a fuel. The power derived from gasification and combustion of the resultant gas is considered to be a source of renewable energy if the gasified compounds were obtained from biomass. The advantage of gasification is that using the syngas is potentially more efficient than direct combustion of the original fuel because it can be combusted at higher temperatures or even in fuel cells, so that the thermodynamic upper limit to the efficiency defined by Carnot’s rule is higher or (in case of fuel cells) not applicable. Gasification can also begin with material which would otherwise have been disposed of such as biodegradable waste. In addition, the high-temperature process refines out corrosive ash elements such as chloride and potassium, allowing clean gas production from otherwise problematic fuels.

Pyrolysis

Pyrolysis is a thermochemical decomposition of organic material at elevated temperatures in the absence of oxygen (or any halogen). It involves the simultaneous change of chemical composition and physical phase, and is irreversible. Pyrolysis is a type of thermolysis, and is most commonly observed in organic materials exposed to high temperatures. It is one of the processes involved in charring wood, starting at 200–300 °C (390–570 °F). It also occurs in fires where solid fuels are burning. In general, pyrolysis of organic substances produces gas and liquid products and leaves a solid residue richer in carbon content, char. Extreme pyrolysis, which leaves mostly carbon as the residue, is called carbonization.

There are a number of other new and emerging technologies that can be used to produce energy from waste and other fuels without direct combustion. Many of these technologies have the potential to produce more electric power from the same amount of fuel than would be possible by direct combustion. This is mainly due to the separation of corrosive components (ash) from the converted fuel, thereby allowing higher combustion temperatures in, for example, boilers, gas turbines and fuel cells.

Clean Energy is the process of generating energy from natural and or renewable resources that limit or eliminate pollutants entering the atmosphere. Clean Energy production include electrical generation from sources such as solar, wind, hydro, natural gas and plant-based oils. For example, biofuel engine combined heat and power (CHP) plants use an adapted reciprocating gas engine, depending upon which biofuel is being used, and are otherwise very similar in design to a gas engine CHP plant. The advantage of using a biofuel is one of reduced hydrocarbon fuel consumption and thus reduced carbon emissions. These plants are generally manufactured as fully packaged units that can be installed within a plantroom or external plant compound with simple connections to the site’s electrical distribution and heating systems. Another variant of the above example is a wood gasifier CHP plant, whereby a wood pellet or wood chip biofuel is gasified in a zero-oxygen high temperature environment, resulting in gas that is then used to power a gas engine.

We Build, Own & Operate Projects and We Acquire Projects

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. Our BOO projects further fall into four primary phases of progress, making up our development cycle as follows:

Pre-Development. In this phase, our business development team is evaluating project opportunities that may come from various sources such as: other developers, utility companies, strategic partners and land owners. In this phase, we are conducting site research, evaluating feedstock parameters, researching the availability for offtake agreements and reviewing regulatory issues surrounding a particular location.

Development Phase. In this phase, we begin deploying capital and committing to projects. This phase generally includes the issuance of term-sheets or letters of intent for the development of projects. We begin the formal and in-depth due-diligence process to further these projects. Once due-diligence has been completed and a decision to move forward has been made, the company begins to assemble the various elements of the project. At this time, amongst other processes: technology is selected, an engineering study is completed, development plans are created, third party EPC operators are engaged, deposits are made on properties, environmental studies begin, permitting begins, feedstock agreements are put in place, a power purchase agreement (“PPA”) is agreed to and project financing is sourced. The development phase can take one year or longer depending on the project size and complexity.

Construction Phase. In this phase, we complete a financial closing with our project finance partners and third party EPC and technology providers, the property is officially purchased or leased and a ground breaking occurs. After this site prep begins, materials are ordered, equipment is ordered and construction begins. Over the next year or longer: through our third party contractors, skilled technicians, laborers and managers build an advanced power plant that turns various forms waste into sources of clean energy and other by-products.

Operating Phase. This phase includes the acceptance of waste materials, the ramp-up of biological elements in the case of an anaerobic digester plant, connecting to the electrical and or gas grids or connecting directly to a large end user. Once the connection is in place and the waste ramp-up phase is complete, and through our third party contractors, the plant is now fully operational. In addition to other administrative functions, management or our third party contractors will now begin to maintain feedstock intake, equipment monitoring and maintenance.

For our acquisition projects, we seek to acquire ongoing projects that are already constructed or operational.

Our Projects in All Phases

We are currently negotiating, developing, constructing or operating, as applicable, twenty (20) projects related to our strategy of acquisition, development or operations of waste-to-energy or clean-tech facilities, which includes developing projects for which we have entered into nonbinding letters of intent to acquire additional biogas facilities in Italy and to develop and construct waste-to-energy or clean-tech facilities in the United States, the Netherlands, the United Kingdom and Israel. We continue to evaluate a pipeline of similar projects in the pre-development phase in the countries listed below and we are also evaluating projects in other countries such as the Czech Republic, Poland, Canada and Mexico.

We currently own, in full or in part, the following operational projects:

United States (operating)

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

	●	Charlotte, NC. Waste-to-energy Anaerobic Digester Plant, 5.2 MW (electricity).
	●	Johnston, RI. Waste-to-energy Anaerobic Digester Plant, 3.2 MW (electricity).

United States (developing)

● Red Springs, NC. New Construction waste-to-energy Anaerobic Digester 3.0 MW Plant

● Wallace, NC. New Construction waste-to-energy Anaerobic Digester 3.0 MW Plant

Italy (operating)

● Soc. ~~agr~~Agr. AGRICERERE ~~srl~~S.r.l. – Tromello, Italy. Waste-to-energy Anaerobic Digester Plant, 999 KW (~~Blue~~electricity). ~~Sphere~~● ~~Pavia~~Soc. Agr. AGRIELEKTRA S.r.l. Alagna, Italy. Waste-to-energy Anaerobic Digester Plant, 999 KW (electricity). ● Soc. Agr. AGRISORSE S.r.l. Garlasco, Italy. Waste-to-energy Anaerobic Digester Plant, 999 KW (electricity). ● Soc. Agr. GEFA S.r.l. Dorno, Italy. Waste-to-energy Anaerobic Digester Plant, 999 KW (electricity). ● Futuris Papia S.p.A. Udine, Italy. Waste-to-energy Anaerobic Digester Plant, 995 KW (electricity).

~~● Soc. agr. AGRIELEKTRA srl – Alagna (Blue Sphere Pavia) 999 KW Plant~~ 3

●We ~~Soc.~~currently ~~agr.~~have ~~AGRISORSE~~nonbinding ~~srl~~letters –of ~~Garlasco~~intent ~~(Blue~~to ~~Sphere~~develop/acquire ~~Pavia)~~the ~~999~~following ~~KW Plant~~projects:

●Italy ~~Soc. agr. GEFA srl – Dorno~~ (~~Blue~~negotiating ~~Sphere~~and/or ~~Pavia)~~conducting ~~999~~due ~~KW Plant~~diligence)

● Cantu, Italy. Acquisition of Clean-Tech Energy Plant, 990 KW (~~developing~~electricity). ● Agrilandia, Italy. Acquisition of Anaerobic Digester Plant, 1MW (electricity). ● Ravena, Italy. Acquisition of Cogeneration Plant, 1MW (electricity). ● Sardinia, Italy (Galileo). New Construction of four Anaerobic Digester Plants, combined 2.7 MMBtu Biogas (4MW equivalent) (electricity).

●The ~~Cortona,~~Netherlands ~~Italy.~~(developing ~~Acquisition~~and ~~of fully operating 1.28MW Clean Energy Plants from Pronto-Verde, A.G.~~negotiating)

● ~~Cantu~~Sterksel, ~~Italy~~NL. ~~Acquisition~~New Construction of ~~fully~~Anaerobic ~~operating~~Digester ~~1MW Clean Energy~~ Plant, ~~from~~10.0 ~~Pronto-Verde,~~MW A(electricity).G.

●The ~~Udine,~~United ~~Italy.~~Kingdom ~~Acquisition~~(negotiating ofand/or ~~fully~~conducting ~~operating~~due ~~1MW Clean Energy Plant from Pronto-Verde, A.G.~~diligence)

● ~~Ostellato~~Corby, ~~Italy~~GB. New Construction of ~~two~~Gasification ~~1MW Anaerobic Digester Plants with Energy Lab~~Plant, S10MW (electricity).~~p.A~~

~~The~~We ~~Netherlands~~are ~~(developing)~~currently negotiating nonbinding letters of intent to develop/acquire the following projects:

●United ~~Sterksel,~~States ~~NL.~~(negotiating ~~New~~and/or ~~Construction~~conducting ~~waste-to-energy~~due Anaerobic Digester 10.0 MW Plant *diligence)

● ~~Terramass~~Boise, NLIdaho. New Construction ~~waste-to-energy~~of Anaerobic Digester 2Plant, 62 MMBtu Biogas (7.53MW MWequivalent) (electricity). ● Woodstock, CT. New Construction of Anaerobic Digester Plant, 28 MMBtu Biogas (3.3MW equivalent) (electricity). ● Hartford, CT. New Construction of Anaerobic Digester Plant, 27 MMBtu Biogas (3.2MW equivalent) (electricity).

*Italy On December 8, 2016, Blue Sphere Brabant B.V., a wholly owned subsidiary of the Company in the Netherlands, won a grant to sell renewable gas on a per MWg basis to Rijksdienst voor Ondernemend Nederland (~~“RVO”)~~negotiating under the Renewable Energy Production Incentive Scheme. The grant provides for the sale of up to 234,466.589 MWh per year, for a maximum total value of the grant equal to €151,934,350.00 (approximately USD $161,642,955) paid over twelve (12) years, from the date the facility begins production. The grant is conditioned upon the following: (1) the construction must be assigned to a supplier (EPC) within one (1) year, with RVO receiving a copy of the assignment; (2) the facility must begin production within four (4) years; (3) notice of any material changes (i.e., in location, receiver, power, required dates, etc.) must be given to RVO; and/or ~~(4)~~conducting ~~RVO~~due ~~is entitled to receive an annual progress report of the realization of the facility~~diligence)

~~The~~● ~~United~~Ostellato, ~~Kingdom~~Italy. New Construction of two Anaerobic Digester Plants, 1MW (~~developing~~electricity). ● Riffle, Italy. Acquisition of two Anaerobic Digester Plants, 2MW (electricity). ● Milan, Italy (Agatos). New Construction of Anaerobic Digester Plant, 19.7 MMBtu Biogas (1MW equivalent) (electricity).

●The ~~Carlton~~Netherlands ~~Forest,~~(negotiating ~~GB.~~and/or ~~New~~conducting ~~Construction~~due ~~waste-to-energy Pyrolysis Plant 7.5MW (electricity~~diligence) ~~+ 10MW (thermal)~~

● ~~Hull~~Het Haantje, GBNL. ~~New~~Acquisition ~~Construction~~of ~~waste-to-energy~~Anaerobic ~~Pyrolysis~~Digester Plant, ~~15MW~~1.5MW Plant (electricity) ~~+ 15MW (thermal)~~.

●Israel ~~Hartlepool,~~(negotiating ~~GB.~~and/or ~~New~~conducting ~~Construction~~due ~~waste-to-energy Pyrolysis Plant 4.5MW (electricity~~diligence) ~~+ 8MW (thermal)~~

● ~~Seal~~Rishon ~~Sands~~Lezion, GBIL. New Construction ~~waste-to-energy~~of ~~Pyrolysis~~Materials ~~Plant~~Recycling ~~16MW~~Facility ~~(electricity)~~and +Anaerobic ~~23MW~~Digester Plant, 2.5MW (~~thermal~~electricity).

~~Israel~~Canada (~~developing~~negotiating and/or conducting due diligence)

● ~~Rishon~~Alberta, ILCanada. New Construction of aAnaerobic ~~MRF~~Digester, ~~(Materials~~64.58 ~~Recycling~~MMBtu ~~Facility)~~Biogas ~~+ a 2~~(7.~~5MW~~6MW ~~Anaerobic~~equivalent) ~~Digester Plant~~(electricity).

2 Greece (negotiating and/or conducting due diligence)

~~Our strategy~~● ~~is to continue to expand in the future~~Kermos, ~~including~~GR ~~through acquisition of additional projects~~(Thrace). ~~From~~New ~~time~~Construction ~~to time we enter into nonbinding letters~~ of ~~intent~~Anaerobic ~~for~~Digestion ~~projects~~Plant, ~~that~~3MW ~~we are evaluating~~(electricity). ~~However~~● Neochori, ~~until~~GR ~~the~~(Thrace). ~~negotiations~~New ~~are~~Construction ~~finalized~~of ~~and~~Anaerobic ~~the~~Digestion ~~parties have executed a definitive agreement~~Plant, ~~there~~3MW ~~can~~(electricity). be● ~~no assurance that we will be able to enter into any development or acquisition transaction~~Fytorio, onGR ~~the~~(Thrace). ~~terms~~New inConstruction ~~the applicable letter~~ of ~~intent~~Anaerobic orDigestion ~~at all~~Plant, or3MW ~~any other similar arrangements~~(electricity). ~~Furthermore, any such transactions that we do enter into would be subject to the uncertainties regarding our existing projects described in the “Risk Factors” section.~~

~~Our United~~All ~~States~~references ~~Projects~~to energy output, whether in MW or MMBtu, are per hour and are approximations.

Our strategy is to continue to expand in the future, including through acquisition of additional projects. From time to time, we negotiate, conduct due diligence and enter into nonbinding letters of intent for projects that we are evaluating. However, until due diligence is complete, further negotiations are finalized and the parties have executed a definitive agreement, there can be no assurance that we will be able to enter into any development or acquisition transaction, on the terms in the applicable letter of intent, if any, or at all, or any other similar arrangements. In the case of new construction projects for which we have not entered into definitive agreements, the power output identified herein reflects management’s position, determined based on a review of relevant factors including, but not limited to, pre-existing relationships with purchasers in the region, demand, land and facility space, environmental and engineering analysis, and the availability of feedstock and other sources of input.

Our Projects in the United States

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

Our North Carolina Project

Design and Development

On June 5, 2014, OEC entered into the NC Turnkey Agreement with Auspark, which amended and restated an original agreement dated April 30, 2014. Pursuant to the NC Turnkey Agreement, Auspark provided the design, supply, engineering, permitting, procurement, assembly, construction, installation, commissioning and delivery of the North Carolina facility (the “North Carolina Facility”), for the fixed price of $17,350,000, payable in accordance with meeting scheduled milestones, with the final payment becoming due upon delivery of a final completion certificate. Payments under the NC Turnkey Agreement were funded by York Renewable Energy Partners LLC (“York”), our joint venture partner for the North Carolina project.

The term of the NC Turnkey Agreement was based on the project construction and workflow completion plan, subject to amendment pursuant to the terms of the agreement. Austep (defined below) guaranteed Auspark’s performance under the NC Turkey Agreement. Upon effectiveness of the BULA, we had anticipated that the NC Turnkey Agreement would be transferred to Andion (defined below), which did not happen. On October 9, 2017, the NC Turnkey Agreement was terminated. For more information, see the subsection below entitled “Austep Liquidation/Restructuring and Continuity of Performance at the North Carolina Facility and the Rhode Island Facility”.

On February 8, 2018, OEC entered into a professional services agreement with ES Engineering Services, LLC, pursuant to which it will perform specified services to complete outstanding development activities at the North Carolina Facility; the agreement anticipates the completion such services by April 30, 2019. OEC is currently negotiating an agreement for specified upgrade and retrofit development services to be performed at the North Carolina Facility.

The Amended OEC Purchase Agreement

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

Concord Energy Partners, LLC

On January 30, 2015, (i) the Company, Concord Energy Partners, LLC, a Delaware limited liability company (“Concord”) and York ~~Renewable Energy Partners LLC (“York”)~~ entered into a development and indemnification agreement (the “Concord Development and Indemnification Agreement”), pursuant to which in 2015 York funded Concord’s payment to us of $1,250,000 in development fees used for developing the project, and Concord issued us 250 Series B units of Concord (“Concord Series B Units”) and issued 750 Series A units of Concord (“Concord Series A Units”) to York, and (ii) we and York entered into an amended and restated limited liability company operating agreement (the “Concord LLC Agreement”) to establish the Concord Series A ~~Units~~ Units and Concord Series B Units and admit us and York as 25% and 75% members of Concord, respectively. Pursuant to the foregoing agreements, York also agreed to ~~pay~~fund Concord’s payment to us ~~two~~of two equal installments of $587,500 upon (a) mechanical completion of the North Carolina project and (b) commercial operation of the North Carolina project. We have received payment of the first installment.

Pursuant to the Concord LLC Agreement, our right to receive distributions from Concord are subject to certain priorities in favor of York, as follows:

(a) ~~The~~York’s ~~unpaid~~nine percent (9%) rate of return on the $500,000 ~~equal~~capital contribution to ~~nine~~Concord to fund liquidated damages to Duke Energy pursuant to the Duke PPA since the commercial operations had not been commenced within 60 days of December 31, 2015; (b) The repayment of York’s $500,000 capital contribution to Concord to fund liquidated damages to Duke Energy pursuant to the Duke PPA since the commercial operations had not been commenced within 60 days of December 31, 2015; (c) The amount of any excess profits from “feedstock tipping fees” shall be distributed with twenty percent (920%) ~~per~~going ~~annum~~to York, and ~~compounded~~eighty ~~annually,~~percent (80%) going to us; (d) The amount of ~~unrecovered~~any ~~capital~~excess ~~contributions~~profits ~~outstanding,~~from “thermal energy” shall be distributed equally between us and York; and (e) Any amount remaining will be ~~paid~~distributed pro-rata to us and York; in proportion to York and our respective ownership of Concord.

~~(b) The unpaid and unrecovered capital contributions outstanding will be paid to York;~~ 5

(c) The amount of any excess profits from “feedstock tipping fees” shall be distributed with twenty percent (20%) going to York, and eighty percent (80%) going to us;

(d) The amount of any excess profits from “thermal energy” shall be distributed equally between us and York; and

(e) Any amount remaining will be distributed pro-rata to us and York in proportion to York and our respective ownership of Concord.

In addition, our right to receive distributions upon a liquidation event of Concord are subject to certain priorities in favor of York, as follows:

(a) ~~The~~York’s ~~unpaid~~nine percent (9%) rate of return, ~~equal~~on toits ~~nine~~unrecovered ~~percent~~capital ~~(9%)~~contributions ~~per~~to ~~annum~~Concord; ~~and~~(b) ~~compounded~~The ~~annually,~~repayment of York’s unrecovered capital contributions ~~outstanding,~~to Concord; and (c) Any amount remaining will be ~~paid~~distributed pro-rata to us and York; in proportion to York and our respective ownership of Concord.

Pursuant to the Concord LLC Agreement, Concord is managed by a board of managers initially consisting of three managers (bthe “Concord Board”). ~~The~~So ~~unpaid~~long as York owns more than 50% of the membership interests of Concord, York is entitled to appoint two of the Concord Board’s three managers. So long as we own no less than 50% of the membership interests of Concord that we acquired pursuant to the Concord Development and ~~unrecovered~~Indemnification Agreement, we are entitled to appoint one manager of the Concord Board. York will make capital contributions ~~outstanding~~to ~~will~~Concord in accordance with the budgeted investment amount for the North Carolina project set forth in the Concord LLC Agreement. In the event that the Concord Board determines in good faith that additional equity capital is needed by Concord and is in the best interests of the North Carolina project, the Concord Board may determine the amount of additional equity capital needed and issue new units to raise the necessary funds. In this case, if we do not exercise our pre-emptive right with respect to such units, our percentage interest in Concord would be ~~paid~~reduced accordingly. The Concord LLC Agreement also contains certain restrictions on our right to transfer our membership interests in Concord to third parties. If we propose to sell any equity or assets relating to or in connection with the development, construction or operation of an energy generation facility to a third party prior to January 30, 2020, Entropy Investment Management LLC, an affiliate of York; ~~and~~that provides project financing for renewable energy projects, will have a right of first refusal to acquire all or a portion of such sale.

(c) Any amount remaining will be distributed pro-rata to us and York in proportion to York and our respective ownership of Concord.

Pursuant to the Concord LLC Agreement, Concord is managed by a board of managers initially consisting of three managers (the “Concord Board”). So long as York owns more than 50% of the membership interests of Concord, York is entitled to appoint two of the Concord Board’s three managers. So long as we own no less than 50% of the membership interests of Concord that we acquired pursuant to the Concord Development and Indemnification Agreement, we are entitled to appoint one manager of the Concord Board. In the event that the Concord Board determines in good faith that additional equity capital is needed by Concord and is in the best interests of the North Carolina project, the Concord Board may determine the amount of additional capital needed and issue new units to raise the necessary funds. In this case, if we do not exercise our pre-emptive right with respect to such units, our percentage interest in Concord would be reduced accordingly. The Concord LLC Agreement also contains certain restrictions on our right to transfer our membership interests in Concord to third parties.

The New OEC Purchase Agreement

On January 30, 2015, we entered into the Orbit Energy Charlotte, LLC Membership Interest Purchase Agreement by and among the Company, Orbit, Concord, and OEC (the “New OEC Purchase Agreement”), pursuant to which (i) Concord purchased all of Orbit’s right, title and interest in and to the membership interests of OEC (the “OEC Interests”), (ii) Orbit abandoned all economic and ownership interest in the OEC Interests in favor of Concord, (iii) Orbit ceased to be a member of OEC and (iv) Concord was admitted as the sole member of OEC, in exchange for consideration of $917,764.

Under the Amended OEC Purchase Agreement and the New OEC Purchase Agreement, we had agreed to pay to Orbit the costs of evaluating and incorporating into the North Carolina project Orbit’s high solids anaerobic digestion technology and two HSAD Units designed by Orbit. Orbit was unable to design and install this technology into the North Carolina project, and we never paid or became obligated to pay any costs pursuant thereto. Instead, digesters were designed and provided by Auspark LLC, ~~the project’s engineering~~(“Auspark”), ~~procurement,~~ ~~construction~~ and ~~technology provider,~~ have been incorporated into the North Carolina project.

The New OEC Purchase Agreement also ~~carries~~carried forward from the Amended OEC Purchase Agreement, and we indemnified York with respect to, our obligation to pay Orbit all amounts owed under the Amended OEC Purchase Agreement, including an amount equal to thirty percent (30%) of the North Carolina project’s distributable cash flow after we and the other equity investors in the North Carolina project fully recoup their respective investments in the North Carolina project (such investments to be calculated solely as amounts expended in and for the construction of the North Carolina project) and the North Carolina project achieves a thirty percent (30%) internal rate of return(the “NC Participation Fee”). The calculation of the project’s internal rate of return would take into account and be computed on the basis of any and all benefits from tax credits, depreciation and other incentives of any nature~~, as well as the OEC Management Fee~~.

On January 2313, 2017, the Company and Orbit entered into an agreement to ~~reduce~~eliminate ~~certain of~~ the Company’s obligations to Orbit under the ~~Amended~~New OEC Purchase Agreement, ~~and~~the Concord LLC Agreement, the New ~~OEC~~OERI Purchase Agreement (defined below), asand ~~set~~the ~~forth~~Rhode ~~above~~Island LLC Agreement (~~please~~defined ~~refer~~below). In connection with the North Carolina project and the Rhode Island project, in exchange for an assignment to us of any rights to the ~~above~~NC ~~descriptions~~Participation Fee and RI Participation Fee (defined below), and the termination of the OEC Management Fee and OERI Management Fee (defined below), Orbit received $200,000.

The Operations of the North Carolina ~~project~~ Project

~~OEC~~ ~~and~~ On ~~Duke~~June ~~Energy~~5, ~~Carolinas~~2014, ~~LLC~~OEC ~~(“Duke~~entered ~~Energy”)~~into ~~are~~a ~~parties~~Service, toMaintenance anand ~~Amended~~Operation ~~and~~Agreement ~~Restated~~(the ~~Renewable~~“Austep ~~Energy~~NC ~~Purchase~~O&M Agreement~~, dated~~”) ~~October~~with 12Austep USA, ~~2012~~whereby ~~and~~Austep ~~amended~~USA onwould ~~April~~perform ~~25,~~the ~~2013,~~day-to-day ~~January 31~~operation, ~~2014~~management, ~~January 20~~service, ~~2015~~ and ~~September~~maintenance ~~30,~~operations ~~2016~~at ~~(as~~the ~~amended,~~North ~~the “Duke~~Carolina ~~PPA”)~~Facility, ~~pursuant~~for toa ~~which~~term ~~OEC~~of ~~has~~10 ~~agreed~~years tobeginning ~~sell,~~on ~~and~~the ~~Duke~~date ~~has~~that ~~agreed to purchase,~~ the ~~energy~~facility ~~output~~achieved ofsubstantial ~~OEC’s facility~~completion, ~~subject~~as towas ~~the~~defined ~~terms~~in ~~and conditions of~~ the ~~Duke~~NC ~~PPA~~Turnkey Agreement. ~~Among~~Austep ~~other~~guaranteed ~~things,~~Austep ~~the~~USA’s ~~Duke~~performance ~~PPA~~under ~~required~~the ~~OEC~~agreement. toUpon ~~commence~~effectiveness ~~commercial operations~~of bythe ~~December 31~~BULA, ~~2015~~we ~~or,~~had ifanticipated ~~not~~that ~~operational~~the ~~within~~Austep 60NC ~~days~~O&M ofAgreement ~~such~~would ~~date,~~be ~~pay~~transferred ~~Duke~~to ~~Energy $500~~Andion,~~000~~ ~~of liquidated damages,~~ which would ~~then~~become ~~extend~~responsible ~~the deadline~~ for ~~commercial~~performance ~~operation~~thereunder. toFor ~~March~~more 30information, ~~2016.~~see ~~Since~~ the ~~commercial~~subsection ~~operations~~below ~~had~~entitled ~~not~~“Austep ~~been commenced~~Liquidation/Restructuring ~~within~~and 60Continuity ~~days~~ of ~~December~~Performance ~~31,~~at ~~2015, OEC was required to pay $500,000 of liquidated damages to Duke Energy pursuant to~~ the ~~Duke~~North ~~PPA~~Carolina ~~during~~Facility ~~the first quarter of 2016,~~ and ~~York~~the ~~contributed~~Rhode ~~these~~Island ~~funds to OEC~~Facility”. On ~~The~~October ~~deadline~~9, ~~for commercial operation was thereafter extended to November 23~~2017, ~~2016 by amendment to~~ the ~~Duke~~Austep ~~PPA.~~NC ~~The~~O&M ~~Duke~~Agreement ~~PPA~~was ~~is effective until August 21, 2030~~terminated. ~~The~~ ~~loss of Duke Energy as a customer of OEC could have a material adverse effect on the Company.~~

~~OEC is~~On ~~projected~~February to20, ~~require~~2018, ~~about~~OEC ~~424~~entered ~~tons~~into ofan ~~organic~~interim ~~feedstock~~operations onand amanagement ~~daily~~agreement ~~basis~~with ~~and~~ES isEngineering ~~working~~Services, ~~with~~LLC, ~~organic~~pursuant ~~waste~~to ~~suppliers~~which toit ~~arrange supplies~~will ofperform ~~feedstock.~~the Asday-to-day ofoperation, ~~today~~management, weservice, ~~have~~and ~~all~~maintenance ~~definitive~~operations ~~agreements~~at ~~signed~~the toNorth ~~supply~~Carolina ~~all~~Facility ~~feedstock~~on ~~needed~~a ~~for~~short-term ~~operation~~basis, ofwhile the ~~North~~ ~~Carolina~~parties ~~project~~negotiate and finalize a long-term agreement.

On ~~November 18, 2016, the North Carolina project connected to the grid, commenced commercial operations and started to provide output~~ 6 to Duke Energy pursuant to the Duke PPA. The North Carolina facility is currently in the mechanical completion and ramp-up phase of the project. Commencement of the commercial operations includes the gradual intake of waste from the facility’s feedstock suppliers, increasing the parasitic load to the digesters, completing the waste-water-treatment resources and completing all other mechanical features needed for the facility to operate at full capacity. The Company estimates that the North Carolina project will be fully completed by the end of the second quarter of 2017.

~~As of~~OEC ~~December~~and Duke Energy Carolinas, LLC (“Duke Energy”) are parties to an Amended and Restated Renewable Energy Purchase Agreement, dated October 12, 2012 and amended on April 25, 2013, January 31, 2014, January 29, 2015 and September 30, 2016 ~~equity~~(as ~~earnings~~amended, inthe “Duke PPA”), pursuant to which OEC has agreed to sell, and Duke has agreed to purchase, the ~~amount~~energy output of $5OEC’s facility,~~960,946~~ subject to the terms and ~~Revenue~~conditions ~~from~~of ~~Services~~the inDuke PPA. Among other things, the ~~amount~~Duke PPA required OEC to commence commercial operations by December 31, 2015 or, if not operational within 60 days of ~~$587~~such date, pay Duke Energy $500,000 inof liquidated damages, which would then extend the deadline for commercial operation to March 30, 2016 ~~with~~. ~~respect~~Since the commercial operations had not been commenced within 60 days of December 31, 2015, OEC was required to pay $500,000 of liquidated damages to Duke Energy pursuant to the ~~North~~Duke ~~Carolina~~PPA ~~project~~during the first quarter of 2016, and York contributed these funds to OEC. The deadline for commercial operation was thereafter extended to November 23, 2016 by amendment to the Duke PPA. The Duke PPA is effective until August 21, 2030. The loss of Duke Energy as a customer of OEC could have a material adverse effect on the Company.

4 The Duke PPA further provides that OEC is responsible for certain interconnections fees and the costs and charges in connection with delivering power to the delivery point. OEC is responsible for delivering 100% of the output nameplate capacity of 5.2MW, and Duke Energy is responsible for purchasing up to the nameplate capacity. During the term of the Duke PPA, the bundled price payable to OEC is fixed per MWh, together with fixed prices per year for specified categories of RECs, as well as minimum REC requirements and purchase obligations during the term. Duke Energy is not responsible for purchasing additional energy or renewable energy attributes which exceeds 10% of the facility’s nameplate capacity. If OEC does not deliver up to the nameplate capacity, it must pay damages equal to specified replacement REC costs.

On or about November 18, 2016, the North Carolina Facility connected to the grid, began commissioning and thereafter commenced commercial operations and started to provide output to Duke Energy pursuant to the Duke PPA. The North Carolina Facility is currently in the mechanical completion and ramp-up phase of the project. Commencement of the commercial operations includes the gradual intake of waste from the facility’s feedstock suppliers, increasing the parasitic load to the digesters, completing the waste-water-treatment resources and completing all other mechanical features needed for the facility to operate at full capacity. The Company estimates that the North Carolina project will be fully completed by the end of the first quarter of 2019.

As of December 31, 2017, we have recorded equity earnings in the amount of $931,771 from nonconsolidated affiliates in 2017 with respect to the North Carolina project.

Our Rhode Island Project

Design and Development

On April 7, 2015, OERI entered into the RI Turnkey Agreement with Auspark, which amended and restated an original agreement dated April 30, 2014. Pursuant to the RI Turnkey Agreement, Auspark provided the design, supply, engineering, permitting, procurement, assembly, construction, installation, commissioning and delivery of the Rhode Island facility (the “Rhode Island Facility”), for the fixed price of $13,800,000, payable in accordance with meeting scheduled milestones, with the final payment becoming due upon delivery of a final completion certificate. Payments under the RI Turnkey Agreement were funded by York, our joint venture partner for the Rhode Island project.

The term of the RI Turnkey Agreement was based on the project construction and workflow completion plan, subject to amendment pursuant to the terms of the agreement. Austep (defined below) guaranteed Auspark’s performance under the RI Turkey Agreement. Upon effectiveness of the BULA, we had anticipated that the RI Turnkey Agreement would be transferred to Andion (defined below), which did not happen. On October 9, 2017, the Austep RI Turnkey Agreement was terminated. For more information, see the subsection below entitled “Austep Liquidation/Restructuring and Continuity of Performance at the North Carolina Facility and the Rhode Island Facility”.

On February 8, 2018, OERI entered into a professional services agreement with ES Engineering Services, LLC, pursuant to which it will perform specified services to complete outstanding development activities at the Rhode Island Facility; the agreement anticipates the completion such services by April 30, 2019. OERI is currently negotiating an agreement for specified upgrade and retrofit development services to be performed at the Rhode Island Facility.

The Amended OEC Purchase Agreement

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

Rhode Island Energy Partners, LLC

On April 8, 2015, (i) the Company, Rhode Island Energy Partners, LLC, a Delaware limited liability company (“Rhode Island”) and York entered into a development and indemnification agreement (the “Rhode Island Development and Indemnification Agreement”), pursuant to which York funded Rhode Island’s ~~paid~~payment to us of development fees of $1,541,900 used for developing the project, and Rhode Island issued us 2,275 Series B units of Rhode Island (“Rhode Island Series B Units), and issued 7,725 Series A units of Rhode Island (“Rhode Island Series A Units”) to York, and (ii) we and York entered into an amended and restated limited liability company operating agreement (the “Rhode Island LLC Agreement”) to establish the Rhode Island Series A Units and Rhode Island Series B Units and admit us and York as 22.75% and 77.25% members of Rhode Island, respectively. Pursuant to the foregoing agreements, York also agreed to fund Concord’s payment to us of us three equal installments of $562,500 upon (a) signing of the Rhode Island Development and Indemnification Agreement, (b) the later of (x) the date of mechanical completion of the Rhode Island project and (y) the date on which an executed interconnection agreement between OERI and National Grid, including receipt of any regulatory approvals from the Rhode Island Public Utility Commission, is delivered by OERI, and (c) commercial operation of the Rhode Island project. To date, York has made ~~payment~~ payments of the first ~~$562,500~~and ~~installment~~the third installments.

Pursuant to the Rhode Island LLC Agreement, our right to receive distributions from OERI are subject to certain priorities in favor of York, as follows:

(a) The amount of any excess profits from “feedstock tipping fees” shall be distributed with twenty percent (20%) going to York, and eighty percent (80%) going to us; (b) The amount of any excess profits from “thermal energy” shall be distributed equally between us and York; and (c) Any amount remaining will be distributed pro-rata to us and York in proportion to York and our respective ownership in Rhode Island.

(b) The amount of any excess profits from “thermal energy” shall be distributed equally between us and York; and

(c) Any amount remaining will be distributed pro-rata to us and York in proportion to York and our respective ownership in Rhode Island.

In addition, our right to receive distributions upon a liquidation event of Rhode Island are subject to certain priorities in favor of York, as follows:

(a) ~~The~~York’s ~~unpaid~~nine percent (9%) rate of return on the sum of all obligations guaranteed ~~obligation~~by York in connection with the Rhode Island project; (b) York’s nine percent (9%) rate of return on its unrecovered capital contributions to Rhode Island; (c) The repayment of York’s unrecovered capital contributions to Rhode Island; and (d) Any amount remaining will be ~~paid~~distributed pro-rata to us and York; in proportion to York and our respective ownership in Rhode Island.

~~(b) The unpaid rate of return, equal to nine percent (9%) per annum and compounded annually, of unrecovered capital contributions outstanding, will be paid to York;~~ 8

Pursuant to the Rhode Island LLC Agreement, Rhode Island is managed by a board of managers initially consisting of three managers (cthe “Rhode Island Board”). ~~The~~So ~~unpaid~~long as York owns more than 50% of the membership interests of Rhode Island, York is entitled to appoint two of the Rhode Island Board’s three managers. So long as we own no less than 50% of the membership interests of Rhode Island that we acquired pursuant to the Rhode Island Development and ~~unrecovered~~Indemnification Agreement, we are entitled to appoint one manager of the Rhode Island Board. York will make capital contributions ~~outstanding~~to ~~will~~Rhode Island in accordance with the budgeted investment amount for the North Carolina project set forth in the Concord LLC Agreement. In the event that the Rhode Island Board determines in good faith that additional equity capital is needed by Rhode Island and is in the best interests of the Rhode Island project, the Rhode Island Board may determine the amount of additional capital needed and issue new units to raise the necessary funds. In this case, if we do not exercise our pre-emptive right with respect to such units, our percentage interest in Rhode Island would be ~~paid~~reduced accordingly. The Rhode Island LLC Agreement also contains certain restrictions on our right to ~~York;~~transfer ~~and~~our membership interests in Rhode Island to third parties. If we propose to sell any equity or assets relating to or in connection with the development, construction or operation of an energy generation facility to a third party prior to April 8, 2020, Entropy Investment Management LLC will have a right of first refusal to acquire all or a portion of such sale.

(d) Any amount remaining will be distributed pro-rata to us and York in proportion to York and our respective ownership in Rhode Island.

Pursuant to the Rhode Island LLC Agreement, Rhode Island is managed by a board of managers initially consisting of three managers (the “Rhode Island Board”). So long as York owns more than 50% of the membership interests of Rhode Island, York is entitled to appoint two of the Rhode Island Board’s three managers. So long as we own no less than 50% of the membership interests of Rhode Island that we acquired pursuant to the Concord Development and Indemnification Agreement, we are entitled to appoint one manager of the Rhode Island Board. In the event that the Rhode Island Board determines in good faith that additional equity capital is needed by Rhode Island and is in the best interests of the Rhode Island project, the Rhode Island Board may determine the amount of additional capital needed and issue new units to raise the necessary funds. In this case, if we do not exercise our pre-emptive right with respect to such units, our percentage interest in Rhode Island would be reduced accordingly. The Rhode Island LLC Agreement also contains certain restrictions on our right to transfer our membership interests in Rhode Island to third parties.

The New OERI Purchase Agreement

On April 8, 2015, we entered into the Orbit Energy Rhode Island, LLC Membership Interest Purchase Agreement by and among the Company, Orbit, Rhode Island and OERI (the “New OERI Purchase Agreement”), pursuant to which (i) Rhode Island purchased all of Orbit’s right, title and interest in and to the membership interests of OERI (the “OERI Interests”), (ii) Orbit abandoned all economic and ownership interest in the OERI Interests in favor of Rhode Island, (iii) Orbit ceased to me a member of OERI and (iv) Rhode Island was admitted as the sole member of OERI, in exchange for consideration of $386,432.

Under the Amended OERI Purchase Agreement and the New OERI Purchase Agreement, we had agreed to pay to Orbit the costs of evaluating and incorporating into the Rhode Island project Orbit’s high solids anaerobic digestion technology and two HSAD Units designed by Orbit. Orbit was unable to design and install this technology into the Rhode Island project, and we never paid or became obligated to pay any costs pursuant thereto. Instead, digesters designed and provided by Auspark LLC, the project’s engineering, procurement, construction and technology provider, have been incorporated into the Rhode Island project.

The New OERI Purchase Agreement also ~~carries~~carried forward from the Amended OERI Purchase Agreement, and we indemnified York with respect to, our obligation to pay Orbit all amounts owed under the Amended OERI Purchase Agreement, including an amount equal to thirty percent (30%) of the Rhode Island project’s distributable cash flow after we and the other equity investors in the Rhode Island project fully recoup our respective investments in the Rhode Island project (such investments to be calculated solely as amounts expended in and for the construction of the Rhode Island project) and the Rhode Island project achieves a thirty percent (30%) internal rate of return (the “RI Participation Fee”). The calculation of the project’s internal rate of return would take into account and be computed on the basis of any and all benefits from tax credits, depreciation and other incentives of any nature~~, as well as the OERI Management Fee~~.

On January 2313, 2017, the Company and Orbit entered into an agreement to ~~reduce~~eliminate ~~certain of~~ the Company’s obligations to Orbit under the ~~Amended~~New ~~OERI~~OEC Purchase Agreement, ~~and~~the Concord LLC Agreement, the New OERI Purchase Agreement, asand ~~set~~the ~~forth~~Rhode ~~above~~Island ~~(please~~LLC ~~refer~~Agreement. In connection with the North Carolina project and the Rhode Island project, in exchange for an assignment to us of any rights to the ~~above~~NC ~~descriptions)~~Participation Fee and RI Participation Fee, and the termination of the OEC Management Fee and OERI Management Fee, Orbit received $200,000.

The Operations of the Rhode Island ~~project~~ Project

On February 20, 2018, OERI entered into an interim operations and management agreement with ES Engineering Services, LLC, pursuant to which it will perform the day-to-day operation, management, service, and maintenance operations at the Rhode Island Facility on a short-term basis, while the parties negotiate and finalize a long-term agreement.

OERI and The Narragansett Electric Company d/b/a National Grid (“National Grid”) are parties to a Power Purchase Agreement, dated May 26, 2011 and amended on April 11, 2013, December 9, 2013, January 9, 2015 and May 27, 2016 (as amended, the “National Grid PPA”), pursuant to which OERI has agreed to sell, and National Grid has agreed to purchase, the energy output of OERI’s facility, subject to the terms and conditions of the National Grid PPA. Among other things, the National Grid PPA required OERI to commence commercial operations by December 31, 2015, which could be extended up to six months by OERI upon deposit of $22,500 of collateral. Since commercial operations were not commenced by December 31, 2015, OERI paid an additional “Development Period Security” of $22,500 pursuant to the National Grid PPA, such funds having been contributed to OERI by York. On May 27 2016, National Grid agreed to modify the date to commence commercial operations to June 30, 2017. As an incentive and evidence of good faith to achieve commercial operation, OERI posted additional collateral in the amount of $22,500, such funds having been contributed to OERI by York. The National Grid PPA is effective for 15 years from the date commercial operations are commenced, which may be extended by 6 years at the option of National Grid. The loss of National Grid as a customer of OERI could have a material adverse effect on the Company.

The National Grid PPA further provides that OERI ~~has~~ ~~obtained~~is ~~all~~responsible ~~the~~for ~~required~~certain ~~permits~~interconnections fees, ~~except~~subject to an adjustment based on MWh sold under the agreement, and the costs and charges in connection with delivering power to the interconnection point. OERI is responsible for delivering 100% of the ~~operating~~output ~~permit~~nameplate capacity of up to 3.2MW, and National Grid is responsible for purchasing up to ~~achieve~~our ~~commercial~~nameplate ~~operation~~capacity. ~~Although~~National noGrid ~~assurances can~~is benot ~~given,~~responsible wefor ~~expect~~purchasing additional energy in excess of the ~~Rhode~~specified ~~Island~~maximum ~~project~~amount. During the term of the agreement, National Grid will pay a fixed bundled price per MWh for energy and RECs, subject to ~~commence~~escalation ~~commercial~~by ~~operations~~a onfactor orof ~~before~~2% ~~the~~annually. ~~modified~~If ~~date~~OERI fails to ~~commence commercial~~deliver ~~operations,~~energy orin ~~June~~accordance 30with the National Grid PPA, ~~2017~~it will be responsible for specified replacement damages.

OERI and Renewable Organics Management LLC are parties to an Organic Waste Delivery Agreement, dated October 13, 2016, in respect of 80,000 tons per year of organic feedstock. This agreement has a five-year term, subject to renewal, and begins upon commencement of operations, at which time feedstock will be supplied to the Rhode Island project. OERI is projected to require 80,000 tons per year of organic feedstock on a daily basis, so the quantity represented by this agreement is expected to satisfy 100% of facility’s feedstock requirements for operations.

As of December 31, 2016, we have recorded deferred revenue Deferred revenues from nonconsolidated affiliates in the amount of $5,658,169 with respect to our project in the Rhode Island project (which will be recorded as revenue upon the commencement of its commercial operations.

Our Italy Projects

The Acquisition of Our Italy Projects

On May 14, 2015, we entered into a Share Purchase Agreement (the “Italy Projects Agreement”) with Volteo Energie S.p.A., Agriholding S.r.l., and Overland S.r.l. (each, a “Seller” and collectively, the “Sellers”) through our indirect, wholly-owned subsidiary, Bluesphere Italy S.r.l. (we subsequently changed the name of Bluesphere Italy S.r.l to Bluesphere Pavia S.r.l (“Blue Sphere Pavia”), which is the name we use herein). Pursuant to the Italy Projects Agreement, we agreed to purchase one hundred percent (100%) of the share capital of Agricerere S.r.l., Agrielektra S.r.l., Agrisorse S.r.l. and Gefa S.r.l (each, an “SPV” and collectively, the “SPVs”) from the Sellers, who collectively held all of the outstanding share capital of each SPV. Each SPV is engaged in the owning and operating of an anaerobic digestion biogas plant for the production and sale of electricity to Gestore del Servizi Energetici GSE, S.p.A., a state-owned company, pursuant to a power purchase agreement. All references to, and descriptions of, the Italy Projects Agreement incorporate the terms of an amendment to the same entered into by the parties on December 14, 2015.

Pursuant to the Italy Projects Agreement, the we agreed to pay an aggregate purchase price of €5,600,000 for all of the SPVs, which, less certain credits applied, has adjusted to $5,646,628 (€5,200,000) (the “Purchase Price”). Fifty percent (50%) of the Purchase Price, less certain credits, was due to the Sellers on the Closing Date and the remaining balance along with annual interest rate of two percent (2%) (“the deferred payment”), less certain credits, is due to the Sellers on the third anniversary of the Closing Date. 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 € 934,519, 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 € 934,519, 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.

Under the Italy Projects agreement, EBITDA is defined as “total cash revenues received minus all cash expenditures made during the relevant period excluding principle and interest payments due to the bank and taxes”.

Pursuant to the Italy Projects Agreement, the Company will reimburse the Sellers the VAT amount that was requested and will be requested by the SPVs for the fiscal year of 2014. The reimbursed amount will not exceed €1,160,425 and will be refunded to the Sellers only after the amount is refunded to the Blue Sphere Pavia by the VAT authorities in Italy. Pursuant to the Italy Projects Agreement, we also issued a corporate guarantee to the Sellers, whereby the Company will secure the obligations of Blue Sphere Pavia under the Italy Projects Agreement.

On December 14, 2015 (the “Closing Date”), pursuant to the Italy Projects Agreement, we completed the acquisitions of one hundred percent (100%) of the share capital of the “SPVs. On the Closing Date, the Company paid an amount of $2,143,181 (€1,952,858), which represented fifty percent (50%) of the Purchase Price adjusted for certain post-closing adjustments and closing costs. The remaining balance of of the Purchase Price (balance less the adjusted closing payment) is promised by a note accruing interest at an annual rate of two percent (2%) to each Seller, with such principal and interest accrued due to each Seller on or before the third anniversary of the Closing Date, subject to adjustment to the variation of EBITDA, as described above. The portion of the Purchase Price and closing costs paid at closing was primarily financed by a loan of €2,900,000, obtained pursuant to the Helios Loan Agreement.

The Operations of the Italy Projects

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

On the Closing Date, each SPV entered into Plant EBITDA Guarantee Agreement with Austep (collectively, the “Plant EBITDA Agreements”). In accordance with the Plant EBITDA Agreements, Austep will operate, maintain and supervise each biogas plant owned by the SPVs. In addition, the Plant EBITDA Agreements guaranteed a monthly aggregate EBITDA of $204,147 (€188,000) from the four SPVs, collectively, for the initial six months following the Closing Date, and thereafter the Plant EBITDA Agreements guarantee an annual aggregate EBITDA of $4,082,946 (€3,760,000) from the four SPVs, collectively. Pursuant to the terms of the Plant EBITDA Agreements, the Company will receive the guaranteed levels of EBITDA, and Austep will receive ninety percent (90%) of the revenue in excess of such levels.

The Helios Loan Agreement

On August 18, 2015, we and two of our wholly-owned subsidiaries, Eastern Sphere Ltd. (“Eastern Sphere”), the parent of Blue Sphere Pavia, and Blue Sphere Pavia, entered into a Long Term Mezzanine Loan Agreement (the “Helios Loan Agreement”) with Helios Italy Bio-Gas 1 L.P. (“Helios”) to finance the Italy Projects Agreement. Under the Helios Loan Agreement, Helios made up to five million euros (€5,000,000) available to Blue Sphere Pavia (the “Helios Loan”) to finance (a) ninety percent (90%) of the total required investment of the first four SPVs acquired, (b) seventy to eighty percent (70-80%) of the total required investment of up to three SPVs subsequently acquired, if applicable, (c) certain broker fees incurred in connection with the acquisitions, and (d) any taxes associated with registration of an equity pledge agreement (as described below). Each financing of an SPV acquisition will be subject to specified conditions precedent and will constitute a separate loan under the Helios Loan Agreement. Helios’s obligation to provide additional funds under the Helios Loan Agreement, in connection with subsequently acquired SPVs, terminated on June 30, 2016.

As of December 31, 2016, the outstanding balance under the Helios Loan was $2,607,000. Subject to specified terms, representations and warranties, the Helios Loan Agreement provides that each loan thereunder will accrue interest at a rate of fourteen and one-half percent (14.5%) per annum, and that Helios is entitled to an annual operation fee of one and one-half percent (1.5%) per annum. Payments of principal, interest and the operation fee are due and payable quarterly. The final payment for each loan will become due no later than the earlier of (a) thirteen and one half years from the date such loan was made available to Blue Sphere Pavia, and (b) the date that the license to produce electricity granted to the relevant SVP expires. Pursuant to the Helios Loan Agreement and an equity pledge agreement, We pledged all our shares in Blue Sphere Pavia to secure all loan amounts utilized under the Helios Loan Agreement.

On December 2015, we borrowed €2,900,000 ($3,149,000) under the Helios Loan Agreement to finance the purchase of the SPVs. No additional funds have since been borrowed.

Fast Charging Battery Technology

On March 2016, we entered into a Share Sale and Purchase Agreement with Voltape Ltd., a company incorporated in Israel (“Voltape”). Pursuant to the Share Sale and Purchase Agreement, we agreed to sell, and Voltape agreed to purchase, 6,860 ordinary shares of Quickcharge Pte. Ltd., a company incorporated in Singapore (“Quickcharge”), such shares representing our entire interest in Quickcharge. In consideration for the shares of Quickcharge, Voltape paid USD $100,000 to the Company. In satisfaction of a condition precedent to the closing of the Share Sale and Purchase Agreement, on March 13, 2016, we entered into a License Termination Agreement with Nanyang Technological University. The Termination Agreement terminates the License Agreement (the “License Agreement”), dated October 30, 2014, between the Company and Nanyang Technological University. The Company has entered the Agreements to divest its interests in this technology and focus on its core businesses.

Strategy

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

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

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

We expect to generate revenue through sales of thermal and electrical energy, energy efficiency technologies and RECs, and by-products, project development services, and tipping fees from accepting waste. On November 18, 2016, our project in the Charlotte, NC Waste to Energy Anaerobic Digester 5.2 MW Plant commenced commercial operations and started to provide its output to Duke Energy pursuant to the power purchase agreement with Duke Energy. The commencement of the commercial operations includes the gradual intake of waste from the facility’s feedstock suppliers, increasing the parasitic load to the digesters, completing the waste-water-treatment resources and completing all other mechanical features needed for the facility to operate at full capacity. As of December 31, 2016, the facility is in its mechanical completion and ramp-up phase of the project. We estimate that this project will be fully completed by April 30, 2017.

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

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

● providing a one-stop, turn-key/build, own and operate/transfer solution;

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

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

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

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

● building local and international teams to support each project;

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

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

On or about June 23, 2017, the Rhode Island Facility connected to the grid, began commissioning and thereafter commenced commercial operations and started to provide output to National Grid pursuant to the National Grid PPA. The Rhode Island Facility is currently in the mechanical completion and ramp-up phase of the project. Commencement of the commercial operations includes the gradual intake of waste from the facility’s feedstock suppliers, increasing the parasitic load to the digesters, completing the waste-water-treatment resources and completing all other mechanical features needed for the facility to operate at full capacity. The Company estimates that the Rhode Island project will be fully completed by the end of the first quarter of 2019.

As of December 31, 2017, we have recorded equity earnings from nonconsolidated affiliates in the amount of $5,405,000, and we have recorded revenue from development fees in the amount of $562,500 in 2017, with respect to the Rhode Island project.

Austep Liquidation /Restructuring and Continuity of Performance at the North Carolina Facility and the Rhode Island Facility

From the Official Records, the Company learned that on June 20, 2017, Austep was put in voluntary liquidation by shareholders’ resolution pursuant the Italian Civil Code and on June 30, 2017, Austep filed a petition in the Bankruptcy Court of Milan (the “Milan Court”) for a creditors’ settlement procedure pursuant to Italian Bankruptcy Law. On July 6, 2017, the Milan Court approved Austep’s petition for a creditors’ settlement procedure providing for Austep to submit (i) a final debt restructuring plan and (ii) a request for certification of the restructuring agreement’s debts.

According to the Official Records, on June 29, 2017, Austep entered into a Business Unit Lease Agreement (BULA) with Andion Italy S.r.l., 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 provided for, among other things, the transfer of Austep’s entire United States operations. Upon effectiveness of the BULA, we had anticipated that the NC Turnkey Agreement, Austep NC O&M Agreement and RI Turnkey Agreement would be transferred to Andion, which did not happen.

As described in more detail above, the NC Turnkey Agreement, Austep NC O&M Agreement and RI Turnkey Agreement relating to Austep’s involvement with the North Carolina Facility and the Rhode Island Facility were terminated, and both OEC and OERI have entered into agreements pursuant to which ES Engineering Services, LLC will perform development and day-to-day operation, management, service, and maintenance operations at the North Carolina Facility and the Rhode Island Facility.

Our Projects in Italy

Our 2015 SPV Facilities

Acquisition of our 2015 SPV Facilities

On May 14, 2015, we entered into a Share Purchase Agreement (the “Italy Projects Agreement”) with Volteo Energie S.p.A., Agriholding S.r.l., and Overland S.r.l. (each, a “Seller” and collectively, the “Sellers”) through our indirect, wholly-owned subsidiary, Bluesphere Pavia S.r.l. (formerly Bluesphere Italy S.r.l.) (“Bluesphere Pavia”). Pursuant to the Italy Projects Agreement, we agreed to purchase one hundred percent (100%) of the share capital of Agricerere S.r.l., Agrielektra S.r.l., Agrisorse S.r.l. and Gefa S.r.l (each, an “SPV” and collectively, the “SPVs”) from the Sellers, who collectively held all of the outstanding share capital of each SPV. Each SPV is engaged in the owning and operating of an anaerobic digestion biogas plant for the production and sale of electricity (each, a “2015 SPV Facility” and collectively, the “2015 SPF Facilities”) to Gestore del Servizi Energetici GSE, S.p.A., a state-owned company, pursuant to the SPVs PPA. All references to, and descriptions of, the Italy Projects Agreement incorporate the terms of an amendment to the same entered into by the parties on December 14, 2015.

Pursuant to the Italy Projects Agreement, we agreed to pay an aggregate purchase price of €5,600,000 for all of the SPVs, which, upon the application of certain credits applied, was adjusted to €5,200,000 (USD $5,646,628) (the “Purchase Price”). Fifty percent (50%) of the Purchase Price, less certain credits, was due to the Sellers on the Closing Date and the remaining balance along with interest at a rate of two percent (2%) per year (the “Deferred Payment”), less certain credits, is due to the Sellers on the third anniversary of the Closing Date. The Purchase Price was 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 € 934,519, 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 € 934,519, 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.

Under the Italy Projects Agreement, EBITDA is defined as “total cash revenues received minus all cash expenditures made during the relevant period excluding principle and interest payments due to the bank and taxes”.

Pursuant to the Italy Projects Agreement, the Company will reimburse the Sellers the VAT amount that was requested and will be requested by the SPVs for the fiscal year of 2014 on or before December 14, 2018. The reimbursed amount will not exceed €1,160,425 and will be refunded to the Sellers only after the amount is refunded to Bluesphere Pavia by the VAT authorities in Italy. Pursuant to the Italy Projects Agreement, we also issued a corporate guarantee to the Sellers, whereby the Company will secure the obligations of Bluesphere Pavia under the Italy Projects Agreement.

On December 14, 2015 (the “Closing Date”), pursuant to the Italy Projects Agreement, we completed the acquisitions of one hundred percent (100%) of the share capital of the “SPVs. On the Closing Date, the Company paid an amount of €1,952,858 (USD $2,143,181), which represented fifty percent (50%) of the Purchase Price adjusted for certain post-closing adjustments and closing costs. The remaining balance of the Purchase Price (balance less the adjusted closing payment) is promised by a note accruing interest at an annual rate of two percent (2%) to each Seller, with such principal and interest accrued due to each Seller on or before the third anniversary of the Closing Date, subject to adjustment to the variation of EBITDA, as described above. The portion of the Purchase Price and all closing costs, pre-closing receivables, fees and related expenses paid at closing were primarily financed by a loan of €2,900,000, obtained pursuant to the Helios Loan Agreement, of which €200,000 was repaid to Helios in March 2016.

The closing of the Italy Projects Agreement was subject to certain conditions precedent including, but not limited to, obtaining consent to the proposed sale and resulting change of control from its lender, Banca IMI, in connection with a certain €22,080,000 Financing Agreement, dated February 25, 2013, between the SPVs, Banca IMI and Intesa San Paolo S.p.A. (the “SPV Financing Agreement”), as well as from other counterparties to certain agreements to which the SPVs are a party. Amounts outstanding under the SPV Financing Agreement are secured by the assets of the SPVs. After the Closing Date, the SPV’s paid a waiver fee of approximately €109,000 to the SPVs’ lender, such amount representing 50% of the fees and expenses charged by the lenders in connection with obtaining these consents. In addition, under the Italy Projects Agreement, the Sellers granted us a special credit of €100,000 per SPV, half of which is allocable to each payment of the Purchase Price. Following the achievement of key milestones under the SPV Financing Agreement, on December 21, 2016, we agreed with the SPVs’ lender to certain revised terms under the SPV Financing Agreement for each SPV, specifically (a) each SPV received a new VAT line of credit equal to €300,000 per SPV, and an extension to each SPV’s existing VAT line of credit for one year, (b) our obligation to fund a debt service reserve account deposit totaling €1,100,000 was terminated, and (c) a minimum cash requirement of €200,000 per account was removed. In addition, on December 21, 2016, the SPVs’ lender also officially approved the Framework EBITDA Agreement. As of December 31, 2017, $15,250,000 was outstanding under the SPV Financing Agreement.

On July 21, 2017, the Company notified the Sellers of its estimated Deferred Payment, pursuant to Article 3.03 of the Italy Projects Agreement regulating the Deferred Payment adjustment mechanism. As of April 16, 2018, two of the three Sellers have accepted the Company’s estimate, and the third Seller, Volteo Energie S.p.A., is reviewing the Company’s estimate subject to an independent opinion of a third party appraiser. Volteo Energie S.p.A., which has a majority interest among the Sellers, is presently going through a bankruptcy procedure.

Termination of our Agreements with Austep to Operate, Maintain and Supervise the 2015 SPV Facilities

As discussed more fully below, the Company has terminated all four Plant EBITDA Agreements with Austep on July 18, 2017. Notwithstanding, these facilities are currently operating and the Company is in the process of replacing Austep with a new operator. The Company believes that the termination of the Plant EBITDA Agreements with Austep and the engagement of a new operator will result in the facilities being operated under terms that are more advantageous to the Company, which the Company believes will improve profitability. Therefore, the Company believes that there will ultimately be no material negative impact resulting from this change in operating partner.

On July 17, 2015, we entered into a Framework EBITDA Guarantee Agreement (the “Framework EBITDA Agreement”) with Austep S.p.A. (“Austep”), an Italian corporation. Austep specializes in the design, construction, operation and servicing of anaerobic digestion plants. The Framework EBITDA Agreement provided a framework pursuant to which Austep performed technical analyses of operating anaerobic digestion plants in Italy that we identified as potential acquisition targets. If and when we acquired such anaerobic digestion plants in Italy, we and Austep had agreed to negotiate individual agreements pursuant to which Austep would operate, maintain and supervise each plant and guarantee agreed-upon levels of EBITDA to us for a specified period. On the Closing Date, all four SPVs entered into Plant EBITDA Agreements with Austep. In accordance with the Plant EBITDA Agreements, Austep operated, maintained and supervised each biogas plant owned by the SPVs until July 12, 2017. The Plant EBITDA Agreements provided that we would receive an annual aggregate EBITDA of €3,760,000 for the four SPVs, collectively, and that Austep would receive ninety percent (90%) of the revenue in excess of such levels.

On July 12, 2017, Austep personnel shut down the engines at all of the 2015 SPV Facilities, and exited all four sites. The Company immediately notified Banca IMI, the SPVs’ lender, and began coordinating with Banca IMA on its remedial action plan. The Company believes that Austep’s failure to perform under the Plant EBITDA Agreements was due to a liquidation/restructuring of Austep. From the Official Records, the Company learned that on June 20, 2017, Austep was put in voluntary liquidation by shareholders’ resolution pursuant the Italian Civil Code and on June 30, 2017, Austep filed a petition in the Bankruptcy Court of Milan (Milan Court) for a creditors’ settlement procedure pursuant to Italian Bankruptcy Law. On July 6, 2017, 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 (ii) a request for certification of the restructuring agreement’s debts. For more information concerning the foregoing, see the subsection entitled “Change in Operator in Italy and Transfer of North Carolina and Rhode Island Project Agreements” above.

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 2015 SPV Facilities, which each SPV had notified Austep of on June 21, 2017, and (ii) Austep, without notice, abandoned the 2015 SPV facilities, the Company had taken over direct management and supervision of the 2015 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 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 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. The Company withheld its costs and damages arising from the loss in generation at the 2015 SPV Facilities, and the costs or remediating and implementing its short-term and long-term operational solutions, from any amounts payable to Austep under the terminated Plant EBITDA Agreements.

On July 14, 2017, the Company entered into a month-to-month Biogas Plants’ Ordinary Management Proposal (the “Interim Agreement”) with Società Agricola Burnigaia Società Semplice d/b/a La Fenice, an Italian company experienced in the operation of biogas plants (“La Fenice”), pursuant to which it operated and supervised the 2015 SPV Facilities. The Interim Agreement with La Fenice terminated in accordance with its terms on September 30, 2017, at which time La Fenice stopped providing operational and supervisory services at the 2015 SPV Facilities.

Our New Agreements to Operate, Maintain and Supervise the 2015 SPV Facilities

On November 7, 2017, each of four SPVs entered into an Operating and Maintenance Contract for an Anaerobic Digestion Plant Using Biogas to Produce Electric Power (each, an “SPV Operating Agreement” and collectively, the “SPV Operating Agreements”) with a new operator, Biogaservizi S.r.l., an Italian company (“Biogaservizi”). Pursuant to the SPV Operating Agreements, Biogaservizi began providing full-service operation, maintenance, and supervision of the 2015 SPV Facilities, including the supply of feedstock, effective as of October 1, 2017. The SPV Operating Agreements are for a term of ten (10) years, and are renewable by the SPVs for one (1) year intervals. The SPV Operating Agreements may be terminated by the SPVs for reasons including, but not limited to, an insolvency or bankruptcy affecting Biogaservizi, revocation of specified state authorizations necessary to operate an SPV facility, and specified operator breaches, failures and delays. An SPV may request a suspension of an SPV Operating Agreement, but if such suspension exceeds thirty (30) days in any contract year and is not attributable to a breach of performance by Biogaservizi, then Biogaservizi shall be entitled to the reimbursement of reasonably incurred and documents costs and expenses resulting from such suspension. Biogaservizi may terminate an SPV Operating Agreement if the SPV fails to make payment of the Operator Fee (defined below) within sixty (60) days of such fee becoming due. In connection with each SPV Operating Agreement, Biogaservizi has until May 4, 2018 to present, to each SPV a first demand guarantee from a leading Italian or EU bank of four hundred thousand Euros (€400,000), to guarantee its obligations, required payments and potential damages under each SPV Operating Agreement (the “Guarantee”). Biogaservizi may reduce the Guarantee to an amount that is at least twenty-five percent (25%) of initial amount if it fully performs for two (2) years following the effective date. Biogaservizi will receive an annual fee for the operation of each 2015 SPV Facility of four hundred and five thousand Euros (€405,000), plus VAT, which is inclusive of all services to be provided (the “Operator Fee”). Biogaservizi guarantees specified performance levels at each 2015 SPV Facility and if it fails to meet such performance levels as measured in six (6) month reference periods, compensatory penalties will be deducted from the Operator Fee, as determined based on a specified formula. Compensatory penalties shall not exceed, on an annual basis, the Operator Fee.

The 2015 SPV Facilities are presently transmitting electricity to the grid, and we anticipate that during the first quarter of 2018, all 2015 SPV Facilities will be generating at full capacity.

The Helios Loan Agreement for the 2015 SPV Facilities

On August 18, 2015, we and two of our wholly-owned subsidiaries, Eastern Sphere Ltd. (“Eastern Sphere”), the parent of Bluesphere Pavia, and Bluesphere Pavia, entered into a Long Term Mezzanine Loan Agreement (the “Helios Loan Agreement”) with Helios Italy Bio-Gas 1 L.P. (“Helios”) to finance the Italy Projects Agreement. Under the Helios Loan Agreement, Helios made up to five million euros (€5,000,000) available to Bluesphere Pavia (the “Helios Loan”) to finance (a) ninety percent (90%) of the total required investment of the first four SPVs acquired, (b) seventy to eighty percent (70-80%) of the total required investment of up to three SPVs subsequently acquired, if applicable, (c) certain broker fees incurred in connection with the acquisitions, and (d) any taxes associated with registration of an equity pledge agreement (as described below). Each financing of an SPV acquisition will be subject to specified conditions precedent and will constitute a separate loan under the Helios Loan Agreement. Helios’s obligation to provide additional funds under the Helios Loan Agreement, in connection with subsequently acquired SPVs, terminated on June 30, 2016.

Subject to specified terms, representations and warranties, the Helios Loan Agreement provides that each loan thereunder will accrue interest at a rate of fourteen and one-half percent (14.5%) per annum, and that Helios is entitled to an annual operation fee of one and one-half percent (1.5%) per annum. Payments of principal, interest and the operation fee are due and payable quarterly. The final payment for each loan will become due no later than the earlier of (a) thirteen and one half years from the date such loan was made available to Bluesphere Pavia, and (b) the date that the license to produce electricity granted to the relevant SPV expires. Pursuant to the Helios Loan Agreement and an equity pledge agreement, Eastern Sphere pledged all its shares in Bluesphere Pavia to secure all loan amounts utilized under the Helios Loan Agreement.

In addition, the Helios Loan Agreement provides for no prepayment of the outstanding amount; however, subject to Helios’ right of first refusal and following 5 years from the date of closing, we may prepay upon meeting certain conditions, including that the net consideration of such prepayment will be the principal amount of the Helios Loan, less loan principal, interest and operation fees previously paid, multiplied by 2.12. The Helios Loan Agreement is subject to certain standard events of default subject to a 7-day cure period, including our failure to make two consecutive installment payments or pay the operations fee, events of insolvency or liquidation, and the declaration of an event of default under each the SPV Financing Agreement.

On December 2015, we borrowed €2,900,000 ($3,149,000) under the Helios Loan Agreement to finance the purchase of the SPVs, of which €200,000 was repaid to Helios in March 2016. No additional funds have since been borrowed. As of December 31, 2017, the outstanding balance under the Helios Loan was $2,804,736.

The Udine SPV Acquisition

Acquisition of our Udine SPV

On June 29, 2017, we entered into a Share Purchase Agreement (the “Udine SPA”) with Pronto Verde A.G. (“Pronto Verde”), 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, which owns and operates a 995 Kw clean-tech plant for the production of electricity from vegetal oil located in Udine, Italy. In connection with the closing of the Udine SPA, Futuris Papia S.r.l. was converted into Futuris Papia S.p.A., a joint stock company organized under the laws of Italy (the “Udine SPV”).

On July 12, 2017, we entered into an Amendment Agreement to the Udine SPA with Pronto Verde and Bluesphere Italy S.r.l., an Italian limited liability company and our wholly-owned subsidiary (“Blue Sphere Italy”), whereby we assigned all of our rights, titles or interests arising out of the Udine SPA to Blue Sphere Italy. The parties also agreed to change the closing date to July 31, 2017. On July 31, 2017, the Company and Blue Sphere Italy entered into a Second and Third Amendment Agreement to the Udine SPA, pursuant to which (a) the closing date was extended to September 4, 2017 and (b) the Company agreed to pay to Pronto Verde an “Advance Payment” in an amount equal to €1,200,000 (USD $1,427,000).

On September 4, 2017, Blue Sphere Italy completed the acquisition of the Udine SPV. The Company paid an aggregate purchase price of €2,408,000 (approximately USD $2,864,051), subject to certain post-closing adjustments, consisting of an advance payment of €1,200,000 (approximately USD $1,427,268) paid on August 1, 2017, and €1,208,000 (approximately USD $1,436,783) paid by the Company at closing, using funds available pursuant to the Second Helios Loan Agreement (as defined below). The transaction included the following: (a) €1,217,000 (approximately USD $1,379,000) to repay the balance of a mortgage loan on the Udine SPV; (b) a commitment to supply feedstock fee and to operate the plant payable to Pronto Verde in the amount of €800,000 (approximately USD $906,000); (c) €100,000 (approximately USD $113,000) to be held in escrow; and (d) €132,000 (approximately USD $149,000) to a former shareholder of the Udine SPV.

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 €1,600,000 (approximately USD $1,912,166) 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. 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.

In September 2017, we borrowed €1,408,000 ($1,682,500) under the Second Helios Loan Agreement to finance the purchase of the Udine SPV. No additional funds have since been borrowed. As of December 31, 2017, the balance of the Second Helios Loan was $1,686,432.

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 CCEngineering 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. The GPOMA became effective upon execution. On November 27, 2017, we notified the Seller that the Udine GPOMA was terminated because, in part, (a) the Seller did not successfully engage the designated supplier to supply vegetal oil, and Futuris Papia was forced to procure vegetal oil from another supplier at a higher cost; (b) the Seller and its operator did not diligently perform specified tasks under the Udine GPOMA, including a proper inspection and review of the facility and preparation of a takeover plan, and Futuris Papia was forced to procure such services from another operator at a higher cost than contemplated by the Udine GPOMA; and (c) due to a number of specified breaches by the Seller to perform under the Udine GPOMA. We reserved our right to recover the damages incurred as a consequence of documented material breaches made in connection with the Udine GPOMA.

Presently, Biogaservizi, the operator of our four other SPVs, is performing general operation and maintenance of the Udine SPV, and OMPI Mottaran S.r.l. is performing operation of the Udine SPV’s engine, subject to our supervision. We have agreed to operate in this capacity with the operators for a period of six (6) months, and then negotiate a longer term agreement for such services.

The Cantu SPV Acquisition

On June 29, 2017, we entered into a Share Purchase Agreement (the “Cantu SPA”) with Pronto Verde, 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 had agreed to pay an aggregate purchase price of €2,200,000 (USD $2,490,000) for the Cantu SPV, subject to an adjustment formula. On November 27, 2017, we notified Pronto Verde that the Cantu SPA was terminated because (a) the deadline for consummation of the closing expired and no agreement to extend the deadline was granted by Blue Sphere, and (b) none of the specified conditions precedent had materialized. On January 12, 2018, we received repayment of €150,000 (approximately USD $179,000) paid to escrow under the SPA. We reserved our right to unspecified damages incurred as a consequence of documented material representations made in connection with the SPA.

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 would purchase thirty-eight and one-half percent (38.5%) of the capital stock of the Cantu SPV 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”). Because we did not ultimately acquire the Cantu SPV, the Down Payment become repayable by the Company with ten percent (10%) interest on December 13, 2017, and any amount of the Down Payment (including interest) that was not timely paid by December 24, 2017 and through March 13, 2018 was subject to penalty interest equal to twenty percent (20%) per annum, and any amounts (including penalty interest) not paid by March 13, 2018 became 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, and 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.

On March 7, 2018, we agreed to settle all unpaid amounts outstanding to Gain in connection with the Gain Down Payment and interest accrued thereon for an amount of €230,126 (approximately USD $288,463). On or before March 15, 2018, we made full payment to Gain, thereby fully terminating the Gain Agreement and any obligations in connection with the Gain Down Payment.

Our Projects in the Netherlands

Presently, we are developing a waste-to-energy anaerobic digester plant in the Netherlands, an equivalent to 10.0 MW plant in Sterskel, Netherlands (the “Sterskel Facility”). On December 8, 2016, Blue Sphere Brabant B.V. (“Blue Sphere Brabant”) won a grant to sell renewable gas from the Rijksdienst voor Ondernemend Nederland (“RVO”) under the Renewable Energy Production Incentive Scheme, for the sale of up to 234,466.589 MWh per year, for a maximum total value of the grant equal to €151,934,350.00 (approximately USD $182,986,964), paid over twelve (12) years, from the date the Sterskel Facility begins production. On September 15, 2017, Blue Sphere Brabant entered into an Agreement for the Purchase and Supply of Green Gas with GasTerra B.V, as amended, pursuant to which the Sterskel Facility will supply a maximum of 3,500 cubic meters per hour of biogas that has been reprocessed into natural gas for a period of twelve (12) years, from January 1, 2020 through January 1, 2032.

On December 5, 2017, Blue Sphere Brabant entered into a Turnkey Agreement for the Design, Construction and Delivery of a Biogas Plant for the Sterksel Facility (the “Sterskel EPC Agreement”) with Anaergia B.V., a private company with limited liability in the Netherlands, pursuant to which Anaergia B.V. will perform the design, supply, engineering, procurement, assembly, commissioning and delivery of the Sterskel Facility with an upgraded biomethane design output capacity of 24,000,000 Nm3/year (or respectively 2,923Nm³/h), for the fixed price of €22,500,000 (approximately USD $26,695,500) payable in accordance with scheduled milestones, with the final payment becoming due upon delivery of a final completion certificate. The term reaching substantial completion is no longer than 20 months after the start date of construction. Also on December 5, 2017, Blue Sphere Brabant entered into a Service, Maintenance and Operation Agreement with Anaergia B.V., pursuant to which Anaergia B.V. will provide the day-to-day operation, service and maintenance at the Sterskel Facility for a term of 12 years beginning on the date that the Sterskel Facility achieves substantial completion.

Blue Sphere Brabant has entered additional agreements required for the construction and operation of the facility, including a lease agreement, the feedstock agreements and an agreement relating to the disposal of the digestate.

Strategy

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

Our model is to acquire or build, own and operate waste-to-energy and clean-tech facilities. We select projects with signed, long-term agreements with waste producers, waste haulers or other sources for feedstock, with national governments or electricity corporations for energy output and with private entities for the sale of other project by-products (such as renewable energy credits, heat and soil amendment). We are currently focused on several types of projects: (i) anaerobic digestion to electricity, (ii) landfill gas to energy, (iii) anaerobic digestion to gas, (iv) gasification, (v) incineration and (vi) energy crop to electricity.

We expect our projects to generate revenue through sales of thermal and electrical energy, energy efficiency technologies and RECs, and by-products, project development services, and tipping fees from accepting waste, as applicable to a particular project. Another component of the clean energy and waste-to-energy industry in the United States is renewable energy credits (“RECs”). A REC represents a MWh or KWh of clean energy. Many states, including North Carolina and Rhode Island, the sites of our two United States projects, require their utilities to prove that a portion of the energy they sell is produced from clean or renewable sources. A REC is used to demonstrate that the relevant unit of energy has a clean or renewable source. Consequently, utilities purchase RECs from producers of clean and renewable energy. Our agreements with Duke Energy and National Grid, for our North Carolina and Rhode Island projects, respectively, provide for “bundled” pricing for the sale of electricity and RECs.

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

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

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

Competition

~~There~~ There are a number of other companies operating in the ~~clean energy and~~ waste-to-energy and clean-tech space, ranging from other project developers to service or equipment providers, buyers and/or investors. Unlike the common market approach in this space (i.e., being solely a project developer, service or equipment provider or a buyer or investor), we seek to provide a one-stop shop, turn-key solution for project development and operation. As described above, our business model is to acquire or develop and manage all aspects of project implementation and sales of the project’s clean energy and by-products. We believe this integrated approach is attractive to project stakeholders and will differentiate us in a positive manner from our competition. We are aware of several competitors in the United States, such as – Harvest Power, Neo Energy, Anaergia, Quasar, CH4 and others. We value these companies, as they are helping to create awareness and credibility for the waste-to-energy space. However, companies in the waste-to-energy industry tend to focus on new or singular technologies, whereas we believe that we have a competitive advantage in being technology agnostic. By having our own technology experts, we are able to focus on finding the best locations where waste is abundant and implementing the best technology for that particular waste stream.

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

Government Regulation

Permitting

Each of our projects in development requires certain government approvals. In the United States, the standard required environmental permits relate to solid waste composting and air quality. All construction and operational permits for our North Carolina and Rhode Island projects have been obtained, except for the operating permit to achieve commercial operation for our Rhode Island project. In Italy, all permits for operation of the projects have been received, and these projects are operational.

All construction and operational permits for our North Carolina and Rhode Island projects have been obtained, except for the operating permit to achieve commercial operation for our Rhode Island project. In Italy, all permits for operation of the projects have been received, and these projects are operational.

Regulatory Changes and Compliance

Many aspects of our operations and facilities are affected by political developments and are subject to both domestic and foreign governmental regulations, including those relating to:

	●	constructing and equipping facilities;
	●	workplace health and safety;
	●	currency conversions and repatriation;
	●	taxation of foreign earnings and earnings of expatriate personnel; and
	●	protecting the environment.

We cannot determine the extent to which new legislation, new regulations or changes in existing laws or regulations may affect our future operations.

Environmental

Our operations and properties are subject to a wide variety of increasingly complex and stringent foreign, federal, state and local environmental laws and regulations, including those governing discharges into the air and water, the handling and disposal of solid and hazardous wastes, the remediation of soil and groundwater contaminated by hazardous substances and the health and safety of employees. Sanctions for noncompliance may include revocation of permits, corrective action orders, administrative or civil penalties and criminal prosecution. Some environmental laws provide for strict, joint and several liability for remediation of spills and other releases of hazardous substances, as well as damage to natural resources. In addition, companies may be subject to claims alleging personal injury or property damage as a result of alleged exposure to hazardous substances. Such laws and regulations may also expose us to liability for the conduct of or conditions caused by others or for our acts that were in compliance with all applicable laws at the time such acts were performed.

These laws and regulations include the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, the Clean Air Act, the Clean Water Act, the Resource Conservation and Recovery Act and similar laws that provide for responses to, and liability for, releases of hazardous substances into the environment. These laws and regulations also include similar foreign, state or local counterparts to these federal laws, which regulate air emissions, water discharges, hazardous substances and waste and require public disclosure related to the use of various hazardous substances. Our operations are also governed by laws and regulations relating to workplace safety and worker health, including the U.S. Occupational Safety and Health Act and regulations promulgated thereunder.

Effect of Existing or Probable Government Regulations on Our Business

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

We ~~believe that our operations comply in all material respects with applicable laws and regulations and that the existence and enforcement~~ 17 of such laws and regulations have no more restrictive an effect on our operations than on other similar companies in our industry. We do not anticipate any material capital expenditures to comply with international, federal and state environmental requirements.

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

Employees

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

Segments and Geographic Information

We have one reporting segment. For information regarding revenue and other information regarding our results of operations for each of our last two fiscal years, please refer to our financial statements included in this Annual Report on Form 10-K and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in Item 7 of this Annual Report on Form 10-K.

Corporate History

We We were incorporated in the state of Nevada on July 17, 2007 and were originally in the business of developing and promoting automotive internet sites. In March 2010, we conducted a reverse merger, name change and forward split of our Common Stock, and current management took over operations, at which point we changed our business focus to become a project integrator in the clean energy production and waste to energy markets. In 2013, we amended and restated our Articles of Incorporation to, among other things, (a) authorize the issuance of 500,000,000 shares of preferred stock, $0.001 par value, in one or more series and with such rights, preferences and privileges as our Board may determine and (b) effect a reverse stock split of our outstanding Common Stock at a ratio of 113-to-1.

In ~~2013~~ On November 23, we2016, ~~amended~~our ~~and~~stockholders ~~restated~~approved ~~our~~a ~~Articles~~reverse split of ~~Incorporation~~our ~~to,~~Common ~~among~~Stock. ~~other~~On ~~things~~March 24, (2017, we effectuated a) ~~authorize~~reverse split of our Common Stock upon the ~~issuance~~filing of ~~500,000,000 shares~~our Certificate of ~~preferred~~Amendment ~~stock, $0~~No.~~001~~ ~~par~~2 ~~value~~to our Amended and Restated Articles of Incorporation, inat ~~one~~a orratio ~~more~~of ~~series~~130-to-1 ~~and~~(the ~~with~~“2017 ~~such~~Reverse ~~rights~~Stock Split”), ~~preferences~~such ~~and~~that ~~privileges~~each as130 ~~our~~shares ~~Board~~ of ~~Directors~~Common ~~may~~Stock ~~determine~~issued and ~~(b)~~outstanding ~~effect~~immediately aprior to the effective time of the 2017 Reverse Stock Split automatically combined into 1 ~~for~~validly ~~113~~issued, ~~reverse~~fully ~~stock~~paid ~~split~~and non-assessable share of our ~~outstanding~~ Common Stock without any further action by the Company or the holder thereof.

Our direct wholly-owned subsidiaries are Eastern Sphere, Binosphere LLC (“Binosphere”), ~~Bluesphere Pavia and~~ Blue Sphere Brabant, Band Bluesphere Italy S.Vr.l. (“~~BSB~~Blue Sphere Italy”). Through our ownership of ~~Blue~~Bluesphere ~~Sphere~~ Pavia, which is owned 100% by Eastern Sphere, we own 100% of Agricerere S.r.l., Agrielekra S.r.l., Agrisorse S.r.l. and Gefa S.r.l. Through our ownership of ~~Eastern~~Blue Sphere Italy, we own 50100% of ~~Sustainable~~Futuris ~~Energy~~Papia ~~Ltd~~S.r.l. ~~(“SEL”)~~Through ~~and~~our ownership of Eastern Sphere, we also own 50% of PureSphere Ltd. We also own a 25% interest in Concord (which owns OEC) and a 22.75% interest in Rhode Island (which owns OERI). On January 31, 2017, we dissolved Johnstonsphere LLC, and on April 30, 2017, we dissolved Sustainable Energy Ltd., neither of which had noany operations. As of April 16, 2018, Blue Sphere Brabant had not commenced operations. Below is a chart of our direct and indirect subsidiaries.

Our Corporate Information

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

Available Information

We also make our ~~annual~~Annual ~~reports~~Reports on Form 10-K, ~~quarterly~~Quarterly ~~reports~~Reports on Form 10-Q and ~~current~~Current ~~reports~~Reports on Form 8-K, and related amendments, available free of charge through our website at www.bluespherecorporate.com as soon as reasonably practicable after we electronically file such material with (or furnish such material to) the Securities and Exchange Commission. The information contained on our website is not incorporated by reference into this Annual Report on Form 10-K and should not be considered to be part of this Annual Report on Form 10-K.

Copies of the reports and other information we file with the Securities and Exchange Commission may also be examined by the public without charge at 100 F Street, N.E., Room 1580, Washington D.C., 20549, or on the internet at www.sec.gov. Copies of all or a portion of such materials can be obtained from the SEC upon payment of prescribed fees. Please call the SEC at 1-800-SEC-0330 for further information.

Item 1A. Risk Factors

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

11 19

Item 1B. Unresolved Staff Comments

Not applicable.

~~Item~~ Item 2. Properties

Our principal executive office is located in North Carolina at 301 McCullough Drive, 4th Floor, Charlotte, NC 28262. WeSince ~~lease~~May 22, 2013, we have leased office space at this site ~~for~~and currently pay $196 per month through May 31, 2017, and have extended the term for an additional 12 months for $186 per month. We also have office space located at 35 Asuta St. Even Yehuda, Israel 40500, for which we pay the operating expenses but do not pay any rent. Each of the SPVs owned by Blue Sphere Pavia lease the property used for the operation of the facilities. We intend to obtain additional working space near our projects if and when we believe this is necessary for the development and operation of the projects. Until such time, we believe that our property is adequate for the conduct of our business.

~~Item 3~~Each of the SPVs owned by Bluesphere Pavia own the real property used for the operation of the facilities, which has been used as collateral to secure the SPVs obligations under the SPV Financing Agreement, as follows: (i) Agrielektra S.r.l. ~~Legal~~owns ~~Proceedings~~the approximately 5.63 acres of real property used for the operation of the SPV, located at Strada Provinciale 29, Alagna (Pavia); (ii) Agricerere S.r.l. owns the approximately 5.85 acres of real property used for the operation of the SPV, located at Strada dei Balzini, Tromello (Pavia); (iii) Agrisorse S.r.l. owns the approximately 6.34 acres of real property used for the operation of the SPV, located at Strada Provinciale 206, Garlasco (Pavia); and (iv) Gefa S.r.l. owns the approximately 4.85 acres of real property used for the operation of the SPV, located at Strada Vicinale di Milano, Dorno (Pavia).

~~From time~~OERI toleases ~~time~~the wereal ~~and~~property ~~our~~in ~~subsidiaries~~Johnston, ~~may~~Rhode beIsland ~~parties~~used tofor ~~legal~~the ~~proceedings~~operation ~~arising~~of in the ~~normal~~Rhode ~~course~~Island Facility. The lease is for a period of ~~our~~15 ~~business.~~years ~~Except as~~beginning ~~noted~~on ~~below~~April 1, we2015, and ~~our~~includes ~~subsidiaries~~two ~~are~~subsequent ~~currently~~renewal ~~not~~terms aof ~~party~~6 and 5 years, ~~nor~~respectively. isThe ~~our~~lease ~~property~~includes ~~subject~~a monthly base rent scale starting at $15,000 toper ~~any~~month ~~material~~in ~~pending~~year ~~legal proceedings.~~1 ~~None~~and ofincreasing ~~our~~each ~~directors,~~year ~~officers,~~up ~~affiliates~~to $22,688.85 orper ~~any~~month ~~owner~~at ofthe ~~record~~end orof ~~beneficially~~the ofinitial ~~more~~term. ~~than~~The ~~five~~current ~~percent~~monthly ~~of our~~rent ~~Common~~is ~~Stock~~$15,450 isper ~~involved~~month. inOEC aowns ~~material~~the ~~proceeding~~approximately ~~adverse~~13.06 toacres usof orreal ~~our~~property ~~subsidiaries~~used orfor ~~has~~the aoperation ~~material~~of ~~interest~~the ~~adverse~~North ~~to us~~Carolina orFacility, ~~our~~located ~~subsidiaries~~at 600 Johnson Road, Charlotte, North Carolina.

~~On October~~The ~~22,~~Udine ~~2016~~SPV, ~~the~~Futuris ~~law~~Papia ~~firm of JS Barkats PLLC filed a complaint against us and Shlomo Palas~~S.p.A., ~~our~~leases ~~Chief~~the ~~Executive~~real ~~Officer, seeking~~property ~~allegedly~~located ~~unpaid~~in ~~legal~~Via ~~fees~~Crimea ~~for~~No. ~~services rendered from June 9~~57, ~~2011 through April 23~~Percoto, ~~2012~~Pavia indi ~~the~~Udine ~~amount~~(UD) ofused ~~USD $428,964.70, plus interest~~ for athe ~~total~~operation of ~~USD $652,000 (the “Barkats Litigation”)~~facility. The ~~Barkats~~lease ~~Litigation~~is ~~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~~a ~~County~~period of ~~New~~17 ~~York~~years ~~(the “New~~beginning ~~York~~on ~~Court”),~~December ~~Index No. 655600/2016. On October 26~~29, ~~2016~~2009, ~~without~~and ~~notice~~renews toautomatically usfor ~~or Mr. Palas or an opportunity to be heard, the New York Court issued~~ a ~~Temporary~~6 ~~Restraining~~year ~~Order~~term ~~(the~~unless ~~“TRO”)~~terminated inby ~~favor~~either JSparty ~~Barkats~~upon ~~PLLC,~~12 ~~prohibiting us~~months’ ~~and~~prior Mrto notice. ~~Palas~~The ~~from~~currently ~~“transferring~~monthly orrent ~~dissipating~~under ~~their assets … to~~ the ~~extent~~lease ofis ~~$652~~€20,000”, ~~pending~~per ~~the~~month ~~return date~~(VAT ofexcluded) JS(approximately ~~Barkats~~USD ~~PLLC’s asset attachment motion~~$23, ~~due November 17~~500), ~~2016.~~and Onis ~~October~~subject ~~28, 2016, we received notice of the foregoing. On October 31, 2016, we removed the Barkats Litigation~~ to ~~federal~~an ~~court,~~annual ~~filed~~increase asbased JSon ~~Barkats~~specified ~~PLLC~~indices v.published ~~Blue~~by ~~Sphere Corporation and Shlomo Palas with~~ the ~~United~~Italian ~~Stated~~National ~~District~~Institute ~~Court,~~for ~~Southern District Court of New York, Docket No~~Statistics. ~~1:16-cv-08404.~~

~~It is~~We ~~the~~intend ~~Company’s~~to ~~position~~obtain ~~that~~additional byworking ~~operation~~space ofnear ~~law,~~our ~~the~~projects ~~TRO~~if ~~expired~~and nowhen ~~later~~we ~~than~~believe ~~November~~this ~~15,~~is ~~2016.~~necessary Onfor ~~November 18, 2016,~~ the ~~Company~~development and ~~Mr.~~operation ~~Palas moved to compel mediation and arbitration~~ of the ~~dispute~~projects. ~~Subsequently,~~Until onsuch ~~December 6~~time, ~~2016,~~we 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. The Company has opposed both motions. We terminated the services of JS Barkats LLC in 2012 and believe ~~the claims brought by JS Barkats PLLC are without merit,~~ that ~~the~~our ~~TRO~~property ~~was~~is ~~improvidently~~adequate ~~granted,~~for ~~and that JS Barkats PLLC misrepresented, mischaracterized and omitted material facts and~~ the ~~law~~conduct ~~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~~our ~~Company~~business.

~~Item~~ 4 Item 3. ~~Mine~~Legal ~~Safety Disclosures~~Proceedings

~~Not applicable~~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.

12 Barkats Litigation

~~PART II~~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 USD $428,964.70, plus interest for a total of USD $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.

~~Item 5~~On October 26, 2016, without notice to us or Mr. ~~Market~~Palas ~~for~~or ~~Registrant~~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 ~~Common~~asset ~~Equity~~attachment motion, ~~Related Stockholder~~due ~~Matters~~November 17, 2016. On October 28, 2016, we received notice of the foregoing. On October 31, 2016, we removed the Barkats Litigation to federal court, filed as JS Barkats PLLC v. Blue Sphere Corporation and ~~Issuer~~Shlomo ~~Purchases~~Palas with the United Stated District Court, Southern District Court of ~~Equity~~New ~~Securities~~York (the “Federal Court”), Docket No. 1:16-cv-08404.

~~Recent Sales~~It is the Company’s position that by operation of ~~Unregistered~~law, ~~Securities~~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.

~~The following~~On ~~are~~July ~~sales~~10, of2017, ~~our~~the ~~unregistered~~Federal ~~securities~~Court ~~during~~granted JS Barkats PLLC’s motion to remand the ~~fiscal~~action ~~year~~to ~~ended~~the ~~December~~New 31York Court, ~~2016~~but ~~that~~denied ~~have~~JS ~~not~~Barkats ~~otherwise~~PLLC’s ~~been reported~~request for costs and fees in ~~our~~bringing ~~periodic~~its remand petition. The Federal Court did not rule upon whether plaintiff’s complaint should be dismissed and/or ~~current~~the ~~reports:~~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.

~~On January~~We 26terminated the services of JS Barkats LLC in 2012 and believe the claims brought by JS Barkats PLLC are without merit, ~~2016~~that the TRO was improvidently granted, weand ~~issued~~that 1JS Barkats PLLC misrepresented,~~000,000~~ ~~shares~~mischaracterized ofand ~~our~~omitted ~~Common~~material ~~Stock~~facts and the law in ~~connection~~seeking ~~with~~the aTRO. ~~private~~We ~~offering~~intend to vigorously defend against the Barkats Litigation, the TRO and ~~pursuant~~any other attempts to aattach ~~subscription agreement~~the ~~dated~~assets ~~June~~of ~~12,~~the ~~2015~~Company.

On ~~February 1, 2016, we issued 540,000 shares of our Common Stock pursuant to a consulting agreement dated April 3, 2015, in consideration~~ 20 ~~for consulting services.~~

~~On February~~Prassas ~~3, 2016, we issued 3-year warrants to purchase up to 1,500,000 shares of our Common Stock at an exercise price of $0.06 per share, in full satisfaction of certain obligations of the Company.~~Litigation

On ~~February~~ March 15, ~~2016~~2017, wePrassas ~~completed~~Capital, aLLC, ~~private~~an ~~offering~~Arizona ~~representing~~limited ~~aggregate~~liability ~~gross~~company (“Prassas”), ~~proceeds~~filed toa complaint against the Company ~~of $1,925,000~~ (the “~~February 2016~~Prassas ~~Offering~~Litigation”), ~~pursuant~~alleging tobreach ~~which~~of wecontract ~~issued~~and further (ia) ~~35,000,000~~seeking ~~shares~~unpaid offees ~~our~~in ~~Common~~the ~~Stock~~amount ~~priced~~of atUSD $01,601,317.~~055~~67 ~~per~~plus ~~share~~interest, ~~the~~(b) ~~closing price~~seeking ~~for~~issuance ~~our shares~~ of ~~Common~~an ~~Stock~~order ~~reported~~of byprejudgment ~~the~~attachment ~~OTCQB~~and ~~Venture~~garnishment ~~Marketplace~~ on the ~~trading~~Company’s ~~day~~bank ~~prior~~accounts, toother ~~the~~property ~~closing~~held ofby the ~~February~~ ~~2016~~Company ~~Offering,~~ and ~~(ii)~~all ~~5-year~~payments ~~warrants~~owed to ~~purchase~~the upCompany tofor 17third parties,~~500,000~~ ~~shares~~(c) ofseeking ~~our Common Stock at~~ an ~~exercise~~injunction ~~price of~~restraining ~~$0.10~~the ~~per~~Company ~~share,~~from ~~which~~transferring ~~was~~funds ~~equal~~or toproperty ~~50%~~outside of the ~~shares~~court’s ~~purchased~~jurisdiction inor alternatively that the ~~offering.~~court ~~The~~appoint ~~Company~~a ~~engaged~~receiver ~~Maxim~~to ~~Group~~manage, ~~LLC~~operate, tocontrol ~~assist in~~and take possession of the ~~offering~~Company’s assets, ~~pursuant~~and to(d) ~~which~~seeking ~~Maxim~~a ~~received~~declaration ~~5-year~~that ~~warrants~~Prassas toCapital, ~~purchase~~LLC (has been granted a) upcontractual right to 2purchase 53,~~800,000~~847 shares of ~~our~~ Common Stock at an ~~exercise~~a price of $06.~~0605~~50 per share ~~and~~ (b)after upgiving effect to ~~1,400,000~~the ~~shares~~Reverse ofStock ~~our~~Split). ~~Common~~The ~~Stock~~Prassas atLitigation anwas ~~exercise~~filed ~~price~~as ofPrassas ~~$0.11~~Capital, ~~per~~LLC ~~share~~v. ~~The~~ ~~form~~Blue ~~and~~Sphere ~~terms~~Corporation ofwith the ~~warrants~~United ~~issued~~States toDistrict ~~Maxim~~Court ~~were~~for ~~substantially~~ the ~~same~~Western asDistrict ~~the~~of ~~warrants~~North ~~issued~~Carolina, toCivil ~~the~~Action ~~February~~No. 153:17-CV-00131. On March 20, ~~2016 investors~~2017, the Company received notice of the foregoing.

On April 10, 2017, the Company filed its answer ~~March~~in 15the Prassas Litigation, ~~2016~~denying the underlying factual allegations contained in the complaint and denying the contention that Prassas is entitled to any relief. The Company further asserted affirmative defenses seeking rescission of the contract, weamong other ~~issued~~relief. 85In addition to filing its answer,~~000~~ ~~shares~~the Company (1) moved for the court to dismiss the Prassas Litigation, because of ~~our~~Prassas’ ~~Common~~failure ~~Stock~~to ~~outstanding~~plead ~~under~~one aor ~~consulting~~more ~~agreement~~essential elements of its claims, ~~dated~~and ~~February~~(2) 22brought against Prassas claims of fraud, breach ~~2015~~of fiduciary duty, constructive fraud, negligence, unjust enrichment and punitive damages. The Company sought reimbursement of amounts fraudulently or negligently billed by Prassas and paid by the Company of not less than $833,000, pre and post judgement interest, attorney’s fees and costs actually incurred in ~~consideration~~defending ~~for~~the ~~consulting~~Prassas ~~services~~Litigation.

On ~~April~~ 13May 10, ~~2016~~2017, wePrassas ~~issued~~filed ~~1,000,000~~its ~~shares~~answer ofto the ~~Common~~Company’s ~~Stock~~response, ofwhereby Prassas moved for the ~~Company~~court to adismiss ~~consultant~~the inCompany’s ~~consideration~~counterclaims ~~for~~alleging ~~corporate finance~~that, among ~~investor~~other ~~communications~~things, ~~and~~the ~~financial~~Company ~~and~~did ~~investor~~not ~~public~~plead ~~relations~~one ~~services~~or more essential elements of its claims. On June 132, ~~2016~~2017, ~~pursuant~~the toCompany responded by filing with the ~~consulting~~court ~~agreement, we~~its ~~issued~~memorandum anin ~~additional~~opposition ~~1,000,000~~to ~~shares~~Prassas’ ofmotion ~~Common~~dismiss ~~Stock~~the asCompany’s counterclaims, and further to motion for a ~~service~~partial ~~bonus~~judgement ~~since~~on the ~~agreement~~pleadings ~~was~~of ~~not~~the ~~terminated~~Company’s ~~prior~~counterclaims. toThe ~~June~~court stayed discovery pending the 9,outcome ~~2016~~of these motions.

On ~~April~~ 13March 30, ~~2016~~2018, wethe ~~issued~~court andenied ~~aggregate~~the ofCompany’s motion ~~875,000~~for ~~shares~~judgment ofon ~~our~~the ~~Common~~pleadings ~~Stock~~and togranted aPrassas’ ~~consultant,~~motion ~~pursuant~~ to ~~consulting~~dismiss ~~agreements dated~~the ~~September~~Company’s 1,counterclaims. ~~2015~~Discovery will proceed and ~~March~~trial 1,is ~~2016,~~scheduled into ~~consideration~~occur ~~for~~January ~~investor~~7, ~~relations and communications services~~2019.

OnThe ~~May~~Company 18believes that Prassas is a disgruntled service provider, ~~2016~~that the claims brought by Prassas are without merit, athat ~~1.5-year~~no ~~warrant~~amounts are owed to ~~purchase~~ ~~shares~~Prassas ofand ~~Common~~that ~~Stock~~amounts, ~~dated~~including ~~May~~those 4,previously ~~2015~~paid to Prassas, ~~was~~are ~~exercised~~payable ~~into~~to ~~700,000~~the ~~shares~~Company. We ofintend ~~Common~~to ~~Stock~~vigorously atdefend anagainst ~~exercise~~the ~~price~~Prassas ofLitigation ~~$0.058 per~~and ~~share,~~any ~~for~~other ~~total~~attempts ~~consideration~~to attach the assets of ~~$40,600~~the Company.

~~On June~~SEC 2, 2016, the Company issued 13,930,742 shares of its Common Stock in consideration of $145,525 in proceeds pursuant to all but one of the investors in a private placement of up to $250,000 of its Common Stock to finance a portion of the funds necessary to complete the acquisitions of the projects by Blue Sphere Pavia closed on December 2, 2015. On or about December 13, 2016, the Company issued the remaining 7,658,129 shares of its Common Stock, in consideration for $83,949 of proceeds.Inquiry

On ~~June~~ 13August 22, ~~2016~~2017, wethe ~~issued~~Company ~~7,103,467~~received ~~shares~~a ofletter ~~Common~~from ~~Stock~~the Division of Enforcement, U.S. Securities & Exchange Commission (the ~~Company~~“SEC”). toThis ~~several~~letter ~~officers,~~requested ~~directors,~~that ~~employees~~we voluntarily provide documents and~~/or~~ ~~consultants of~~other information relating to whether the ~~Company.~~unaudited ~~All~~interim ~~shares~~financial ~~were~~statements ~~issued~~included ~~pursuant~~in toour ~~the~~Quarterly ~~Company’s~~Reports ~~Global~~on ~~Share~~Form ~~and~~10-Q ~~Options~~filed ~~Incentive~~on ~~Enhancement~~February ~~Plan~~22, ~~(2014)~~ 2016 and ~~the~~May ~~Company’s~~23, ~~Global~~2016 ~~Share~~were ~~Incentive~~reviewed ~~Plan~~by ~~(2010)~~an independent public accounting firm, as required by SEC Regulation S-X.

On ~~June~~ On 26February 22, 2016 and on May 23, 2016, we ~~issued~~filed ~~500~~a Transition Report and Quarterly Report on Form 10-Q,~~000~~ ~~shares~~respectively (the “Non-Reviewed Filings”), each of ~~Common~~which ~~Stock~~contained interim financial statements and notes thereto that had not been reviewed by the Company’s independent auditors 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 “Interim Review Requirement”), the circumstances of which were detailed in an explanatory note displayed at the beginning of each Non-Reviewed Filing. The inability of the Company’s independent registered public accounting firm to complete a review of the Company’s interim financial statements was caused when the Company encountered several obstacles to obtaining records from the SPVs, (in ~~full~~connection ~~satisfaction~~with the Company’s acquisition of ~~certain~~the ~~obligations~~2015 ~~under~~SPV Facilities on December 14, 2015) that were necessary to complete the review and preparation of the SPVs’ financial statements. The Company carefully considered the potential impact of the missing financial records on the SPV’s financials, and based on a ~~subscription agreement~~review of the SPV’s trial balances, the Company estimated the aggregate effect of such amount to be immaterial to the Company’s financial statements ultimately contained in the Non-Reviewed Filings. Company management recognized the significance and seriousness of its inability to timely and properly submit the Non-Reviewed Filings in accordance with the Interim Review Requirement, and took several curative steps, including engagement of a new auditor to complete the review of the SPVs financials, hiring of a new Chief Financial Officer of the Company to consolidate a role that had previously been performed by two separate persons and ensuring full disclosure by including a prominently displayed explanatory note on each of the Non-Reviewed Filings. The Company thereafter amended the Non-Reviewed Filings on May 23, 2016 and June 13, 2016, respectively, to file its interim financial statements and notes thereto following the review thereof by the Company’s independent auditors. In response to an inquiry, the Company has provided further information to the SEC regarding the Non-Reviewed Filings, and intends to continue to be fully cooperative with the SEC’s inquiry. Because the Non-Reviewed Filings were not initially made in compliance with the Interim Review Requirement, we can provide no assurances that there will not be adverse consequences to our financial position, business or the market for our Common Stock, from the SEC or any other regulatory authorities.

In ~~June~~ Item and July 2016, The Company conducted an offering (the “June 2016 Offering”) consisting of (a) up to USD $3,000,000 of shares of its Common Stock, priced at the closing price for shares of Common Stock, as reported on the OTCQB Venture Marketplace on the trading day prior to each respective closing of the offering, and (b) five (5) year warrants to purchase shares of its Common Stock in an amount equal to one hundred percent (100%) of the number of shares of Common Stock so purchased by the subscriber, with an exercise price equal to the per share price of the Common Stock, or $0.011 per share, whichever is greater. On July 26, 2016, the Company completed closings of the June 2016 Offering, both such closings representing aggregate gross proceeds to the Company of $1,370,000. In connection with both closings, the Company and subscribers entered into (i) subscription agreements and issued 18,266,668 shares of Common Stock at $0.075 per share, and (ii) warrants to purchase up to 18,266,668 shares of Common Stock at an exercise price of $0.11 per share. The Company engaged Maxim Group LLC to assist in the offering, pursuant to which, Maxim Group LLC received commissions equal to 4.~~44%~~ ofMine ~~the~~Safety gross proceeds raised, warrants to purchase up to 928,000 shares of Common Stock at an exercise price of $0.0825 per share, and warrants to purchase up to 928,000 shares of Common Stock at an exercise price of $0.121 per share.Disclosures

13 Not applicable.

On ~~August 7, 2016, we issued 143,000 shares of Common Stock, in consideration for past capital advisory services rendered to the~~ 21 ~~Company.~~

~~On August~~PART ~~16, 2016, we issued 400,000 shares of Common Stock, in satisfaction of debt of $24,000.~~ II

On ~~September~~ Item ~~15,~~5. ~~2016,~~Market wefor ~~issued~~Registrant’s ~~500,000 shares of~~ Common ~~Stock to a consultant~~Equity, ~~pursuant~~Related toStockholder aMatters ~~consulting~~and ~~agreement~~Issuer ~~dated~~Purchases ~~March~~of ~~1, 2016,~~Equity ~~in consideration for investor relations and communications services.~~ Securities

~~On September~~Recent ~~15,~~Sales ~~2016, we issued 500,000 shares~~ of ~~Common~~Unregistered ~~Stock to a consultant, pursuant to a consulting agreement dated September 1, 2016, in consideration for investor relations and communications services.~~Securities

OnEach ~~October 25, 2016, we completed a private placement~~ of ~~our securities to JMJ Financial, an accredited investor (~~the ~~“October~~below ~~2016~~transactions ~~Financing”).~~were ~~Pursuant~~exempt tofrom the ~~October~~ ~~Financing,~~registration werequirements ~~entered into a Securities Purchase Agreement with the investor thereby agreeing to issue shares~~ of ~~Common Stock, notes, and warrants to purchase shares of Common Stock, in exchange for USD $500,000 paid at closing and an additional USD $250,000 which were paid at December 20, 2016 after~~ the ~~achievement~~Securities ofAct ~~certain milestones, as well as up to an additional USD $250,000~~ in ~~financing~~reliance upon ~~the~~Section ~~mutual agreement with the Investor. Pursuant to the terms of such October 2016 Financing, we agreed to issue to JMJ~~ 4(ia) ~~restricted shares of Common Stock equal to twenty-five percent~~ (~~25%~~2) of the ~~note~~Securities ~~principal paid to us by JMJ~~Act, ~~subject to~~Regulation ~~certain~~D ~~adjustments,~~promulgated ~~(ii)~~under ~~a six (6) month promissory note covering~~ the ~~note~~Securities ~~principal~~Act ~~plus an amount equal to approximately five percent (5%) of the actual note principal~~and, in ~~total~~the ~~USD~~case ~~$1,053,000,~~of ~~and~~sales ~~(iii)~~to ainvestors ~~five~~who ~~(5)~~are ~~year~~non-US ~~warrant to purchase 10~~persons,~~000,000 shares~~ ofRegulation ~~Common~~S ~~Stock~~promulgated ~~with~~under anthe ~~aggregate~~Securities ~~exercise amount of USD $750,000~~Act.

On ~~December~~ 14November 21, ~~2016~~2017, wethe Company issued 7a Convertible Promissory Note to Morningview Financial,~~658~~ LLC,~~129~~ ~~shares~~having a principal amount of ~~our~~$165,000, of ~~Common~~which ~~Stock~~$11,550 constituted an original issue discount, in ~~consideration~~exchange for a purchase price of $83153,~~949~~450 (the ~~pursuant~~“Morningview Note”). In contemplation thereof, the Company and Morningview Financial, LLC entered into a Securities Purchase Agreement. The Morningview Note matures on November 21, 2018, and bears interest at a rate of 5%, which will increase to 18% if not paid in full upon maturity. The holder may convert the ~~July~~Morningview ~~2015~~Note ~~Offering Subscription~~at any time, at conversion price of $1.80 per share, if converted in the first 6 months following issuance, and if converted thereafter, at a conversion price that is the lower of $1.80 per share or equal to a 35% discount to the lowest sale price during the 15 trading days prior to the date of the notice to convert. The Morningview Note may be prepaid, subject to a tiered premium scale ranging from 110% to 130% of outstanding principal. The Morningview Note contains customary terms found in like instruments for conversion price adjustments, and includes a 25% liquidated penalty in the event of a reverse split of Common Stock or specified events of liquidity and bankruptcy. Morningview Financial, LLC has a right of first refusal to match any capital or financing terms offered by any third party. Upon an issuance by the Company of securities which include terms more favorable than the Morningview Note, the holder shall have the option to incorporate such terms into the Morningview Note. The foregoing descriptions of the Morningview Note and Securities Purchase Agreement do not purport to be complete and are qualified in their entirety by reference to the full text of the same, filed as exhibits hereto, and are incorporated herein by reference.

On ~~December~~November 2022, ~~2016~~2017, wethe Company issued ~~950~~a 12% Convertible Promissory Note to JSJ Investments, having a principal amount of $75,000, ~~shares~~of which $3,000 constituted an original issue discount, in exchange for a purchase price of ~~Common~~$72,000 ~~Stock~~(the “JSJ Note”). The JSJ Note matures on November 21, 2018 and is payable thereafter on demand, and bears interest at a rate of 12%, which will increase to 18% on default. In the ~~CEO~~event of a default, the ~~Company~~holder ~~and~~may ~~850~~request immediate repayment,~~000~~ ~~shares of~~which ~~Common~~includes ~~Stock~~a cash default. The holder may convert the JSJ Note any time after 6 months following the issuance date, at a conversion price that is equal to a 35% discount to the ~~Chairman~~lowest sale price during the 15 trading days prior to the date of the ~~Board~~notice to convert. The JSJ Note may be prepaid, subject to a tiered premium scale ranging from 115% to 150% of Weoutstanding ~~under~~principal. ~~their~~The ~~service~~JSJ ~~agreements~~Note ~~with~~contains terms found in like instruments for conversion price adjustments, such as in the event of a merger, reorganization, or sale of the Company, and provides for weighted average price adjustments upon the issuance of common stock equivalent instruments while the JSJ Note is outstanding. WeThe ~~have~~foregoing ~~estimated~~description of the JSJ Note does not purport to be complete and ~~recorded~~ is qualified in its entirety by reference to the ~~fair~~full ~~value~~text of ~~such~~the ~~shares~~same, filed as an ~~expense~~exhibit ~~of $50~~hereto,~~025~~ ~~which~~and ~~was~~is ~~recorded~~incorporated ~~through~~herein ~~the~~by ~~vesting periods~~reference.

On December 304, ~~2016~~2017, wethe Company issued ~~850~~a 12% Convertible Note to EMA Financial,~~000~~ ~~shares~~LLC, having a principal amount of ~~Common~~$125,000 ~~Stock~~of towhich $7,500 constituted an ~~EVP~~original issue discount, in exchange for a purchase price of $117,500 (the ~~under~~“EMA ~~his~~Note”). In ~~service~~contemplation ~~agreement with~~thereof, the Company and EMA Financial, LLC entered into a Securities Purchase Agreement. The WeEMA ~~have~~Note ~~estimated~~matures on December 4, 2018, and ~~recorded~~bears interest at a rate of 12%, which will increase to 24% on default. The holder may convert the ~~fair~~EMA ~~value~~Note any time, at a conversion price that is equal to the lower of ~~such~~(a) ~~shares~~the closing sale price on the day immediately prior to the date of the notice to convert, or (b) a 35% discount to the lowest sale price during the 20 trading days prior to the date of the notice to convert. The EMA Note may be prepaid, subject to a tiered premium scale ranging from 135% to 150% of outstanding amounts due under the EMA Note. The EMA Note contains terms found in like instruments for conversion price adjustments, such as anin ~~expense~~the event of ~~$23~~a merger,~~623~~ ~~which~~reorganization, ~~was~~or ~~recorded~~sale ~~through~~ of the ~~vesting~~Company. The ~~period~~foregoing descriptions of the EMA Note and Securities Purchase Agreement do not purport to be complete and are qualified in their entirety by reference to the full text of the same, filed as exhibits hereto, and are incorporated herein by reference.

On December 3010, ~~2016~~2017, wethe Company issued ~~5,775,000~~a ~~shares~~Convertible ofPromissory ~~Common~~Note ~~Stock~~ to ~~several~~Altshuler ~~officers~~Sham netz, ~~directors~~having a principal amount of $212,800, ~~employees~~which was discounted in the amount of $12,839 and~~/or~~ ~~consultants~~the net amount of $199,961 (the “Altshuler Note”). In contemplation thereof, the Company and Altshuler Sham netz entered into a Securities Purchase Agreement. The ~~All~~Altshuler ~~shares~~Note ~~were~~matures ~~issued~~on ~~pursuant~~December 6, 2018, and bears interest at a rate of 12%, which will increase to 15% on default. The holder may convert the ~~Company’s~~Altshuler ~~Global~~Note ~~Share~~any ~~and~~time, ~~Options~~at ~~Incentive~~a ~~Enhancement~~conversion ~~Plan~~price that is equal to the lower of (~~2014~~a) ( the ~~“2014~~closing ~~Incentive~~sale ~~Plan~~price ~~and~~on the ~~Company’s~~day ~~Global~~immediately ~~Share~~prior ~~Incentive~~to ~~Plan~~the date of the notice to convert, or (~~2010~~b) 35% of the lowest sale price during the 20 trading days prior to the date of the notice to convert. The WeAltshuler ~~has~~Note ~~estimated~~may ~~and~~be ~~recorded~~prepaid in the ~~fair~~ ~~value~~first 6 months, subject to a tiered premium scale ranging from 135% to 150% of ~~such~~outstanding ~~shares~~amounts due under the Altshuler Note. The Altshuler Note contains terms found in like instruments for conversion price adjustments, such as anin ~~expense~~the event of ~~$386~~a merger,~~347~~ reorganization, or sale of the Company, including a right to purchase any convertible securities or rights to purchase stock, warrants, securities or other property issued by the Company while the Crown Note is outstanding on the same terms, on a pro rata basis. The Securities Subscription Agreement contains a 9 month right of first refusal, pursuant to which ~~was~~Altshuler ~~recorded~~Sham ~~through~~netzs may participate, pro rata, on the ~~vesting~~same ~~periods~~terms of a future offering of more than $200,000. The foregoing descriptions of the Altshuler Note and Securities Purchase Agreement do not purport to be complete and are qualified in their entirety by reference to the full text of the same, filed as exhibits hereto, and are incorporated herein by reference.

On ~~December~~ On 30January 3, ~~2016~~2018, wethe Company issued ~~300~~a Convertible Promissory Note to Crown Bridge Partners, LLC, having a principal amount of $339,000, of which $30,000 constituted an original issue discount, in exchange for $309,000, payable in tranches (the “Crown Note”). In contemplation thereof, the Company and Crown Bridge Partners, LLC entered into a Securities Purchase Agreement, pursuant to which the Company agreed to issue the Crown Note and five-year warrants to purchase shares of Common Stock and included piggyback registration rights for Common Stock issued and underlying such securities. On or about January 3, 2018, Crown Bridge Partners, LLC paid $103,000 to the Company under the first tranche, having an original discount amount of $10,000, resulting in ~~consideration~~an ~~for~~outstanding principal ~~past~~balance ~~services~~under ~~rendered~~the aCrown ~~member~~Note of $113,000; as of the ~~Board~~ date hereof, no additional tranches have been funded. The Crown Note matures on January 3, 2019, and bears interest at a rate of ~~Directors~~10%, which will increase to 12% upon default. The holder may convert the ~~Company~~Crown Note any time, at a conversion price that is equal to the lowest sale price during the 20 trading days prior to the date of the notice to convert. The WeCrown ~~have~~Note ~~estimated~~may be prepaid, subject to a tiered premium scale ranging from 135% to 150% of outstanding amounts due under the ~~fair~~Crown ~~value~~Note. The Crown Note contains terms found in like instruments for equitable conversion price adjustments. Crown Bridge Partners, LLC has a right of ~~such~~first ~~shares~~refusal to match any capital or financing terms offered by any third party. On January 3, ~~and~~2018, ~~recorded~~the Company issued to Crown Bridge Partners, LLC a five-year Warrant to purchase up to 56,500 shares of Common Stock at an ~~expense~~exercise price of $193.15 per share,~~770~~ subject to adjustment. The foregoing descriptions of the Crown Note, Securities Purchase Agreement and the Warrant do not purport to be complete and are qualified in their entirety by reference to the full text of the same, filed as exhibits hereto, and are incorporated herein by reference.

On On January 3129, ~~2017~~2018, wethe Company issued ~~404~~6,~~167~~539 shares of Common Stock to ~~the~~its ~~Former~~Executive ~~Chief~~Vice ~~Financial~~President ~~Officer~~pursuant ~~(Israel) of~~ the ~~Company~~Personal ~~and~~Employment ~~350,000 shares~~Agreement ofbetween ~~Common~~the ~~Stock~~Company toand ~~Former Chief Financial Officer (U~~Mr.~~S.)~~ ofKerner, ~~the~~dated ~~Company~~January ~~under~~1, ~~their~~2016, ~~departure~~for ~~settlement~~services ~~agreements~~rendered ~~with~~ to the Company thereunder.

On January 30, 2018, the Company issued a Convertible Promissory Note to Labrys Fund, LP, having a principal amount of $500,000 of which $50,000 constituted an original issue discount, in exchange for $450,000, payable in tranches (the “Labrys Note”). In contemplation thereof, the Company and Labrys Fund, LP entered into a Securities Purchase Agreement. On or about January 30, 2018, Labrys Fund, LP paid $153,000 to the Company under the first tranche, having an original discount amount of $17,000, resulting in an outstanding principal balance under the Labrys Note of $170,000; as of the date hereof, no additional tranches have been funded. The ~~transactions~~ ~~described~~Labrys ~~above~~Note ~~were~~matures ~~exempt~~on ~~from~~July ~~registration~~29, 2018, and bears interest at a rate of 12%, which will increase to 24% upon default. The holder may convert the Labrys Note any time, at a conversion price that the lower of the lowest sale price during the 20 trading days prior to (a) the date of the notice to convert or (b) the date of the Labrys Note. The oustanding amounts due under the Labrys Note may be prepaid prior to maturity, at the default interest rate plus a $750 in fixed fees. The Labrys Note contains terms found in like instruments for equitable conversion price adjustments. Pursuant to the Securities ~~Act~~Purchase Agreement with Labrys Fund, LP, on January 31, 2018, the Company issued 7,500 shares of Common Stock as ~~transactions~~a commitment fee and 85,500 shares of Common Stock, returnable upon proper repayment of the Labrys Note. The foregoing descriptions of the Labrys Note and Securities Purchase Agreement do not ~~involving~~purport ato ~~public~~be ~~offering~~complete and are qualified in their entirety by reference to the full text of the same, filed as exhibits hereto, and are incorporated herein by reference.

14 On February 20, 2018, the Compensation Committee of our Board made grants under the Company’s 2016 Incentive Plan to specified employees, officers, directors and consultants of the Company consisting of, in the aggregate, 124,000 shares of Common Stock and option to purchase, in the aggregate, up to 115,000 shares of Common Stock at $1,80 per share. All 124,000 shares of Common Stock were issued by the Company on March 23, 2018, and Stock Option Agreements dated February 20, 2018 were entered into with each grantee.

~~Market~~ ~~Information~~ On February 20, 2018, our Board approved and adopted the Company’s 2018 Stock Incentive Plan (the “2018 Incentive Plan”), pursuant to which the Company may award up to 570,000 shares of Common Stock, options to purchase shares of Common Stock and other equity-based awards to eligible participants. The terms of the 2018 Incentive Plan are substantially identical to the terms of the 2016 Incentive Plan. As of April 6, 2018, the 2018 Incentive Plan has not been approved by the shareholders of the Company, and no awards have been issued in connection with the 2018 Incentive Plan.

~~Our~~ ~~Common~~ On ~~Stock~~February is25, ~~quoted~~2018, on the ~~OTCQB~~Company ~~under~~entered ~~the~~into ~~symbol~~a ~~“BLSP”.~~loan ~~The~~extension ~~following~~in ~~quotations,~~connection ~~which~~with ~~were~~a ~~obtained~~90-day ~~from~~Loan ~~nasdaq.com, reflect~~Agreement ~~the~~entered ~~high~~into ~~and~~with ~~low~~Global ~~bids~~Smart ~~for~~cards ~~our~~Inc. ~~Common~~on ~~Stock~~August ~~for~~20, ~~the~~2017, ~~periods~~as ~~indicated~~extended through February 20, ~~based~~2018. onOn ~~inter-dealer~~February ~~prices~~25, ~~without~~2018, ~~retail~~the ~~mark-up, mark-down~~parties oragreed ~~commission~~to ~~and~~an ~~may~~extension ~~not~~of ~~represent~~the ~~actual~~loan ~~transactions.~~to ~~The~~April ~~first~~20, ~~day~~2018, onfor which ~~our~~the ~~Common~~Company ~~Stock~~paid ~~traded~~$15,000 ~~under~~and ~~BLSP~~issued ~~was March~~three-year ~~16,~~warrants ~~2010.~~to ~~The~~purchase ~~high~~up ~~and~~to ~~low~~20,000 ~~bid~~shares ~~prices~~ of ~~our~~ Common Stock at the lowest price published on Yahoo finance for the ~~periods~~seven ~~indicated~~(7) ~~below~~trading ~~are~~days asprior ~~follows:~~to the holder’s notice of conversion to Global Smart cards Inc.

Quarter Ended	High		Low
December 31, 2016	$	0.08	$	0.05
September 30, 2016	$	0.08	$	0.06
June 30, 2016	$	0.09	$	0.07
March 31, 2016	$	0.09	$	0.05

On March 5, 2018, the Company issued 21,552 shares of Common Stock to three directors of the Company and 7,184 shares of Common Stock to retired director of the Company for services that were rendered in the fourth quarter of 2017, pursuant to the Company’s Amended and Restated Non-Employee Directors Compensation Plan.

Quarter Ended	High		Low
December 31, 2015	$	0.04	$	0.02
September 30, 2015	$	0.04	$	0.01
June 30, 2015	$	0.07	$	0.02
March 31, 2015	$	0.23	$	0.04

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. Except as noted, none of the foregoing transactions involved any underwriters, underwriting discounts or commissions. All recipients of the foregoing transactions either received adequate information about the Company or had access, through their relationships with the Company, to such information. Furthermore, the Company affixed appropriate legends to the share certificates and instruments issued in each of the foregoing transactions setting forth that the securities had not been registered and the applicable restrictions on transfer.

~~Holders~~ 22

~~As of~~Market December 31, 2016, we had 136 holders of record of our Common Stock, per the listing of stockholders maintained by the Company’s transfer agent, ClearTrust, LLC. This number does not include beneficial owners whose shares are held in the names of various security brokers, dealers, and registered clearing agencies.Information

~~Dividends~~Our Common Stock is quoted on the OTCQB under the symbol “BLSP”. The following quotations, which were obtained from nasdaq.com, reflect the high and low bids for our Common Stock for the periods indicated, based on inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions. The first day on which our Common Stock traded under BLSP was March 16, 2010. The high and low bid prices of our Common Stock for the periods indicated below are as follows:

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

Quarter Ended	High		Low

December 31, 2017	$	2.19	$	1.40
September 30, 2017	$	2.75	$	2.06
June 30, 2017	$	5.75	$	2.70
March 31, 2017	$	8.70	$	4.55

Issuer Purchases of Equity Securities

Quarter Ended	High		Low

December 31, 2016	$	10.53	$	7.02
September 30, 2016	$	10.40	$	6.50
June 30, 2016	$	0.07	$	7.80
March 31, 2016	$	11.70	$	5.20

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.Holders

We As of April 16, 2018, we had no134 ~~share~~holders ~~repurchase~~of ~~activity~~record ~~during~~of our Common Stock, per the ~~twelve~~listing ~~months~~of ~~ended~~stockholders ~~December~~maintained 31by the Company’s transfer agent, ~~2016~~ClearTrust, LLC. This number does not include beneficial owners whose shares are held in the names of various security brokers, dealers, and registered clearing agencies.

15 Dividends

~~Item 6~~We have never paid any cash dividends on our Common Stock and do not anticipate paying any cash dividends on our Common Stock in the foreseeable future. ~~Selected~~We ~~Financial~~intend ~~Data~~to retain future earnings, if any, to fund ongoing operations and the future capital requirements of our business. Any future determination to pay cash dividends will be at the discretion of the Board and will be dependent upon our financial condition, results of operations, capital requirements and such other factors as the Board deems relevant.

~~As a~~Issuer ~~smaller~~Purchases ~~reporting~~of ~~company,~~Equity ~~we are not required to provide the information required by this item.~~Securities

~~Item 7~~On June 17, 2015, our Board approved a share repurchase program (the “Share Repurchase Program”). ~~Management’s~~Under ~~Discussion~~the ~~and~~Share ~~Analysis~~Repurchase Program, we are authorized to repurchase up to $500,000 worth of ~~Financial Condition~~our ~~and~~Common ~~Results~~Stock. We may purchase shares of ~~Operations~~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.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the consolidated audited financial statements and notes thereto included in Part II, Item 8 of this Form 10-K. The following discussion contains forward-looking statements. Forward-looking statements are not guarantees of future performance and our actual results may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such differences include, but are not limited to, those discussed under the heading “Note Regarding Forward-Looking Statements” and in Part I, Item 1A of this Form 10-K under the heading “Risk Factors.” We ~~assume~~had no ~~obligation~~share torepurchase ~~revise~~activity orduring ~~update any~~the ~~forward-looking~~twelve ~~statements~~months ~~for~~ended ~~any~~December ~~reason~~31, ~~except as required by law~~2017.

~~Company~~ ~~Overview~~ 23

~~We are an international developer and independent power producer active around the world in the clean energy~~ ~~production~~ Item ~~and waste to energy markets~~6. WeSelected ~~aspire~~Financial to become a key player in these global markets, working with enterprises with clean energy, waste to energy and related by-product potential to generate clean energy, soil amendments, compost and other by-products. We are currently focusing on projects related to the construction, acquisition or development of biogas facilities in the United States, Italy, the Netherlands, the United Kingdom and Israel.Data

~~Our~~As ~~business model is based on two main activities: we are~~ a ~~Build,~~smaller ~~Own~~reporting ~~& Operate (BOO)~~ company, ~~and~~ we are anot ~~strategic~~required ~~acquirer of already constructed and operational facilities. In 2016, we continued~~ to ~~execute~~provide ~~on our BOO business model by integrating~~ the ~~construction,~~information ~~financing~~required and management of the North Carolina and Rhode Island projects. The North Carolina project commenced commercial operations on November 18, 2016 and we anticipate that the Rhode Island project to commence commercial operations by ~~April~~this ~~30, 2017 and to have a collective capacity of 8~~item.4 MW. Any revenue generated by the North Carolina is recognized as Equity Income (loss) in Non-Consolidated Subsidiaries and any revenue generated by the Rhode Island project is recorded as deferred revenue from nonconsolidated affiliates until the facility is commercially operational. We also executed on our acquisition strategy in 2015 by acquiring four SVPs in Italy, each of which owns an operational anaerobic digester with approximately 1 MW of capacity. 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.

~~Results of Operations – For the~~ ~~Year~~ Item ~~Ended~~7. ~~December~~Management’s ~~31,~~Discussion ~~2016~~and ~~Compared~~Analysis toof ~~the~~Financial ~~Year~~Condition ~~Ended~~and ~~September~~Results ~~30,~~of ~~2015~~Operations

~~Results~~ The following discussion and analysis of ~~Operations~~our financial condition and results of operations should be read in conjunction with the consolidated audited financial statements and notes thereto included in Part II, Item 8 of this Form 10-K. The following discussion contains forward-looking statements. Forward-looking statements are not guarantees of future performance and our actual results may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such differences include, but are not limited to, those discussed under the heading “Note Regarding Forward-Looking Statements” and in Part I, Item 1A of this Form 10-K under the heading “Risk Factors.” We assume no obligation to revise or update any forward-looking statements for any reason, except as required by law.

~~Revenue~~Company ~~from Services~~Overview

~~Revenue~~We ~~from~~are ~~Services~~an ~~for~~international developer and independent power producer active around the ~~twelve-month~~ ~~period~~world ~~ended~~in ~~December~~the ~~31,~~clean ~~2016~~energy ~~were~~production ~~$587~~and waste to energy markets. We aspire to become a key player in these global markets,~~500~~ asworking ~~compared~~with enterprises with clean energy, waste to $0energy ~~for~~and ~~the~~related ~~twelve~~by-~~month~~product ~~period~~potential ~~ended~~to ~~September~~generate 30clean energy, ~~2015~~ soil amendments, compost and other by-products. ~~The~~We ~~increase~~are iscurrently ~~attributable~~focusing on projects related to ~~commencement~~the construction, acquisition or development of biogas facilities in the ~~commercial~~United ~~operation~~States, ofItaly, ~~our~~the ~~North~~Netherlands, ~~Carolina~~the ~~project~~United Kingdom and Israel.

~~General~~ Our business model is based on two main activities: we are a Build, Own & Operate (BOO) company, and ~~Administrative~~we ~~Expenses~~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 project commenced commercial operations on November 18, 2016 and we anticipate that the Rhode Island project to commence commercial operations by April 30, 2017 and to have a collective capacity of 8.4 MW. Any revenue generated by the North Carolina is recognized as Equity Income (loss) in Non-Consolidated Subsidiaries and any revenue generated by the Rhode Island project is recorded as deferred revenue from nonconsolidated affiliates until the facility is commercially operational. We also executed on our acquisition strategy in 2015 by acquiring four SVPs in Italy, each of which owns an operational anaerobic digester with approximately 1 MW of capacity. 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.

~~General~~Results ~~and~~of ~~administrative~~Operations ~~expenses~~– ~~for~~For the ~~year~~Year ~~ended~~Ended December 31, ~~2016~~2017 ~~were~~Compared ~~$7,516,000 as compared~~ to ~~$5,317,000 for~~ the ~~year~~Year ~~ended~~Ended ~~September~~December 3031, ~~2015. The increase is mainly attributable to the increase in compensation expenses to employees and service providers.~~2016

16 Revenue from Services

~~Net~~Revenue from Sales of ~~Loss~~ Electricity & Services for the twelve-month period ended December 31, 2017 were $3,823,000 as compared to $587,500 revenues from services for the twelve-month period ended December 31, 2016. The increase is attributable to the consolidation of the SPVs by our wholly-owned subsidiary, Bluesphere Pavia.

WeUS ~~incurred~~GAAP aaccounting ~~net~~standards ~~loss~~have ofrequired ~~$1,801,000~~Blue ~~for~~Sphere ~~the~~to ~~year~~report ~~ended~~the ~~December~~income ~~31,~~of ~~2016,~~its aswholly ~~compared~~owned tosubsidiaries on a ~~net~~non-consolidated ~~loss~~basis. US ofGAAP ~~$7,462,000 for~~also ~~the~~required ~~year~~Blue ~~ended~~Sphere ~~September~~report ~~30,~~the ~~2015.~~income ~~The~~from ~~decrease~~Nonconsolidated inAffiliates ~~net~~as ~~loss~~Equity isEarnings. Blue ~~mainly~~Sphere ~~attributable~~believes tothat anthese ~~increase~~accounting instandards ~~the~~do ~~nonconsolidated~~not ~~affiliates as~~provide athe ~~result~~most representative description of the ~~commencement~~total ofrevenues generated by the ~~commercial~~company ~~operations~~and ofor ~~our~~its ~~North~~subsidiaries ~~Carolina~~during ~~project~~the past twelve months.

~~Results~~The offollowing ~~Operations~~table –is ~~For~~a ~~the~~detailed ~~Three Months~~representation ~~Ended~~of ~~December~~the ~~31,~~revenues ~~2015~~generated ~~Compared~~by toBlue ~~the~~Sphere ~~Three~~and ~~Months~~its ~~Ended December 31, 2014~~subsidiaries.

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

	December 31,
Sales of Electricity	2017		2016
Agrielektra. S.r.l.	$	1,784	$	2,194
Agricerere, S.r.l.		1,597		705
Agrisorse, S.r.l.		1,824		1,232
Gefa, S.r.l.		1,417		2,095
Futuris Papia S.p.A.		450		-
Total Sales of Electricity		7,072		6,225

Development Services		563		588

Equity income (losses) in Non-Consolidated affiliates		8,083		5,961

Total Gross Revenues	$	17,416	$	12,774

~~Net~~Cost ~~Loss~~of Revenues

We Cost ~~incurred a net loss~~ of ~~$1,288,000~~revenues for the ~~three~~ twelve-month period ended December 31, ~~2015~~2017 were $2,225,000, as compared to ~~a net loss of~~ $~~1,314,000~~0 for the ~~three~~twelve-month period ended December 31, ~~2014~~ 2016. The increase is attributable to the consolidation of the SPVs by our wholly-owned subsidiary, Bluesphere Pavia.

~~Inflation and~~Gross ~~Seasonality~~Profit

In ~~management’s~~ Gross ~~opinion,~~profit ~~our~~for ~~results~~the oftwelve-month ~~operations~~period ~~have~~ended ~~not~~December ~~been~~31, ~~materially~~2017 ~~affected~~were by$1,598,000, ~~inflation~~as orcompared ~~seasonality~~to $587,500 ~~and~~for ~~management does~~the ~~not~~twelve-month ~~expect~~period ~~that~~ended ~~inflation~~December ~~risk~~31, or2016. ~~seasonality~~The ~~would~~increase ~~cause~~is ~~material~~attributable ~~impact~~to onthe consolidation of the SPVs by our ~~operations~~wholly-owned insubsidiary, ~~the~~Bluesphere ~~future~~Pavia.

~~Critical Accounting~~General ~~Policies~~and Administrative Expenses

~~The~~ ~~preparation~~ General ~~of financial statements in conformity with GAAP in the United States requires our management to make assumptions, estimates~~ and ~~judgments~~administrative ~~that~~expenses ~~affect~~for the ~~amounts~~year ~~reported~~ended inDecember ~~the financial statements~~31, ~~including~~2017 ~~the~~were ~~notes thereto~~$6, ~~and related disclosures of commitments and contingencies~~220,000 ifas ~~any.~~compared ~~Note 3~~ to ~~our~~$7,516,000 ~~consolidated~~for ~~audited financial statements describes~~ the ~~significant accounting~~year ~~policies~~ended ~~and~~December ~~methods~~31, ~~used in the preparation of our financial statements~~2016. WeThe ~~consider~~decrease ~~our~~is ~~critical~~mainly ~~accounting~~attributable ~~policies~~ to ~~be those related to share-based payments because they are both important to~~ the ~~portrayal~~decrease ofin ~~our~~compensation ~~financial condition and require management to make judgments and estimates about uncertain matters~~expenses.

~~Liquidity and~~Financial ~~Capital~~Expenses ~~Resources~~(income), net

~~Liquidity~~ is Financial ~~the~~Expenses ~~ability~~(income), ofnet afor ~~company~~the toyear ~~generate~~ended ~~funds~~December to31, ~~support~~2017 ~~its~~were ~~current~~$4,060,000 ~~and~~as ~~future~~compared ~~operations~~to $1,728,000 ~~satisfy~~for ~~its~~the ~~obligations,~~year ~~and~~ended ~~otherwise operate~~December on31, an2016. ~~ongoing~~The ~~basis.~~increase ~~Significant~~is ~~factors~~mainly inattributable to the ~~management~~consolidation of ~~liquidity~~the ~~are~~SPVs ~~funds~~by ~~generated~~our bywholly-owned ~~operations~~subsidiary, ~~levels~~Bluesphere ofPavia ~~accounts receivable~~ and ~~accounts~~increase ~~payable~~in the financing and ~~capital~~financing ~~expenditures~~cost that were available for the Company.

~~As of December 31, 2016, we had cash of $416,000 as compared to $1,888,000 as of December 31, 2015. As of~~ ~~December 31, 2016, we had a working capital deficit of $9,669,000 as compared to $7,505,000 as of December 31, 2015. The decrease~~ 24 in our working capital deficit is mainly attributable to decrease in cash in the amount of $1,472,000, increase in current maturities of debentures and long term loan in the amount of $2,439,000 increase other accounts payable in the amount of $1,008,000. The decrease in our working capital deficit was mitigated by the decrease in deferred revenues from nonconsolidated affiliates in the amount of $3,394,000 due to the commencement of commercial operations of our North Carolina Project.

~~Net~~Gain ~~cash~~from ~~used~~Change in operating activities was $4,819,000 for the year ended December 31, 2016, as compared to $818,000 for the year ended September 30, 2015. The decrease is mainly attributable to the increase in Equity earnings in nonconsolidated affiliates and decrease in change in Fair Value of Warrants Liability ~~expenses. Net cash used in operating activities was $2,125,000 for the three-month period ended December 31, 2015.~~

~~Net cash~~Gain ~~flows~~from ~~used~~Change in ~~investing~~Fair ~~activities~~Value ~~was~~of ~~$60,000~~Warrants Liability for the ~~year~~twelve-month period ended December 31, ~~2016~~2017 was $2,039,000, as compared to $371,390,000 for the ~~year~~ twelve-month period ended ~~September~~December 3031, ~~2015~~2016. ~~Net~~The ~~cash~~gain ~~flows~~is ~~used~~attributable to the decrease in ~~investing~~the ~~activities~~Fair ~~was~~Value ~~$2,143,000~~of ~~for~~our Warrants Liability mainly due to the ~~three~~decrease in the price of shares of our Common Stock. The estimated fair value of our outstanding warrants liability was measured using Black-~~month~~Scholes ~~period~~valuation ~~ended~~models. ~~December 31,~~These ~~2015~~valuation ~~which~~models ~~represents~~involved ~~mainly~~using such inputs as the ~~cash~~estimated ~~used~~fair tovalue ~~acquire~~of the ~~one~~underlying ~~hundred~~stock ~~percent~~at ~~(100%)~~the measurement date, risk-free interest rates, expected dividends on stock and expected volatility of the ~~share~~price ~~capital~~of the underlying stock. The table bellows explains the changes in the Fair Value of ~~SPVs~~Warrants Liability during the twelve-month period ended December 31, 2017 and 2016.

Net cash flows provided by financing activities was approximately $3,393,000 for the year ended December 31, 2016 as compared to approximately $718,000 for the prior period September 30, 2015. The increase in cash provided by financing activities was due to increase in Proceeds from issuance of shares and warrants due to offerings that we conducted during 2016 and decrease in our loan repayments. We have principally financed our operations through the sale of our Common Stock. 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. Our ability to continue as a going concern is dependent upon raising capital from financing transactions and future sales. Net cash flows provided by financing activities was approximately $5,995,000 for the three-month period ended December 31, 2015 and represents mainly cash provided by our $3 million offering of senior debentures and warrants, as further described in our Form 8-K filed with the SEC on December 28, 2015, and loans received in connection with the acquisition of the SPVs.

	Warrants Liability
Balance at January 1, 2016	$	544
Issuance of warrants		2,839
Changes in fair value		(1,338	)
Balance at December 31, 2016	$	2,045
Issuance of warrants		647
Changes in fair value		(2,039	)
Balance at December 31, 2017	$	653

17 Equity Earnings in Nonconsolidated Affiliates

~~To date~~Equity Earnings in Nonconsolidated Affiliates for the twelve-month period ended December 31, we2017 ~~have~~was ~~principally~~$8,083,000 ~~financed~~as ~~our~~compared ~~operations~~to ~~through~~$5,961,000 for the ~~sale~~twelve-month ofperiod ~~our~~ended ~~Common~~December ~~Stock~~31, 2016. The increase is attributable to the ~~issuance~~commencement of ~~debt,~~the commercial operation of our ~~operations~~North ~~in Italy~~Carolina project, which commenced its commercial operations and ~~development~~began ~~fees~~providing ~~received~~output ~~for~~to ~~the~~Duke ~~North~~Energy ~~Carolina~~pursuant to a power purchase agreement on November 18, 2016, and commencement of the commercial operation of our Rhode Island ~~projects.~~project, ~~Although~~which ~~management~~commenced ~~anticipates~~its ~~that~~commercial ~~cash resources~~operations ~~will~~and bebegan ~~available~~providing output to ~~the~~National ~~Company~~Grid Energy pursuant to a power purchase agreement on June 23, ~~distributions~~2017. ~~from~~Until commencement of the ~~Italians~~commercial operations, we had not recorded our share of net earnings generated by the North Carolina and Rhode Island projects it ~~believes~~as ~~existing~~equity ~~cash~~earnings, ~~will~~but ~~not~~rather, behad ~~sufficient~~recorded tothem ~~fund~~as ~~planned~~deferred ~~operations~~revenue ~~and~~in ~~projects~~our ~~investments~~current ~~through the next 12 months~~liabilities.

~~Therefore, we~~Equity ~~are~~Loss ~~still seeking to raise additional funds for future operations and possible project investment, and any meaningful equity or convertible debt financing will likely result~~ in ~~significant~~Nonconsolidated ~~dilution to our existing stockholders. There is no assurance that additional funds will be available on terms acceptable to us, or at all.~~Subsidiaries

~~Off~~Equity earnings in Nonconsolidated Subsidiaries for the twelve-~~Balance~~month period ended December 31, 2017 was $236,000, as compared to a loss of $444,000, for the twelve-month period ~~Sheet~~ended ~~Arrangements~~December 31, 2016. As demonstrated below, our loss is attributable to our share of net losses generated by the SPVs. For more information concerning our Equity in Nonconsolidated Subsidiaries, see Note 5 to our consolidated audited financial statements.

~~As of~~Net ~~December 31, 2016, we had no off-balance sheet arrangements of any nature.~~Loss

~~Change~~ We incurred a net loss of $ 3,908,000 for the year ended December 31, 2017, as compared to a net loss of $1,801,000 for the year ended December 31, 2016. The increase in ~~Fiscal~~net ~~Year~~loss is mainly attributed to an extinguishment of short term loan amounted $2,106,000 and extinguishment of debenture amounted $1,263,000. The increase was mitigated by an increase in gross profit of $1,010,500.

As ~~previously reported, on January 24, 2016, the Company’s Board changed the Company’s fiscal year end from September~~ 25 30 to December 31, effective January 1, 2016. As a result of this change, the Company initially filed a Transition Report on Form 10-Q for the three-month period ended December 31, 2015, and the Company has included the audited financials for the three-month period ended December 31, 2015 with this report.

~~Item 7A.~~Inflation ~~Quantitative~~ and ~~Qualitative Disclosures about Market Risk~~Seasonality

~~As a~~In ~~smaller~~management’s ~~reporting~~opinion, ~~company~~our results of operations have not been materially affected by inflation or seasonality, weand ~~are~~management does not ~~required~~expect tothat ~~provide~~inflation ~~the~~risk ~~information~~or ~~required~~seasonality bywould ~~this~~cause ~~item~~material impact on our operations in the future.

~~Item 8.~~Critical ~~Financial~~Accounting ~~Statements and Supplementary Data~~Policies

The preparation of financial statements ~~required~~in toconformity bewith ~~included~~GAAP in ~~this~~the ~~report~~United ~~appear~~States asrequires ~~indexed~~our management to make assumptions, estimates and judgments that affect the amounts reported in ~~Appendix~~the Afinancial statements, including the notes thereto, and related disclosures of commitments and contingencies, if any. Note 2 to ~~this~~our ~~report~~consolidated ~~beginning~~audited onfinancial ~~page~~statements Fdescribes 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-1based payments and fair value of the acquired assets and liabilities as part of the purchase price allocation because they are both important to the portrayal of our financial condition and require management to make judgments and estimates about uncertain matters.

~~Item 9.~~Liquidity ~~Changes in~~ and ~~Disagreements~~Capital ~~with Accountants on Accounting and Financial Disclosure~~Resources

~~None~~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.

~~Item~~As of December 31, 2017, we had cash of $1,053,000 9Aas compared to $416,000 as of December 31, 2016. ~~Controls~~As of December 31, 2017, we had a working capital deficit of $16,224,00 as compared to $9,669,000 as of December 31, 2016. The decrease in our working capital deficit is mainly attributable to increase in current maturities of debentures and ~~Procedures~~long-term loans in the amount of $3,692,000, increase other accounts payable in the amount of $. 5,525,000 The decrease in our working capital deficit was mitigated by the decrease in Deferred Revenues from Nonconsolidated Affiliates in the amount of $5,658,000 and increase in cash and cash equivalents in the amount of 637,000.

~~Evaluation~~Net cash used in operating activities was $3,395,000 for the year ended December 31, 2017, as compared to $4,819,000 for the year ended December 31, 2017. The decrease is mainly attributed to an extinguishment of ~~Disclosure~~short ~~Controls~~term loan amounted $2,106,000 and ~~Procedures~~extinguishment of debenture amounted $1,263,000 which appear as an expenses in the P&L is adjusted for cash flow purposes and is mitigated by increase in equity earning in non- consolidated affiliate amounted $2,122,000.

~~Our~~Net ~~management~~cash isflows ~~responsible~~used ~~for establishing and maintaining a system of disclosure controls and procedures (as defined~~ in ~~Rule~~investing ~~13a-15(e) under the Exchange Act) that is designed~~activities towas ~~ensure that information required to be disclosed by the Company in the reports that we file or submit under the Exchange Act is recorded~~$2, ~~processed~~197,000 ~~summarized~~for ~~and reported within~~ the ~~time~~year ~~periods~~ended ~~specified~~December ~~in the Commission’s rules and forms. Disclosure controls and procedures include~~31, ~~without limitation~~2017, ~~controls~~as ~~and~~compared ~~procedures designed~~ to ~~ensure~~$60,000 ~~that~~for ~~information required to be disclosed by an issuer in~~ the ~~reports~~year ~~that~~ended itDecember ~~files or submits under the Exchange Act is accumulated and communicated to the issuer’s management~~31, 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 disclosure2016.

~~Pursuant~~Net tocash ~~Rule~~flows ~~13a-15(b)~~provided ~~under~~by ~~the~~financing ~~Exchange~~activities ~~Act,~~was ~~the~~approximately ~~Company carried out an evaluation with the participation of the Company’s management~~$6,237,000 ~~including~~for the ~~Company’s Chief~~year ~~Executive~~ended ~~Officer~~December ~~(“CEO”) and the Company’s Chief Financial Officer (“CFO”)~~31, of2017 ~~the effectiveness of the Company’s disclosure controls and procedures (~~as ~~defined~~compared ~~under~~to ~~Rule~~approximately ~~13a-15~~$3,393,000 ~~(e)~~for ~~under~~ the ~~Exchange~~year ~~Act) as of the three months~~ ended December 31, 2016. ~~Based~~The ~~upon~~increase ~~that~~in ~~evaluation,~~cash ~~the~~provided ~~Company’s~~by ~~CEO~~financing ~~and~~activities ~~CFO~~was ~~concluded~~due ~~that,~~to asincrease ofin ~~the~~Proceeds ~~end~~from issuance of ~~such period,~~shares ~~the Company’s disclosure controls~~ and ~~procedures~~warrants due ~~were~~to ~~not~~offerings ~~effective in ensuring~~ that ~~(i)~~we ~~information~~conducted ~~required~~during. ~~to be~~We ~~disclosed~~have byprincipally usfinanced inour ~~the~~operations ~~reports~~through ~~that we file or submit under~~ the ~~Exchange~~sale ~~Act~~of isour ~~recorded,~~Common ~~processed,~~Stock ~~summarized~~ and ~~reported~~ ~~within~~short ~~the~~terms ~~time~~loans. ~~periods~~The ~~specified~~opinion inof ~~the~~our ~~SEC’s~~independent ~~rules~~registered ~~and~~public ~~forms~~accounting ~~and~~firm ~~(ii)~~on ~~information~~our ~~required~~audited tofinancial bestatements ~~disclosed~~as byof usand for in the ~~reports~~ ~~that~~year weended ~~file~~December or31, ~~submit~~2017 ~~under~~contains ~~the~~an ~~Exchange~~explanatory ~~Act~~paragraph isregarding ~~accumulated~~substantial ~~and~~doubt ~~communicated~~about our ability to ~~our~~continue as ~~management,~~a ~~including~~going ~~our~~concern. ~~principal executive~~Our ~~and~~ability ~~principal~~to ~~financial~~continue ~~officers,~~as ora ~~persons~~going ~~performing~~concern ~~similar~~is ~~functions,~~dependent asupon ~~appropriate~~raising tocapital ~~allow~~from ~~timely~~financing ~~decisions~~transactions ~~regarding~~and ~~required~~future ~~disclosure~~sales.

~~Management~~To isdate, inwe ~~the~~have ~~process~~principally offinanced ~~determining~~our operations ~~how~~through ~~best~~the tosale ~~change~~of our ~~current~~Common ~~system~~Stock, ~~and~~the ~~implement~~issuance aof ~~more~~debt, ~~effective~~our ~~system~~operations toin ~~ensure~~Italy ~~that~~and ~~information~~development ~~required~~fees toreceived befor ~~disclosed~~the North ~~has~~Carolina ~~been recorded, processed, summarized~~ and ~~reported~~Rhode ~~accurately~~Island projects. ~~Our~~Although management ~~acknowledges~~anticipates ~~the~~that ~~existence~~cash ofresources ~~this~~will ~~issue,~~be ~~and intends~~available to ~~develop~~the ~~procedures~~Company, todistributions from ~~address~~the itItalians tooperations, ~~the~~North ~~extent~~Carolina ~~possible~~and ~~given~~Rhode ~~limitations~~Island inprojects ~~financial~~it ~~and~~believes ~~human~~existing ~~resources~~cash inwill ~~and~~not ~~to remediate~~be ~~all~~sufficient ~~the~~to ~~material~~fund planned ~~weaknesses~~operations byand ~~the~~projects ~~end~~investments ofthrough the ~~fiscal~~next ~~quarter~~12 ~~ending June 30, 2017~~months.

~~Changes~~Therefore, we are still seeking to raise additional funds for future operations and possible project investment, and any meaningful equity or convertible debt financing will likely result in ~~Internal~~significant ~~Controls~~dilution to our existing stockholders. There is no assurance that additional funds will be available on terms acceptable to us, or at all.

~~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~~ 26 defined in Rule 13a-15(f) under the Exchange Act) occurred during the three-month period ended December 31, 2016. Based on that evaluation, our CEO and our CFO concluded that changes occurred in the Company’s internal controls over financial reporting during the three-month period ended December 31, 2016 which have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting. Specifically, the Company consolidated the roles and responsibilities of two individuals providing CFO services into one full-time CFO position.

~~Item 9B.~~Off-Balance ~~Other~~Sheet ~~Information~~Arrangements

OnAs ~~February~~of 13December 31, 2017, we ~~issued~~had ano 90off-~~day~~balance ~~Promissory Note~~sheet toarrangements ~~Viskoben Limited for the principal sum~~ of ~~$200,000~~any ~~(the "Viskoben Note")~~nature. The Viskoben Note will mature on May 14, 2017, and bears interest at an absolute rate of ten percent (10.0%) through maturity, or a thirty percent (30.0%) rate of interest calculated annually. Upon an event of default, which in addition to other standard provisions, includes the Company's failure to make payment under the Viskoben Note within 15 days of such payment being demanded by Viskoben Limited, the principal balance and all accrued interest shall immediately become due and payable.

~~The~~Change ~~foregoing description of the Viskoben Note does not purport to be complete and are qualified~~ in ~~its~~Fiscal ~~entirety by reference to the full text of the Viskoben Note filed as Exhibit 10.31 hereto, and incorporated herein by reference.~~Year

18 As previously reported, on January 24, 2016, the Company’s Board changed the Company’s fiscal year end from September 30 to December 31, effective January 1, 2016. As a result of this change, the Company initially filed a Transition Report on Form 10-Q for the three-month period ended December 31, 2015, and the Company has included the audited financials for the three-month period ended December 31, 2015 with this report.

~~PART~~Item ~~III~~7A. Quantitative and Qualitative Disclosures about Market Risk

~~Item~~As ~~10.~~a ~~Directors~~smaller reporting company, ~~Executive~~ ~~Officers~~we ~~and~~are ~~Corporate~~not ~~Governance~~required to provide the information required by this item.

~~Executive~~ Item ~~Officers~~8. Financial Statements and ~~Directors~~Supplementary Data

The ~~following~~financial ~~table~~statements ~~sets~~required ~~forth~~to ~~the~~be ~~names~~included ~~and~~in ~~ages of~~this ~~the~~report ~~members~~appear ofas ~~our~~indexed ~~Board~~in ofAppendix ~~Directors~~A ~~and~~to ~~our~~this ~~executive~~report ~~officers~~beginning ~~and~~on ~~the~~page ~~positions held by each~~F-1. ~~There are no family relationships among any of our directors and executive officers. The officers are appointed by our Board.~~

Name	Age	Position
Joshua Shoham	65	Chairman of the Board, Class III Director
Shlomo Palas	55	Chief Executive Officer, Class III Director
Yigal Brosh	53	Class II Director
Shimon Erlichman	65	Class I Director
Lyron Bentovim	47	Class II Director
David A. Doctor	65	Class I Director
Roy Amitzur	54	Executive Vice President
Ran Daniel	48	Chief Financial Officer
Elad Kerner	49	Executive Vice President

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

~~Joshua Shoham – Chairman of the Board – Mr~~None. Shoham became our Chairman on March 2, 2012. Mr. Shoham has extensive experience in senior executive management and in international business development in the United States, Europe and China. He has held several General Manager positions and is co-founder of several high-tech startups. Mr. Shoham was also a strategic market development consultant responsible for a range of transactions in the Israeli and Chinese traditional and high-tech industries. He previously served as a director on the board of Bio-Cell (TASE: BCEL), which merged its activities into Protalix Biotherapeutics (AMEX: PLX). Mr. Shoham holds an MBA and a B.A. in Economics, both from the Hebrew University of Jerusalem, and an LL.B. degree from the Faculty of Law of Tel-Aviv University. Our Board believes Mr. Shoham’s qualifications to serve as a member of our Board include his extensive experience in senior management and international business development.

~~Shlomo~~Item ~~Palas – Chief Executive Officer and Director – Mr~~9A. ~~Palas~~Controls ~~became our Chief Executive Officer~~ and a director on March 3, 2010. Mr. Palas is a highly experienced entrepreneur who has held executive positions at a number of leading Israeli firms. From 2005 to 2010, he served as an entrepreneur advising companies in the biodiesel industry. Prior to that he was a senior consultant with Mitzuv, a leading management consulting firm, and has served in a variety of marketing roles. Since 2010, Mr. Palas has specialized in the renewable and clean tech industries. He has gained significant experience in renewable and clean tech manufacturing, off-take contracts with leading petrol companies, legal/financial structuring, and fundraising for these industries. He has also developed a large network in private and government sectors in many cities across China. Mr. Palas previously served as Chief Executive Officer of Becco Biofuels China Ltd., which was a company active in the biofuel industry. Mr. Palas participated in the establishment of the largest commercial algae farm in China together with one of China’s largest electrical utilities. Mr. Palas holds a B.A. in Statistics and Management from Haifa University and an M.S. from Baruch College. Our Board believes Mr. Palas’ qualifications to serve as a member of our Board include his significant experience in renewable and clean tech manufacturing and his management and entrepreneurial experience.Procedures

~~Yigal~~Evaluation ~~Brosh – Director – Mr. Brosh has been a member~~ of ~~our~~Disclosure ~~Board~~Controls ~~since May 2014. Mr. Brosh is a director at Abroker Trading & Securities LTD.~~ and Chairman of the Board at Environmental Services Company Ltd. Environmental Services Company is a government-owned national infrastructure company, established for the purpose of handling all the hazardous waste produced in Israel. The company owns the Ramat Hovav plant for the treatment of hazardous waste, which handles a wide variety of organic, inorganic and solid materials. Mr. Brosh previously served as a director at Analyst Portfolio Management Ltd. and is former Chief Executive Officer, director and partner of Millennium Mutual Funds. Mr. Brosh holds a B.A. in Economics and MBA (Hebrew University of Jerusalem) and an investment portfolio management license from the Israel Securities Authority (ISA). Our Board believes Mr. Brosh’s qualifications to serve as a member of our Board include his extensive experience in the environmental and waste management industry and his executive experience.Procedures

~~Shimon~~Our ~~Erlichman~~management –is ~~Director~~responsible ~~– Mr.~~for ~~Erlichman~~establishing ~~has~~and ~~been~~maintaining a ~~member~~system of ~~our~~disclosure ~~Board~~controls ~~since~~and ~~September~~procedures ~~2015.~~(as ~~Mr.~~defined ~~Erlichman~~in ~~previously~~Rule ~~served~~13a-15(e) asunder ~~Chief~~the ~~Financial~~Exchange ~~Officer~~Act) ~~of two~~that ~~Israeli~~is ~~companies~~designed ~~traded~~to onensure ~~the~~that ~~Israeli~~information ~~Stock~~required ~~Exchange~~to ~~and~~be ~~established~~disclosed ~~his~~by ~~own~~the ~~company~~Company in ~~1980,~~the ~~which~~reports ~~provides~~that ~~services~~we ~~to local~~file or submit under the Exchange Act is recorded, processed, summarized and ~~foreign~~reported ~~companies~~within inthe ~~Israel.~~time ~~Mr.~~periods ~~Erlichman~~specified ~~holds~~in athe BCommission’s rules and forms.A. inDisclosure ~~Accounting~~controls and ~~Economics~~procedures ~~from~~include, ~~Bar~~without ~~Ilan~~limitation, ~~University~~controls and isprocedures ~~a member~~designed ofto ensure that information required to be disclosed by an issuer in the ~~Israeli~~reports ~~Institute~~that ofit ~~Certified~~files ~~Public~~or ~~Accountants.~~submits ~~Our~~under ~~Board~~the ~~believes~~Exchange ~~Mr.~~Act ~~Erlichman~~is accumulated and communicated to the issuer’s ~~qualifications~~management, toincluding ~~serve as~~its aprincipal ~~member~~executive ofofficer ~~our~~or ~~Board~~officers ~~include~~and ~~his~~principal financial ~~expertise~~officer ~~and~~or ~~his~~officers, ~~professional~~or ~~experience~~persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

19 Pursuant to Rule 13a-15(b) under the Exchange Act, the Company carried out an evaluation with the participation of the Company’s management, including the Company’s Chief Executive Officer (“CEO”) and the Company’s Chief Financial Officer (“CFO”), of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15 (e) under the Exchange Act) as of the three months ended December 31, 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.

~~Lyron~~Management ~~Bentovim~~is –in ~~Director~~the ~~– Mr.~~process ~~Bentovim~~of ~~has~~determining ~~been~~how abest ~~member~~to ofchange our ~~Board~~current ~~since~~system ~~August 2016. Mr. Bentovim presently serves as President~~ and ~~Chief~~implement ~~Executive~~a ~~Officer of~~more ~~Glimpse~~effective ~~Group,~~system ~~and~~to isensure ~~the~~that ~~founder~~information ~~and~~required ~~Managing Partner of DarkLight Partners, a strategic advisor~~ to ~~small~~be ~~and~~disclosed ~~mid-cap~~has ~~companies. Prior~~been ~~to founding DarkLight Partners~~recorded, ~~from 2014 to 2015~~processed, ~~Mr.~~summarized ~~Bentovim served as Chief Operating Officer~~ and ~~Chief~~reported ~~Financial Officer of Top Image Systems (NASDAQ: TISA)~~accurately. ~~Prior~~Our tomanagement ~~this~~acknowledges ~~position~~the heexistence ~~served as Chief Operating Officer and Chief Financial Officer~~ of ~~NIT~~ ~~Health~~this ~~from 2013 to 2014. From 2009 until 2012~~issue, ~~Mr. Bentovim served as the Chief Operating Officer~~ and ~~the~~intends ~~Chief~~to ~~Financial Officer~~develop ofprocedures ~~Sunrise~~to ~~Telecom~~address ~~Inc.~~it ~~Prior~~ to joining Sunrise Telecom Inc., from 2001 until 2009, Mr. Bentovim was a Managing Director for Skiritai Capital LLC. Mr. Bentovim has over 20 years of industry experience, including his experience as a member of the ~~board of~~extent ~~directors~~possible ~~for~~given ~~public~~limitations ~~and~~in ~~private~~financial ~~companies, including Manhattan Bridge Capital, Inc., RTW Inc., Ault Inc., Top Image Systems, Three-Five Systems Inc., Sunrise Telecom Incorporated,~~ and ~~Argonaut~~human ~~Technologies~~resources ~~Inc. Mr. Bentovim has also served~~ in ~~senior~~ and ~~executive~~ ~~positions~~to ~~with~~remediate ~~WebBrix~~all ~~Inc., USWeb/CKS,~~ the ~~Mitchell~~material ~~Madison~~weaknesses ~~Group~~by ~~LLC~~the ~~and~~end ~~McKinsey & Company Inc. Mr. Bentovim has an MBA from Yale School~~ of ~~Management and a Law degree from~~ the ~~Hebrew~~fiscal ~~University.~~quarter ~~Our~~ending ~~Board~~June ~~believes~~30, Mr2018. ~~Bentovim’s qualifications to serve as a member of our Board include his professional executive experience and experience as a strategic advisor.~~

~~David~~Changes Doctor – Director – Mr. Doctor has been a member of our Board since December 2016. Mr. Doctor presently serves as President and Chief Executive Officer of E4 Carolinas, Inc., a trade association for over 130 energy companies in ~~North~~Internal Carolina and South Carolina. In 2012, Mr. Doctor joined the Duke University Energy Initiative, where he served as a Director and Engagement Administrator, and presently serves as an Energy Industry Fellow. In 2009, Mr. Doctor co-founded Datrix World, LLC, and until 2011 served as Chief Executive Officer. In 2005, Mr. Doctor co-founded Interaction Intelligence Institute, Inc., and until 2009 served as its Chief Executive Officer. From 1997 until 2005, Mr. Doctor served as the University of Louisville’s College of Business Bank One Entrepreneur in Residence. From 2001 through 2003, Mr. Doctor served as Genscape, Inc.’s Chief Executive Officer and on its board of directors. From 1993 through 1997, Mr. Doctor was Chief Executive Officer of a subsidiary of Tenneco, Inc., Tenneco Energy Resources Corporation, a holding company containing 27 energy corporations. In 1994, Mr. Doctor co-founded and served as Chairman, President and Chief Executive Officer of EnTrade Corporation, a U.S. energy trading company which was sold to Tenneco Energy. Prior to that he served as Director of Strategy for Texas Gas Transmission Corporation. Mr. Doctor has established strategy for two Fortune 500 regulated energy utilities, and has co-founded or led seven companies, most of which have been companies in the energy industry. As a Chief Executive Officer, he has created or led more than a dozen start-ups, including energy trading, online collaboration, retail, energy information, consulting and software-as-a-service companies. Mr. Doctor has served on the boards of directors of seven private corporations. He has been twice named an Inc. Magazine/Ernst & Young Entrepreneur of the Year. Mr. Doctor is a 1974 Summa Cum Laude graduate of the University of Detroit. Our Board believes Mr. Doctor’s qualifications to serve as a member of our Board include his extensive leadership experience in the energy industry and his executive and strategic experience with developing and growing early stage companies.Controls

~~Roy~~Our ~~Amitzur~~management, –with ~~Executive~~the ~~Vice~~participation ~~President –~~of ~~Mr. Amitzur has served as~~ our ~~Executive~~CEO ~~Vice~~and ~~President~~CFO, ~~since~~performed ~~August~~an ~~2011.~~evaluation ~~Since 2008 and prior~~ to ~~joining~~determine ~~the~~whether ~~Company, Mr.~~any ~~Amitzur~~change ~~served~~in asour ~~President~~internal ofcontrols ~~Clean~~over ~~Technologies~~financial ~~Group~~reporting ~~Ltd,~~(as adefined ~~holding~~in ~~and~~Rule ~~integration~~13a-15(f) ~~company~~under ~~specializing~~the inExchange ~~investment in~~Act) ~~water~~occurred ~~technologies~~during ~~and~~the ~~water~~three-month ~~and~~period ~~waste~~ended ~~water~~December ~~project~~31, ~~execution~~2017. InBased ~~addition~~on that evaluation, ~~Mr.~~our ~~Amitzur~~CEO ~~has~~and ~~previously~~our ~~managed~~CFO aconcluded ~~number~~that ~~of start-up~~changes ~~companies,~~occurred ~~including~~in ~~Bio~~the ~~Pure~~Company’s ~~Technology~~internal ~~Ltd.,~~controls ~~Proxy~~over ~~Aviation~~financial ~~Systems,~~reporting ~~Inc.,~~during ~~and~~the ~~Aquarius~~twelve-month ~~Technologies~~period ~~Inc.~~ended ~~Mr.~~December ~~Amitzur has~~31, ~~significant~~2017 ~~experience~~which inhave ~~implementing~~materially ~~BOT~~affected, ~~and~~or ~~turn-key~~are ~~projects~~reasonably inlikely ~~water~~to ~~technologies~~materially ~~and~~affect, ~~water~~the ~~and~~Company’s ~~waste~~internal ~~water~~controls ~~execution around~~over ~~the~~financial ~~world~~reporting.

~~Ran~~Item ~~Daniel – Chief Financial Officer – Mr~~9B. ~~Daniel~~Other has served as our Chief Financial Officer since May 2016,. From August 2014 to March 2016, Mr. Daniel served as General Counsel and Head of the Family Office of Elie Tahari Ltd., and from December 2012 to August 2014, he served as Executive Vice President of IDH Properties LLC. Mr. Daniel served as Principal of Daniel Capital Management Inc. from 2009 through December 2012. Mr. Daniel has more than 20 years of financial and business management experience in the United States, Europe and Israel. He has worked with real estate, fashion and high-tech companies as well as high net worth individuals. He has been involved with financing, project management, M&A and real estate transactions. Mr. Daniel is licensed as a Certified Public Accountant (CPA) in the United States and Israel, admitted to practice law in the State of New York, licensed as a Real Estate Broker in the State of New York and a Chartered Financial Analyst (CFA). Mr. Daniel is a member of the CFA Institute, the New York Society of Security Analysts and the New York State Bar Association. Mr. Daniel holds a Bachelor of Economics, a Bachelor of Accounting and an MBA in Finance from the Hebrew University, as well as a Graduate Degree in Law from Bar-Ilan University. Our Board believes Mr. Daniel’s qualifications to serve as our Chief Financial Officer include his extensive chief financial executive experience, his expertise in reporting and finance-related activities for international operations, and his experience in M&A and real estate activities.Information

~~Dr.~~CFO Elad Kerner – Executive Vice President – Dr. Kerner has served as our Executive Vice President since January 2016. Dr. Kerner has a Ph.D. in law from Bar-Ilan University and brings wealth of knowledge in economics, finance and management. Dr. Kerner is an expert in commercial transactions, international investment, mergers & acquisitions, corporate finance and corporate governance. Before joining Blue Sphere, Dr. Kerner was General Counsel for Israel Aerospace Industries, Ltd, was the Chief Executive Officer of Toptrio Group and was a Partner in the law firm of Shugol, Ketzef, Ehrlich, Kerner & Co. Dr. Kerner was a Lieutenant Colonel and Military Judge in the Israeli Defense Forces.Change

20 On April 5, 2018, the Company reported via Current Report on Form 8-K that Mr. Ran Daniel resigned as Chief Executive Officer effective April 1, 2018 and would continue to provide transitional support services through April 30, 2018. As a correction, a formal resignation as of April 1, 2018 was not tendered by Mr. Daniel. As of April 1, 2018, Mr. Daniel ceased serving as the Company’s Chief Financial Officer, and the agreement between the Company and Mr. Daniel had been to provide transitional support and financial and reporting services through May 31, 2018, not April 30, 2018. However, Mr. Daniel is no longer providing transitional support and financial and reporting services to the Company.

~~Legal Proceedings~~Maturity Date Extensions to the Company’s Outstanding Debentures

WeThis ~~know~~foregoing ~~of no~~summarizes ~~pending~~transactions ~~proceedings~~previously inreported ~~which~~by ~~any~~the ~~director,~~Company ~~officer,~~on orForm ~~affiliate~~8-K isfiled ~~either~~on aDecember ~~party adverse to us~~28, ~~or our subsidiaries~~2015, oron ~~has a~~Form ~~material~~8-K ~~interest~~filed ~~adverse~~on toMarch us24, ~~or our subsidiaries~~2017, ~~except~~on ~~for~~Form ~~our~~8-K/A ~~Chief~~filed ~~executive~~on ~~Officer~~December 28, ~~Shlomi Palas~~2017, ~~who~~and ison aForm co8-~~defendant in~~K/A ~~the~~filed ~~Barkats~~on ~~Litigation~~April as9, ~~described above~~2018.

~~None~~As reported on Form 8-K/A by the Company on December 28, 2017, on December 23, 2015, the Company completed an offering with six investors (the “2015 Debenture Holders”), thereby issuing $3,000,000 of our ~~executive~~ ~~officers~~two-year or11% ~~directors~~Senior ~~have~~Debentures (ithe “2015 Debentures”) ~~been~~and ~~involved~~warrants into ~~any~~purchase ~~bankruptcy~~up ~~proceedings~~to ~~within~~61,544 ~~the~~shares ~~last~~of ~~five~~Common ~~years~~Stock, with 50% of such shares exercisable at a price per share of $6.50 and the other 50% of such shares exercisable at price per share of $9.75 (iiall such warrants, the “2015 Debenture Warrants”). ~~been~~On ~~convicted in~~March 24, 2017, the Company and five of the six 2015 Debenture Holders, representing an aggregate principal balance of $2,000,000, amended the 2015 Debentures to provide that some or ~~has~~all ~~pending~~of ~~any~~the ~~criminal~~principal ~~proceedings~~balance, and accrued but unpaid interest thereon, is convertible into shares of our Common Stock at the 2015 Debenture Holders’ election. The 2015 Debenture Debentures initially matured on December 22, 2017 (~~other~~the ~~than~~“2015 ~~traffic~~Debenture ~~violations~~Maturity Date”). Between December 22, 2017 and ~~other~~December ~~minor~~28, ~~offenses~~2017, the Company and the 2015 Debenture Holders entered into a letter agreement dated December 21, 2017 (the “First 2015 Debenture Letter Agreement”), pursuant to which (~~iii~~a) ~~been~~the ~~subject~~Company and the 2015 Debenture Holders extended the 2015 Debenture Maturity Date to ~~any order~~April 3, ~~judgment~~2018; or(a) ~~decree~~the ~~enjoining,~~Company ~~barring,~~agreed ~~suspending~~to orpay ~~otherwise~~to ~~limiting~~the ~~involvement~~2015 Debenture Holders, in ~~any~~the ~~type~~aggregate, $150,000, of ~~business~~which $30,000 ~~securities or~~was ~~banking~~paid ~~activity~~and $120,000 was payable on or before April 3, 2018; (ivc) ~~been~~the ~~found~~Company toand ~~have~~the ~~violated~~2015 ~~any~~Debenture ~~Federal,~~Holders ~~state~~amended orthe ~~provincial~~exercise ~~securities~~price orof ~~commodities~~the ~~law~~2015 Debenture Warrants to $1.60 per share; and ~~such finding~~(d) ~~has~~the ~~not~~Company ~~been~~issued ~~reversed~~to the 2015 Debenture Holders five-year warrants to purchase, ~~suspended~~in orthe ~~vacated~~aggregate, up to 224,550 shares of Common Stock at $1.60 per share (the “First New Warrants”).

~~Corporate Governance~~On April 3, 2018, the Company and the 2015 Debenture Holders entered into a second letter agreement (the “Second 2015 Debenture Letter Agreement”), pursuant to which the Company and the 2015 Debenture Holders agreed to new terms governing repayment of the 2015 Debentures consisting of three new extensions to the 2015 Debenture Maturity Date, whereby the parties agreed to extend the 2015 Debenture Maturity Date to May 7, 2018 (the “Tier 1 Maturity Date”), and any amounts not paid by the Tier 1 Maturity Date will become automatically subject to a 2015 Debenture Maturity Date of June 30, 3018 (the “Tier 2 Maturity Date”), and any amounts not paid by the Tier 2 Maturity Date will become subject to a 2015 Debenture Maturity Date of December 31, 2018 (the “Tier 3 Maturity Date”). On April 3, 2018, five of the six 2015 Debenture Holders and the Company entered into a Third Amendment to Senior Debenture and the remaining 2015 Debenture Holder and the Company entered into a Second Amendment to Senior Debenture, all such amendments being on substantially the same terms (collectively, the “April 2018 Debenture Amendments”), to implement the terms of the Second 2015 Debenture Letter Agreement, as follows: (a) as consideration for the Tier 1 Maturity Date, the Company shall pay to the Holders, on or before the Tier 1 Maturity Date, an aggregate fee of $241,315 consisting of amounts of fees and interest outstanding, plus $30,000 as an extension fee; (b) as consideration for the Tier 2 Maturity Date, if and to the extent applicable, the Company will pay to the 2015 Debenture Holders, on or before the Tier 2 Maturity Date, an extension fee of $30,000; and (c) as consideration for the Tier 3 Maturity Date, if and to the extent applicable: (i) commencing on July 1, 2018, the 2015 Debentures shall accrue aggregate interest at the rate of $2,000 per day; and (ii) the Company shall pay to the 2015 Debenture Holders an aggregate fee, on or before the Tier 3 Maturity Date, equal to $150,000. Interest on the Debenture will continue to accrue at the rate of eleven percent (11%) until repaid and through the Tier 2 Maturity Date. Also on April 3, 2018, in connection with the Second Letter Agreement, the Company issued to the 2015 Debenture Holders five-year warrants to purchase, in the aggregate, up to 227,272 shares of Common Stock at $1.60 per share, in substantially the same form as the First New Warrants.

~~Board~~February ofand ~~Directors~~August 2017 Loan Agreement

WeOn ~~currently~~February ~~have~~7, ~~six~~2017, ~~directors~~the ~~serving~~Company onentered ~~our~~into ~~Board~~a 90-day Loan Agreement with Viskoben Limited to borrow $200,000 at a quarterly interest rate of ~~Directors~~ten percent (10.0%), Aor ~~majority~~thirty percent of(30.0%) if calculated annually. On June 27, 2017, the ~~authorized~~Loan ~~number~~was offully ~~directors~~paid ~~constitutes~~by the Company. On August 20, 2017, the Company entered into a ~~quorum~~90-day Loan Agreement with Global Smart cards Inc., an affiliated party of ~~the~~Viskoben ~~Board~~Limited ~~for~~to ~~the~~borrow ~~transaction~~$200,000 at a quarterly interest rate of ~~business~~ten percent (10. ~~The~~0%). ~~directors~~As ~~must~~of beDecember ~~present~~31, at2017, ~~the~~this ~~meeting~~note towas ~~constitute~~not apaid ~~quorum~~and extended through February 20, 2018 in consideration of $7,600. ~~However~~On February 25, ~~any~~2018, ~~action~~this ~~required~~loan orwas ~~permitted~~extended to beApril ~~taken~~20, by2018 ~~the Board~~in ~~may~~consideration beof ~~taken~~$15,000 and ~~without~~three-year awarrants ~~meeting~~to ifpurchase ~~all~~up ~~members~~to 20,000 shares of Common Stock at the ~~Board~~lowest ~~consent~~price inpublished ~~writing~~on Yahoo finance for the seven (7) trading days prior to the ~~action~~holder’s notice of conversion.

~~We are not a listed issuer, as such term is defined~~ ~~in Rule 10A-3 of the Exchange Act, and are therefore not subject to director independence standards. However, using the definition~~ 27 ~~of “independent director” from NASDAQ Rule 5605(a)(2), the following directors would be considered independent: Yigal Brosh, Shimon Erlichman, David Doctor and Lyron Bentovim.~~

~~Our~~PART directors are elected by the vote of a majority in interest of the holders of our Common Stock and hold office until the earlier of his or her death, resignation, removal or expiration of the term for which he or she was elected and until a successor has been elected and qualified. The Board may also appoint directors to fill vacancies on the Board created by the death, resignation or removal of any director. Our Board consists of three classes of directors, apportioned as equally as possible, each of which is elected every three years.III

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

21 Executive Officers and Directors

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

On October 12, 2015, our Board designated the following three committees of the Board: an Audit Committee, a Finance Committee and an Administration and Management Committee. On November 20, 2016, our Board designated the following two committees of the Board: a Compensation Committee and a Nominations Committee.

Name	Age	Position
Joshua Shoham	66	Chairman of the Board, Class III Director
Shlomo Palas	56	Chief Executive Officer, Class III Director
Yigal Brosh	54	Class II Director
Shimon Erlichman	67	Class I Director
David A. Doctor	67	Class I Director
Roy Amitzur	55	Executive Vice President
Yosef Keret	51	Chief Financial Officer (as of April 1, 2018)
Elad Kerner	50	Executive Vice President

~~Shimon~~Joshua ~~Erlichman~~Shoham is– Chairman of the Board – Mr. Shoham became our Chairman ofon March 2, 2012. Mr. Shoham has extensive experience in senior executive management and in international business development in the ~~Audit Committee~~United States, Europe and ~~Yigal~~China. ~~Brosh~~He has held several General Manager positions and ~~Lyron~~is ~~Bentovim~~co-founder ~~are~~of ~~its~~several ~~members~~high-tech startups. ~~The~~Mr. ~~Audit~~Shoham ~~Committee~~was isalso a strategic market development consultant responsible for, ~~among~~a ~~other~~range ~~things,~~of ~~overseeing the~~transactions ~~financial~~in ~~reporting~~the Israeli and ~~audit~~Chinese ~~process~~traditional and ~~evaluating~~high-tech ~~our~~industries. ~~internal~~He ~~controls~~previously ~~over~~served ~~financial~~as ~~reporting.~~a ~~The~~director ~~Board~~on ~~has~~the ~~determined that~~board ~~Yigal~~of ~~Brosh~~Bio-Cell (TASE: BCEL), ~~Shimon~~which ~~Erlichman~~merged ~~and~~its ~~Lyron~~activities ~~Bentovim~~into ~~would~~Protalix ~~each~~Biotherapeutics be(AMEX: ~~considered~~PLX). ~~“independent~~Mr. ~~directors”~~Shoham holds an MBA and ~~“Audit Committee~~a ~~financial~~B.A. ~~experts”~~in ~~within~~Economics, both from the ~~meaning~~Hebrew University of Jerusalem, and an LL.B. degree from the ~~NASDAQ~~Faculty of Law of Tel-Aviv University. Our Board believes Mr. Shoham’s qualifications to serve as a member of our Board include his extensive experience in senior management and ~~Exchange~~international ~~Act~~business ~~rules~~development.

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

~~The~~Yigal ~~members~~Brosh – Director – Mr. Brosh has been a member of ~~the~~our ~~Administration~~Board ~~and~~since ~~Management Committee~~May ~~are~~2014. ~~Shlomo~~Mr. ~~Palas~~Brosh is a director at Abroker Trading & Securities LTD. and ~~Joshua~~Chairman ~~Shoham~~of the Board at Environmental Services Company Ltd. Environmental Services Company is a government-owned national infrastructure company, established for the purpose of handling all the hazardous waste produced in Israel. The ~~Administration~~company ~~and~~owns ~~Management~~the ~~Committee~~Ramat isHovav ~~responsible~~plant for the treatment of hazardous waste, ~~among~~which ~~other~~handles ~~things~~a wide variety of organic, ~~managing~~ inorganic and ~~overseeing~~solid ~~daily~~materials. ~~operations~~Mr. Brosh previously served as a director at Analyst Portfolio Management Ltd. and ~~transactions~~is former Chief Executive Officer, director and partner of Millennium Mutual Funds. Mr. Brosh holds a B.A. in Economics and MBA (Hebrew University of Jerusalem) and an investment portfolio management license from the ~~ordinary~~Israel ~~course~~Securities Authority (ISA). Our Board believes Mr. Brosh’s qualifications to serve as a member of our ~~business~~Board include his extensive experience in the environmental and waste management industry and his executive experience.

~~Yigal~~Shimon ~~Brosh~~Erlichman is– ~~the~~Director ~~Chairman~~– ofMr. ~~the~~Erlichman ~~Compensation Committee,~~has ~~and~~been ~~Shimon~~a ~~Erlichman~~member isof aour ~~member~~Board since September 2015. ~~The~~Mr. ~~Compensation~~Erlichman ~~Committee~~previously isserved ~~responsible~~as ~~for,~~Chief ~~among~~Financial ~~other~~Officer ~~things,~~of ~~establishing~~two ~~and overseeing~~Israeli companies traded on the ~~Company’s~~Israeli ~~executive~~Stock Exchange and ~~equity~~established ~~compensation~~his ~~programs~~own company in 1980, ~~establishing~~which ~~performance~~provides ~~goals~~services ~~and~~to ~~objectives,~~local and ~~evaluating~~ ~~performance~~foreign ~~against~~companies ~~such~~in ~~goals~~Israel. ~~and~~Mr. ~~objectives~~Erlichman holds a B.A. ~~The~~in ~~Board~~Accounting ~~has~~and ~~determined~~Economics ~~that~~from ~~Yigal~~Bar ~~Brosh~~Ilan University and ~~Shimon~~is ~~Erlichman~~a ~~would each~~member beof ~~considered~~the ~~“independent~~Israeli ~~directors”~~Institute ~~within~~of ~~the~~Certified ~~meaning~~Public Accountants. Our Board believes Mr. Erlichman’s qualifications to serve as a member of ~~the~~our ~~NASDAQ~~Board include his financial expertise and ~~Exchange~~his ~~Act~~professional ~~rules~~experience.

~~David Doctor is the Chairman of the Nominations~~ ~~Committee, and Shimon Erlichman and Lyron Bentovim are its members.The Nominations Committee is responsible for, among other things,~~ 28 establishing and overseeing the Company’s director nominations process and procedures, developing and maintaining the Company’s corporate governance policies, and any related matters required by federal securities laws. The Board has determined that David Doctor, Lyron Bentovim and Shimon Erlichman would be considered “independent directors” within the meaning of the NASDAQ and Exchange Act rules.

~~Current~~David ~~copies~~Doctor – Director – Mr. Doctor has been a member of our Board since December 2016. Mr. Doctor presently serves as President and Chief Executive Officer of E4 Carolinas, Inc., a trade association for over 130 energy companies in North Carolina and South Carolina. In 2012, Mr. Doctor joined the ~~charters~~Duke University Energy Initiative, where he served as a Director and Engagement Administrator, and presently serves as an Energy Industry Fellow. In 2009, Mr. Doctor co-founded Datrix World, LLC, and until 2011 served as Chief Executive Officer. In 2005, Mr. Doctor co-founded Interaction Intelligence Institute, Inc., and until 2009 served as its Chief Executive Officer. From 1997 until 2005, Mr. Doctor served as the University of Louisville’s College of Business Bank One Entrepreneur in Residence. From 2001 through 2003, Mr. Doctor served as Genscape, Inc.’s Chief Executive Officer and on its board of directors. From 1993 through 1997, Mr. Doctor was Chief Executive Officer of a subsidiary of Tenneco, Inc., Tenneco Energy Resources Corporation, a holding company containing 27 energy corporations. In 1994, Mr. Doctor co-founded and served as Chairman, President and Chief Executive Officer of EnTrade Corporation, a U.S. energy trading company which was sold to Tenneco Energy. Prior to that he served as Director of Strategy for Texas Gas Transmission Corporation. Mr. Doctor has established strategy for two Fortune 500 regulated energy utilities, and has co-founded or led seven companies, most of which have been companies in the ~~Audit Committee~~energy industry. As a Chief Executive Officer, ~~Finance~~he ~~Committee~~has created or led more than a dozen start-ups, ~~Compensation~~including ~~Committee~~energy trading, online collaboration, retail, energy information, consulting and ~~Nominations~~software-as-a-service ~~Committee~~companies. ~~are~~Mr. ~~available~~Doctor has served on ~~our~~the ~~corporate~~boards ~~website~~of atdirectors ~~http:~~of seven private corporations. He has been twice named an Inc. Magazine/~~/www~~Ernst & Young Entrepreneur of the Year.~~bluespherecorporate~~ Mr.~~com~~ Doctor is a 1974 Summa Cum Laude graduate of the University of Detroit. Our Board believes Mr. Doctor’s qualifications to serve as a member of our Board include his extensive leadership experience in the energy industry and his executive and strategic experience with developing and growing early stage companies.

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

OnYosef Keret – Chief Financial Officer - Mr. Keret has served as our Chief Financial Officer since April ~~27,~~2018. ~~2016~~From August 2015 to October 2017, ~~our~~Mr. Keret ~~Board~~served ~~approved~~as the Chief Executive Officer and ~~adopted a~~Managing ~~code~~Director of ~~ethics~~Weebit-Nano Ltd. (ASX:WBT). From October 1996 to October 2015, Mr. Keret served as the ~~“Code~~Chief Financial Officer of ~~Ethics”)~~numerous public and private companies, including Eric Cohen Books Ltd. ~~The~~& Burlington ~~Code~~English ofLtd., ~~Ethics~~Daimler isFinancial ~~applicable~~Services toIsrael ~~all~~Ltd., ofPluristem ~~our~~Life ~~directors~~Systems Inc. (NASDAQ:PST), ~~officers~~M.L.L Software and ~~employees,~~Computers ~~including~~Industries ~~our~~Ltd. ~~principal~~(TASE:MLL), ~~executive~~and ~~officer~~Top ~~and~~Image ~~principal~~Systems ~~financial~~Ltd. ~~officer~~(NASDAQ:TISA). ~~The~~Mr. ~~Code~~Keret ofcommenced ~~Ethics~~his ~~addresses~~career ~~such~~at ~~individuals’ conduct~~Kost ~~with~~Forer ~~respect~~Gabbay to& Kasierer, ~~among~~registered ~~other~~public ~~things~~accounting firm, ~~conflicts~~a member firm of ~~interests;~~Ernst ~~compliance~~& ~~with~~Young ~~applicable~~International. ~~laws,~~Mr. ~~rules~~Keret ~~and~~has ~~regulations;~~served ~~rules~~on the Board toof ~~promote~~Directors ~~full,~~of ~~fair,~~Wize ~~accurate,~~Pharma ~~timely~~Inc. since November 2017 and ~~understandable~~on ~~disclosure;~~the ~~use~~Board of ~~Company~~Directors ~~assets~~of Weebit-Nano Ltd., since August 2015, and continues ~~corporate~~to ~~opportunities;~~serve ~~confidentiality;~~in both capacities as a non-executive ~~fair~~director. ~~dealing;~~Mr. Keret holds a B.A. from Haifa University in Economics and ~~reporting~~Accounting and ~~enforcement.~~is Aa ~~current~~Certified ~~copy~~Public ofAccountant ~~the~~in ~~Code~~Israel. Our Board of ~~Ethics~~Directors isbelieves ~~available~~Mr. onKeret’s qualifications to serve as our ~~corporate~~Chief ~~website~~Financial atOfficer ~~http://www~~include his extensive chief executive, chief financial executive and board experience, and his expertise in reporting and finance-related activities for international operations.~~bluespherecorporate.com.~~

~~Anti~~Dr. Elad Kerner – Executive Vice President – Dr. Kerner has served as our Executive Vice President since January 2016. Dr. Kerner has a Ph.D. in law from Bar-~~Harassment~~Ilan ~~Policy~~ University and brings wealth of knowledge in economics, finance and management. Dr. Kerner is an expert in commercial transactions, international investment, mergers & acquisitions, corporate finance and corporate governance. Before joining Blue Sphere, Dr. Kerner was General Counsel for Israel Aerospace Industries, Ltd, was the Chief Executive Officer of Toptrio Group and was a Partner in the law firm of Shugol, Ketzef, Ehrlich, Kerner & Co. Dr. Kerner was a Lieutenant Colonel and Military Judge in the Israeli Defense Forces.

~~On April 27, 2016, our Board approved and adopted~~ ~~an anti-harassment policy (the “Anti-Harassment Policy”). The Anti-Harassment Policy is applicable to all of our directors,~~ 29 ~~officers and employees and addresses, among other things, fair treatment of individuals in the workplace.~~

~~Compliance under~~Legal ~~Section~~Proceedings ~~16(a) Beneficial Ownership Reporting Compliance~~

~~Section~~We ~~16(a)~~know of ~~the~~no ~~Securities~~pending ~~Exchange~~proceedings ~~Act~~in ~~of 1934~~which ~~requires~~any ~~our~~director, ~~directors~~officer, ~~and~~or ~~executive~~affiliate ~~officers~~is ~~and~~either ~~persons~~a ~~who~~party ~~own~~adverse ~~more~~to ~~than~~us, ~~10%~~or of our ~~outstanding~~subsidiaries, ~~shares~~or ofhas ~~Common~~a ~~Stock (collectively,~~material ~~“Reporting~~interest ~~Persons”)~~adverse to ~~file~~us ~~with~~or ~~the SEC initial reports of ownership and reports of changes in ownership in~~ our ~~Common Stock and other equity securities. To the Company’s knowledge~~subsidiaries, ~~based~~except ~~solely~~for onour ~~its~~Chief ~~review~~executive ~~of the copies of such reports received or written representations from certain Reporting Persons that no other reports were required~~Officer, ~~the~~Shlomi ~~Company believes that during its fiscal year ended December 31~~Palas, ~~2016,~~who ~~all~~is ~~filing~~a ~~requirements~~co-defendant ~~applicable~~in to the ~~Reporting~~Barkats ~~Persons~~Litigation ~~were timely~~as ~~met~~described above.

~~Stockholder~~None ~~Communications~~ of our executive officers or directors have (i) been involved in any bankruptcy proceedings within the last five years, (ii) been convicted in or has pending any criminal proceedings (other than traffic violations and other minor offenses), (iii) been subject to any order, judgment or decree enjoining, barring, suspending or otherwise limiting involvement in any type of business, securities or banking activity or (iv) been found to have violated any Federal, state or provincial securities or commodities law and such finding has not been reversed, suspended or vacated.

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

22 Board of Directors

~~Item~~We 11currently have five directors serving on our Board of Directors. ~~Executive~~ ~~Compensation~~A majority of the authorized number of directors constitutes a quorum of the Board for the transaction of business. The directors must be present at the meeting to constitute a quorum. However, any action required or permitted to be taken by the Board may be taken without a meeting if all members of the Board consent in writing to the action.

~~Executive~~We ~~Summary~~are ~~Compensation Table~~not ~~for~~a ~~Calendar~~listed ~~Years~~issuer, ~~2015~~as such term is defined in Rule 10A-3 of the Exchange Act, and ~~2016~~are therefore not subject to director independence standards. However, using the definition of “independent director” from NASDAQ Rule 5605(a)(2), the following directors would be considered independent: Yigal Brosh, Shimon Erlichman and David Doctor.

~~The~~Our ~~table~~directors ~~below~~are ~~sets~~elected ~~forth,~~by ~~for~~the vote of a majority in interest of the holders of our ~~last~~Common ~~two~~Stock ~~calendar~~and ~~years,~~hold office until the ~~compensation~~earlier ~~earned~~of byhis ~~our~~or ~~named executive~~her ~~officers~~death, ~~Shlomo~~resignation, ~~Palas~~removal or expiration of the term for which he or she was elected and until a successor has been elected and qualified. The Board may also appoint directors to fill vacancies on the Board created by the death, ~~our~~resignation ~~Chief~~or ~~Executive~~removal ~~Officer~~of any director. Our Board consists of three classes of directors, ~~Roy~~apportioned ~~Amitzur~~as ~~and~~equally ~~Elad~~as ~~Kerner~~possible, ~~our~~each ~~Executive~~of ~~Vice~~which ~~Presidents~~is elected every three years.

Name and Principal Position	Year		Salary ($)		Bonus ($)		Stock awards ($)(1)		Option awards ($)(1)(2)		Non-equity incentive plan compensation ($)		Non-qualified deferred compensation earnings ($)		All other compensation ($)(3)		Total ($)
Shlomo Palas (4)		2016		204,000		—		216,386		—		—		—		36,720		457,106
(CEO)		2015		183,000		—		72,354		—		—		—		4,590		259,944
Roy Amitzur		2016		180,000		—		209,543		—		—		—		32,400		421,943
(EVP)		2015		180,000		—		69,100		—		—		—		4,050		253,150
Elad Kerner		2016		201,627				75,650										277,277
(EVP)		2015		—		—		—		—		—		—		—		—

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

	(1)	For assumptions made in the valuation of stock awards and option awards, see Note 15 to our Audited Consolidated Financial Statements.
	(2)	On February 24, 2015, as previously reported for option award amounts reflected for 2015, the Board granted five-year options to purchase shares of Common Stock at an exercise price of $0.14 per share to Messrs. Palas and Amitzur under the 2014 Incentive Plan, but such options were subsequently terminated on November 20, 2016.
	(3)	All other compensation includes payment by the Company into specified welfare benefit plans and required insurance payments.
	(4)	Shlomo Palas is also a director of the Company. Mr. Palas receives no compensation as a director.

23 Committees of the Board of Directors

~~Outstanding~~On ~~Equity~~October ~~Awards~~12, at2015, ~~Fiscal~~our ~~Year-End~~Board designated the following three committees of the Board: an Audit Committee, a Finance Committee and an Administration and Management Committee. On November 20, 2016, our Board designated the following two committees of the Board: a Compensation Committee and a Nominations Committee.

AsShimon Erlichman is the Chairman of ~~December~~the 31Audit Committee and Yigal Brosh is a member. The Audit Committee is responsible for, ~~2016~~among other things, overseeing the ~~following~~financial ~~named~~reporting and ~~executive~~audit ~~officers~~process ~~had the~~and ~~following~~evaluating ~~unexercised~~our ~~options,~~internal ~~stock~~controls ~~that~~over financial reporting. The Board has ~~not~~determined ~~vested,~~that Yigal Brosh and Shimon ~~equity~~Erlichman ~~incentive~~would ~~plan~~each ~~awards:~~be considered “independent directors” and “Audit Committee financial experts” within the meaning of the NASDAQ and Exchange Act rules.

	Option Awards								Stock Awards
Name	Number of securities underlying unexercised options (#) exercisable		Number of securities underlying unexercised options (#) un-exercisable		Option exercise price	Option expiration date		Number of shares or units of stock that have not vested			Market value of shares or units of stock that have not vested ($)		Equity incentive plan awards: Number of unearned shares, units or other rights that have not vested (#)		Equity incentive plan awards: Market or payout value of unearned shares, units or other rights that have not vested ($)
Shlomo Palas (1) (CEO)		230,089		—	0.5763		04/30/2018			300,000		20,070		—		—
Roy Amitzur (2) (EVP)		168,142		—	0.5763		04/30/2018			291,667		19,512		—		—

David Doctor is the Chairman of the Finance Committee, and Yigal Brosh and Shlomo Palas are its members. The Finance Committee is responsible for, among other things, reviewing our investment policy, annual financing plan and financial structure.

	(1)	On April 30, 2013, under the 2010 Incentive Plan, Mr. Palas was granted options to purchase 230,089 shares of Common Stock, which vested quarterly over a two-year period. The options are fully vested and exercisable for 5 years from the date of the grant at an exercise price of $0.5763 per share. On February 24, 2015, pursuant to the 2014 Incentive Plan, Mr. Palas was granted 3,600,000 shares of Common Stock, vesting on a quarterly basis over a two-year period. As of December 31, 2016, 3,300,000 of such shares have been issued, with the final installment of 300,000 shares vesting on March 31, 2017.
	(2)	On April 30, 2013, under the 2010 Incentive Plan, Mr. Amitzur was granted options to purchase 168,142 shares of Common Stock, which vested quarterly over a two-year period. The options are fully vested and exercisable for 5 years from the date of the grant at an exercise price of $0.5763 per share. On February 24, 2015, pursuant to the 2014 Incentive Plan, Mr. Amitzur was granted 3,500,000 shares of Common Stock, vesting on a quarterly basis over a two-year period. As of December 31, 2016, 3,208,333 of such shares have been issued, with the final installment of 291,667 shares vesting on March 31, 2017.

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

~~Narrative~~Yigal ~~Disclosure~~Brosh tois ~~Executive~~the ~~Summary~~Chairman of the Compensation ~~Table~~Committee, and ~~Outstanding~~ ~~Equity~~Shimon ~~Table~~Erlichman is a member. The Compensation Committee is responsible for, among other things, establishing and overseeing the Company’s executive and equity compensation programs, establishing performance goals and objectives, and evaluating performance against such goals and objectives. The Board has determined that Yigal Brosh and Shimon Erlichman would each be considered “independent directors” within the meaning of the NASDAQ and Exchange Act rules.

~~Shlomo~~David ~~Palas~~Doctor is the Chairman of the Nominations Committee and Shimon Erlichman is its member. The Nominations Committee is responsible for, among other things, establishing and overseeing the Company’s director nominations process and procedures, developing and maintaining the Company’s corporate governance policies, and any related matters required by federal securities laws. The Board has determined that David Doctor and Shimon Erlichman would be considered “independent directors” within the meaning of the NASDAQ and Exchange Act rules.

OnCurrent ~~October~~copies ~~15, 2015, we entered into a service agreement with Mr. Palas to retain him as the Company’s Chief Executive Officer. The service agreement, which was intended to extend the term~~ of ~~a previous service agreement with Mr. Palas, will expire on October 15, 2020, subject to a five-year extension at~~ the ~~option~~charters of the ~~Company~~Audit ~~and Mr. Palas. As Chief Executive Officer~~Committee, ~~Mr.~~Finance ~~Palas~~Committee, ~~among~~Compensation ~~other~~Committee ~~duties, is responsible for setting our overall corporate direction, including establishing~~ and ~~maintaining~~Nominations ~~budgets~~Committee ~~and~~are ~~ensuring~~available weon ~~have adequate capital for~~ our ~~operations, marketing and general~~ corporate ~~activities.~~website Under the terms of his service agreement, Mr. Palas will receive $204,000 in annual base compensation during the first year of the agreement, subject to an annual increase review, as well as stock grants vesting on each one year anniversary of the agreement to purchase 950,000 shares of Common Stock for a price of $0.01 and on such other terms as provided in the grants. Mr. Palas will also be entitled to participate in any bonus, incentive compensation, savings and retirement and insurance plans of the Company. Mr. Palas’ employment may be terminated with or without cause by the Company, subject to the terms of his service agreement. Mr. Palas received $183,000 in annual base compensation in 2015 and $204,000 in annual base compensation in 2016. Pursuant to his service agreement, Mr. Palas exercised options to purchase 950,000 shares of Common Stock at ~~an exercise price of $0~~http://www.~~01 on December 20, 2016~~bluespherecorporate.com.

24 Code of Ethics

On ~~February~~April 2427, ~~2015~~2016, ~~Mr.~~our ~~Palas~~Board ~~was issued~~approved ~~750,000~~and ~~shares~~adopted ofa ~~Common~~code ~~Stock~~of ~~under~~ethics (the ~~2010~~“Code ~~Incentive~~of ~~Plan~~Ethics”). InThe ~~addition,~~Code onof ~~February~~Ethics ~~24,~~is ~~2015~~applicable ~~the~~to ~~Company~~all ~~granted~~of 3our directors,~~600,000 shares~~ ofofficers ~~Common~~and ~~Stock~~employees, toincluding ~~Mr.~~our ~~Palas~~principal ~~under~~executive ~~its~~officer ~~2014~~and ~~Incentive~~principal ~~Plan~~financial officer. The ~~shares~~Code ~~vest~~of onEthics aaddresses ~~quarterly~~such ~~basis~~individuals’ ~~over~~conduct awith ~~two-year~~respect ~~period and~~to, ~~will~~among beother ~~issued~~things, inconflicts ~~annual~~of ~~installments.~~interests; Ascompliance ofwith ~~December~~applicable 31laws, ~~2016,~~rules ~~3,300,000~~and ofregulations; ~~such~~rules ~~shares have been issued~~ to ~~Mr.~~promote ~~Palas~~full, ~~with the~~fair, ~~final installment of 300~~accurate,~~000~~ ~~shares~~timely toand beunderstandable ~~issued~~disclosure; ~~following~~use ~~March~~of ~~31,~~Company ~~2017.~~assets ~~Also~~and oncorporate ~~February~~opportunities; ~~24,~~confidentiality; ~~2015,~~fair ~~the~~dealing; ~~Board~~and ~~granted~~reporting ~~options to~~and ~~purchase~~enforcement. upA tocurrent ~~900,000~~copy ~~shares~~ of ~~Common~~the ~~Stock~~Code toof ~~Mr.~~Ethics ~~Palas,~~is ~~such~~available ~~options~~on ~~having~~our ~~never~~corporate ~~been~~website ~~issued~~at ~~and subsequently terminated on November 20, 2016~~http://www.bluespherecorporate.com.

~~Roy~~Anti-Harassment ~~Amitzur~~Policy

On ~~October~~April 1527, ~~2015~~2016, weour ~~entered~~Board ~~into a~~approved ~~service agreement with Roy Amitzur~~ and ~~JLS~~adopted ~~Advanced~~an ~~Investment~~anti-harassment ~~Holdings~~policy ~~Limited~~ (~~“JLS”), a company owned by Mr. Amitzur, to retain Mr. Amitzur as~~ the ~~Company’s Executive Vice President. On December 29, 2016, we entered into an addendum to Mr. Amitzur’s service agreement, whereby the parties and Renewable Energy Management Services (~~“~~RES~~Anti-Harassment Policy”)~~, a wholly owned subsidiary of RR Water Projects Ltd~~., ~~which is owned and controlled by Mr. Amitzur and his wife, agreed that all compensation and equity paid, issued or granted thereunder will be to REM.~~ The ~~service~~Anti-Harassment ~~agreement,~~Policy ~~which~~is ~~was~~applicable ~~intended~~ to ~~extend the~~all ~~term~~ of aour ~~previous service agreement with Mr. Amitzur~~directors, ~~will~~officers ~~expire~~and onemployees ~~October 14, 2020, subject to a five-year extension at the option of the Company~~ and ~~Mr. Amitzur. As Executive Vice President~~addresses, ~~Mr. Amitzur,~~ among other ~~duties~~things, isfair ~~responsible~~treatment ~~for developing and managing the Company’s projects and sourcing the required capital for such projects. Under the terms~~ of ~~his~~individuals ~~service agreement, Mr. Amitzur will receive $180,000~~ in ~~annual base compensation during~~ the first year of the agreement, subject to an annual increase review, as well as stock grants vesting on each one year anniversary of the agreement to purchase up to 850,000 shares of the Company’s common stock for a price of $0workplace.01 and on such other terms as provided in the grants. Mr. Amitzur will also be entitled to participate in any bonus, incentive compensation, savings and retirement and insurance plans of the Company. Mr. Amitzur’s employment may be terminated with or without cause by the Company, subject to the terms of his service agreement. Mr. Amitzur received $180,000 in annual base compensation in 2015 and in 2016. Pursuant to his service agreement, Mr. Amitzur exercised options to purchase 850,000 shares of Common Stock at an exercise price of $0.01 on December 30, 2016.

OnCompliance ~~February 24, 2015, Mr. Amitzur was issued 675,000 shares of Common Stock~~ under ~~the~~Section ~~2010 Incentive Plan. In addition, on February 24, 2015 the Company granted 3,500,000 shares of Common Stock to Mr. Amitzur under its 2014 Incentive Plan. The shares vest on~~ 16(a) ~~quarterly~~Beneficial ~~basis~~Ownership ~~over~~Reporting a two-year period and will be issued in annual installments. As of December 31, 2016, 3,208,333 of such shares have been issued to Mr. Amitzur, with the final installment of 291,667 shares to be issued following March 31, 2017. Also on February 24, 2015, the Board granted options to purchase up to 700,000 shares of Common Stock to Mr. Amitzur, such options having never been issued and subsequently terminated on November 20, 2016. All such shares and options are have been transferred or issued into the name of RES.Compliance

~~Elad~~Section ~~Kerner~~16(a) of the Securities Exchange Act of 1934 requires our directors and executive officers and persons who own more than 10% of our outstanding shares of Common Stock (collectively, “Reporting Persons”) to file with the SEC initial reports of ownership and reports of changes in ownership in our Common Stock and other equity securities. To the Company’s knowledge, based solely on its review of the copies of such reports received or written representations from certain Reporting Persons that no other reports were required, the Company believes that during its fiscal year ended December 31, 2016, all filing requirements applicable to the Reporting Persons were timely met.

OnStockholder January 1, 2016, Eastern Sphere, our wholly-owned subsidiary, entered into an employment agreement with Mr. Elad Kerner to retain him as the Company’s Executive Vice President. The service agreement commenced on April 1, 2016 and will expire on April 1, 2021, subject to a five-year extension at the option of the Company and Mr. Kerner. As Executive Vice President, Mr. Kerner, among other duties, is responsible for developing and implementing the finance strategy of the Company. Under the terms of his service agreement, Mr. Kerner will receive $180,000 in annual base compensation during the first year of the agreement, subject to an annual increase review, as well as stock grants vesting upon execution and again on each one year anniversary of the agreement to purchase 850,000 shares of Common Stock for a price of $0.01 and on such other terms as provided in the grants. Mr. Kerner will also be entitled to participate in any bonus, incentive compensation, savings and retirement and insurance plans of the Company. In connection with his business development activity, upon the closing of project acquisitions and/or new projects, Mr. Kerner is entitled to received defined amounts of shares of Common Stock as incentive compensation and cash bonus amounts determined on a case-by-case basis by our Board (which shall never exceed 3% of a project’s total value). Mr. Kerner’s employment may be terminated with or without cause by the Company, subject to the terms of the service agreement. Mr. Kerner received $201,627 in annual base compensation in 2016. Pursuant to his service agreement, Mr. Kerner purchased 850,000 shares of Common Stock at an exercise price of $0.01 on June 13, 2016.Communications

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

~~Director Compensation Table~~ 31

~~The table below sets forth, for our fiscal year ended December 31, 2016,~~ ~~the~~ Item ~~compensation~~11. ~~earned~~Executive ~~by each of our directors.~~Compensation

	Fees earned or paid in cash ($)		Stock awards ($)(1)(2)		Options awards ($)(1)(3)		Non-equity incentive plan compensation ($)		Nonqualified deferred compensation earnings ($)		All other compensation ($)		Total ($)
Shlomo Palas (4)		—		—		—		—		—		—		—
Joshua Shoham (5)		—		236,846		—		—		—		212,400		449,246
Yigal Brosh (6)(7)		20,000		112,714		—		—		—		—		132,714
Shimon Erlichman (6)		20,000		50,000		—		—		—		—		70,000
Itai Haboucha (6)		20,000		50,000		—		—		—		—		70,000
Lyron Bentovim (6)		7,065		17,663		—		—		—		—		24,728
David Doctor (6)		1,033		2,582		—		—		—		—		3,615

Executive Summary Compensation Table for Calendar Years 2016 and 2017

	(1)	Stock awards made pursuant to the Directors Compensation Plan are based on a fixed annual dollar value, with the number of shares issued determined based on the trading price of Common Stock reported on the OTCQB® Venture Marketplace on the date of the grant. For assumptions made in the valuation of all other stock awards and option awards, see Note 15 to our Audited Consolidated Financial Statements.
	(2)	As of December 31, 2016, the aggregate number of stock awards outstanding was 4,205,680. As of December 31, 2016, awards of Common Stock are outstanding to each of our directors, as follows: 300,000 shares to Mr. Palas, 291,667 shares to Mr. Shoham, 776,552 shares to Mr. Brosh, 747,385 shares to Mr. Erlichman, 264,022 shares to Mr. Bentovim and 38,588 to Mr. Doctor.
	(3)	As of December 31, 2016, the aggregate number of option awards outstanding was 778,761. As of December 31, 2016, options to purchase shares of Common Stock are outstanding to each of our directors, as follows: to Mr. Palas, options to purchase up to 230,088 shares; and to Mr. Shoham, options to purchase up to 203,540 shares. On February 24, 2015, as previously reported for option award amounts reflected, the Board granted five-year options to purchase shares of Common Stock at an exercise price of $0.14 per share to Messrs. Shoham and Brosh under the 2014 Incentive Plan, but such options were terminated on November 20, 2016.
	(4)	All the compensation received by Mr. Palas was attributable to his role as Chief Executive Officer of the Company.
	(5)	Mr. Shoham received $180,000 in consulting fees pursuant to an advisory agreement and payment by the Company of 32,400 into specified welfare benefit plans and required insurance payments
	(6)	Reflects fees and stock awards earned pursuant to the Directors Compensation Plan.
	(7)	Stock awards include 300,000 shares of Common Stock granted by our Board on December 20, 2016 as a one-time special award for services performed.

The table below sets forth, for our last two calendar years, the compensation earned by our named executive officers, Shlomo Palas, our Chief Executive Officer, Roy Amitzur and Elad Kerner, our Executive Vice Presidents.

Directors Compensation Plan

Name and Principal Position	Year	Salary ($)	Bonus ($)	Stock Awards ($)⁽¹⁾	Option Awards ($)⁽¹⁾	Non-Equity Incentive Plan Compensation ($)	Non-Qualified Deferred Compensation Earnings ($)	All Other Compensation ($)⁽²⁾	Total ($)
Shlomo Palas ⁽³⁾	2017	204,000	—	75,675	—	—	—	36,720	316,395
(CEO)	2016	204,000	—	216,386	—	—	—	36,720	457,106

Roy Amitzur	2017	180,000	—	68,845	—	—	—	32,400	281,245
(EVP)	2016	180,000	—	209,543	—	—	—	32,400	421,943

Elad Kerner	2017	246,016		16,658				27,800	290,473
(EVP)	2016	201,627	—	75,650	—	—	—	—	277,277

On April 27, 2016, our Board approved the Company’s Non-Employee Directors Compensation Plan, and on February 1, 2017, our Board approved the Company’s Amended and Restated Non-Employee Directors Compensation Plan (as amended, the “Directors Compensation Plan”), applicable to members of the Board who are not employees of the Company (each, an “Eligible Director”). Under the Directors Compensation Plan, beginning on January 1, 2016, each Eligible Director shall be entitled to an annual cash retainer of USD $20,000, paid semi-annually, and a quarterly stock award equal to USD $12,500, determined based on the closing price of a share of Common Stock on the last trading day of such quarter, as reported on the OTCQB® Venture Marketplace. Eligible Directors shall also receive meeting fees equal to (a) USD $1,500 for scheduled quarterly meetings of the Board attended in-person, (b) USD $500 for scheduled quarterly meetings of the Board attended by teleconference, (c) USD $250 for special meetings of the Board, and (d) USD $500 for meetings of the committees of the Board. If an Eligible Director attends a meeting of the Board and one or more meetings of a committee of the Board on the same date, the Eligible Director shall receive the full fee for the meeting of the Board and 50% of the fee for each meeting of a committee of the Board attended.

	(1)	For assumptions made in the valuation of stock awards and option awards, see Note 15 to our audited consolidated financial statements.
	(2)	All other compensation includes payment by the Company into specified welfare benefit plans and insurance payments.
	(3)	Shlomo Palas is also a director of the Company. Mr. Palas receives no compensation as a director.

26 32

~~Narrative~~Outstanding ~~Disclosure~~Equity toAwards ~~Director~~at ~~Compensation Table~~Fiscal Year-End

~~All~~As of ~~the~~December ~~compensation~~31, ~~received~~2017, ~~by Shlomo Palas was attributable to his role as Chief Executive Officer of~~ the ~~Company,~~following asnamed ~~described~~executive ~~above~~officers ~~under~~had the ~~heading~~following ~~“Executive Summary~~unexercised ~~Compensation~~options, ~~Table”.~~stock ~~The~~that ~~compensation~~has ~~received~~not byvested, ~~our~~and ~~other~~equity ~~directors~~incentive ~~was~~plan ~~in accordance with the Directors Compensation Plan or was individually negotiated, as described below.~~awards:

	Option Awards						Stock Awards
Name	Number of securities underlying unexercised options (#) exercisable	Number of securities underlying unexercised options (#) un- exercisable	Option exercise price	Option expiration date		Number of shares or units of stock that have not vested		Market value of shares or units of stock that have not vested ($)	Equity incentive plan awards: Number of unearned shares, units or other rights that have not vested (#)	Equity incentive plan awards: Market or payout value of unearned shares, units or other rights that have not vested ($)
Shlomo Palas ⁽¹⁾ (CEO)	1,770	—	74.92		04/30/2018		—	—	—	—
Roy Amitzur ⁽²⁾ (EVP)	1,293	—	74.92		04/30/2018		—	—	—	—

On February 24, 2015, our Board granted 600,000 shares of Common Stock to Mr. Shoham under the 2010 Incentive Plan, and on June 13, 2016 the shares were issued. In addition, on February 24, 2015 the Company granted 3,500,000 shares of Common Stock to Mr. Shoham under its 2014 Incentive Plan. The shares vest on a quarterly basis over a two-year period and will be issued in annual installments. As of December 31, 2016, 3,208,333 of such shares have been issued to Mr. Shoham, with the final installment of 291,667 shares to be issued following March 31, 2017. Also on February 24, 2015, the Board granted options to purchase up to 700,000 shares of Common Stock to Mr. Shoham, such options having never been issued and subsequently terminated on November 20, 2016.

	(1)	On April 30, 2013, under the 2010 Incentive Plan, Mr. Palas was granted options to purchase 1,770 shares of Common Stock, which vested quarterly over a two-year period. The options are fully vested and exercisable for 5 years from the date of the grant at an exercise price of $74.92 per share.
	(2)	On April 30, 2013, under the 2010 Incentive Plan, Mr. Amitzur was granted options to purchase 1,293 shares of Common Stock, which vested quarterly over a two-year period. The options are fully vested and exercisable for 5 years from the date of the grant at an exercise price of $74.92 per share.

OnNarrative ~~February~~Disclosure ~~24, 2015, our Board granted 100,000 shares of Common Stock~~ to ~~Mr.~~Executive ~~Brosh~~Summary ~~under~~Compensation ~~the~~Table ~~2010 Incentive Plan,~~ and onOutstanding ~~June~~Equity 13, 2016 the shares were issued. In addition, on February 24, 2015 the Company granted 350,000 shares of Common Stock to Mr. Brosh under its 2014 Incentive Plan. The shares vest on a quarterly basis over a two-year period and will be issued in annual installments. As of December 31, 2016, 320,833 of such shares have been issued to Mr. Brosh, with the final installment of 29,167 shares to be issued following March 31, 2017. On December 30, 2016, our Board granted 300,000 shares of Common Stock to Mr. Brosh as a one-time special award for services performed. Also on February 24, 2015, the Board granted options to purchase up to 175,000 shares of Common Stock to Mr. Brosh, such options having never been issued and subsequently terminated on November 20, 2016.Table

~~Indemnification~~Shlomo ~~of Officers and Directors~~Palas

~~Our~~On ~~bylaws~~October ~~provide~~15, ~~that~~2015, we ~~shall~~entered ~~indemnify~~into a service agreement with Mr. Palas to retain him as the Company’s Chief Executive Officer. The service agreement, which was intended to extend the ~~fullest~~term ~~extent~~of ~~permitted~~a byprevious ~~applicable~~service ~~law~~agreement with Mr. Palas, will expire on October 15, 2020, subject to a five-year extension at the option of the Company and Mr. Palas. As Chief Executive Officer, Mr. Palas, among other duties, is responsible for setting our ~~officers~~overall corporate direction, ~~directors~~including establishing and maintaining budgets and ensuring we have adequate capital for our operations, ~~employees~~marketing and ~~agents~~general ~~against~~corporate ~~expenses~~activities. ~~incurred~~Under inthe ~~connection with~~terms ~~actions~~of orhis ~~proceedings~~service ~~brought~~agreement, ~~against~~Mr. ~~them~~Palas bywill ~~reason~~receive $204,000 in annual base compensation during the first year of ~~their~~the ~~serving~~agreement, orsubject ~~having~~to ~~served~~an annual increase review, as ~~officers~~well as stock grants vesting on each one year anniversary of the agreement to purchase 7,308 ~~directors~~shares of Common Stock for a price of $0.01 and on such other terms as provided in the grants. Mr. Palas will also be entitled to participate in any bonus, ~~employees~~incentive compensation, ~~agents~~ savings and retirement and insurance plans of the Company. Mr. Palas’ employment may be terminated with or without cause by the Company, subject to the terms of his service agreement. Mr. Palas received $204,000 in ~~other~~annual ~~capacities~~base compensation in 2016 and 2017. Pursuant to his service agreement, Mr. Palas exercised options to purchase 7,308 shares of Common Stock at an exercise price of $0.01 on December 20, 2016 and on October 20, 2017.

~~Insofar as indemnification for liabilities arising~~ ~~under the Securities Act may be permitted to our directors and officers pursuant to the foregoing provisions, or otherwise, we~~ 33 ~~have been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.~~

On February 24, 2015 the Company granted 27 ,692 shares of Common Stock to Mr. Palas under its 2014 Incentive Plan. As of December 31, 2017, all of such shares have been issued to Mr. Palas

~~Equity~~Roy ~~Compensation Plan Information~~Amitzur

On ~~February~~October 2415, 2015, ~~our~~we ~~Board~~entered ~~approved~~into ~~and adopted~~a ~~the~~service ~~Global~~agreement ~~Share~~with Roy Amitzur and ~~Options~~JLS ~~Incentive~~Advanced ~~Enhancement~~Investment ~~Plan~~Holdings Limited (~~2014~~“JLS”), (a company owned by Mr. Amitzur, to retain Mr. Amitzur as the ~~“2014~~Company’s ~~Incentive~~Executive ~~Plan~~Vice President. On December 29, 2016, we entered into an addendum to Mr. Amitzur’s service agreement, whereby the parties and Renewable Energy Management Services (“RES”), ~~pursuant~~a wholly owned subsidiary of RR Water Projects Ltd., which is owned and controlled by Mr. Amitzur and his wife, agreed that all compensation and equity paid, issued or granted thereunder will be to REM. The service agreement, which ~~the~~ ~~Company~~was ~~may~~intended ~~award~~to ~~shares~~extend the term of ~~Common~~a ~~Stock~~previous service agreement with Mr. Amitzur, ~~options~~will expire on October 14, 2020, subject to ~~purchase~~a ~~shares~~five-year extension at the option of ~~Common~~the ~~Stock~~Company and ~~other~~Mr. ~~equity-based~~Amitzur. ~~awards~~As toExecutive ~~eligible participants~~Vice President, Mr. ~~The~~Amitzur, ~~2014~~among ~~Incentive~~other ~~Plan~~duties, ~~replaced~~is responsible for developing and managing the Company’s ~~Global~~projects ~~Share~~and ~~Incentive~~sourcing ~~Plan~~the ~~(2010)~~required (capital for such projects. Under the ~~“2010~~terms ~~Incentive Plan”)~~of his service agreement, Mr. ~~All~~Amitzur ~~options~~will ~~issued~~receive ~~and~~$180,000 ~~outstanding~~in ~~under~~annual base compensation during the ~~2010~~first ~~Incentive~~year ~~Plan~~of ~~are~~the ~~exercisable~~agreement, ~~within~~subject ~~five-years~~to an annual increase review, as well as stock grants vesting on each one year anniversary of ~~issuance~~the agreement to purchase up to 6, at539 anshares ~~exercise~~of Common Stock for a price of $0.~~5763~~01 ~~per~~and ~~share~~on such other terms as provided in the grants. ~~All~~Mr. ~~options~~Amitzur ~~granted~~will ~~under~~also be entitled to participate in any bonus, incentive compensation, savings and retirement and insurance plans of the ~~2014~~Company. ~~Incentive~~Mr. ~~Plan~~Amitzur’s ~~were~~employment may be terminated with or without cause by the ~~Board~~Company, subject to the terms of ~~Directors~~ his service agreement. Mr. Amitzur received $180,000 in annual base compensation in 2016 and in 2017. Pursuant to his service agreement, Mr. Amitzur exercised options to purchase 6,539 shares of Common Stock at an exercise price of $0.01 on ~~November~~December 20, 2016 and on October 20, 2017.

On ~~August~~February 824, ~~2016,~~2015 ~~our Board approved and adopted~~ the Company’s ~~2016~~granted ~~Stock Incentive Plan (the “2016 Incentive Plan”)~~26,923 ~~pursuant to which the Company may award~~ shares of Common Stock, ~~options~~ to ~~purchase~~Mr. ~~shares~~Palas ofunder ~~Common~~its ~~Stock~~2014 ~~and~~Incentive ~~other~~Plan. ~~equity-based~~As ~~awards~~of toDecember ~~eligible participants. On November 23~~31, ~~2016~~2017, ~~the~~all ~~holders~~such ofshares ~~a majority of the issued~~ and ~~outstanding~~options ~~shares~~have ofbeen ~~Common~~transferred ~~Stock~~or ~~approved~~issued ~~the~~into ~~2016 Incentive Plan. The 2016 Incentive Plan replaced~~ the ~~2014~~name ~~Incentive~~of ~~Plan~~RES. ~~The 2016 Incentive Plan is described in more detail below.~~

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

On January 1, 2016, Eastern Sphere, our wholly-owned subsidiary, entered into an employment agreement with Mr. Elad Kerner to retain him as the Company’s Executive Vice President. The ~~following~~service ~~table~~agreement ~~summarizes~~commenced ~~information~~ on April 1, 2016 and will expire on April 1, 2021, subject to a five-year extension at the option of the Company and Mr. Kerner. As Executive Vice President, Mr. Kerner, among other duties, is responsible for developing and implementing the finance strategy of the Company. Under the terms of his service agreement, Mr. Kerner will receive $180,000 in annual base compensation during the first year of the agreement, subject to an annual increase review, as well as stock grants vesting upon execution and again on each one year anniversary of the ~~close~~agreement to purchase 6,539 shares of ~~business~~Common Stock for a price of $0.01 and on ~~December~~such 31other terms as provided in the grants. Mr. Kerner will also be entitled to participate in any bonus, ~~2016~~incentive ~~concerning~~compensation, savings and retirement and insurance plans of the Company. In connection with his business development activity, upon the closing of project acquisitions and/or new projects, Mr. Kerner is entitled to receive defined amounts of shares of Common Stock as incentive compensation and cash bonus amounts determined on a case-by-case basis by our ~~Equity~~Board ~~Incentive~~(which ~~Plans:~~shall never exceed 3% of a project’s total value). Mr. Kerner’s employment may be terminated with or without cause by the Company, subject to the terms of the service agreement. Mr. Kerner received $246,016 in annual base compensation in 2017. Pursuant to his service agreement, Mr. Kerner purchased 6,539 shares of Common Stock at an exercise price of $0.01 on July 21, 2017.

	Number of securities to be issued upon exercise of outstanding options, warrants and rights		Weighted-average exercise price of outstanding options, warrants and rights		Securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
Plan category	(a)		(b)		(c)
Equity compensation plans approved by security holders		2,544,765	$	—		42,455,235
Equity compensation plans not approved by security holders		2,439,676	$	0.180		—
Total		4,984,441	$	0.090		42,455,235

~~(1)~~Director ~~The number of securities in column (a) includes 2,544,765 shares of Common Stock that have accrued but not yet issued to members of our Board pursuant to the Directors~~ Compensation ~~Plan, for services rendered in 2016.~~Table

The ~~2016~~table ~~Incentive~~below ~~Plan~~sets forth, for our fiscal year ended December 31, 2017, the compensation earned by each of our directors.

The purpose of the 2016 Incentive Plan is (i) assisting the Company and its nonconsolidated affiliates in the recruitment and retention of persons with ability and initiative, (ii) providing an incentive to such persons to contribute to the growth and success of the Company’s businesses by affording such persons equity participation in the Company and (iii) associating the interests of such persons with those of the Company and its nonconsolidated affiliates and stockholders.

	Fees Earned or Paid in Cash ($)		Stock Awards ($)⁽¹⁾⁽²⁾		Options Awards ($)⁽¹⁾⁽³⁾		Non-Equity Incentive Plan Compensation ($)		Non-Qualified Deferred Compensation Earnings ($)		All Other Compensation ($)		Total ($)
Shlomo Palas ⁽⁴⁾		—		—		—		—		—		—		—
Joshua Shoham ⁽⁵⁾		—		68,853		—		—		—		212,400		281,253
Yigal Brosh ⁽⁶⁾		20,000		50,000		—		—		—		—		70,000
Shimon Erlichman ⁽⁶⁾		20,000		50,000		—		—		—		—		70,000
Lyron Bentovim ⁽⁶⁾⁽⁷⁾		20,000		50,000		—		—		—		—		70,000
David Doctor ⁽⁶⁾		20,000		50,000		—		—		—		—		70,000

General Provisions of the 2016 Incentive Plan

	(1)	Stock awards made pursuant to the Amended and Restated Non-Employee Director Compensation Plan are based on a fixed annual dollar value, with the number of shares issued determined based on the trading price of Common Stock reported on the OTCQB® Venture Marketplace on the last date of the reporting period. For assumptions made in the valuation of all other stock awards and option awards, see Note 15 to our audited consolidated financial statements.
	(2)	As of December 31, 2017, the aggregate number of stock awards outstanding was 28,736. As of December 31, 2017, awards of Common Stock are outstanding to each of our directors, as follows: 7,184 shares to each of Mr. Brosh, Mr. Erlichman, Mr. Bentovim and Mr. Doctor.
	(3)	As of December 31, 2017, the aggregate number of option awards outstanding was 5,992. As of December 31, 2017, options to purchase shares of Common Stock are outstanding to each of our directors, as follows: to Mr. Palas, options to purchase up to 1,770 shares; and to Mr. Shoham, options to purchase up to 1,556 shares. All such options were granted on April 30, 2012 and expire on April 30, 2018.
	(4)	All the compensation received by Mr. Palas was attributable to his role as Chief Executive Officer of the Company.
	(5)	Mr. Shoham received $180,000 in consulting fees pursuant to an advisory agreement and payment by the Company of $32,400 into specified welfare benefit plans and required insurance payments
	(6)	Reflects fees and stock awards earned pursuant to the Amended and Restated Non-Employee Director Compensation Plan.
	(7)	On and effective as of February 20, 2018, Lyron Bentovim resigned from the Company’s Board of Directors. Mr. Bentovim was a member of our Audit Committee and Nominations Committee, and was Chairman of the Finance Committee. Mr. Bentovim resigned because he had a different perspective on the strategic direction of the Company; specifically, he suggested not to pursue fundraising activities that the Company has negotiated. Mr. Bentovim believed such differences would prevent him from serving effectively on the Board of Directors.

~~The~~Directors Board shall have the sole authority to implement, interpret, and/or administer the 2016 Incentive Plan unless the Board delegates (i) all or any portion of its authority to implement, interpret, and/or administer the 2016 Incentive Plan to a committee of the Board (i.e., the Compensation ~~Committee), or (ii) the authority to grant and administer awards under the 2016 Incentive~~ Plan ~~to an officer of the Company.~~

~~The~~On April 27, 2016, ~~Incentive~~our Board approved the Company’s Non-Employee Directors Compensation Plan, ~~relates~~and on February 1, 2017, our Board approved the Company’s Amended and Restated Non-Employee Directors Compensation Plan (as amended, the “Directors Compensation Plan”), applicable to members of the ~~issuance~~ Board who are not employees of upthe toCompany 45(each,~~000~~ an “Eligible Director”). Under the Directors Compensation Plan,~~000~~ ~~shares~~beginning ofon ~~Common~~January ~~Stock~~1, of2016, ~~which~~each upEligible Director shall be entitled to 15an annual cash retainer of USD $20,000,~~000~~ ~~shares~~paid ~~shall~~semi-annually, beand ~~reserved~~a ~~specifically~~quarterly ~~for~~stock award equal to USD $12,500, determined based on the ~~issuance~~closing price of ~~Incentive~~ a share of Common Stock ~~Options,~~on ~~subject~~the tolast ~~adjustment~~trading asday ~~described~~of ~~below~~such quarter, ~~and~~as reported on the OTCQB® Venture Marketplace. Eligible Directors shall bealso ~~effective~~receive meeting fees equal to (a) USD $1,500 for ~~ten~~scheduled quarterly meetings of the Board attended in-person, (10b) ~~years~~USD $500 for scheduled quarterly meetings of the Board attended by teleconference, ~~unless~~(c) ~~earlier~~USD ~~terminated~~$250 for special meetings of the Board, and (d) USD $500 for meetings of the committees of the Board. No ~~single~~If ~~participant~~an ~~under~~Eligible Director attends a meeting of the ~~2016~~Board ~~Incentive~~and ~~Plan~~one ~~may~~or more meetings of a committee of the Board on the same date, the Eligible Director shall receive ~~more~~the ~~than~~full 25fee for the meeting of the Board and 50% of ~~all~~the ~~options~~fee ~~awarded~~for ineach meeting of a ~~single~~committee ~~year~~of the Board attended.

~~Any employee of the Company or an affiliate, a~~ ~~director, or a consultant to the Company or an affiliate may be an “Eligible Person” under the 2016 Incentive Plan.~~ 35 The 2016 Incentive Plan provides Eligible Persons the opportunity to participate in the enhancement of stockholder value by the award of options and Common Stock, granted as stock bonus awards, restricted stock awards, deferred share awards and performance-based awards, under the 2016 Incentive Plan. This further provides for the Company to make payment of bonuses and/or consulting fees to certain Eligible Persons in options and Common Stock, or any combination thereof.

~~Certain~~Narrative ~~options~~Disclosure to beDirector ~~granted~~Compensation to employees under the 2016 Incentive Plan are intended to qualify as Incentive Stock Options (“ISOs”) pursuant to Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”), while other options granted under the 2016 Incentive Plan will be nonqualified options not intended to qualify as ISOs (“Nonqualified Options”), either or both as provided in the agreements evidencing the options granted.Table

28 All of the compensation received by Shlomo Palas was attributable to his role as Chief Executive Officer of the Company, as described above under the heading “Executive Summary Compensation Table”. The compensation received by our other directors was in accordance with the Directors Compensation Plan or was individually negotiated, as described below.

On October 15, 2015, we entered into an advisory agreement with Joshua Shoham to retain Mr. Shoham as a strategic and business advisor to the Company, in addition to his role as Chairman of the Board. The agreement, which was intended to extend the term of a previous advisory agreement with Mr. Shoham, will expire on October 14, 2020, subject to a five year extension at the option of the Company and Mr. Shoham. Under the terms of his advisory agreement, Mr. Shoham will receive $180,000 in annual base compensation during the first year of the agreement, subject to an annual increase review, as well as stock grants vesting on each one year anniversary of the agreement to purchase up to 6,539 shares of Common Stock ~~Options~~ for a price of $0.01 and on such other terms as provided in the grants. Mr. Shoham will also be entitled to participate in any bonus, incentive compensation, savings and retirement and insurance plans of the Company. Mr. Shoham’s advisory agreement may be terminated with or without cause by the Company, subject to the terms of such agreement. Mr. Shoham received $180,000 in consulting fees in 2016. On February 24, 2015, the Company granted 26,924 shares of Common Stock to Mr. Shoham under its 2014 Incentive Plan. As of December 31, 2017, all of such shares had been issued to Mr. Shoham. On August 8, 2016, the Board approved specified performance bonuses to Mr. Shoham, as follows: (i) $25,000 payable in connection with the acquisition of the four SPVs by Bluesphere Pavia; (ii) $65,000 payable in connection with the North Carolina project; and (iii) $60,000 payable in connection with the Rhode Island project. All such specified performance bonuses vested immediately, but have not been paid to Mr. Shoham. The Company intends to pay such amounts, only once the cash flows of the specified projects are sufficient to support the payment. Pursuant to his advisory agreement, Mr. Shoham exercised options to purchase 6,539 shares of Common Stock at an exercise price of $0.01 on December 20, 2016 and on October 20, 2017.

~~The~~Indemnification Board or the Compensation Committee shall have sole and absolute discretionary authority (i) to determine, authorize, and designate those persons pursuant to the 2016 Incentive Plan who are to receive options under the 2016 Incentive Plan, (ii) to determine the number of ~~shares~~Officers ~~of Common Stock to be covered by such options~~ and the terms thereof, (iii) to determine the type of option granted (ISO or Nonqualified Option), and (iv) to determine other such details concerning the vesting, termination, exercise, transferability and payment of such options. The Board or the Compensation Committee shall thereupon grant options in accordance with such determinations as evidenced by a written option agreement. Subject to the express provisions of the 2016 Incentive Plan, the Board or the Compensation Committee shall have discretionary authority to prescribe, amend and rescind rules and regulations relating to the 2016 Incentive Plan, to interpret the 2016 Incentive Plan, to prescribe and amend the terms of the option agreements and to make all other determinations deemed necessary or advisable for the administration of the 2016 Incentive Plan.Directors

~~The~~Our ~~exercise~~bylaws ~~price~~provide ~~per~~that ~~share~~we ~~for Common Stock or options granted under the 2016 Incentive Plan~~ shall ~~be determined by the Board or the Compensation Committee~~indemnify, ~~but~~to ~~in no case shall be less than one hundred percent (100%) of~~ the ~~fair~~fullest ~~market~~extent ~~value~~permitted ofby ~~the~~applicable ~~Common Stock (determined in accordance with the 2016 Incentive Plan at the time the option is granted)~~law, ~~provided~~our ~~that~~officers, ~~with respect to ISOs granted to a person who holds ten percent (10%) or more of the total combined voting power of all classes of stock of the Company~~directors, ~~the~~employees ~~exercise~~and ~~price~~agents ~~per~~against ~~share for~~expenses ~~Common~~incurred ~~Stock~~in ~~shall~~connection ~~not be less than 110% of the fair market value of the Common Stock. The fair market value of the Common Stock~~ with ~~respect~~actions toor ~~which~~proceedings ~~ISOs~~brought ~~may~~against bethem ~~exercisable for the first time~~ by ~~any~~reason ~~Eligible Person during any calendar year under all such plans~~ of ~~the~~their ~~Company~~serving ~~and~~or ~~its~~having ~~nonconsolidated~~served ~~affiliates~~as ~~shall~~officers, ~~not~~directors, ~~exceed $100~~employees,~~000,~~ agents or ~~such~~in other ~~amount provided in Section 422 of the Code~~capacities.

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

~~The Board or the Compensation Committee may, in~~ ~~its sole discretion, grant awards of Common Stock in the form of bonus awards and restricted stock awards. Each stock award agreement~~ 36 shall be in such form and shall contain such terms and conditions as the Board or the Compensation Committee deems appropriate. The terms and conditions of each stock award agreement may change from time to time and need not be uniform with respect to Eligible Persons, and the terms and conditions of separate stock award agreements need not be identical.

~~Deferred~~Equity ~~Stock~~Compensation ~~Awards~~Plan Information

~~The~~On ~~Board~~February or24, ~~the~~2015, ~~Compensation~~our ~~Committee~~Board ~~may~~approved ~~authorize grants~~and ofadopted ~~shares~~the ofGlobal ~~Common~~Share ~~Stock~~and toOptions beIncentive ~~awarded~~Enhancement atPlan a(2014) ~~future~~(the ~~date~~“2014 ~~upon~~Incentive ~~such~~Plan”), ~~terms~~pursuant ~~and~~to ~~conditions~~which as the ~~Committee~~Company may ~~determine. Such~~award ~~awards~~shares ~~shall~~of beCommon ~~conferred~~Stock, ~~upon~~options ~~the~~to ~~Eligible~~purchase ~~Person~~shares asof ~~consideration~~Common ~~for~~Stock ~~the~~and ~~performance~~other ofequity-based ~~services~~awards ~~and~~to ~~subject~~eligible toparticipants. ~~the~~The ~~fulfillment of~~2014 ~~specified~~Incentive ~~conditions~~Plan ~~during~~replaced the ~~deferral~~Company’s ~~period.~~Global ~~Each~~Share ~~deferred~~Incentive ~~stock~~Plan ~~award~~(2010) ~~agreement~~(the ~~shall~~“2010 beIncentive inPlan”). ~~such~~All ~~form~~options ~~and~~issued ~~shall contain such terms~~ and ~~conditions~~outstanding asunder the ~~Board~~2010 orIncentive ~~the~~Plan ~~Compensation~~are ~~Committee~~exercisable ~~deems~~within ~~appropriate.~~five-years ~~The terms and conditions~~ of ~~each~~issuance, ~~deferred stock~~at ~~award~~an ~~agreement~~exercise ~~may~~price ~~change~~of ~~from~~$74.92 ~~time~~per toshare. ~~time~~All ~~and~~options ~~need~~granted ~~not~~under bethe ~~uniform~~2014 ~~with~~Incentive ~~respect~~Plan towere ~~Eligible~~terminated ~~Persons,~~by ~~and~~ the ~~terms~~Board ~~and conditions~~ of ~~separate~~Directors ~~deferred~~on ~~stock~~November ~~award~~20, ~~agreements need not be identical~~2016.

~~Performance~~On ~~Share~~August ~~Awards~~8, 2016, our Board approved and adopted the Company’s 2016 Stock Incentive Plan (the “2016 Incentive Plan”), pursuant to which the Company may award shares of Common Stock, options to purchase shares of Common Stock and other equity-based awards to eligible participants. On November 23, 2016, the holders of a majority of the issued and outstanding shares of Common Stock approved the 2016 Incentive Plan. The 2016 Incentive Plan replaced the 2014 Incentive Plan. The 2016 Incentive Plan is described in more detail below.

The ~~Board~~2010 orIncentive ~~the Compensation Committee may authorize grants of shares of Common Stock to be awarded upon the achievement of specified performance objectives~~Plan, ~~upon~~2014 ~~such~~Incentive ~~terms~~Plan and ~~conditions as~~2016 ~~the~~Incentive ~~Board~~Plan orare ~~the~~collectively ~~Compensation~~referred Committee may determine. Such awards shall be conferred upon the Eligible Person upon the achievement of specified performance objectives during a specified performance period, such objectives being set forth in the grant and including a minimum acceptable level of achievement and, optionally, a formula for measuring and determining the number of performance shares to ~~be issued. Each performance share award agreement shall be in such form and shall contain such terms and conditions~~ as ~~the~~our ~~Board or~~“Equity ~~the~~Incentive ~~Compensation Committee deems appropriate~~Plans”. The terms and conditions of each performance share award may change from time to time and need not be uniform with respect to Eligible Persons, and the terms and conditions of separate performance share award agreements need not be identical.

~~Adjustments~~The following table summarizes information as of the close of business on December 31, 2017 concerning our Equity Incentive Plans:

If the Company shall effect a subdivision or consolidation of shares or other capital readjustment, the payment of a stock dividend, or other increase or reduction of the number of shares of the Common Stock outstanding, without receiving consideration therefore in money, services or property, then (i) the number, class, and per share price of shares of Common Stock subject to outstanding options and other awards under the 2016 Incentive Plan and (ii) the number of and class of shares then reserved for issuance under the 2016 Incentive Plan and the maximum number of shares for which awards may be granted to an Eligible Person during a specified time period shall be appropriately and proportionately adjusted. The Board or the Compensation Committee shall make such adjustments, and its determinations shall be final, binding and conclusive.

	Number of securities to be issued upon exercise of outstanding options, warrants and rights		Weighted-average exercise price of outstanding options, warrants and rights		Securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
Plan category	(a)		(b)		(c)
Equity compensation plans approved by security holders⁽¹⁾		—	$	—		277,387

Equity compensation plans not approved by security holders		5,992	$	74.92		—
Total		5,992	$	74.92		277,387

~~Change in Control~~(1)

IfDuring 2017, the Company isissued ~~merged~~68,767 orshares ~~consolidated~~of ~~with~~Common ~~another~~Stock ~~entity~~to ordirectors ~~sells~~pursuant orto ~~otherwise disposes of substantially all of~~ its ~~assets~~Non-Employee toDirectors ~~another company while options or stock awards remain~~Compensation ~~outstanding~~Plan under the 2016 Incentive Plan, unless provisions are made in connection with such transaction for the continuance of the 2016 Incentive Plan and/or the assumption or substitution of such options or stock awards with new options or stock awards covering the stock of the successor company, or parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and prices, then all outstanding options and stock awards which have not been continued, assumed or for which a substituted award has not been granted shall, whether or not vested or then exercisable, unless otherwise specified in the stock option or stock award agreement, terminate immediately as of the effective date of any such merger, consolidation or sale.

~~Withholding~~The of2016 ~~Taxes~~ Incentive Plan

~~Subject~~The topurpose ~~other~~of ~~customary~~the ~~terms,~~2016 ~~the~~Incentive ~~Company~~Plan ~~may, prior~~is to(i) ~~certificating~~assisting ~~any~~the ~~Common~~Company ~~Stock,~~and ~~deduct~~its ornonconsolidated ~~withhold~~affiliates ~~from~~in ~~any~~the ~~payment~~recruitment ~~pursuant~~and toretention aof ~~stock~~persons ~~option~~with orability ~~stock~~and ~~award~~initiative, ~~agreement~~ (ii) providing an ~~amount~~incentive ~~that~~to issuch ~~necessary~~persons to ~~satisfy~~contribute ~~any~~to ~~withholding~~the ~~requirement~~growth and success of the Company’s inbusinesses ~~which~~by itaffording ~~believes,~~such inpersons ~~good~~equity ~~faith,~~participation ~~is necessary~~ in ~~connection~~the ~~with~~Company ~~U.S.~~and ~~federal,~~(iii) ~~state,~~associating ~~local~~the orinterests ~~transfer~~of ~~taxes~~such aspersons awith ~~consequence~~those of the ~~issuance~~Company orand ~~lapse~~its ofnonconsolidated ~~restrictions~~affiliates onand ~~such Common Stock~~stockholders.

29General Provisions of the 2016 Incentive Plan

~~Item~~The ~~12. Security~~Board ~~Ownership~~shall have the sole authority to implement, interpret, and/or administer the 2016 Incentive Plan unless the Board delegates (i) all or any portion of ~~Certain~~its ~~Beneficial~~authority ~~Owners~~to implement, interpret, and/or ~~Management~~administer the 2016 Incentive Plan to a committee of the Board (i.e., the Compensation Committee), or (ii) the authority to grant and administer awards under the 2016 Incentive Plan to an officer of the Company.

The ~~following~~2016 ~~table~~Incentive ~~sets~~Plan ~~forth~~relates ~~certain~~to ~~information~~the ~~with~~issuance ~~respect~~of up to ~~the~~346,154 ~~beneficial~~shares ~~ownership~~ of Common Stock ~~by: (i) each director~~, ~~(ii) each~~ of ~~the~~which ~~executive~~up ~~officers~~to ~~of the Company~~115,384 ~~(iii)~~shares ~~all~~shall ~~current~~be ~~directors~~reserved ~~and~~specifically ~~executive~~for ~~officers~~the ~~as a~~issuance ~~group,~~of ~~and~~Incentive ~~(iv)~~Stock ~~each~~Options, ~~person~~subject ~~(including~~to ~~any~~adjustment ~~“group”~~ as ~~that~~described ~~term~~below, isand ~~used~~shall inbe ~~Section~~effective 13for ten (d10)~~(3)~~ ofyears, ~~the~~unless ~~Exchange~~earlier ~~Act) known~~terminated. toNo ~~the~~single ~~Company~~participant tounder be the ~~beneficial~~2016 ~~owner~~Incentive ofPlan may receive more than 525% of ~~the outstanding shares of the Company’s Common Stock. Unless otherwise indicated in the footnotes to the table,~~ all ~~information~~options ~~set~~awarded ~~forth~~ in ~~the~~a ~~table~~single ~~is as of February 14, 2017~~year.

~~Directors~~Any employee of the Company or an affiliate, a director, or a consultant to the Company or an affiliate may be an “Eligible Person” under the 2016 Incentive Plan. The 2016 Incentive Plan provides Eligible Persons the opportunity to participate in the enhancement of stockholder value by the award of options and ~~Named~~Common ~~Executive~~Stock, ~~Officers~~granted as stock bonus awards, restricted stock awards, deferred share awards and performance-based awards, under the 2016 Incentive Plan. This further provides for the Company to make payment of bonuses and/or consulting fees to certain Eligible Persons in options and Common Stock, or any combination thereof.

Title of Class	Directors and Named Executive Officers	Amount and Nature of Beneficial Ownership (1)		Percent of Class (1)
Common Stock	Shlomo Palas (2)		6,645,579		2.37	%
Common Stock	Joshua Shoham (3)		6,079,208		2.17	%
Common Stock	Yigal Brosh (4)		1,497,385		0.53	%
Common Stock	Shimon Erlichman (5)		1,874,436		0.67	%
Common Stock	Lyron L. Bentovim (6)		264,022		0.09	%
Common Stock	David A. Doctor (7)		38,588		0.01	%
Common Stock	Roy Amitzur (8)		6,298,323		2.25	%
Common Stock	Elad Kerner		850,000		0.30	%
Common Stock	Directors and Officers as a Group (8 persons)		23,547,541		8.31	%

Certain options to be granted to employees under the 2016 Incentive Plan are intended to qualify as Incentive Stock Options (“ISOs”) pursuant to Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”), while other options granted under the 2016 Incentive Plan will be nonqualified options not intended to qualify as ISOs (“Nonqualified Options”), either or both as provided in the agreements evidencing the options granted.

~~Stockholders with 5% Beneficial Ownership~~ 37

Title of Class	Name and Address of Beneficial Owner	Amount and Nature of Beneficial Ownership (1)(2)		Percent of Class (1)(2)
Common Stock	Dr. Amiram Borenstein Ltd. 18 Reines Street Tel Aviv, Israel		15,490,331		5.53	%
Common Stock	Lazarus Management Company LLC (9)(10) 3200 Cherry Creek South Drive, Suite 670 Denver, Colorado 80209		83,861,896		28.20	%
Common Stock	Auto Transtech Inc. (11) 8155 N. 76th Street Milwaukee, WI 53223		26,666,668		9.09	%

Stock Options

30 The Board or the Compensation Committee shall have sole and absolute discretionary authority (i) to determine, authorize, and designate those persons pursuant to the 2016 Incentive Plan who are to receive options under the 2016 Incentive Plan, (ii) to determine the number of shares of Common Stock to be covered by such options and the terms thereof, (iii) to determine the type of option granted (ISO or Nonqualified Option), and (iv) to determine other such details concerning the vesting, termination, exercise, transferability and payment of such options. The Board or the Compensation Committee shall thereupon grant options in accordance with such determinations as evidenced by a written option agreement. Subject to the express provisions of the 2016 Incentive Plan, the Board or the Compensation Committee shall have discretionary authority to prescribe, amend and rescind rules and regulations relating to the 2016 Incentive Plan, to interpret the 2016 Incentive Plan, to prescribe and amend the terms of the option agreements and to make all other determinations deemed necessary or advisable for the administration of the 2016 Incentive Plan.

	(1)	Applicable percentages are based on 279,913,848 shares outstanding, adjusted as required by rules of the SEC. Beneficial ownership is determined under the rules of the SEC and generally includes voting or investment power with respect to securities. Shares of Common Stock subject to options, warrants and convertible notes currently exercisable or convertible, or exercisable or convertible within 60 days are deemed outstanding for computing the percentage of the person holding such securities but are not deemed outstanding for computing the percentage of any other person. Unless otherwise indicated in the footnotes to this table, the Company believes that each of the stockholders named in the table has sole voting and investment power with respect to the shares of Common Stock indicated as beneficially owned by them.
	(2)	The 6,645,579 shares of Common Stock include (i) 6,115,491 shares currently owned, (ii) 300,000 shares awarded pursuant to a stock award under the 2014 Incentive Plan which will vest within 60 days, and (iii) 230,088 shares exercisable pursuant to options awarded under the Company’s 2010 Incentive Plan.
	(3)	The 6,079,208 shares of Common Stock include (i) 5,584,001 shares currently owned, (ii) 291,667 shares awarded pursuant to a stock award under the 2014 Incentive Plan which will vest within 60 days, and (iii) 203,540 shares exercisable pursuant to options awarded under the Company’s 2010 Incentive Plan.
	(4)	The 1,497,385 shares of Common Stock include (i) 720,833 shares currently owned, (ii) 29,167 shares awarded pursuant to a stock award under the 2014 Incentive Plan which will vest within 60 days, and (iii) 747,385 shares accrued, but not yet issued, pursuant to the Directors Compensation Plan, for services rendered to the Board during 2016.
	(5)	The 1,874,436 shares of Common Stock include (i) 1,127,051 shares currently owned, and (ii) 747,385 shares accrued, but not yet issued, pursuant to the Directors Compensation Plan, for services rendered to the Board during 2016.
	(6)	The 264,022 shares of Common Stock are accrued, but not yet issued, pursuant to the Directors Compensation Plan, for services rendered to the Board during 2016.
	(7)	The 38,588 shares of Common Stock are accrued, but not yet issued, pursuant to the Directors Compensation Plan, for services rendered to the Board during 2016.
	(8)	The 6,298,323 shares of Common Stock include (i) 5,838,514 shares currently owned, (ii) 291,667 shares awarded pursuant to a stock award under the 2014 Incentive Plan which will vest within 60 days, and (iii) 168,142 shares exercisable pursuant to options awarded under the Company’s 2010 Incentive Plan.

The exercise price per share for Common Stock or options granted under the 2016 Incentive Plan shall be determined by the Board or the Compensation Committee, but in no case shall be less than one hundred percent (100%) of the fair market value of the Common Stock (determined in accordance with the 2016 Incentive Plan at the time the option is granted), provided that, with respect to ISOs granted to a person who holds ten percent (10%) or more of the total combined voting power of all classes of stock of the Company, the exercise price per share for Common Stock shall not be less than 110% of the fair market value of the Common Stock. The fair market value of the Common Stock with respect to which ISOs may be exercisable for the first time by any Eligible Person during any calendar year under all such plans of the Company and its nonconsolidated affiliates shall not exceed $100,000, or such other amount provided in Section 422 of the Code.

	(9)	Lazarus Management Company LLC beneficially owns 83,861,896 shares of Common Stock as the investment advisor and general partner of Lazarus Investment Partners LLLP, Lazarus Israel Opportunities Fund LLLP and Lazarus Israel Opportunities Fund II LLLP. Lazarus Investment Partners LLLP beneficially owns 11,073,204 shares of Common Stock, consisting of 8,800,476 shares of Common Stock and 2,272,728 shares of Common Stock issuable upon the exercise of warrants. Lazarus Israel Opportunities Fund LLLP beneficially owns 54,718,018 shares of Common Stock, consisting of 42,218,018 shares of Common Stock and 12,500,000 shares of Common Stock issuable upon the exercise of warrants. Lazarus Israel Opportunities Fund II LLLP beneficially owns 18,070,674 shares of Common Stock, consisting of 15,343,401 shares of Common Stock and 2,727,273 shares of Common Stock issuable upon the exercise of warrants.
	(10)	Shares beneficially owned by Lazarus Management Company LLC are aggregated without regard to the “9.99% Blocker”, a provision contained in its warrants, which prevents the Company from effecting a conversion or exercise thereof, to the extent that, as a result of such conversion or exercise, the holder or its affiliates beneficially owns more than 9.99%, in the aggregate, of the issued and outstanding shares of Common Stock calculated immediately after giving effect to the issuance of shares of Common Stock upon the conversion or exercise of such warrants.
	(11)	The 26,666,668 shares of Common Stock consists of 13,333,334 shares of Common Stock and 13,333,334 shares of Common Stock issuable upon the exercise of warrants.

Bonus and Restricted Stock Awards

31 The Board or the Compensation Committee may, in its sole discretion, grant awards of Common Stock in the form of bonus awards and restricted stock awards. Each stock award agreement shall be in such form and shall contain such terms and conditions as the Board or the Compensation Committee deems appropriate. The terms and conditions of each stock award agreement may change from time to time and need not be uniform with respect to Eligible Persons, and the terms and conditions of separate stock award agreements need not be identical.

~~Item~~Deferred ~~13. Certain~~Stock ~~Relationships, Related Transactions and Director Independence~~Awards

~~Related~~The ~~Transactions~~Board or the Compensation Committee may authorize grants of shares of Common Stock to be awarded at a future date upon such terms and conditions as the Committee may determine. Such awards shall be conferred upon the Eligible Person as consideration for the performance of services and subject to the fulfillment of specified conditions during the deferral period. Each deferred stock award agreement shall be in such form and shall contain such terms and conditions as the Board or the Compensation Committee deems appropriate. The terms and conditions of each deferred stock award agreement may change from time to time and need not be uniform with respect to Eligible Persons, and the terms and conditions of separate deferred stock award agreements need not be identical.

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

WeThe ~~are~~Board ~~currently~~or ~~party~~the Compensation Committee may authorize grants of shares of Common Stock to ~~certain~~be ~~services~~awarded upon the achievement of specified performance objectives, upon such terms and ~~employment~~ ~~agreements~~conditions ~~with~~as ~~our~~the ~~executives~~Board or the Compensation Committee may determine. Such awards shall be conferred upon the Eligible Person upon the achievement of specified performance objectives during a specified performance period, such objectives being set forth in the grant and including a ~~non-executive~~minimum ~~member~~acceptable level of ~~our~~achievement ~~Board~~and, optionally, a formula for measuring and determining the number of ~~Directors,~~performance ~~which~~shares ~~are~~to ~~specifically~~be ~~described~~ issued. Each performance share award agreement shall be in ~~Part~~such ~~III~~form and shall contain such terms and conditions as the Board or the Compensation Committee deems appropriate. The terms and conditions of each performance share award may change from time to time and need not be uniform with respect to Eligible Persons, ~~Item~~and 12the terms and conditions of ~~this~~separate ~~report~~performance share award agreements need not be identical.

In July 2015, in order to finance a portion of the funds necessary to complete the acquisitions of the SPVs by Blue Sphere Pavia, we conducted a private placement of up to $250,000 of our Common Stock at $0.0176 per share to certain accredited investors (the “July Offering”). On December 2, 2015, we closed on the July Offering, resulting in gross proceeds to the Company of $225,526, and agreed to issue 21,588,871 shares of our Common Stock at $0.0104 per share, pursuant to certain subscription agreements. All investors in the July Offering were accredited investors and independent of the Company, but were part of a group led by a former member of our Board, Itai Haboucha. Mr. Haboucha did not receive any shares of Common Stock, was not paid any commissions and received no other compensation in connection with the July Offering. On June 2, 2016, the Company issued 13,930,742 shares of Common Stock in connection with the July Offering and pursuant to subscription agreements dated December 2, 2015, in consideration of $145,526, and on or about December 13, 2016, the Company issued the remaining 7,658,129 shares of Common Stock in connection with the July Offering and pursuant to a subscription agreement dated December 2, 2015, in consideration for $80,000.Adjustments

OnIf ~~December~~the ~~18,~~Company ~~2015~~shall effect a subdivision or consolidation of shares or other capital readjustment, wethe ~~entered~~payment ~~into~~of a ~~no-interest bearing~~stock ~~€118~~dividend,~~000~~ ~~promissory~~or ~~note~~other ~~with~~increase ~~R.S.~~or ~~Palas~~reduction ~~Management~~of ~~Ltd.~~the number of shares of the Common Stock outstanding, anwithout ~~entity~~receiving ~~owned~~consideration therefore in money, services or property, then (i) the number, class, and ~~controlled~~per byshare ~~Shlomi~~price ~~Palas.~~of ~~The~~shares ~~loan~~ of Common Stock subject to outstanding options and other awards under the ~~promissory~~2016 ~~note~~Incentive ~~was~~Plan ~~used~~and to(ii) ~~finance~~the anumber ~~portion~~of and class of shares then reserved for issuance under the ~~acquisition~~2016 ofIncentive Plan and the ~~four~~maximum ~~SPVs~~number inof ~~Italy~~shares ~~pursuant~~for which awards may be granted to ~~the~~an ~~Italy~~Eligible ~~Projects Agreement.~~Person Weduring ~~have~~a ~~since~~specified ~~paid~~time ~~back~~period ~~the~~shall ~~loan~~be ~~under~~appropriately and proportionately adjusted. The Board or the ~~promissory~~Compensation ~~note~~Committee ~~with~~shall ~~proceeds~~make ~~from~~such ~~our~~adjustments, ~~December~~and ~~2015~~its ~~offering~~determinations ofshall ~~the~~be ~~Company’s debentures~~final, binding and conclusive.

~~Director Independence~~ 38

~~Please~~Change ~~see~~in ~~Part III, Item 10 under the heading “Corporate Governance” for information about the independence of our directors.~~Control

32 If the Company is merged or consolidated with another entity or sells or otherwise disposes of substantially all of its assets to another company while options or stock awards remain outstanding under the 2016 Incentive Plan, unless provisions are made in connection with such transaction for the continuance of the 2016 Incentive Plan and/or the assumption or substitution of such options or stock awards with new options or stock awards covering the stock of the successor company, or parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and prices, then all outstanding options and stock awards which have not been continued, assumed or for which a substituted award has not been granted shall, whether or not vested or then exercisable, unless otherwise specified in the stock option or stock award agreement, terminate immediately as of the effective date of any such merger, consolidation or sale.

~~Item~~Withholding ~~14. Principal~~of ~~Accounting Fees and Services~~Taxes

~~Brightman~~Subject ~~Almagor~~to ~~Zohar&~~other ~~Co.~~customary terms, athe ~~member firm~~Company ofmay, ~~Deloitte~~prior ~~Touche~~to ~~Tohmatsu~~certificating ~~Limited~~any Common Stock, andeduct ~~independent~~or ~~registered~~withhold ~~public~~from ~~accounting~~any ~~firm,~~payment ~~served~~pursuant asto ~~our~~a ~~independent~~stock ~~public~~option ~~accountants for~~or stock award agreement an amount that is necessary to satisfy any withholding requirement of the ~~fiscal~~Company ~~years~~in ~~ended~~which ~~December~~it 31believes, ~~2016~~in ~~and~~good ~~2015~~faith, ~~for~~is ~~which~~necessary ~~audited~~in ~~financial~~connection ~~statements~~with ~~appear~~U.S. infederal, ~~this~~state, ~~Annual~~local ~~Report~~or transfer taxes as a consequence of the issuance or lapse of restrictions on ~~Form 10-K~~such Common Stock.

~~The following table presents the aggregate~~ ~~fees~~ Item ~~for~~12. ~~professional~~Security ~~services~~Ownership ~~rendered~~of byCertain ~~such~~Beneficial ~~accountants~~Owners ~~to us during their respective term as our principal accountants in 2016~~ and ~~2015.~~Management

	2016		2015
		(US$ in thousands)		(US$ in thousands)
Audit and Audit related Fees (1)		131		60
Tax Fees		—		16
Total		131		76

The following table sets forth certain information with respect to the beneficial ownership of Common Stock by: (i) each director, (ii) each of the executive officers of the Company, (iii) all current directors and executive officers as a group, and (iv) each person (including any “group” as that term is used in Section 13(d)(3) of the Exchange Act) known to the Company to be the beneficial owner of more than 5% of the outstanding shares of the Company’s Common Stock. Unless otherwise indicated in the footnotes to the table, all information set forth in the table is as of April 16, 2018.

~~(1)~~Directors ~~Includes professional services rendered in connection with the audit of our annual financial statements~~ and ~~the~~Named ~~review~~Executive ~~of our interim financial statements.~~Officers

Audit Fees

Title of Class	Directors and Named Executive Officers	Amount and Nature of Beneficial Ownership ⁽¹⁾		Percent of Class ⁽¹⁾
Common Stock	Shlomo Palas ⁽²⁾		111,428		2.79	%
Common Stock	Joshua Shoham ⁽³⁾		93,303		2.33	%
Common Stock	Yigal Brosh		31,001		0.78	%
Common Stock	Shimon Erlichman		33,901		0.85	%
Common Stock	David A. Doctor		19,779		0.50	%
Common Stock	Roy Amitzur ⁽⁴⁾		95,989		2.40	%
Common Stock	Elad Kerner ⁽⁵⁾		42,617		1.07	%
Common Stock	Directors and Officers as a Group (7 persons)		428,018		10.56	%

~~The aggregate fees billed by our principal accountant for the audit of our annual financial statements, review~~ ~~of financial statements included in the quarterly reports and other fees that are normally provided by the accountant in connection~~ 39 ~~with statutory and regulatory filings or engagements for the fiscal years ended December 31, 2016 and 2015 were $121,000 and $60,000, respectively.~~

~~Audit-Related~~Stockholders ~~Fees~~with 5% Beneficial Ownership

Our principal accountant provided audit related services that are reasonably related to the performance of our audit or review of our financial statements for the fiscal years ended December 31 2016 and did not provide assurance or related services that are reasonably related to the performance of our audit or review of our financial statements for the fiscal years ended December 31 2015. The fees billed by our principal accountant for those services were $10,000 in 2016 and 0 in 2015.

Title of Class	Name and Address of Beneficial Owner	Amount and Nature of Beneficial Ownership ⁽¹⁾⁽²⁾		Percent of Class ⁽¹⁾⁽²⁾
Common Stock	Ibex Investors LLC ⁽⁶⁾⁽⁷⁾ 3200 Cherry Creek South Drive, Suite 670 Denver, Colorado 80209		645,091		15.69%
Common Stock	Auto Transtech Inc. ⁽⁸⁾ 8155 N. 76th Street Milwaukee, WI 53223		205,128		5.03%
Common Stock	Justin Keener ⁽⁹⁾ 3960 Howard Hughes Parkway Las Vegas, NV 89169		372,225		9.36%

Tax Fees

	(1)	Applicable percentages are based on 3,977,755 shares outstanding, adjusted as required by rules of the SEC. Beneficial ownership is determined under the rules of the SEC and generally includes voting or investment power with respect to securities. Shares of Common Stock subject to options, warrants and convertible notes currently exercisable or convertible, or exercisable or convertible within 60 days are deemed outstanding for computing the percentage of the person holding such securities but are not deemed outstanding for computing the percentage of any other person. Unless otherwise indicated in the footnotes to this table, the Company believes that each of the stockholders named in the table has sole voting and investment power with respect to the shares of Common Stock indicated as beneficially owned by them.
	(2)	The 111,428 shares of Common Stock include (i) 88,658 shares currently owned, (ii) 1,770 shares exercisable pursuant to options awarded under the 2010 Incentive Plan, and (iii) 21,000 shares exercisable pursuant to options awarded under the 2016 Incentive Plan.
	(3)	The 93,303 shares of Common Stock include (i) 73,737 shares currently owned, (ii) 1,566 shares exercisable pursuant to options awarded under the 2010 Incentive Plan, and (iii) 18,000 shares exercisable pursuant to options awarded under the 2016 Incentive Plan.
	(4)	The 95,989 shares of Common Stock include (i) 75,695 shares currently owned, (ii) 1,294 shares exercisable pursuant to options awarded under the 2010 Incentive Plan, and (iii) 19,000 shares exercisable pursuant to options awarded under the 2016 Incentive Plan.

The aggregate fees billed for professional services rendered by our principal accountant for tax compliance, tax advice and tax planning for the fiscal year ended September 30, 2015 were $16,000. There were no such fees billed for the fiscal year ended December 31,2016.

	(5)	The 42,617 shares of Common Stock include (i) 29,617 shares currently owned, and (ii) 13,000 shares exercisable pursuant to options awarded under the 2016 Incentive Plan.
	(6)	Ibex Investors LLC (formerly Lazarus Management Company LLC) beneficially owns 645,092 shares of Common Stock as the investment advisor and general partner of Ibex Microcap Fund LLLP (formerly Lazarus Investment Partners LLLP) and Ibex Israel Fund LLLP (formerly Lazarus Israel Opportunities Fund II LLLP). Ibex Microcap Fund LLLP beneficially owns 85,179 shares of Common Stock, consisting of 67,696 shares of Common Stock and 17,483 shares of Common Stock issuable upon the exercise of warrants. Ibex Israel Fund LLLP beneficially owns 559,913 shares of Common Stock, consisting of 442,780 shares of Common Stock and 117,133 shares of Common Stock issuable upon the exercise of warrants.

~~All~~(7) ~~Other~~Shares ~~Fees~~beneficially owned by Ibex Investors LLC are aggregated without regard to the “9.99% Blocker”, a provision contained in its warrants, which prevents the Company from effecting a conversion or exercise thereof, to the extent that, as a result of such conversion or exercise, the holder or its affiliates beneficially owns more than 9.99%, in the aggregate, of the issued and outstanding shares of Common Stock calculated immediately after giving effect to the issuance of shares of Common Stock upon the conversion or exercise of such warrants.

~~There~~(8) ~~were~~The no205,128 ~~other~~shares ~~fees~~of ~~billed~~Common ~~for~~Stock ~~products or~~consist ~~services~~of ~~provided~~102,564 byshares ~~our~~of ~~principal~~Common ~~accountant~~Stock ~~for~~and ~~the~~102,564 ~~fiscal~~shares ~~years~~of ~~ended~~Common ~~December~~Stock ~~31,~~issuable ~~2016~~upon ~~and~~the ~~2015~~exercise of warrants.

~~Our~~(9) ~~audit~~The ~~committee~~372,225 ~~reviewed~~shares orof ~~ratified the~~Common ~~engagement~~Stock consist of ~~the~~Common ~~Company’s~~Stock ~~principal~~issuable ~~accountant~~upon orexercise of warrants issued on October 25, 2016, December 20, 2016, February 14, 2017, March 14, 2017, April 13, 2017, May 11, 2017 and June 7, 2017, as reported in the ~~fees~~Amendment ~~disclosed~~No. ~~above~~1 to Schedule 13G filed by Mr. Keener on February 15, 2018.

33 40

Item 1513. ~~Exhibits~~ ~~and~~Certain ~~Financial~~Relationships, ~~Statement~~Related ~~Schedules~~Transactions and Director Independence

No.	Description	Note(s)
3.1	Amended and Restated Articles of Incorporation, dated November 22, 2013.	(1)
3.2	Amended and Restated Bylaws, dated June 17, 2015.	(2)
4.1	Form of Common Stock Certificate.	(15)
10.1	Orbit Energy Rhode Island LLC Membership Interest Purchase Agreement, dated April 8, 2015.	(3)
10.2	Rhode Island Energy Partners LLC Development and Indemnification Agreement, dated April 8, 2015.	(3)
10.3	Amended and Restated Rhode Island Energy Partners LLC Agreement, dated April 8, 2015.	(3)
10.4	Orbit Energy Charlotte, LLC Letter Agreement dated January 29, 2015.	(4)
10.5	Orbit Energy Charlotte, LLC Membership Interest Purchase Agreement, dated January 30, 2015.	(5)
10.6	Concord Energy Partners, LLC Development and Indemnification Agreement, dated January 30, 2015.	(4)
10.7	Amended and Restated Concord Energy Partners LLC Agreement, dated January 30, 2015.	(4)
10.8	Share Purchase Agreement by and among Bluesphere Italy S.r.l. and Volteo Energie S.p.A., Agriholding S.r.l. and Overland S.r.l., dated May 14, 2015.	(7)
10.9	Amendment to the Share Purchase Agreement Dated May 14, 2015, by and among Bluesphere Italy S.r.l. and Volteo Energie S.p.A., Agriholding S.r.l. and Overland S.r.l., dated December 14, 2015.	(21)
10.10	Framework EBITDA Guarantee Agreement dated July 17, 2015.	(5)
10.11	Long Term Mezzanine Loan Agreement by and among Blue Sphere Corp., Eastern Sphere Ltd., Bluesphere Italy S.r.l., and Helios Italy Bio-Gas 1 L.P., dated August 18, 2015.	(8)
10.12	Organic Waste Delivery Agreement, dated October 13, 2016.	(20)
10.13	Acceptance Letter of Grant Application from Rijksdienst voor Ondernemend Nederland, dated December 8, 2016.	(19)
10.14	Service Agreement between Blue Sphere Corporation and Shlomo Palas, dated October 15, 2015.	(9) #
10.15	Service Agreement by and among Blue Sphere Corporation, JLS Advanced Investment Holdings Limited, and Roy Amitzur, dated October 15, 2015.	(9) #
10.16	Advisory Agreement between Blue Sphere Corporation and Joshua Shoham, dated October 15, 2015.	(9) #
10.17	Addendum No. 1 to Service Agreement dated December 29, 2016, between the Company, Mr. Amitzur, JLS Advanced Investment Holdings Limited and Renewable Energy Management Services.	(21)
10.18	Service and Consulting Agreement dated May 30, 2013, between the Company and Efim Monsov.	(21)
10.19	Personal Employment Agreement dated January 1, 2016, between Eastern Sphere and Elad Kerner.	(21)
10.20	Services Agreement, dated May 1, 2016, between the Company and Ran Daniel.	(11)
10.21	Form of July Offering Subscription Agreements, entered into December 2, 2015.	(12)
10.22	Form of February 3, 2016 Warrant.	(12)
10.23	Form of Securities Subscription Agreement and Warrant from the February 2016 Offering.	(10)
10.24	Form of Securities Subscription Agreement and Warrant from the June 2016 Offering.	(13)
10.25	Form of Maxim Warrant.	(14)
10.26	Form of Securities Purchase Agreement, Promissory Note and Common Stock Purchase Warrant from the October 2016 Financing.	(16)
10.27	2010 Stock Incentive Plan.	(18)
10.28	2014 Stock Incentive Plan.	(6)
10.29	2016 Stock Incentive Plan	(14)
10.30	Amended and Restated Non-Employee Director Compensation Policy.	(21)
10.31	Promissory Note issued by the Company to Viskoben Limited, dated February 13, 2017	(22)

Related Transactions

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

No.	Description	Note(s)
14.1	Code of Ethics and Anti-Harassment Policy of the Company.	(17)
21.1	Subsidiaries of Registrant.	(21)
23.1	Consent of Brightman Almagor Zohar & Co.	*
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	*
99.1	Charter of the Audit Committee.	(20)
99.2	Charter of the Finance Committee.	(20)
99.3	Charter of the Nominations Committee.	(20)
99.4	Charter of the Compensation Committee.	(20)
101	The following materials from Blue Sphere Inc.’s Annual Report on Form 10-K for the year ended December 31, 2016 are formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statement of Stockholders’ Equity/ (Deficit), (iv) Consolidated Statements of Cash Flow, and (iv) Notes to Consolidated Financial Statements.	*

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

#		Indicates management contract or compensatory plan or arrangement.
*		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 Current Report on Form 8-K filed with the SEC on April 14, 2015.
(4)		Incorporated by reference to our Current Report on Form 8-K filed with the SEC on February 5, 2015.
(5)		Incorporated by reference to our Quarterly Report on Form 10-Q filed with the SEC on August 14, 2015.
(6)		Incorporated by reference to our Quarterly Report on Form 10-Q filed with the SEC on May 15, 2015.
(7)		Incorporated by reference to our Current Report on Form 8-K filed with the SEC on May 18, 2015.
(8)		Incorporated by reference to our Current Report on Form 8-K filed with the SEC on August 24, 2015.
(9)		Incorporated by reference to our Annual Report on Form 10-K filed with the SEC on January 13, 2016.
(10)		Incorporated by reference to our Current Report on Form 8-K filed with the SEC on February 17, 2016.
(11)		Incorporated by reference to our Current Report on Form 8-K filed with the SEC on May 4, 2016.
(12)		Incorporated by reference to our Quarterly Report on Form 10-Q/A filed with the SEC on June 13, 2016.
(13)		Incorporated by reference to our Current Report on Form 8-K filed with the SEC on July 8, 2016.
(14)		Incorporated by reference to our Registration Statement on Form S-1 filed with the SEC on August 15, 2016.
(15)		Incorporated by reference to Amendment No. 1 to our Registration Statement on Form S-1/A filed with the SEC on September 1, 2016.
(16)		Incorporated by reference to our Current Report on Form 8-K filed with the SEC on October 31, 2016.
(17)		Incorporated by reference to our Current Report on Form 8-K filed with the SEC on April 29, 2016.
(18)		Incorporated by reference to our Amendment to Annual Report on Form 10-K filed with the SEC on March 9, 2011.
(19)		Incorporated by reference to our Current Report on Form 8-K filed with the SEC on December 13, 2016.
(20)		Incorporated by reference to our Registration Statement on Form S-1 filed with the SEC on December 15, 2016.
(21)		Incorporated by reference to Amendment No. 1 to our Registration Statement on Form S-1 filed with the SEC on February 2, 2017.

Director Independence

35 Please see Part III, Item 10 under the heading “Corporate Governance” for information about the independence of our directors.

~~SIGNATURES~~ Item 14. Principal Accounting Fees and Services

~~Pursuant~~Brightman toAlmagor ~~the~~Zohar ~~requirements~~& ofCo., ~~the~~a ~~Securities Exchange~~member ~~Act~~firm of ~~1934,~~Deloitte ~~the~~Touche ~~registrant~~Tohmatsu ~~has~~Limited, ~~duly~~an ~~caused~~independent ~~this~~registered ~~report~~public toaccounting befirm, ~~signed~~served onas ~~its~~our ~~behalf~~independent bypublic accountants for the ~~undersigned~~fiscal years ended December 31, ~~thereunto~~2017 ~~duly authorized~~and 2016, for which audited financial statements appear in this Annual Report on Form 10-K.

February 14, 2017	Blue Sphere Corporation
	By:	/s/ Shlomo Palas
		Shlomo Palas
		President, Chief Executive Officer, Secretary and Director

The following table presents the aggregate fees for professional services rendered by such accountants to us during their respective term as our principal accountants in 2017 and 2016.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

	2017		2016
Audit and Audit related Fees ⁽¹⁾	$	110,000	$	131,000
Tax Fees		5,000		—
Total	$	115,000	$	131,000

By:	/s/ Shlomo Palas		February 14, 2017
	(1)	Includes professional services rendered in connection with the audit of our annual financial statements and the review of our interim financial statements.
	Shlomo Palas
	(2)	Amounts are in US Dollars.
	President, Chief Executive Officer, Secretary and Director
	(Principal Executive Officer)

By:	/s/ Ran Daniel	February 14, 2017
	Ran Daniel
	Chief Financial Officer and Treasurer
	(Principal Accounting Officer and Principal Financial Officer)

Audit Fees

By:	/s/ Joshua Shoham	February 14, 2017
	Joshua Shoham
	Director

The aggregate fees billed by our principal accountant for the audit of our annual financial statements, review of financial statements included in the quarterly reports and other fees that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for the fiscal years ended December 31, 2017 and 2016 were approximately $110,000 and $121,000, respectively.

By:	/s/ Yigal Brosh	February 14, 2017
	Yigal Brosh
	Director

Audit-Related Fees

By:	/s/ Shimon Erlichman	February 14, 2017
	Shimon Erlichman
	Director

Our principal accountant provided audit related services that are reasonably related to the performance of our audit or review of our financial statements for the fiscal years ended December 31, 2017 and December 31 2016. The fees billed by our principal accountant for those services were approximately $10,000 in 2016. There were no such fees filled for the year 2017.

By:	/s/ Lyron Live Bentovim	February 14, 2017
	Lyron Live Bentovim
	Director

Tax Fees

By:	/s/ David Doctor	February 14, 2017
	David Doctor
	Director

The aggregate fees billed for professional services rendered by our principle accountant for tax compliance, tax advise and tax planning for the fiscal year ended December 31, 2017 were $5,000. There were no such fees billed for the fiscal year-ended December 31, 2016.

36 All Other Fees

~~APPENDIX~~There Awere -no ~~FINANCIAL~~other ~~STATEMENTS~~fees billed for products or services provided by our principal accountant for the fiscal years ended December 31, 2017 and 2016.

~~BLUE~~Our ~~SPHERE~~audit ~~CORPORATION~~ committee reviewed or ratified the engagement of the Company’s principal accountant or the fees disclosed above.

~~CONSOLIDATED FINANCIAL STATEMENTS~~ 41

AS Item OF15. ~~DECEMBER~~Exhibits ~~31,~~and ~~2016~~Financial Statement Schedules

IN U.S. DOLLARS

No.	Description	Note(s)
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 Certificate of Incorporation.	15
3.2	Amended and Restated Bylaws, dated June 17, 2015.	4
4.1	Form of Common Stock Certificate.	8
10.100	Service Agreement between the Company and Shlomo Palas, dated October 15, 2015.	38	#
10.101	Service Agreement by and among the Company, JLS Advanced Investment Holdings Limited, and Roy Amitzur, dated October 15, 2015.	38	#
10.102	Addendum No. 1 to Service Agreement dated December 29, 2016, between the Company, Mr. Amitzur, JLS Advanced Investment Holdings Limited and Renewable Energy Management Services.	11	#
10.103	Advisory Agreement between the Company and Joshua Shoham, dated October 15, 2015.	38	#
10.104	Services Agreement, dated May 1, 2016, between the Company and Ran Daniel.	7	#
10.105	Service and Consulting Agreement dated May 30, 2013, between the Company and Efim Monsov.	11	#
10.106	Personal Employment Agreement dated January 1, 2016, between Eastern Sphere and Elad Kerner.	11	#
10.107	Services Agreement, effective as of April 1, 2018, between Mr. Yossi Keret and the Company.	33	#
10.200	Form of Subscription Agreement from December 2015 Debenture Offering.	5
10.201	Form of Senior Debenture from December 2015 Debenture Offering.	5
10.202	Form of Warrants from December 2015 Debenture Offering.	5
10.203	Form of Pledge Agreement from December 2015 Debenture Offering.	5
10.204	Form of First Amendment to Senior Debenture.	14

~~TABLE OF CONTENTS~~42

	Page
10.205		Letter Agreement, dated December 22, 2017, between the Company and the 2015 Debenture Holders.	31
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	F-2
10.206		Form of Debenture Amendments, between the Company and the 2015 Debenture Holders.	31
CONSOLIDATED FINANCIAL STATEMENTS:
10.207		Form of Warrant Amendments, between the Company and the 2015 Debenture Holders.	31
Consolidated Balance sheets as of December 31, 2016, and 2015	F-3
10.208		Form of New Warrants issued on December 22, 2017 by the Company to the 2015 Debenture Holders.	31
Consolidated Statements of operations for the year ended December 31, 2016 and the year ended September 30, 2015 and for the three months period ended December 31, 2015	F-4
10.209		Form of Second Letter Agreement, dated April 3, 2018, between the Company and the 2015 Debenture Holders.	34
Statements of changes in stockholders’ equity (deficit) for the year ended December 31, 2016 and the year ended September 30, 2015 and for the three months period ended December 31, 2015	F-6
10.210		Form of April 2018 Debenture Amendments, dated April 3, 2018, between the Company and the 2015 Debenture Holders.	34
Consolidated Statements of cash flows for the year ended December 31, 2016 and the year ended September 30, 2015 and for the three months period ended December 31, 2015	F-8
10.211		Form of Second New Warrants, issued on April 3, 2018, by the Company to the 2015 Debenture Holders.	34
Notes to consolidated financial statements	F-10
10.212		Debenture Refinance and Purchase Agreement, dated May 26, 2017.	11
10.213		Form of Pledge Agreement used in connection with the Debenture Refinance.	17
10.214		Form of Convertible Senior Debenture used in connection with the Debenture Refinance.	17
10.215		Form of Warrant used in connection with the Debenture Refinance.	17
10.216		Loan Extension, Additional Investment & Conversion Agreement, dated February 21, 2018, between the Company and JMJ Financial.	32
10.217		Promissory Note #3, dated February 13, 2018, issued by the Company to JMJ Financial.	32
10.218		Form of Securities Purchase Agreement Document SPA-10212016, dated as of October 24, 2016, between the Company and JMJ Financial.	32
10.219		Form of Promissory Note, dated October 25, 2016, between the Company and JMJ Financial.	35
10.220		Form of Common Stock Purchase Warrants issued by the Company to JMJ Financial.	35
10.221		Letter Agreement, dated March 1, 2017, between JMJ Financial and the Company.	12
10.222		Amendment #2 to the Securities Purchase Agreement and to the $1,053,000 Promissory Note, dated March 14, 2017, by and between the Company and JMJ Financial.	13
10.223		Amendment #3 to the Securities Purchase Agreement and to the $1,579,500 Promissory Note, dated April 13, 2017, by and between the Company and JMJ Financial.	16

~~F-1~~ 43

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

10.224	Amendment #4 to the Securities Purchase Agreement, the $1,579,500 Promissory Note, and the Common Stock Purchase Warrants, dated April 28, 2017, by and between the Company and JMJ Financial.	16
10.225	Amendment #5 to the Securities Purchase Agreement and to the $1,579,500 Promissory Note, dated May 11, 2017, by and between the Company and JMJ Financial.	16
10.226	Amendment #6 to the Securities Purchase Agreement, the $2,106,000 Promissory Note, and the Common Stock Purchase Warrants, dated May 18, 2017, by and between the Company and JMJ Financial.	18
10.227	Amendment #7 to the Securities Purchase Agreement, the $2,106,000 Promissory Note, and the Common Stock Purchase Warrants, dated June 6, 2017, by and between the Company and JMJ Financial.	19
10.228	Amendment #8 to the Securities Purchase Agreement, the $2,106,000 Promissory Note, and the Common Stock Purchase Warrants, dated June 6, 2017, by and between the Company and JMJ Financial.	23
10.229	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 the Company and JMJ Financial.	28
10.230	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 the Company and JMJ Financial.	28
10.231	Promissory Note, dated August 20, 2017, issued by the Company to Global Smart Cards Inc.	*
10.232	Appendix to Loan Agreement, dated November 20, 2017, between the Company, Eastern Sphere and Global Smard Cards Inc.	*
10.233	Appendix B to Loan Agreement, dated February 25, 2018, between the Company, Eastern Sphere and Global Smard Cards Inc.	*
10.234	Securities Purchase Agreement, dated November 21, 2017, between the Company and Morningview Financial, LLC.	*
10.235	Convertible Promissory Note, dated November 21, 2017, issued by the Company to Morningview Financial, LLC.	*
10.236	12% Convertible Promissory Note, dated November 22, 2017, issued by the Company to JSJ Investments.	*
10.237	Securities Purchase Agreement, dated December 4, 2017, between the Company and EMA Financial, LLC.	*
10.238	12% Convertible Note, dated December 4, 2017, issued by the Company to EMA Financial, LLC.	*
10.239	Securities Purchase Agreement, dated December 10, 2017, between the Company and Altshuler Sham netz.	*

~~REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM~~44

To the Board of Directors and Stockholders of

10.240	12% Convertible Note, dated December 10, 2017, between the Company and Altshuler Sham netz.	*
10.241	Securities Purchase Agreement, dated January 3, 2018, between the Company and Crown Bridge Partners, LLC.	*
10.242	Convertible Promissory Note, dated January 3, 2018, issued by the Company to Crown Bridge Partners, LLC.	*
10.243	Common Stock Purchase Warrant, dated January 3, 2018, issued by the Company to Crown Bridge Partners, LLC.	*
10.244	Securities Purchase Agreement, dated January 30, 2018, between the Company and Labrys Fund, LP.	*
10.245	Convertible Promissory Note, dated January 30, 2018, issued by the Company to Labrys Fund, LP.	*
10.300	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 the Company and Pronto Verde A.G.	20
10.301	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 the Company and Pronto Verde A.G.	20
10.302	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, between the Company and Pronto Verde A.G.	21
10.303	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).	22
10.304	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 the Company and Pronto Verde A.G.	22
10.305	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 the Company and Pronto Verde A.G.	24
10.306	Long Term Mezzanine Loan Agreement, dated August 30, 2017, between the Company, Bluesphere Italy S.r.l. and Helios 3 Italy Bio-Gas 2 L.P.	25
10.307	Equity Pledge Agreement, dated August 30, 2017, between the Company and Helios 3 Italy Bio-Gas 2 L.P.	25
10.308	Subordination Agreement, dated August 30, 2017, between the Company, Bluesphere Italy S.r.l. and Helios 3 Italy Bio-Gas 2 L.P.	25
10.309	Guarantee Plant Operation Management Agreement, dated September 4, 2017, between Pronto Verde A.G. and FUTURIS PAPIA S.p.A.	25
10.310	Agreement, dated September 11, 2017, between the Company and Gain Solutions, S.R.O.	26

~~Blue Sphere Corporation.~~ 45

We have audited the accompanying consolidated balance sheets of Blue Sphere Corporation and its subsidiaries ("the Company") as of December 31, 2016 and 2015, the related consolidated statements of operations, stockholders' deficit, and cash flows for the year ended December 31, 2016, for the year ended September 30, 2015 and for the three months period ended December 31, 2015. These financial statements are the responsibility of the Company’s Board of Directors and management. Our responsibility is to express an opinion on the financial statements based on our audits.

10.311	Letter from the Company to Gain Solutions, S.R.O. concerning an Irrevocable Guaranty of Down Payment, Interest and Penalty Interest, dated September 11, 2017.	26
10.312	Security Agreement, dated September 11, 2017, between the Company and Gain Solutions, S.R.O.	26
10.313	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)	27
10.314	Form of Operating and Maintenance Contract for an Anaerobic Digestion Plant Using Biogas to Produce Electric Power between each SPV and Biogaservizi S.r.l. (as translated from Italian into English).	29
10.315	Turnkey Agreement for the Design, Construction and Delivery of a Biogas Plant, dated as of December 4, 2017, between Blue Sphere Brabant B.V. and Anaergia B.V.	30
10.316	Service, Maintenance and Operation Agreement, dated as of December 4, 2017, between Blue Sphere Brabant B.V. and Anaergia B.V.	30
10.317	Performance Guarantee Agreement, dated as of December 4, 2017, between Blue Sphere Brabant B.V. and Anaergia B.V.	30
10.400	2010 Stock Incentive Plan	1
10.401	2014 Stock Incentive Plan	3
10.402	2016 Stock Incentive Plan.	8
10.403	2018 Stock Incentive Plan	*
10.404	Amended and Restated Non-Employee Director Compensation Plan.	11
14.1	Code of Ethics and Anti-Harassment Policy of the Company.	37
21.1	Subsidiaries of Registrant.	23
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	*
99.1	Charter of the Audit Committee.	36
99.2	Charter of the Finance Committee.	36
99.3	Charter of the Nominations Committee.	36
99.4	Charter of the Compensation Committee.	36
101	The following materials from Blue Sphere Corporation’s Annual Report on Form 10-K for the year ended December 31, 2017 are formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statement of Stockholders’ Equity/ (Deficit), (iv) Consolidated Statements of Cash Flow, and (iv) Notes to Consolidated Financial Statements.	*

~~We conducted our audits in accordance~~ ~~with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we~~ 46 plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Blue Sphere Corporation and its subsidiaries as of December 31, 2016 and 2015 and the results of their operations and their cash flows for the year ended December 31, 2016, for the year ended September 30, 2015 and for the three months period ended December 31, 2015, in conformity with accounting principles generally accepted in the United States of America.

1		Incorporated by reference to our Amendment to Annual Report on Form 10-K filed with the SEC on March 9, 2011.
2		Incorporated by reference to our Current Report on Form 8-K filed with the SEC on December 3, 2013.
3		Incorporated by reference to our Quarterly Report on Form 10-Q filed with the SEC on May 15, 2015.
4		Incorporated by reference to our Current Report on Form 8-K filed with the SEC on June 17, 2015.
5		Incorporated by reference to our Current Report on Form 8-K filed with the SEC on December 28, 2015.
6		Incorporated by reference to our Current Report on Form 8-K filed with the SEC on February 17, 2016.
7		Incorporated by reference to our Current Report on Form 8-K filed with the SEC on May 4, 2016.
8		Incorporated by reference to our Registration Statement on Form S-1 (File No. 333-213145) filed with the SEC on August 15, 2016.
9		Incorporated by reference to Amendment No. 1 to our Registration Statement on Form S-1/A (File No. 333-213145) filed with the SEC on September 1, 2016.
10		Incorporated by reference to our Current Report on Form 8-K filed with the SEC on December 13, 2016.
11		Incorporated by reference to our Amendment No. 1 to Registration Statement on Form S-1/A (File No. 333-215110) filed with the SEC on February 2, 2017.
12		Incorporated by reference to our Amendment No. 2 to Registration Statement on Form S-1/A (File No. 333-215110) filed with the SEC on March 7, 2017.
13		Incorporated by reference to our Current Report on Form 8-K filed with the SEC on March 20, 2017.
14		Incorporated by reference to our Current Report on Form 8-K filed with the SEC on March 24, 2017.
15		Incorporated by reference to our Amendment No. 2 to Registration Statement on Form S-1/A (File No. 333-215110) filed with the SEC on March 24, 2017.
16		Incorporated by reference to our Quarterly Report on Form 10-Q filed with the SEC on May 15, 2017.
17		Incorporated by reference to our Current Report on Form 8-K filed with the SEC on May 26, 2017.
18		Incorporated by reference to our Amendment No. 4 to Registration Statement on Form S-1/A (File No. 333-215110) filed with the SEC on May 30, 2017.
19		Incorporated by reference to our Registration Statement on Form S-1 (File No. 333-218692) filed with the SEC on June 13, 2017.
20		Incorporated by reference to our Current Report on Form 8-K filed with the SEC on July 6, 2017.
21		Incorporated by reference to our Current Report on Form 8-K filed with the SEC on July 14, 2017.
22		Incorporated by reference to our Current Report on Form 8-K filed with the SEC on July 19, 2017.
23		Incorporated by reference to our Amendment No. 5 to Registration Statement on Form S-1/A (File No. 333-215110) filed with the SEC on July 24, 2017.
24		Incorporated by reference to our Amendment to Current Report on Form 8-K/A filed with the SEC on August 4, 2017.
25		Incorporated by reference to our Current Report on Form 8-K filed with the SEC on September 6, 2017.
26		Incorporated by reference to our Amendment to Current Report on Form 8-K/A filed with the SEC on September 14, 2017.
27		Incorporated by reference to our Current Report on Form 8-K filed with the SEC on September 19, 2017.
28		Incorporated by reference to our Quarterly Report on Form 10-Q filed with the SEC on November 20, 2017.
29		Incorporated by reference to our Current Report on Form 8-K/A filed with the SEC on November 22, 2017.
30		Incorporated by reference to our Current Report on Form 8-K filed with the SEC on December 11, 2017.
31		Incorporated by reference to our Current Report on Form 8-K/A filed with the SEC on December 28, 2017.
32		Incorporated by reference to our Current Report on Form 8-K filed with the SEC on February 27, 2018.
33		Incorporated by reference to our Current Report on Form 8-K filed with the SEC on April 5, 2018.
34		Incorporated by reference to our Current Report on Form 8-K/A filed with the SEC on April 9, 2018.
35		Incorporated by reference to our Current Report on Form 8-K filed with the SEC on October 31, 2016.
36		Incorporated by reference to our Registration Statement on Form S-1 (File No. 333-215110) filed with the SEC on December 15, 2016.
37		Incorporated by reference to our Current Report on Form 8-K filed with the SEC on April 29, 2016.
38		Incorporated by reference to our Annual Report on Form 10-K filed with the SEC on January 13, 2016.

~~The accompanying financial statements~~ ~~have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1b to the consolidated financial~~ 47 statements, the Company has incurred recurring losses from operations that raises substantial doubt about its ability to continue as a going concern. Management's plans concerning these matters are also described in Note 1b. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

~~/s/ Brightman Almagor Zohar & Co.~~ SIGNATURES

~~Brightman~~ Pursuant ~~Almagor~~to ~~Zohar~~the &requirements Coof the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Certified Public Accountants

April 17, 2018	Blue Sphere Corporation

	By:	/s/ Shlomo Palas
		Shlomo Palas
		President, Chief Executive Officer, Secretary and Director

~~Member~~ Pursuant to the requirements of ~~Deloitte~~the ~~Touche~~Securities ~~Tohmatsu~~Exchange ~~Limited~~Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Tel Aviv, Israel

By:	/s/ Shlomo Palas	April 17, 2018
	Shlomo Palas
	President, Chief Executive Officer, Secretary and Director
	(Principal Executive Officer) (Principal Accounting Officer and Principal Financial Officer)

February 14, 2017

By:	/s/ Joshua Shoham	April 17, 2018
	Joshua Shoham
	Director

F-2

By:	/s/ Yigal Brosh	April 17, 2018
	Yigal Brosh
	Director

BLUE SPHERE CORPORATION

By:	/s/ Shimon Erlichman	April 17, 2018
	Shimon Erlichman
	Director

CONSOLIDATED BALANCE SHEETS

By:	/s/ David Doctor	April 17, 2018
	David Doctor
	Director

~~(Amounts in thousands except share and per share data)~~ 48

	December 31, 2016			December 31, 2015
Assets
CURRENT ASSETS:
Cash and cash equivalents	$	416		$	1,888
Related Parties		1,408			1,378
Other current assets		81			37
Total current assets		1,905			3,303
PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation		50			30
INVESTMENTS IN NOCONSOLIDATED AFFILIATES		10,137			7,570
INVESTMENTS IN NONCONSOLIDATED SUBSIDIARIES		4,429			4,993
Total assets	$	16,521		$	15,896
Liabilities and Stockholders’ Deficit
CURRENT LIABILITIES:
Current maturities of Debentures and long term loan	$	2,988		$	549
Short term loan		280			—
Accounts payables		557			124
Other accounts payable		2,091			1,083
Deferred revenues from nonconsolidated affiliates		5,658			9,052
Total current liabilities		11,574			10,808
ACCRUED SEVERANCE PAY		11			—
LONG TERM BANK LOAN		112			127
LONG TERM LOANS AND LIABILITIES		5,003			5,543
DEBENTURES		—			2,360
WARRANTS LIABILITY		2,045			544
COMMITMENTS AND CONTIGENCIES (Note 10)
TOTAL LIABILITIES		18,745			19,382
STOCKHOLDERS’ DEFICIT:
Common shares of $0.001 par value each:
Authorized: 1,750,000,000 shares at December 31, 2016 and 2015. Issued and outstanding: 279,151,681 shares and 180,502,443 shares at December 31, 2016 and December 31, 2015, respectively.		279			1,256
Proceeds on account of shares		—			165
Treasury shares		(28	)		(28	)
Accumulated Other Comprehensive Income		33			—
Additional paid-in capital		43,985			39,813
Accumulated deficit		(46,493	)		(44,692	)
Total Stockholders’ Deficit		(2,224	)		(3,486	)
Total liabilities and Stockholders’ Deficit	$	16,521		$	15,896

APPENDIX A - FINANCIAL STATEMENTS

~~The accompanying notes are an integral~~BLUE ~~part~~SPHERE ~~of the consolidated financial statements.~~CORPORATION

~~F-3~~ CONSOLIDATED FINANCIAL STATEMENTS

~~BLUE~~AS OF ~~SPHERE~~DECEMBER ~~CORPORATION~~31, 2017

~~CONSOLIDATED~~IN ~~STATEMENTS~~U.S. ~~OF OPERATIONS~~ DOLLARS

~~(Amounts in thousands except share and~~TABLE ~~per~~OF ~~share data)~~ CONTENTS

	Year ended						Three Months ended
	Page
	December 31, 2016			September 30, 2015			December 31, 2015
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	F-2
Revenue from Services	$	588		$	—		$	—
CONSOLIDATED FINANCIAL STATEMENTS:
OPERATING EXPENSES -
Consolidated Balance sheets as of December 31, 2017, and 2016	F-3
General and administrative expenses		(7,516)			(5,317	)		(1,106	)
Consolidated Statements of operations for the year ended December 31, 2017 and December 31, 2016	F-4
OPERATING LOSS		(6,928	)		(5,317	)		(1,106	)
Statements of changes in stockholders’ equity (deficit) for the year ended December 31, 2017 and December 31, 2016	F-6
Financial Expense (Income), net		1,728			2,145			(75)
Consolidated Statements of cash flows for the year ended December 31, 2017 and December 31, 2016	F-7
Loss (gain) from Change in Fair Value of Warrants Liability		(1,390	)		—			219
Notes to consolidated financial statements	F-9
NET LOSS BEFORE INCOME TAXES AND EQUITY EARNINGS (LOSSES)		(7,266	)		(7,462	)		(1,250	)
Income Taxes		(52	)		—			—
Equity Earnings in Nonconsolidated Affiliates		5,961			—			—
Equity Losses in Non-Consolidated Subsidiaries		(444	)		—			(38	)
NET LOSS	$	(1,801	)	$	(7,462	)	$	(1,288	)
Net loss per common share - basic and diluted	$	(0.008	)	$	(0.088	)	$	(0.007	)
Weighted average number of common shares outstanding during the period - basic and diluted		235,909,374			85,135,631			177,011,554

~~The~~ F- ~~accompanying notes are an integral part of the consolidated financial statements.~~1

~~F-4~~ REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

~~BLUE~~To the ~~SPHERE~~Board ~~CORPORATION~~ of Directors and Shareholders of

~~CONSOLIDATED STATEMENTS OF COMPREHENSIVE~~Blue ~~LOSS~~Sphere Corporation.

~~(Amounts in thousands except share and~~Opinion ~~per~~on ~~share~~the ~~data)~~Financial Statements

	Year ended					Three Months ended
	December 31, 2016			September 30, 2015		December 31, 2015
NET LOSS	$	1,801		$	7,462	$	1,288
Other comprehensive loss, net of tax:
Currency translation adjustments		(33	)		—		—
TOTAL COMPREHENSIVE LOSS	$	1,768		$	7,462	$	1,288

We have audited the accompanying consolidated balance sheets of Blue Sphere Corporation and its subsidiaries (“the Company”) as of December 31, 2017 and 2016, and the related consolidated statements of operations, comprehensive loss, changes in shareholders’ deficiency and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

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

~~F-5~~The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1c to the consolidated financial statements, the Company has incurred recurring losses from operations and has stockholders’ deficit that raises substantial doubt about its ability to continue as a going concern. Management’s plans concerning these matters are also described in Note 1c. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

~~BLUE~~Basis for ~~SPHERE CORPORATION~~opinion

~~STATEMENTS~~These consolidated OFfinancial statements are the responsibility of the Company’s management. Our responsibility is to express an ~~CHANGES~~opinion INon ~~SHAREHOLDERS~~the Company’s ~~EQUITY~~financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (~~DEFICIT~~United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

~~(Amounts~~We conducted our audits in ~~thousands,~~accordance ~~except~~with ~~share~~the standards of the PCAOB. Those standards require that we plan and perform the audit ~~per~~to ~~share~~obtain ~~data)~~reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

						Proceeds
						on										Total
						account					Additional					Stockholders’
	Common Stock					of		Treasury			paid-in		Accumulated			Equity
	Shares			Amount		shares		Shares			Capital		deficit			(deficit)
BALANCE AT SEPTEMBER 30, 2014		50,109,036		$	1,126	$	20	$	—		$	35,106	$	(35,942	)	$	310
Share based compensation		—			—		—		—			558		—			558
Issuance of common stock, net of issuance cost		9,338,682			9		—		—			338		—			347
Issuance of common stock in respect of issuance of convertible notes		75,532,381			76		—		—			1,449		—			1,525
Issuance of shares for services		33,116,550			33		—		—			1,541		—			1,574
Issuance of convertible debentures		—			—		—		—			482		—			482
Treasury shares purchases		(144,054	)		—		—		(28	)		—		—			(28	)
Net loss		—			—		—		—			—		(7,462	)		(7,462	)
BALANCE AT SEPTEMBER 30, 2015		167,952,595		$	1,244	$	20		(28	)	$	39,474	$	(43,404	)	$	(2,694	)
Issuance of shares for services		2,435,000			2		—		—			134		—			136
Issuance of common stock, net of issuance cost		10,114,848			10		—		—			205		—			215
Proceeds on account of shares		—			—		145		—			—		—			145
Net loss		—			—		—		—			—		(1,288	)		(1,288	)
BALANCE AT DECEMBER 31, 2015		180,502,443		$	1,256	$	165	$	(28	)	$	39,813	$	(44,692	)	$	(3,486	)

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

~~F-6~~Brightman Almagor Zohar & Co.

~~BLUE~~Certified Public ~~SPHERE CORPORATION~~Accountants

~~STATEMENTS~~Member of OFDeloitte ~~CHANGES~~Touche INTohmatsu ~~SHAREHOLDERS’ EQUITY (DEFICIT)~~ Limited

~~(Amounts in thousands~~Tel Aviv, ~~except share and per share data)~~ Israel

					Proceeds
					on								Accumulated					Total
					account						Additional		other					Stockholders’
	Common Stock				of			Treasury			paid-in		comprehensive		Accumulated			Equity
	Shares		Amount		shares			Shares			Capital		income		deficit			(deficit)
BALANCE AT DECEMBER 31, 2015		180,502,443	$	1,256	$	165		$	(28	)	$	39,813	$	—	$	(44,692	)	$	(3,486	)
Share reverse split adjustment		—		(1,075)		—			—			1,075		—		—			—
Extinguish of liability upon shares issuance		20.936,596		21		—			—			1,506		—		—			1,527
Issuance of common stock, net of issuance cost		55,581,900		55		(20	)		—			682		—		—			717
Issuance of shares for services		7,508,000		7		—			—			738		—		—			745
Issuance of shares with respect to proceeds on account of shares		13,930,742		14		(145)			—			131		—		—			—
Exercise of warrants		700,000		1		—			—			40				—			41
Comprehensive loss		—		—		—			—			—		33		(1,801	)		(1,768	)
BALANCE AT DECEMBER 31, 2016		279,159,681	$	279	$	—			(28	)	$	43,985	$	33	$	(46,493	)	$	(2,224	)

April 17, 2018

~~The accompanying notes are an integral~~We ~~part~~have ofserved as the ~~consolidated~~Company’s ~~financial~~auditor ~~statements.~~since 2010

F-7 2

BLUE SPHERE CORPORATION

CONSOLIDATED BALANCE ~~STATEMENTS OF CASH FLOWS~~SHEETS

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

	Year ended
	December 31, 2017			December 31, 2016
	December 31, 2016			September 30, 2015
Assets
CASH FLOWS FROM OPERATING ACTIVITIES:
CURRENT ASSETS:
Net loss for the period	$	(1,801	)	$	(7,462	)
Cash and cash equivalents	$	1,053		$	416
Adjustments required to reconcile net loss to net cash used in operating activities:
Inventory		1,989			—
Share based payment		1,181			558
Trade account receivables		1,876			—
Depreciation		17			6
Related Parties		—			1,408
Capital loss from disposal of property, plant and equipment		12			—
Other current assets		3,724			81
Expenses in respect of Convertible notes and loans		162			1,949
Total current assets		8,642			1,905
Equity earnings in Nonconsolidated Affiliates		(5,961	)		—
PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation		17,416			50
Equity losses in nonconsolidated subsidiary		444			—
INVESTMENTS IN NOCONSOLIDATED AFFILIATES		12,562			10,137
Issuance of shares for services		745			1,574
INVESTMENTS IN NONCONSOLIDATED SUBSIDIARIES		—			4,429
Changes in Warrants Liability		(1,338	)		—
OTHER LONG-TERM ASSETS		2,467			—
Amortization of projects cost		—			469
Total assets	$	41,087		$	16,521
Expenses in respect of severance pay		11			—
Liabilities and Stockholders’ Deficit
Impairment of Investment		—			(22	)
CURRENT LIABILITIES:
Decrease in related parties		(80	)		—
Current maturities of Debentures and long-term loans	$	6,680		$	2,988
Decrease (increase) in other current assets		(33	)		244
Short term loans		4,151			280
Increase in deferred revenues from Nonconsolidated Affiliates		—			1,482
Deferred payment due to the acquisition of the SPVs		2,068			—
Increase in accounts payables		439			46
Accounts payables		4,351			557
Increase in other account payables		1,383			338
Other accounts payable		7,616			2,091
Net cash used in operating activities		(4,819	)		(818	)
Deferred revenues from nonconsolidated affiliates		—			5,658
CASH FLOWS FROM INVESTING ACTIVITIES:
Total current liabilities		24,866			11,574
Purchase of property and equipment		(60	)		(37	)
ACCRUED SEVERANCE PAY		18			11
Net cash used in investing activities		(60	)		(37	)
LONG TERM BANK LOANS		13,274			112
CASH FLOWS FROM FINANCING ACTIVITIES:
LONG TERM LOANS AND LIABILITIES		3,682			5,003
Proceeds from Short Term Loans		750			—
ASSET RETIREMENT OBLIGATION		35			—
Proceeds from issuance of debenture		—			625
WARRANTS LIABILITY		653			2,045
Proceeds from loans		50			859
COMMITMENTS AND CONTIGENCIES (Note 13)
Proceeds from exercise of warrants		41
TOTAL LIABILITIES		42,528			18,745
Repayment of loans and convertible debentures		(449	)		(1,081	)
STOCKHOLDERS’ DEFICIT:
Proceeds from issuance of shares and warrants		3,001			315
Common shares of $0.001 par value each:
Net cash provided by financing activities		3,393			718
Authorized: 1,750,000,000 shares at December 31, 2017 and 2016. Issued and outstanding: 3,725,980 shares and 2,147,382 shares at December 31, 2017 and December 31, 2016, respectively.		4			2
DECREASE IN CASH AND CASH EQUIVALENTS		(1,486	)		(137	)
Treasury shares		(28	)		(28	)
EFFECT OF CHANGES IN EXCHANGE RATES ON CASH BALANCES IN FOREIGN CURRENCIES		14			—
Accumulated Other Comprehensive Income		(83	)		33
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		1,888			298
Additional paid-in capital		49,067			44,262
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	416		$	161
Accumulated deficit		(50,401	)		(46,493	)
NON-CASH TRANSACTION:
Total Stockholders’ Deficit		(1,441	)		(2,224	)
Increase in investments in nonconsolidated affiliates against deferred revenues	$	2,133		$	4,952
Total liabilities and Stockholders’ Deficit	$	41,087		$	16,521
Extinguish of debt upon shares issuance	$	373		$	—
Issuance expense paid through Common Stock	$	225		$	—
Proceeds on account of shares exercised into Common Stock	$	229		$	—
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest	$	621		$	172

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

F-8 3

BLUE SPHERE CORPORATION

CONSOLIDATED STATEMENTS OF ~~CASH FLOWS~~OPERATIONS

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

	Three months ended December 31,
	Year ended
	2015
	December 31, 2017			December 31, 2016
CASH FLOWS FROM OPERATING ACTIVITIES:
Revenue from sales of electricity	$	3,260		$	—
Net loss for the period	$	(1,288	)
Development services		563			588
Adjustments required to reconcile net loss to net cash used in operating activities:
TOTAL REVENUES		3,823			588
Depreciation		1
COST OF REVENUES		2,225			—
Equity losses in nonconsolidated subsidiary		38
GROSS PROFIT (LOSS)		1,598			588
Expenses in respect of convertible notes and loans		26
OPERATING EXPENSES -
Changes in Warrants Liability		219
General and administrative expenses		6,220			7,516
Issuance of shares for services		136
Loss from obtaining control in a former non-consolidated subsidiary		2,331			—
Increase in related parties		(1,378	)
OPERATING LOSS		(6,953	)		(6,928	)
Increase in other current assets		(16	)
Financial Expense, net		4,060			1,728
Increase in accounts payables		66
Loss from extinguishment of short term loan		2,106			—
Increase in other account payables		71
Loss from extinguishment of debenture		1,263			—
Net cash used in operating activities		(2,125	)
Gain from Change in Fair Value of Warrants Liability		(2,039	)		(1,390	)
CASH FLOWS FROM INVESTING ACTIVITIES:
NET LOSS BEFORE INCOME TAXES		(12,343	)		(7,266	)
Investment in nonconsolidated subsidiary		(2,143	)
Income Taxes		116			(52	)
Net cash used in investing activities		(2,143	)
NET LOSS BEFORE EQUITY INCOME (LOSSES)		(12,227	)		(7,318	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Equity income in Non-Consolidated affiliates		8,083			5,961
Proceeds from loans received		3,183
Equity income (loss) in Non-Consolidated Subsidiaries		236			(444	)
Proceeds from issuance of debenture and warrants		2,672
NET LOSS	$	(3,908	)	$	(1,801	)
Repayment of loans		(5	)
Net loss per common share - basic and diluted	$	(1.02	)	$	(0.99	)
Proceeds on account of shares		145
Weighted average number of common shares outstanding during the period - basic and diluted		3,837,111			1,814,668
Net cash provided by financing activities		5,995
INCREASE IN CASH AND CASH EQUIVALENTS		1,727
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		161
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	1,888
NON-CASH TRANSACTION:
Increase in investments in nonconsolidated affiliates against deferred revenues	$	2,618
Loans exercised into Common Stock	$	188
Increase Investment in nonconsolidated subsidiary in consideration of Long Term Loan	$	4,236
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest	$	4

~~F-9~~ The accompanying notes are an integral part of the consolidated financial statements.

~~BLUE SPHERE CORPORATION~~ F- 4

~~NOTES~~BLUE SPHERE ~~TO CONSOLIDATED FINANCIAL STATEMENTS~~CORPORATION

~~(Amounts in thousands, except share and~~CONSOLIDATED ~~per~~STATEMENTS ~~share~~OF ~~data)~~COMPREHENSIVE LOSS

~~NOTE~~(Amounts 1in –thousands ~~GENERAL~~except share and per share data)

a. General


	Year ended
	December 31, 2017		December 31,2016

NET LOSS	$	3,908	$	1,801
Other comprehensive loss, net of tax:

Currency translation adjustments		116		(33	)

TOTAL COMPREHENSIVE LOSS	$	4,024	$	1,768

Blue Sphere Corporation (the “Company”), together with its wholly-owned subsidiaries, Eastern Sphere Ltd. (“Eastern”), BinoSphere LLC (“Binosphere”), Bluesphere Pavia S.r.l (“Bluesphere Pavia”, formerly called Bluesphere Italy S.r.l.), Sustainable Energy Ltd. (“SEL”), 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~~accompanying ofnotes ~~Nevada~~are onan ~~July~~integral ~~17,~~part ~~2007 and was originally in the business~~ of ~~developing and promoting automotive internet sites. On February 17, 2010,~~ the ~~Company~~condensed ~~conducted~~consolidated afinancial 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 marketsstatements. 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. As of December 31, 2016, SEL had not commenced operations. On January 31, 2017, we dissolved Johnstonsphere LLC, which had no operations since inception.

b. F- ~~Going concern consideration~~5

~~The accompanying financial statements~~BLUE ~~have~~SPHERE been prepared assuming that the Company will continue as a going concern. As of December 31, 2016, the Company had approximately $416 thousand in cash, a negative working capital of approximately $9,669 thousand, a stockholders’ deficit of approximately $2,224 thousand and an accumulated deficit of approximately $46,493 thousand. Management anticipates their business will require substantial additional investments that have not yet been secured. The Company anticipates that the existing cash will not be sufficient to continue its operations through the next 12 months. Management is continuing in the process of fund raising in the private equity and capital markets as the Company will need to finance future activities and general and administrative expenses. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Company’s ability to continue as a going concern is dependent upon raising capital from financing transactions and revenue from operations.CORPORATION

~~These financial statements~~STATEMENTS doOF ~~not~~CHANGES ~~include~~IN ~~any adjustments that may be necessary should the Company be unable to continue as a going concern. The Company~~SHAREHOLDERS’~~s continuation~~ ~~as a going concern is dependent on its ability to obtain additional financing as may be required and ultimately to attain profitability.~~(DEFICIT)

~~NOTE 2~~(Amounts –in ~~SIGNIFICANT~~thousands, ~~ACCOUNTING~~except ~~POLICIES~~share and per share data )

a. Functional currency

					Proceeds
					on								Accumulated						Total
					account						Additional		other						Stockholders’
	Common Stock				of			Treasury			paid-in		comprehensive			Accumulated			Equity
	Shares		Amount		shares			Shares			Capital		Income (loss)			deficit			(deficit)

BALANCE AT January 1, 2016		1,388,481	$	1	$	165		$	(28	)	$	41,068	$	—		$	(44,692	)	$	(3,486	)

Extinguish of liability upon shares issuance		161,051		*		—			—			1,527		—			—			1,527
Issuance of common stock, net of issuance cost		427,552		1		(20	)		—			736		—			—			717
Issuance of shares for services		57,754		*		—			—			745		—			—			745
Issuance of shares with respect to proceeds on account of shares		107,160		*		(145	)		—			145		—			—			—
Exercise of warrants		5,385		*		—			—			41					—			41
Comprehensive loss		—		*		—			—			—		33			(1,801	)		(1,768	)
BALANCE AT DECEMBER 31, 2016		2,147,383	$	2	$	—			(28	)	$	44,262	$	33		$	(46,493	)	$	(2,224	)

Extinguish of liability upon shares issuance		7,406		*		—			—			47		—			—			47
Issuance of common stock, net of issuance cost		1,440,000		2		—			—			4,121		—			—			4,123
Issuance of shares for services		27,598		*		—			—			166		—			—			166
Share based Compensation		103,594		*		—			—			471		—			—			471
Comprehensive loss		—		*		—			—			—		(116	)		(3,908	)		(4,024	)
BALANCE AT DECEMBER 31, 2017		3,725,981	$	4	$	—			(28	)	$	49,067	$	(83	)	$	(50,401	)	$	(1,441	)

~~The~~* ~~functional~~less ~~currency~~than ~~of the company is U~~$1.S dollar. The functional currency of the subsidiaries is also U.S dollar, except for Blue Sphere Pavia. Accordingly, all monetary assets, liabilities, expenses and equity earnings of the foreign subsidiary are re-measured into U.S. dollars at the exchange rates in effect at the reporting date. The foreign currency translation adjustments are included as a component in the stockholders’ Deficit in the accompanying consolidated balance sheet as a component of accumulated other Comprehensive Loss.

b.** ~~Basis~~Issuance cost during the period were of ~~Presentation~~$377

The ~~consolidated~~accompanying ~~financial~~notes ~~statements~~are ~~have~~an ~~been~~integral ~~prepared~~part ~~in accordance with generally accepted accounting principles in the United States (“GAAP”) and includes the accounts~~ of the ~~Company~~consolidated ~~and~~financial ~~its wholly owned subsidiaries~~statements. ~~All intercompany transactions and balances have been eliminated in consolidation.~~

F-10 6

BLUE SPHERE CORPORATION

~~NOTES TO~~ CONSOLIDATED STATEMENTS ~~FINANCIAL~~OF ~~STATEMENTS~~CASH FLOWS

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

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (continued)

	Year ended
	December 31,			December 31,
	2017			2016
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss for the period	$	(3,908	)	$	(1,801	)
Adjustments required to reconcile net loss to net cash used in operating activities:
Share based payment		471			1,181
Extinguish of liability upon shares issuance		47			—
Loss from extinguishment of debenture		1,263			—
Loss from extinguishment of short term loans		2,106			—
Depreciation		843			17
Capital loss from disposal of property, plant and equipment		—			12
Expenses in respect of Convertible notes and loans		(672	)		162
Equity earnings in Nonconsolidated Affiliates		(8,083	)		(5,961	)
Equity losses (gain) in nonconsolidated subsidiaries		(236	)		444
Issuance of shares for services		166			745
Loss from obtaining control in a former non-consolidated subsidiary		2,331			—
Changes in Warrants Liability		(2,039	)		(1,338	)
Expenses in respect of severance pay		7			11
Changes in operating assets and liabilities:
Decrease in related parties		—			(80	)
Increase in inventory		(1,902	)		—
Increase in trade accounts receivables		(239	)		—
Decrease (increase) in other current assets		1,913			(33	)
Decrease in other long-term assets		2,426			—
Increase in accounts payables		1,104			439
Increase in other account payables		1,007			1,383
Net cash used in operating activities		(3,395	)		(4,819	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment		(281	)		(60	)
Investment in nonconsolidated subsidiary		(2,972	)		—
Consolidation of a former non-consolidated subsidiaries (see note a)		1,056			—
Net cash used in investing activities		(2,197	)		(60	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short term loans		2,743			750
Repayment of short term loans		(1,200	)		—
Proceeds from long term loans		1,557			50
Proceeds from exercise of warrants		—			41
Repayment of loans and convertible debentures		(986	)		(449	)
Proceeds from issuance of shares and warrants, net of issuance cost		4,123			3,001
Net cash provided by financing activities		6,237			3,393

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		645			(1,486	)

EFFECT OF CHANGES IN EXCHANGE RATES ON CASH BALANCES IN FOREIGN CURRENCIES		(68	)		14

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		416			1,888

CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	1,053		$	416

NON-CASH TRANSACTION:
Increase in investments in nonconsolidated affiliates against deferred revenues	$	230		$	2,133
Extinguish of debt upon shares issuance	$	—		$	373
Issuance expense paid through Common Stock	$	—		$	225
Proceeds on account of shares exercised into Common Stock	$	—		$	229
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest	$	999		$	621

c.The accompanying ~~Cash~~notes ~~equivalents~~are an integral part of the consolidated financial statements.

~~Cash equivalents are short~~ F-~~term~~ highly liquid investments which include short term bank deposit (up to three months from date of deposit), that are not restricted as to withdrawals or use that are readily convertible to cash with maturities of three months or less as of the date acquired.7

d.BLUE ~~Fair~~SPHERE ~~Value of Financial Instruments~~CORPORATION

~~The Company~~CONSOLIDATED ~~records~~STATEMENTS ~~its~~OF ~~financial~~CASH assets and liabilities at fair value. The accounting guidance for fair value provides a framework for measuring fair value, clarifies the definition of fair value, and expands disclosures regarding fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The accounting guidance establishes a three-tiered hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:FLOWS

~~Level~~(Amounts ~~1 – Quoted prices~~ in ~~active~~thousands, ~~markets~~except ~~for~~share ~~identical~~and ~~assets~~per orshare ~~liabilities.~~data)

~~Level 2~~(a) –2017 ~~Inputs~~Consolidation other than Level 1 that are observable, either directly or indirectly, such as quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of ~~the~~Non-Consolidated ~~assets or liabilities.~~subsidiaries

~~Level 3~~1. –On ~~Unobservable~~July ~~inputs~~1, ~~that~~2017, ~~are~~the ~~supported~~Company byconsolidated ~~little~~Agricerere orS.r.l., noAgrielektra ~~market~~S.r.l., ~~activity~~Agrisorse S.r.l. and ~~that~~Gefa ~~are~~S.r.l., ~~significant~~non-consolidated tosubsidiaries. ~~the~~The ~~fair~~consolidation ~~value~~was recorded by allocating the cost of the acquisitions to the assets orconsolidated, ~~liabilities~~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:

The Company recognizes transfers among Level 1, Level 2 and Level 3 classifications as of the actual date of the events or change in circumstances that caused the transfers.

Accounts Receivable	$	(1,149	)
Prepaid expenses and other current assets		(3,261	)
Property, plant and equipment		(15,094	)
Other noncurrent assets		(4,382	)
Short term loans		3,969
Accounts payable and accrued liabilities		2,787
Bank loans		15,244
Total net assets, net of cash consolidated		(1,886	)
Less: Capital loss from obtaining control in a former non-consolidated subsidiary		(2,331	)
Add: Investment in non-consolidated Subsidiaries		5,089
Net cash consolidated:	$	872

~~The Company’s~~2. ~~financial~~On ~~instruments~~October 1, ~~including~~2017, ~~cash~~the ~~equivalents~~Company have commenced to consolidate FUTURIS PAPIA S.r.l., ~~accounts~~a ~~payable~~non-consolidated ~~and~~subsidiary. ~~accrued~~The ~~liabilities have~~consolidation ~~carrying~~was ~~amounts~~recorded ~~which~~by ~~approximate~~allocating ~~fair~~the ~~value~~cost ~~due~~of the acquisitions to the ~~short-term~~assets ~~maturity~~consolidated, ofincluding ~~these~~other ~~instruments~~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:

e. Property, plant and equipment

Accounts Receivable	$	(417	)
Inventory		(50	)
Prepaid expenses and other current assets		(571	)
Property, plant and equipment		(2,016	)
Goodwill		(304	)
Accounts payable and accrued liabilities		536
Asset Retirement Obligation		34
Total net assets, net of cash consolidated		(2,788	)

Add: Investment in non-consolidated Subsidiaries		2,972
Net cash consolidated:	$	184

~~Property, plant and equipment are stated at cost, less accumulated depreciation. Assets are depreciated using the straight~~ F-~~line~~ ~~method over their estimated useful lives.~~8

~~Annual rates~~BLUE ofSPHERE ~~depreciation are as follows:~~CORPORATION

	%
Computers, electronic equipment and software		33
Vehicles		15
Office furniture and equipment		15

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data)

~~F-11~~ NOTE 1 – GENERAL

~~BLUE~~a. ~~SPHERE CORPORATION~~ General

~~NOTES~~Blue TOSphere ~~CONSOLIDATED~~Corporation ~~FINANCIAL~~(the “Company”), ~~STATEMENTS~~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, par value $0.001 per share (“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.

~~(Amounts~~Unless inthe ~~thousands~~context otherwise requires, ~~except~~the ~~share~~terms “Bluesphere”, “The Company”, “we”, “us”, and “our” ~~per~~in ~~share~~these ~~data)~~notes to consolidated financial statements refer to Blue Sphere Corporation and its consolidated subsidiaries.

~~NOTE~~ F- ~~2 – SIGNIFICANT ACCOUNTING POLICIES (continued)~~9

f.BLUE ~~Investment~~SPHERE ~~in nonconsolidated affiliates~~CORPORATION

~~Investments~~NOTES inTO ~~companies~~CONSOLIDATED inFINANCIAL ~~which the~~STATEMENTS ~~Company has the ability to exert significant influence over operating and financial policies~~ (~~generally 20% to 50% ownership),~~Amounts ~~but~~in ~~which the Company does not control~~thousands, ~~are~~except ~~accounted~~share ~~for using the equity method. Under the equity method, investments are initially recorded at cost~~ and ~~adjusted~~per ~~for~~share dividends and undistributed earnings and losses. The Company evaluates its investments in nonconsolidated Affiliates for impairment whenever events or changes in circumstances indicate that the carrying value of such investments may have experienced a decline in value. When there is evidence of loss in value that is other than temporary, the Company compares the estimated fair value of the investment to the carrying value of the investment to determine whether impairment has occurred. If the estimated fair value is less than the carrying value, the excess of the carrying value over the estimated fair value is recognized as an impairment loss. data)

g.NOTE 1 ~~Use~~– ofGENERAL ~~estimates~~(continued)

~~The~~b. ~~preparation~~Business ofdevelopment financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results may differ from those estimates. On an on-going basis, management evaluates its estimates, judgments and assumptions. Those estimates and assumptions affect including investments in nonconsolidated affiliates, investments in non-consolidated subsidiaries, deferred revenue from nonconsolidated affiliates, contingencies and litigation, income taxes and determination of fair value of stock-based compensation. These estimates are based available as of the date of the consolidated financial statements; therefore, actual results could differ from management’s estimates. year

h1. ~~Loss~~Change ~~per~~in ~~share~~Operator in Blue Sphere Pavia’s facilities and Transfer of North Carolina and Rhode Island Project Agreements

~~Net~~On ~~loss~~July ~~per~~18, ~~share~~2017, ~~basic~~the ~~and diluted,~~Company isterminated ~~computed~~its onfour ~~the~~Plant ~~basis~~EBITDA ofGuarantee ~~the~~Agreements ~~net~~dated ~~loss~~December ~~for~~15, ~~the~~2015 ~~period~~(collectively, ~~divided~~the by“Plant ~~the~~EBITDA ~~weighted~~Agreements”) with ~~average~~Austep ~~number~~S.p.A. ofan ~~common~~Italian ~~shares~~corporation ~~outstanding~~(“Austep”), ~~during~~ the ~~period.~~Company’s ~~Diluted~~former ~~net~~operator ~~loss~~in ~~per~~Italy ~~share~~that isoperated, ~~based~~maintained, and ~~upon~~supervised the ~~weighted~~Company’s ~~average~~four ~~number~~facilities ofin ~~common~~Italy ~~shares~~(the ~~and~~“SPV ofFacilities”) ~~common~~owned ~~shares~~by ~~equivalents outstanding~~the ~~when~~Company ~~dilutive.~~through ~~Common~~its indirect, ~~share~~wholly-owned ~~equivalents~~subsidiaries,Agricerere ~~include:~~S.r.l., ~~(i)~~Agrielektra ~~outstanding~~S.r.l., ~~stock~~Agrisorse ~~options~~S.r.l. ~~under~~and ~~the~~Gefa ~~Company’s~~S.r.l ~~share~~(each, ~~incentive plan~~an “SPV” and ~~warrants~~collectively, ~~which~~the ~~are~~“SPVs”). ~~included~~Also ~~under~~as ~~the~~fully ~~treasury~~described ~~share~~herein, ~~method~~we ~~when~~understand ~~dilutive,~~that ~~and~~the ~~(ii)~~agreements ~~common~~relating ~~shares~~ to ~~be issued under~~ the development ~~assumed~~and ~~conversion~~operation of ~~the~~our ~~Company’s~~facilities ~~outstanding~~in ~~convertible~~North ~~notes,~~Carolina ~~which~~and ~~are~~Rhode ~~included~~Island ~~under~~will ~~the~~be ~~if-converted~~transferred ~~method~~by ~~when dilutive.~~Austep ~~The~~to ~~computation~~its ofaffiliated ~~diluted~~entity, ~~net~~Andion Italy ~~loss~~S.r.l. ~~per~~(“Andion”). ~~share~~Presently, ~~for~~ the ~~years~~agreements ~~ended~~are ~~December~~validly ~~31,~~in ~~2016~~force and ~~September 30, 2015 and for~~ the ~~three~~ ~~months~~parties ~~period~~continue ~~ended~~to ~~December~~develop, 31operate, maintain, ~~2015~~and ~~does~~supervise ~~not~~the ~~include~~facilities ~~common~~in ~~share~~North ~~equivalents,~~Carolina ~~since~~and ~~such~~Rhode ~~inclusion would be anti-dilutive~~Island.

iFrom 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. ~~Income~~Furthermore, ~~taxes~~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.

~~The~~According ~~Company~~to ~~account for income taxes using~~ the ~~asset~~Official ~~and~~Records, on ~~liability~~June ~~method~~29, ~~which~~2017, ~~requires~~Austep ~~the~~entered ~~recognition of~~into ~~deferred~~a ~~tax~~Business ~~assets~~Unit ~~and~~Lease ~~liabilities~~Agreement ~~for~~(“BULA”) ~~the~~with ~~expected~~Andion, ~~future~~with ~~tax~~the ~~consequences~~intent of ~~events~~assuring the ~~that~~regular ~~have~~operation ~~been~~of ~~recognized~~certain inoperations ~~Company’s consolidated~~and ~~financial~~agreements ~~statements~~by ~~or in our tax returns~~Andion. ~~Estimates~~Andion ~~and~~is ~~judgments~~wholly ~~occur~~owned inby ~~the~~Arcus ~~calculation~~Holdings ofSa, ~~certain~~a ~~tax liabilities~~Luxembourg ~~and~~entity inowned ~~the~~by ~~determination~~White ofCloud ~~the~~Capital ~~recoverability~~II ofSCSp, ~~certain~~which ~~deferred~~controls ~~income~~Austep ~~tax~~Holdings ~~assets,~~S.p.A. ~~which~~Austep ~~arise~~Holdings ~~from~~S.p.A. ~~temporary~~wholly-owns ~~differences~~Austep and ~~carryforwards.~~Austep ~~Deferred~~USA, ~~income~~and ~~tax~~Austep ~~assets~~USA ~~and~~wholly-owns ~~liabilities~~Auspark ~~are~~LLC ~~measured~~and ~~using~~Austep ~~the~~Rhode ~~currently~~Island ~~enacted~~LLC. ~~tax~~Andion ~~rates~~is ~~that~~not ~~apply~~subject to ~~taxable~~the liquidation/restructuring ~~income~~of inAustep. ~~effect~~The ~~for~~BULA ~~the~~provides ~~years~~for, inamong ~~which~~other ~~those~~things, ~~tax~~the ~~assets~~transfer ~~are~~of ~~expected~~Austep’s toentire beUnited ~~realized~~States oroperations ~~settled.~~and, ~~Management~~accordingly, the ~~regularly~~agreements ~~assess~~relating to the ~~likelihood~~ ~~that~~delivery ~~deferred~~and ~~tax~~operation ~~assets~~of ~~will~~our beNorth ~~recovered~~Carolina ~~from~~and ~~future~~Rhode ~~taxable~~Island ~~income~~facilities. ~~and,~~The toterm of the ~~extent~~BULA ~~that~~is three ~~management~~(3) ~~believe,~~months ~~based upon~~from the ~~weight~~effective date of ~~available~~the ~~evidence~~BULA, ~~that~~and itwill isautomatically ~~more~~renew ~~likely~~if ~~than~~ not ~~that~~terminated ~~all~~by orone ~~a portion~~ of ~~deferred~~the ~~tax~~parties ~~assets will not be~~with ~~realized,~~at aleast ~~valuation~~thirty ~~allowance~~(30) isdays’ ~~established~~written ~~through~~notice. anThe ~~adjustment~~BULA towill ~~income~~become ~~tax~~effective ~~expense.~~upon ~~The factors~~execution ~~used~~by toall ~~assess~~parties, ~~the~~and ~~likelihood~~is ofsubject ~~realization~~to finalization of ~~our~~negotiations ~~deferred~~with ~~tax~~unions ~~assets~~regarding ~~include~~all ~~the~~employees ~~Company’s~~who ~~forecast~~will ofnot ~~future taxable~~be ~~income~~transferred ~~and~~with ~~available~~the ~~tax~~BULA. ~~planning~~Presently, ~~strategies~~the ~~that~~agreements relating ~~could~~to bethe ~~implemented~~delivery toand ~~realize~~operation ~~the~~of ~~net~~our ~~deferred~~North ~~tax~~Carolina ~~assets.~~and ~~Assumptions represent~~Rhode ~~management’s~~Island ~~best~~facilities ~~estimates~~are ~~and~~validly ~~involve~~in ~~inherent~~force, ~~uncertainties~~ and the ~~application~~parties continue ofto ~~management’s~~develop, ~~judgment. The~~operate, ~~Company~~maintain, ~~account~~and ~~for~~supervise ~~uncertainty~~the inNorth ~~income~~Carolina ~~taxes~~and ~~recognized~~Rhode inIsland ~~the~~facilities ~~Company’s~~in ~~consolidated~~accordance ~~financial~~with ~~statements~~the ~~by regularly~~terms ~~reviewing~~of ~~our~~such ~~tax~~agreements. ~~positions~~If and ~~benefits~~when tothe beBULA ~~realized.~~becomes ~~The~~effective, ~~Company’s~~we ~~recognize~~anticipate ~~tax~~that ~~liabilities~~Andion ~~based~~will ~~upon~~continue ~~management’s estimate~~to ofoperate, ~~whether~~maintain, and supervise the ~~extent~~North toCarolina ~~which,~~and ~~additional~~Rhode ~~taxes~~Island ~~will~~facilities befor ~~due~~the ~~when~~foreseeable ~~such~~future ~~estimates~~unless ~~are~~the ~~more-likely-than-not~~Italian toreceiver bewill ~~sustained. An~~sell ~~uncertain~~the ~~income~~Austep ~~tax~~US ~~position~~operation to ~~will~~another ~~not~~operator. beThrough ~~recognized~~the ifprocess itof ~~has~~Austep’s ~~less~~liquidation/restructuring, ~~than~~the aItalian ~~50%~~liquidator ~~likelihood~~will ofcompare ~~being~~competitive offers ~~sustained~~to ~~upon~~acquire ~~examination by~~the ~~taxing~~operations ~~authorities.~~and ~~The~~agreements ~~provision~~that ~~for~~are ~~income~~the ~~taxes~~subject ~~includes~~of the ~~effects~~BULA; therefore, the acquirer of ~~any~~the ~~resulting~~agreements ~~tax~~relating to ~~reserves,~~the oroperation ~~unrecognized~~of ~~tax~~the ~~benefits, that~~Company’s ~~are~~North ~~considered~~Carolina ~~appropriate~~Facility asand ~~well~~Rhode asIsland ~~the~~Facility ~~related~~may ~~net~~be ~~interest~~Andion, ~~and~~or ~~penalties~~potentially another purchaser.

j. F- ~~Comprehensive loss~~10

~~Comprehensive income~~BLUE ~~(loss)~~SPHERE ~~consists of net income (loss) and other gains and losses affecting equity that under US GAAP are excluded from net income (loss). For the Company, such items consist of translation adjustments.~~CORPORATION

~~F-12~~ NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Amounts in thousands, except share and per share data)

~~BLUE~~NOTE 1 ~~SPHERE~~– ~~CORPORATION~~ GENERAL (continued)

~~NOTES~~On TOJuly ~~CONSOLIDATED~~12, ~~FINANCIAL~~2017, ~~STATEMENTS~~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 (~~Amounts~~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 ~~thousands~~its intervention. On the same date, the ~~except~~Company ~~share~~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 ~~share~~facility ~~data)~~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.

~~NOTE~~On 2July 17, 2017, the Company –received ~~SIGNIFICANT~~a ~~ACCOUNTING~~copy ~~POLICIES~~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 (~~continued~~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.

kOn 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. ~~Revenues~~The ~~from~~Company ~~Services~~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.

~~The Company recognizes revenues from Development Fees in accordance with ASC Topic 605~~ F-20 ~~Revenue Recognition from Services.~~11

l.BLUE ~~Treasury~~SPHERE ~~shares~~CORPORATION

~~Treasury shares~~NOTES ~~are~~TO ~~held~~CONSOLIDATED byFINANCIAL ~~the~~STATEMENTS (Amounts in ~~Company~~thousands, ~~and~~except ~~presented~~share ~~as a reduction of the Company shareholders’ deficit~~ and ~~carried~~per atshare ~~their cost to the Company, under treasury shares.~~ data)

m.NOTE 1 ~~Stock-based~~– ~~compensation~~GENERAL (continued)

~~The Company~~On ~~recognizes~~November ~~the~~8, ~~estimated~~2017, ~~fair value of share-based awards under stock-based compensation cost. The Company measures compensation expense for share-based awards based on estimated fair values on~~ the ~~date of grant using the Black-Scholes option-pricing model.~~SPV ~~This~~Facilities ~~option~~entered ~~pricing~~into ~~model~~an ~~requires~~Operating ~~estimates as to the option’s expected term~~ and ~~the~~Maintenance ~~price~~Contract ~~volatility of the underlying stock. The Company measures compensation expense~~ for ~~the shares based on the market value of the underlying stock at the date of grant, less~~ an ~~estimate~~Anaerobic ofDigestion ~~dividends~~Plant ~~that~~Using ~~will~~Biogas ~~not accrue~~ to ~~the~~Produce ~~shares holders prior to vesting. The Company elected to recognize~~Electric ~~compensation~~Power ~~cost~~with ~~for awards that have~~ a ~~graded~~new ~~vesting~~operator, ~~schedule~~Biogaservizi ~~using~~S.r.l., ~~the~~an ~~straight-line~~Italian ~~approach~~company (“Biogaservizi”). ~~Share-based~~Pursuant ~~payments~~ to ~~non-employees are measured at~~ the ~~fair~~SPV ~~value of the goods or services received or the fair value of the equity instruments issued if it is determined~~Operating ~~the~~Agreements, ~~fair~~Biogaservizi ~~value~~began ofproviding ~~the~~full-service ~~goods~~operation, ~~or services cannot be reliably measured~~maintenance, and ~~are~~supervision ~~recorded at the date the goods or services are received. The amount recognized as an expense is adjusted to reflect the number~~ of ~~awards expected to vest. The fair value of equity awards is charged to~~ the ~~statement~~SPV ofFacilities, ~~operations over the service period. The offset to the recorded cost is to additional Paid in Capital.~~including ~~Consideration received on~~ the ~~exercise~~supply of ~~stock~~feedstock, ~~options~~effective ~~is recorded~~ as ~~capital~~of ~~stock~~October ~~and~~1, ~~the related share-based payments reserve is transferred to share capital~~2017.

n.The ~~Contingencies~~SPV Operating Agreements are for a term of ten (10) years, and are renewable by the SPVs for one (1) year intervals.

~~The~~In ~~Company~~connection iswith ~~involved~~each ~~in various~~SPV ~~commercial~~Operating ~~and~~Agreement, ~~other~~Biogaservizi ~~legal~~must ~~proceedings~~provide, ~~that~~and ~~arise~~has ~~from~~provided, ~~time~~ to ~~time~~each inSPV ~~the~~a ~~ordinary~~first ~~course~~demand ofguarantee ~~business.~~from ~~Except~~a ~~for~~leading ~~income~~Italian ~~tax~~or ~~contingencies~~EU orbank ~~contingent~~of ~~consideration~~€400,000 or(approximately ~~other~~$463,000), ~~contingent~~to ~~liabilities~~guarantee ~~incurred~~its orobligations, ~~acquired~~required inpayments aand ~~business~~potential ~~combination,~~damages ~~the~~under ~~Company~~each ~~records~~SPV ~~accruals~~Operating ~~for~~Agreement. ~~these~~Biogaservizi ~~types~~may ofreduce ~~contingencies~~the Guarantee to ~~the~~an ~~extent~~amount that ~~Company~~is ~~concludes~~at ~~their~~least ~~occurrence~~twenty-five ispercent ~~probable~~(25%) ~~and~~of ~~that~~initial ~~the~~amount ~~related~~if ~~liabilities~~it ~~are~~fully ~~reasonably~~performs ~~estimated.~~for ~~When~~two ~~accruing~~(2) ~~these~~years ~~costs,~~following the ~~Company~~effective date. Biogaservizi will ~~recognize~~receive an ~~accrual~~annual infee ~~the~~for ~~amount~~the ~~within~~operation ~~a range~~ of ~~loss~~each ~~that~~SPV isFacility ~~the~~of ~~best~~four ~~estimate~~hundred ~~within~~and ~~the~~five ~~range.~~thousand ~~When~~Euros no(€405), ~~amount~~plus ~~within~~VAT, ~~the~~which ~~range~~ is ainclusive ~~better~~of ~~estimate~~all services ~~than~~to ~~any~~be ~~other~~provided ~~amount,~~ (the ~~Company~~“Operator ~~accrues~~Fee”). ~~for~~Biogaservizi ~~the~~will ~~minimum~~guarantee ~~amount~~specified ~~within~~performance ~~the~~levels ~~range.~~at ~~Legal~~each ~~costs~~SPV ~~are~~Facility and ~~expensed~~if asit ~~incurred.~~fails ~~Contingent consideration~~to ~~and~~meet ~~other~~such ~~contingent~~performance ~~liabilities~~levels ~~incurred~~as ormeasured ~~acquired~~ in asix ~~business~~(6) ~~combination~~month ~~are~~reference ~~recorded~~periods, atcompensatory apenalties ~~probability~~will ~~weighted~~be ~~assessment~~deducted offrom ~~their~~the ~~fair~~Operator ~~value~~Fee, ~~and~~as ~~monitored~~determined based on ana ~~ongoing~~specified ~~basis~~formula. ~~for~~Compensatory ~~changes~~penalties inshall ~~that~~not ~~value~~exceed, on an annual basis, the Operator Fee.

FUntil 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-13 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.

~~BLUE~~The ~~SPHERE~~consolidation ~~CORPORATION~~ 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:

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Cash and cash equivalents	$	872
Accounts Receivable		1,149
Prepaid expenses and other current assets		3,261
Property, plant and equipment		15,094
Other noncurrent assets		4,382
Short term loans		(3,969	)
Accounts payable and accrued liabilities		(2,787	)
Bank loans		(15,244	)
Total net assets consolidated:	$	2,758

~~(Amounts~~The infair ~~thousands,~~values ~~except~~of ~~share~~property, plant and equipment associated with the acquisitions were determined to be Level 3 under the fair value hierarchy. Property, plant ~~per~~and ~~share~~equipment ~~data)~~values were estimated using either the cost or market approach, if a secondhand market existed.

~~NOTE~~ F- ~~2 – SIGNIFICANT ACCOUNTING POLICIES (continued)~~12

o.BLUE ~~Newly~~SPHERE ~~issued accounting pronouncements~~CORPORATION

~~In May~~NOTES ~~2014,~~TO ~~the~~CONSOLIDATED ~~FASB~~FINANCIAL ~~issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition~~STATEMENTS ~~requirements in Accounting Standards Codification~~ (~~“ASC”) 605, Revenue Recognition. The new revenue recognition standard~~Amounts ~~requires entities to recognize revenue~~ in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. In August 2015thousands, ~~the~~except ~~FASB~~share issued Accounting Standards Update No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, or ASU 2015-14. This amendment defers the effective date of the previously issued Accounting Standards Update ASU 2014-09, until the interim and ~~annual~~per ~~reporting~~share ~~periods beginning after December 15, 2017. Earlier application is permitted for interim and annual reporting periods beginning after December 15, 2016.~~ data)

InNOTE ~~August~~1 ~~2015,~~– ~~the~~GENERAL ~~FASB has issued Accounting Standards Update~~ (~~ASU~~continued) No. 2015-15, Interest - Imputation of Interest (Subtopic 835-30): Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements - Amendments to SEC Paragraphs Pursuant to Staff Announcement at June 18, 2015 EITF Meeting . This ASU adds SEC paragraphs pursuant to the SEC Staff Announcement at the June 18, 2015, Emerging Issues Task Force meeting about the presentation and subsequent measurement of debt issuance costs associated with line-of-credit arrangements. Given the absence of authoritative guidance within ASU 2015-03 for debt issuance costs related to line-of-credit arrangements, the SEC staff would not object to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. The Company does not expect this update will have a material impact on the presentation of the Company’s consolidated financial position, results of operations and cash flows.

~~In November 2015, the FASB has issued Accounting Standards Update (ASU) No~~2. ~~2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes, which changes how deferred taxes are classified on organizations’ balance sheets.~~ The ~~ASU eliminates the current requirement for organizations to present deferred tax liabilities and assets as current and noncurrent in a classified balance sheet. Instead~~Udine, ~~organizations~~Italy will be required to classify all deferred tax assets and liabilities as noncurrent. The amendments apply to all organizations that present a classified balance sheet. For public companies, the amendments are effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The Company does not expect this update will have a material impact on the presentation of the Company’s consolidated financial position, results of operations and cash flows.Acquisition

FOn 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 €2,517 (approximately $2,972), which included the initial purchase price in the amount of €2,358 (approximately $2,784), transaction costs and certain post-14 closing adjustments based on net financial position, net working capital, and certain net receivables as of the closing date.

~~BLUE~~Operations ~~SPHERE~~of ~~CORPORATION~~ the Udine SPV

~~NOTES~~In TOaccordance ~~CONSOLIDATED~~with ~~FINANCIAL~~a ~~STATEMENTS~~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. Effective from October 1, 2017, we notified Pronto Verde that the Udine GPOMA was terminated because, in part, (a) Pronto Verde did not successfully engage the designated supplier to supply vegetal oil, and the Company was forced to procure vegetal oil from another supplier at a higher cost; (b) Pronto Verde and its operator did not diligently perform specified tasks under the GPOMA, including a proper inspection and review of the facility and preparation of a takeover plan, and the Company was forced to procure such services from another operator at a higher cost than contemplated by the Udine GPOMA; and (c) due to a number of specified breaches by Pronto Verde to perform under the GPOMA.

~~(Amounts~~ F- ~~in thousands, except share and per share data)~~13

~~NOTE~~BLUE ~~3 -~~SPHERE ~~FAIR VALUE MEASUREMENT~~CORPORATION

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

	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

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

	Balance as of December 31, 2015,
	Level 1		Level 2		Level 3		Total
Liabilities:
Deferred payment due to the acquisition of the SPVs	$	—	$	—	$	2,910	$	2,910
Warrants liability	$	—	$	—	$	544	$	544
Total liabilities	$	—	$	—	$	3,454	$	3,454

NOTE 1 – GENERAL (continued)

~~Deferred~~Appling ~~payment due to~~ the ~~acquisition of~~Equity ~~the SPVs - Represents the remaining balance of fifty percent (50%) of the Purchase Price that is due to the Sellers on the~~method ~~third anniversary~~ of ~~the~~account ~~closing~~for ~~date.~~this ~~The~~investment 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 January 1, 2015	$	—
Increase due to acquisition of the SPVs		2,910
Balance at December 31, 2015	$	2,910
Changes in fair value, interest expense and translation adjustments		(225)
Balance at December 31, 2016	$	2,685

Until October 1, 2017 The Company applied the equity method of accounting for this investment because the GPOMA 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. However, since the GPOMA between the Company and Pronto Verde was terminated the Company did not apply the equity method of accounting for those investments from October 1, 2017 and consolidate the assets and liabilities of those investments in its Condensed Consolidated Balance Sheet.

~~Warrant~~Effective ~~Liability—The~~from ~~estimated~~October ~~fair~~1, ~~values of~~2017, ~~outstanding~~the ~~warrant~~Company ~~liability~~consolidated ~~were~~Futuris ~~measured~~Papia ~~using~~S.r.l., ~~Black~~a non-~~Scholes~~consolidated ~~valuation models~~subsidiary. ~~These~~Commencing ~~valuation~~that ~~models~~date, ~~involved~~the ~~using~~Company ~~such~~does ~~inputs as~~not apply the ~~estimated~~equity ~~fair~~method ~~value~~ of accounting for the ~~underlying~~investments ~~stock~~in atFuturis Papia S.r.l. because the ~~measurement~~Company ~~date~~operates, ~~risk-free~~maintains ~~interest~~and ~~rates~~supervises the biogas plant. Furthermore, ~~expected~~the ~~dividends~~Company onreigned ~~stock and~~influence ~~expected~~over ~~volatility~~the operating policies of the ~~price~~plants. ofThe consolidation was recorded by allocating the ~~underlying~~cost ~~stock.~~of ~~Due~~the acquisitions to the ~~nature~~assets ofconsolidated, ~~these~~including ~~inputs~~other intangible assets, based on their estimated fair values at the ~~valuation~~consolidation ofdate. Based on the ~~warrants was~~consolidation ~~considered~~date avaluations, ~~Level~~the 3preliminary ~~measurement.~~purchase price allocations for as the following:

As of December 31,2016, and 2015, the Level 3 liabilities consisted of the Company’s warrant liability.

Cash and cash equivalents	$	184
Inventory		50
Accounts Receivable		417
Prepaid expenses and other current assets		571
Property, plant and equipment		2,016
Goodwill		304
Accounts payable and accrued liabilities		(536	)
Asset Retirement Obligation		(34	)
Total net assets consolidated:	$	2,972

	Warrants Liability
Balance at January 1, 2015	$	—
Issuance of warrants		325
Changes in fair value		219
Balance at December 31, 2015	$	544
Issuance of warrants		2,839
Changes in fair value		1,338
Balance at December 31, 2016	$	2,045

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.

F-15 14

BLUE SPHERE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 4 1 – ~~INVESTMENTS~~GENERAL ~~IN NONCONSOLIDATED AFFILIATES~~ (continued)

~~Investment~~The inHelios ~~nonconsolidated~~Mezzanine ~~affiliates~~Loan ~~consists of the following:~~ Facility

	December 31, 2016					December 31, 2015
	Carrying Value (In thousands)		Ownership Percentage			Carrying Value (In thousands)		Ownership Percentage
Investment in Concord Energy Partners, LLC	$	5,960		25.00	%	$	4,795		25.00	%
Rhode Island Energy Partners LLC	$	4,177		22.75	%	$	2,775		22.75	%
Total	$	10,137				$	7,570

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.

~~Deferred~~The ~~revenues~~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 ~~nonconsolidated~~the date the funds were made available to Blue Sphere Italy or (ii) the date ~~affiliates~~of ~~consists~~expiration of certain licenses granted to the ~~following:~~ 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.

	December 31, 2016					December 31, 2015
	Carrying Value (In thousands)		Ownership Percentage			Carrying Value (In thousands)		Ownership Percentage
Deferred revenues from Concord Energy Partners, LLC	$	—		25.00	%	$	4,795		25.00	%
Deferred revenues from Rhode Island Energy Partners LLC	$	4,177		22.75	%	$	2,776		22.75	%
Deferred Revenue from Services from Rhode Island Energy Partners LLC	$	1,481		22.75	%	$	1,481		22.75	%
Total	$	5,658				$	9,052

The Cantu, Italy Acquisition

~~Deferred~~On ~~revenues~~June ~~represent~~29, ~~payment~~2017, ~~that~~the Company ~~were~~entered ~~received~~into bya Share Purchase Agreement (the ~~Company~~“Cantu inSPA”) ~~connection~~with the Seller, relating to the purchase of ~~those~~one ~~projects~~hundred percent ~~but~~(100%) ~~were~~of ~~not~~the ~~recognized~~share ascapital ~~revenue~~of ENERGYECO S.r.l., a limited liability company organized under the laws of Italy (the “Cantu SPV”), which owns and ~~increase~~operates a 0.990 Kw plant for the production of electricity from vegetal oil located in Cantù, Italy. The closing in relation to the ~~affiliate’s~~Cantu SPV is subject to specified conditions precedent including, but not limited to, consummation ~~membership~~of ~~interest~~an ~~accounted~~acquisition of all the minority share capital of the Cantu SPV by the ~~Company~~Seller ~~using~~from the ~~step-~~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 €2,200 (approximately $2,490). The purchase price is subject to post-~~step~~closing adjustment based on net financial position, net working capital, and certain net receivables, to be calculated on the basis inof ~~accordance~~the ~~with~~Cantu ~~ASC~~SPV’s ~~323-10-35-15.~~final ~~Such~~closing ~~deferred~~audited ~~revenues~~financial statements. The purchase price will be ~~recorded~~paid to the ~~Income~~Seller ~~statement~~at ~~upon~~closing, ~~the~~less ~~commencement~~(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) €1,010 (approximately $1,145) to repay the balance ~~commercial~~of ~~operations~~two loans payable of the ~~plant~~Cantu ~~and~~SPV; ~~fulfillment~~(c) a brokerage fee payable by the Seller in the amount of ~~all~~€60 (approximately ~~the~~$68); ~~Company’s~~and ~~obligation~~(d) ~~under~~€100 ~~the~~(approximately ~~above~~$113) ~~agreements~~to be held in escrow.

F-16 15

BLUE SPHERE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 1 4 – ~~INVESTMENTS~~GENERAL ~~IN NONCONSOLIDATED AFFILIATES~~ (continued)

~~North~~On ~~Carolina~~November ~~Project~~27, 2017, the Company notified the Seller that the Cantu SPA was terminated because (a) the deadline for consummation of the closing expired and no agreement to extend the deadline was granted by the Company, and (b) none of the specified conditions precedent had materialized. The Company also demanded the repayment of €150 (approximately USD $179) paid to escrow under the SPA, which is reimbursable should the closing not occur due to Seller’s breach or in the event that a condition precedent to closing does not materialize. The Company also reserved its right to unspecified damages incurred as a consequence of documented material representations made in connection with the SPA.

OnIn ~~January~~connection ~~30,~~with ~~2015,~~Company’s purchase of the ~~Company~~Cantu SPV, ~~Concord~~on ~~Energy~~September ~~Partners~~11, ~~LLC~~2017, ~~(“Concord”)~~the ~~and~~Company ~~York~~entered ~~Renewable Energy~~into ~~Partners~~an ~~LLC~~agreement (the “~~York~~Gain Agreement”) ~~entered~~with Gain aSolutions, ~~development~~S.R.O., ~~and~~a ~~indemnification~~company ~~agreement~~incorporated (under the ~~“Concord~~laws ~~Development~~of ~~and Indemnification~~the ~~Agreement~~Czech Republic (“Gain”), pursuant to which ~~the~~Gain will ~~Company~~purchase ~~will~~thirty-eight ~~own~~and 25one-half percent (38.5%) of the ~~membership~~capital ~~interest~~stock of ~~Concord~~the ~~and~~Cantu ~~York~~SPV ~~will~~(the “Gain SPV Shares”) ~~pay~~from the Company for a purchase price of €1,100 (approximately $1,~~250~~320), inwhich ~~consideration~~included ofa ~~the~~€200 ~~Company’s~~(approximately ~~Project~~$240) ~~Development~~down payment ~~Services~~paid by Gain (the “Gain Down Payment”). ~~York~~The ~~also~~Gain ~~agreed~~Agreement is subject to ~~pay~~Gain’s ~~the~~completion ~~Company two~~of ~~equal~~due ~~installments~~diligence and ofentry ~~$587~~into ~~upon~~definitive ~~the~~agreements ~~commencement~~to ofconsummate the ~~commercial~~purchase ~~operation~~ and ~~mechanical~~sale ~~completion~~ of the ~~North~~Gain ~~Carolina project~~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’s ~~right~~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 ~~receive~~penalty interest equal to twenty percent ~~distributions~~(20%) ~~from~~per ~~Concord~~annum, ~~are~~and any amounts (including penalty interest) not paid by March 13, 2018 shall be subject to ~~certain~~penalty ~~priorities~~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 ~~favor~~connection ofwith ~~York~~the secured Gain Down Payment, asthe ~~follows:~~ 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.

(a) The unpaid rate of return, equal to nine percent (9%) per annum and compounded annually, of unrecovered capital contributions outstanding, will be paid to York; (b) The unpaid and unrecovered capital contributions outstanding will be paid to York; (c) The amount of any excess profits from “feedstock tipping fees” shall be distributed with twenty percent (20%) will be paid to York, and the balance to the Company; (d) The amount of any excess profits from “thermal energy” shall be distributed equally between the Company and York; and (e) Any amount remaining will be distributed pro F-~~rata~~ ~~between the Company and York in proportion to the respective ownership Concord.~~16

InBLUE ~~addition,~~SPHERE ~~the Company’s right to receive distributions upon a liquidation event of Concord are subject to certain priorities in favor of York, as follows:~~ CORPORATION

~~(a)~~NOTES ~~The~~TO ~~unpaid~~CONSOLIDATED ~~rate~~FINANCIAL of return, equal to nine percent (9%) per annum and compounded annually, of unrecovered capital contributions outstanding, will be paid to York; (b) The unpaid and unrecovered capital contributions outstanding will be paid to York; and (c) Any amount remaining will be distributed pro-rata to the Company and York in proportion to the respective ownership in Concord.STATEMENTS

On(Amounts ~~November~~in 18thousands, ~~2016,~~except ~~The~~share ~~North Carolina Project commenced commercial operations~~ and ~~started to provide its output to Duke Energy pursuant to the Purchase~~ ~~Power~~per ~~Agreement~~share with Duke. The commencement of the commercial operations includes the gradual intake of waste from the Facility’s feedstock suppliers, increasing the parasitic load to the digesters, completing the waste-water-treatment resources and completing all other mechanical features needed for the Facility to operate at full capacity. The Company estimates that construction of the facility will be fully completed by March 31, 2017. data)

~~F-17~~ NOTE 1 – GENERAL (continued)

~~BLUE~~Pro ~~SPHERE~~forma ~~CORPORATION~~ results

~~NOTES~~The TOfollowing ~~CONSOLIDATED~~are ~~FINANCIAL~~unaudited pro ~~STATEMENTS~~forma financial information for the year ended December 31, 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.

~~(Amounts~~The inunaudited ~~thousands,~~pro ~~except~~forma ~~share~~financial information is not intended to represent or be indicative of the Company’s condensed consolidated and combined statements ~~per~~of ~~share~~operations ~~data)~~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.

NOTE 4 – INVESTMENTS IN NONCONSOLIDATED AFFILIATES (continued)

	Year Ended
	December 31
	2017			2016
		(Unaudited)			(Unaudited)

Revenues	$	8,023		$	6,225
Net (loss) income		(4,284	)		(1,801	)
Net (loss) earnings per common share
Basic and diluted	$	(0.76	)	$	(0.99	)

~~Rhode~~c. ~~Island~~Going ~~Project~~concern consideration

OnThe ~~April~~accompanying 8financial statements have been prepared assuming that the Company will continue as a going concern. As of December 31, ~~2015~~2017, the Company had approximately $1,053 ~~Rhode~~thousand ~~Island~~in ~~Energy~~cash, ~~Partners~~a ~~LLC~~negative ~~(“Rhode~~working ~~Island”)~~capital ~~and~~of ~~York~~approximately ~~entered into~~$16,424 thousand, a ~~development~~stockholders’ ~~and~~deficiency ~~indemnification~~of ~~agreement~~approximately $1,182 ~~(the~~thousand ~~“Rhode~~and ~~Island~~an ~~Development~~accumulated ~~and~~deficit ~~Indemnification~~of ~~Agreement”)~~approximately $50,146 ~~pursuant to~~thousand. ~~which~~Management ~~the~~anticipates ~~Company~~their business will ~~own~~require substantial 22additional investments that have not yet been secured.~~75%~~ ofThe Company anticipates that the ~~membership~~existing ~~interest~~cash ofwill ~~Rhode~~not ~~Island~~be ~~and~~sufficient to ~~York~~continue ~~will~~its ~~pay~~operations through the ~~Company~~next ~~$1,482~~12 months. Management is continuing in ~~consideration~~ the process of ~~the~~fund ~~Company’s~~raising ~~Project~~in ~~Development~~the ~~Services.~~private ~~Pursuant~~equity and tocapital ~~this~~markets ~~agreement~~as ~~York~~the ~~also~~Company ~~agreed~~will need to ~~pay~~finance ~~the~~future ~~Company~~activities ~~three~~and ~~equal~~general and administrative expenses. These conditions ~~installments~~raise ofsubstantial ~~$563~~doubt ~~upon~~about the ~~signing~~Company’s ofability ~~the~~to ~~Rhode~~continue ~~Island~~as ~~Development~~a ~~and~~going ~~Indemnification~~concern. ~~Agreement,~~Company’s ~~the~~ability ~~commencement~~to ofcontinue ~~the~~as ~~commercial~~a ~~operation~~going ~~and~~concern ~~mechanical~~is ~~completion~~dependent ofupon ~~the~~raising ~~Rhode~~capital ~~Island~~from ~~project~~financing transactions and revenue from operations.

~~The~~ F- ~~company’s right to receive distributions from Rhode Island are subject to certain priorities in favor of York, as follows:~~17

~~(a)~~BLUE ~~The~~SPHERE amount of any excess profits from “feedstock tipping fees” shall be distributed with twenty percent (20%) going to York, and eighty percent (80%) going to us; (b) The amount of any excess profits from “thermal energy” shall be distributed equally between the Company and York; and (c) Any amount remaining will be distributed pro-rata to us and York in proportion to York and our respective ownership in the Rhode Island project.CORPORATION

~~The~~NOTES ~~company’s~~TO ~~right~~CONSOLIDATED toFINANCIAL ~~receive distributions upon a liquidation event of Concord are subject to certain priorities in favor of York, as follows:~~ STATEMENTS

(a)Amounts ~~The~~in ~~unpaid guaranteed obligation return will be paid to York; (b) The unpaid rate of return~~thousands, ~~equal~~except toshare ~~nine percent (9%)~~ and per ~~annum~~share ~~and compounded annually, of unrecovered capital contributions outstanding, will be paid to York; (c~~data) The unpaid and unrecovered capital contributions outstanding will be paid to York; and (d) Any amount remaining will be distributed pro-rata to the Company and York in proportion to York and our respective ownership in the Rhode Island project.

~~On January 13, 2017, the~~NOTE ~~Company~~2 ~~and~~– ~~Orbit~~SIGNIFICANT ~~Energy,~~ACCOUNTING Inc., a former partner of the Company in both projects entered into an agreement to reduce certain of the Company’s past obligations in consideration of Two Hundred Thousand Dollars ($200) which will be paid in twelve monthly equal installments starting January 27, 2017. Any amount not paid when due will accrue interest at the simple annual rate of eight per cent (8%) from the date due until the date fully paid. The Company accrued the full settlement amount at December 31, 2016.POLICIES

~~The~~a. ~~tables~~Functional ~~set forth below summarize the combined financial information related to the nonconsolidated affiliates that are accounted for under the equity method as of December 31, 2016, and December 31,2015.~~currency

	December 31, 2016
(Dollars in thousands)	Concord		Rhode Island
Assets:
Restricted Cash	$	500	$	751
Property, Plant and Equipment, net of accumulated depreciation		26,169		19,230
Total assets	$	26,669	$	19,981
Current liabilities	$	652	$	142
Membership Interest		26,017		19,839
Total liabilities and Membership Interest	$	26,669	$	19,981

The functional currency of the company is U.S dollar. The functional currency of the subsidiaries is also U.S. dollar, except for Blue Sphere Pavia. Accordingly, all monetary assets, liabilities, expenses and equity earnings of the foreign subsidiary are re-measured into U.S. dollars at the exchange rates in effect at the reporting date. The foreign currency translation adjustments are included as a component in the stockholders’ Deficit in the accompanying consolidated balance sheet as a component of accumulated other Comprehensive Loss.

	December 31, 2015
(Dollars in thousands)	Concord		Rhode Island
Assets:
Property, Plant and Equipment, net of accumulated depreciation	$	22,878		15,901
Other assets		17		—
Total assets	$	22,895	$	15,901
Current liabilities	$	2,127	$	2,224
Membership Interest		20,768		13,677
Total liabilities and Membership Interest	$	22,895	$	15,901

Basis of Presentation

~~F-18~~ The consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and includes the accounts of the Company and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.

~~BLUE~~c. ~~SPHERE~~Principles ~~CORPORATION~~of Consolidation

~~NOTES~~The consolidated TOfinancial ~~CONSOLIDATED~~statements ~~FINANCIAL~~include ~~STATEMENTS~~the accounts of the Company and its wholly-owned subsidiaries. All inter-company accounts and transactions have been eliminated. The functional currency of the Company and its subsidiaries is the U.S. dollar.

~~(Amounts~~ F- ~~in thousands, except share and per share data)~~18

~~NOTE~~BLUE ~~5 –~~SPHERE ~~INVESTMENTS IN NONCONSOLIDATED SUBSIDAIRIES~~ CORPORATION

InNOTES ~~2015,~~TO ~~The~~CONSOLIDATED ~~Company~~FINANCIAL acquired one hundred percent (100%) of the share capital of Agricerere S.r.l., Agrielektra S.r.l., Agrisorse S.r.l. and Gefa S.r.l (each, an “SVP” and collectively, the “SVPs”) in consideration of $5,647 (€5,200) (“Purchase Price”). Each SVP owns and operates an anaerobic digestion biogas plant for the production and sale of electricity to Gestore del Servizi Energetici GSE, S.p.A., a state-owned utility company, pursuant to a power purchase agreement. The Company to paid 50% of the Purchase Price on the closing date (December 14, 2015) and the remaining balance will be paid on the third anniversary of the closing date. The remaining balance bears interest at an annual rate of two percent (2%). The Purchase Price is subject to certain adjustments and to the difference between the actual EBITDA results in the 18 months following the closing date divided by 1.5 and € 935, per the following mechanism:STATEMENTS

(~~i) If~~Amounts ~~the actual EBITDA results~~ in ~~the~~thousands, 18except ~~months~~share ~~following the closing date divided by 1.5 is greater than € 935 then the deferred~~and ~~payment shall be increased by the amount equal to 50% (fifty~~ per ~~cent)~~share ~~of this difference.~~data)

~~(ii) If~~NOTE ~~the~~2 ~~actual~~– ~~EBITDA~~SIGNIFICANT ~~results in the 18 months following the closing date divided by 1.5 is lesser than € 935 then the deferred~~ACCOUNTING ~~payment~~POLICIES ~~shall be reduced by the amount of the amount necessary to maintain Purchase Price that yields an Equity IRR of 25%, but not more than 35% of the remaining balance.~~ (continued)

~~The Company also agreed to reimburse the sellers the VAT amount that was claimed by the SPVs through the closing date~~d. ~~The~~Cash ~~reimbursed amount will not exceed € 1,160 and will be refunded to the Sellers only after the amount will be refunded to the Company by the VAT authorities in Italy.~~equivalents

InCash ~~2015,~~equivalents ~~the~~are ~~Company~~short-term highly ~~entered~~liquid ~~into~~investments anwhich ~~EBITDA~~include ~~Guarantee~~short ~~Agreement~~term ~~(“EBITDA~~bank ~~Guarantee~~deposit ~~Agreement”) with Austep S.p.A.~~ (~~“Austep”).~~up ~~Austep~~to ~~specializes~~three inmonths ~~design,~~from ~~construction,~~date ~~operation and servicing~~ of ~~anaerobic digestion plants. Pursuant to the EBITDA Guarantee Agreement~~deposit), ~~Austep~~that ~~will~~are ~~operate,~~not ~~maintain and supervise the Company’s biogas plants~~restricted inas ~~consideration~~ to awithdrawals ~~monthly~~or ~~guaranteed~~use ~~EBITDA~~that ofare ~~$204~~readily ~~(€188)~~convertible ~~during the initial six months following the Closing Date and an annual guaranteed EBITDA of $4,083 (€3,760) then after. Pursuant~~ to ~~the~~cash ~~terms of the agreements~~ with ~~Austep,~~maturities ~~the Company will receive the guaranteed levels~~ of ~~EBITDA~~three ~~and~~months ~~Austep~~or ~~will~~less ~~receive~~as ~~ninety percent (90%)~~ of the ~~revenue~~date ~~in excess of these levels~~acquired.

The Company applies the equity method because the EBITDA Guarantee Agreement whereby Austep operates, maintains and supervises each plant, prevents the Company from exercising a controlling influence over operating policies of the plantse. ~~Under~~ ~~this~~Fair ~~method,~~Value ~~the equity investment is reflected as an investment in non-consolidated subsidiaries on our Balance Sheets and the net earnings or losses~~ of ~~the~~Financial investments is reflected as equity in net earnings of nonconsolidated subsidiaries on the Company’s consolidated statements of operations. The Company’s investment in the SPV’s carrying value exceeded its proportionate share of the net assets of the SPVs by $19. This Premium was recognized as part of the carrying value in the Company’s equity investment in the SPVs. Instruments

~~Investment~~The Company records its financial assets and liabilities at fair value. The accounting guidance for fair value provides a framework for measuring fair value, clarifies the definition of fair value, and expands disclosures regarding fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in ~~nonconsolidated~~an orderly transaction between market participants ~~subsidiaries~~at ~~included~~the reporting date. The accounting guidance establishes a three-tiered hierarchy, which prioritizes the ~~following~~inputs ~~activity~~used ~~during~~in the ~~years~~valuation methodologies in measuring fair value:

	Year ended December 31,
	2016			2015
Balance at beginning of period	$	4,993		$	—
Investment in nonconsolidated subsidiaries		—			5,031
Equity in losses of nonconsolidated subsidiaries		(444	)		(38	)
Translation adjustment		(120	)		—
Balance at end of period	$	4,429		$	4,993

Level 1 – Quoted prices in active markets for identical assets or liabilities.

~~F-19~~ Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

~~BLUE~~Level ~~SPHERE~~3 ~~CORPORATION~~– Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

~~NOTES~~The TOCompany ~~CONSOLIDATED~~recognizes ~~FINANCIAL~~transfers among ~~STATEMENTS~~Level 1, Level 2 and Level 3 classifications as of the actual date of the events or change in circumstances that caused the transfers.

~~(Amounts~~The inCompany’s ~~thousands~~financial instruments, ~~except~~including ~~share~~cash equivalents, accounts payable and accrued liabilities have carrying amounts which approximate fair ~~per~~value ~~share~~due ~~data)~~to the short-term maturity of these instruments.

Filing Compare · BLUE SPHERE CORP.