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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14C INFORMATION

(Amendment No. 1)

Information Statement Pursuant to Section 14(c)
 of the Securities Exchange Act of 1934

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NOTICE OF STOCKHOLDER ACTION BY WRITTEN CONSENT

AND INFORMATION STATEMENT

WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE

REQUESTED NOT TO SEND US A PROXY.

To our fellow Stockholders:

Notice is hereby given that holders of a majority of the voting power represented by the issued and outstanding shares of common stock and Series C Convertible Preferred Stock of Lime Energy Co., a Delaware corporation (which we refer to in this notice as the “Company,” “we,” “us,” or “our”), have ratified and approved by written consent (the “Written Consent”) the Company’s potential issuance of common stock upon conversion of a convertible note (the “Note”) issued to Bison Capital Partners IV, L.P., a Delaware limited partnership (“Bison”), under that certain Note Purchase Agreement (the “Note Purchase Agreement”), dated March 24, 2015, between the Company and Bison, in order to finance, in part, the consideration for the Company’s acquisition of EnerPath International Holding Company, a Delaware corporation (the “EnerPath Acquisition”).

The Company’s entry into the Note Purchase Agreement and the EnerPath Acquisition, both of which are discussed in the accompanying information statement, did not require approval of our stockholders. However, under the Note, the number of shares issuable upon conversion of the Note is subject to a 19.99% cap that must remain in place until our stockholders approve its removal. The cap and the conditions to its removal were included in the Note in order to conform to applicable rules of the NASDAQ Stock Market LLC. The Written Consent was executed on March 24, 2015, but the removal of the cap will not become effective until a date that is at least 20 calendar days after the mailing of the accompanying information statement.

The Written Consent has already been delivered and we are not soliciting your vote or consent. This notice and the accompanying information statement constitute notice to you from the Company of the approval by written consent, as contemplated by Section 228(e) of the Delaware General Corporation Law, of certain corporate actions by less than the unanimous written consent of our stockholders.

The information statement is first being mailed to our stockholders on or about August    , 2015.

THIS IS NOT A NOTICE OF A MEETING OF STOCKHOLDERS AND

NO STOCKHOLDER MEETING WILL BE HELD TO CONSIDER THIS MATTER.

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LIME ENERGY CO.

3 Convery Blvd., Suite 600

Woodbridge, New Jersey 07095

INFORMATION STATEMENT

Pursuant to Section 14(c) of the Securities Exchange Act of 1934

THIS INFORMATION STATEMENT IS BEING SENT TO YOU FOR INFORMATIONAL PURPOSES ONLY AND NO VOTE OR OTHER ACTION OF THE COMPANY’S STOCKHOLDERS IS REQUIRED IN CONNECTION WITH THIS INFORMATION STATEMENT.

We Are Not Asking You for a Proxy and You are Requested Not to Send Us a Proxy.

INTRODUCTION

On March 24, 2015, Lime Energy Co., a Delaware corporation, which we refer to as the “Company,” “Lime,” “we,” “us” or “our,” and Bison Capital Partners IV, L.P., a Delaware limited partnership (“Bison”), entered into a Note Purchase Agreement (the “Note Purchase Agreement”), pursuant to which the Company issued a subordinated convertible note due March 24, 2020 (the “Note”) in the principal amount of $11.75 million (the “Note Issuance”). The proceeds from the Note Issuance were used to finance the Company’s acquisition of EnerPath International Holding Company, a Delaware corporation (“EnerPath”), which we refer to as the “EnerPath Acquisition.”

On the earlier of March 24, 2018 or a change of control of the Company, up to the original principal amount of the Note may, at the election of the Note holder, be converted into shares of our common stock, par value $0.0001 per share (the “Common Stock”). However, the Note provides that no portion of the amount due under the Note may be converted into more than 19.99% of the outstanding Common Stock (the “Conversion Cap”) without the approval of our stockholders, as required by the rules of the NASDAQ Stock Market LLC (“Nasdaq”) on which our Common Stock is traded.

Pursuant to the requirements of Section 14(c) of the Securities Exchange Act of 1934 and Section 228(d) of the Delaware General Corporation Law (the “DGCL”), this Information Statement is being furnished to the stockholders of record as of March 24, 2015, in connection with the approval of the potential issuance of our Common Stock in excess of the Conversion Cap, which approval will not become effective until 20 calendar days after the date this Information Statement is first mailed to our stockholders (the “Cap Removal Effective Date”).

Except as to the removal of the Conversion Cap discussed above, no separate vote of our stockholders was required with respect to the Note Issuance or the EnerPath Acquisition, which was effected by way of a merger of EnerPath with a wholly-owned subsidiary of the Company as further discussed in this Information Statement. On March 24, 2015, three of our stockholders (the “Majority Stockholders”) owning, together, 6,055,452 shares of Common Stock and 10,000 shares of our Series C Convertible Preferred Stock (the “Series C Preferred Stock”), or approximately 75% of our then outstanding voting securities, executed a written consent (the “Written Consent”) approving and adopting the potential issuance of our Common Stock in excess of the Conversion Cap, but only after the Cap Removal Effective Date. There are no rights of appraisal or similar rights of dissenters with respect to the Note Issuance or the EnerPath Acquisition.

This Information Statement is first being sent to stockholders on or about August    , 2015. We will request brokerage houses, nominees, custodians, fiduciaries and other like parties to forward this Information Statement to the beneficial owners of the Common Stock held of record by them on March 24, 2015.

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SUMMARY TERM SHEET OF THE MERGER

On March 24, 2015, Lime Energy Co., a Delaware corporation, which we refer to as the “Company,” “Lime,” “we,” “us” or “our,” EIHC MergerSub, Inc., a Delaware corporation and a wholly-owned subsidiary of the Company, which we refer to as “Merger Sub,” EnerPath International Holding Company, a Delaware corporation, which we refer to as “EnerPath,” and all of the stockholders of EnerPath, including Janina Guthrie as the Stockholder Representative, entered into an Agreement and Plan of Merger, a copy of which is attached hereto as Annex A and which we refer to as the “Merger Agreement,” pursuant to which, among other things, EnerPath merged with and into Merger Sub, a transaction which we refer to as the “Merger,” with EnerPath surviving as a direct, wholly-owned subsidiary of the Company.

The following summary highlights selected information from this Information Statement and may not contain all of the information that is important to you. Accordingly, you should read carefully this entire Information Statement, including the annexes and documents incorporated by reference herein, as well as the other documents referred to in this Information Statement. Each item in this summary includes a page reference directing you to a more complete description of that item in this Information Statement. For information on how to obtain without charge the documents that are incorporated by reference into this Information Statement, please follow the instructions under “Where You Can Find More Information.”

The Parties to the Merger (page 4)

Lime Energy Co.

Lime is a provider of energy efficiency programs that enable utility clients to reach underserved markets and achieve energy reduction goals. The Company’s principal executive offices are presently located at 3 Convery Blvd., Suite 600, Woodbridge, New Jersey 07095. Investors may contact the Company at (732) 791-5380.

EnerPath International Holding Company

EnerPath and its subsidiaries provide utility companies with comprehensive energy efficiency programs, which enable the utility companies to reduce the energy consumption of their utility customers and achieve overall energy reduction goals. Working on behalf of the utilities, EnerPath designs and implements turnkey demand-side-management programs (“DSM Programs”) for the utility companies’ small- and mid-sized businesses and residential customers. EnerPath’s principal place of business is at 1758 Orange Tree Lane, Redlands, California 92374, and its telephone number is (909) 335-1699.

Merger Sub

EIHC MergerSub, Inc. was formed as a wholly-owned subsidiary of Lime under the laws of the State of Delaware solely for the purpose of entering into the Merger Agreement and completing the Merger.

The Merger (page 5)

On March 24, 2015 (the “Closing Date”), the Company entered into the Merger Agreement with EnerPath, Merger Sub and the other parties thereto. Upon the terms and subject to the conditions of the Merger Agreement, at the effective time of the Merger:

·                  Merger Sub merged with and into EnerPath, with EnerPath continuing as the surviving entity.

·                  EnerPath became a wholly-owned subsidiary of the Company.

The Merger Consideration (page 5)

·                  The Company paid $11 million in cash (the “Purchase Price”) for all of the outstanding stock of EnerPath.

·                  The Merger Agreement provided for an adjustment to the Purchase Price if EnerPath’s tangible net worth (“TNW”) as of the closing was less than $4,400,000 or more than $4,900,000 (the “TNW Range”).

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·                  The parties to the Merger Agreement established escrow accounts equal to (i) $250,000 to cover various claims relating to any post-closing adjustments in the event the final TNW was outside of the TNW Range, (ii) 10% of the Purchase Price to cover any post-closing indemnity obligations and (iii) $75,000 to pay post-closing expenses of the stockholders’ representative.

·                  Post-closing, the parties determined that the closing TNW (the “Closing TNW”) fell within the TNW Range, and the $250,000 escrow was released to the stockholders’ representative on June 25, 2015.

Approval of the Merger (page 7)

·                  The Board of Directors of the Company (the “Board of Directors”) unanimously approved the Merger on March 23, 2015. Under the DGCL, no stockholder approval was required for the Merger.

·                  EnerPath’s board of directors and stockholders unanimously approved the Merger on March 23, 2015.

Reasons for the Merger (page 7)

The Board of Directors considered the following factors in determining that the Merger was in the best interests of the Company and its stockholders:

·                  the acquisition of EnerPath, a leading provider of software and technology solutions for utilities, would provide the Company with a West Coast presence;

·                  the EnerPath Acquisition would bring together the software and technology platform of EnerPath and the sales and project implementation strengths of the Company; and

·                  the EnerPath Acquisition would bring utilities a new platform for engaging commercial customers while delivering substantial, cost-effective energy efficiency solutions.

Certain U.S. Federal Income Tax Consequences of the Merger (page 8)

The payment of the Merger consideration in exchange for the stock of EnerPath was a fully taxable transaction, in which each former holder of EnerPath stock recognized taxable income equal to the difference between the tax basis of his or her surrendered stock and the Merger consideration received. For general informational purposes only, and not as a substitute for individual tax advice, certain general federal income tax consequences of the Merger to the former stockholders of EnerPath are described in “Certain U.S. Federal Income Tax Consequences of the Merger” below. Each former stockholder of EnerPath should consult his or her own tax advisor with respect to the tax consequences of the Merger applicable to his or her own particular circumstances.

Funding of the Merger (page 8)

The Merger was an all-cash transaction. On March 24, 2015, the Company entered into a Note Purchase Agreement with Bison and received $11,750,000 in cash proceeds to finance the Merger consideration and to pay fees and expenses incurred in connection therewith (including certain fees and expenses incurred by Bison in connection with the Note Purchase Agreement).

Employment Matters (page 12)

In connection with the closing of the EnerPath Acquisition, two executives of EnerPath, Stephen Guthrie and Steven Meyers, entered into employment and non-competition agreements with Lime.

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THE MERGER

This discussion of the Merger is qualified in its entirety by reference to the Merger Agreement, which is attached to this Information Statement as Annex A. You should read the entire Merger Agreement carefully.

The Parties to the Merger

Lime Energy Co.

Lime is a provider of energy efficiency programs that enable utility clients to reach underserved markets and achieve energy reduction goals. We focus on deploying energy solutions for small- and mid-sized commercial businesses that improve energy efficiency, reduce energy-related expenditures, and lessen the impact of energy use on the environment. Our small business energy solutions (SBES) programs provide a cost-effective avenue for our utility clients to offer products and services to a hard-to-reach customer base, while satisfying aggressive state-mandated energy reduction goals.

For additional information regarding the Company and its business, please see our filings with the Securities Exchange Commission (the “SEC”) that are incorporated by reference into this Information Statement. See “Where You Can Find More Information” on page 46.

EnerPath International Holding Company

EnerPath, which has been in the energy efficiency business for over 20 years, delivers large-scale energy efficiency programs to utilities, cities and corporations in the United States and Canada.

EnerPath provides utilities with comprehensive energy efficiency programs that enable the utilities to reduce the energy consumption of their customers and achieve overall energy reduction goals. EnerPath delivers these energy efficiency programs on a performance basis where it is only paid for realized energy efficiency savings. Working on behalf of the utilities, EnerPath designs and implements DSM Programs for the utilities’ customers (mainly small- and mid-sized businesses and residential customers) in order to deliver energy solutions that achieve improvements in energy efficiency and customer satisfaction. In designing a DSM Program, EnerPath works with the utility to understand its needs and constraints and configure the program to best achieve the utility’s goals. Implementing a DSM Program involves contacting, on behalf of the utility, potential customers using customer lists and other marketing tools; performing energy audits; structuring and selling projects pursuant to program parameters; procuring equipment; installing energy efficiency measures through subcontractors; arranging financing as needed; and conducting completed project quality inspections and customer surveys.

EnerPath executes its programs through its proprietary EnerWorks software, which is a scalable, real-time delivery platform that greatly simplifies and streamlines the procedures involved in implementing a high-volume DSM Program. The multi-platform, multi-language system provides tools for field representatives, program managers, and utility customers that maximize the effectiveness of DSM Programs through improved customer participation and program management. The software enables real-time energy audits and engineering calculations, instant document production, and real-time web-based reporting and program management; all while creating a full audit trail for environmental and regulatory purposes. The EnerWorks platform also provides EnerPath and the utilities with rich data resources to apply to the design of future projects and programs.

EnerPath currently delivers energy efficiency solutions to four of the 25 largest electric utilities in the United States. These solutions, which include energy-efficient lighting upgrades, mechanical (HVAC) upgrades, water conservation measures, building controls, refrigeration, pool pumps, building shell improvements, and appliance recycling, are designed to reduce energy costs and lessen the impact of energy consumption on the environment.

Merger Sub

EIHC MergerSub, Inc. was formed as a wholly-owned subsidiary of Lime under the laws of the State of Delaware solely for the purpose of entering into the Merger Agreement and completing the Merger.

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The Merger

On March 24, 2015, the Company entered into the Merger Agreement, pursuant to which Merger Sub merged with and into EnerPath, with EnerPath continuing as the surviving entity and becoming a wholly-owned subsidiary of the Company.

The Merger Consideration

General

The total consideration paid by the Company to EnerPath’s stockholders in connection with the Merger consisted of $11 million in cash, of which, pursuant to an Escrow Agreement executed by the parties at the closing of the EnerPath Acquisition (the “Closing”), (i) $629,387.38 (10% of the Purchase Price) was placed in escrow to cover various claims related to any post-closing indemnity obligations, (ii) $250,000 was placed in escrow to cover any post-closing adjustments to the Purchase Price (the “Purchase Price Escrow Amount”), as described below, and (iii) $75,000 was placed in escrow to pay post-closing expenses of the stockholders’ representative (the “Stockholder Representative Expense Amount”). As discussed below, the Purchase Price was subject to adjustment based upon the TNW target, and was allocated among EnerPath’s stockholders, certain holders of EnerPath’s outstanding indebtedness, and certain other obligations.

Working Capital Adjustment

The Purchase Price was subject to an adjustment at the Closing if EnerPath’s estimated TNW as of the Closing fell outside the TNW Range. The preliminary calculation of the estimated TNW at Closing was determined to be within the TNW Range. The calculation of the final TNW was to occur within 90 days following the Closing. On June 25, 2015, the parties agreed to a final calculation of the TNW and concurred that the Closing TNW was within the TNW Range; accordingly, the Purchase Price Escrow Amount was released to the stockholders’ representative.

In addition, on June 25, 2015, the Stockholder Representative Expense Amount was released to the stockholders’ representative.

Background to the Merger

In the Fall of 2013, EnerPath engaged the services of an investment banking firm, FMI Capital Advisors (“FMI”), for purposes of soliciting potential buyers who might be interested in acquiring EnerPath. Prior to that time, neither the Company, EnerPath, nor any of their respective affiliates or subsidiaries had engaged in any prior communications or transactions. In February 2014, the Company reached out to EnerPath outside the FMI process and expressed interest in acquiring EnerPath because it believed the EnerPath Acquisition would enhance the Company’s energy efficiency programs business. In particular, the Company anticipated that EnerPath’s enterprise software would facilitate cost-effective delivery of energy services to a broader range of commercial and residential utility customers than those serviced by the Company at that time. EnerPath also had a geographic presence complementary to that of Lime.

On July 2, 2014, the Company and EnerPath entered into a Confidentiality Agreement, and FMI delivered to the Company a Confidential Information Memorandum describing EnerPath’s organizational structure, business, operations, and financial information. Immediately following the execution of the Confidentiality Agreement, and continuing for several months thereafter, the Company conducted its operational and financial due diligence on EnerPath, which included conversations with EnerPath principals Stephen Guthrie, Janina Guthrie, and Steven Meyers.

Concurrently with the ongoing due diligence investigation of EnerPath, in the Fall of 2014, the Company initiated discussions with Bison about Bison making a possible capital investment in the Company. Bison is an investment firm that makes growth capital investments in middle-market companies for expansion, acquisitions and balance sheet recapitalizations.

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On November 14, 2014, the Company submitted an indication of interest (the “IOI”) to EnerPath offering to acquire EnerPath for a total purchase price of $16 million, consisting of (i) a cash payment of $8 million (net of EnerPath’s outstanding indebtedness and transaction fees, which were estimated to be $3 million), and (ii) the issuance of 2,666,667 shares of the Company’s Common Stock (valued at $3.00 per share). The IOI anticipated the retention of Stephen Guthrie, Steven Meyers and certain other members of EnerPath’s management, and the entering into of mutually satisfactory employment agreements with Messrs. Guthrie and Meyers. The IOI also required EnerPath to agree to a six-month exclusivity period during which EnerPath would not engage in any discussions or negotiations with any other party regarding a possible acquisition of EnerPath.

In response to the IOI, EnerPath asked for, and the Company provided, clarification on a number of points related to the IOI, including (i) the Company’s capital structure; (ii) the Company’s sources of acquisition financing and working capital; (iii) any transfer restrictions that would be imposed upon, and any registration rights that would be made available to, former EnerPath stockholders following the EnerPath Acquisition; (iv) any contractual rights Bison would have in connection with any possible investment by Bison in the Company; and (v) any necessary approvals that would have to be obtained by the Company in order to consummate a transaction.

On November 23, 2014, EnerPath, through FMI, proposed the following terms (the “EnerPath Response”): (i) a cash payment of $9 million (net of EnerPath’s outstanding indebtedness and transaction fees); (ii) the issuance of 2,900,000 shares of the Company’s Common Stock (valued at $3.00 per share); (iii) an adjustment, upward or downward, in the cash payable at Closing, based upon the TNW of EnerPath at Closing equaling $5 million; (iv) no escrow or holdback to cover indemnity claims; and (v) an exclusivity period of 60 days.

On November 26, 2014, the Company sent a counterproposal to EnerPath, as follows: (i) a cash payment of $8.75 million (versus $9 million); (ii) the issuance of 2,666,667 shares (versus 2,900,000 shares) of the Company’s Common Stock; and (iii) an escrow in an amount equal to 10% of the Purchase Price as a reserve to cover indemnity claims for a period of one year following the Closing.

Thereafter, between December 1 and December 3, 2014, the Company and FMI continued to negotiate certain provisions of the IOI, including (i) a potential cap on indemnity claims, and (ii) the TNW target.

As the Company continued its due diligence review of EnerPath, it also finalized negotiations with Bison regarding an equity infusion by Bison into the Company. On December 23, 2014, the Company issued to Bison 10,000 shares of Series C Preferred Stock for $10 million (the “Series C Preferred Stock Purchase”), which amount was to be used to fund the Company’s working capital needs. Following the Series C Preferred Stock Purchase, the Company pursued various alternatives to finance the cash portion of the proposed purchase price for EnerPath, including a potential issuance of convertible debt to Bison.

On January 28, 2015, the Company received a draft term sheet from Bison containing a proposal for Bison to purchase $12.25 million in notes convertible into shares of the Company’s Common Stock. Following a series of discussions on the terms of the financing transaction, the Company and Bison signed a letter of intent on February 24, 2015, and the parties proceeded toward negotiation of definitive documentation relating to the Note Issuance. For additional information, see the discussion of “The Issuance of Securities” beginning on page 13. In the meantime, the Company sent EnerPath a revised offer as follows: the Company would acquire EnerPath for a total purchase price of $12 million, which would include (i) a cash payment of $9 million (net of EnerPath’s outstanding indebtedness and transaction fees, which were estimated to be $3 million); (ii) a potential earn-out of up to $3 million payable in 50% increments on January 1, 2016 and 2017 based upon the achievement of certain revenue targets; and (iii) a TNW target of $5.65 million with no adjustment to the Purchase Price, either up or down, so long as any variance in the final TNW target was $250,000 or less. Following further negotiations, EnerPath agreed to accept a total purchase price of $11 million in cash. Thereafter, the Company and EnerPath, through their respective counsel, continued to negotiate and exchange drafts of the Merger Agreement and employment agreements for each of Mr. Guthrie and Mr. Meyers.

Prior to the Closing of the Merger, Stephen Guthrie and Janina Guthrie, majority stockholders and principal executive officers of EnerPath, executed and delivered to the Company a voting agreement in which they agreed to vote all of their shares of EnerPath common stock in favor of the Merger Agreement.

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Approval by the Board of Directors of the Company; Reasons for the Merger

On March 23, 2015, the Board of Directors approved (i) unanimously, the terms and execution of the Merger Agreement and the transactions and documents contemplated by the Merger Agreement, and (ii) by a majority, the terms and conditions of the Note Purchase Agreement and the Note Issuance (Andreas Hildebrand and Peter Macdonald, two directors affiliated with Bison, recused themselves from the Board of Directors’ consideration of the Note Issuance).

In approving the Merger, the Board of Directors considered a variety of factors weighing in favor of or relevant to the Merger including, without limitation, those described below:

·                  the acquisition of EnerPath, a leading provider of software and technology solutions for utilities, would provide the Company with a West Coast presence;

·                  EnerPath’s enterprise software, EnerWorks, would enable the Company to expand cost-effective delivery of energy services to a broader range of commercial and residential utility customers;

·                  the EnerPath Acquisition would bring together the software and technology platform of EnerPath and the sales and project implementation strengths of the Company, which would significantly enhance the Company’s energy efficiency programs; and

·                  the EnerPath Acquisition would bring utilities a new platform for engaging commercial customers while delivering substantial, cost-effective energy efficiency solutions.

EnerPath’s Reasons for the Merger

EnerPath’s board of directors and management considered a variety of possible alternatives to the Merger, including other acquisition or combination possibilities for EnerPath and the continuation of EnerPath as an independent entity. EnerPath’s board of directors and management considered the range of possible benefits to EnerPath’s stockholders, and the perceived risks, of each such alternative as well as the anticipated cost, timing and likelihood of success of each such alternative. Based on the foregoing considerations and other matters deemed relevant by EnerPath’s board of directors and management, EnerPath’s board of directors determined that entering into the Merger Agreement and consummating the Merger were in the best interests of EnerPath and its stockholders for a variety of business reasons including, but not limited to, the following:

·                  The EnerPath Acquisition would enable the EnerPath team to join forces with Lime to create an energy services company platform that is well positioned to respond to the needs of utility commercial customers and channel partners.

·                  Lime’s interest in diversification with products, services and business lines aligned well with EnerPath.

·                  EnerPath felt a larger organization could invest in better infrastructure such as software, data analysis, and shared services to create a more sophisticated service offering to utility clients.

·                  Lime’s existing utility clients complemented EnerPath’s very well and provided strong geographic continuity across which to leverage supply chain and sales resources.

·                  EnerPath felt Lime’s culture fit well with EnerPath’s.

Approval by the Stockholders

Under Section 228 of the DGCL, unless prohibited in a corporation’s certificate of incorporation, any action required or permitted by the DGCL to be taken at an annual or special meeting of stockholders of a Delaware corporation may be taken without a meeting, without prior notice, and without a vote if a consent in writing, setting forth the action so taken, is signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. The Company’s By-Laws allow for, and the Certificate of Incorporation does not prohibit, action by stockholders by written consent, without a meeting and without prior notice.

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Under the DGCL, approval of the Merger did not require a vote by Company stockholders, because the Merger was between a wholly-owned subsidiary of the Company and EnerPath. However, the Note Purchase Agreement required stockholder approval in order to remove the Conversion Cap in accordance with certain Nasdaq rules. For additional information, see the discussion under “The Issuance of Securities” beginning on page 13.

The stockholders of EnerPath unanimously approved the EnerPath Acquisition by written consent on March 23, 2015.

Regulatory Approvals

No regulatory approvals were required to consummate the Merger.

Funding of the Merger

On March 24, 2015, the Company and Bison entered into the Note Purchase Agreement. Pursuant to the Note Purchase Agreement, the Company issued a Note due March 24, 2020 in the principal amount of $11,750,000. The proceeds from the Note Issuance were used to finance the EnerPath Acquisition and to pay fees and expenses incurred in connection therewith (including certain fees and expenses incurred by Bison in connection with the Note Purchase Agreement). For more information on the Note Issuance see “The Issuance of Securities.”

Accounting Treatment of the Merger

The EnerPath Acquisition will be accounted for as a purchase. Therefore, beginning on the Closing Date, the results of operations of EnerPath will be included in our consolidated results of operations. For purposes of preparing consolidated financial statements, the Purchase Price, including the costs associated with the EnerPath Acquisition at the date of completion, will be allocated to the assets and liabilities of EnerPath based on their fair market values, with the excess allocated to goodwill, which is required to be tested for impairment at least annually.

Certain U.S. Federal Income Tax Consequences of the Merger

The following is a summary of certain material U.S. federal income tax consequences of the Merger to the former stockholders of EnerPath. This summary is based on the Internal Revenue Code of 1986, as amended (the “Code”), final, proposed, and temporary regulations issued thereunder, administrative rulings and pronouncements issued by the Internal Revenue Service (“IRS”) and court decisions, all as now in effect. All of these authorities are subject to change, possibly with retroactive effect so as to result in tax consequences different from those described below. We have not sought (and do not intend to seek) any ruling from the IRS with respect to statements made and conclusions reached in this discussion, and the statements and conclusions in this Information Statement are not binding on the IRS or any court. This summary is provided for general information purposes only and is not intended as a substitute for individual tax advice. We can provide no assurances that the tax consequences described below will not be challenged by the IRS or will be sustained by a court if so challenged. The discussion applies only to the former stockholders of EnerPath who held their stock as capital assets, and does not address the tax consequences that may be relevant to particular former holders subject to special treatment under certain federal income tax laws, such as persons subject to the alternative minimum tax, non-U.S. persons or U.S. expatriates. In addition, this summary does not discuss the state, local, foreign or non-income tax consequences of the Merger to the former stockholders of EnerPath. Former stockholders of EnerPath should consult their own tax advisors regarding the tax consequences of the Merger to them.

The payment of the Merger consideration in exchange for the stock of EnerPath was a fully taxable transaction, in which each former holder of EnerPath stock recognized taxable income equal to the difference between the tax basis of his or her surrendered stock and the Merger consideration received. In general, such income is long-term capital gain if such holder’s holding period for his or her EnerPath stock is greater than one year as of the date of the closing. Under current law, holders are taxed on long-term capital gains at a maximum 20% U.S. federal rate. Short-term capital gains are taxed at ordinary income rates. Under current law, the highest marginal ordinary income tax rate for individuals is 39.6%. In addition, a 3.8% Medicare contribution tax will generally apply to all or a portion of the net investment income of a holder that is an individual, that is not a nonresident alien for

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federal income tax purposes, and that has adjusted gross income (subject to certain adjustments) that exceeds a threshold amount ($250,000 if married filing jointly or if considered a “surviving spouse” for federal income tax purposes, $125,000 if married filing separately, and $200,000 in other cases).

At the Closing, the Company placed a certain portion of the Merger consideration into an escrow account to fund post-closing indemnification obligations, cover certain post-closing adjustments and to pay post-closing expenses of the stockholders’ representative. Because some of the amounts held in escrow will, if distributed, be distributed to the former stockholders of EnerPath after the taxable year in which the Closing occurs, a former holder of EnerPath stock may apply the installment method of reporting to the gain recognized with respect to the former holder’s disposition of his or her stock. Under the installment method, former holders should report gain in 2015 based upon such former holder’s portion of the Merger consideration received at the Closing, any additional amounts received with respect to post-closing adjustments, and such former holder’s share of the stockholders’ representative expenses that are used to pay Closing costs in 2015. In determining the basis of the former holder’s EnerPath stock that is taken into account in determining gain in 2015 and later, the holder’s adjusted basis (including selling expenses) is allocated pro rata between payments received in 2015 and payments from the escrow account that will potentially be received in later taxable years. The remaining amount of gain would be included in gross income in the years in which payments on distributions from the escrow account, if any, are received.

It is possible that a former stockholder of EnerPath may be liable for interest on the amount of tax that is deferred under the installment method until after 2015. No interest, however, will be due if the total amount of installment obligations of such former holder (and related persons) is $5 million or less (taking into account the former holder’s share of the escrow account and other unrelated installment obligations) at the end of the applicable year.

Former holders may choose to elect out of the installment method treatment and to recognize the entire gain immediately. Such an election is made by reporting the gain in full on a timely-filed (including extensions) 2015 return. If an election not to apply the installment method is made, the former holder must include in the amount realized for the sale such former holder’s portion of the escrow.

Because the payments to the holders, if any, from disbursements from the escrow do not provide for stated interest, each such payment in distribution from the escrow will be treated as a partial payment of interest and a partial payment of principal for tax purposes. This treatment will apply regardless of whether the former holder elects to not use the installment method. The amount of interest is determined on the federal short-term rate for the month that includes the closing (or the federal short-term rates for either of the previous two months if lower).

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THE MERGER AGREEMENT

This section describes the material terms of the Merger Agreement and certain other agreements contemplated by the Merger Agreement. The description of the Merger Agreement, in this section and elsewhere in this Information Statement, is qualified in its entirety by reference to the complete text of the Merger Agreement, a copy of which is attached as Annex A and is incorporated by reference into this Information Statement. We encourage you to read the Merger Agreement carefully and in its entirety.

Conditions to the Merger

Completion of the Merger was subject to a number of conditions, including:

·                  the absence of legal restraints to completion of the Merger;

·                  the receipt of all necessary third-party consents, authorizations and approvals;

·                  the absence of any material adverse changes in the business of EnerPath;

·                  the delivery of all closing deliverables and ancillary agreements contemplated by the Merger Agreement, including an executed escrow agreement and executed non-competition agreements and employment agreements with Stephen Guthrie and Steven Meyers; and

·                  the receipt of all necessary corporate approvals, including approvals of the Board of Directors of the Company, the Board of Directors of EnerPath, and the unanimous consent of EnerPath’s stockholders.

On the Closing Date, all of the closing conditions for the Merger were met and the EnerPath Acquisition was consummated.

Representations and Warranties; Indemnification

The Merger Agreement contains representations and warranties made by EnerPath and EnerPath’s stockholders to the Company, and representations and warranties made by the Company and Merger Sub to EnerPath. These representations and warranties were made solely for purposes of the Merger Agreement and were qualified by and subject to important limitations and exceptions negotiated by the parties to the Merger Agreement. In your review of the representations and warranties contained in the Merger Agreement and described in this summary, you should bear in mind that the representations and warranties were made solely for the benefit of the parties to the Merger Agreement and were negotiated for the purpose of allocating contractual risk among the parties to the Merger Agreement, rather than to establish matters as facts. The representations and warranties and any descriptions thereof should not be read alone or relied upon as characterizations of the actual state of facts or the condition of the Company, EnerPath, or any of their respective subsidiaries or affiliates. Instead, such provisions or descriptions should be read in conjunction with the other information provided elsewhere in this document or incorporated by reference into this Information Statement.

In the Merger Agreement, EnerPath, the Company, and Merger Sub made representations and warranties relating to, among other things:

·                  organization and standing;

·                  corporate power and authority to enter into and perform obligations under, and enforceability of, the Merger Agreement; and

·                  absence of conflicts with contracts, applicable laws, required consents, and required filings.

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EnerPath made representations and warranties relating to, among other things:

·                  EnerPath’s organizational documents and capitalization;

·                  compliance with laws and permit requirements;

·                  accuracy of financial statements;

·                  absence of undisclosed liabilities;

·                  material contracts;

·                  assets and real property;

·                  intellectual property;

·                  customers and suppliers;

·                  insurance;

·                  absence of litigation and governmental orders;

·                  environmental matters;

·                  employee benefits, labor and employment matters;

·                  tax matters;

·                  absence of transactions with related parties; and

·                  guarantees.

The stockholders of EnerPath made representations and warranties relating to, among other things:

·                  ownership of EnerPath stock;

·                  absence of claims against EnerPath;

·                  absence of conflicts with contracts and applicable laws; and

·                  authority to enter into and perform obligations under, and the enforceability of, the Merger Agreement.

The Company and Merger Sub made representations and warranties relating to, among other things, the formation of Merger Sub; the sufficiency of funds to complete the Merger; and absence of litigation that could prevent, enjoin, or delay the Merger.

The representations and warranties of the parties to the Merger Agreement will survive for 18 months after the Closing Date, except for (i) certain customary fundamental representations and warranties, which will survive indefinitely, and (ii) representations and warranties concerning environmental matters and employee benefits, which will survive until 60 days following the expiration of the statute of limitations applicable to any claim with respect to such representation or warranty. The covenants and agreements of the parties to the Merger Agreement will survive the Closing.

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Subject to certain exceptions, no indemnity payment from the escrow fund will occur with respect to breaches of representations or warranties until such time as the aggregate losses subject to indemnification equal or exceed $175,000, at which point the right to indemnification will include the entire amount of losses up to the Purchase Price. These limitations do not apply to breaches of representations and warranties regarding corporate organization, qualification to conduct business, authorization, capitalization, environmental matters, employee benefits matters, obligation to pay any brokers’ fees, and ownership of EnerPath’s common stock.

The EnerPath stockholders agreed to indemnify the Company and Merger Sub for losses resulting from (i) any inaccuracy in or breach of representations or warranties of EnerPath or the EnerPath stockholders contained in the Merger Agreement, (ii) any breach or non-fulfillment of certain covenants, agreements or obligations to be performed by EnerPath or the EnerPath stockholders, (iii) any claims by any EnerPath stockholder with respect to such stockholder’s rights with respect to the Purchase Price, (iv) any claim made by certain indemnified persons under an agreement between a utility client and EnerPath Services, Inc., a wholly-owned subsidiary of EnerPath, relating to the Merger or the transactions contemplated by the Merger Agreement, and (v) any tax claims relating to the classification of EnerPath’s independent contractors or consultants.

The stockholders of EnerPath also provided a general release of all claims against EnerPath, its subsidiaries, the Company, and each of their respective officers, directors, managers, employees and affiliates.

Director and Officer Indemnification and Insurance

Pursuant to the terms of the Merger Agreement, EnerPath has retained all rights to indemnification, advancement of expenses and exculpation in favor of each person that served as a director or officer of EnerPath or any of its subsidiaries at any time prior to the effective time of the Merger (each a “D&O Indemnified Party”). EnerPath agreed to maintain such rights as provided in the organizational or charter documents of EnerPath or its subsidiaries, in each case as in effect on the Closing Date, or pursuant to any other agreement in effect on the Closing Date and previously disclosed to the Company.

For six years after the Closing Date, the Company and EnerPath will indemnify and hold harmless all D&O Indemnified Parties against all liabilities arising out of any such actions or omissions of a D&O Indemnified Party occurring at or prior to the Closing Date in such person’s capacity as a director or officer of EnerPath or its subsidiaries.

EnerPath agreed that, before the Closing Date, it would obtain “tail” insurance policies with respect to claims arising out of or relating to events that occurred before or at the Closing Date, with claims periods of (i) at least six years from the Closing Date for directors’ and officers’ liability; (ii) three years from the Closing Date for employment practices and fiduciary liability; and (iii) two years from the Closing Date for professional errors and omissions liability. The Company agreed to bear up to $75,000 of the policy cost at Closing.

Employment Matters

At closing, Stephen Guthrie and Steven Meyers entered into employment and non-competition agreements with the Company. In addition, the Company agreed to continue EnerPath’s 401(k) plan through December 31, 2015.

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THE ISSUANCE OF SECURITIES

As previously noted, on March 24, 2015, the Company and Bison entered into the Note Purchase Agreement (the “Financing Transaction”). Pursuant to the Note Purchase Agreement, the Company issued a Note due March 24, 2020 in the principal amount of $11,750,000. The proceeds from the Note Issuance were used to finance the EnerPath Acquisition and to pay fees and expenses incurred in connection therewith (including certain fees and expenses incurred by Bison in connection with the Note Purchase Agreement). The Company has made certain representations, warranties and covenants in the Note Purchase Agreement, including representations and warranties regarding EnerPath and each of its subsidiaries. Under the terms of the Note Purchase Agreement, the Company must indemnify Bison and its affiliates from losses, damages and claims arising out of any breach by the Company of its representations, warranties, and covenants. As of the date of the Note Issuance, Bison owned 10,000 shares of Series C Preferred Stock which was, as of such date, convertible into approximately 30% of the Common Stock, making Bison the Company’s single largest stockholder.

The Board of Directors approved the Financing Transaction on March 23, 2015 with Andreas Hildebrand and Peter Macdonald, the two directors who were designated to the Board of Directors by Bison, recusing themselves from the Board of Directors’ consideration of the Financing Transaction.

On March 31, 2015, Bison and the Company entered into an amendment to the Note (the “Amendment”). As amended, the Note provides that the Company may pay interest at a rate (the “Interest Rate”) of 10.5% per annum on the outstanding principal amount, paid semi-annually in cash, or allow interest to accrue and be added to the principal amount at a rate of 12.5% per annum. Upon the occurrence of an event of default under the Note, the Interest Rate would increase by 2.0% per annum until the Note is redeemed or the event of default is cured.

All or any portion of the principal amount of the Note plus all accrued but unpaid interest thereon, but not more than the original principal amount of the Note, may, at the election of the Note holder, be converted into our Common Stock on the earlier of March 24, 2018 or a change of control of the Company. The Note, if converted, would have a dilutive effect on earnings per share and on the equity ownership of the present holders of Common Stock.

The initial conversion price of the Note ($3.16) was greater than the book and the market value of the Common Stock on March 24, 2015. However, the conversion price is subject to anti-dilution adjustments and adjustments in connection with stock splits and similar occurrences and certain other events set forth in the Note. Such adjustments could result in a deemed future price for the Common Stock into which the Note is convertible that is less than the book or market value of the Common Stock on March 24, 2015.

The Nasdaq rules require an issuer to obtain stockholder approval prior to the issuance of securities in connection with:

·                  the acquisition of the stock or assets of another company that involves the issuance or potential issuance of common stock (or securities convertible into or exercisable for common stock) where the number of shares of common stock to be issued is or will be equal to or in excess of 20% of the number of shares of common stock outstanding before the issuance of the stock or securities; or

·                  a transaction other than a public offering involving the sale, issuance or potential issuance, by the issuer, of common stock (or securities convertible into or exercisable for common stock) equal to 20% or more of the common stock or 20% or more of the voting power outstanding before the issuance for less than the greater of book or market value of the common stock.

In order to comply with the Nasdaq rules discussed above, the Note provides that no portion of the amount due under the Note may be converted into more than 19.99% of the outstanding Common Stock prior to the date on which the stockholders of the Company are deemed to have approved the removal of this cap, which will be no earlier than 20 calendar days after the date this Information Statement is first mailed to our stockholders.

The Note is guaranteed by each subsidiary of the Company, including EnerPath and each of its subsidiaries, but will be subordinated to permitted senior indebtedness of the Company of between $8 million and $15 million in

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the aggregate. The actual amount of permitted senior indebtedness will depend on the Company’s Consolidated Adjusted EBITDA (as defined in the Note) over a trailing four-quarter period. The Note is secured by a lien on all of the assets of the Company and each of its subsidiaries. The Company may not prepay the Note. The holder of the Note may require the Company to redeem the Note upon an event of default, a change of control, or the Company giving notice of its determination to exercise the Company’s redemption right for the Series C Preferred Stock. The Company is subject to certain financial affirmative and negative covenants, including a minimum Consolidated Adjusted EBITDA covenant for trailing 12-month periods beginning March 31, 2016, as set forth in the Note, as amended. In addition, should the Company fail to meet certain trailing 12-month EBITDA targets for the quarters ending June 30, September 30, or December 31, 2015, then for each such quarter in which such EBITDA target is not met, an additional $1 million in interest will accrue and be added to the principal (however, principal in excess of $11,750,000 may not be converted into shares of Common Stock). As of June 30, 2015, the Company was in compliance with all applicable covenants under the Note, as amended.

On the Closing Date, as contemplated by the Note Purchase Agreement, the Company amended and restated the Shareholder and Investor Rights Agreement, dated as of December 23, 2014 (the “Original Shareholder Agreement”), by and among the Company, Bison and the other stockholders parties thereto (as amended and restated, the “Amended and Restated Shareholder Agreement”) and the Registration Rights Agreement, dated as of December 23, 2014, by and among the Company, Bison and the other stockholders parties thereto (as amended and restated, the “Amended and Restated Registration Rights Agreement”). Pursuant to the terms of the Amended and Restated Shareholder Agreement, in the event the Company proposes to issue new securities (subject to certain exceptions), the Company must allow Bison to purchase a proportion of the new securities equal to the number of shares of Common Stock beneficially owned by Bison (including for this purpose the shares of Common Stock into which the Note could convert) divided by the total number of shares of Common Stock outstanding on a fully-diluted basis. The operational consent rights and director appointment rights held by Bison under the Original Shareholder Agreement remain in the Amended and Restated Shareholder Agreement; with the exception that, in the event Bison is no longer entitled to designate at least one director under the terms of the Series C Preferred Stock, Bison will be entitled under the Amended and Restated Shareholder Agreement to designate that number of directors that is consistent with its ownership of Common Stock (including shares of Common Stock that are issuable upon conversion of the Series C Preferred Stock and the Note, assuming the Note was immediately convertible) provided it holds at least 5% of the Common Stock (computed in the same fashion).

Pursuant to the Amended and Restated Registration Rights Agreement, Bison is entitled to certain registration rights in connection with the Common Stock into which its shares of Series C Preferred Stock and the Note may convert, including the right to demand the registration of such shares at any time after December 23, 2015 and rights to include such shares in certain other registration statements filed by the Company. Additionally, certain other stockholders of the Company are entitled to include certain of their shares of Common Stock in a registration statement filed by the Company. The Company has agreed to indemnify the other parties to the Amended and Restated Registration Rights Agreement in connection with any claims related to their sale of securities under a registration statement, subject to certain exceptions.

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

As of March 24, 2015, the record date, there were 9,526,636 shares of our Common Stock and 10,000 shares of our Series C Preferred Stock issued and outstanding. Each share of Common Stock entitles the holder thereof to one vote with respect to each item to be voted on by holders of the shares of Common Stock. In addition, each share of Series C Preferred Stock entitles the holder thereof to 416.66 votes per share with respect to each item to be voted on, in each case voting together as a single class with holders of our Common Stock, except as provided by law or by the provisions of our Certificate of Incorporation. As of such date, we had no other securities, voting or nonvoting, outstanding.

The following tables set forth information regarding the beneficial ownership of our securities as of June 30, 2015 by:

·                  each person known by us to be the beneficial owner of more than 5% of the outstanding shares of our voting securities;

·                  each of our directors and named executive officers; and

·                  all of our directors and executive officers as a group (eight persons).

Each stockholder’s beneficial ownership is based on 9,564,148 shares of our Common Stock outstanding as of June 30, 2015. Beneficial ownership is determined in accordance with the rules of the SEC. Except as otherwise noted, the persons or entities named have sole voting and investment power with respect to all shares shown as beneficially owned by them, and the address of each person listed in the following table is c/o Lime Energy Co., 3 Convery Blvd., Suite 600, Woodbridge, New Jersey 07095.

Beneficial Owners of Greater Than 5% of Our Voting Securities (determined in accordance with Rule 13d-3 under the Securities Exchange Act of 1934):

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* Denotes beneficial ownership of less than 1%.

(1) Represents options to purchase Common Stock exercisable within 60 days of June 30, 2015.

(2) As of June 30, 2015, Bison holds 100% of the 10,000 outstanding shares of Series C Preferred Stock, which were convertible (subject to adjustment in accordance with the terms of the Series C Preferred Stock) into 4,166,666 shares of Common Stock (representing beneficial ownership of 30.4% of the Common Stock). Bison Capital Partners IV GP, L.P. is the general partner of Bison and shares voting and investment power with Bison. Each disclaims beneficial ownership of the 27,352 shares of Common Stock held by Andreas Hildebrand and the 26,061 shares of Common Stock held by Peter Macdonald.

Directors and Executive Officers:

* Denotes beneficial ownership of less than 1%.

(1) Represents options to purchase Common Stock exercisable within 60 days of June 30, 2015.

(2) This amount does not include 6,802 shares of unvested restricted stock.

(3) This amount does not include 3,333 shares of unvested restricted stock.

(4) This amount does not include 5,722 shares of unvested restricted stock.

(5) This amount does not include 8,828 shares of unvested restricted stock.

(6) This amount does not include 5,361 shares of unvested restricted stock.

(7) This amount does not include 8,468 shares of unvested restricted stock.

(8) This amount does not include 7,099 shares of unvested restricted stock.

(9) This amount does not include 16,770 shares of unvested restricted stock.

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Changes in Control

We are not aware of any arrangements, including any pledge by any person of our stock, the operation of which may at a subsequent date result in a change of control of the Company, other than matters described herein.

No Dissenters’ Right of Appraisal

Neither the DGCL nor our Certificate of Incorporation provides our stockholders with dissenters’ rights in connection with the Note Issuance or the Note Purchase Agreement. This means that no stockholder is entitled to receive any cash or other payment as a result of, or in connection with, the Note Purchase Agreement and the Note Issuance, even if a stockholder has not been given an opportunity to vote.

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ENERPATH AUDITED FINANCIAL STATEMENTS

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INDEPENDENT ACCOUNTANTS’ AUDIT REPORT

March 10, 2015

To the Board of Directors and Stockholders of

EnerPath International Holding Company

1758 Orange Tree Lane

Redlands, CA 92374

We have audited the accompanying statements of financial position of EnerPath International Holding Company and subsidiaries as of December 31, 2014 and 2013, and the related statements of activities and cash flows for the years then ended. The prior year information is presented for comparative purposes only and has been derived from the Company’s 2013 financial statements from our report dated March 14, 2014.

The accompanying Consolidated Financial Statements include the accounts of EnerPath International Holding Company and subsidiary corporations, after elimination of all material intercompany accounts, transactions, and profits.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amount and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimate made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

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Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of EnerPath International Holding Company and subsidiaries as of December 31, 2014 and 2013, 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.

FOX & STEPHENS, CPA’s, INC.

/s/ Fox & Stephens, CPA’s

Rancho Cucamonga, California

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ENERPATH INTERNATIONAL HOLDING COMPANY

AND SUBSIDIARIES

Combined Balance Sheet as of

December 31, 2014 and 2013

SEE INDEPENDENT ACCOUNTANTS’ AUDIT REPORT

The accompanying notes are an integral part of the financial statements

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ENERPATH INTERNATIONAL HOLDING COMPANY

AND SUBSIDIARIES

Combined Statement of Operations

for the Years Ended December 31, 2014 and 2013

SEE INDEPENDENT ACCOUNTANTS’ AUDIT REPORT

The accompanying notes are an integral part of the financial statements

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ENERPATH INTERNATIONAL HOLDING COMPANY

AND SUBSIDIARIES

Combined Statement of Changes in Retained Earnings

for the Years Ended December 31, 2014 and 2013

SEE INDEPENDENT ACCOUNTANTS’ AUDIT REPORT

The accompanying notes are an integral part of the financial statements

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ENERPATH INTERNATIONAL HOLDING COMPANY

AND SUBSIDIARIES

Combined Statement of Cash Flows

for the Years Ended December 31, 2014 and 2013

SEE INDEPENDENT ACCOUNTANTS’ AUDIT REPORT

The accompanying notes are an integral part of the financial statements

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ENERPATH INTERNATIONAL HOLDING COMPANY

AND SUBSIDIARIES

Combined Statement of Cash Flows

for the Years Ended December 31, 2014 and 2013

SEE INDEPENDENT ACCOUNTANTS’ AUDIT REPORT

The accompanying notes are an integral part of the financial statements

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ENERPATH INTERNATIONAL HOLDING COMPANY

AND SUBSIDIARIES

Notes to Financial Statements

DECEMBER 31, 2014 AND 2013

1. Nature of Operations

EnerPath International Holding Company (EPIHC) and its two wholly owned subsidiaries, EnerPath Services, Inc. (ESI) and EnerPath, Inc. (EP) are presented as combined financial statements. All of the companies share common management, and general and administrative expenses with corporate offices in Redlands, California, Cambridge, Massachusetts, Rochester, New York, Nanuet, New Jersey and Knoxville, Tennessee. EPIHC is incorporated in Delaware.

EnerPath Services, Inc. provides energy efficiency (EE) upgrades through sponsored programs that reduce energy costs for commercial businesses and residential customers. ESI utilizes survey tools developed by EP to conduct energy efficiency surveys and identify opportunities for installation of EE equipment, retrofits and upgrades. Upon customer acceptance of recommendations, ESI then subcontracts energy equipment installation and manages all quality assurance of the project from beginning to end to assure accurate realization of energy savings and projected cost reductions for customers. ESI specializes in EE equipment and programs in the areas of lighting, lighting controls, HVAC, pumps & motors, refrigeration, water, gas and other EE improvements for utility companies, commercial, industrial, institutional, hospitality, government and retail markets throughout the United States. ESI is expanding its business in the public utility market place by developing and managing energy efficiency programs for business and residential customers. The two largest customers accounted for 43% and 38% of sales in 2014 and 59% and 27% of sales in 2013.

EnerPath, Inc. develops software and manages customized customer dashboards with a focus in the energy services and public utility market place. EP provides energy survey, subcontractor and quality verification tools to manage the entire work flow for ESI and other clients. EP licenses software which is oriented to all types of energy consuming assets found in buildings for both commercial and residential customers. It also provides a proven platform for public utilities to track many of their customer incentives and rebate programs, which currently includes a refrigerator recycling program. The largest customer accounted for 55% of sales in 2014 and 43% of sales in 2013.

2. Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the 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 revenues and expenses during the reporting period. Actual results could differ from those estimates.

3. Date of Management’s Review

In preparing the financial statements, management has evaluated events and transactions for potential recognition or disclosure through March 10, 2015, the date these financial statements were available to be issued.

SEE INDEPENDENT ACCOUNTANTS’ AUDIT REPORT

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ENERPATH INTERNATIONAL HOLDING COMPANY

AND SUBSIDIARIES

Notes to Financial Statements
December 31, 2014 and 2013

4. Summary of Significant Accounting Policies

A. Revenue and Cost Recognition

Costs of revenues earned include all direct material and subcontractor costs and those indirect costs related to contract performance, such as supplies, repairs, and depreciation costs. Operating costs are charged to expense as incurred. Changes in job performance, job conditions, estimated profitability and final contract settlements, may result in revisions to costs and income and are recognized in the period in which the revisions are determined.

B. Inventories

Inventories are reported at the lower of cost or market using the first-in, first-out method.

C. Property and Equipment

Depreciation and amortization is provided on the straight-line and declining-balance methods over the estimated useful lives of the assets.

D. Income Taxes

Accelerated and straight-line depreciation is used for tax reporting and financial statement reporting.

E. Uncertain Tax Positions

In accordance with FASB ASC 740-10, the Company holds uncertain tax positions in the form of unrecognized tax benefits. Included in the accompanying Balance Sheets at December 31, 2014, are deferred tax assets of $935,993, representing tax loss and credit carry forwards. Realization of that asset is dependent on the Company’s ability to generate future taxable income.

Management believes that it is more likely than not the forecasted taxable income will be sufficient to utilize the tax carry forward before their expiration to fully recover the asset. However, there can be no assurance that the company will meet its expectations of future income. As a result, the amount of the deferred tax assets considered realizable could be reduced in the near term if estimates of future taxable income are reduced. Such an occurrence could materially adversely affect the Company’s results of operations and financial condition.

SEE INDEPENDENT ACCOUNTANTS’ AUDIT REPORT

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ENERPATH INTERNATIONAL HOLDING COMPANY

AND SUBSIDIARIES

Notes to Financial Statements
December 31, 2014 and 2013

5. Property, Plant and Equipment

Property, Plant and Equipment consists of the following:

Other assets include organizational costs of $64,769, net of accumulated amortization of $23,595 for 2014 and $19,275 for 2013.

6. Line of Credit

ESI has a line of credit with New Resource Bank which matures August 20, 2015. It has a credit limit of $4,000,000 and bears interest at Prime (currently 3.25 percent) plus 2.5 percent with a minimum rate of 5.75 percent. It is secured by all of ESI’s assets and has interest only monthly payments. As of December 31, 2014, the total outstanding loan amount was $3,700,000. The Line of Credit contains covenants relating to maintaining quarterly income and cash flow requirements. ESI was in compliance with all covenants as of December 31, 2014.

7. Accrued Liabilities

Accrued liabilities consisted of the following:

SEE INDEPENDENT ACCOUNTANTS’ AUDIT REPORT

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ENERPATH INTERNATIONAL HOLDING COMPANY

AND SUBSIDIARIES

Notes to Financial Statements
December 31, 2014 and 2013

8. Long-term Debt

Long-term debt at December 31, 2014 and 2013 were as follows:

Principal repayments due in the next five years are as follows:

9. Operating Leases

ESI and EP lease its premises in Redlands, Cambridge, Rochester, Nanuet and Knoxville under monthly or yearly operating leases. All of the leases offer renewals at the end of each term. The total monthly lease payments are as follows:

Total lease payments for ESI and EP in 2014 and 2013 were $290,872 and $203,968, respectively.

SEE INDEPENDENT ACCOUNTANTS’ AUDIT REPORT

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ENERPATH INTERNATIONAL HOLDING COMPANY

AND SUBSIDIARIES

Notes to Financial Statements
December 31, 2014 and 2013

10. Income Taxes

The deferred income tax asset consists of the following:

The provision for taxes on income consists of the following:

The statutory Federal tax rate on pretax income differs from the actual rate because of the effect of graduated tax rates, book to tax depreciation differences, certain expenses not being deductible for tax purposes and state income taxes. The Deferred tax asset consists of a federal net operating loss carry forward of $1,521,920, a California net operating loss carry forward of $3,765,075 and a New York net operating loss carry forward of $1,207,169. If not utilized, they will expire in 2033.

11. Related Party Transactions

During the year ended December 31, 2014, ESI loaned related company, EP a net total of $5,176,764. Also during the year, EPIHC loaned related company ESI a net total of $85,668. Both of these loans were eliminated in the combination of the financial statements.

During the year ended December 31, 2013, the company borrowed $100,000 from shareholders. The term of the loan is five years with an interest rate of 10%. Total interest ESI paid on this loan was $8,814 in 2014 and $4,104 in 2013.

SEE INDEPENDENT ACCOUNTANTS’ AUDIT REPORT

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ENERPATH INTERNATIONAL HOLDING COMPANY

AND SUBSIDIARIES

Notes to Financial Statements

DECEMBER 31, 2014 AND 2013

12. Concentration of Credit Risk

At December 31, 2014, New York State Electric and Gas owed ESI $1,929,978 and Los Angeles Department of Water and Power owed ESI $3,487,487. These receivables were paid subsequent to year end.

The Company maintains its cash deposits in accounts at New Resource Bank which, at times during the year may exceed the federally insured limits. The balances are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000 per financial institution.

13. Employee Benefit Plan

EnerPath Services, Inc. and EnerPath, Inc. have adopted a 401(k) Profit Sharing Plan which covers all employees. Employer contributions are currently 100% for up to 3% of employee contributions and 50% up to a maximum of 5% percent of eligible salary contributions. Total employer contributions to this plan for the years ended December 31, 2014 and 2013 were $119,146 and $93,760, respectively.

14. Stock Option Plan

The Company’s 2009 Stock Option Plan (the Plan), which is shareholder-approved, permits the granting of share options and shares to its employees for up to 45,001 shares of common stock. The company believes that such awards better align the interests of its employees with those of its shareholders. Option awards are generally granted with an exercise price equal to the market price of the Company’s stock at the date of grant; those options generally vest over four years. Certain option and share awards provide for accelerated vesting at the discretion of the plan administrator, as defined in the Plan.

A summary of the option activity under the Plan as of December 31, 2014, and changes during the year then ended is presented below:

SEE INDEPENDENT ACCOUNTANTS’ AUDIT REPORT

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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED COMBINED FINANCIAL INFORMATION

EnerPath Acquisition

On March 24, 2015 (the “Closing Date”), Lime Energy Co. (the “Company”) entered into and consummated the transactions contemplated by an Agreement and Plan of Merger (the “Merger Agreement”) by and among EIHC MergerSub, Inc., a Delaware corporation and a wholly-owned subsidiary of the Company (“Merger Sub”), EnerPath International Holding Company, a Delaware corporation (“EnerPath”), Janina Guthrie, as the Stockholder Representative, and all of the stockholders of EnerPath (the “Stockholders”) (the transactions contemplated by the Merger Agreement, collectively, the “EnerPath Acquisition”) pursuant to which Merger Sub merged with and into EnerPath with EnerPath being the surviving corporation of the merger. EnerPath is a California-based provider of software solutions and program administration for utility energy efficiency programs.

The consideration paid in connection with the EnerPath Acquisition was approximately $11.0 million in cash which was financed through the issuance of a subordinated convertible note payable to Bison Capital Partners IV, L.P. (the “Note”).

The unaudited pro forma condensed consolidated combined statements of operations for the year ended December 31, 2014 and the three months ended March 31, 2015 are presented as if the EnerPath Acquisition had occurred on January 1, 2014.

The unaudited pro forma condensed consolidated combined financial information is presented for illustrative purposes only and is not necessarily indicative of the consolidated financial position or result of operations that would have actually been reported had the acquisition occurred as of the dates indicated, nor is it necessarily indicative of future consolidated financial position or results of operations. The unaudited pro forma condensed consolidated combined financial information does not include, nor does it assume, any benefits from cost savings or synergies of the combined operations or the costs necessary to achieve these cost savings, or synergies, and such differences may be material.

The unaudited pro forma condensed consolidated combined financial information was prepared using the acquisition method of accounting and was based on the audited consolidated financial statements of the Company and EnerPath as of and for the year ended December 31, 2014. The preliminary estimates of the fair values of the assets acquired and liabilities assumed and assumptions could change significantly during the purchase price measurement period as we finalize the valuations of the assets acquired and liabilities assumed, and the related tax balances. Such changes could result in material variances between the Company’s future financial results and the amounts presented in the unaudited pro forma information, including variances in the estimated purchase price, fair values recorded and expenses associated with these items.

The unaudited pro forma condensed consolidated combined financial information should be read in conjunction with the Company’s historical consolidated financial statements and notes thereto included in its Annual Report on Form 10-K for the year ended December 31, 2014, its Quarterly Report on Form 10-Q for the three months ended March 31, 2015 and with EnerPath’s historical consolidated financial statements and notes thereto included in this Information Statement. The acquisition of EnerPath and a preliminary purchase price allocation are reflected in the Balance Sheet in the Company’s Quarterly Report on Form 10-Q for the three months ended March 31, 2015.

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Lime Energy Co.

Unaudited Pro Forma Condensed Consolidated Combined Statement of Operations

Year ended December 31, 2014

($ in thousands, except share data)