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| Share Name | Share Symbol | Market | Type |
|---|---|---|---|
| Kallo Inc (CE) | USOTC:KALO | OTCMarkets | Common Stock |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 0.000001 | 0.00 | 00:00:00 |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| x | QUARTERLY REPORT UNDER TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2020 |
| OR | |
| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission file number 000-53183
KALLO INC.
(Exact name of registrant as specified in its charter)
NEVADA
(State or other jurisdiction of incorporation or organization)
255 Duncan Mill Road,
Suite 504
Toronto, Ontario
Canada M3B 3H9
(Address of principal executive offices, including zip code.)
(416) 246-9997
(Registrant’s telephone number, including area code)
Indicate by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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 last 90 days. YES x NO o
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 (SS 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 x NO o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer, “accelerated filer,” “non-accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
| Large Accelerated Filer | o | Accelerated Filer | o | ||
| Non-accelerated Filer | o | Smaller Reporting Company | x | ||
| Emerging Growth Company | o | ||||
| (Do not check if 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 x NO o
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicated the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 1,147,698,199 as of January 31, 2021.
KALLO INC.
SEPTEMBER 30, 2020
-2-
PART I – FINANCIAL INFORMATION
| ITEM 1. | FINANCIAL STATEMENTS. |
KALLO INC.
(Amounts expressed in US dollars)
(Unaudited)
| September 30, | December 31, | |||||||
| ASSETS | 2020 | 2019 | ||||||
| Current Assets: | ||||||||
| Total Current Assets | $ | — | $ | — | ||||
| TOTAL ASSETS | $ | — | $ | — | ||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIENCY | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable and accrued liabilities | 4,072,183 | 3,860,499 | ||||||
| Convertible loans payable – third parties | 283,870 | 265,217 | ||||||
| Short term loans payable | 68,996 | 66,521 | ||||||
| Convertible loans payable – related parties | 972,023 | 907,132 | ||||||
| Liability for issuable shares | 10,436,290 | 1,724,290 | ||||||
| Total Current Liabilities | 15,833,362 | 6,823,659 | ||||||
| TOTAL LIABILITIES | 15,833,362 | 6,823,659 | ||||||
| Commitments and Contingencies (Note 7) | ||||||||
| Stockholders’ Deficiency | ||||||||
|
Preferred stock, $0.00001 par value, 100,000,000 shares authorized,
95,000,000 Series A preferred shares issued and outstanding |
950 | 950 | ||||||
| Common stock, $0.00001 par value, 1,150,000,000 shares authorized, 1,147,698,199 and 1,147,698,199 shares issued and outstanding, respectively. | 11,478 | 11,478 | ||||||
| Additional paid-in capital | 41,920,116 | 41,920,116 | ||||||
| Assignment of liabilities | (3,455,111 | ) | (3,462,554 | ) | ||||
| Accumulated deficit | (54,310,795 | ) | (45,293,649 | ) | ||||
| Total Stockholders’ Deficiency | (15,833,362 | ) | (6,823,659 | ) | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIENCY | $ | — | $ | — | ||||
See accompanying notes to the unaudited consolidated financial statements
-3-
KALLO INC.
Consolidated Statements of Operations
(Amounts expressed in US dollars)
(Unaudited)
| Three Months Ended | Nine months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||
| Operating Expenses | ||||||||||||||||
| General and administration | $ | 8,803,221 | $ | 105,116 | $ | 9,001,974 | $ | 1,924,539 | ||||||||
| Selling and marketing | — | 1,413 | 18,563 | 29,381 | ||||||||||||
| Operating loss | (8,803,221 | ) | (106,529 | ) | (9,020,537 | ) | (1,953,920 | ) | ||||||||
| Interest and financing costs | (28,051 | ) | (28,052 | ) | (83,544 | ) | (83,240 | ) | ||||||||
| Foreign exchange (loss) gain | (79,171 | ) | 39,621 | 86,935 | (92,476 | ) | ||||||||||
| Net Loss | $ | (8,910,443 | ) | $ | (94,960 | ) | $ | (9,017,146 | ) | $ | (2,129,636 | ) | ||||
| Basic and diluted net loss per share | $ | (0.01 | ) | $ | (0.00 | ) | $ | (0.01 | ) | $ | (0.00 | ) | ||||
| Weighted average shares used in calculating | ||||||||||||||||
| Basic and diluted net loss per share | 1,147,698,199 | 1,147,698,199 | 1,147,698,199 | 1,147,698,199 | ||||||||||||
See accompanying notes to the unaudited consolidated financial statements
-4-
KALLO INC.
Consolidated Statements of Changes in Stockholders’ Deficiency
For the six months ended September 30, 2020
(Amounts expressed in US dollars)
(Unaudited)
| Deficit | ||||||||||||||||||||||||||||||||
| Accumulated | Total | |||||||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Additional | Assignment | During the | Stockholders’ | |||||||||||||||||||||||||||
| $.00001 par value | $.00001 par value | Paid-In | Of | Development | Equity | |||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Liabilities | Stage | (Deficit) | |||||||||||||||||||||||||
| Balance December 31, 2019 | 95,000,000 | $ | 950 | 1,147,698,199 | $ | 11,478 | $ | 41,920,116 | $ | (3,462,554 | ) | $ | (45,293,649 | ) | $ | (6,823,659 | ) | |||||||||||||||
| Cash settlement of liabilities | — | — | — | — | — | 7,443 | — | 7,443 | ||||||||||||||||||||||||
| Net Income | — | — | — | — | — | — | 161,215 | 161,215 | ||||||||||||||||||||||||
| Balance March 31, 2020 | 95,000,000 | 950 | 1,147,698,199 | 11,478 | 41,920,116 | (3,455,111 | ) | (45,132,434 | ) | (6,655,001 | ) | |||||||||||||||||||||
| Net Loss | — | — | — | — | — | — | (267,918 | ) | (267,918 | ) | ||||||||||||||||||||||
| Balance June 30, 2020 | 95,000,000 | 950 | 1,147,698,199 | 11,478 | 41,920,116 | (3,455,111 | ) | (45,400,352 | ) | (6,922,919 | ) | |||||||||||||||||||||
| Net loss | — | — | — | — | — | — | (8,910,443 | ) | (8,910,443 | ) | ||||||||||||||||||||||
| Balance September 30, 2020 | 95,000,000 | $ | 950 | 1,147,698,199 | $ | 11,478 | $ | 41,920,116 | $ | (3,455,111 | ) | $ | (54,310,795 | ) | $ | (15,833,362 | ) | |||||||||||||||
See accompanying notes to the unaudited consolidated financial statements
-5-
KALLO INC.
Consolidated Statements of Cash Flows
(Amounts expressed in US dollars)
(Unaudited)
| Nine months Ended | ||||||||
| September 30, | ||||||||
| 2020 | 2019 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net Loss | $ | (9,017,146 | ) | $ | (2,129,636 | ) | ||
| Adjustment to reconcile net loss to cash used in operating activities: | ||||||||
| Stock based compensation | 8,701,110 | 1,574,480 | ||||||
| Interest and penalties | 83,544 | 83,240 | ||||||
| Unrealized foreign exchange loss (gain) | (88,174 | ) | 92,576 | |||||
| Changes in operating assets and liabilities: | ||||||||
| Increase (decrease) in accounts payable and accrued liabilities | 316,561 | 352,171 | ||||||
| NET CASH USED IN OPERATING ACTIVITIES | (4,105 | ) | (27,169 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds from short term loans payable | 4,105 | 27,169 | ||||||
| NET CASH PROVIDED BY FINANCING ACTIVITIES | 4,105 | 27,169 | ||||||
| NET (DECREASE) INCREASE IN CASH | — | — | ||||||
| CASH - BEGINNING OF PERIOD | — | — | ||||||
| CASH - END OF PERIOD | $ | — | $ | — | ||||
| SUPPLEMENTAL CASH FLOW INFORMATION | ||||||||
| Income tax paid | $ | — | $ | — | ||||
| Interest paid | $ | — | $ | — | ||||
|
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES |
||||||||
| Settlement of accounts payable by FE Pharmacy, Inc. | $ | 7,443 | $ | 80,727 | ||||
See accompanying notes to the unaudited consolidated financial statements
-6-
KALLO INC.
Notes to Consolidated Financial Statements
September 30, 2020
(Amounts expressed in US dollars)
(Unaudited)
NOTE 1 – BUSINESS AND GOING CONCERN
Organization
Kallo Inc. (“Kallo” or the “Company”) develops customized health care solutions designed to improve or enhance the delivery of care in the countries and regions we serve.
Going Concern
The accompanying unaudited consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The amounts of assets and liabilities in the consolidated financial statements do not purport to represent realizable or settlement values. The Company has incurred operating losses since inception and has an accumulated deficit and a working capital deficit at September 30, 2020. The Company is expected to incur additional losses as it executes its go to market strategy. This raises substantial doubt about the Company’s ability to continue as a going concern.
The Company has met its historical working capital requirements from the sale of common shares and short term loans. In order to not burden the Company, the officer/stockholder has agreed to provide funding to the Company to pay its annual audit fees, filing costs and legal fees as long as the board of directors deems it necessary. However, there can be no assurance that such financial support shall be ongoing or available on terms or conditions acceptable to the Company. These consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
NOTE 2 – ACCOUNTING POLICIES AND OPERATIONS
Basis of Presentation
The accompanying unaudited consolidated financial statements of the Company have been prepared in conformity with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 8-03 of Regulation S-X related to smaller reporting companies. These unaudited consolidated financial statements should be read in conjunction with the annual audited consolidated financial statements and notes, which are included as part of the Company’s Form 10-K filed with the SEC for the year ended December 31, 2019.
Operating results for the periods presented are not necessarily indicative of the results that may be expected for the full year. Notes to the financial statements which substantially duplicate the disclosure contained in the audited consolidated financial statements for fiscal year ended December 31, 2019 as reported in the 10-K have been omitted. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, considered necessary for a fair presentation, have been included in the accompanying unaudited consolidated financial statements.
Recently Adopted Accounting Pronouncements
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments which requires the use of a new current expected credit loss (“CECL”) model in estimating allowances for doubtful accounts with respect to accounts receivable. Receivables from revenue transactions, or trade receivables, are recognized when the corresponding revenue is recognized under ASC Topic 606, Revenue from Contracts with Customers. The CECL model requires that the Company estimate its lifetime expected credit loss with respect to these receivables and record allowances that when deducted from the balance of the receivables, represent the estimated net amounts expected to be collected. Given the generally short term nature of trade receivables, we do not apply a discounted cash flow methodology. However, the Company considers whether historical loss rates are consistent with expectations of forward-looking estimates for our trade receivables. This ASU is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The Company adopted the new standard on January 1, 2020. The adoption of this ASU did not have a material impact on our consolidated financial statements and related disclosures.
-7-
KALLO INC.
Notes to Consolidated Financial Statements
September 30, 2020
(Amounts expressed in US dollars)
(Unaudited)
NOTE 2 – ACCOUNTING POLICIES AND OPERATIONS (continued)
Recently Issued Accounting Pronouncements
On December 18, 2019 the FASB issued the ASU 2019-12 “Income taxes (Topic 740)—Simplifying the accounting for income taxes”. The amendments in this update simplify the accounting for income taxes by removing certain exceptions to the general principles and also improve consistent application by clarifying and amending existing guidance, such as franchise taxes and interim recognition of enactment of tax laws or rate changes. The amendments in this update are effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. The Company is assessing the effects that the adoption of this accounting pronouncement may have on its financial statements.
NOTE 3 – COMMON STOCK
During the nine months ended September 30, 2020, there were no movements in share capital issued and outstanding.
On April 8, 2017, the Company entered into an agreement with FE Pharmacy Inc., a company controlled by a shareholder of Kallo, and a related party, whereby in consideration for the issuance of 475,000,000 common stock of Kallo, FE Pharmacy Inc. assumed and will pay all of the Company’s outstanding indebtedness as at April 7, 2017. The 475,000,000 shares issuable to FE Pharmacy Inc. has been valued at the book value of the total liabilities assigned to FE Pharmacy Inc. of $4,135,037. The assignment of the liabilities to FE Pharmacy Inc. has been recorded as a receivable in the equity section of the consolidated balance sheet and will be reduced as the liabilities are settled by FE Pharmacy Inc. During the nine months ended September 30, 2020, the assignment of liabilities amount has been reduced by $7,443 cash settlement of accounts payable.
NOTE 4 – RELATED PARTY TRANSACTIONS
During the quarter ended September 30, 2020, the Board of Directors approved the issuance of 1,089,000,000 shares to directors and shareholders of the Company for par value of $10,890, resulting in stock-based compensation valued at $8,701,110. These shares will be issued after the Company is able to increase its authorized number of common shares.
During 2019, the Board of Directors approved the issuance of 57,000,000 shares to directors and shareholders of the Company for par value of $570, resulting in as stock-based compensation valued at $1,373,130. These shares will be issued after the Company is able to increase its authorized number of common shares.
During the year ended December 31, 2019, the Company designated 5,000,000 of is preferred stock as Series B preferred stock, each of which has 1,000 votes and are not convertible. The Company, will not, without the approval or express written consent of the all the holders of the Series B preferred stock (i) establish, create, authorize or approve the issuance of any series or class of preferred stock (ii) change any of the rights, privileges or preferences of the Series B preferred stock or (iii) redeem the Series B preferred stock..
During the year ended December 31, 2019, the Board of Directors approved the issuance of 5,000,000 Series B preferred shares to a director as compensation for services rendered and their fair value were deemed to be $201,350 based on the voting rights of the preferred shares relative to the fair value of the Company at the date of the approved issuance. These shares will be issued after the Company becomes current on all its filings requirements.
Included in liability for issuable shares is 3,731,005 common shares valued at $149,240 and approved for issuance to a family of the controlling shareholder of FE Pharmacy Inc as compensation during 2018 which will be issued after the Company is able to increase its authorized number of common shares. The transfer agent has erroneously issued these shares in spite of the Company’s instructions to wait for the increase in authorized number of common shares.
Included in accounts payable and accrued liabilities is an amount of $1,535,834 (December 31, 2019 - $1,332,488) due to directors of the Company as of September 30, 2020.
Included in convertible loans payable to related parties is an amount of $972,023 (December 31, 2019 - $907,132), including accrued interest, owing to a director and a shareholder of the Company as of September 30, 2020.
-8-
KALLO INC.
Notes to Consolidated Financial Statements
September 30, 2020
(Amounts expressed in US dollars)
(Unaudited)
NOTE 4 – RELATED PARTY TRANSACTIONS (continued)
Included in short term loans payable is an amount of $52,673 (December 31, 2019 - $49,758) due to the controlling shareholder of FE Pharmacy Inc. and a related party as at September 30, 2020.
NOTE 5 – CONVERTIBLE LOANS PAYABLE
|
September 30, 2020 |
December 31, 2019 | |||||||
| Convertible promissory notes bearing interest at 15% per annum – third parties | $ | 283,870 | $ | 265,217 | ||||
| Convertible promissory notes bearing interest at 15% per annum – related parties | 972,023 | 907,132 | ||||||
| $ | 1,255,893 | $ | 1,172,349 | |||||
The Convertible loans payable bear 15% interest per annum and are convertible at a fixed price at any time during their 1 year term. The Company has the option to pay the note at any time. The Company analyzed the conversion option for derivative accounting consideration under ASC Topic 815-40, Derivatives and Hedging – Contract in Entity’s Own Stock and concluded that the embedded conversion was a derivative but the fair value of the feature was zero. The total outstanding notes is $1,255,893, including accrued interest, of which $972,023 is to from related parties. Interest of $83,544 on the convertible loans payable are included in net finance charge for the nine months ended September 30, 2020 included in the consolidated statement of operations. All of the above convertible loans payable were in default as of September 30, 2020.
NOTE 6 – SHORT TERM LOANS PAYABLE
|
September 30, 2020 |
December 31, 2019 |
|||||||
| Non-interest bearing short term funding from third party | $ | 16,323 | $ | 16,763 | ||||
| Non-interest bearing short term funding from related party | 52,673 | 49,758 | ||||||
| $ | 68,996 | $ | 66,521 | |||||
As of September 30, 2020, the balance of $68,996 represented short term funding provided by a third party and a related party which are non-interest bearing, unsecured and have no fixed repayment date. The loan from third party in Canadian dollars is $21,772 which is subject to revaluation at the end of each quarter.
-9-
KALLO INC.
Notes to Consolidated Financial Statements
September 30, 2020
(Amounts expressed in US dollars)
(Unaudited)
NOTE 7 – COMMITMENTS AND CONTINGENCIES
Contingencies
On April 21, 2017, an ex-employee of Kallo obtained a judgement ordering Kallo to pay Canadian $ 135,959 for unpaid wages and expenses relating to services performed in 2016. The full amount has been accrued for in the financial statements of Kallo.
On October 24, 2016, a consultant obtained a judgement ordering Kallo to pay Canadian $34,924 for unpaid fees. The full amount has been accrued for in the financial statements of Kallo.
On October 6, 2017, Thornley Fallis Communications Inc. (“Thornley”) commenced a third party claim against Kallo concerning monies that Kallo allegedly owed to Thornley for redesign of a website and public relation services. Thornley is seeking damages in the amount of Canadian $169,345 plus interest on the amounts outstanding and indemnification of the costs of the action. An amount of Canadian $134,960 has been accrued for in the financial statements of Kallo.
There is also a claim by Commercial Credit Adjusters on behalf of Northwest Company for payment of Canadian $34,000. An amount of Canadian $24,016 has been accrued for in the financial statements of Kallo. Negotiations are in process for the settlement of this debt for a lump sum.
Canada Revenue Agency has assessed the Company for unpaid Canadian $77,664 as at September 30, 2020 representing unremitted employee source deductions and related penalties and interest, the full amount of which has been accrued in the financial statements of Kallo.
Responsibility for payments of the above claims has been assumed by FE Pharmacy Inc.under the terms of the agreement mentioned in Note 3.
Agreement
On June 26, 2020, the Company finalized contracts with the Republic of Kenya (“Kenya”) and Techno-Investment Module Limited (“TIM”) for a Project Contract and a Finance Contract. Under the terms of the Agreement, Kenya is seeking to borrow the sum of 1,068,932,543 Euros from TIM and the funds are to be used primarily to build phase one of a planned National Healthcare Infrastructure in the Republic of Kenya to be undertaken by Kallo Inc. In accordance with the Finance Contract, Kallo Inc. may receive up to four payments of 40,261,253 Euros in consideration for the goods and services that the Company is to provide under the Project Contract.
NOTE 8 – SUBSEQUENT EVENTS
On December 11, 2020, the Company finalized contracts with the Ministry of Health and the Ministry of Finance of the State of Eritrea (the “Ministry”) and Techno-Investment Module Limited (“TIM”) for National Healthcare Projects and Loan Agreement/Contract. Under the terms of the Agreement, the Ministry is seeking to borrow the sum of 521,437,477 Euros from TIM and the funds are to be used primarily to fund certain healthcare projects to be undertaken by Kallo Inc. TIM is to provide 521,437,477 Euros in four equal instalments. After receiving its share of the instalments payment, Kallo Inc. will deliver 25,000,000 Euros of each payment to the Ministry’s National Food Security Program.
On December 10, 2020, the Company finalized contracts with the Ministry of Health and the Ministry of Finance of the Republic of Mozambique (“Mozambique”) and Techno-Investment Module Limited (“TIM”) for National Healthcare Projects and Loan Agreement/Contract. Under the terms of the Agreement, Mozambique is seeking to borrow the sum of 1,305,256,575 Euros from TIM and the funds are to be used primarily to fund certain healthcare projects to be undertaken by Kallo Inc. TIM is to provide 1,305,256,575 Euros in four equal instalments. After receiving its share of the instalments payment, Kallo Inc. will then deliver 125,000,000 Euros of each payment to the Ministry’s National Food Security Program.
-10-
KALLO INC.
Notes to Consolidated Financial Statements
March 31, 2020
(Amounts expressed in US dollars)
(Unaudited)
NOTE 8 – SUBSEQUENT EVENTS (continued)
On November 30, 2020, the Company finalized with the Ministry of Health and the Ministry of Finance of the Federal Democratic Republic of Ethiopia (the “Borrower”) and Techno-Investment Module Limited (“TIM”) for National Healthcare Projects and Loan Agreement/Contract. Under the terms of the Agreement, the Borrower is seeking to borrow the sum of 2,459,817,336 Euros from TIM and the funds are to be used primarily to fund certain healthcare projects to be undertaken by Kallo Inc. TIM is to provide 2,459,817,336 Euros in four equal instalments to the Borrower, of which 1,860,437,075 Euros is to be used in connection with the National Healthcare Infrastructure program. After receiving its share of the instalments payment, Kallo Inc. will then deliver 125,000,000 Euros of each instalment payment received to the Borrower’s National Food Security Program.
On November 10, 2020, the Company finalized contracts with the Ministry of Health and the Ministry of Finance of the Kingdom of Eswatini (“Eswatini”) and Techno-Investment Module Limited (“TIM”) for National Healthcare Projects and Loan Agreement/Contract. Under the terms of the Agreement, Eswatini is seeking to borrow the sum of 549,978,787 Euros from TIM and the funds are to be used primarily to fund certain healthcare projects to be undertaken by Kallo Inc. TIM is to provide 549,978,787 Euros in four equal instalments to Kallo Inc and the Company will deliver 75,000,000 Euros of each payment to Eswatini’s National Food Security Program.
-11-
As used herein, the term “we,” “us,” “our,” and the “Company” refers to Kallo, Inc. a Nevada corporation.
THIS FORM 10-Q CONTAINS “FORWARD-LOOKING STATEMENTS”. FORWARD-LOOKING STATEMENTS ARE STATEMENTS CONCERNING ESTIMATES, PLANS, OBJECTIVES, GOALS, STRATEGIES, EXPECTATIONS, INTENTIONS, PROJECTIONS, DEVELOPMENTS, FUTURE EVENTS, PERFORMANCE OR PRODUCTS, UNDERLYING (EXPRESSED OR IMPLIED) ASUMPTIONS AND OTHER STATEMENTS THAT ARE OTHER THAN HISTORICAL FACTS. IN SOME CASES FORWARD-LOOKING STATEMENTS CAN BE IDENTIFIED BY THE USE OF FORWARD-LOOKING WORDS SUCH AS “ESTIMATED,” “BELIEVES,” “EXPECTS,” “MAY,” “WILL,” “SHOULD,” OR “ANTICIPATES,” OR THE NEGATIVE OF THESE WORDS OR OTHER VARIATIONS OF THESE WORDS OR COMPARABLE WORDS, OR BY DISCUSSIONS OF PLANS OR STRATEGY THAT INVOLVE RISKS AND UNCERTAINTIES. MANAGEMENT WISHES TO CAUTION THE READER THAT THESE FORWARD-LOOKING STATEMENTS, INCLUDING, BUT NOT LIMITED TO, STATEMENTS REGARDING THE COMPANY AND ITS PLANS OR INTENTIONS, ESTIMATES, GOALS, COMPETITIVE TRENDS AND OTHER MATTERS THAT ARE NOT HISTORICAL FACTS ARE ONLY PREDICTIONS. NO ASSURANCES CAN BE GIVEN THAT SUCH PREDICTIONS WILL PROVE CORRECT OR THAT THE ANTICIPATED FUTURE RESULTS WILL BE ACHIEVED. ACTUAL EVENTS OR RESULTS MAY DIFFER MATERIALLY EITHER BECAUSE ONE OR MORE PREDICTIONS PROVE TO BE ERRONEOUS OR AS A RESULT OF OTHER RISKS FACING THE COMPANY. FORWARD-LOOKING STATEMENTS SHOULD BE READ IN LIGHT OF THE CAUTIONARY STATEMENTS AND IMPORTANT FACTORS DESCRIBED IN THIS FORM 10-Q, INCLUDING, BUT NOT LIMITED TO “THE FACTORS THAT MAY AFFECT FUTURE RESULTS” SHOWN AS ITEM 1A AND IN MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. THE RISKS INCLUDE, BUT ARE NOT LIMITED TO, THE RISKS ASSOCIATED WITH AN EARLY-STAGE COMPANY HAS LIMITED ASSETS AND OPERATIONS, THE COMPARATIVELY LIMITED FINANCIAL RESOURCES OF THE COMPANY, THE COMPANY IS INSOLVENT AND ITS TOTAL LIABILITIES EXCEED ITS TOTAL ASSETS, THE INTENSE COMPETITION THE COMPANY FACES FROM OTHER ESTABLISHED COMPETITORS, AND THE LEGAL UNCERTAINTIES THAT DIRECTLY AND INDIRECTLY IMPACT DEVELOPMENT-STAGE COMPANIES. ANY ONE OR MORE OF THESE OR OTHER RISKS COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE FUTURE RESULTS INDICATED, EXPRESSED, OR IMPLIED IN SUCH FORWARD-LOOKING STATEMENTS. WE UNDERTAKE NO OBLIGATION TO UPDATE OR REVISE ANY FORWARD-LOOKING STATEMENT TO REFLECT EVENTS, CIRCUMSTANCES, OR NEW INFORMATION AFTER THE DATE OF THIS FORM 10-Q OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED OR OTHER SUBSEQUENT EVENTS.
-12-
| ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. |
As used herein, the term “we,” “our,” “us,” and the “Company” refers to Kallo, Inc., a Nevada corporation unless otherwise noted.
This section of the report includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like: believe, expect, estimate, anticipate, intend, project and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements, which apply only as of the date of this report. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or our predictions. All funds are reflected in United States dollars unless otherwise indicated.
Any reading of this Quarterly Report on Form 10-Q should also include a reading of Item 1A, Risk Factors in our Annual Report on Form 10-K for the fiscal year ending December 31, 2020. We have no recent history of generating any revenues or positive cash flow and there can be no assurance that we will be successful in generating any revenues or, if we are successful in generating revenues, that we can sustain any such revenues at a level that will allow us to become solvent or otherwise operate with a positive cash flow at any time in the future. There is a high risk that the Company may be facing severe and prolonged financial adversity with the high likelihood that the Company’s stockholders will lose their entire investment.
We are a small company with limited financial and managerial resources and we are insolvent. There is substantial doubt that we can continue as an on-going business for the next twelve months unless we obtain additional capital to pay our bills and meet our operating expenses. This is because we have generated insignificant revenues from our operations during the last ten years. We have been able to remain in business as a result of investments, in debt or equity securities, by our officers and directors and by other unrelated parties. We expect to incur operating losses in the foreseeable future and our ability to continue as a going concern is dependent upon our ability to raise additional money through investments by others and achieve profitable operations. There is no assurance that we will be able to raise additional money or that additional money or that additional financing will be available to us on satisfactory terms or that we will be able to achieve profitable operations. The consolidated statements were prepared under the assumption that we will continue as a going concern, however, there can be no assurance that such financial support shall be ongoing or available on terms or conditions acceptable to the Company. This raises substantial doubt about our ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
For the last ten fiscal years, starting January 2010, our management and board of directors have raised funds through a personal and professional network of investors. This has enabled product and business development, continued operations, and generation of customer interest. In order to continue operations, management has contemplated several options to raise capital and sustain operations in the next 12 months. These options include, but are not limited to, debt and equity offers to existing shareholders, debt and equity offers to independent investment professionals and through various other financing alternatives. We currently believe that if we can secure sufficient additional capital on a timely basis, in sufficient amounts and on reasonable terms and if we are successful in securing at least one project that likely will enable us to continue operations for the next 12 months. There can be no guarantee that we will receive sufficient additional capital on a timely basis and on reasonable terms that will allow is to continue to remain in business. Currently we have not received any commitment from any third party to provide the additional capital that we believe we will require to sustain our Company as a corporate entity or otherwise allow us to meet our financial obligations.
On April 8, 2017, the Company entered into an agreement with FE Pharmacy Inc. whereby in consideration for the issuance of 475,000,000 common stock of Kallo, FE Pharmacy Inc. assumed and will pay all of the Company’s outstanding indebtedness as of April 7, 2017. Management believes that with this agreement in place, it can concentrate on bringing the potential projects as detailed below to fruition and if circumstances allow and if we can avoid further severe financial decline, any additional funding may be met through one of the three options mentioned above.
In 2017 the Government of Ghana initiated several discussions with us, to revisit how the Ministry of Defense – Military Hospital requirements, the Ministry of Health healthcare infrastructure requirements and the Ministry of Education Teaching Hospital infrastructure requirements can be met using the Kallo Integrated Delivery Model. The success of these discussions confirmed Ghana’s continued belief in the Kallo Integrated Delivery System, as the best solution for the nation’s healthcare infrastructure development, which is very encouraging for our continued business in Ghana.
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On June 20, 2017, our branch office was legally registered in Ghana. A valid tax identification number was issued and this number is to be used by us in all of our anticipated business that we hope to conduct within Ghana. We have incorporated four SPVs (Special Purpose Vehicles / Companies) to oversee the various projects we seek to undertake in Ghana. The SPVs are all incorporated under the laws of Ghana as private companies. Based on our internal management assessments conducted without the benefit of any independent third-party review or evaluation, we believe that our business plans involving Ghana are sound and may offer us significant business opportunities. However, we cannot assure you that we will be able to obtain sufficient financing on reasonable terms and on a timely basis that will allow us to pursue these opportunities.
We have entered into four major concession agreements with four key governmental institutions in Ghana. We have also, through our SPVs has entered into the following concession arrangements for the construction and operation of various hospital facilities in Ghana:
| Project Description | Kallo SPV | |
| 1 | Tamale Military Hospital project | K-TMH Ghana Limited |
| 2 | Cape Coast Teaching Hospital project | K-UCC Cape Coast Limited |
| 3 | Sunyani Teaching Hospital project | K-UENR Sunyani Limited |
| 4 | Ho Teaching Hospital project | K-UHAS Ho Limited |
These agreements are effective upon execution and the concession period will start from the date on which financial close is achieved with the Lenders and all conditions precedent are satisfied or waived. The financing has not closed yet and there is no guarantee that financial close will be achieved.
The Global need for standardized healthcare service delivery to all geographies and to all people is the fundamental business driver for the innovation of the Kallo Integrated Delivery System – “KIDS”.
This unique and comprehensive concept was developed based on first hand discovery and a detailed study of ground realities and causal analysis over 15 years. The business issues in the current healthcare systems are addressed by intricate orchestration of technologies both proprietary and off the shelf to create a standardized healthcare delivery model across the continuum of care.
A strategic market approach was defined for customers to take a well-informed decision and to work with Kallo on a national strategy for healthcare infrastructure and a standardized healthcare services delivery model across the country. This led to the development of a structured business development process and management for business success.
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After many years of hard work in developing countries we now see a dynamic shift in the thought process within the developing countries to consider innovative solutions leveraging technology for strengthening and advancing their healthcare infrastructure and services delivery for all citizens alike.
On June 26, 2020, the Cabinet Secretary of the Department of Health and the Cabinet Secretary of the National Treasury and Planning of the Republic of Kenya entered into a Project Contract with Kallo Inc. and a Loan Contract with Techno-Investment Module Ltd., now with its registered office in Spain for implementing Kallo Integrated Delivery Systems (KIDS) in the Republic of Kenya to strengthen their National Healthcare Infrastructure and build a robust, sustainable healthcare ecosystem.
On November 10, 2020, the Minister of Health and the Minister of Finance of the Kingdom of Eswatini entered into a Project Contract with Kallo Inc. and a Loan Contract with Techno-Investment Module Ltd., now with its registered office in Spain for implementing Kallo Integrated Delivery Systems (KIDS) in the Republic of Kenya to strengthen their National Healthcare Infrastructure and build a robust, sustainable healthcare ecosystem.
On November 30, 2020, the Minister of Health and the Minister of Finance of the Federal Democratic Republic of Ethiopia entered into a Project Contract with Kallo Inc. and a Loan Contract with Techno-Investment Module Ltd., now with its registered office in Spain for implementing Kallo Integrated Delivery Systems (KIDS) in the Republic of Kenya to strengthen their National Healthcare Infrastructure and build a robust, sustainable healthcare ecosystem. Included in the contract is Medical Tourism project with a Medical Center of Excellence.
On December 10, 2020, the Minister of Health and the Minister of Finance of the Republic of Mozambique entered into a Project Contract (Phase-1) with Kallo Inc. and a Loan Contract (Phase-1) with Techno-Investment Module Ltd., now with its registered office in Spain for implementing Kallo Integrated Delivery Systems (KIDS) in the Republic of Kenya to strengthen their National Healthcare Infrastructure and build a robust, sustainable healthcare ecosystem.
On December 11, 2020, the Minister of Health and the Minister of Finance of the State of Eritrea entered into a Project Contract with Kallo Inc. and a Loan Contract with Techno-Investment Module Ltd., now with its registered office in Spain for implementing Kallo Integrated Delivery Systems (KIDS) in the Republic of Kenya to strengthen their National Healthcare Infrastructure and build a robust, sustainable healthcare ecosystem.
Plan of Operation
The following plan of operation contains forward-looking statements, which involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth elsewhere in this document. Because of the speculative nature of our operations and the nature of the African countries we are attempting to do business with, there is no assurance that any of the planned operations will occur.
To the extent that we are financially able and if circumstances allow, we plan to continue to develop components of Kallo Integrated Delivery System:
Kallo Integrated Delivery System (KIDS)
MobileCareTM – a mobile trailer that opens into a state of the art clinical setup in a vehicle equipped with the latest technology in healthcare. More than just a facility, MobileCare TM can instantly connect the onboard physician with specialists for on-demand consultation via satellite through its Telehealth system. This is truly a holistic approach to delivering healthcare to the remotely located. For many rural communities, the nearest hospital, doctor or nurse may be hundreds of kilometers away. In many cases, this gap can be bridged using Telehealth technology that allows patients, nurses and doctors to talk as if they were in the same room.
RuralCareTM – prefabricated modular healthcare units focused in rural areas where no roads infrastructure is available. They are equipped to provide primary healthcare including X-Ray, ultrasound, surgery, pharmacy and lab services. Ranging from 1,200 to 3,800 square feet, these clinics can be up and running in disaster zones or rural areas in as little as one week. Similar to the MobileCare TM product, RuralCare TM also utilizes satellite communications to access the Telehealth system.
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Our overall healthcare mission is to “reach the unreached”. Based on our own internal assessments conducted by our officers and without the benefit of any independent third party evaluation, we believe that may be able to offer end-to-end solution that may include the following:
Global command center – located in the Kallo headquarters in Canada, this is the escalation point for the coordination of delivery of Telehealth and eHealth support. It consists of both the Clinical Command Center and the Administrative Command Center.
Regional command centers, Clinical and Administrative – located in the urban area hospitals and connected with satellite communications, these centers coordinate all aspects of the healthcare delivery solution with the Mobile clinics and Rural clinics including clinical services, Telehealth services, pharmacy and medical consumable coordination as well as escalations to the Global response center.
Kallo University – provides education, training and development of local resources for all aspects of the healthcare delivery which includes clinical, engineering and administration.
Emergency Medical Services – provides ground and air ambulance vehicles for emergency patient transport. We have now incorporated Medical Drone Services.
Based solely on our internal management assessments conducted without the benefit of any independent third-party review or evaluation, we believe that our end-to-end delivery solution is equipped with necessary medical equipment as per regional healthcare requirements. We also install our copyrighted software and third party software as required along with a five (5) year support agreement renewable after the five (5) year initial term that includes the medical equipment, software licenses, installation implementation and training. If we are successful then we anticipate that may, if circumstances are favorable, allow us to generate an ongoing revenue stream for service, maintenance, spare-parts, and consumables. However, we can not assure you that even if we are able to achieve these goals that we can do so at levels that may allow us to achieve and sustain positive cash flow and profitability. We have incurred significant and protracted losses and we have no record of achieving and sustaining positive cash flow and profitability and we can not be certain that we will achieve either or both of these goals at any time in the future.
Business Overview
The Global need for standardized healthcare service delivery to all geographies and to all people is the fundamental business driver for the innovation of the Kallo Integrated Delivery System – “KIDS”.
This unique and comprehensive concept was developed based on first hand discovery and a detailed study of ground realities and causal analysis over 15 years. The business issues in the current healthcare systems are addressed by intricate orchestration of technologies both proprietary and off the shelf to create a standardized healthcare delivery model across the continuum of care.
A strategic market approach was defined for customers to take a well-informed decision and to work with Kallo on a national strategy for healthcare infrastructure and a standardized healthcare services delivery model across the country. This led to the development of a structured business development process and management for business success.
The business development model, unique to KIDS, included in-country stakeholder workshops and white-board sessions on the KIDS concept and its application in their context of healthcare infrastructure and healthcare services delivery model.
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Kallo instituted the concept of conducting detailed Clinical, Engineering and Technology studies led by Kallo to establish detailed requirements for preparation of a customized proposal for the country and a phased roll out plan.
In addition, Kallo has addressed the major issue of financing such large initiatives in under developed countries by developing a network of financial institutions and Banks across the globe focused on humanitarian and healthcare projects.
Go-To-Market Strategy
Our Sales Go-To-Market Strategy is segmented based on the varying needs of our customers in the following three categories:
| 1. | Full solution with Kallo Integrated Delivery System (KIDS) – typically longer sales cycle and includes the end to end solution of Mobile Clinics, Rural Poly Clinics, Global and Regional response centers, Clinical and Administrative command centers, telehealth support, Kallo University training, pharmacy and medical consumable support and Emergency services with ground and air ambulance vehicles. This solution is focused on the end-to-end healthcare needs of developing countries. |
| 2. | Medical Tourism |
| 3. | COVID-19 Rapid Response Program |
Kallo’s Value Proposition
| ● | Laying the foundational elements in building the primary care infrastructure for an entire country |
| ● | Providing Technologies for current and future adoption of advancements in clinical services such as Telemedicine, remote maintenance and management etc. |
| ● | Creating operational policies and procedures to set higher standards of care |
| ● | Provide Education and training to build resource capacity within the country |
| ● | KIDS provide a modular and flexible Point-of-Care facility to enable healthcare services from cities to the most rural areas in a given country and helps overcome inequalities in healthcare services across all geographies. |
Kallo’s Key Market Differentiators
Kallo differentiates itself in our market segment by offering the most comprehensive and holistic healthcare deliver solution available to meet the needs of developing countries and countries with rural and remote populations. Kallo has invested considerable time and energy studying and understanding the healthcare needs of our target market.
Unequivocal Differentiators
| 1. | Care platforms (Point-of-care facilities - Mobile Clinics, Rural clinics & Modular Hospitals) manufactured to North American and internationally accepted standards |
| 2. | Programs, facilities and services set-up to proactively detect and treat infectious diseases |
| 3. | On-going Tele-health service support, leveraging both local and international expertise |
| 4. | On-going education, training, & certification programs offered through Kallo University |
| 5. | On-going service & maintenance programs for all facilities and equipment |
| 6. | Leverages local skillsets and creates employment opportunities |
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Competitive Landscape
Healthcare landscape is the most complex industry at large. It has developed in each area of its function in an isolated fashion and hence today we have disparate functions, technologies and infrastructure. Globally healthcare industry leaders are working hard to bring a synchronized approach in patient encounter, diagnosis and treatment including preventive care. Kallo has leaped into the future with the KIDS concept and have successfully brought together technologies including global telemedicine, infrastructure and functional expertise leading the industry and have created the Kallo business ecosystem.
Kallo Integrated Delivery System (KIDS) has been the key to our success in the under-developed, countries and will take a lead into developing and developed countries with the flexibility of deploying components of KIDS.
Need for additional capital
We have incurred significant and protracted operating losses since inception and have an accumulated deficit and a working capital deficit at September 30, 2020. We expect to incur additional losses as we execute our go to market strategy. This raises substantial doubt about the Company’s ability to continue as a going concern.
We cannot guarantee we will be successful in our business operations. Our business is subject to risks inherent in the establishment of a business enterprise, including limited capital resources and possible cost overruns due to price increases in services and products.
To become profitable and competitive, we anticipate that we will have to sell our products and services in sufficient volumes and with margins that may allow us to achieve profitability. We cannot assure you or anyone that we will be successful in these efforts and that we will avoid any of the severe financial and nonfinancial consequences that commonly result when a corporation is insolvent.
There is no guaranty that we will obtain sufficient additional financing on a timely basis and on reasonable terms. If financing is not available on satisfactory terms, we may be unable to continue, develop, or expand our operations. Any equity financing will likely result in immediate and substantial dilution of existing stockholders.
Results of operations
Revenues
We did not generate any revenues during the nine months ended September 30, 2020 or 2019. However, we are pursuing what we hope may be suitable business opportunities that, based on our own internal management assessments conducted without the benefit of any independent third-party review or evaluation, may offer us commercially feasible and appropriate opportunities. However, we can assure you that we will be successful in any of these matters or, if we achieve any success, that it will allow to achieve and sustain positive cash flow and profitability. We are insolvent and we continue to incur losses with no assurance that we will ever generate any revenues or if we do generate any revenues that we can sustain such revenues at any level in excess of our costs.
Expenses
During the three months ended September 30, 2020 we incurred total expenses of $8,910,443, including $8,799,655 in salaries and compensation, $2,098 in professional fees, $28,051 in interest and financing costs, $79,171 of loss on foreign exchange gain and $1,468 as other expenses whereas during the three months ended September 30, 2019 we incurred total expenses of $94,960, including $99,497 in salaries and compensation, $2,000 in professional fees, $28,052 in interest and financing costs, $1,413 in selling and marketing and $3,619 as other expenses offset by $39,621 foreign exchange gain.
The increase in our total expenses for the three months ended September 30, 2020 from the comparative period is mainly due to an increase of $8,700,158 in salaries and compensation due to non-cash stock based compensation of $8,701,110 and $118,792 deterioration in foreign exchange loss. The negative change in foreign exchange is due to the depreciation of the US dollar vis a vis the Canadian dollar.
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During the nine months ended September 30, 2020 we incurred total expenses of $9,017,146, including $8,988,763 in salaries and compensation, $6,098 in professional fees, $83,544 in interest and financing costs, $18,563 in selling and marketing and $7,113 as other expenses offset by $86,935 foreign exchange gain whereas during the nine months ended September 30, 2019 we incurred total expenses of $2,129,636, including $1,872,875 in salaries and compensation, $37,647 in professional fees, $83,240 in interest and financing costs, $92,476 in loss on foreign exchange, $29,381 in selling and marketing and $14,017 in other expenses.
The increase in salaries and compensation of $7,115,888 is mainly due to increased non-cash stock based compensation of $7,126,630 in the current period compared to the previous period. There is also a positive change in foreign exchange of $179,411 due to appreciation of the US dollar vis a vis the Canadian dollar.
The Company is operating with a minimal number of full time employees and office space until it can secure new contracts.
Net Loss
During the three months ended September 30, 2020 we did not generate any revenues and incurred a net loss of $8,910,443 compared to a net loss of $94,960 during the same period in 2019. The main reason was the non-cash stock based compensation and foreign exchange loss as discussed above. In that respect, we can not assure you that we will be successful in reducing our losses at any time in the future and we may face significant and protracted financial losses and we cannot guarantee that we will achieve any of our business goals.
During the nine months ended September 30, 2020 we did not generate any revenues and we incurred a net loss of $9,017,146 compared to a net loss of $2,129,636 during the same period in 2019. The main reasons were the increase in salaries and compensation due to non-cash stock based compensation, offset by a positive movement in exchange rate as discussed above. In that respect, we can not assure you that we will be successful in reducing our losses at any time in the future and we may face significant and protracted financial losses and we cannot guarantee that we will achieve any of our business goals. We are insolvent and our Total Liabilities exceed our Total Assets and we may become more insolvent unless and until we can generate sufficient revenues and positive cash flow that may allow us to meet our financial and legal obligations to our creditors.
Liquidity and capital resources
As at September 30, 2020, the Company had no current assets and current liabilities of $15,833,362, indicating working capital deficiency of $15,833,362. As of September 30, 2020, we had no assets and our total liabilities were $15,833,362 comprised of $4,072,183 in accounts payable and accrued liabilities, convertible loans payable of $1,255,893, short term loans of $68,996 and liability for issuable shares of $10,436,290.
Cash used in operating activities amounted to $4,105 during the nine months ended September 30, 2020, primarily as a result of the net loss adjusted for non-cash items and various changes in operating assets and liabilities.
Cash provided by financing activities amounted to $4,105 from proceeds from short term loans payable.
There was no cash movement in investing activities during the current nine months period ended September 30, 2020.
As of September 30, 2020, our Total Liabilities exceeded our Total Assets because we were insolvent. In that respect we face all the risks and uncertainties of any insolvent corporation that could easily result in stockholders losing all or substantially all of their investment. Our common stock and our preferred stock are securities that should only be acquired by persons who can accept the HIGH RISK of such an investment and the total loss of their investment.
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| ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. |
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
| ITEM 4. | CONTROLS AND PROCEDURES. |
Evaluation of Disclosure Controls and Procedures
We maintain “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. We conducted an evaluation (the “Evaluation”), under the supervision and with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the design and operation of our disclosure controls and procedures (“Disclosure Controls”) as of the end of the period covered by this report pursuant to Rule 13a-15 of the Exchange Act. Based on this Evaluation, our CEO and CFO concluded that our Disclosure Controls were not effective as of the end of the period covered by this report due to lack of segregation of duties in financial reporting and presence of adjusting journal entries during the audit as well as insufficient controls over the financial close process and preparation of the financial statements.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting during the quarter ended September 30, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
| ITEM 1. | LEGAL PROCEEDINGS. |
On April 21, 2017, an ex-employee of Kallo obtained a judgement ordering Kallo to pay Canadian $ 135,959 for unpaid wages and expenses relating to services performed in 2016. The full amount has been accrued for in the financial statements of Kallo.
On October 24, 2016, a consultant obtained a judgement ordering Kallo to pay Canadian $34,924 for unpaid fees. The full amount has been accrued for in the financial statements of Kallo.
On October 6, 2017, Thornley Fallis Communications Inc. (“Thornley”) commenced a third party claim against Kallo concerning monies that Kallo allegedly owed to Thornley for redesign of a website and public relation services. Thornley is seeking damages in the amount of Canadian $169,345 plus interest on the amounts outstanding and indemnification of the costs of the action. An amount of Canadian $134,960 has been accrued for in the financial statements of Kallo.
There is also a claim by Commercial Credit Adjusters on behalf of Northwest Company for payment of Canadian $34,000. An amount of Canadian $24,016 has been accrued for in the financial statements of Kallo. Negotiations are in process for the settlement of this debt for a lump sum.
Canada Revenue Agency has assessed the Company for unpaid Canadian $77,664 as at September 30, 2020 representing unremitted employee source deductions and related penalties and interest, the full amount of which has been accrued in the financial statements of Kallo.
While we believe that we may be successful in resolving these claims, we cannot assure that the outcome will not have a material adverse effect upon us.
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| ITEM 1A. | RISK FACTORS. |
Our Common Stock is subject to a number of substantial risks, including those described below. No attempt has been made to rank these risks in the order of their likelihood or potential harm. In addition to those general risks enumerated elsewhere in the document, any purchaser of the Company’s common stock should also consider the following risk factors:
Risks Related to the Ownership of the Company’s Stock
1. No Revenues from Operations & Continuing Losses; Risk of Loss & Insolvency. During the past two fiscal years we have not generated and revenues and there can be no assurances that we will be successful in generating revenues in the future. In that respect we face all of the risks inherent in an early-stage business. We have incurred losses and there can be no assurance that we will ever achieve profitability and positive cash flow. While we believe that our business strategies are sound, there can be no assurance that our business will generate profits and positive cash flow or if we generate profits and positive cash flow, that it can be sustained. Investors should be aware that they may lose all or substantially all of their investment. We are also insolvent since our Total Liabilities exceed our Total Assets.
2. Limited Corporate Officers & Employees. We have only three corporate officers, one of which is part-time and an aggregate of four employees, including our three officers. As a result, we may not be able to evaluate ever-changing market, technology and competitive trends effectively and we are likely to incur significant additional losses thereby.
3. Auditor’s Opinion: Going Concern & Insolvency. Our independent auditors have expressed substantial doubt about the Company’s ability to continue as a going concern since: (a) our Total Current Liabilities exceed our Total Current Assets; (b) our Total Liabilities exceed our Total Assets; and (c) we are an early-stage company and there exists only a limited history of operations. Since our Total Liabilities exceed our Total Assets, we are insolvent and anyone who acquires our Common Stock should be prepared to lose their entire investment.
4. Limited Financial Resources; Need for Additional Financing. Our financial resources are minimal and we are insolvent. We need to obtain additional financing from the sale of our Common Stock, Debt, or some combination thereof in order to undertake further business plans. Our ability to operate as a going concern is contingent upon our receipt of additional financing through private placements or by loans. We anticipate that we will require significant additional funds in the future if we are successful in marketing our products and services. There can be no assurance that if additional funds are required they will be available, or, if available, that they can be obtained on terms satisfactory to our Board of Directors. In the event the Company elects to issue stock to raise additional capital, any rights or privileges attached to such stock may either (i) dilute the percentage of ownership of the already issued common shares or (ii) dilute the value of such shares; or (iii) both. No rights or privileges have been assigned to the stock and any such rights and privileges will be at the total discretion of the Board of Directors of the Company. There can be no guarantee that we will be able to obtain additional financing, or if we are successful, that we will be able to do so on terms that are reasonable in light of current market conditions. Further, we have not received any commitment from any person to provide any additional financing and we cannot assure that any such commitment is forthcoming.
5. Limited and Sporadic Trading Market for Common Stock. Our Common Stock trades on the OTC Market on a limited and sporadic basis and there can be no assurance that a liquid trading market for our Common Stock will develop and, if it does develop, that it can be sustained.
6. Lack of Revenues And Development Stage Company. We have no history of generating Sales Revenues and we cannot assure that we will generate any Sales Revenues in the future or, if we do, that we can achieve Sales Revenues at a level that will allow us to also achieve and maintain profitability and positive cash flow. We face all of the risks inherent in a new business. There is no information at this time upon which to base an assumption that our plans will either materialize or prove successful. Our present business plans and strategies have been developed by our corporate officers and they have been evaluated by any independent third party. plans have not been determined. There can be no assurance that any of our business plans and strategies will generate sales revenues that will result in any profits or positive cash flow. Investors should be aware that they may lose all or substantially all of their investment.
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7. Lack of Dividends & No Likelihood of Dividends. We have not paid dividends and do not contemplate paying dividends in the foreseeable future.
8. Competition. We are an insignificant participant among firms which offer health care products and services. There are many well-established health care product and service companies which have significantly greater financial and managerial resources, technical expertise and experience than the Company. In view of our limited financial and managerial resources, we will likely be at a significant competitive disadvantage vis-a-vis our competitors.
9. No Ability to Control & Matter of Voting Rights Held by our President. Any person who acquires our Common Stock will have no real ability to influence or control the Company or otherwise have any ability to elect any person to our Board of Directors. Our officers, directors, and certain other persons currently control the Company and there is no likelihood that any person who acquires our Common Stock will have any real ability to influence or control the Company in any meaningful way. Further and at present, our President, John Cecil, is the owner and holder of 5,000,000 shares of our Series B Preferred Stock with each share having one thousand (1,000) votes per share with the right to vote with our Common Stockholders at any meeting of or action taken by the holders of our Common Stock. As a result, Mr. Cecil has the clear ability to control the Company via the exercise of his voting rights provided by the Series B Preferred Stock and all of the holders of our Common Stock effectively have no real ability to exercise any influence upon the affairs of the Company. In addition, Mr. Cecil is the owner and holder of 70,000,000 shares of the Company’s Series A Preferred Stock with each Series A Preferred share having one hundred (100) votes per share. As a result of the foregoing, any holder or group of holders of our Common Stock will have no reasonable ability to influence or control the Company’s policies, affairs, or strategies.
10. Negative Equity. Our Total Liabilities exceed our Total Assets. As a result, we are insolvent and we cannot assure you that we will be able to become solvent at any time in the future.
11. Possible Rule 144 Stock Sales. Many of our shares of our outstanding Common Stock are “restricted securities” and may be sold only in compliance with Rule 144 adopted under the Securities Act of 1933, as amended or other applicable exemptions from registration. Any person who acquires our common stock in any private placement should carefully review Rule 144 since any potential public resale may be limited and current broker-dealer and clearing firm requirements may make any re-sale of our common stock difficult at best.
12. Absence of Underwriter Commitment. Based on our current plans, we anticipate that we will likely need to raise significant additional capital to meet our current and anticipated financial needs, we have not received any commitment from any registered broker-dealer or underwriter to assist us in raising needed capital. As a result, we face a clear risk that we will not have sufficient cash resources to meet our current financial obligations and otherwise implement our business plans. In that event, we may not be able to implement our plans and we will not be able to achieve profitability and positive cash flow or, if we do, that we can sustain either or both of them for any period of time.
13. Risks of Low Priced Stocks. Currently, our common stock is not trading in any market and there is no certain prospect that the Company’s common stock will regain any trading in any organized market. In the past, the Company’s common stock had only limited and sporadic trading in the so-called “pink sheets,” and before that, on the “Electronic Bulletin Board.” As a result and due to the absence of a market, a shareholder may find it more difficult to dispose of, or to obtain accurate quotations as to the price of, the Company’s securities. In the absence of a security being quoted on NASDAQ, or the Company having $2,000,000 in net tangible assets, trading in the Common Stock is covered by Rule 3a51-1 promulgated under the Securities Exchange Act of 1934 for non-NASDAQ and non-exchange listed securities. Under such rule, broker/dealers who recommend such securities to persons other than established customers and accredited investors (generally institutions with assets in excess of $5,000,000 or individuals with net worth in excess of $1,000,000 or an annual income exceeding $200,000 or $300,000 jointly with their spouse) must make a special written suitability determination for the purchaser and receive the purchaser’s written agreement to a transaction prior to sale.
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In general, securities are also exempt from this rule if the market price is at least $5.00 per share, or for warrants, if the warrants have an exercise price of at least $5.00 per share. The Securities Enforcement and Penny Stock Reform Act of 1990 requires additional disclosure related to the market for penny stocks and for trades in any stock defined as a penny stock. The Commission has recently adopted regulations under such Act which define a penny stock to be any NASDAQ or non-NASDAQ equity security that has a market price or exercise price of less than $5.00 per share and allow for the enforcement against violators of the proposed rules.
In addition, unless exempt, the rules require the delivery, prior to any transaction involving a penny stock, of a disclosure schedule prepared by the Commission explaining important concepts involving the penny stock market, the nature of such market, terms used in such market, the broker/dealer’s duties to the customer, a toll-free telephone number for inquiries about the broker/dealer’s disciplinary history, and the customer’s rights and remedies in case of fraud or abuse in the sale.
Disclosure also must be made about commissions payable to both the broker/dealer and the registered representative, current quotations for the securities, and if the broker/dealer is the sole market-maker, the broker/dealer must disclose this fact and its control over the market.
Finally, monthly statements must be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks. While many NASDAQ stocks are covered by the proposed definition of penny stock, transactions in NASDAQ stock are exempt from all but the sole market-maker provision for (i) issuers who have $2,000,000 in tangible assets ($5,000,000 if the issuer has not been in continuous operation for three years), (ii) transactions in which the customer is an institutional accredited investor and (iii) transactions that are not recommended by the broker/dealer. In addition, transactions in a NASDAQ security directly with the NASDAQ market-maker for such securities, are subject only to the sole market-maker disclosure, and the disclosure with regard to commissions to be paid to the broker/dealer and the registered representatives.
Finally, all NASDAQ securities are exempt if NASDAQ raised its requirements for continued listing so that any issuer with less then $2,000,000 in net tangible assets or stockholder’s equity would be subject to delisting. These criteria are more stringent than the proposed increased in NASDAQ’s maintenance requirements.
Our securities are subject to the above rules on penny stocks and the market liquidity for our securities could be severely affected by limiting the ability of broker/dealers to sell our securities.
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| ITEM 6. | EXHIBITS. |
The following documents are included herein:
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|
Incorporated
by
reference |
Filed | ||||
| Exhibit | Document Description | Form | Date | Number | herewith |
| 101.INS | XBRL Instance Document | X | |||
| 101.SCH | XBRL Taxonomy Extension – Schema | X | |||
| 101.CAL | XBRL Taxonomy Extension – Calculations | X | |||
| 101.DEF | XBRL Taxonomy Extension – Definitions | X | |||
| 101.LAB | XBRL Taxonomy Extension – Labels | X | |||
| 101.PRE | XBRL Taxonomy Extension – Presentation | X | |||
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Pursuant to the requirements of the Securities Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on this 3rd day of March, 2021.
| KALLO INC. | ||
| (The “Registrant”) | ||
| BY: | JOHN CECIL | |
| John Cecil | ||
| President, Principal Executive Officer, Principal Financial Officer, Principal Accounting Officer, and a Chairman of the Board of Directors | ||
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|
Incorporated
by
reference |
Filed | ||||
| Exhibit | Document Description | Form | Date | Number | herewith |
| 101.INS | XBRL Instance Document | X | |||
| 101.SCH | XBRL Taxonomy Extension – Schema | X | |||
| 101.CAL | XBRL Taxonomy Extension – Calculations | X | |||
| 101.DEF | XBRL Taxonomy Extension – Definitions | X | |||
| 101.LAB | XBRL Taxonomy Extension – Labels | X | |||
| 101.PRE | XBRL Taxonomy Extension – Presentation | X | |||
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1 Year Kallo (CE) Chart |
1 Month Kallo (CE) Chart |
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