The registrant had 9,907,548,9541,147,698,199 shares of common stock outstanding as of October 11, 2017.December 31, 2020.
As used herein, the term “we,” “us,” “our,” and the “Company” refers to Kallo, Inc. a Nevada corporation.
FORWARD-LOOKING STATEMENTS
THIS FORM 10-K 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-K, 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-K OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED OR OTHER SUBSEQUENT EVENTS.
We were incorporated in the state of Nevada on December 12, 2006 as Printing Components Inc. and then changed our name to Diamond Technologies Inc. and then to our current name of Kallo Inc. On December 11, 2009, we merged with Kallo Technologies Inc. (formerly known as Rophe Medical Technologies Inc.), an Ontario corporation and its shareholders (collectively "Rophe"“Rophe”) wherein we acquired all of the issued and outstanding shares of common stock of Rophe in exchange for 3,000,000 common shares and $1,200,000.
Upon acquiring Rophe, the focus of our business was to develop medical information technology software. It has since expanded to the delivery and support of an end to endend-to-end healthcare solution for developing countries and rural communities with the focus on improving all aspects of health care delivery.
Business Overview
We are a small company with limited financial resources and we offer what we believe may be an end-to-end health care solution that is called the Kallo Integrated Delivery System (KIDS) and. Our KIDS product currently consists of the following 3three (3) components:
| 1. | Care Platforms |
| a. | These include the care facility platforms – MobileCareTM and RuralCareTM described in more detail in the MD&A section, Dialysis care and brick and mortar hospitals as well as the emergency medical services care both land and air transportation. |
| 2. | Digital Technology |
| a. | This component of the business includes the Electronic Medical Records (EMR), Picture Archiving and Communication System (PACS), eLearning system, eGovernance solutions as well as our Tele-health solution that supports the Global and Regional response centers for real time support of medical emergencies. |
| 3. | Education & Training |
| a. | This component includes the education and training for all aspects of healthcare management – clinical including clinical informatics, engineering including bio-medical, information and communications technology and health administration. |
Each of these components are currently included in the full KIDS solution but can also be used as individual components to enhance an existing health care infrastructure.
Our Copyrighted Technologies:
While we believe that our technologies are protected under Canadian and International copyrights and are authored by John Cecil and owned by Kallo Inc.John Cecil., we have not obtained any evaluation of the extent of our copyright or other intellectual property right claims by any independent third party and we have no present plans to obtain any such evaluation. And in that context, we believe that Kallo Inc. has ownershipthe rights ofto the products referred in this section, of which items B, C, and D (listed below) are under development and we anticipate that they will likely require further development work. There can be no assurance that we will not later discover that the extent of our copyright claims are limited and/or that we may be subject to claims of infringement asserted by other persons.
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| A. | M.C. Telehealth – Mobile Clinic Telehealth System – Developed and launched in November 2011. |
| B. | EMR Integration Engine – Electronic Medical Record Integration Engine - Under development. |
| C. | C&ID-IMS – Communicable and Infectious Disease Information Management System - Under Development |
| D. | CCG Technology – Clinical-Care Globalization technology – Under Development |
The following is a summary of the information:
| Number | Date of Filing | Place of Filing | Duration | |||||||||
| 1072203 | November 3, 2009 | Canada | Life of the Author, the remainder of the calendar year in which the author dies, and a period of 50 years following the end of that calendar year | |||||||||
| 1072204 | November 3, 2009 | Canada | Life of the Author, the remainder of the calendar year in which the author dies, and a period of 50 years following the end of that calendar year | |||||||||
| 1072205 | November 3, 2009 | Canada | Life of the Author, the remainder of the calendar year in which the author dies, and a period of 50 years following the end of that calendar year | |||||||||
| 1072543 | November 17, 2009 | Canada | Life of the Author, the remainder of the calendar year in which the author dies, and a period of 50 years following the end of that calendar year | |||||||||
Our Products in Development
Our product portfolio includes three earlier stage products listed below, all of which highlight the broad applicability of our proprietary technologies to a diverse range ofwhat we believe may offer us potential future products. Weproduct opportunities if market conditions allow and in that event we plan to evaluate partnership opportunities for further development and commercialization of these products.
| 1. | The company has |
| 2. | C&ID-IMS is an Internet-based solution for monitoring and managing Communicable and Infectious Disease information. Our target markets are Health Organizations and Ministries of Health, hospitals and Center for Disease Control (CDC) & the World Health Organization (WHO) members around the globe. While we believe that our technologies are protected under Canadian and International copyrights and are authored by and owned by John Cecil, we have not obtained any third-party independent evaluation of the extent of our copyright or other intellectual property right claims by any independent third-party and we have no present plans to obtain any such evaluation. And in that context, we believe that Kallo Inc. has the rights to the products referred in this section, of which items B, C, and D (listed below) are under development and we anticipate that they will likely require further development work. There can be no assurance that we will not later discover that the extent of our copyright claims are limited and/or that we may be subject to claims of infringement asserted by other persons. |
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| 3. | CCG is our clinical-care globalization technology. |
| 4. | MC-Telehealth (Mobile Clinic with Telehealth system) is our planned mobile clinic long distance or Telehealth technology. |
| 5. | KIDS (Kallo Integrated Delivery System), a Technology & process framework defines and describes the component parts of the various products and services |
| 6. | KIDS (Kallo Integrated Delivery System) Global Tele-Health Ecosystems. The Tele-health Program encompasses the broad variety of Technologies and administrative processes needed to deliver virtual medical care, health promotion/prevention and other patient education to KIDS patients. Overall, we have conducted only a limited amount of internal evaluation of our technology and our planned business operations. That is, we have not engaged or secured any independent third-party evaluation of our technology, our copyright claims, and our planned business operations and even our business model. In that respect there is a clear risk that we may later discover that our limited internal management assessments are materially inaccurate and in one or more respects we have made inaccurate assumptions regarding the willingness of the marketplace to adopt, accept or utilize all of our technology and/or the business model that we have adopted. We may also discover that our copyright claims are invalid and conflict with superior claims asserted by other persons with the result we are exposed to conflicting claims with resulting liability thereby. To the extent that our assumptions and/or our business model is materially inaccurate or fails to address the needs of the healthcare marketplace, we will likely incur significant and protracted financial losses thereby. |
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Target Market
Based on our current internal management assessments undertaken without the benefit of any independent third-party review or evaluation, we believe that our primary target market for the Kallo Integrated Delivery System is global with the current focus(KIDS) may be one or more selected markets in certain developing countries where health care services are limited. Welimited and where we may be able to enter into what we hope may be commercially feasible contractual arrangements without undue and unacceptable risks and challenges. To that end and in anticipation that we may be successful in these efforts, we have established several sales and marketing partnership agreements under "Business Associate"“Business Associate” section either representing Kallo independently or as an organization. WeWhile we are currently in various stages of our sales cycle with more than 10 countries.
Additionally, with the components of our KIDS solution, we are targeting markets where, if our financial resources and market conditions allow, we can providebelieve we may be able to offer complimentary services to existing health care infrastructures. These markets currently include the following:
| · | Communicable & Infectious disease Information Management System – supporting World Health Organization (WHO) and Center for Disease Control (CDC); $200B market |
| · | Electronic Medical Records integration engine for Health Information Access Layer – focused on clinics, hospitals, IDC & IHC; $100B market |
| · | Clinical Care Globalization – focused on medical tourism; $40B market |
| · | Mobile Medical Clinics – focused on disaster recovery management and rural community health services for wide range of services, HIV monitoring, chemotherapy, acute care, dialysis, etc; $30B market However, we are acutely aware that market conditions are ever-changing and we can not assure you that we can undertake these efforts, or if we do, that we can do so without incurring significant and protracted losses and negative cash flow. |
Intellectual Property and Research and Development
If market conditions and our financial resources allow, we anticipate that we likely will continue our efforts in research and development through collaborations with medical faculties in Canada and the United States on an ongoing basis where our company stands to benefit from the technology ownership of the treatment or diagnostic systems developed for commercial use.
Since 2016, we decreased our expenses relating to research and development but plan towe anticipate that we will, if market conditions and our financial resources allow, continue our research and development work on the Mobile Clinic and Telehealth system, which we believeanticipate will may1 be in demand in the future.
Competition
We are a small company with limited financial resources. We compete with many larger, well-established entities in various sectors; mobile clinic and temporary medical facility manufacturers, health care equipment resellers, EMR developers, health care education providers, EMS contracted services, etc. Our competitors tend to be focused on a component of our health care solution, but do have established histories in their particular area of expertise affording them a resource advantage. We are effectively in the start-up phase of operations and as a result, we have little or no impact upon our competition. Our differentiating factor however isWe believe that, if market conditions and our financial resources allow, we may be able to offer a fully integrated solution. In the opportunities that we have been engaged in, we have not encountered a competitor that offers the full end to end solution that we are proposing to our customers.
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Management’s View of the Market Trend
The Intelligence Unit of The Economist published a report in 2017 recognizing that access to healthcare is a key topic of debate worldwide and that countries are facing a range of healthcare challenges.
In 2016, they developed the Global Access to Healthcare Index to measure how healthcare systems across 60 countries are working to address their most pressing healthcare needs.
As shown in Chart 1 below, the index is based on a set of accessibility and healthcare-system measures. The accessibility domain measures access to specific kinds of care and the healthcare systems domain measures access to effective and relevant healthcare services such as policy, institutions, and infrastructure.
One of the primary findings of this report is that much more needs to be done to develop and extend coverage, the geographical reach of infrastructure, equity of access, and efficiency to improve the sustainability of health systems.
Specifically, the key findings of the report are as follows:
| 1. | Political will and a social compact are prerequisites for both access and sustainable health systems. |
| 2. | Public investment underpins good access and demonstrates the commitment of governments to ensuring the health of their populations. |
| 3. | Universal coverage does not mean universal access, but extending universal health coverage (UHC) can be a crucial part of improving access. |
| 4. | Access to data is fundamental. |
| 5. | A well-trained and integrated workforce is the backbone of a sustainable healthcare system. |
| 6. | Good primary care is a vital building block for good access. |
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As might be expected, the index reveals that wedeveloped countries are well positioned to assistperforming much better in all areas compared with developing countries. For example, Chart 8 below identifies the lowest performing countries in the global focusarea of equity of access to healthcare.
The report also recognizes that many developing countries have shown significant improvements in their efforts to meet the UN’s Millennium Development Goals (MDGs), and the countries that have signed up to the Sustainable Development Goals (SDGs) have agreed to aim for a 40% reduction in premature deaths by 2030. As part of the SDGs, countries have pledged to reduce child and maternal deaths and mortality from tuberculosis, HIV and malaria by two-thirds, and deaths from non-communicable diseases (NCDs) and other causes by one-third. Yet it is increasingly clear that insufficient investment in healthcare, particularly in the developing world, has led to disparities in health outcomes globally.
Over the last couple of decades there have been growing multilateral efforts to encourage countries to increase the amount of money they spend on improving health care delivery through our solution platforms. Global spendinghealthcare. The WHO has recommended that countries spend a minimum of 5% of GDP on health care in 2013 totaled $7.2 trillion or 10.6%order to be taken seriously on provision of global gross domestic product. Health spending is expectedaccess. Meanwhile, in the Abuja Declaration of 2001 the heads of state of African Union countries pledged to rise an averageset a target of 5.2%allocating at least 15% of their budgets to improving healthcare. Over a year in 2014 – 2018decade later, however, many of them were still making insufficient progress.
The extensive work that Kallo has done over the past 10 years studying the health challenges faced by many African countries has led to $9.3 trillion. A numberthe design of our comprehensive healthcare delivery solution which addresses all of the driving factorskey findings of this report.
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With regards to the importance of political will, Kallo’s approach of working closely with the government, providing a national healthcare system tailored to the specific needs of the increase, emerging market expansion, infrastructure improvementscountry and treatmentKallo’s commitment to providing ongoing support helps to engender the political will that developing countries need to achieve success.
With regards to the importance of public investment in healthcare, Kallo is helping to address this need by providing innovative financing options which allow developing countries to make the needed healthcare investments without creating undue negative economic impact.
With regards to the issue of universal health coverage, the report states that there is an important distinction to be made between the ability to access healthcare services and its successful delivery to a wide population. Further, the report states that a right to healthcare may be guaranteed in law, but not actually available in reality, especially in remote and underdeveloped regions. Kallo’s KIDS solution specifically recognizes the importance of extending universal health coverage through the innovative use of a variety of care platforms that can reach the unreached while using technology advances, fall into our portfolioto ensure that the access to healthcare services is available to all the citizens of productsa country.
With regards to access to data, the KIDS solution includes state-of-the-art integrated electronic medical records and services. Other factors includehospital information systems to gather and process the health needsdata that is critical to allowing governance structures to effectively oversee the entire healthcare system.
With regards to the importance of an aginga well-trained and growing populationintegrated workforce, Kallo has recognized the importance of providing education and training to local healthcare practitioners by establishing Kallo University which collaborates with teaching institutions and hospitals in Canada to provide a wide range of these services.
With regards to the importance of good primary care, the KIDS solution specifically focuses on providing primary care through all of its care platforms as well as providing specialized care as required.
Through all of Kallo’s extensive study of the rising prevalencehealthcare challenges of chronic diseases. The most rapid growth is expected to be indeveloping countries and as confirmed by the Middle East and Africa due, in part, to population growth and efforts to expand access to care. All figures quoted from "World Industry Outlook: Healthcare and Pharmaceuticals, Thekey findings of this Economist Intelligence Unit May 2104".
Government Regulation and Compliance
The healthcare regulations and standards vary widely in the geographic areas that we are focused in, with the primary concerns around patient health, safety, and privacy. With rapid advances in clinical and technology changes, the increased scrutiny by governments, the media and consumers has created continual monitoring and increased regulation on drug and patient safety specifically.
Within the global market that we serve, North America has some of the most stringent regulations and standards for medical technology and pharmaceutical approvals. As such, we have partnered with a number of major biomedical devices/equipment suppliers to ensure the highest standards of equipment. WeIf we are successful, we intend to utilize only the highest standards of product regardless of the market that we are serving.
Employees
As of October 9, 2017,January 14, 2021, we have four full time employees.
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Warranties
We do not provide warranties in connection with our products or services. Our third party products are supplied with the manufacturer'smanufacturer’s warranty and we offer additional coverage with a service agreement.
Insurance
We currently do not have insurance but, do intendif our financial resources allow, we plan to insure the businessobtain general liability and other insurance as soon as fiscally possible.
Executive Offices
Our administrative office is located at 225255 Duncan MillsMill Road, Suite 504, Toronto, Ontario, Canada, M3B 3H9, our telephone number is (416) 246-9997. Our registered agent for services of process is the Corporation Trust Company of Nevada, located at 6100 Neil Road, Suite 500, Reno, Nevada 89511. Our fiscal year end is December 31st.
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.
3. Auditor's Opinion: Going Concern & Insolvency. Our independent auditors have expressed substantial doubt about the Company's ability to continue as a smaller reportinggoing 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.
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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 defineda 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 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.
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. 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.
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.
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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 12b-23a51-1 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.
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 Exchange Actproposed 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 requiredrecommended by the broker/dealer. In addition, transactions in a NASDAQ security directly with the NASDAQ market-maker for such securities, are subject only to provide the information under this item.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 than $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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None.
The executive offices of Kallo Inc. are located at 225255 Duncan MillsMill Road, Suite 504, Toronto, Ontario, Canada, M3B 3H9, our telephone number is (416) 246-9997.
| ITEM 3. | 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 $25,000$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.
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.
| ITEM 4. | MINE SAFETY DISCLOSURES. |
None.
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| ITEM 5. | MARKET FOR OUR COMMON STOCK, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. |
Our shares are traded on OTC Markets under the symbol "KALO"“KALO”. A summary of trading by quarter for 20162019 and 20152018 is as follows:
| Fiscal Year – 2016 | High Bid | Low Bid | |
| Fourth Quarter 10-1-16 to 12-31-16 | $0.0002 | $0.00005 | |
| Third Quarter 7-1-16 to 9-30-16 | $0.0001 | $0.0001 | |
| Second Quarter 4-1-16 to 6-30-16 | $0.0001 | $0.0001 | |
| First Quarter 1-1-16 to 3-31-16 | $0.0002 | $0.00001 | |
| Fiscal Year – 2015 | High Bid | Low Bid | |
| Fourth Quarter 10-1-15 to 12-31-15 | $0.0011 | $0.0001 | |
| Third Quarter 7-1-15 to 9-30-15 | $0.035 | $0.0008 | |
| Second Quarter 4-1-15 to 6-30-15 | $0.15 | $0.265 | |
| First Quarter 1-1-15 to 3-31-15 | $0.11 | $0.0462 | |
Fiscal Year 2019 | High Bid | Low Bid | ||||||
| Fourth Quarter 10-1-19 to 12-31-19 | $ | 0.0400 | $ | 0.0013 | ||||
| Third Quarter 7-1-19 to 9-30-19 | $ | 0.0360 | $ | 0.0128 | ||||
| Second Quarter 4-1-19 to 6-30-19 | $ | 0.0237 | $ | 0.0125 | ||||
| First Quarter 1-1-19 to 3-31-19 | $ | 0.0400 | $ | 0.0140 | ||||
Fiscal Year 2018 | High Bid | Low Bid | ||||||
| Fourth Quarter 10-1-18 to 12-31-18 | $ | 0.0600 | $ | 0.0150 | ||||
| Third Quarter 7-1-18 to 9-30-18 | $ | 0.0420 | $ | 0.0113 | ||||
| Second Quarter 4-1-18 to 6-30-18 | $ | 0.0600 | $ | 0.0101 | ||||
| First Quarter 1-1-18 to 3-31-18 | $ | 0.0825 | $ | 0.0080 | ||||
Dividends
We have not declared any cash dividends, nor do we intend to declare cash dividends at this point. We are not subject to any legal restrictions respecting the payment of cash dividends, except that they may not be paid to render us insolvent.insolvent and any payment of any dividends is subject to the limitations of the Nevada General Corporation Law. Dividend policy will be based on our cash resources and needs and it is anticipated that allany cash that may be available cash will likely be needed for our operations and to pay our creditors in the foreseeable future.
A stock dividend was declared on February 11, 2008, wherein two additional common shares were issued for each one common share issued and outstanding as at February 25, 2008. We have not declared any other dividends.
Section 15(g) of the Securities Exchange Act of 1934
Our company'scompany’s shares are covered by Section 15(g) of the Securities Exchange Act of 1934, as amended that imposes additional sales practice requirements on broker/dealers who sell 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 annual income exceeding $200,000 or $300,000 jointly with their spouses). For transactions covered by the Rule, the broker/dealer must make a special suitability determination for the purchase and have received the purchaser'spurchaser’s written agreement to the transaction prior to the sale. Consequently, the Rule may affect the ability of broker/dealers to sell our securities and also may affect your ability to sell your shares in the secondary market.
Section 15(g) also imposes additional sales practice requirements on broker/dealers who sell penny securities. These rules require a one page summary of certain essential items. The items include the risk of investing in penny stocks in both public offerings and secondary marketing; terms important to in understanding of the function of the penny stock market, such as "bid"“bid” and "offer"“offer” quotes, a dealers "spread"“spread” and broker/dealer compensation; the broker/dealer compensation, the broker/dealers duties to its customers, including the disclosures required by any other penny stock disclosure rules; the customers rights and remedies in causes of fraud in penny stock transactions; and, the FINRA'sFINRA’s toll free telephone number and the central number of the North American Administrators Association, for information on the disciplinary history of broker/dealers and their associated persons.
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Securities authorized for issuance under equity compensation plans
We currently have two equity compensation plans: the 2012 Non-Qualified Incentive Stock Option Plan and the 2011 Non-Qualified Incentive Stock Option Plan.
The 2012 Non-Qualified Incentive Stock Option Plan provides for the issuance of shares of our Common Stock for services rendered to us. The board of directors is vested with the power to determine the terms and conditions of the options. The Plan includes 50,000,000 shares of common stock.
The 2011 Non-Qualified Incentive Stock Option Plan provides for the issuance of shares of our Common Stock for services rendered to us. The board of directors is vested with the power to determine the terms and conditions of the shares. The Plan included 10,000,000 shares of common stock. On September 7, 2012, 7,233,334 shares have been issued under this 2011 Non-Qualified Stock Option Plan; and, 2,766,666 shares of common stock remain available under this plan.
| Plan category | Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) | Weighted-average exercise price of outstanding options, warrants and rights (b) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities in column (a)) (c) |
Equity compensation plans approved by security holders | None | None | None |
Equity compensation plans not approved by securities holders | 0 | $0.0 | 52,766,666 |
| Total | 0 | $0.0 | 52,766,666 |
| Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted-average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans (excluding securities in column (a)) | ||||||||||
| Plan category | (a) | (b) | (c) | |||||||||
| Equity compensation plans | ||||||||||||
| approved by security holders | None | None | None | |||||||||
| Equity compensation plans | ||||||||||||
| not approved by securities holders | 0 | $ | 0.0 | 52,766,666 | ||||||||
| Total | 0 | $ | 0.0 | 52,766,666 | ||||||||
| ITEM 6. | SELECTED FINANCIAL DATA. |
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.
| ITEM 7. |
Our management believes that, if market conditions and our financial resources allow, we may be well-positioned to assist in the global focus on improving health care delivery through our solution platforms. Global spending on health care in 2013 totaled $7.2 trillion or 10.6% of the report includesglobal gross domestic product. Health spending is expected to increase an average of 5.2% a year in 2014 – 2018 to $9.3 trillion. A number of forward-looking statementsthese factors drive the increase that includes emerging market expansion, infrastructure improvements and treatment and technology advances. Overall, we believe that if these market trends and our financial resources allow, may offer us opportunities to provide our products and services. Our assessments and our plans are based solely upon the determinations made by our internal management without the benefit of any independent third party review or evaluation. In that respect there is a clear risk that our plans do not accurately 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 shoulddo 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 certainaccurately incorporate market trends, inherent risks and uncertaintiesother known and unknown factors that could cause actual results to differresult in protracted and significant losses and further negative cash flow with the result that our financial condition could materially from historical results or our predictions. All funds are reflected in United States dollars unless otherwise indicated.deteriorate with resulting destruction of each stockholder’s investment.
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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. This is because we have generated no revenues from our operations during the last eightnine 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 the Companywe 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 the Company'sour 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 sixnine 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. Management's opinion isWe currently believe that the combination of the three options along with the forecasted closing ofif we can secure sufficient additional capital on reasonable terms and on a timely basis and if we are successful in securing at least one project that likely will enable continuedus to continue operations for the next 12 months. There iscan be no assuranceguarantee that we will receive sufficient additional moneycapital on a timely basis in sufficient amounts and on reasonable terms that will allow is to continue to remain in business. Currently we have not received any commitment from these options and our existing shareholders are under no legal dutyany 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 with additional financing nor haveto meet our shareholders committed to provide us with additional financing.
On April 8, 2017, the Company entered into an agreement with FE Pharmacy Inc. whereby in consideration for the issuance of 475,000,000 post reverse stock splitshares of our common stock, of Kallo, FE Pharmacy Inc. assumed and will assume and pay all of the Company'sCompany’s outstanding indebtedness as at April 7, 2017. Management believes that with this agreement in place, it can concentrate on bringing the potential projects as detailed below to fruition
In 2017 the signingGovernment of a US$200,000,925 (Two Hundred million nine hundred and twenty-five US dollars) Supply ContractGhana initiated several discussions with us, to revisit how the Ministry of Defense – Military Hospital requirements, the Ministry of Health healthcare infrastructure requirements and Public Hygienethe 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.
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.
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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 appropriate financial commitments are received 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.
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 Guinea. 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 April 14, 2015,November 10, 2020, the Minister of Health and Public Hygiene,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 a letter confirmedSpain for implementing Kallo Integrated Delivery Systems (KIDS) in the selectionRepublic of Kallo Inc., as supplier pursuantKenya to the MobilCareTM Supply Contract, to designstrengthen their National Healthcare Infrastructure and build specialized hospitalsa 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 regionsRepublic of Conakry, Kindia, Labe, KankanKenya to strengthen their National Healthcare Infrastructure and Nzerekore, and asked Kallo to mobilize its technical teams for site visits to engagebuild a robust, sustainable healthcare ecosystem. Included in preliminary studies for the constructioncontract is Medical Tourism project with a Medical Center of these hospitals. No equipment has been sold under the terms of this supply contract, nor is there any assurance any equipment will be sold thereunder.Excellence.
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On December 10, 2020, the Supply Contract, Kallo will implement an integrated healthcare delivery solution forMinister of Health and the Minister of Finance of the Republic of Guinea. The componentsMozambique 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 the solution include, MobileCare, RuralCare, Hospital Information Systems, Telehealth Systems, Pharmacy Information, disaster management, airKenya to strengthen their National Healthcare Infrastructure and surface patient transportation systems and clinical training.
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 market conditions are favorable, 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, MobileCareTM 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 MobileCareTM product, RuralCareTM also utilizes satellite communications to access the Telehealth system.
Our overall healthcare mission is to "reach the unreached". TheBased 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 includesthat may include the following:
Global response 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 CommandRegional response centers, Clinical and Administrative Command centers
– 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 responseKallo University
– provides education, training and development of local resources for all aspects of the healthcare delivery which includes clinical, engineering andEmergency Medical Services
– provides ground and air ambulance vehicles for emergency patient-16-
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 partythird-party software as required along with a 5five (5) year support agreement renewable after the 5five (5) year initial term that includes the medical equipment, software licenses,
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 it’s application in their context of healthcare infrastructure and healthcare services delivery model.
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 |
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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 |
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) – typically longer sales cyclehas been the key to our success in the under-developed, countries and includeswill take a lead into developing and developed countries with the end to end solutionflexibility 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.
Need for additional capital
We have incurred significant and protracted operating losses since inception and has an accumulated deficit and a working capital deficit at December 31, 2019. We expect 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.
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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.
There is no guaranty that we will obtain sufficient additional financing on acceptablea 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. EquityAny equity financing couldwill likely result in additionalimmediate and substantial dilution toof existing shareholders.
Results of operations
December 31, 20162019 compared to December 31, 2015
Revenues
We did not generate any revenues during the year ended December 31, 20162019 or 2015. We2018. However, we are pursuing numerous saleswhat 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.
Expenses
During the year ended December 31, 20162019 we incurred total expenses of $2,999,110,$2,355,889, including $1,928,905$1,974,082 in salaries and compensation, $31,533 in depreciation, $96,661$39,647 in professional fees, $25,553$51,908 in selling and marketing, $323,944$111,292 in interest and financing costs, $147,970$160,062 in foreign exchange loss in change in fair value on derivative liabilities, $104,018 in fixed asset impairment and $371,318$18,898 as other expenses, net of $30,792 foreign exchange gain.general and administrative expenses. Our professional fees consist of legal, consulting, accounting and auditing fees.
During the year ended December 31, 20152018 we incurred total expenses of $8,964,960.
The decreaseincrease in our expenses for the year ended December 31, 20162019 was primarily due to a decreasean increase in salaries and compensation of $2,875,926,$1,303,898 as a result of non-cash stock-based compensation of $1,574,480 in 2019 compared to $270,516 in 2018 issued to management and employees. There is also a decrease in professional fees of $1,387,248, a decrease$45,651 as the Company was catching up on all its previously late filings in interest2018 and financing costs of $624,663, a decrease in other expenses of $621,911, a decrease in selling and marketing expenses of $204,612$68,821. There is a foreign exchange loss of $160,062 in 2019 compared to a foreign exchange gain of $258,866 in 2018 as a result of the appreciation of the Canadian dollar versus the US dollar. The Company is operating with a minimal number of full-time employees and a decrease in the impairment charge of $251,490. The decreases are due to significant curtailing of operations mid-year because theoffice space until it can secure new contracts that the Company was anticipating did not materialize and Kallo had to significantly reduce its operations.
Net Loss
During the year ended December 31, 20162019 we incurred a net loss of $2,999,110$2,355,889 compared to a net loss of $8,964,960$763,631 in 2015.2018. The main reason for the increase in the loss is the increase in salaries and compensation and negative 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.
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Liquidity and capital resources
As at December 31, 2016,2019, we had no current assets, of $57,011, current liabilities of $4,151,405$6,823,659 and a working capital deficiency of $4,094,394.$6,823,659. As of December 31, 2016, our total2019, we had no assets were $57,011 in prepaid expenses and our total liabilities were $4,151,405$6,823,659 comprised of $2,731,879$3,860,499 in accounts payable and accrued liabilities, loans payable of $16,215, derivative liabilities of $270,581, deferred lease inducement of $1,260,$66,521, convertible loans payable of $806,673, bank overdraft$1,172,349 and liability for issuable shares of $211 and convertible promissory notes of $324,586.
Cash used in operating activities amounted to $328,848$27,362 during fiscal 2016,2019, primarily and 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 during the year amounted to $323,878 and represented mainly$27,362 from proceeds from convertibleshort term loans payable.
As of December 31, 2019, our Total Liabilities exceeded our Total Assets and we were insolvent. In that respect we face all the risks and uncertainties 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.
Summary of critical accounting policies
Basis of Presentation
The accompanying consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles ("GAAP"(“GAAP”) and in accordance with the instructions to Form 10-K related to smaller reporting companies as promulgated by the Securities and Exchange Commission.
Stock-Based Compensation
The Company accounts for share-based compensation in accordance with ASC 718, Stock Compensation. Under the provisions of ASC 718, share-based compensation cost is measured at the grant date, based on the calculated fair value of the award, and is recognized as an expense for services rendered and over the employee'semployee’s requisite service period (generally the vesting period of the equity grant).
Stock Issued in Exchange for Services
The valuation of the Company'sCompany’s common stock issued to non-employees in exchange for services is valued at an estimated fair market value as determined by Management of the Company based upon trading prices of the Company'sCompany’s common stock on the dates of the stock transactions. The corresponding expense of the services rendered is recognized over the contractor'scontractor’s requisite service period (generally the vesting period of the equity grant).
| ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. |
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.
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| PAGE | |
| 2018 | |
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To the StockholdersShareholders and Board of
Kallo Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Kallo Inc. and its subsidiary (collectively, the "Company"“Company”) as of December 31, 20162019 and 20152018, and the related consolidated statements of operations, changes in stockholders'stockholders’ deficiency, and cash flows for the years then ended. These consolidated financial statements areended, and the responsibility ofrelated notes (collectively referred to as the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
Going Concern Matter
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has suffered recurring losses since inceptionfrom operations and had an accumulated deficit andhas a workingnet capital deficit at December 31, 2016 whichdeficiency that raises substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ |
We have served as the Company's auditor since 2020. Lakewood, Colorado | |
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KALLO INC.
As at December 31, 20162019 and 2015
(Amounts expressed in US dollars)
| 2016 | 2015 | |||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash | $ | - | $ | 4,998 | ||||
| Prepaid expenses | 57,011 | 132,259 | ||||||
| Total Current Assets | 57,011 | 137,257 | ||||||
| Deposit – long term | - | 20,627 | ||||||
| Equipment, net | - | 135,551 | ||||||
| TOTAL ASSETS | $ | 57,011 | $ | 293,435 | ||||
| LIABILITIES AND STOCKHOLDERS' DEFICIENCY | ||||||||
| Current Liabilities: | ||||||||
| Bank overdraft | $ | 211 | $ | - | ||||
| Accounts payable and accrued liabilities | 2,731,879 | 1,204,942 | ||||||
| Derivative liabilities | 270,581 | 210,834 | ||||||
| Convertible promissory notes, net of discount of $8,872 and $69,568 respectively | 324,586 | 204,826 | ||||||
| Convertible loans payable – third parties | 191,510 | 105,395 | ||||||
| Short term loans payable | 16,215 | 15,730 | ||||||
| Convertible loans payable – related parties | 615,163 | 272,712 | ||||||
| Deferred lease inducement | 1,260 | 15,380 | ||||||
| Total Current Liabilities | 4,151,405 | 2,029,819 | ||||||
| Convertible promissory notes, net of discount of $Nil and $59,939 respectively | - | 24,551 | ||||||
| TOTAL LIABILITIES | 4,151,405 | 2,054,370 | ||||||
| Commitments and Contingencies | ||||||||
| 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, 15,000,000,000 shares authorized, 8,098,742,772 and 5,648,390,746 shares issued and outstanding respectively. | 80,988 | 56,485 | ||||||
| Additional paid-in capital | 30,965,822 | 30,324,674 | ||||||
| Accumulated deficit | (35,142,154 | ) | (32,143,044 | ) | ||||
| Total Stockholders' Deficiency | (4,094,394 | ) | (1,760,935 | ) | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY | $ | 57,011 | $ | 293,435 | ||||
| ASSETS | 2019 | 2018 | ||||||
| Current Assets: | ||||||||
| Total Current Assets | $ | — | $ | — | ||||
| TOTAL ASSETS | $ | — | $ | — | ||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIENCY | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable and accrued liabilities | $ | 3,860,499 | $ | 3,307,421 | ||||
| Convertible loans payable – third parties | 265,217 | 240,369 | ||||||
| Short term loans payable | 66,521 | 38,355 | ||||||
| Convertible loans payable – related parties | 907,132 | 820,688 | ||||||
| Liability for issuable shares | 1,724,290 | 149,240 | ||||||
| Total Current Liabilities | 6,823,659 | 4,556,073 | ||||||
| TOTAL LIABILITIES | 6,823,659 | 4,556,073 | ||||||
| Commitments and Contingencies | ||||||||
| 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 | (3,462,554 | ) | (3,550,857 | ) | ||||
| Accumulated deficit | (45,293,649 | ) | (42,937,760 | ) | ||||
| Total Stockholders’ Deficiency | (6,823,659 | ) | (4,556,073 | ) | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIENCY | $ | — | $ | — | ||||
The accompanying notes are an integral part of these consolidated financial statements
-23-
KALLO INC.
(Amounts expressed in US dollars)
For the Year Ended December 31, 2016 | For the Year Ended December 31, 2015 | |||||||
| Operating Expenses | ||||||||
| General and administration | 2,396,884 | 7,434,862 | ||||||
| Selling and marketing | 25,553 | 230,165 | ||||||
| Impairment of assets | 104,018 | 355,508 | ||||||
| Depreciation | 31,533 | 76,457 | ||||||
| Operating loss | (2,557,988 | ) | (8,096,992 | ) | ||||
| Interest and financing costs | (323,944 | ) | (948,607 | ) | ||||
| Change in fair value of derivative liabilities | (147,970 | ) | 97,890 | |||||
| Foreign exchange gain | 30,792 | 66,093 | ||||||
Loss on extinguishment of convertible promissory note and short term loan payable | - | (83,344 | ) | |||||
| Net loss | $ | (2,999,110 | ) | $ | (8,964,960 | ) | ||
| Net loss per share - Basic and diluted | $ | (0.00 | ) | $ | (0.01 | ) | ||
| Weighted average number of shares outstanding - Basic and diluted | 7,366,923,856 | 966,447,335 | ||||||
| For the Year Ended December 31, | ||||||||
| 2019 | 2018 | |||||||
| Operating Expenses | ||||||||
| General and administration | $ | 2,032,627 | $ | 790,477 | ||||
| Selling and marketing | 51,908 | 120,729 | ||||||
| Operating loss | (2,084,535 | ) | (911,206 | ) | ||||
| Interest and financing costs | (111,292 | ) | (111,291 | ) | ||||
| Foreign exchange gain (loss) | (160,062 | ) | 258,866 | |||||
| Net loss | $ | (2,355,889 | ) | $ | (763,631 | ) | ||
| Net loss per share - Basic and diluted | $ | (0.00 | ) | $ | (0.00 | ) | ||
| Weighted average number of shares outstanding - Basic and diluted | 1,147,698,199 | 1,136,329,577 | ||||||
The accompanying notes are an integral part of these consolidated financial statements
-24-
Consolidated Statements of Changes in Stockholders'Stockholders’ Deficiency
(Amounts expressed in US dollars)
Preferred Stock $.00001 par value | Common Stock $.00001 par value | Additional Paid-In | Deficit Accumulated During the Development | Total Stockholders' | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Stage | Equity (Deficit) | ||||||||||||||||||||||
| Balance December 31, 2014 | 95,000,000 | $ | 950 | 382,156,160 | $ | 3,822 | $ | 22,297,758 | $ | (23,178,084 | ) | $ | (875,554 | ) | ||||||||||||||
| Issuance of common shares – Kodiak put | - | - | 6,250,000 | 63 | 172,120 | - | 172,183 | |||||||||||||||||||||
| Shares issued to directors and employees | - | - | 2,989,800,000 | 29,898 | 3,671,702 | - | 3,701,600 | |||||||||||||||||||||
| Shares issued for debt conversion | - | - | 2,196,251,125 | 21,963 | 1,290,955 | - | 1,312,918 | |||||||||||||||||||||
| Issuance of common shares for cash | - | - | 68,867,121 | 689 | 2,490,400 | - | 2,491,089 | |||||||||||||||||||||
| Shares issued for consulting services | - | - | 3,508,500 | 35 | 230,392 | - | 230,427 | |||||||||||||||||||||
| Stock issued for settlement of payables | - | - | 1,557,840 | 15 | 171,347 | - | 171,362 | |||||||||||||||||||||
| Net Loss | - | - | - | - | - | (8,964,960 | ) | (8,964,960 | ) | |||||||||||||||||||
| Balance December 31, 2015 | 95,000,000 | 950 | 5,648,390,746 | 56,485 | 30,324,674 | (32,143,044 | ) | (1,760,935 | ) | |||||||||||||||||||
| Shares issued to directors and employees | - | - | 4,485,000,000 | 44,850 | 403,650 | - | 448,500 | |||||||||||||||||||||
| Shares issued for debt conversion | - | - | 2,450,352,026 | 24,503 | 192,648 | - | 217,151 | |||||||||||||||||||||
| Cancellation of shares issued to directors and employees | - | - | (4,485,000,000 | ) | (44,850 | ) | 44,850 | - | - | |||||||||||||||||||
| Net Loss | - | - | - | - | - | (2,999,110 | ) | (2,999,110 | ) | |||||||||||||||||||
| Balance December 31, 2016 | 95,000,000 | $ | 950 | 8,098,742,772 | $ | 80,988 | $ | 30,965,822 | $ | (35,142,154 | ) | $ | (4,094,394 | ) | ||||||||||||||
| 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, 2017 | 95,000,000 | $ | 950 | 1,135,699,249 | $ | 11,357 | $ | 41,435,879 | $ | (3,600,452 | ) | $ | (42,174,129 | ) | $ | (4,326,395 | ) | |||||||||||||||
| Shares issued for cash | — | — | 9,077,050 | 91 | 362,991 | (363,082 | ) | — | — | |||||||||||||||||||||||
| Shares issuable as compensation | — | — | 3,031,900 | 31 | 121,245 | — | — | 121,276 | ||||||||||||||||||||||||
| Shares retired | — | — | (110,000 | ) | (1 | ) | 1 | — | — | — | ||||||||||||||||||||||
| Cash settlement of liabilities | — | — | — | — | — | 412,677 | — | 412,677 | ||||||||||||||||||||||||
| Net Loss | — | — | — | — | — | — | (763,631 | ) | (763,631 | ) | ||||||||||||||||||||||
| Balance December 31, 2018 | 95,000,000 | 950 | 1,147,698,199 | 11,478 | 41,920,116 | (3,550,857 | ) | (42,937,760 | ) | (4,556,073 | ) | |||||||||||||||||||||
| Cash settlement of liabilities | — | — | — | — | — | 88,303 | — | 88,303 | ||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | (2,355,889 | ) | (2,355,889 | ) | ||||||||||||||||||||||
| 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 | ) | |||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements
-25-
KALLO INC.
(Amounts expressed in US dollars)
For the Year Ended December 31, 2016 | For the Year Ended December 31, 2015 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | (2,999,110 | ) | $ | (8,964,960 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities | ||||||||
| Depreciation | 31,533 | 76,457 | ||||||
| Stock-based compensation | 448,500 | 3,701,600 | ||||||
| Impairment of assets | 104,018 | 355,508 | ||||||
| Loss on extinguishment of accounts payable | - | 83,344 | ||||||
| Amortization of debt discount | 120,635 | 780,364 | ||||||
| Deferred lease inducement | (14,120 | ) | (19,801 | ) | ||||
| Change in fair value of derivative liabilities | 147,970 | (97,890 | ) | |||||
| Interest and penalties on promissory notes | 201,642 | 128,397 | ||||||
| Unrealized foreign exchange gains | 7,244 | (60,981 | ) | |||||
| Non-cash consulting fees | - | 230,427 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Decrease (Increase) in other receivables | - | 11.531 | ||||||
| Decrease (Increase) in deferred project cost | - | 24,990 | ||||||
| Decrease (Increase) in prepaid expenses and deposits | 95,875 | 18,357 | ||||||
| (Decrease) in deferred revenue | - | (24,990 | ) | |||||
| Increase (Decrease) in accounts payable and accrued liabilities | 1,526,965 | 204,885 | ||||||
| NET CASH USED IN OPERATING ACTIVITIES | (328,848 | ) | (3,552,762 | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Purchase of equipment | - | (225,033 | ) | |||||
| NET CASH USED IN INVESTING ACTIVITIES | - | (225,033 | ) | |||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from issuance of common stock | - | 2,663,272 | ||||||
| Proceeds from convertible promissory notes | - | 580,075 | ||||||
| Proceeds from other convertible notes ($268,311 from related parties; 2015 - $272,712) | 323,667 | 341,423 | ||||||
| Increase in bank indebtedness | 211 | - | ||||||
| Repayment of loans payable | - | (53,540 | ) | |||||
| NET CASH PROVIDED BY FINANCING ACTIVITIES | 323,878 | 3,531,230 | ||||||
| Effect of exchange rate changes on cash | (28 | ) | 1,224 | |||||
| NET DECREASE IN CASH | (4,998 | ) | (245,341 | ) | ||||
| CASH | ||||||||
| Beginning of year | 4,998 | 250,339 | ||||||
| End of year | $ | - | $ | 4,998 | ||||
| SUPPLEMENTAL CASH FLOW INFORMATION: | ||||||||
| Income tax paid | $ | - | $ | - | ||||
| Interest paid | $ | - | $ | - | ||||
| SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES | ||||||||
| Note issued for settlement of accounts payable | $ | - | $ | 18,610 | ||||
| Short term loan transferred to convertible note | $ | - | $ | 22,977 | ||||
| Accounts payable for equipment | $ | - | $ | 244,243 | ||||
| Initial debt discount on convertible promissory notes | $ | - | $ | 607,510 | ||||
| Stock issued for settlement of accounts payable | $ | - | $ | 171,362 | ||||
| Conversion of promissory notes into common shares | $ | 217,151 | $ | 1,312,918 | ||||
| Convertible loan payable for expenses paid directly by lender | $ | 5,434 | $ | - | ||||
| For the Year Ended December 31, | ||||||||
| 2019 | 2018 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | (2,355,889 | ) | $ | (763,631 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities | ||||||||
| Stock-based compensation | 1,574,480 | 270,516 | ||||||
| Impairment of prepaid expenses | — | 3,000 | ||||||
| Interest and penalties | 111,292 | 111,291 | ||||||
| Unrealized foreign exchange gains | 160,631 | (260,304 | ) | |||||
| Changes in operating assets and liabilities: | ||||||||
| Decrease in prepaid expenses | — | 1,000 | ||||||
| Increase in accounts payable and accrued liabilities | 482,124 | 253,123 | ||||||
| NET CASH USED IN OPERATING ACTIVITIES | (27,362 | ) | (385,005 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from short term loans payable | 27,362 | 21,923 | ||||||
| Shares issued for cash | — | 363,082 | ||||||
| NET CASH PROVIDED BY FINANCING ACTIVITIES | 27,362 | 385,005 | ||||||
| Effect of exchange rate changes on cash | — | — | ||||||
| NET DECREASE IN CASH | — | — | ||||||
| CASH | ||||||||
| Beginning of year | — | — | ||||||
| End of year | $ | — | $ | — | ||||
| SUPPLEMENTAL CASH FLOW INFORMATION: | ||||||||
| Income tax paid | $ | — | $ | — | ||||
| Interest paid | — | — | ||||||
| SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES | ||||||||
| Settlement of promissory notes and accounts payable by FE Pharmacy Inc. | 88,303 | 412,677 | ||||||
| Unissued shares for consulting services reclassified to liability | 1,575,050 | 149,240 | ||||||
The accompanying notes are an integral part of these consolidated financial statements
-26-
KALLO INC.
December 31, 20162019 and 2015
(Amounts expressed in US dollars)
NOTE 1 - BUSINESS AND GOING CONCERN
Organization
Kallo Inc. ("Kallo"(“Kallo” or the "Company"“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 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 December 31, 2016.2019. The Company is expected to incur additional losses as it executes its go to market strategy. This raises substantial doubt about the Company'sCompany’s ability to continue as a going concern.
The Company has met its historical working capital requirements from the sale of common shares and related party loans. In order to not burden the Company, certain officers/stockholders have 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. The 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 consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles ("GAAP"(“GAAP”) and in accordance with the instructions to Form 10-K related to smaller reporting companies as promulgated by the Securities and Exchange Commission.
Basis of Consolidation
The consolidated financial statements include the accounts of Kallo and its wholly-owned subsidiary, Rophe Medical Technologies Inc. Significant inter-company transactions and balances have been eliminated on consolidation.
-27-
KALLO INC.
Notes to Consolidated Financial Statements
December 31, 20162019 and 2015
(Amounts expressed in US dollars)
NOTE 2 - ACCOUNTING POLICIES AND OPERATIONS (continued)
Earnings Per Share
The Company computes basic net loss per share in accordance with ASC 260, Earnings Per Share, by dividing the net loss for the period by the weighted average number of common shares outstanding during the year. Diluted loss per share reflects the potential dilution of securities that could share in earnings of an entity. In a loss year, dilutive common equivalent shares are excluded from the loss per share calculation as the effect would be anti-dilutive. For the years ended December 31, 20162019 and 2015,2018, basic and diluted losses per share are the same for both years.
Use of Estimates
The preparation of consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Key estimates include the fair value of common stock issued for services received by the Company, valuation of financial instruments, useful life of equipment, impairment of long lived assets, measurement of non-monetary transactions and provision for penalties and interest on estimated payroll tax liabilities.
Software Development Costs
Software development costs are accounted for in accordance with ASC 985-20, Costs of Software to be Sold, Leased or Marketed. Software development costs incurred internally in creating computer software products are expensed until technological feasibility has been established upon completion of a detailed program design. Based on the Company'sCompany’s product development process, technological feasibility is established upon completion of a working model. The determination of technological feasibility and the ongoing assessment of the recoverability of these costs require considerable judgment by management with respect to certain external factors including anticipated future gross product revenues, estimated economic life and changes in hardware and software technology.
Thereafter, all software development costs incurred through the software'ssoftware’s general release date are capitalized and subsequently reported at the lower of amortized cost or net realizable value. Capitalized costs are amortized based on current and expected future revenue for each software solution with minimum annual amortization equal to the straight-line amortization over the estimated economic life of the solution. No costs have been capitalized to date as the Company has not completed a working model as of yet.
Related party transactions
FASB ASC 850, "Related Party Disclosures" requires companies to include in their financial statements disclosures of material related party transactions. The Company discloses all material related party transactions. Related parties are defined to include any principal owner, director or executive officer of the Company and any immediate family members of a principal owner, director or executive officer.
-28-
KALLO INC.
Notes to evaluate a long-lived asset for recoverability when there is an event or circumstance that indicates the carrying value of the asset may not be recoverable. The Company follows the guidance of ASU 2012-02 and first assesses qualitative factors to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired as a basis for determining whether it is necessary to perform the quantitative impairment test. An impairment loss is recognized when the carrying amount of a long-lived asset or asset group is not recoverable (when carrying amount exceeds the gross, undiscounted cash flows from use and disposition) and is measured as the excess of the carrying amount over the asset's (or asset group's) fair value. Management evaluated whether there are any adverse qualitative factors in respect to equipment indicating that they might be impaired. Since there were indicators of impairment, Management reviewed its long-lived intangible assets and has determined that the Clinical Command Center and Infrastructure fixed assets were impaired on Consolidated Financial Statements
December 31, 20152019 and all other equipment on December 31, 2016.
(Amounts expressed in US dollars)
NOTE 2 – ACCOUNTING POLICIES AND OPERATIONS (continued)
Research and Development
The Company accounts for research and development costs in accordance with ASC 730-10, Research and Development. Accordingly, all research and development costs are charged to expense as incurred as software development costs.
Foreign Currency Translation
The Company'sCompany’s functional and reporting currency is the United States dollar. Transaction may occur in Canadian dollars which are accounted for under ASC 830,Foreign Currency Matters. Monetary assets and liabilities denominated in foreign currencies are translated using the exchange rate prevailing at the balance sheet date. Non-monetary assets and liabilities denominated in foreign currencies are translated at rates of exchange in effect at the date of the transaction. Average monthly rates are used to translate revenues and expenses. Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are included in the Statements of Operations. The Company has not, to the date of these consolidated financial statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.
Income Taxes
The Company accounts for income taxes under FASB ASC 740, Income Taxes. Deferred income tax assets and liabilities are determined based upon differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statements of operations in the period that includes the enactment date. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized.
The Company recognizes the effect of income tax positions only if those positions are more likely than not to be sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which a change in judgement occurs, as a result of information that arises or when a tax position is effectively settled. Interest and penalties related to income tax matters are recognized in general and administrative expense.
In accordance with the statute of limitations for federal tax returns, the Company's federal tax returns for the years 2011 through 20152019 are subject to examination.
-29-
KALLO INC.
Notes to Consolidated Financial Statements
December 31, 2019 and 2018
(Amounts expressed in US dollars)
NOTE 2 – ACCOUNTING POLICIES AND OPERATIONS (continued)
Fair Value of Financial Instruments
The Company used a three-level hierarchy that prioritizes the inputs used in valuation techniques for determining fair value of investments and liabilities. The Company defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Financial assets and liabilities recorded in the accompanying consolidated balance sheets are categorized based on the inputs to the valuation techniques as follows:
Level 1
– Financial assets and liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market that the company has the ability to access at the measurement date (examples include active exchange-traded equity securities, listed derivatives and most United States Government and agency securities).Level 2
– Financial assets and liabilities whose values are based on quoted prices in markets where trading occurs infrequently or whose values are based on quoted prices of instruments with similar attributes in active markets. Level 2 inputs include the following:| • | Quoted prices for identical or similar assets or liabilities in non-active markets (examples include corporate and municipal bonds which trade infrequently); | |
| • | Inputs other than quoted prices that are observable for substantially the full term of the asset or liability (examples include interest rate and currency swaps); and | |
| • | Inputs that are derived principally from or corroborated by observable market data for substantially the full term of the asset or liability (examples include certain securities and derivatives). |
Level 3
– Financial assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflectAn asset or liability'sliability’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Availability of observable inputs can vary and is affected by a variety of factors. The Company uses judgment in determining fair value of assets and liabilities and Level 3 assets and liabilities involve greater judgment than Level 1 and Level 2 assets or liabilities.
There are no financial instruments that are accounted for at fair value by level within the fair value hierarchy at December 31, 20152019 and 2014:2018.
-30-
December 31, 2016 | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| Liabilities: | ||||||||||||||||
| Derivative liability | $ | - | $ | - | $ | 270,581 | $ | 270,581 | ||||||||
December 31, 2015 | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| Liabilities: | ||||||||||||||||
| Derivative liabilities | $ | - | $ | - | $ | 210,834 | $ | 210,834 | ||||||||
KALLO INC.
Notes to Consolidated Financial Statements
December 31, 2019 and 2018
(Amounts expressed in US dollars)
NOTE 2 – ACCOUNTING POLICIES AND OPERATIONS (continued)
Stock-Based Compensation
The Company accounts for share-based compensation in accordance with ASC 718, Stock Compensation. Under the provisions of ASC 718, share-based compensation cost is measured at the grant date, based on the calculated fair value of the award, and is recognized as an expense for services rendered and over the employee'semployee’s requisite service period (generally the vesting period of the equity grant).
Contingencies
The Company accrues estimates for resolution of any legal and other contingencies when losses are probable and estimable, in accordance with ASC 450, Contingencies. Legal defense costs are accrued as incurred.
Stock Issued in Exchange for Services
In accordance with ASC 505, the valuation of the Company'sCompany’s common stock issued to non-employees in exchange for services is valued at an estimated fair market value as determined by Management of the Company based upon trading prices of the Company'sCompany’s common stock on the dates of the stock transactions. The corresponding expense of the services rendered is recognized over the contractor'scontractor’s requisite service period (generally the vesting period of the equity grant).
Convertible promissory note
The Company accounts for conversion options embedded in convertible notes in accordance with ASC 815. ASC 815 generally requires companies to bifurcate conversion options embedded in convertible notes from their host instruments and to account for them as free standing derivative financial instruments if they do not meet the criteria for classification in stockholders'stockholders’ equity.
The Company has evaluated the terms and conditions of its convertible notes under the guidance of ASC 815. The conversion feature did not meet the definition of "indexed“indexed to a company'scompany’s own stock"stock” provided for in ASC 815. Therefore, the conversion features require bifurcation and liability classification. The Company recorded the conversion feature as a derivative liability and debt discount and is amortized over the life of the convertible note. The debt discount is recorded against the related convertible note outstanding. The amortization is recorded as interest expense. The derivative liabilities are re-valued at the end of each reporting period using the lattice Model, with changes in the fair value of the derivative liability recorded as charges or credits to income, in the period in which the changes occur.
-31-
KALLO INC.
Notes to Consolidated Financial Statements
December 31, 2019 and 2018
(Amounts expressed in US dollars)
NOTE 2 - ACCOUNTING POLICIES AND OPERATIONS (continued)
Revenue recognition
Revenue iswill be recognized when all of the following criteria are met: persuasive evidence of an arrangement exists; delivery or performance has occurred; the sales price is fixed or determinable; and collection is reasonably assured.
Professional service revenue will primarily consistsconsist of the fees the Company earns related to installation and consulting services. The Company recognizeswill recognize revenue from professional services upon delivery or completion of performance.
Training services arewill be recognized upon delivery of the training.
There were no revenues during 20162019 and 2015.
Lease accounting
The Company evaluates eachfollows ASU 2016-02 (Topic 842), “Leases”. ASU 2016-02 requires that a lessee recognize the assets and liabilities that arise from operating leases. A lessee should recognize in the statement of financial position a liability to make lease for classification as eitherpayments (the lease liability) and a capital lease or an operating lease. If substantially all ofright-of-use asset representing its right to use the benefits and risks of ownership have been transferred to the Company as lessee, the Company records the lease as a capital lease at its inception. The Company performs this evaluation at the inception of the lease and when a modification is made to a lease. If the lease agreement callsunderlying asset for a scheduled rent increase during the lease term, the Company recognizes the lease expense on a straight-line basis over the lease term.
| ● | whether expired or existing contracts contain leases under the new definition of a lease; | |
| ● | lease classification for expired or existing leases; and | |
| ● | whether previously capitalized initial direct costs would qualify for capitalization under Topic 842. |
The Company determinesalso made the straight-line rent expense impactaccounting policy decision not to recognize lease assets and liabilities for leases with a term of an operating lease upon inception of the lease.
Advertising costs
The Company expenses advertising costs as incurred. The total costs the Company recognized related to advertising were approximately $Nil and $56,014,$Nil during the years ended December 31, 20162019 and 2015, respectively.
Recently AdoptedRecent Accounting Pronouncements
Accounting Standards Board ("FASB") issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in ASC 605, Revenue Recognition. This ASU is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. The effective date will be the first quarter of fiscal year 2019 using one of two retrospective application methods or a cumulative effect approach. The Company is evaluating the potential effects on the consolidated financial statements.
In February 2016, the FASB issued an ASU related to the accounting for leases. The new standard establishes a right-of-use ("ROU"(“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. This pronouncement is effective for annual and interim periods beginning after December 15, 2018,2019, with early adoption permitted. The Company is evaluating the impact that the new standard will have on its consolidated financial statements.
-32-
KALLO INC.
Notes to Consolidated Financial Statements
December 31, 20162019 and 2015
(Amounts expressed in US dollars)
NOTE 2 - ACCOUNTING POLICIES AND OPERATIONS (continued)
Recent Accounting Pronouncements
Accounting Standards Adopted
In June 2018, the FASB issued ASU 2018-07, Compensation - Stock Compensation (Topic 718): Improvement to Non-employee Share-Based Payment Accounting, which is part of the FASB’s simplification initiative to maintain or improve the usefulness of the information provided to the users of financial statements while reducing cost and complexity in financial reporting. This update provides consistency in the accounting for share-based payments to nonemployees with that of employees. The Company has adopted ASU 2018-07 in the first quarter of 2019. The adoption of ASU 2018-07 did not have a material impact on the Company’s financial statements and related disclosures.
Recently Issued Accounting Standards Not Yet Adopted
In August 2018, the FASB issued ASU No. 2018 13, Fair Value Measurement (Topic 820): Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement ("ASU 2018-13"), which removes and modifies some existing disclosure requirements and adds others. ASU 2018-13 modifies the disclosure requirements for fair value measurements and removes the requirement to disclose (1) the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, (2) the policy for timing of transfers between levels, and (3) the valuation processes for Level 3 fair value measurements. ASU 2018-13 requires disclosure of changes in unrealized gains and losses for the period included in other comprehensive income (loss) for recurring Level 3 fair value measurements held at the end of the reporting period and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The ASU is effective for all entities for fiscal years beginning after December 15, 2019, including interim periods therein. Early adoption is permitted for any eliminated or modified disclosures upon issuance of this ASU. The Company is currently evaluating the impact of the adoption of this standard.
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.
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KALLO INC.
Notes to Consolidated Financial Statements
December 31, 2019 and 2018
(Amounts expressed in US dollars)
NOTE 3 – CAPITAL STOCK
Common Stock
During the year ended December 31, 2015,2019, there were no movements in share capital issued and outstanding.
On December 12, 2018, the Company put $172,183 and 6,250,000received subscription agreements for the subscription of 9,077,050 common shares were issued pursuant to the above Agreement. The agreement expired on December 31, 2015 with no additional extension.
On December 4, 2018, the Company underapproved the Plan at a proposed maximum offering price per shareissuance of $0.15. This 2011 Plan is for persons employed or associated with the Company, including without limitation any employee, director, general partner, officer, attorney, accountant, consultant or advisor, is intended to advance the best interests of the Company by providing additional incentive to those persons who have a substantial responsibility for its management, affairs, and growth by increasing their proprietary interest in the success of the Company, thereby encouraging them to maintain their relationships with the Company. As at December 31, 2016, 7,233,334 shares have been issued under this 2011 Non-Qualified Stock Option Plan with no additional shares issued in 2016 under this plan.
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 year ended December 31, 2015,2019, the Company issued 68,867,121 shares forassignment of liabilities amount has been reduced by $88,303 (2018 - $412,677) cash settlement of $2,491,089.
Preferred Stock
The Company has designated 95,000,000 of its preferred stock as Series A Preferred Stock, each of which has 100 votes. The Company, will not, without the affirmative vote or written consent of the holders of at least a majority of the outstanding Series A Preferred Stock (i) authorize or create any additional series of stock ranking prior to or on a parity with the Series A Preferred Stock as to dividends, voting rights, or the distribution of assets upon liquidation; or (ii) change any of the rights, privileges or preferences of the Series A Preferred Stock.
The Company issued 95,000,000 Series A Preferred shares to several directors as compensation for services rendered during 2014. The shares of Series A Preferred stock are not convertible, carry voting rights of 100 votes per Preferred share and the fair value of the Preferred shares were deemed to be $288,780 based on the voting rights of the Preferred shares relative to the fair value of the Company at the date of the issuance.
During 20162019 and 2015,2018, the Company did not issue any Preferred Class shares.
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KALLO INC.
Notes to Consolidated Financial Statements
December 31, 20162019 and 2015
(Amounts expressed in US dollars)
NOTE 4 – RELATED PARTY TRANSACTIONS
During 2016, 3,775,000,0002019, the Board of Directors approved the issuance of 57,000,000 shares (2015 – 2,662,500,000) were issued to directors and shareholders of the Company as stock-based compensation and they were valued usingat $1,373,700. These shares will be issued after the market closing priceCompany is able to increase its authorized number of common shares.
During 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 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 grant,approved issuance. These shares will be issued after the Company becomes current on all its filings requirements.
During 2018, 3,031,900 valued at $377,500 (2015 - $3,630,000). The 3,775,000,000 shares to be$121,276 were issued to the directors during 2016 were subsequently rescindedfamily of the controlling shareholder of FE Pharmacy Inc. and not issued. In addition, during 2015, 6,470,914a related party as compensation for services rendered and for nominal cash. A further 3,731,005 valued at $149,240 was approved for issuance to the same family of the controlling shareholder of FE Pharmacy Inc, as compensation for services rendered but will be issued after the authorized number of common shares were issued to a director of the Company is increased. The transfer agent has erroneously issued these shares in spite of the Company’s instructions to wait for cashthe increase in authorized number of $323,546 common shares.
On April 8, 2017, the Company entered into an agreement with FE Pharmacy Inc., a company controlled by a shareholder of Kallo, and 55,104,172a related party, whereby in consideration for the issuance of 475,000,000 shares wereof 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 issued 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 year ended December 31, 2019, the assignment of liabilities amount has been reduced by $88,303 (2018 - $412,677) cash settlement of accounts payable. Subsequent to December 31, 2019, there were additional cash settlement of accounts payable of $7,500 which reduced the assignment of liabilities amount.
Included in convertible loans payable to related parties is an affiliate for cashamount of $1,938,282.
Included in accounts payable and accrued liabilities is an amount of $306,664 (2015$1,332,488 (2018 - $7,873)$908,004) due to directors and officers of the Company as at December 31, 2016.2019.
Included in short term loans payable is an amount of $49,758 (2018 - $22,396) due to the controlling shareholder of FE Pharmacy Inc. and a related party as at December 31, 2019.
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| 2016 | 2015 | |||||||
| Computer equipment under capital lease | $ | 223,683 | $ | 223,683 | ||||
| Nexus computer equipment under capital lease | 42,023 | 42,023 | ||||||
| Computer equipment | 50,724 | 50,724 | ||||||
| Computer software | 37,210 | 37,210 | ||||||
| Hardware & Installation | 10,128 | 10,128 | ||||||
| Office furniture and equipment | 27,739 | 27,739 | ||||||
| Leasehold improvement | 55,072 | 55,072 | ||||||
| Medical Equipment | 13,274 | 13,274 | ||||||
| Clinical Command Center | 15,790 | 15,790 | ||||||
| Infrastructure | 7,911 | 7,911 | ||||||
| Total Equipment | 483,554 | 483,554 | ||||||
| Less accumulated depreciation | (379,536 | ) | (348,003 | ) | ||||
| Less impairment | (104,018 | ) | - | |||||
| Equipment – net | $ | - | $ | 135,551 | ||||
KALLO INC.
Notes to Consolidated Financial Statements
December 31, 20162019 and 2015
(Amounts expressed in US dollars)
| 2016 | 2015 | |||||||
| Balance as at Beginning of Period | $ | 229,377 | $ | 16,175 | ||||
| New convertible promissory notes | - | 633,611 | ||||||
| Original issue discount | - | (53,536 | ) | |||||
| Interest and penalties | 103,502 | 114,914 | ||||||
| Derivative liabilities | - | (607,510 | ) | |||||
| Converted into shares | (128,928 | ) | (654,641 | ) | ||||
| Amortization of debt discount | 120,635 | 780,364 | ||||||
| Balance as at end of period | $ | 324,586 | $ | 229,377 | ||||
| Convertible notes – short term | (324,586 | ) | (204,826 | ) | ||||
| Convertible notes – long term | $ | - | $ | 24,551 | ||||
| 2015 | 2016 | |||||||
| Fair value as at Beginning of Year | $ | 210,834 | $ | 336,390 | ||||
| New promissory notes | - | 607,510 | ||||||
| Elimination associated with conversion of promissory notes | (88,223 | ) | (635,176 | ) | ||||
| Change in fair value loss (gain) | 147,970 | (97,890 | ) | |||||
| Fair value as at End of Year | $ | 270,581 | $ | 210,834 | ||||
NOTE 75 – CONVERTIBLE LOANS PAYABLE
| 2016 | 2015 | |||||||
| Convertible promissory note bearing interest at 15% per annum – third party | $ | 191,510 | $ | 105,395 | ||||
| Convertible promissory note bearing interest at 15% per annum – related party | 615,163 | 272,712 | ||||||
| $ | 806,673 | $ | 378,107 | |||||
| 2019 | 2018 | |||||||
| Convertible promissory note bearing interest at 15% per annum - third parties | $ | 265,217 | $ | 240,369 | ||||
| Convertible promissory note bearing interest at 15% per annum – related parties | 907,132 | 820,688 | ||||||
| $ | 1,172,349 | $ | 1,061,057 | |||||
The Convertible loans payable which bear 15% interest per annum and are convertible at a fixed price at any time during the 1 year term. The companyCompany has the option to pay the note at any time. The companyCompany 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 from the debt offering is $806,673,$1,172,349, including accrued interest, of which $615,163$907,132 is to from related parties. Interest of $98,140$111,292 (2018 - $111,291) on the convertible loans payable are included in net finance charge of $323,944 for the periodyear ended June 30, 2016December 31, 2019 included in the consolidated statement of operations.
NOTE 86 – SHORT TERM LOANS PAYABLE
| 2016 | 2015 | |||||||
| Non-interest bearing short term funding from third parties | 16,215 | 15,730 | ||||||
| $ | 16,215 | $ | 15,730 | |||||
| 2019 |
2018 | |||||||
| Non-interest bearing short term funding from third party | $ | 16,431 | $ | 15,959 | ||||
| Non-interest bearing short term funding from related party | 49,758 | 22,396 | ||||||
| $ | 66,521 | $ | 38,355 | |||||
As at December 31, 2016,2019, the balance of $16,215 (2015$66,521 (2018 - $15,730)$38,355) represented short term funding provided by a third partiesparty and a related party which are non-interest bearing, unsecured and have no fixed repayment date. The amountportion of the loan from third party in Canadian dollars is $21,772 which is subject to revaluation at the end of each period end.
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KALLO INC.
Notes to Consolidated Financial Statements
December 31, 20162019 and 2015
(Amounts expressed in US dollars)
NOTE 97 – INCOME TAXES
The Company had no income taxes payable at December 31, 20162019 and 2015.
The reconciliation of income tax provision computed at statutory rates to the reported income tax provision is as follows:
| 2016 | 2015 | |||||||
| Net loss for the year | $ | (2,999,110 | ) | $ | (8,964,960 | ) | ||
| Effective statutory rate | 34 | % | 34 | % | ||||
| Expected tax recovery | $ | (1,019,697 | ) | $ | (3,048,086 | ) | ||
| Net effects of non deductible and allowable items | 254,917 | 1,742,542 | ||||||
| Change in valuation allowance | 764,780 | 1,305,544 | ||||||
| $ | - | $ | - | |||||
| 2019 | 2018 | |||||||
| Net loss for the year | $ | (2,355,889 | ) | $ | (763,631 | ) | ||
| Effective statutory rate | 21 | % | 21 | % | ||||
| Expected tax recovery | $ | (494,737 | ) | $ | (160,363 | ) | ||
| Net effects of non deductible and allowable items | 330,641 | 56,808 | ||||||
| Change in valuation allowance | 164,096 | 103,555 | ||||||
| $ | — | $ | — | |||||
Deferred income taxes reflect the net income tax effect of temporary differences between the carrying amounts of the assets and liabilities for financial reporting purposes and amounts used for income taxes. The Company'sCompany’s deferred income tax assets and liabilities consist of the following:
| 2016 | 2015 | |||||||
| Net operating loss carry forward | $ | 5,525,126 | $ | 4,779,729 | ||||
| Equipment | 138,154 | 118,771 | ||||||
| Valuation allowance | (5,663,280 | ) | (4,898,500 | ) | ||||
| Deferred tax assets, net of valuation allowance | $ | - | $ | - | ||||
| 2019 | 2018 | |||||||
| Net operating loss carry forward | $ | 3,904,460 | $ | 3,723,615 | ||||
| Equipment | 31,344 | 48,094 | ||||||
| Valuation allowance | (3,935,805 | ) | (3,771,709 | ) | ||||
| Deferred tax assets, net of valuation allowance | $ | — | $ | — | ||||
Net operating loss carry forwards totaled approximately $16,250,000$18,593,000 at December 31, 2016.2019. The net operating loss carry forwards will begin to expire in the year 2021 if not utilized. After consideration of all the evidence, management has recorded a valuation allowance at December 31, 20162019 due to uncertainty of realizing the deferred tax assets. Utilization of the Company'sCompany’s net operating loss carry forwards may be limited based on changes in ownership as defined in Internal Revenue Code Section 382. Tax years 2011 through 20162019 remain open to examination by tax authorities.
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KALLO INC.
Notes to Consolidated Financial Statements
December 31, 20162019 and 2015
(Amounts expressed in US dollars)
NOTE 108 – COMMITMENTS AND CONTINGENCIES
| 2017 | $ | 18,620 | ||
| $ | 18,620 |
| 2015 | $ | 209,965 | ||
| 2016 | 245,720 | |||
| $ | 455,685 |
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 $25,000$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 Consolidated Financial Statements
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 $85,746 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.
Commitment
On December 31, 20166, 2019 the Company entered into a Joint Venture Corporation Agreement (the “Agreement”) with Techno-Investment Module, Ltd, a corporation domiciled in the Republic of Belarus (“TIM”) and 2015
NOTE 119 – SUBSEQUENT EVENTS
After December 31, 2016, promissory notes2019, accounts payable for a total of $39,644 were converted into 720,806,182 common shares and promissory notes for a total of $320,000$7,500 were settled in cash by FE Pharmacy, Inc. under the agreement mentioned below.in Note 3.
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On May 7 2019, we received the resignation of our principal independent accountant, Malone Bailey, LLP.
MaloneBailey has served as our principal independent accountant for the prior fiscal years since 2014. The principal independent accountant's report issued by MaloneBailey, LLP for either of the years ended December 31, 2016 and December 31, 2017 did not contain any adverse opinion or disclaimer of opinion and it was not modified as to uncertainty, audit scope, or accounting principles except for an explanatory paragraph regarding our ability to continue as a going concern.
We are able to report that during the years ended December 31, 2015, December 31, 2016 and December 2017 through May 7, 2019 there were no disagreements with MaloneBailey, our former principal independent accountant, on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which, if not resolved to MaloneBailey's satisfaction, would have caused it to make reference to the subject matter of the disagreement(s) in connection with its reports on our consolidated financial statements for such periods. During the period of engagement there were no reportable events as that term is defined in Item 304(a)(1)(iv) of Regulation S-K except MaloneBailey having advised us that it identified certain deficiencies in our internal control over financial reporting that constitute material weaknesses as described in Item 9A of our Annual Report on Form 10-K for the year ended December 31, 2018. At no time in the past two years did the accounting opinion of MaloneBailey contain an adverse opinion or disclaimer of opinion or was qualified or modified as to uncertainty, audit scope, or accounting principles except for an explanatory paragraph regarding our ability to continue as a going concern.
New independent registered public accounting firm
On November 12, 2020 we retained the services of BF Borgers, Certified Public Accountants (“B.F. Borgers CPA”) to serve as our principal independent accountant for the fiscal years ended December 31, 2018 and December 31, 2019. B.F. Borgers CPA is the successor to our prior principal independent accountant, MaloneBailey, LLP.
| ITEM 9A | CONTROLS AND PROCEDURES. |
Evaluation of Disclosure Controls and Procedures
We maintain "disclosure“disclosure controls and procedures,"” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act"“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"“Evaluation”), under the supervision and with the participation of our Chief Executive Officer ("CEO"(“CEO”) and Chief Financial Officer ("CFO"(“CFO”), of the effectiveness of the design and operation of our disclosure controls and procedures ("(“Disclosure Controls"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.
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Management’s Report on Internal Control Over Financial Reporting.
Management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Exchange Act Rule 13a -15(f). The Company'sCompany’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
Because of the inherent limitations due to, for example, the potential for human error or circumvention of controls, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures may deteriorate.
Management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework inInternal Control – Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Based on this evaluation, management concluded that the Company'sCompany’s internal control over financial reporting was not effective as of December 31, 2016.2019. Material weakness identified included:
| * | Lack of segregation of duties |
| * | Insufficient controls over the financial close process and preparation of the financial statements identified by the auditors during the audit of the company's financial statements for the year ended December 31, 2019. |
We will begin to take steps to remedy the foregoing material weaknesses, including hiring a VP of Finance to oversee the accounting and financial reporting process, after the Company is up to date on all its filings.
Changes in Internal Controls
There were no changes in our internal control over financial reporting during the quarter ended December 31, 20162019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
| ITEM 9B. | OTHER INFORMATION. |
None.
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Officers and Directors
Each of our directors serves until his or her successor is elected and qualified. Each of our officers is elected by the board of directors to a term of one (1) year and serves until his or her successor is duly elected and qualified, or until he or she is removed from office. The board of directors has no nominating, auditing or compensation committees. It does have an audit committee comprised of the board of directors.
The names, addresses, ages and positions of our present officers and directors are set forth below:
| Name and Address | Age | Position(s) | ||||
John Cecil 255 Duncan Mill Road, | ||||||
| President, Chairman of the Board of Directors, Chief Executive Officer and Chief Financial Officer | ||||||
Lloyd A. Chiotti 255 Duncan Mill Road, | 70 | Chief Operating Officer and Director | ||||
Samuel R Baker 255 Duncan Mill Road, Canada M3B 3H9 | 83 | Secretary and a Director | ||||
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Background of officers and directors
John Cecil – President, Chairman of the Board of Directors, Chief Executive Officer Treasurer, Principaland Chief Financial Officer and Principal Accounting Officer
On October 20, 2010, John Cecil was appointed Chairman of the Board of Directors, Chief Executive Officer and a Director and on February 29, 2016, Mr Cecil was appointed President. And as of March 25, 2011, John Cecil was appointed the treasurer, principal financial officer and principal accounting officer of Kallo Inc. Since December 31, 2009, John Cecil was on our board of directors. Since December 2003 John Cecil has been the president of Rophe Medical Technologies Inc., in Toronto, Canada. He iswas responsible for its research and development and the design and copyright of the company'scompany’s technology. From May 2008 to April 2009 Mr. Cecil was the Senior Healthcare Solutions Architect at SUN Microsystems Canada Inc., in Toronto, Canada, a publicly traded company listed on the NASDAQ under the symbol JAVA. He was responsible for Innovative product positioning by workshops / white
Samuel Baker - Secretary and a Director
On November 17, 2010, Samuel Baker was appointed Secretary and a member of our Board of Directors. Since October 1997 Mr. Baker has been the Senior Lawyer at Baker Law Firm in Toronto, Canada. Since September 2008, Mr. Baker has been the director of Arehada Mining Limited. Arehada Mining Limited operates a lead/zinc mine in Inner Mongolia, China. It is a public company traded on the Toronto Stock Exchange, ticker symbol AHD.
Lloyd Chiotti – Chief Operating Officer and Director
On September 22, 2011, Lloyd Chiotti was appointed to our board of directors and on February 29, 2016, Mr Chiotti was appointed Chief Operating Officer. In February 2015, Mr. Chiotti began full time with Kallo Inc. as the Executive Vice President. He holds an Engineering degree and an MBA, both from the University of Toronto. He worked with Enbridge Gas Distribution (formerly The Consumers Gas Company) for over 34 years. Over the course of his career he held a number of senior management positions including Director of Information Services and a number of Regional General Manager roles within Operations. In 2006 he joined the Engineering department to lead the Asset Management initiative as Director, Asset Management Strategy. In this capacity, he led a team which implemented an Asset Management system for gas distribution consistent with the international standard called PAS 55 (now ISO 55001). In 2010 he was appointed to the position of Director, Distribution Asset Management. In this capacity, he was responsible for all distribution system planning and records management and led the development of a comprehensive methodology to develop risk based, long range asset management plans. He was actively involved in the natural gas industry. He served as Chair of the Asset Management Task Force of the Canadian Gas Association from 2006 to 2013 and served as a member of the Distribution Working Committee of the International Gas Union from 2007 to 2012. Throughout his career he has also served on the Boards of a number of not-for-profit organizations including: President, Alternative Computer Training for the Disabled; Chair, United Way of Peel Campaign 1992; Chair of the Board, West Park Healthcare Centre Foundation; Vice-Chair of the Board, Junior Achievement of Toronto and Chair of the Board, Toronto Mendelssohn Choir. He retired from Enbridge on October 1, 2013.
Conflicts of Interest
There is no conflict that we foresee as our officers and directors devote full time to the business and the operations of the company except for Samuel R. Baker who is not full time in the organization.
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Involvement in Certain Legal Proceedings
During the past ten years, Messrs. Cecil, Baker, and Chiotti have not been the subject of the following events:
| 1. | A petition under the Federal bankruptcy laws or any state insolvency law was filed by or against, or a receiver, fiscal agent or similar officer was appointed by a court for the business or property of such person, or any partnership in which he was a general partner at or within two years before the time of such filing, or any corporation or business association of which he was an executive officer at or within two years before the time of such filing; |
| 2. | Convicted in a criminal proceeding or is a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses); |
| 3. | The subject of any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from, or otherwise limiting, the following activities; |
| i) | Acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity; |
| ii) | Engaging in any type of business practice; or |
| iii) | Engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of Federal or State securities laws or Federal commodities laws; |
| 4. | The subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any Federal or State authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity described in paragraph 3.i in the preceding paragraph or to be associated with persons engaged in any such activity; |
| 5. | Was found by a court of competent jurisdiction in a civil action or by the Commission to have violated any Federal or State securities law, and the judgment in such civil action or finding by the Commission has not been subsequently reversed, suspended, or vacated; |
| 6. | Was found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any Federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated; |
| 7. | Was the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of: |
| i) | Any Federal or State securities or commodities law or regulation; or |
| ii) | Any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or |
| iii) | Any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or |
| 8. | Was the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26)), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29)), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member. |
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Audit Committee and Charter
We have a separately designated audit committee of the board. Our board of directors performs the audit committee functions. None of our directors are deemed independent. Two of our directors also hold positions as our officers. Our audit committee is responsible for: (1) selection and oversight of our independent accountant; (2) establishing procedures for the receipt, retention and treatment of complaints regarding accounting, internal controls and auditing matters; (3) establishing procedures for the confidential, anonymous submission by our employees of concerns regarding accounting and auditing matters; (4) engaging outside advisors; and, (5) funding for the outside auditory and any outside advisors engagement by the audit committee. A copy of our audit committee charter is filed as an exhibit to our 2007 Form 10-K.
Audit Committee Financial Expert
We do not have an audit committee financial expert.
Code of Ethics
We have adopted a corporate code of ethics. We believe our code of ethics is reasonably designed to deter wrongdoing and promote honest and ethical conduct; provide full, fair, accurate, timely and understandable disclosure in public reports; comply with applicable laws; ensure prompt internal reporting of code violations; and provide accountability for adherence to the code. A copy of the code of ethics is filed as Exhibit 14.1 to our S-1 filed with the Securities and Exchange Commission on August 25, 2014.
Disclosure Committee and Committee Charter
We have a disclosure committee and disclosure committee charter. Our disclosure committee is comprised of all of our officers and directors. The purpose of the committee is to provide assistance to the Chief Executive Officer and the Chief Financial Officer in fulfilling their responsibilities regarding the identification and disclosure of material information about us, and the accuracy, completeness and timeliness of our financial reports. A copy of the disclosure committee charter is filed as Exhibit 99.2 to our 2007 Form 10-K.
Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our directors, officers and persons who beneficially owned more than ten percent of our common stock to file reports of ownership and changes in ownership of common stock. Based solely upon a review of Forms 3, 4 and 5 furnished to us during the fiscal year 2015,2018, all officers, directors, and persons who beneficially own more than ten percent of our common stock filed all reports required by Section 16(a) of the Securities Exchange Act of 1934, as amended.
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The following table sets forth the compensation paidpayable by us during the last two fiscal years for our officers. This information includes the dollar value of base salaries, bonus awards and number of stock options granted, and certain other compensation, if any. The compensation discussed addresses all compensation awarded to, earned by, or paid to our named executive officers.
Summary Compensation Table
| (a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | (j) |
Name and Principal Position [1] | Year | Salary ($) | Bonus ($) | Stock Awards ($)[1] | Option Awards ($) | Non-Equity Incentive Plan Compensation (S) | Change in Pension Value & Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($) | Totals ($) |
| John Cecil | 2016 | 161,907 | 0 | 225,000 | 0 | 0 | 0 | 0 | 386,907 |
| Chairman & CEO | 2015 | 132,902 | 0 | 1,950,000 | 0 | 0 | 0 | 0 | 2,082,902 |
| Vince Leitao | 2016 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Former President | 2015 | 29,644 | 0 | 0 | 0 | 0 | 0 | 0 | 29,644 |
| (resigned 02/29/2016) | |||||||||
| Samuel Baker | 2016 | 0 | 0 | 42,500 | 0 | 0 | 0 | 0 | 42,500 |
| Secretary | 2015 | 0 | 0 | 480,000 | 0 | 0 | 0 | 0 | 480,000 |
| Lloyd Chiotti | 2016 | 130,334 | 0 | 110,000 | 0 | 0 | 0 | 0 | 240,334 |
| Director & EVP | 2015 | 0 | 0 | 1,200,000 | 0 | 0 | 0 | 0 | 1,200,000 |
| (a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | (j) |
| Change in | |||||||||
| Pension Value & | |||||||||
| Nonqualified | |||||||||
| Non-Equity | Deferred | ||||||||
| Stock | Option | Incentive Plan | Compensation | All Other | |||||
| Name and Principal | Salary | Bonus | Awards | Awards | Compensation | Earnings | Compensation | Totals | |
| Position [1] | Year | ($) | ($) | ($)[1] | ($) | (S) | ($) | ($) | ($) |
| John Cecil | 2019 | 165,083 | 0 | 1,068,950 | 0 | 0 | 0 | 0 | 1,234,033 |
| Chairman & CEO | 2018 | 165,246 | 0 | 0 | 0 | 0 | 0 | 0 | 165,246 |
| Samuel Baker | 2019 | 0 | 0 | 72,300 | 0 | 0 | 0 | 0 | 72,300 |
| Secretary | 2018 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Lloyd Chiotti | 2019 | 132,891 | 0 | 241,000 | 0 | 0 | 0 | 0 | 373,891 |
| Director & EVP | 2018 | 133,022 | 0 | 0 | 0 | 0 | 0 | 0 | 133,022 |
| [1] | During the year ended December 31, |
The number of shares approved for issuance as compensation to each named executive officer for the year ended December 31, 20162019 was as follows:
| · | John Cecil |
| · | Samuel Baker – 3,000,000 common shares issuable as compensation valued at |
| · |
The values reported represent the issue date fair value of the shares multiplied by the number of shares issuable.
All compensation received by our officers and directors has been disclosed.
Option/SAR Grants
There are no stock option, retirement, pension, or profit sharing plans for the benefit of our officers and directors other than our 2012 and 2012 Non-Qualified Incentive Stock Option Plans. No options have been granted to our officers and directors thereunder.
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Long-Term Incentive Plan Awards
We do not have any long-term incentive plans that provide compensation intended to serve as incentive for performance.
Compensation of Directors
The members of our board of directors are not compensated for their services as directors. We no longer have employment contracts with our officers or directors.
Indemnification
Under our Bylaws, we may indemnify an officer or director who is made a party to any proceeding, including a lawsuit, because of his position, if he/she acted in good faith and in a manner he/she reasonably believed to be in our best interest. We may advance expenses incurred in defending a proceeding. To the extent that the officer or director is successful on the merits in a proceeding as to which he/she is to be indemnified, we must indemnify him/her against all expenses incurred, including attorney'sattorney’s fees. With respect to a derivative action, indemnity may be made only for expenses actually and reasonably incurred in defending the proceeding, and if the officer or director is judged liable, only by a court order. The indemnification is intended to be to the fullest extent permitted by the laws of the State of Nevada.
Regarding indemnification for liabilities arising under the Securities Act of 1933, which may be permitted to directors or officers under Nevada law, we are informed that, in the opinion of the Securities and Exchange Commission, indemnification is against public policy, as expressed in the Act and is, therefore, unenforceable.
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The following table sets forth, as of the date of this report, the total number of shares owned beneficially by each of our directors, officers and key employees, individually and as a group, and the present owners of 5% or more of our total outstanding shares. The stockholder listed below has direct ownership of his/her shares and possesses sole voting and dispositive power with respect to the shares.
Name and Address Beneficial Owner [1] | Number of Common Shares Owned | Percentage of Ownership | Number of Preferred Shares Owned | Percentage of Ownership |
John Cecil [2] 225 Duncan Mills Road, Suite 504 Toronto, ON M3B 3H9 | 1,653,612,857 | 20.52% | 70,000,000 | 73.69% |
Lloyd Chiotti 31 Sisman Avenue Aurora, ON, L4G 6R9 | 823,242,258 | 10.22% | 5,000,000 | 5.26% |
Samuel Baker [3] 255 Duncan Mill Road, Unit 504 Toronto, ON, M3B 3H9 | 327,903,850 | 4.07% | 0 | 0.00% |
| All Officers and Directors as a Group (3 persons) | 2,804,758,965 | 34.81% | 75,000,000 | 78.95% |
Name and Address Beneficial Owner [1] | Number of Common Shares Owned | Percentage of Ownership | Number of Preferred Shares Owned | Percentage of Ownership | ||||||||||||
John Cecil [2] 255 Duncan Mill Road, Suite 504 | 507,756,028 | 44.10 | % | 70,000,000 | 73.69 | % | ||||||||||
Lloyd Chiotti 255 Duncan Mill Road, Suite 504 | 91,370,917 | 7.94 | % | 5,000,000 | 5.26 | % | ||||||||||
Samuel Baker [3] 255 Duncan Mill Road, Suite 504 | 30,546,508 | 2.65 | % | — | 0.00 | % | ||||||||||
| All Officers and Directors as a Group (3 persons) | 629,673,453 | 54.69 | % | 75,000,000 | 78.95 | % | ||||||||||
[1] | The persons named above may be deemed to be a |
| [2] | Includes |
| [3] | Includes |
| [4] | Each preferred share is entitled to 100 votes. |
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As at December 31, 2015,2019, we owe our officers and directors $7,873$1,332,488 in accounts payable and accrued liabilities.
(1)
Audit FeesThe aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for our audit of annual financial statements and review of financial statements included in our Form 10-Qs or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years was:
| 2016 | $ | 49,530 | MaloneBailey LLP | ||
| 2015 | $ | 149,446 | MaloneBailey LLP |
| 2019 | $ | 30,000 | BF Borgers | ||
| 2018 | $ | 31,030 | MaloneBailey LLP |
(2)
Audit-Related FeesThe aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountants that are reasonably related to the performance of the audit or review of our financial statements and are not reported in the preceding paragraph:
| 2016 | $ | 0 | MaloneBailey, LLP | ||
| 2015 | $ | 0 | MaloneBailey LLP |
| 2019 | $ | 0 | BF Borgers | ||
| 2018 | $ | 0 | MaloneBailey LLP |
(3)
Tax FeesThe aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning was:
| 2016 | $ | 0 | MaloneBailey, LLP | ||
| 2015 | $ | 0 | MaloneBailey LLP |
| 2019 | $ | 0 | BF Borgers | ||
| 2018 | $ | 0 | MaloneBailey LLP |
(4)
All Other FeesThe aggregate fees billed in each of the last two fiscal years for the products and services provided by the principal accountant, other than the services reported in paragraphs (1), (2), and (3) was:
| 2016 | $ | 0 | MaloneBailey LLP | ||
| 2015 | $ | 0 | MaloneBailey LLP | ||
| 2019 | $ | 0 | BF Borgers | ||
| 2018 | $ | 0 | MaloneBailey LLP | ||
(5)
Our audit(6)
The percentage of hours expended on the principal-48-
| ITEM 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. |
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| Incorporated by reference | Filed | ||||
| Exhibit | Document Description | Form | Date | Number | herewith |
| 2.1 | Articles of Merger | 8-K | 1/21/11 | 2.1 | |
| 3.1 | Articles of Incorporation | SB-2 | 3/05/07 | 3.1 | |
| 3.2 | Bylaws | SB-2 | 3/05/07 | 3.2 | |
| 3.3 | Amended Articles of Incorporation (11/23/2015) | 8-K | 12/02/15 | 3.1 | |
| 4.1 | Specimen Stock Certificate | SB-2 | 3/05/07 | 4.1 | |
| 10.1 | Agreement with Rophe Medical Technologies Inc. dated December 11, 2009 | 10-K | 3/31/10 | 10.2 | |
| 10.2 | Amended Agreement with Rophe Medical Technologies Inc. dated December 18, 2009 | 10-K | 3/31/10 | 10.3 | |
| 10.3 | Amended Agreement with Rophe Medical Technologies Inc. dated March 16, 2010 | 10-K | 3/31/10 | 10.4 | |
| 10.4 | Investment Agreement with Kodiak Capital Group, LLC dated October 20, 2014 | S-1 | 10/30/14 | 10.6 | |
| 10.5 | Amended Agreement with Jarr Capital Corp. | 8-K | 2/22/11 | 10.1 | |
| 10.6 | Termination of Employment Agreement with John Cecil | 8-K | 2/22/11 | 10.2 | |
| 10.7 | Termination of Employment Agreement with Vince Leitao | 8-K | 2/22/11 | 10.3 | |
| 10.8 | Termination of Employment Agreement with Samuel Baker | 8-K | 2/22/11 | 10.4 | |
| 10.9 | Services Agreement with Buchanan Associates Computer Consulting Ltd. | 10-K | 5/18/11 | 10.1 | |
| 10.10 | Equipment Lease Agreement with Buchanan Associates Computer Consulting Ltd. | 10-K | 5/18/11 | 10.2 | |
| 10.11 | Agreement with Mansfield Communications Inc. | 10-K | 5/18/11 | 10.3 | |
| 10.12 | Agreement with Watt International Inc. | 10-K | 5/18/11 | 10.4 | |
| 10.13 | Pilot EMR Agreement with Nexus Health Management Inc. | 10-K | 5/18/11 | 10.5 | |
| 10.14 | 2011 Non-Qualified Stock Option Plan | S-8 | 6/27/11 | 10.1 | |
| 10.15 | Multimedia Contractual Agreement with David Miller | 8-K | 10/28/11 | 10.1 | |
| 10.16 | Strategic Alliance Agreement with Petro Data Management Services Limited and Gateway Global Fabrication Ltd. | 8-K | 11/02/11 | 10.1 | |
| ITEM 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (CONTINUED) |
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| 10.17 | Independent Contractor Agreement with Savers Drug Mart | 8-K | 1/26/12 | 10.1 | |
| 10.18 | 2012 Non-Qualified Stock Option Plan | S-8 | 9/06/12 | 10.1 | |
| 10.19 | Memorandum of Offering with Ministry of Health of Republic of Ghana | S-1/A-3 | 6/26/13 | 10.32 | |
| 10.20 | Addendum to Investment Agreement with Kodiak | S-1/A-4 | 7/31/13 | 10.33 | |
| 10.21 | Second Addendum to Investment Agreement with Kodiak | S-1 | 8/25/14 | 10.34 | |
| 10.22 | Email from Kodiak | S-1/A-1 | 9/24/14 | 10.35 | |
| 10.23 | Email from Kodiak | S-1/A-1 | 9/24/14 | 10.36 | |
| 14.1 | Code of Ethics | S-1 | 8/25/14 | 14.2 | |
| 16.1 | Letter from Collins Barrow Toronto LLP | 8-K/A-1 | 2/15/12 | 16.3 | |
| 16.2 | Letter from Schwartz Levitsky Feldman LLP | 8-K/A-3 | 8/13/14 | 16.1 | |
| 21.1 | List of Subsidiary Companies | 10-K | 3/31/10 | 21.1 | |
| Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | X | ||||
| Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | X | ||||
| 99.1 | Audit Committee Charter | 10-K | 4/15/08 | 99.1 | |
| 99.2 | Disclosure Committee Charter | 10-K | 4/15/08 | 99.2 | |
| 99.3 | FCPA Code | S-1 | 8/25/14 | 99.3 | |
| 99.4 | Letter from Ministry of Health | 8-K | 6/08/15 | 99.2 | |
| 99.5 | Letter from Minister of Health and Public Hygiene | 8-K | 6/24/15 | 99.2 | |
| 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 |
| ITEM 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (CONTINUED) |
| Incorporated by reference | Filed | ||||
| Exhibit | Document Description | Form | Date | Number | herewith |
| 31.1 | Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | X | |||
| 32.1 | Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | X | |||
| 99.1 | Audit Committee Charter. | 10-K | 4/15/08 | 99.1 | |
| 99.2 | Disclosure Committee Charter. | 10-K | 4/15/08 | 99.2 | |
| 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 Section 13 or 15(d) of the Securities and Exchange Act of 1934, the registrant has duly caused this amended report to be signed on its behalf by the undersigned, thereunto duly authorized, on this 14th day of November, 2017.
| KALLO INC. | ||
| BY: | JOHN CECIL | |
| John Cecil | ||
| President, Principal Executive Officer, Principal Financial Officer | ||
Pursuant to the requirements of the Securities Act of 1934, this amended report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated:
| Signature | Title | Date |
| JOHN CECIL | President, Principal Executive Officer, | |
| John Cecil | Principal Financial Officer and the Chairman of Board of Directors | |
| SAMUEL BAKER | Corporate Secretary and member of | |
| Samuel Baker | the Board of Directors | |
LLOYD A. CHIOTTI Lloyd A. Chiotti | Chief Operating Officer and member of the | |
| Board of Directors | January 14, 2021 |
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| Incorporated by reference | Filed | ||||
| Exhibit | Document Description | Form | Date | Number | herewith |
| 2.1 | Articles of Merger | 8-K | 1/21/11 | 2.1 | |
| 3.1 | Articles of Incorporation | SB-2 | 3/05/07 | 3.1 | |
| 3.2 | Bylaws | SB-2 | 3/05/07 | 3.2 | |
| 3.3 | Amended Articles of Incorporation (11/23/2015) | 8-K | 12/02/15 | 3.1 | |
| 4.1 | Specimen Stock Certificate | SB-2 | 3/05/07 | 4.1 | |
| 10.1 | Agreement with Rophe Medical Technologies Inc. dated December 11, 2009 | 10-K | 3/31/10 | 10.2 | |
| 10.2 | Amended Agreement with Rophe Medical Technologies Inc. dated December 18, 2009 | 10-K | 3/31/10 | 10.3 | |
| 10.3 | Amended Agreement with Rophe Medical Technologies Inc. dated March 16, 2010 | 10-K | 3/31/10 | 10.4 | |
| 10.4 | Investment Agreement with Kodiak Capital Group, LLC dated October 20, 2014 | S-1 | 10/30/14 | 10.6 | |
| 10.5 | Amended Agreement with Jarr Capital Corp. | 8-K | 2/22/11 | 10.1 | |
| 10.6 | Termination of Employment Agreement with John Cecil | 8-K | 2/22/11 | 10.2 | |
| 10.7 | Termination of Employment Agreement with Vince Leitao | 8-K | 2/22/11 | 10.3 | |
| 10.8 | Termination of Employment Agreement with Samuel Baker | 8-K | 2/22/11 | 10.4 | |
| 10.9 | Services Agreement with Buchanan Associates Computer Consulting Ltd. | 10-K | 5/18/11 | 10.1 | |
| 10.10 | Equipment Lease Agreement with Buchanan Associates Computer Consulting Ltd. | 10-K | 5/18/11 | 10.2 | |
| 10.11 | Agreement with Mansfield Communications Inc. | 10-K | 5/18/11 | 10.3 | |
| 10.12 | Agreement with Watt International Inc. | 10-K | 5/18/11 | 10.4 | |
| 10.13 | Pilot EMR Agreement with Nexus Health Management Inc. | 10-K | 5/18/11 | 10.5 | |
| 10.14 | 2011 Non-Qualified Stock Option Plan | S-8 | 6/27/11 | 10.1 | |
| 10.15 | Multimedia Contractual Agreement with David Miller | 8-K | 10/28/11 | 10.1 | |
| 10.16 | Strategic Alliance Agreement with Petro Data Management Services Limited and Gateway Global Fabrication Ltd. | 8-K | 11/02/11 | 10.1 | |
| 10.17 | Independent Contractor Agreement with Savers Drug Mart | 8-K | 1/26/12 | 10.1 | |
| 10.18 | 2012 Non-Qualified Stock Option Plan | S-8 | 9/06/12 | 10.1 | |
| 10.19 | Memorandum of Offering with Ministry of Health of Republic of Ghana | S-1/A-3 | 6/26/13 | 10.32 | |
| 10.20 | Addendum to Investment Agreement with Kodiak | S-1/A-4 | 7/31/13 | 10.33 | |
| 10.21 | Second Addendum to Investment Agreement with Kodiak | S-1 | 8/25/14 | 10.34 | |
| 10.22 | Email from Kodiak | S-1/A-1 | 9/24/14 | 10.35 | |
| 10.23 | Email from Kodiak | S-1/A-1 | 9/24/14 | 10.36 | |
| 14.1 | Code of Ethics | S-1 | 8/25/14 | 14.2 | |
| 16.1 | Letter from Collins Barrow Toronto LLP | 8-K/A-1 | 2/15/12 | 16.3 | |
| 16.2 | Letter from Schwartz Levitsky Feldman LLP | 8-K/A-3 | 8/13/14 | 16.1 | |
| 21.1 | List of Subsidiary Companies | 10-K | 3/31/10 | 21.1 | �� |
| Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | X | ||||
| Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | X | ||||
| 99.1 | Audit Committee Charter | 10-K | 4/15/08 | 99.1 | |
| 99.2 | Disclosure Committee Charter | 10-K | 4/15/08 | 99.2 | |
| 99.3 | FCPA Code | S-1 | 8/25/14 | 99.3 | |
| 99.4 | Letter from Ministry of Health | 8-K | 6/08/15 | 99.2 | |
| 99.5 | Letter from Minister of Health and Public Hygiene | 8-K | 6/24/15 | 99.2 | |
| 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 |