UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| ☒ | QUARTERLY REPORT UNDER TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED |
| OR | |
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission file number 000-53183
KALLO INC.
(Exact name of registrant as specified in its charter)
NEVADA
(State or other jurisdiction of incorporation or organization)
255 Duncan MillsMill Road,
Suite 504
Toronto, Ontario
Canada M3B 3H9
(Address of principal executive offices, including zip code.)
(416) 246-9997
(Registrant'sRegistrant’s telephone number, including area code)
Indicate by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the last 90 days. YES ☒ NO ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§(SS 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES ☒ NO ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large“large accelerated filer," "accelerated “accelerated filer," "non-accelerated” “non-accelerated filer," "smaller” “smaller reporting company"company” and "emerging“emerging growth company"company” in Rule 12b-2 of the Exchange Act. (Check one):
| Large Accelerated Filer | ☐ | Accelerated Filer | ☐ | |||
| Non-accelerated Filer | ☐ | Smaller Reporting Company | ☒ | |||
| (Do not check if smaller reporting company) | Emerging Growth Company | ☐ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐☒ NO ☒
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicated the number of shares outstanding of each of the issuer'sissuer’s classes of common stock, as of the latest practicable date:
KALLO INC.
KALLO INC.
(Amounts expressed in US dollars)
(Unaudited)
September 30, 2016 | December 31, 2015 | |||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash | $ | 211 | $ | 4,998 | ||||
| Prepaid expenses | 101,045 | 132,259 | ||||||
| Total Current Assets | 101,256 | 137,257 | ||||||
| Deposit – long term | - | 20,627 | ||||||
| Equipment, net | - | 135,551 | ||||||
| TOTAL ASSETS | $ | 101,256 | $ | 293,435 | ||||
| LIABILITIES AND STOCKHOLDERS' DEFICIENCY | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable and accrued liabilities | $ | 2,534,797 | $ | 1,204,942 | ||||
| Derivative liabilities | 210,295 | 210,834 | ||||||
Convertible promissory notes, net of discount of $21,634 and $69,568 respectively | 286,182 | 204,826 | ||||||
| Convertible loans payable – third parties | 189,599 | 105,395 | ||||||
| Short term loans payable | 16,599 | 15,730 | ||||||
| Convertible loans payable – related parties | 608,683 | 272,712 | ||||||
| Deferred lease inducement | 5,043 | 15,380 | ||||||
| Total Current Liabilities | 3,851,198 | 2,029,819 | ||||||
Convertible promissory notes, net of discount of $Nil and $59,939 respectively | - | 24,551 | ||||||
| TOTAL LIABILITIES | 3,851,198 | 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 | (34,797,702 | ) | (32,143,044 | ) | ||||
| Total Stockholders' Deficiency | (3,749,942 | ) | (1,760,935 | ) | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY | $ | 101,256 | $ | 293,435 | ||||
| March 31, | December 31, | |||||||
| ASSETS | 2019 | 2018 | ||||||
| Current Assets: | ||||||||
| Total Current Assets | $ | — | $ | — | ||||
| TOTAL ASSETS | $ | — | $ | — | ||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIENCY | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable and accrued liabilities | 3,426,576 | 3,307,421 | ||||||
| Convertible loans payable – third parties | 246,496 | 240,369 | ||||||
| Short term loans payable | 65,031 | 38,355 | ||||||
| Convertible loans payable – related parties | 842,003 | 820,688 | ||||||
| Liability for issuable shares | 1,724,290 | 149,240 | ||||||
| Total Current Liabilities | 6,304,396 | 4,556,073 | ||||||
| TOTAL LIABILITIES | 6,304,396 | 4,556,073 | ||||||
| Commitments and Contingencies (Note 7) | ||||||||
| Stockholders’ Deficiency | ||||||||
| Preferred stock, $0.00001 par value, 100,000,000 shares authorized, 95,000,000 Series A preferred shares issued and outstanding | 950 | 950 | ||||||
| Common stock, $0.00001 par value, 1,150,000,000 shares authorized, 1,147,698,199 and 1,147,698,199 shares issued and outstanding, respectively. | 11,478 | 11,478 | ||||||
| Additional paid-in capital | 41,920,116 | 41,920,116 | ||||||
| Assignment of liabilities | (3,494,442 | ) | (3,550,857 | ) | ||||
| Accumulated deficit | (44,742,498 | ) | (42,937,760 | ) | ||||
| Total Stockholders’ Deficiency | (6,304,396 | ) | (4,556,073 | ) | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIENCY | $ | — | $ | — | ||||
See accompanying notes to the unaudited consolidated financial statements
-1-
KALLO INC.
(Amounts expressed in US dollars)
(Unaudited)
Three Months Ended September 30, | Nine months Ended September 30, | |||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||
| Operating Expenses | ||||||||||||||||
| General and administration | $ | 426,880 | $ | 843,232 | $ | 2,109,138 | $ | 6,388,992 | ||||||||
| Selling and marketing | 456 | 71,224 | 25,080 | 194,773 | ||||||||||||
| Impairment of assets | - | - | 104,018 | - | ||||||||||||
| Depreciation | - | 15,496 | 31,533 | 35,850 | ||||||||||||
| Operating loss | (427,336 | ) | (929,952 | ) | (2,269,769 | ) | (6,619,615 | ) | ||||||||
| Interest and financing costs | (64,501 | ) | (394,387 | ) | (258,720 | ) | (816,330 | ) | ||||||||
| Change in fair value of derivative liabilities | 57,778 | 26,625 | (87,684 | ) | 54,792 | |||||||||||
| Foreign exchange (loss) gain | 39,663 | 1,457 | (38,485 | ) | 18,547 | |||||||||||
Loss on extinguishment of short term loan payable and convertible promissory note | - | - | - | (83,344 | ) | |||||||||||
| Net loss | $ | (394,396 | ) | $ | (1,296,257 | ) | $ | (2,654,658 | ) | $ | (7,445,950 | ) | ||||
| Basic and diluted net loss per share | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.02 | ) | ||||
| Weighted average shares used in calculating | ||||||||||||||||
| Basic and diluted net loss per share | 8,098,742,772 | 607,936,690 | 7,366,923,856 | 473,124,235 | ||||||||||||
| Three months Ended | ||||||||
| March 31, | ||||||||
| 2019 | 2018 | |||||||
| Operating Expenses | ||||||||
| General and administration | $ | 1,711,474 | $ | 122,820 | ||||
| Selling and marketing | 1,086 | — | ||||||
| Operating loss | (1,712,560 | ) | (122,820 | ) | ||||
| Interest and financing costs | (27,442 | ) | (27,442 | ) | ||||
| Foreign exchange (loss) gain | (64,736 | ) | 83,934 | |||||
| Net Loss | $ | (1,804,738 | ) | $ | (66,328 | ) | ||
| Basic and diluted net loss per share | $ | (0.00 | ) | $ | (0.00 | ) | ||
| Weighted average shares used in calculating | ||||||||
| Basic and diluted net loss per share | 1,147,698,199 | 1,135,699,249 | ||||||
See accompanying notes to the unaudited consolidated financial statements
-2-
KALLO INC.
For the three months ended March 31, 2019
(Amounts expressed in US dollars)
(Unaudited)
Nine months Ended September 30, | ||||||||
| 2016 | 2015 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net Loss | $ | (2,654,658 | ) | $ | (7,445,950 | ) | ||
| Adjustment to reconcile net loss to cash used in operating activities: | ||||||||
| Depreciation | 31,533 | 35,850 | ||||||
| Stock based compensation | 448,500 | 3,414,000 | ||||||
| (Gain) Loss on extinguishment of short term loan payable and convertible promissory note | - | 83,344 | ||||||
| Non cash consulting fees | - | 230,739 | ||||||
| Change in fair value of derivative liabilities | 87,684 | (54,792 | ) | |||||
| Impairment of assets | 104,018 | - | ||||||
| Interest and penalties | 149,179 | 23,100 | ||||||
| Deferred lease inducement | (10,337 | ) | (15,547 | ) | ||||
| Amortization of debt discount | 107,873 | 776,005 | ||||||
| Unrealized foreign exchange loss | 26,058 | (33,007 | ) | |||||
| Changes in operating assets and liabilities: | ||||||||
| Decrease (increase) in other receivables | - | 11,531 | ||||||
| (Increase) decrease in prepaid expenses and deposit | 51,841 | 31,469 | ||||||
| Decrease in deferred project costs | - | 24,990 | ||||||
| (Decrease) in deferred revenue | - | (24,990 | ) | |||||
| Increase (decrease) in accounts payable and accrued liabilities | 1,329,848 | (213,500 | ) | |||||
| NET CASH USED IN OPERATING ACTIVITIES | (328,461 | ) | (3,156,758 | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITY | ||||||||
| Purchase of equipment | - | (258,383 | ) | |||||
| NET CASH USED IN INVESTING ACTIVITY | - | (258,383 | ) | |||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds from issuance of common stock | - | 2,663,273 | ||||||
| Proceeds from convertible promissory notes | - | 580,075 | ||||||
| Proceeds from other convertible notes ($268,311 from related parties) | 323,667 | - | ||||||
| Repayment of loans payable | - | (53,540 | ) | |||||
| NET CASH PROVIDED BY FINANCING ACTIVITIES | 323,667 | 3,189,808 | ||||||
| Effect of exchange rate changes on cash | 7 | 2,868 | ||||||
| NET DECREASE IN CASH | (4,787 | ) | (222,465 | ) | ||||
| CASH - BEGINNING OF PERIOD | 4,998 | 250,339 | ||||||
| CASH - END OF PERIOD | $ | 211 | $ | 27,874 | ||||
| SUPPLEMENTAL CASH FLOW INFORMATION | ||||||||
| Income tax paid | $ | - | $ | - | ||||
| Interest paid | $ | - | $ | - | ||||
| SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES | ||||||||
| Conversion of promissory notes into common shares | $ | 217,151 | $ | 897,937 | ||||
| Convertible loan payable for expenses paid directly by lender | $ | 5,434 | $ | - | ||||
| Initial debt discount on convertible promissory notes | $ | - | $ | 614,064 | ||||
| Accounts payable for equipment | $ | - | $ | 210,892 | ||||
| Stock issued for settlement of accounts payable | $ | - | $ | 171,362 | ||||
| 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, 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 | — | — | — | — | — | 56,415 | — | 56,415 | ||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | (1,804,738 | ) | (1,804,738 | ) | ||||||||||||||||||||||
| Balance March 31, 2019 | 95,000,000 | $ | 950 | 1,147,698,199 | $ | 11,478 | $ | 41,920,116 | $ | (3,494,442 | ) | $ | (44,742,498 | ) | $ | (6,304,396 | ) | |||||||||||||||
See accompanying notes to the unaudited consolidated financial statements
-3-
KALLO INC.
Consolidated Statements of Cash Flows
(Amounts expressed in US dollars)
(Unaudited)
| Three months Ended | ||||||||
| March 31, | ||||||||
| 2019 | 2018 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net Loss | $ | (1,804,738 | ) | $ | (66,328 | ) | ||
| Adjustment to reconcile net loss to cash used in operating activities: | ||||||||
| Stock based compensation | 1,574,480 | — | ||||||
| Interest and penalties | 27,442 | 27,441 | ||||||
| Unrealized foreign exchange loss (gain) | 64,984 | (85,063 | ) | |||||
| Changes in operating assets and liabilities: | ||||||||
| Increase (decrease) in accounts payable and accrued liabilities | 111,489 | 123,950 | ||||||
| NET CASH USED IN OPERATING ACTIVITIES | (26,343 | ) | — | |||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds from short term loans payable | 26,343 | — | ||||||
| NET CASH PROVIDED BY FINANCING ACTIVITIES | 26,343 | — | ||||||
| NET (DECREASE) INCREASE IN CASH | — | — | ||||||
| CASH - BEGINNING OF PERIOD | — | — | ||||||
| CASH - END OF PERIOD | $ | — | $ | — | ||||
| SUPPLEMENTAL CASH FLOW INFORMATION | ||||||||
| Income tax paid | $ | — | $ | — | ||||
| Interest paid | $ | — | $ | — | ||||
| SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES | ||||||||
| Settlement of accounts payable by FE Pharmacy, Inc. | $ | 56,415 | $ | 29,086 | ||||
See accompanying notes to the unaudited consolidated financial statements
-4-
KALLO INC.
March 31, 2019
(Amounts expressed in US dollars)
(Unaudited)
NOTE 1 – BUSINESS AND GOING CONCERN
Organization
Kallo Inc. ("Kallo" or the "Company") develops customized health care solutions designed to improve or enhance the delivery of care in the countries and regions we serve
Going Concern
The accompanying unaudited consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The amounts of assets and liabilities in the consolidated financial statements do not purport to represent realizable or settlement values. The Company has incurred operating losses since inception and has an accumulated deficit and a working capital deficit at September 30, 2016. March 31, 2019. The Company is expected to incur additional losses as it executes its go to market strategy.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 short term loans. In order to not burden the Company, the officer/stockholder has agreed to provide funding to the Company to pay its annual audit fees, filing costs and legal fees as long as the board of directors deems it necessary. However, there can be no assurance that such financial support shall be ongoing or available on terms or conditions acceptable to the Company. These consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
NOTE 2 – ACCOUNTING POLICIES AND OPERATIONS
Basis of Presentation
The accompanying unaudited consolidated financial statements of the Company have been prepared in conformity with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 8-03 of Regulation S-X related to smaller reporting companies. These unaudited consolidated financial statements should be read in conjunction with the annual audited consolidated financial statements and notes, which are included as part of the Company'sCompany’s Form 10-K filed with the SEC for the year ended December 31, 2015.
Operating results for the periods presented are not necessarily indicative of the results that may be expected for the full year. Notes to the financial statements which substantially duplicate the disclosure contained in the audited consolidated financial statements for fiscal year ended December 31, 20152018 as reported in the 10-K have been omitted. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, considered necessary for a fair presentation, have been included in the accompanying unaudited consolidated financial statements.
Recently Adopted Accounting Pronouncements
In 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, with early adoption permitted. The Company is evaluating the impact that theadopted this new standard willon January 1, 2019 using the modified retrospective transition approach but it did not have a material impact on itsthe consolidated financial statements.statements as there was no lease in existence.
-5-
KALLO INC.
Notes to Consolidated Financial Statements
March 31, 2019
(Amounts expressed in US dollars)
(Unaudited)
NOTE 2 – ACCOUNTING POLICIES AND OPERATIONS (continued)
Recently Adopted Accounting Pronouncements (continued)
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.
NOTE 3 – COMMON STOCK
During the ninethree months period ended September 30, 2016, the holders of promissory notes converted the principalMarch 31, 2019, there were no movements in share capital issued and the related interest outstanding of $128,928 into 2,450,352,026 shares. The fair value of the derivative liability associated with the notes that were converted, $88,223 was reclassified to equity upon conversion. Therefore the Company recorded $217,151 in conjunction with the conversions.
On September 12, 2016, the Company rescinded its decision to issue the 4,485,000,000 common shares to various directors and employees.
NOTE 4 – RELATED PARTY TRANSACTIONS
During the nine months periodquarter ended September 30, 2016, $268,311 was received from a directorMarch 31, 2019, the Board of Directors approved the issuance of 57,000,000 shares to directors and an affiliateshareholders of the Company as stock-based compensation and they were valued at $1,373,700. These shares will be issued after the Company is includedable to increase its authorized number of common shares.
During the quarter ended March 31, 2019, the Company designated 5,000,000 of is preferred stock as Series B preferred stock, each of which has 1,000 votes and are not convertible. The Company, will not, without the approval or express written consent of the all the holders of the Series B preferred stock (i) establish, create, authorize or approve the issuance of any series or class of preferred stock (ii) change any of the rights, privileges or preferences of the Series B preferred stock or (iii) redeem the Series B preferred stock..
During the quarter ended March 31, 2019, the Board of Directors approved the issuance of 5,000,000 Series B preferred shares to a director as compensation for services rendered and their fair value were deemed to be $201,350 based on the voting rights of the preferred shares relative to the fair value of the Company at the date of the approved issuance. These shares will be issued after the Company becomes current on all its filings requirements.
Included in liability for issuable shares is 3,731,005 common shares valued at $149,240 and approved for issuance to a family of the convertible loans payablecontrolling shareholder of FE Pharmacy Inc as compensation during 2018 which will be issued after the Company is able to related parties. As at September 30, 2016,increase its authorized number of common shares. The transfer agent has erroneously issued these shares in spite of the total outstanding notes fromCompany’s instructions to wait for the director and the affiliate is $608,683, including accrued interest.
Included in accounts payable and accrued liabilities is an amount of $232,327$1,006,306 (December 31, 2018 - $908,004) due to directors of the Company as at September 30, 2016.of March 31, 2019.
-6-
KALLO INC.
Notes to Consolidated Financial Statements
March 31, 2019
(Amounts expressed in US dollars)
(Unaudited)
NOTE 5 – CONVERTIBLE PROMISSORY NOTES AND DERIVATIVE LIABILITIES
September 30, 2016 | ||||
| Fair value as at Beginning of Period | $ | 210,834 | ||
| New promissory notes | - | |||
| Elimination associated with conversion of promissory notes | (88,223 | ) | ||
| Change in fair value loss (gain) | 87,684 | |||
| Fair value as at End of Period | $ | 210,295 | ||
September 30, 2016 | September 30, 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 | 77,860 | - | ||||||
| Discount on penalties | - | (20,000 | ) | |||||
| Derivative liabilities | - | (587,510 | ) | |||||
| Converted into shares | (128,928 | ) | (443,659 | ) | ||||
| Amortization of debt discount | 107,873 | 776,005 | ||||||
| Balance as at End of Period | $ | 286,182 | $ | 321,086 | ||||
| Convertible notes – short term | (286,182 | ) | (296,535 | ) | ||||
| Convertible notes – long term | $ | - | $ | 24,551 | ||||
| September 30, 2016 | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| Liabilities: | ||||||||||||||||
| Derivative liabilities | $ | - | $ | - | $ | 210,295 | $ | 210,295 | ||||||||
| December 31, 2015 | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| Liabilities: | ||||||||||||||||
| Derivative liabilities | $ | - | $ | - | $ | 210,834 | $ | 210,834 | ||||||||
September 30, 2016 | December 31, 2015 | |||||||
| Convertible promissory notes bearing interest at 15% per annum – third party | $ | 189,599 | $ | 105,395 | ||||
| Convertible promissory notes bearing interest at 15% per annum – related parties | 608,683 | 272,712 | ||||||
| $ | 798,282 | $ | 378,107 | |||||
March 31, 2019 | December 31, 2018 | |||||||
| Convertible promissory notes bearing interest at 15% per annum – third parties | $ | 246,496 | $ | 240,369 | ||||
| Convertible promissory notes bearing interest at 15% per annum – related parties | 842,003 | 820,688 | ||||||
| $ | 1,088,499 | $ | 1,061,057 | |||||
The Convertible loans payable which bear 15% interest per annum and are convertible at a fixed price at any time during thetheir 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 immaterial.zero. The total outstanding notes from this debt offering is $798,282,$1,088,499, including accrued interest, of which $608,683$842,003 is to from related parties. Interest of $71,319$27,442 on the convertible loans payable are included in net finance charge of $194,219 for the periodthree months ended September 30, 2016March 31, 2019 included in the consolidated statement of operations.
NOTE 76 – SHORT TERM LOANS PAYABLE
September 30, 2016 | December 31, 2015 | |||||||
| Non-interest bearing short term funding from third parties | 16,599 | 15,730 | ||||||
| $ | 16,599 | $ | 15,730 | |||||
March 31, 2019 | December 31, 2018 | |||||||
| Non-interest bearing short term funding from third party | $ | 16,292 | $ | 16,431 | ||||
| Non-interest bearing short term funding from related party | 48,739 | 21,924 | ||||||
| $ | 65,031 | $ | 38,355 | |||||
As at September 30, 2016,of March 31, 2019, the balance of $16,599$65,031 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 amountloan from third party in Canadian dollars is $21,772 which is subject to revaluation at the end of each quarter.
-7-
| 2016 | $ | 76,240 | ||
| $ | 76,240 |
KALLO INC.
Notes to Consolidated Financial Statements
March 31, 2019
(Amounts expressed in US dollars)
(Unaudited)
NOTE 97 – COMMITMENTS AND CONTINGENCIES
Contingencies
On April 21, 2017, an ex-employee of Kallo obtained a judgement ordering Kallo to pay Canadian $ 135,959 for unpaid wages and expenses relating to services performed in 2016. The full amount has been accrued for in the financial statements of Kallo.
On October 24, 2016, a consultant obtained a judgement ordering Kallo to pay Canadian $34,924 for unpaid fees. The full amount has been accrued for in the financial statements of Kallo.
On October 6, 2017, Thornley Fallis Communications Inc. ("Thornley") commenced a third party claim against Kallo concerning monies that Kallo allegedly owed to Thornley for redesign of a website and public relation services. Thornley is seeking damages in the amount of Canadian $169,345 plus interest on the amounts outstanding and indemnification of the costs of the action. An amount of Canadian $134,960 has been accrued for in the financial statements of Kallo.
There is also a claim by Commercial Credit Adjusters on behalf of Northwest Company for payment of Canadian $34,000. An amount of Canadian $24,016 has been accrued for in the financial statements of Kallo. Negotiations are in process for the settlement of this debt for a lump sum.
Canada Revenue Agency has assessed the Company for unpaid Canadian $112,243 as at March 31, 2019 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.
NOTE 8 – SUBSEQUENT EVENTS
After September 30, 2016, promissory notesMarch 31, 2019, 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$39,388 were settled in cash by FE Pharmacy Inc. under the agreement mentioned below.
On April 18, 2017, the Board of Directors approved a reverse stock split of the authorized and outstanding shares of common stock on a 1 for 600 basis, after which, the authorized number of common stock will decrease from 15,000,000,000 to 25,000,000. After the completion of the reverse stock split, the Board of Directors approved the increase of the authorized number of common stock from 25,000,000 to 1,150,000,000. As FINRA has not yet approved the reverse stock split yet, it is not effective yet. Therefore, the common share and per common share data in these financial statements and related notes hereto have not been retroactively adjusted to account for the effect of the reverse stock split for all periods presented prior to April 18, 2017.
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As used herein, the term “we,” “us,” “our,” and the “Company” refers to Kallo, Inc. a Nevada corporation.
THIS FORM 10-Q CONTAINS "FORWARD-LOOKING STATEMENTS". FORWARD-LOOKING STATEMENTS ARE STATEMENTS CONCERNING ESTIMATES, PLANS, OBJECTIVES, GOALS, STRATEGIES, EXPECTATIONS, INTENTIONS, PROJECTIONS, DEVELOPMENTS, FUTURE EVENTS, PERFORMANCE OR PRODUCTS, UNDERLYING (EXPRESSED OR IMPLIED) ASUMPTIONS AND OTHER STATEMENTS THAT ARE OTHER THAN HISTORICAL FACTS. IN SOME CASES FORWARD-LOOKING STATEMENTS CAN BE IDENTIFIED BY THE USE OF FORWARD-LOOKING WORDS SUCH AS “ESTIMATED,” "BELIEVES," "EXPECTS," "MAY," "WILL," "SHOULD," OR "ANTICIPATES," OR THE NEGATIVE OF THESE WORDS OR OTHER VARIATIONS OF THESE WORDS OR COMPARABLE WORDS, OR BY DISCUSSIONS OF PLANS OR STRATEGY THAT INVOLVE RISKS AND UNCERTAINTIES. MANAGEMENT WISHES TO CAUTION THE READER THAT THESE FORWARD-LOOKING STATEMENTS, INCLUDING, BUT NOT LIMITED TO, STATEMENTS REGARDING THE COMPANY AND ITS PLANS OR INTENTIONS, ESTIMATES, GOALS, COMPETITIVE TRENDS AND OTHER MATTERS THAT ARE NOT HISTORICAL FACTS ARE ONLY PREDICTIONS. NO ASSURANCES CAN BE GIVEN THAT SUCH PREDICTIONS WILL PROVE CORRECT OR THAT THE ANTICIPATED FUTURE RESULTS WILL BE ACHIEVED. ACTUAL EVENTS OR RESULTS MAY DIFFER MATERIALLY EITHER BECAUSE ONE OR MORE PREDICTIONS PROVE TO BE ERRONEOUS OR AS A RESULT OF OTHER RISKS FACING THE COMPANY. FORWARD-LOOKING STATEMENTS SHOULD BE READ IN LIGHT OF THE CAUTIONARY STATEMENTS AND IMPORTANT FACTORS DESCRIBED IN THIS FORM 10-Q, INCLUDING, BUT NOT LIMITED TO "THE FACTORS THAT MAY AFFECT FUTURE RESULTS" SHOWN AS ITEM 1A AND IN MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. THE RISKS INCLUDE, BUT ARE NOT LIMITED TO, THE RISKS ASSOCIATED WITH AN EARLY-STAGE COMPANY HAS LIMITED ASSETS AND OPERATIONS, THE COMPARATIVELY LIMITED FINANCIAL RESOURCES OF THE COMPANY, THE COMPANY IS INSOLVENT AND ITS TOTAL LIABILITIES EXCEED ITS TOTAL ASSETS, THE INTENSE COMPETITION THE COMPANY FACES FROM OTHER ESTABLISHED COMPETITORS, AND THE LEGAL UNCERTAINTIES THAT DIRECTLY AND INDIRECTLY IMPACT DEVELOPMENT-STAGE COMPANIES. ANY ONE OR MORE OF THESE OR OTHER RISKS COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE FUTURE RESULTS INDICATED, EXPRESSED, OR IMPLIED IN SUCH FORWARD-LOOKING STATEMENTS. WE UNDERTAKE NO OBLIGATION TO UPDATE OR REVISE ANY FORWARD-LOOKING STATEMENT TO REFLECT EVENTS, CIRCUMSTANCES, OR NEW INFORMATION AFTER THE DATE OF THIS FORM 10-Q OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED OR OTHER SUBSEQUENT EVENTS.
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| ITEM 2. |
This section of the report includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like: believe, expect, estimate, anticipate, intend, project and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements, which apply only as of the date of this report. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or our predictions. All funds are reflected in United States dollars unless otherwise indicated.
We are a small company with limited financial and managerial resources and we are insolvent. There is substantial doubt that we can continue as an on-going business for the next twelve months unless we obtain additional capital to pay our bills. This is because we have generated noinsignificant revenues from our operations during the last seveneight 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 fiveeight 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 a timely basis, in sufficient amounts and on reasonable terms and if we are successful in securing at least one project that likely will enable 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 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 split common stock of Kallo, FE Pharmacy Inc. assumed and will assume and pay all of the Company'sCompany’s outstanding indebtedness as atof April 7, 2017. Management believes that with this agreement in place, it can concentrate on bringing the potential projects as detailed below to fruition
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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 Republic Of Guinea. On April 14, 2015, the MinisterKallo Integrated Delivery Model. The success of Health and Public Hygiene, in a letterthese discussions confirmed the selection of Kallo Inc., as supplier pursuant to the MobilCare TM Supply Contract, to design and build specialized hospitalsGhana’s continued belief in the regionsKallo 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 Conakry, Kindia, Labe, Kankanour 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 Nzerekore,may offer us significant business opportunities. However, we cannot assure you that we will be able to obtain sufficient financing on reasonable terms and asked Kalloon a timely basis that will allow us to mobilize its technical teams for site visits to engagepursue these opportunities.
We have entered into four major concession agreements with four key governmental institutions in preliminary studiesGhana. We have also, through our SPVs has entered into the following concession arrangements for the construction and operation of these hospitals. No equipmentvarious hospital facilities in Ghana:
| Project Description | Kallo SPV | |
| 1 | Tamale Military Hospital project | K-TMH Ghana Limited |
| 2 | Cape Coast Teaching Hospital project | K-UCC Cape Coast Limited |
| 3 | Sunyani Teaching Hospital project | K-UENR Sunyani Limited |
| 4 | Ho Teaching Hospital project | K-UHAS Ho Limited |
These agreements are effective upon execution and the concession period will start from the date on which financial close is achieved with the Lenders and all conditions precedent are satisfied or waived. The financing has been sold under the terms of this supply contract. Therenot closed yet and there is no assurance any equipmentguarantee that financial close will be purchased under this supply contract.
Plan of Operation
The following plan of operation contains forward-looking statements, which involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth elsewhere in this document. Because of the speculative nature of our operations and the nature of the African countries we are attempting to do business with, there is no assurance that any of the planned operations will occur.
To the extent that we are financially able and if circumstances allow, we plan to continue to develop components of Kallo Integrated Delivery System:
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Kallo Integrated Delivery System (KIDS)
MobileCareTM – a mobile trailer that opens into a state of the art clinical setup in a vehicle equipped with the latest technology in healthcare. More than just a facility, MobileCare TM can instantly connect the onboard physician with specialists for on-demand consultation via satellite through its Telehealth system. This is truly a holistic approach to delivering healthcare to the remotely located. For many rural communities, the nearest hospital, doctor or nurse may be hundreds of kilometers away. In many cases, this gap can be bridged using Telehealth technology that allows patients, nurses and doctors to talk as if they were in the same room.
RuralCareTM – prefabricated modular healthcare units focused in rural areas where no roads infrastructure is available. They are equipped to provide primary healthcare including X-Ray, ultrasound, surgery, pharmacy and lab services. Ranging from 1,200 to 3,800 square feet, these clinics can be up and running in disaster zones or rural areas in as little as one week. Similar to the 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 patientBased solely on our internal management assessments conducted without the benefit of any independent third-party review or evaluation, we believe that our end-to-end delivery solution is equipped with necessary medical equipment as per regional healthcare requirements. We also install our copyrighted software and third party software as required along with a 5five (5) year support agreement renewable after the 5five (5) year initial term that includes the medical equipment, software licenses, installation implementation and training. This generatesIf we are successful then we anticipate that may, if circumstances are favorable, allow us to generate an ongoing revenue stream for service, maintenance, spare-parts, and consumables. However, we can not assure you that even if we are able to achieve these goals that we can do so at levels that may allow us to achieve and sustain positive cash flow and profitability. We have incurred significant and protracted losses and we have no record of achieving and sustaining positive cash flow and profitability and we can not be certain that we will achieve either or both of these goals at any time in the future.
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Business Overview
The Global need for standardized healthcare service delivery to all geographies and to all people is the fundamental business driver for the innovation of the Kallo Integrated Delivery System – “KIDS”.
This unique and comprehensive concept was developed based on first hand discovery and a detailed study of ground realities and causal analysis over 15 years. The business issues in the current healthcare systems are addressed by intricate orchestration of technologies both proprietary and off the shelf to create a standardized healthcare delivery model across the continuum of care.
A strategic market approach was defined for customers to take a well-informed decision and to work with Kallo on a national strategy for healthcare infrastructure and a standardized healthcare services delivery model across the country. This led to the development of a structured business development process and management for business success.
The business development model, unique to KIDS, included in-country stakeholder workshops and white-board sessions on the KIDS concept and its application in their context of healthcare infrastructure and healthcare services delivery model.
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:
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Kallo’s Value Proposition
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) has been the key to our success in the under-developed, countries and will take a lead into developing and developed countries with the flexibility of deploying components of the KIDS implementation without the full support structure. This strategy is focused on augmenting healthcare support where needed, such as, disaster management, North American First Nations, medical equipment supply, installation and testing.KIDS.
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Need for additional capital
We have incurred significant and protracted operating losses since inception and have an accumulated deficit and a working capital deficit at March 31, 2019. We expect to incur additional losses as we execute our go to market strategy. This raises substantial doubt about the Company’s ability to continue as a going concern.
We cannot guarantee we will be successful in our business operations. Our business is subject to risks inherent in the establishment of a business enterprise, including limited capital resources and possible cost overruns due to price increases in services and products.
To become profitable and competitive, we anticipate that we will have to sell our products and services.
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
Revenues
We did not generate any revenues during the ninethree months ended September 30, 2016March 31, 2019 or 2015.
Expenses
During the three months ended September 30, 2016March 31, 2019 we incurred total expenses of $394,396,$1,804,738, including $309,928$1,672,873 in salaries and compensation, $64,501$32,897 in professional fees, $27,442 in interest and financing costs, $64,736 in loss on foreign exchange, $1,086 in selling and $117,408marketing and $5,704 as other expenses net of $57,778 in gain in fair value of derivative liabilities and $39,663 in gain on foreign exchange loss whereas during the three months ended September 30, 2015March 31, 2018 we incurred total expenses of $1,296,257,$66,328, including $502,653$101,945 in salaries and compensation, $15,496 in depreciation, $215,547$17,155 in professional fees, $71,224 in selling and marketing expenses, $394,387fees. $27,442 in interest and financing costs, $83,934 in gain on foreign exchange and $123,575 in$3,720 as other expenses, net of $26,625 gain in change in fair value on derivative liabilities.
The decreaseincrease in our total expenses for the three months ended September 30, 2016March 31, 2019 from the comparative period is mainly due to a decreasean increase in salaries and compensation of $192,725, a decrease$1,570,928 due to non-cash stock-based compensation of $1,574,480, an increase in professional fees of $215,547, a decrease$15,742, an increase of $148,670 in interest and financing costs of $329,886 and a decreaseforeign exchange loss. The negative change in selling expenses of $70,768. The overall decrease in expenses reflect the slow down of the operations pending the finalization of new contracts. Salaries and compensation represent verbal commitment made to staying employees. The decrease in interest and financing costsforeign exchange is due to lower convertible promissory notes as these were converted into shares.the depreciation of the US dollar vis a vis the Canadian dollar.
The Company is operating with a minimal number of full time employees and office space until it can secure new contracts.
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Net Loss
During the three months ended September 30, 2016March 31, 2019 we did not generate any revenues and incurred a net loss of $394,396$1,804,738 compared to a net loss of $1,296,257$66,328 during the same period in 2015.2018. The main reasons were the decreasesincrease in salaries and compensation and professional fees forforeign exchange loss as discussed above. In that respect, we cannot assure you that we will be successful in reducing our losses at any time in the reasons discussed above.
Liquidity and capital resources
As at September 30, 2016,March 31, 2019, the Company had no current assets of $101,256 and current liabilities of $3,851,198,$6,304,396, indicating working capital deficiency of $3,749,942.$6,304,396. As of September 30, 2016, our totalMarch 31, 2019, we had no assets were $101,256 in cash and prepaid expenses and our total liabilities were $3,851,198$6,304,396 comprised of $2,534,797$3,426,576 in accounts payable and accrued liabilities, $210,295 in derivative liabilities, $286,182 in convertible promissory notes, convertible loans payable of $798,282,$1,088,499, short term loans of $16,599$65,031 and deferred lease inducementliability for issuable shares of $5,043.
Cash used in operating activities amounted to $328,461$26,343 during the ninethree months ended September 30, 2016,March 31, 2019, primarily as a result of the net loss adjusted for non-cash items and various changes in operating assets and liabilities.
Cash provided by financing activities amounted to $26,343 from proceeds from short term loans payable.
There was no cash usedmovement in investing activities during the current ninethree months period ended September 30, 2016.March 31, 2019.
As of March 31, 2019, our Total Liabilities exceeded our Total Assets and we were insolvent. In that respect we face all the risks and uncertainties of any insolvent corporation that could easily result in stockholders losing all or substantially all of their investment. Our common stock and our preferred stock are securities that should only be acquired by persons who can accept the HIGH RISK of such an investment.
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We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
Evaluation of Disclosure Controls and Procedures
We maintain "disclosure controls and procedures," as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act"), that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. We conducted an evaluation (the "Evaluation"), under the supervision and with the participation of our Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), of the effectiveness of the design and operation of our disclosure controls and procedures ("Disclosure Controls") as of the end of the period covered by this report pursuant to Rule 13a-15 of the Exchange Act. Based on this Evaluation, our CEO and CFO concluded that our Disclosure Controls were not effective as of the end of the period covered by this report due to lack of segregation of duties in financial reporting and presence of adjusting journal entries during the audit.
Changes in Internal Controls
There were no changes in our internal control over financial reporting during the quarter ended September 30, 2016March 31, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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On April 21, 2017, an ex-employee of Kallo obtained a judgement ordering Kallo to pay Canadian $ 135,959 for unpaid wages and expenses relating to services performed in 2016. The full amount has been accrued for in the financial statements of Kallo.
On October 24, 2016, a consultant obtained a judgement ordering Kallo to pay Canadian $34,924 for unpaid fees. The full amount has been accrued for in the financial statements of Kallo.
On October 6, 2017, Thornley Fallis Communications Inc. ("Thornley") commenced a third party claim against Kallo concerning monies that Kallo allegedly owed to Thornley for redesign of a website and public relation services. Thornley is seeking damages in the amount of Canadian $169,345 plus interest on the amounts outstanding and indemnification of the costs of the action. An amount of Canadian $134,960 has been accrued for in the financial statements of Kallo.
There is also a claim by Commercial Credit Adjusters on behalf of Northwest Company for payment of Canadian $34,000. An amount of Canadian $24,016 has been accrued for in the financial statements of Kallo. Negotiations are no pending lawsuits.
Canada Revenue Agency has assessed the Company for unpaid Canadian $112,243 as at March 31, 2019 representing unremitted employee source deductions and related penalties and interest, the full amount of which has been accrued in the financial statements of Kallo.
While we believe that we may be successful in resolving these claims, we cannot assure that the outcome will not have a material adverse effect upon us.
| ITEM 1A. | RISK FACTORS. |
Our Common Stock is subject to a number of substantial risks, including those described below. No attempt has been made to rank these risks in the order of their likelihood or potential harm. In addition to those general risks enumerated elsewhere in the document, any purchaser of the Company’s common stock should also consider the following risk factors:
Risks Related to the Ownership of the Company’s Stock
1. No Revenues from Operations & Continuing Losses; Risk of Loss & Insolvency. During the past two fiscal years we have not generated and revenues and there can be no assurances that we will be successful in generating revenues in the future. In that respect we face all of the risks inherent in an early-stage business. We have incurred losses and there can be no assurance that we will ever achieve profitability and positive cash flow. While we believe that our business strategies are sound, there can be no assurance that our business will generate profits and positive cash flow or if we generate profits and positive cash flow, that it can be sustained. Investors should be aware that they may lose all or substantially all of their investment. We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.also insolvent since our Total Liabilities exceed our Total Assets.
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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 going concern since: (a) our Total Current Liabilities exceed our Total Current Assets; (b) our Total Liabilities exceed our Total Assets; and (c) we are an early-stage company and there exists only a limited history of operations. Since our Total Liabilities exceed our Total Assets, we are insolvent and anyone who acquires our Common Stock should be prepared to lose their entire investment.
4. Limited Financial Resources; Need for Additional Financing. Our financial resources are minimal and we are insolvent. We need to obtain additional financing from the sale of our Common Stock, Debt, or some combination thereof in order to undertake further business plans. Our ability to operate as a going concern is contingent upon our receipt of additional financing through private placements or by loans. We anticipate that we will require significant additional funds in the future if we are successful in marketing our products and services. There can be no assurance that if additional funds are required they will be available, or, if available, that they can be obtained on terms satisfactory to our Board of Directors. In the event the Company elects to issue stock to raise additional capital, any rights or privileges attached to such stock may either (i) dilute the percentage of ownership of the already issued common shares or (ii) dilute the value of such shares; or (iii) both. No rights or privileges have been assigned to the stock and any such rights and privileges will be at the total discretion of the Board of Directors of the Company. There can be no guarantee that we will be able to obtain additional financing, or if we are successful, that we will be able to do so on terms that are reasonable in light of current market conditions. Further, we have not received any commitment from any person to provide any additional financing and we cannot assure that any such commitment is forthcoming.
5. Limited and Sporadic Trading Market for Common Stock. Our Common Stock trades on the OTC Market on a limited and sporadic basis and there can be no assurance that a liquid trading market for our Common Stock will develop and, if it does develop, that it can be sustained.
6. Lack of Revenues And Development Stage Company. We have no history of generating Sales Revenues and we cannot assure that we will generate any Sales Revenues in the future or, if we do, that we can achieve Sales Revenues at a level that will allow us to also achieve and maintain profitability and positive cash flow. We face all of the risks inherent in a new business. There is no information at this time upon which to base an assumption that our plans will either materialize or prove successful. Our present business plans and strategies have been developed by our corporate officers and they have been evaluated by any independent third party. plans have not been determined. There can be no assurance that any of our business plans and strategies will generate sales revenues that will result in any profits or positive cash flow. Investors should be aware that they may lose all or substantially all of their investment.
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.
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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. Negative Equity. Our Total Liabilities exceed our Total Assets. As a result, we are insolvent and we cannot assure you that we will be able to become solvent at any time in the future.
11. Possible Rule 144 Stock Sales. Many of our shares of our outstanding Common Stock are "restricted securities" and may be sold only in compliance with Rule 144 adopted under the Securities Act of 1933, as amended or other applicable exemptions from registration. Any person who acquires our common stock in any private placement should carefully review Rule 144 since any potential public resale may be limited and current broker-dealer and clearing firm requirements may make any re-sale of our common stock difficult at best.
12. Absence of Underwriter Commitment. Based on our current plans, we anticipate that we will likely need to raise significant additional capital to meet our current and anticipated financial needs, we have not received any commitment from any registered broker-dealer or underwriter to assist us in raising needed capital. As a result, we face a clear risk that we will not have sufficient cash resources to meet our current financial obligations and otherwise implement our business plans. In that event, we may not be able to implement our plans and we will not be able to achieve profitability and positive cash flow or, if we do, that we can sustain either or both of them for any period of time.
13. Risks of Low Priced Stocks. Currently, our common stock is not trading in any market and there is no certain prospect that the Company’s common stock will regain any trading in any organized market. In the past, the Company’s common stock had only limited and sporadic trading in the so-called "pink sheets," and before that, on the "Electronic Bulletin Board." As a result and due to the absence of a market, a shareholder may find it more difficult to dispose of, or to obtain accurate quotations as to the price of, the Company's securities. In the absence of a security being quoted on NASDAQ, or the Company having $2,000,000 in net tangible assets, trading in the Common Stock is covered by Rule 3a51-1 promulgated under the Securities Exchange Act of 1934 for non-NASDAQ and non-exchange listed securities. Under such rule, broker/dealers who recommend such securities to persons other than established customers and accredited investors (generally institutions with assets in excess of $5,000,000 or individuals with net worth in excess of $1,000,000 or an annual income exceeding $200,000 or $300,000 jointly with their spouse) must make a special written suitability determination for the purchaser and receive the purchaser's written agreement to a transaction prior to sale.
In general, securities are also exempt from this rule if the market price is at least $5.00 per share, or for warrants, if the warrants have an exercise price of at least $5.00 per share. The Securities Enforcement and Penny Stock Reform Act of 1990 requires additional disclosure related to the market for penny stocks and for trades in any stock defined as a penny stock. The Commission has recently adopted regulations under such Act which define a penny stock to be any NASDAQ or non-NASDAQ equity security that has a market price or exercise price of less than $5.00 per share and allow for the enforcement against violators of the proposed rules.
In addition, unless exempt, the rules require the delivery, prior to any transaction involving a penny stock, of a disclosure schedule prepared by the Commission explaining important concepts involving the penny stock market, the nature of such market, terms used in such market, the broker/dealer's duties to the customer, a toll-free telephone number for inquiries about the broker/dealer's disciplinary history, and the customer's rights and remedies in case of fraud or abuse in the sale.
Disclosure also must be made about commissions payable to both the broker/dealer and the registered representative, current quotations for the securities, and if the broker/dealer is the sole market-maker, the broker/dealer must disclose this fact and its control over the market.
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| 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 | |
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 | |
| 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 |
Finally, monthly statements must be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks. While many NASDAQ stocks are covered by the proposed definition of penny stock, transactions in NASDAQ stock are exempt from all but the sole market-maker provision for (i) issuers who have $2,000,000 in tangible assets ($5,000,000 if the issuer has not been in continuous operation for three years), (ii) transactions in which the customer is an institutional accredited investor and (iii) transactions that are not recommended by the broker/dealer. In addition, transactions in a NASDAQ security directly with the NASDAQ market-maker for such securities, are subject only to the sole market-maker disclosure, and the disclosure with regard to commissions to be paid to the broker/dealer and the registered representatives.
Finally, all NASDAQ securities are exempt if NASDAQ raised its requirements for continued listing so that any issuer with less then $2,000,000 in net tangible assets or stockholder's equity would be subject to delisting. These criteria are more stringent than the proposed increased in NASDAQ's maintenance requirements.
Our securities are subject to the above rules on penny stocks and the market liquidity for our securities could be severely affected by limiting the ability of broker/dealers to sell our securities.
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| ITEM 6. | EXHIBITS. |
The following documents are included herein:
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| Incorporated by reference | Filed | ||||
| Exhibit | Document Description | Form | Date | Number | herewith |
| 101.INS | XBRL Instance Document | X | |||
| 101.SCH | XBRL Taxonomy Extension – Schema | X | |||
| 101.CAL | XBRL Taxonomy Extension – Calculations | X | |||
| 101.DEF | XBRL Taxonomy Extension – Definitions | X | |||
| 101.LAB | XBRL Taxonomy Extension – Labels | X | |||
| 101.PRE | XBRL Taxonomy Extension – Presentation | X | |||
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Pursuant to the requirements of the Securities Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on this 14th day of November, 2017.
| KALLO INC. |
| KALLO INC. | ||
| (The | ||
| BY: | JOHN CECIL | |
| John Cecil | ||
| President, Principal Executive Officer, Principal Financial Officer, Principal Accounting Officer, and a Chairman of the Board of Directors | ||
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The following documents are included herein:
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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 | |
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| Incorporated by reference | Filed | ||||
| Exhibit | Document Description | Form | Date | Number | herewith |
| 101.INS | XBRL Instance Document | X | |||
| 101.SCH | XBRL Taxonomy Extension – Schema | X | |||
| 101.CAL | XBRL Taxonomy Extension – Calculations | X | |||
| 101.DEF | XBRL Taxonomy Extension – Definitions | X | |||
| 101.LAB | XBRL Taxonomy Extension – Labels | X | |||
| 101.PRE | XBRL Taxonomy Extension – Presentation | X | |||
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| 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 | |
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 | |
| 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 |