REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON DATES AS THE COMMISSION, ACTING UNDER SAID SECTION 8(a), MAY DETERMINE.
KALLO INC.
This prospectus relates to the resale of up to 50,000,000 shares of common stock issuable to Kodiak Capital Group, LLC in 2012 for investment banking services pursuant to an Investment Agreement with us dated September 26th, 2012July 15, 2014 (the “Investment Agreement”"Investment Agreement" or “Equity"Equity Line of Credit”Credit").
The Offering |
| Shares of common stock offered by Kodiak: | Up to 50,000,000 shares of common stock, which when issued, would represent approximately 14.65%12.25% of our outstanding common stock. |
| | |
Common stock to be outstanding after the offering:offering assuming all 50,000,000 shares sold: | Up to 341,345,536402,998,416 shares of common stock. |
| | |
| Use of proceeds: | We will not receive any proceeds from the sale of the shares by Kodiak. However, we will receive proceeds from the Equity Line of Credit. See “Use"Use of Proceeds”Proceeds". |
| | |
| Risk factors: | You should carefully read and consider the information set forth under the caption “Risk Factors”"Risk Factors" beginning on page10 and all other information set forth in this prospectus before investing in our common stock. |
| | |
| OTC Bulletin Board Symbol: | KALO |
Negative Impact and Limits on Equity Line of Credit
The resale of shares of Kodiak will have a dilutive effect upon existing shareholders and cause the control of the Company to change as a result of the number of shares being issued. Further, by causing up to 50,000,000 shares of common stock to be ingested into the current market, there could be increased difficulty in liquidating existing ownership positions in our shares of common stock. If Kodiak does not purchase any shares put"Put" to it, we will not receive any funds from this offering. Kodiak Capital Group must purchase all of the shares of common stock we put"Put" to it, provided, Kodiak Capital Group does not own more that 4.9% of our total outstanding shares of common stock. Further, we will not be entitled to deliver a put notice"Put Notice" to Kodiak and Kodiak will not be obligated to purchase any shares unless the following conditions are satisfied:
(I) this registration statement shall have been declared effective and shall remain effective and available for the resale of all the 50,000,000 shares of common stock at all times until the Closing with respect to a put"Put" by us;
(II) at all times during the period beginning on the related put notice"Put Notice" date and ending on and including the related closing date, the common stock shall be traded on the Over-the-Counter Bulletin Board and shall not have been suspended from trading thereon for a period of two (2) consecutive trading days;
(III) Kodiak shall not have been notified of any pending or threatened proceeding or other action to suspend the trading of the common stock;
(IV) We have complied with our obligations and is otherwise not in breach of or in default under the Investment Agreement, the Registration Rights Agreement or any other agreement executed in connection herewith which has not been cured prior to delivery of the first put notice;"Put Notice";
(V) no injunction shall have been issued and remain in force, or action commenced by a governmental authority which has not been stayed or abandoned, prohibiting the purchase or the issuance of the common stock to Kodiak; and,
(VI) the issuance of the shares of common stock to Kodiak will not violate any shareholder approval requirements of the Over-the-Counter Bulletin Board.
If any of the events described in clauses (I) through (VI) above occurs, then Kodiak will have no obligation to purchase the number of shares put"Put" to it . it.
Analysis of Number of Shares Issuable Under the Equity Line of Credit Agreement
Based on Stock Price Variance
| 52 week average price $0.11 (19 Dec 2011-18 Dec 2012) | |
| 52 week average price $0.52 (08-08-2013 to 08-07-2014) | | 52 week average price $0.52 (08-08-2013 to 08-07-2014) |
Projection: Share price change v/s capital drawn from equity line of credit | | Stock price drop | Share Price | Discounted Price to Kodiak | Shares Required | Capital drawn from equity line of credit | Share Price | Discounted Price to Kodiak | Shares Required | Capital drawn from equity line of credit |
| -25% | 0.083 | 0.066 | 30,303,030 | $2,000,000.00 | 0.0525 | 0.042 | 41,666,667 | $1,750,000.00 |
| -50% | 0.055 | 0.044 | 45,454,545 | $2,000,000.00 | 0.035 | 0.028 | 62,500,000 | $1,750,000.00 |
| -75% | 0.028 | 0.022 | 50,000,000 | $1,100,000.00 | 0.0175 | 0.014 | 125,000,000 | $1,750,000.00 |
Currently, the market price for our shares of common stock is $0.018$0.07 per share. Based on that price, we could put all 50,000,000 shares of common stock to Kodiak Capital Group and we could receive $0.014$0.07 per share or a total of $720,000. In order to receive the entire $2,000,000 based upon current prices we would have to register and additional 78,888,888 shares of common stock .$350,000.
Transactions Withwith Kodiak Capital Group
We have not done any transactionsOn September 26, 2012, we entered into an Investment Agreement with Kodiak Capital Group, LLC ("Kodiak") whereby we could issue 50,000,000 shares in exchange for an option to sell up to $2,000,000 worth of our shares at a price equal to eighty percent (80%) of the lowest daily preceding five days Volume Weighted Average Price at the time of exercise and expires six months from inception. We recorded a stock subscription receivable (included in equity) in the amount of $100,000 which was determined to be the fair value of the option on September 26, 2012. On October 24, 2012, we filed an S-1 registration statement relating to the resale of up to 50,000,000 shares of common stock issuable to Kodiak for investment banking services pursuant to an investment agreement dated September 26, 2012. Our registration statement was declared effective on October 9, 2013.
On or its affiliates. In May 2010about February 25, 2014, we had"Put" 3,472,223 shares, valued at $250,000 to Kodiak.
The Investment Agreement terminated on April 9, 2014. On July 15, 2014, we entered into a similar agreementthe First Amendment to the Investment Agreement with Kodiak Capital Group, whichwherein it was cancelled and withdrawn by us in April 2011, and no transaction took placeagreed that we could "Put" to cause any impact on the market priceKodiak up to 50,000,000 shares of our stock.common stock provided that the investment amount, when taken together with all other "Put Notices," shall not exceed $2,000,000. The termination date will be December 15, 2015.
Capital Requirements
Analysis of our business acquisition and operations cost indicate a reasonable requirement of USD $2,000,000 or less. Based on market response to our products, services, and technologies, it is management’smanagement's opinion that we will not require additional funding. Management discussed and decided on the 6 month termination provision, anticipating that the Companywe would draw the $2,000,000 line of credit in installments within 5 months.before December 31, 2015. This is based upon our belief and the representations made to us by Kodiak that it would be continuously reselling our shares into the market, thereby consistently remaining below the 4.9% ownership limitation. If Kodiak is unable to resell the shares it acquires from us into the market place, the belief that we could draw the $2,000,000 in installments is flawed and accordingly we will be not able to draw upon the $2,000,000 within six months .$2,000,000.
Our business
KALLO INC. wasWe were incorporated in the stateState of Nevada, on December 12, 2006, to engage in the business of selling printing equipment, media, display stands and consumables such as inks (dye, uv,UV, solvent) ink cartridges. We subsequently changed our name to Diamond Technologies Inc. and then to our current name of Kallo Inc.
Rophe Medical Technologies Inc.
On December 11, 2009, we entered into an agreement was entered into by the Company to acquire 100%with Kallo Technologies Inc. (formerly known as Rophe Medical Technologies Inc.), an Ontario corporation and its shareholders (collectively "Rophe") wherein we acquired all of the issued and outstanding shares of common stock of Rophe Medical Technologies Inc. (“Rophe”)in exchange for cash consideration3,000,000 restricted shares of $1,200,000our common stock and 3,000,000$1,200,000. As a result of our acquisition of Rophe, we were no longer a "shell company" as that term is defined in Rule 405 of the Company’s common shares valued at $0.122 per share for total purchase priceSecurities Act of $1,565,000 (the “Rophe Acquisition”). The $1,200,000 was initially payable1933, as follows: $50,000 within 30 days of the date of the agreement; $200,000 on March 31, 2010; $250,000 on April 30, 2010; $233,333 on launch of Project 1; $233,333 on launch of Project 2; and, $233,334 on launch of Project 3. This transaction was closed on December 31, 2009.amended.
Subsequently,Software development
On December 10, 2010, we entered into an agreement with Advanced Software Technologies, Inc., located in the Rophe Acquisition payment termsGrand Cayman Islands ("AST"). Under the Agreement, we were amendedappointed sales agent for AST and 3,000,000 additional shareswill be paid fees by AST for selling AST products.
Sales commission agreement
On November 20, 2012, we signed a memorandum of understanding with the remaining cash consideration as follows: $35,000 by March 5, 2010, $65,000 by March 31, 2010, $233,333 on launchMinistry of Project 1; $233,333 on launch of Project 2; and, $233,334 on launch of Project 3. As at December 31, 2011, there is a payable in the amount of $56,502. The 3,000,000 shares were considered issued as at the closing dateHealth of the acquisition and the totalRepublic of 6,000,000 shares issuedGhana for the Rophe acquisition are restricted.supply and implementation of a National Mobile Care program with Mobile Clinics and Clinical Command Centers integrated with the existing healthcare system and improve the healthcare delivery services to the rural and remote population of Ghana at large for a total project cost for National implementation and Maintenance support for five years of $158,500,000 (the "Ghana Project").
The total recorded acquisition price of $865,000 was allocated to the copyrights obtained in the acquisition as they were the only significant assets of Rophe, which did not have any operations. The Company has not recorded the remaining contingent payment of $700,000 due to the uncertaintyIn respect of the launch of Projects 1, 2 and 3.Ghana Project, we have agreed with two third parties to pay sales commissions.
On or about December 11, 2009,January 23, 2014, we changed our business focus from selling printing equipment to manufacturingannounced the signing of a $200,000,925 Supply Contract with the Ministry of Health and developing software designed to taking medical information from many sources and depositing it into a single source as an electronic medical record for each patient.Public Hygiene of the Republic Of Guinea (the "Guinea Project").
Under the Supply Contract, we will implement customized healthcare delivery solutions for the Republic of Guinea. The components of the solutions include, MobileCare, RuralCare, Hospital Information Systems, Telehealth Systems, Pharmacy Information, disaster management, air and surface patient transportation systems and clinical training.
In respect of the Guinea Project, we have agreed with two third parties in Guinea to pay sales commissions for facilitating and securing the Contract with the Ministry of Health of the Republic of Guinea.
On March 8, 2014, we have agreed with a third party to pay sales commissions for facilitating and securing the Contract with the Government of the Republic of Sierra Leone.
Office Executive Offices
Our administrative office is located at 15 Allstate Parkway,675 Cochrane Drive, Suite 600,630, Markham, Ontario, Canada L3R 5B6,0B8, our telephone number is (416) 246-9997. Our registered agent for service 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.
Selected financial data
The following financial information summarizes the more complete historical financial information at the end of this prospectus.
| | As of | | As of | | As of | | As of | |
| | June 30, 2014 | | December 31, 2013 | | December 31, 2012 | | December 31, 2011 | |
| | (Unaudited) | | (Audited) | | (Audited) | | (Audited) | |
| Balance Sheet | | | | | | | | | | | | |
| Total Assets | | $ | 1,082,887 | | | $ | 978,093 | | | $ | 1,402,779 | | | $ | 1,163,270 | |
| Total Liabilities | | $ | 1,076,912 | | | $ | 1,274,581 | | | $ | 1,478,934 | | | $ | 2,056,815 | |
| Stockholders' Equity (Deficiency) | | $ | 5,975 | | | $ | (296,488 | ) | | $ | (76,155 | ) | | $ | (893,545 | ) |
| | | | | | | | | | | | | | | | | |
| | For the | | For the Year | | For the Year | | For the Year | |
| | Three Months | | Ended | | Ended | | Ended | |
| | Ended June 30, 2013 | | December 31, 2013 | | December 31, 2012 | | December 31, 2011 | |
| | (Unaudited) | | (Audited) | | (Audited) | | (Audited) | |
| Statements of Operations | | | | | | | | | | | | | | | | |
| Revenue | | $ | -0- | | | $ | -0- | | | $ | -0- | | | $ | -0- | |
| Total Expenses | | $ | 432,173 | | | | 1,603,283 | | | $ | 7,003,791 | | | $ | 5,337,700 | |
| Net Loss | | $ | (432,173 | ) | | | (1,603,283 | ) | | $ | (7,003,791 | ) | | $ | (5,337,700 | ) |
| | As of | As of |
| | December 31, 2012 | December 31, 2011 |
| | (Audited) | (Audited) |
| Balance Sheet | | | |
| Total Assets | $ | 1,480,999 | $ | 1,163,270 |
| Total Liabilities | $ | 1,557,154 | $ | 2,056,815 |
| Stockholders’ Equity (Deficit) | $ | (76,155) | $ | (893,545) |
| | For the Year Ended | For the Year Ended |
| | December 31, 2012 | December 31, 2011 |
| | (Audited) | (Audited) |
| Income Statement | | | | |
| Revenue | $ | 0 | $ | 0 |
| Total Expenses | $ | 7,003,791 | $ | 5,337,700 |
| Net Loss | $ | (7,003,791) | $ | (5,337,700) |
RISK FACTORS
Please consider the following risk factors before deciding to invest in our common stock.
Risks associated with Kallo Inc.:
1. Our auditors have included a going concern emphasis of matter paragraph, which indicates that the consolidated financial statements were prepared under the assumption that the Company will continue as a going concern.
Our auditors have included a going concern emphasis of matter paragraph. This means that the amounts of assets and liabilities in the consolidated financial statements do not purport to represent realizable or settlement values.
2. Because we have changed business, we lack an operating history and have losses which we expect to continue into the future. There is no assurance our operations will result in profitable revenues. If we cannot generate sufficient revenues to operate profitably, we may suspend or cease operations.
We were incorporated on December 12, 2006 and we have not generated revenues during the past three years. We have no operating history upon which an evaluation of our future success or failure can be made. Our net loss since inception is $17,365,763 .$20,046,213. Our ability to achieve and maintain profitability and positive cash flow is dependent upon
* our ability to manufacture our products| - | our ability to manufacture our products |
* our ability to attract customers who will buy products| - | our ability to attract customers who will buy products |
* our ability to generate revenues| - | our ability to generate revenues |
Based upon current plans, we expect to incur operating losses in future periods because we will be incurring expenses and not generating revenues. We cannot guarantee that we will be successful in generating revenues in the future. Failure to generate revenues will cause us to go out of business.
3. We have only one customer and we cannot guarantee we will ever have a solid customer base. Even if we obtain clients or customers, there is no assurance that we will make a profit.
We have only one customer. While we have identified other customers, there is no assurance we will engage in business with any of them. Even if we obtain additional orders for our products or clients there is no guarantee that we will ever generate revenues or a profit if we are unable to attract additional customers and sell them our products, we will have to suspend or cease operations.
4. We need additional capital in order to stay in business for one year. If we can’tcan't raise it, we could go out of business.
We have exhausted our capital and need additional funds to continue our operations. If we can’tcan't raise it through this offering, we may have to cease operations. Analysis of our business acquisition and operations cost indicate a reasonable requirement of USD $2,000,000$500,000 or less. The equity line of credit for $2,000,000 would satisfy the need for capital established by the business analysis in our management’smanagement's opinion. We believe we could maintain our current operations upon receipt of $500,000 .$500,000.
5. Because we are small and do not have much capital, we must limit marketing our services to potential customers and suppliers. As a result, we may not be able to attract enough customers to operate profitably. If we do not make a profit, we may have to suspend or cease operations.
Because we are small and do not have much capital, we must limit marketing our website to potential customers and suppliers. Because we will be limiting our marketing activities, we may not be able to attract enough customers to buy or suppliers to sell products to operate profitably. If we cannot operate profitably, we may have to suspend or cease operations.
6. Because most of our assets and our officers and directors are located outside the United States of America, it may be difficult for an investor to enforce within the United States any judgments obtained against us or any of our officers and directors.
Our assets are located outside of the United States and most of our officers’officers' and directors’directors' assets are located outside the United States. As a result, it may be difficult for you to effect service of process or enforce within the United States, any judgments obtained against us or our officers or directors, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state thereof. In addition, it is unlikely that the courts of Canada and other jurisdictions would recognize or enforce judgments of United States courts obtained against us or our officers and directors predicated upon the civil liability provisions of the securities laws of the United States or any state thereof, or be competent to hear original actions brought in Canada or other jurisdictions against us or our officers and directors predicated upon the securities laws of the United States or any state thereof.
7. We operate in a highly competitive industry and we cannot guarantee you that we will ever achieve any level of success in competing for clients.
The computer industry is very competitive. We are at a competitive disadvantage in attracting clients due to our relatively small size. Most of our competitors are larger and more diversified than we are and have greater financial resources. We cannot predict the degree of success, if any, with which we will meet competition in the future.
Risks associated with this offering:
8. We are registering an aggregate of 50,000,000 shares of common stock, which are to be issued under the Equity Line of Credit. The sale of such shares could depress the market price of our common stock.
We are registering an aggregate of 50,000,000 shares of common stock which will be issued pursuant to the Equity Line of Credit. The sale of these shares into the public market could depress the market price of our common stock. As of January 31, 2013,Currently, there were 291,345,536are 352,998,416 shares of our common stock issued and outstanding.
9. Existing stockholders could experience substantial dilution upon the issuance of common stock pursuant to the Equity Line of Credit.
This registration contemplates our issuance of up to 50,000,000 shares of our common stock to Kodiak, subject to certain restrictions and obligations. If the terms and conditions of the Equity Line of Credit are satisfied, and we choose to exercise our Put Rights to sell 50,000,000 shares of our common stock to Kodiak, our existing stockholders’stockholders' ownership will be diluted by such sales. Consequently, the value of your investment may decrease. Our Equity Line of Credit with Kodiak contemplates the potential future issuance and sale of up to $2,000,000 of our common stock to Kodiak subject to certain restrictions and obligations.
10. Kodiak will pay less than the then-prevailing market price for our common stock.
The common stock to be issued to Kodiak pursuant to the Investment Agreement will be purchased at a twenty percent (20%) discount to the lowest closing “best bid”"best bid" price (the highest posted bid price) of the common stock during the five consecutive trading days immediately following the date of our notice to Kodiak of our election to put shares pursuant to the Investment Agreement. Kodiak has a financial incentive to sell our common stock immediately upon receiving the shares to realize the profit equal to the difference between the discounted price and the market price. If Kodiak sells the shares, the price of our common stock could decrease. If our stock price decreases, Kodiak may have a further incentive to sell the shares of our common stock that it holds. These sales may have a further impact on our stock price.
11. There may not be sufficient trading volume in our common stock to permit us to put shares to Kodiak.
In order to put the shares to Kodiak, there has to be sufficient trading volume to allow Kodiak to resell the shares put"Put" to it into the open market. Insufficient trading volume will prevent Kodiak from selling its shares into the market and prevent us from putting more shares to Kodiak since it is a condition to our contract with Kodiak that Kodiak can never own more than 4.99% of our total outstanding shares of common stock at any one time. If we cannot “put”"Put" shares to Kodiak, we cannot receive payment therefore.
12. Our common stock is thinly traded, so you may be unable to sell at or near ask prices or at all if you need to sell your shares to raise money or otherwise desire to liquidate your shares.
Our common stock has historically been sporadically or “thinly-traded”"thinly-traded" on the OTC Bulletin Board, meaning that the number of persons interested in purchasing our common stock at or near ask prices at any given time may be relatively small or nonexistent. This situation is attributable to a number of factors, including the fact that we are a small company which is relatively unknown to stock analysts, stock brokers, institutional investors and others in the investment community that generate or influence sales volume, and that even if we came to the attention of such persons, they tend to be risk-averse and would be reluctant to follow an unproven company such as ours or purchase or recommend the purchase of our shares until such time as we became more seasoned and viable.
As a consequence, there may be periods of several days or more when trading activity in our shares is minimal or non-existent, as compared to a mature issuer which has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on share price. It is possible that a broader or more active public trading market for our common stock will not develop or be sustained, or that current trading levels will continue.
13. The limited public trading market may cause volatility in our stock price.
The quotation of our common stock on the OTCBB does not assure that a meaningful, consistent and liquid trading market currently exists, and in recent years such market has experienced extreme price and volume fluctuations that have particularly affected the market prices of many smaller companies like us. Our common stock is thus subject to this volatility. Sales of substantial amounts of our common stock, or the perception that such sales might occur, could adversely affect prevailing market prices of our common stock.
14. The application of the “penny stock”"penny stock" rules could adversely affect the market price of our common shares and increase your transaction costs to sell those shares.
The SEC has adopted rule 3a51-1 which establishes the definition of a “penny"penny stock,”" for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, Rule 15g-9 requires:
·- | that a broker or dealer approve a person’sperson's account for transactions in penny stocks; and |
·- | the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased |
In order to approve a person’sperson's account for transactions in penny stocks, the broker or dealer must:
·- | obtain financial information and investment experience objectives of the person; and |
·- | make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks. |
The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which, in highlight form:
·- | sets forth the basis on which the broker or dealer made the suitability determination; and |
·- | that the broker or dealer received a signed, written agreement from the investor prior to the transaction. |
Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock”"penny stock" rules. This may make it more difficult for investors to dispose of our common stock and cause a decline in the market value of our stock.
15. Rule 144 Related Risk.
The SEC adopted amendments to Rule 144, which became effective on February 15, 2008 that apply to securities acquired both before and after that date. Under these amendments, a person who has beneficially owned restricted shares of our common stock for at least six months would be entitled to sell their securities provided that (i) such person is not deemed to have been one of our affiliates at the time of, or at any time during the three months preceding a sale, (ii) we are subject to the Exchange Act periodic reporting requirements for at least 90 days before the sale and (iii) if the sale occurs prior to satisfaction of a one-year holding period, we provide current information at the time of sale.
Persons who have beneficially owned restricted shares of our common stock for at least six months but who are our affiliates at the time of, or at any time during the three months preceding a sale, would be subject to additional restrictions, by which such person would be entitled to sell within any three-month period only a number of securities that does not exceed the greater of either of the following:
·- | 1% of the total number of securities of the same class then outstanding; or |
·- | the average weekly trading volume of such securities during the four calendar weeks preceding the filing of a notice on Form 144 with respect to the sale; |
provided, in each case, that we are subject to the Exchange Act periodic reporting requirements for at least three months before the sale. Such sales by affiliates must also comply with the manner of sale, current public information and notice provisions of Rule 144.
16. Restrictions on the reliance of Rule 144 by Shell Companies or former Shell Companies.
Historically, the SEC staff has taken the position that Rule 144 is not available for the resale of securities initially issued by companies that are, or previously were, blank check companies, like us. The SEC has codified and expanded this position in the amendments discussed above by prohibiting the use of Rule 144 for resale of securities issued by any shell companies (other than business combination related shell companies) or any issuer that has been at any time previously a shell company. The SEC has provided an important exception to this prohibition, however, if the following conditions are met:
·- | The issuer of the securities that was formerly a shell company has ceased to be a shell company; |
·- | The issuer of the securities is subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act; |
·- | The issuer of the securities has filed all Exchange Act reports and material required to be filed, as applicable, during the preceding 12 months (or such shorter period that the issuer was required to file such reports and materials), other than Current Reports on Form 8-K; and |
·- | At least one year has elapsed from the time that the issuer filed current comprehensive disclosure with the SEC reflecting its status as an entity that is not a shell company. |
As a result, it is likely that pursuant to Rule 144, stockholders who receive our restricted securities in a business combination will not be able to sell our shares without registration until one year after we have completed our initial business combination. We are not a “shell company”"shell company" and have not been so for a period in excess of twelve (12) months.
Forward-Looking Statements
Statements in this prospectus may be “forward-looking"forward-looking statements.”" Forward-looking statements include, but are not limited to, statements that express our intentions, beliefs, expectations, strategies, predictions or any other statements relating to our future activities or other future events or conditions. These statements are based on current expectations, estimates and projections about our business based, in part, on assumptions made by management. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may, and are likely to, differ materially from what is expressed or forecasted in the forward-looking statements due to numerous factors, including those described above and those risks discussed from time to time in this prospectus, including the risks described under “Risk"Risk Factors,”" and “Management’s"Management's Discussion and Analysis of Financial Condition and Results of Operations”Operations" in this prospectus and in other documents
which we file with the Securities and Exchange Commission. In addition, such statements could be affected by risks and uncertainties related to our ability to raise any financing which we may require for our operations, competition, government regulations and requirements, pricing and development difficulties, our ability to make acquisitions and successfully integrate those acquisitions with our business, as well as general industry and market conditions and growth rates, and general economic conditions. Any forward-looking statements speak only as of the date on which they are made, and we do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of this prospectus.
We will not receive any proceeds from the sale of common stock offered by Kodiak. However, we will receive proceeds from the sale of our common stock to Kodiak pursuant to the Investment Agreement. The proceeds from our exercise of the Put Right pursuant to the Investment Agreement will be used for working capital.
SELLING SECURITYHOLDER
The following table details the name of each selling stockholder, the number of shares owned by Kodiak Capital Group LLC, (“Kodiak”("Kodiak") the sole selling stockholder, and the number of shares that may be offered by Kodiak Capital Group LLC is not a broker-dealer. Kodiak is deemed an underwriter and therefore this offering is also considered an indirect primary offering. Kodiak may sell up to 50,000,000shares,50,000,000 shares, which are issuable upon the exercise of our put rightPut Right with Kodiak. Kodiak will not assign its obligations under the equity line of credit.
| Name | Total number of shares owned prior to offering | Percentage of shares owned prior to offering | Number of shares being offered | Percentage of shares owned after the offering assuming all of the shares are sold in the offering | Total number of shares owned prior to offering | Percentage of shares owned prior to offering | Number of shares being offered | Percentage of shares owned after the offering assuming all of the shares are sold in the offering |
| | | | | | | | | |
Kodiak Capital Group LLC (1) | 0 | 0% | 50,000,000 | 14.65% | 0 | 0% | 50,000,000 | 12.41% |
(1) | Pursuant to put right set forth in Investment Agreement. Ryan Hudson exercises dispositive and voting control for Kodiak Capital Group, LLC. |
(1)Pursuant to Put Right set forth in Investment Agreement. Ryan Hudson exercises dispositive and voting control for Kodiak Capital Group, LLC.
This prospectus includes 50,000,000 shares of common stock offered by Kodiak.
Kodiak and any of its pledgees, assignees and successors-in-interest may, from time to time, sell any or all of its shares of common stock on the OTC Bulletin Board or any other stock exchange, market or trading facility on which our shares are traded or in private transactions. These sales may be at fixed or negotiated prices. Kodiak may use any one or more of the following methods when selling shares:
| · | ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers; |
| · | block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction; |
| · | purchases by a broker-dealer as principal and resale by the broker-dealer for its account; |
| · | an exchange distribution in accordance with the rules of the applicable exchange; |
| · | privately negotiated transactions; |
| · | settlement of short sales entered into after the effective date of the registration statement of which this prospectus is a part; |
| · | broker-dealers may agree with Kodiak to sell a specified number of such shares at a stipulated price per share; |
| · | through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise; |
| · | a combination of any such methods of sale; or |
| · | any other method permitted pursuant to applicable law. |
Kodiak or its pledgees, donees, transferees or other successors in interest, may also sell the shares directly to market makers acting as principals and/or broker-dealers acting as agents for themselves or their customers. Such broker-dealers may receive compensation in the form of discounts, concessions or commissions from the selling stockholder and/or the purchasers of shares for whom such broker-dealers may act as agents or to whom they sell as principal or both, which compensation as to a particular broker-dealer might be in excess of customary commissions. Market makers and block purchasers purchasing the shares will do so for their own account and at their own risk. It is possible that Kodiak will attempt to sell shares of common stock in block transactions to market makers or other purchasers at a price per share which may be below the then market price. Kodiak cannot assure
that all or any of the shares offered in this prospectus will be issued to, or sold by, Kodiak. Kodiak and any brokers, dealers or agents, upon effecting the sale of any of the shares offered in this prospectus, will be deemed to be “underwriters”"underwriters" as that term is defined under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, or the rules and regulations under such acts. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act.
Kodiak Capital Group LLC is not permitted to assign its obligations under the equity line.
We are paying all fees and expenses incident to the registration of the shares, including fees and disbursements of counsel to Kodiak, but excluding brokerage commissions or underwriter discounts. Kodiak, alternatively, may sell all or any part of the shares offered in this prospectus through an underwriter. Kodiak has not entered into any agreement with a prospective underwriter; however, there is no assurance that any such agreement will not be entered into.
Kodiak may pledge its shares to its brokers under the margin provisions of customer agreements. If Kodiak defaults on a margin loan, the broker may, from time to time, offer and sell the pledged shares. Kodiak and any other persons participating in the sale or distribution of the shares will be subject to applicable provisions of the Securities Exchange Act of 1934, as amended, and the rules and regulations under such act, including, without limitation, Regulation M. These provisions may restrict certain activities of, and limit the timing of purchases and sales of any of the shares by, Kodiak or any other such person. In the event that Kodiak is deemed affiliated with purchasers or distribution participants within the meaning of Regulation M, then Kodiak will not be permitted to engage in short sales of common stock. Furthermore,
under Regulation M, persons engaged in a distribution of securities are prohibited from simultaneously engaging in market making and certain other activities with respect to such securities for a specified period of time prior to the commencement of such distributions, subject to specified exceptions or exemptions. In regards to short sells, Kodiak is contractually restricted from engaging in short sells. All of these limitations may affect the marketability of the shares.
We have agreed to indemnify certain of Kodiak, or their transferees or assignees, against certain liabilities, including liabilities under the Securities Act of 1933, as amended, or to contribute to payments the selling stockholder or their respective pledgees, donees, transferees or other successors in interest, may be required to make in respect of such liabilities. If the selling stockholder notifies us that it has a material arrangement with a broker-dealer for the resale of the common stock, then we would be required to amend the registration statement of which this prospectus is a part, and file a prospectus supplement to describe the agreements between the selling stockholder and the broker-dealer.
We agreed to use our best reasonable efforts to keep this prospectus effective until the earlier of (i) the date on which the shares may be resold by Kodiak without registration and without regard to any volume limitations by reason of Rule 144 under the Securities Act or any other rule of similar effect or (ii) all of the shares have been sold pursuant to this prospectus or Rule 144 under the Securities Act or any other rule of similar effect. Since Kodiak is deemed an underwriter, Rule 144 of the Securities Act of 1933, as amended, is unavailable for the resale of the shares by Kodiak.
MARKET FOR OUR COMMON STOCK
Our shares are traded on the Bulletin Board operated by the Financial Industry Regulatory Authority under the symbol “KALO”"KALO". A summary of trading by quarter for 2012, 20112014, 2013 and 20102012 is as follows:
| Fiscal Year – 2012 | High Bid | Low Bid |
| | | |
| | Fourth Quarter 10-1-2012 to 12-31-12 | $0.06 | $0.01 |
| | Third Quarter 7-1-12 to 9-30-12 | $0.20 | $0.01 |
| | Second Quarter 4-1-12 to 6-30-12 | $1.00 | $0.25 |
| | First Quarter 1-1-12 to 3-31-12 | $0.24 | $0.05 |
| | | | |
| Fiscal Year – 2011 | High Bid | Low Bid |
| | | |
| | Fourth Quarter 10-1-11 to 12-31-11 | $0.11 | $0.02 |
| | Third Quarter 7-1-11 to 9-30-11 | $0.10 | $0.05 |
| | Second Quarter 4-1-11 to 6-30-11 | $0.22 | $0.10 |
| | First Quarter 1-1-11 to 3-31-11 | $0.22 | $0.05 |
The foregoing reflects a three-for-one stock dividend declared on February 11, 2008.
| Fiscal Year – 2014 | High Bid | Low Bid |
| | Second Quarter 04-01-14 to 06-31-14 | $0.06 | $0.02 |
| | First Quarter 01-01-14 to 03-31-14 | $0.06 | $0.02 |
| | | | |
| Fiscal Year – 2013 | High Bid | Low Bid |
| | Fourth Quarter 10-01-2013 to 12-31-13 | $0.06 | $0.02 |
| | Third Quarter 07-01-13 to 09-30-13 | $0.05 | $0.02 |
| | Second Quarter 04-01-13 to 06-30-13 | $0.04 | $0.01 |
| | First Quarter 01-01-13 to 03-31-13 | $0.04 | $0.01 |
| | | | |
| Fiscal Year – 2012 | High Bid | Low Bid |
| | Fourth Quarter 10-01-2012 to 12-31-12 | $0.06 | $0.01 |
| | Third Quarter 07-01-12 to 09-30-12 | $0.20 | $0.01 |
| | Second Quarter 04-01-12 to 06-30-12 | $1.00 | $0.25 |
| | First Quarter 01-01-12 to 03-31-12 | $0.24 | $0.05 |
Dividends
We have not declared any cash dividends, nor do we intend to do so. We are not subject to any legal restrictions respecting the payment of dividends, except that they may not be paid to render us insolvent. Dividend policy will be based on our cash resources and needs and it is anticipated that all available cash will be needed for our operations 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 NASD’sNASD'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.
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 2012Non-Qualified2012 Non-Qualified Incentive Stock Option Plan provides for the issuance of stock options 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 50,000,0005,000,000 shares of common stock.
The 2011 Non-Qualified Incentive Stock Option Plan provides for the issuance of stock options 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 included 10,000,000 shares of common stock. At September 7, 2012, options to acquire 7,233,334 shares have been granted; 7,233,334 options have been exercised; and, 2,766,666 options to acquire shares of common stock remain available under this plan.
| | Number of securities to | Weighted-average | Number of securities remaining |
| | be issued upon exercise | exercise price of | available for future issuance |
| | of outstanding options, | outstanding options, | under equity compensation plans |
| | warrants and rights | warrants and rights | (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 |
| | Number of securities to | Weighted-average | Number of securities remaining |
| | be issued upon exercise | exercise price of | available for future issuance |
| | of outstanding options, | outstanding options, | under equity compensation plans |
| | warrants and rights | warrants and rights | (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 |
MANAGEMENT’SMANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
This section of the reportprospectus 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.prospectus. 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.
Our auditors have included a going concern emphasis of matter paragraphThere is substantial doubt that we can continue as part ofan on-going business for the audit ofnext twelve months unless we obtain additional capital to pay out our year-end consolidated financial statements. Webills. This is because we have not generated revenues from our operations during the last threesix years. The only revenues generated by us was in 2007, when we were engaged in the business of selling printing equipment and related products. 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 financial statements were prepared under the assumption that the Company 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’sCompany's 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 four fiscal years, starting January 2010, Kalloour management and board of directors have raised funds through a personal and professional network of angel 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. One of these options is an equity line of credit from Kodiak Capital Group LLC. Management’sManagement's opinion is that this line of credit from Kodiak Capital Group LLC will enable continued operations for the next 12 months. During the six months period ended June 30, 2014, Kallo has "Put" and received $250,000 under the equity line of credit from Kodiak. There is no assurance that Kodiak Capital Group LLC will continue to supply us with anyadditional money. In the event we do not receive any funds from Kodiak, we will continue to borrow money from or sell restricted shares of our common stock to our officers and directors in order to maintain operations. Our officers and directors are under no legal duty to provide us with additional financing nor have our officers and directors committed to provide us with additional financing.
Analysis of our business acquisition and operations cost indicate a reasonable requirement of USD $2,000,000 or less. We have entered into an agreement with Kodiak Capital Group, LLC., a Delaware limited liability company (“Kodiak”("Kodiak") whereby we have the right to “put”"Put" to Kodiak up to $2,000,000 in our shares of common stock. In connection therewith, we have filed a Form S-1 registration statement with the Securities and Exchange Commission registering for sale up to 50,000,000 shares of our common stock. Our previous arrangement with Kodiak expired in April 2014, but, on July 15, 2014, the Company and Kodiak Capital Group, LLC amended the investment agreement to extend the agreement through December 31, 2015. Based upon the current price of our common stock, we believe that if Kodiak purchases all 50,000,000 shares of common stock, we will only receive $720,000. In orderapproximately $2,000,000. The reasonable funding requirement of US$2,000,000 is estimated to raisefund our operations and capital requirements over the balance of $1,280,000, we will have to register another 100,000,000 shares of common stock. The foregoing assumesnext 12 months. Management believes that the market price for our common stockCompany can be generating revenue in the next 6 – 12 months, and therefore will not decrease further. If the market price for our common stock decreases further, we will have to registerrequire additional shares for sale which will continue to dilute our existing shareholders substantially .funding.
On November 20, 2012, we signed a memorandum of understanding with the Ministry of Health of the Republic of Ghana for the supply and implementation of a National Mobile Care program with Mobile Clinics and Clinical Command Centers integrated with the existing healthcare system and improve the healthcare delivery services to the rural and remote population of Ghana at large for a total project cost for National implementation and Maintenance support for five years of US$158,500,000.Ghana.
1. TheOn January 23, 2014, we announced the signing of a US$200,000,925 (Two Hundred Million Nine Hundred Twenty-five US dollars) Supply Contract with the Ministry of Health and Public Hygiene of the Republic of Ghana andOf Guinea.
Under the Supply Contract, Kallo Inc. have agreed that a contractwill implement customized healthcare delivery solutions for the implementationRepublic of Guinea. The components of the Mobile Care projects willsolutions include, MobileCare, RuralCare, Hospital Information Systems, Telehealth Systems, Pharmacy Information, disaster management, air and surface patient transportation systems and clinical training.
The Government of Guinea has been looking into securing funding for the Kallo MobileCare Project for US$ 200,000,925 and a financial institution has come to the stage of agreeing on the terms requested by the Government of Guinea based on their acceptable economic framework for such projects. We expect the final documentation between the financial institution and the Government of Guinea to be signed whencompleted shortly, which would trigger the following conditions have been satisfied:release of Kallo's down payment for the project initiation and production.
MobileCare™ supply contract includes:
a) 1. | Approval of the Credit Agreement by the Cabinet and Parliament of Republic of Ghana and the relevant KALLO INC. for the implementation of the projects;Mobile clinics- (10) |
b) 2. | Approval by the Ministry of Health of the detailed proposal for Mobile Care project submitted by Kallo Inc., dated 19 November 2012 which includes detailed technical specifications for the mobile clinics, training and maintenance support services.Clinical Command Centre - (1) |
c) 3. | The training program will include a certification process for Kallo Inc., affiliated Canadian and United States Of America Medical Teaching University and Applied Science Colleges.Administration Centre -(1) |
d) 4. | Successful completion of “Value for Money” audit of the Contractor’s proposal and negotiations;Utility vehicles - (2) |
e) 5. | Approval of the contract by the Public Procurement Authority of Ghana. |
2. That the National rollout overview and supply and training schedules will be mutually agreed, upon the acceptance of the indicative terms and condition of the loan by the Ministry of Finance and Economic Planning of the Republic of Ghana;
3. That Party B’s financial proposals attached herein to be used by the Ministry of Finance and Economic Planning for consideration and value for money assessment;
a) | That Party B’s technical proposals shall be considered by a team of experts for assessment and negotiation |
4. Any disputes between the parties shall be resolved through negotiation and mediation by the appropriate authorities
5. That within 30 days after the signing of the MOU, Party A shall notify Party B by a written document his requirements and specifications which shall include and not be limited to the following information:
a) | Feasibility study reportUser training - (5 years) |
b) 6. | National geographic locationsProfessional and demographic deployment schedules for Mobile Clinicsclinical training - (5 years) |
| 7. | Hardware and Clinical Command Centerssoftware maintenance - (5years) |
c) 8. | Different functional requirements of Mobile clinics for both rural and urban locationsOperations & management support - (5 years) |
d) 9. | Number of Mobile ClinicsMaintenance and Clinical Command Centers in each regioncontinued educational support - (5 years) |
e) 10. | Current standards forSupply chain management of medical equipment, in hospital in Ghana, for example: the standard of radiation control of X-ray machineconsumables and spare parts - (5 years) |
f) 11. | Standards for electric appliances used in mobile clinicsAdvanced and for environmental protection, for example: power outlet and interface of electric appliances, busing standards for the protection for X-ray machine |
g) | Standards for waste-water treatment, medical waste treatment, operating-room and supply room of the Mobile Clinicintegrated software systems, including telehealth - (1 full system) |
h) 12. | Human resources deployment in district level hospital for mobile clinicFixed Medical Hospital - (1) |
i) 13. | Standards for contagions diseases isolation and sterilization in GhanaAmbulances - (20) |
j) 14. | Principal of accessory and spare-parts supply |
k) | Principle of medical consumables and medical equipment consumables |
As at March 13, 2013, the following items have been satisfied:
a) | Approval by the Ministry of Health of the detailed proposal for Mobile Care project submitted by Kallo Inc., dated 19 November 2012 which includes detailed technical specifications for the mobile clinics, training and maintenance support services. |
b) | The training program will include a certification process for Kallo Inc., affiliated Canadian and United States Of America Medical Teaching University and Applied Science Colleges. |
c) | Feasibility study report |
d) | National geographic locations and demographic deployment schedules for Mobile Clinics and Clinical Command Centers |
e) | Different functional requirements of Mobile clinics for both rural and urban locations |
f) | Number of Mobile Clinics and Clinical Command Centers in each region |
g) | Current standards for medical equipment in hospital in Ghana, for example: the standard of radiation control of X-ray machine |
h) | Standards for electric appliances used in mobile clinics and for environmental protection, for example: power outlet and interface of electric appliances, busing standards for the protection for X -ray machine |
i) | Standards for waste-water treatment, medical waste treatment, operating-room and supply room of the Mobile Clinic |
j) | Human resources deployment in district level hospital for mobile clinic |
k) | Standards for contagions diseases isolation and sterilization in Ghana |
l) | Principal of accessory and spare-parts supply |
m) | Principle of medical consumables and medical equipment consumablesHelicopter - (1) |
Plan of Operation at March 31, 2013
The following planPlan of operationOperation 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.
Kallo mobile Care implementation plan for Guinea and Ghana is based on the timelines of the Mobiles Clinic’sClinic's delivery and training provided by Kallo.
Based on the Deliverydelivery of our plan, of Kallo Inc. there is a lead-time of 5-6six months for production and delivery of the first 2two mobile clinics in Guinea and Ghana from the time of confirmed purchase order along with payments through Bank.bank.
In this period of 5-6six months from the date of purchase order confirmation to Kallo Inc.us the following shallwill be completed forto go live of the Mobile Clinics.
| 1. | Establish geographical coverage for Mobile Clinics based on hospitals to population ratio in specific rural areas of Guinea and Ghana |
| 2. | Establish the Specialistsspecialists support from Teaching Hospitalsteaching hospitals |
| 3. | Establish Leadershipleadership for operational and administrative support |
| 4. | Establish Governance Councilsgovernance councils for operations, Educationeducation and Trainingtraining |
Kallo Mobile CareOur mobile care program with Mobile Clinics, Clinicalmobile clinics, clinical and Administrative Command Centersadministrative command centers deployed in an integrated model with the current healthcare delivery services will produce demonstrable impact in the community in terms of improved healthcare delivery within 12 months of implementation that would contribute to the flagship achievement by the current government to its merit.
For the Ghana Project, as of the date of this prospectus, the Kallo Mobile Care Program project-scope has been elevated to national discussions to include key stakeholders in healthcare delivery, National Disaster Management Organization (NADMO), National Security Agency (NSA), Ministry of Defence, Ministry of Health, Ghana Health Services (GHS), National Development Planning Commission (NDPC) and the local governments.
New Business Developments in Ghana
As a result of the recent prioritization of Ministry Of Health Short and Medium-Long-Term Programmes of Work and Performance Targets and Agreements on Key Health Indicators from the Office of the President, on April 23, 2013, the Minister Of Health of Ghana Hon. Sherry Ayittey wrote to the Minister of Finance of Ghana that the Ministry of Health had received, considered and approved an unsolicited Offer/Proposal from Kallo Inc. for the provision of Fixed Facilities with funding from the Export-Import (EXIM) Bank of the USA. She stated in the letter that this Project deliverables are in line with policy and strategy guidelines and do reflect the aspirations of the Ministry.
A value for money (VFM) assessment conducted by the Ministry Of Health on our case development and deliverability has determined that the logic of the project, for the level of investment involved is clear and supported by evidence. She further states that the anticipated project solution represents a best value for money option.
The total value of this approved project is US$174,350,000 as confirmed by the Minister of Health in the approval letter.
In the letter the Minister of Health has requested the Minister of Finance to negotiate and conclude the funding arrangement and the respective financing terms and conditions ahead of a joint submission to the Cabinet for consideration and approval.
The Ministry has identified project sites for this project as follows:
| | Polyclinic Urban-Urban | Polyclinic Rural Rural | Total | CHIPS CPD |
| Greater Accra | 3 | 1 | 4 | 0 |
| Ashanti Region | 2 | 1 | 3 | 0 |
| Central Region | 2 | 1 | 3 | 2 |
| Northern Region | 2 | 2 | 4 | 2 |
| Upper East Region | 1 | 2 | 3 | 2 |
| Upper West Region | 0 | 0 | 0 | 1 |
| Western Region | 2 | 3 | 5 | 0 |
| Volta Region | 1 | 1 | 2 | 2 |
| Eastern Region | 1 | 1 | 2 | 0 |
| Brong-Ahafo Region | 1 | 0 | 1 | 1 |
| | 15 | 12 | 27 | 10 |
Our plan and focus during the next twelve months include implementing Kallo Mobile Care program in Ghana in a timely manner,both, selling our existing productsproduct as well as developing and possibly selling new products. Since changing to our current business, we have not generated any revenues.
Costs Associated with the Plan of Operations
Currently under the Plan of Operations, we have expenses towards 7six full time resources, including engineers, applications specialist, and project and operations managers. We have completed the product development phase for Electronic Medical Records system, Mobile Clinics, and Clinical Command Centers. Our efforts are focused in commercializing these technologies and generating revenue. The current capital requirement caters only to the resources, infrastructure, and business development expenses for these technologies. Management analysis of our business acquisition and operations cost indicate a reasonable requirement of USD $2,000,000 or less for the next 12-18 months of operations. Kallo managementWe anticipates that this infusion of capital will generate revenue from sales of the above-mentioned technologies. This will in turn sustain theour company and enable further development of our other Kallo owned copyrighted technologies.
Our Sales and Marketing Strategy for existing developed products
KALLO EMCURx (EMR)
As of the date of this report,prospectus, we have achieved an EMR milestone for Specialists, by securing an accepted and signed installation order. Our specialist EMR product, EMCURx, is customized to satisfy the needs of specialists, regardless of their specialty. The software is being installed and an advance payment of $24,990 has been received as of December 31, 2012.June 30, 2014. Revenue from this installation will be $30,000 with an anticipated gross profit of $20,000. An updated and more powerful version of the software will be available in 2014 and installation will be completed then. Clinical user and administrative training will be completed in July 2013afterwards to ensure seamless transition to a paperless digital medical clinic. Work on this order has commenced and installation will be completed in the third quarter 2013.
Our milestones during the next twelve months are:
1 - Developing our sales organization and marketing the third party products along with our software that bring the data from these products into an EMR system in the major metropolitan areas of Canada. We expect the cost to be $300,000 and 12 months to complete this Milestone.| 1. | Developing our sales organization and marketing the third party products along with our software that brings the data from these products into an EMR system in the major metropolitan areas of Canada. We expect the cost to be $300,000 and 12 months to complete this milestone. |
2 – Simultaneously with the build-up of our sales organization, we will build a product support team that will provide installation, training and customer support. We expect the cost to be $500,000 and 12 months to complete this Milestone .
3 – Expanding our market from the larger metropolitan areas to the smaller rural and more distant medical facilities. We expect the cost to be $250,000 and 12 months to complete this Milestone.| 2. | Simultaneously with the build-up of our sales organization, we will build a product support team that will provide installation, training and customer support. We expect the cost to be $500,000 and 12 months to complete this milestone. |
4 – Developing our Mobile Care business globally. We expect the cost to be $ 700,000 and 12 months to complete| 3. | Expanding our market from the larger metropolitan areas to the smaller rural and more distant medical facilities. We expect the cost to be $250,000 and 12 months to complete this Milestone. |
| 4. | Developing our Mobile Care business globally. We expect the cost to be $ 700,000 and 12 months to complete the Milestone. |
Within Canada, we will focus on having a direct sales force to market and sell EMR to walk-in clinics/doctor’sdoctor's offices, Independent Diagnostic Centers /Independent Health Facilitiesindependent diagnostic centers /independent health facilities and hospitals. The revenue generation from EMR consists of product sales, implementation, integration, training, on-going maintenance, and professional services.
Outside Canada, we may establish commercial partnerships for all of our product candidates in order to accelerate development and marketing in those countries and further broaden our products’products' commercial potential.
KALLO MOBILE CARE
We have successfully launched one of our copyrighted technologies “MOBILE CARE”"MOBILE CARE" - Mobile Clinicsmobile clinics in November 2011, and have since then received several enquiries for this product from countries in Africa, Vietnam,Southeast Asia, North West Territories and Northern Ontario in Canada, USA, and the Middle East. We have not been contacted by Sudan, Syria, or Iran. If we were contacted by Sudan, Syria, or Iran, we would not do business with them or with any entity located within their geographical boundaries since they are designated by the U.S. Department of State as sponsors of terrorism and are subject to U.S. economic sanctions and export controls. Based on the levels of interest from the local Ministries of Health, we have selected companies with business and technical strengths as our local representatives for sales and support in the region. Mobile CareMOBILE CARE is a state of the art clinical setup in a vehicle equipped with the latest technology in healthcare. More than just a facility, Mobile CareMOBILE CARE 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. Mobile CareMOBILE CARE is not the same thing as EMR referred to herein.
We expect to see sales revenues from Kallo’sKallo's Mobile Care business unit in the next twelve (12) months. Kallo’s Mobile ClinicOur MOBILE CLINIC is equipped with necessary medical equipment as per regional healthcare requirements. We also install our copyrighted software and third party software as required. Revenue is generated by charging for medical equipment, software licenses, installation implementation and training. This generates an ongoing revenue stream for service, maintenance, spare-parts, and consumables.
Our Development and Commercialization Strategy for new products
We intend to initiate sales of our products in our target commercial areas. Our target commercial areas are hospitals, clinics and doctors’doctors' offices. We expect to focus on marketing our current offering as well as completing product development for our product candidates in order to increase our possibilities for current and future revenue generation.
Our forward-looking plan envisions applying our copyrighted design and technology to develop three additional products, to bring to market integrated computer systems that address today’stoday's critical health management needs in epidemic control, medical information flow across borders and provision of heath care in rural and remote areas.
In addition to our EMR, which is ready for production, we have prioritized the following products for completion of development and are listing them in order of priority.
| 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 |
We do not at this time have a definitive timetable as to when we will complete these intense development efforts.
We are considered to be in the development stage, as defined under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 915-205. We have been in the development stage since our inception. We have had no substantial recurring source of revenue; we have incurred operating losses since inception and at December 31, 2012 had a working capital deficiency of $1,018,696.
The development and marketing of new medical software technology is capital intensive. We have funded operations to date either through the sale of our common stock or through advances made by our key shareholders.
We have utilized funds obtained to date for organizational purposes and to commence certain financial transactions. We require additional funding to complete these transactions (including the acquisition of a service-based, valued-business enterprise and related expenses), expand our marketing and sales efforts and increase the Company’sCompany's revenue base.
Limited operating history; need for additional capital
There is nolimited historical financial information about us upon which to base an evaluation of our performance. We cannot guarantee we will be successful in our business operations. Our business is subject to risks inherent in the establishment of a new business enterprise, including limited capital resources and possible cost overruns due to price increases in services and products.
To become profitable and competitive, we have to sell our products and services.
We have no assurance that future financing will be available to us on acceptable terms. If financing is not available on satisfactory terms, we may be unable to continue, develop, or expand our operations. Equity financing could result in additional dilution to existing shareholders.
Results of operations
June 30, 2014 compared to June 30, 2013
Revenues
a) | We did not generate any revenues during the year ended December 31, 2012 or 2011. From our inception on December 12, 2006 through December 31, 2012 we generated $15,887 in revenues. We generated the revenues in 2007 when we were engaged in the business of selling printing equipment and related products. The revenues were generated in fiscal year 2007. Since then we have not generated any revenues. We are in the process of completing the user training for our first installation of EMR for Specialists and will start generating revenues in early 2013. |
We did not generate any revenues during the six months ended June 30, 2014 or 2013. We are in the process of completing the user training for our first installation of EMR for specialists and we expect to start generating revenues in 2014 or 2015.
Expenses
During the yearthree months ended December 31, 2012June 30, 2014 we incurred total expenses of $7,003,791,$432,173, including $5,392,199$158,697 in salaries and compensation, $88,569$11,374 in depreciation, $615,747$164,802 in professional fees, $419,702$18,299 in selling and marketing expenses and $487,574$79,001 as other expenses.expenses whereas during the three months ended June 30, 2013 we incurred total expenses of $192,785, including $155,557 in salaries and compensation, $22,142 in depreciation, $180,200 in professional fees, $124,056 in selling and marketing expenses and $91,109 in other expenses net of $333,612 gain in change in fair value on convertible promissory note and $46,667 gain on extinguishment of convertible promissory note. Our professional fees consist of legal, consulting, accounting and auditing fees. The increase in our total expenses for the three months ended June 30, 2014 from the comparative period is mainly due to the unrealized gain of $380,279 on fair value changes and extinguishment in convertible promissory note in the previous quarter which was not present in the current quarter. Otherwise, there is a decrease of $10,768 in depreciation, $15,398 in professional fees, $105,757 in selling and marketing expenses and $12,108 in other expenses as the Company did not have to do as much work for getting the new contracts in the Republic of Ghana and Guinea.
During the yearsix months ended December 31, 2011June 30, 2014 we incurred total expenses of $5,337,700.
The increase in our expenses for the year ended December 31, 2012 was primarily due to an increase$1,077,167, including $519,900 in salaries and compensation, of $2,403,849offset by a decrease$22,747 in research and development costs of $162,815 and a decreasedepreciation, $285,514 in professional fees, $142,435 in selling and marketing expenses and $106,571 as other expenses whereas during the six months ended June 30, 2013 we incurred total expenses of $686,981.$1,027,757, including $330,342 in salaries and compensation, $44,284 in depreciation, $390,481 in professional fees, $174,068 in selling and marketing expenses and $88,582 in other expenses net of $34,003 gain in change in fair value of convertible promissory note and $46,667 gain on extinguishment of convertible promissory note. Our professional fees consist of legal, consulting, accounting and auditing fees. Total expenses for the six months ended June 30, 2014 are generally in line with the comparative period. There is an increase of $189,558 in salaries and compensation due to non-cash stock based compensation of $230,400 in 2014 to employees and professional fees decreased by $104,967.
Net Loss
During the year ended December 31, 2012 we did not generate any revenues and we incurred a net loss of $7,003,791 compared to a net loss of $5,337,700 in 2011.
From our inception on December 12, 2006 to December 31, 2012 we incurred a net loss of $17,401,262, $15,089,288 of which was general and administration, $824,292 of which was software development costs, $938,559 of which was selling and marketing and $552,170 of which was other expenses.
Results of Operations
From Inception on December 12, 2006 to December 31, 2012
During the year 2007, we incorporated the company, hired the attorney and the auditor and began to negotiate contracts and sell printing related products.
During the year 2008 we continued sourcing products. We did not sell any products or services.
During the year 2009, we did not sell any products or services. We acquired all of the issued and outstanding shares of common stock of Rophe Medical Technologies, Inc.
During the year 2010, we relocated the Company’s executive office to Markham, Ontario, changed the Company’s name to Kallo Inc., cancelled various employment contracts with previous officers and obtained forgiveness of debt from several directors and officers for compensation and debt owing to them. Our loss since inception is $9,892,676.
Since inception, we sold 5,000,000 pre-dividend shares of common stock to our officers and directors for $50; issued 490,500 pre-dividend shares of common stock at $0.25 per share for a total of $122,625; and issued 83,334 pre-dividend shares of common stock at $0.60 per share for a total of $50,000. Those shares were subsequently increased to reflect a 3 for 1 stock dividend declared on February 11, 2008.
In 2009, we sold 150,000 shares of common stock to our President for $15,000. We issued 6,000,000 shares of common stock to Rophe Medical Technologies Inc. and incurred debt of $100,000 for 300 common shares of Rophe .
In the first quarter of 2010, we sold 1,133,664 shares of common stock at $0.15 per share for a total of $170,050.
Between July 1, 2010 and October 25, 2010, the Company sold 1,580,000 units of the Company’s common stock and common share warrant at $0.25 per unit for gross proceeds of $395,000. Each unit comprised of one common share and one common share warrant. Each common share warrant is exercisable for a period of one year expiring on December 31, 2011 at a price of $0.50 per share.
On August 18, 2010, we issued 13,500,000 common stock of the Company valued at $3,375,000 for cash proceeds of $1,350 from the directors and officers of the Company and stock based compensation of $3,373,650.
In 2011, we sold 13,604,132 shares of common stock for a total of $718,694 and issued 883,334 shares of common stock to creditors in satisfaction of $49,434 in outstanding payables. We also issued 58,500,000 common stock of the Company valued at $3,125,000 for cash proceeds of $5,850 from the directors and officers of the Company and stock based compensation of $3,119,150.
On October 24, 2011, we issued 1,000,000 common stock of the Company valued at $70,000 to a consultant for the provision of services relating to the marketing of the Company’s business and products to the public.
During the quarter ended March 31, 2012, the Company issued 5,000,000 shares of its common stock valued at $350,000 to consultants for the provision of various services to the Company.
During the year ended December 31, 2012, the Company’s issued 52,589,910 shares of its common stock in consideration of $2,629,497, of which $394,474 was received as at December 31, 2011.
On February 3, 2012, the Company issued 500,000 shares of its common stock to creditors in consideration of satisfaction of $35,927 in outstanding payables.
On June 1, 2012, the Company issued 500,000 restricted shares of its common stock to a past officer as compensation of $60,000 for past services rendered.
On July 20, 2012, the Company issued 350,000 restricted shares of common stock to a creditor in consideration of satisfaction for services rendered for a fair value of $24,500.
During the year ended December 31, 2012, the Company sold 117,833,494 restricted shares of its common stock at $0.0001 to various officers, employees and parties related to them in consideration of satisfaction of $11,564 in outstanding payables and as compensation for future services in the amount of $4,734,814.
On September 26, 2012, the Company entered into a investment agreement with Kodiak Capital Group, LLC (“Kodiak”) whereby the company issued 2,000,000 shares of its common stock in exchange for an option to sell up to $2,000,000 worth of shares of the Company at a price equal to eighty percent (80%) of the lowest daily preceding five days Volume Weighted Average Price at the time of exercise and expires six months from inception.
From Inception on December 12, 2006 to December 31, 2011
During the year 2007, we incorporated the company, hired the attorney and the auditor and began to negotiate contracts and sell printing related products.
During the year 2008, we continued sourcing products. We did not sell any products or services.
During the year 2009, we did not sell any products or services. We acquired all of the issued and outstanding shares of common stock of Rophe Medical Technologies, Inc.
During the year 2010, we relocated the Company’s executive office to Markham, Ontario, changed the Company’s name to Kallo Inc., cancelled various employment contracts with previous officers and obtained forgiveness of debt from several directors and officers for compensation and debt owing to them. Our loss since inception is $9,892,676.
Since inception, we sold 5,000,000 pre-dividend shares of common stock to our officers and directors for $50; issued 490,500 pre-dividend shares of common stock at $0.25 per share for a total of $122,625; and issued 83,334 pre-dividend shares of common stock at $0.60 per share for a total of $50,000. Those shares were subsequently increased to reflect a 3 for 1 stock dividend declared on February 11, 2008.
In 2009, we sold 150,000 shares of common stock to our President for $15,000. We issued 6,000,000 shares of common stock to Rophe Medical Technologies Inc. and incurred debt of $100,000 for 300 common shares of Rophe.
In the first quarter of 2010, we sold 1,133,664 shares of common stock at $0.15 per share for a total of $170,050.
Between July 1, 2010 and October 25, 2010, the Company sold 1,580,000 units of the Company’s common stock and common share warrant at $0.25 per unit for gross proceeds of $395,000. Each unit comprised of one common share and one common share warrant. Each common share warrant is exercisable for a period of one year expiring on December 31, 2011 at a price of $0.50 per share.
On August 18, 2010, we issued 13,500,000 common stock of the Company valued at $3,375,000 for cash proceeds of $1,350 from the directors and officers of the Company and stock based compensation of $3,373,650.
In 2011, we sold 13,604,132 shares of common stock for a total of $718,694 and issued 883,334 shares of common stock to creditors in satisfaction of $49,434 in outstanding payables. We also issued 58,500,000 common stock of the Company valued at $3,125,000 for cash proceeds of $5,850 from the directors and officers of the Company and stock based compensation of $3,119,150.
On October 24, 2011, we issued 1,000,000 common stock of the Company valued at $70,000 to a consultant for the provision of services relating to the marketing of the Company’s business and products to the public.
December 31, 2011 compared to December 31, 2010
Revenues
We did not generate any revenues during the year ended December 31, 2011 or 2010.
Expenses
During the year ended December 31, 2011 we incurred total expenses of $5,337,700, including $2,988,350 in salaries and compensation, $162,815 in research and development costs, $85,296 in depreciation, $1,302,728 in professional fees, $426,017 in selling and marketing expenses and $372,494 as other expenses. Our professional fees consist of legal, consulting, accounting and auditing fees.
During the year ended December 31, 2010 we incurred total expenses of $3,662,252.
The increase in our expenses for the year ended December 31, 2011 was primarily due to an increase in salaries and compensation of $441,321, an increase in selling and marketing expenses of $367,533 and an increase in professional fees of $982,774, offset by a decrease in research and development costs of $498,662.
Net Loss
During the yearthree months ended December 31, 2011June 30, 2014 we did not generate any revenues and incurred a net loss of $432,173 compared to a net loss of $192,785 during the same period in 2013. The main reason is mainly due to the unrealized gain of $380,279 on fair value changes and extinguishment in convertible promissory note in the previous quarter.
During the six months ended June 30, 2014 we did not generate any revenues and we incurred a net loss of $5,337,700 compared to$1,077,167 in line with a net loss of $3,662,252$1,027,757 during the same period in 2010.
From our inception on December 12, 2006 to December 31, 2011 we incurred a net loss of $9,757,198, $8,183,469 of which was general and administration, $824,292 of which was software development costs, $518,857 of which was selling and marketing and $230,580 of which was other expenses.2013.
Liquidity and capital resources
As at December 31, 2012, weJune 30, 2014, the Company had current assets of $538,458,$139,147 and current liabilities of $1,557,154, and a$1,076,912, indicating working capital deficiency of $1,018,696.$937,765. As of December 31, 2012,June 30, 2014, our total assets were $1,480,999$1,082,887 in cash, prepaid expenses, copyrights, equipment and our total liabilities were $1,557,154$1,076,912 comprised of $993,277$920,780 in accounts payable and accrued liabilities, $55,000$20,000 in accrued officer salaries, Rophe Medical Technologies Inc. acquisition costs payableshort term loans of $525, loans payable of $174,327, convertible promissory notes of $200,767,$50,135, deferred revenue of $24,990 and obligations under capital leasesloan of $108,268.$61,007
Cash used in operating activities amounted to $1,925,257$1,102,781 during fiscal 2012,the six months ended June 30, 2014, primarily as a result of the net loss adjusted for non-cash items and various changes in operating assets and liabilities.
There were no cash used in investing activities during the current six months period ended June 30, 2014.
Cash provided by financing activities during the six months ended June 30, 2014 amounted to $1,112,470 and represented proceeds from sale of common stock.
The Company issued 17,440,940 shares of common stock for cash consideration of $872,047 and obtained $249,983 from the exercise of a "Put" with Kodiak during the six months period ended June 30, 2014.
From Inception in 2009 to December 31, 2013
During 2009, we did not sell any products or services.
During 2010, we relocated the Company's executive office to Markham, Ontario, changed the Company's name to Kallo Inc., cancelled various employment contracts with previous officers and obtained forgiveness of debt from several directors and officers for compensation and debt owing to them.
Since inception, we sold 5,000,000 pre-dividend shares of common stock to our officers and directors for $50; issued 490,500 pre-dividend shares of common stock at $0.25 per share for a total of $122,625; and issued 83,334 pre-dividend shares of common stock at $0.60 per share for a total of $50,000. Those shares were subsequently increased to reflect a 3 for 1 stock dividend declared on February 11, 2008.
In 2009, we sold 150,000 shares of common stock to our President for $15,000. We issued 6,000,000 shares of common stock to Rophe Medical Technologies Inc. and incurred debt of $100,000 for 300 common shares of Rophe.
In the first quarter of 2010, we sold 1,133,664 shares of common stock at $0.15 per share for a total of $170,050.
Between July 1, 2010 and October 25, 2010, the Company sold 1,580,000 units composed of one share and one share warrant at $0.25 per unit for gross proceeds of $395,000. Each common share warrant is exercisable for a period of one year from the effective date of the registration statement into one share of common stock at an exercise price of $0.50 per share. A registration statement (SEC file no. 333-184572) was declared effective by the SEC on October 9, 2013 and accordingly the exercise period of the stock purchase warrants expires on October 9, 2014.
On August 18, 2010, we issued 13,500,000 shares valued at $3,375,000 for cash proceeds of $1,350 from the directors and officers of the Company and stock based compensation of $3,373,650.
In 2011, we sold 13,604,132 shares of common stock for a total of $718,694 and issued 883,334 shares of common stock to creditors in satisfaction of $49,434 in outstanding payables. We also issued 58,500,000 common stock of the Company valued at $3,125,000 for cash proceeds of $5,850 from the directors and officers of the Company and stock based compensation of $3,119,150.
On October 24, 2011, we issued 1,000,000 shares valued at $70,000 to a consultant for the provision of services relating to the marketing of the Company's business and products to the public.
During 2012, the Company issued 5,000,000 shares valued at $350,000 to consultants for the provision of various services to the Company.
During 2012, the Company sold 52,589,910 shares for $2,629,497, of which $394,474 was received as at December 31, 2011.
On June 1, 2012, the Company issued 500,000 shares to a past officer as compensation of $60,000 for past services rendered.
On July 20, 2012, the Company issued 350,000 shares to a creditor in consideration of satisfaction for services valued at the fair value of $35,427.
During 2012, the Company sold 117,833,494 shares at $0.0001 to various officers, employees and parties related to them in consideration of satisfaction of $11,564 in outstanding payables and as compensation for future services in the amount of $4,734,814.
On September 26, 2012, the Company entered into an investment agreement with Kodiak Capital Group, LLC ("Kodiak") whereby the company would issue 2,000,000 shares in exchange for an option to sell up to $2,000,000 worth of shares of the Company at a price equal to eighty percent (80%) of the lowest daily preceding five days Volume Weighted Average Price at the time of exercise and expires six months from inception. Subsequent to December 31, 2013, we "Put" $250,000 and 3,472,223 shares have been issued pursuant to the above Agreement.
During 2013, the Company issued 26,402,036 shares in consideration of $1,320,124, 200,000 shares valued at $5,000 to a consultant as compensation and 1,156,524 shares as repayment for short term loans; the value of the stock issued for repayment of the debt was $46,261.
Liquidity and capital resources
As at December 31, 2013, we had current assets of $65,120, current liabilities of $1,274,581, and a working capital deficiency of $1,209,461. As of December 31, 2013, our total assets were $978,093 in cash, other receivables, prepaid expenses, copyrights and our total liabilities were $1,274,581 comprised of $1,082,587 in accounts payable and accrued liabilities, $20,000 in accrued officer salaries, loans payable of $137,444, deferred revenue of $24,990 and deposit for shares to be issued of $9,560.
Cash used in operating activities amounted to $1,590,958 during fiscal 2013, primarily as a result of the net loss adjusted for non-cash items and various changes in operating assets and liabilities.
There was no cash used in investing activities during the year.
Cash provided by financing activities during the year amounted to $2,227,881$1,299,961 and represented mainly proceeds from sales of common stock of $2,235,004,$1,290,124, proceeds from convertible promissory notesshares to be issued of $50,000,$9,560, proceeds from loans payable of $12,165,$68,118, net of capital lease paymentsrepayment of $69,288.convertible promissory notes of $20,000.
In 2012,Summary of critical accounting policies
Basis of Presentation
The consolidated financial statements have been prepared using accounting principles generally accepted in the Company’s issued 52,589,910 sharesUnited States of America ("US GAAP") as applicable to a development stage enterprise under Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 915-205 through December 31, 2013. During the quarter ended March 31, 2014, the Company has elected to early adopt Accounting Standards Update No. 2014-10, Development Stage Entities (topic 915): Elimination of Certain Financial Reporting Requirements. The adoption of the ASU allows the company to remove the inception to date information and all references to development stage.
Intangible Assets - Copyrights
Copyrights are stated at cost. According to the Canadian Intellectual Property laws in Canada, the life of a copyright is the author's life, the remainder of the calendar year in which the author dies, and a period of 50 years following the end of that calendar year. As a result, the useful life of the copyrights are determined to be indefinite are not amortized but subject to testing for impairment. The Company reviews the value of the copyrights on an annual basis to determine if the value has been impaired. Based on its common stock in considerationevaluations, there was no impairment of $2,629,496, of which $394,474 was receivedcopyrights as at June 30, 2014, December 31, 2011 .2013, and December 31, 2012.
Impairment of Long-lived Assets -29-
Long-lived assets comprise of equipment and copyrights. The Company accounts for impairment of long-lived assets in accordance with the guidance established in ASC 360, Accounting for the Impairment or Disposal of Long-Lived Assets, which requires the Company 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 copyrights and equipment indicating that they might be impaired. Since there were indicators of impairment, Management reviewed its long-lived intangible assets and has determined that no impairment exists that relate to these assets through December 31, 2013.
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's requisite service period (generally the vesting period of the equity grant).
Stock Issued in Exchange for Services
The valuation of the Company'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's common stock on the dates of the stock transactions. The corresponding expense of the services rendered is recognized over the employee's requisite service period (generally the vesting period of the equity grant).
We were incorporated in the state of Nevada on December 12, 2006 as Printing Components Inc. to engage in the business of selling printing equipment and related products. We subsequentlythen changed our name to Diamond Technologies Inc. and then to our current name of Kallo Inc. On December 11, 2009, we entered into an agreementmerged 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 restrictedcommon shares of our common stock and $1,200,000. As a result of our acquisition of Rophe, we were no longer a “shell company” as that term is defined in Rule 405 of the Securities Act of 1933, as amended.
Kallo Inc., does not own the products referred in this section with exception to certain components developed by Kallo Inc.,
| 2. | Kallo’sKallo's Copyrighted Technologies: |
The following technologies are protected under Canadian and International copyrights are authored by John Cecil and owned by Kallo Inc. as referenced in the acquisition agreement between Kallo Inc. (formally known as Diamond Medical Technologies Inc.) and Rophe Medical Technologies Inc. Kallo Inc., has ownership rights of the products referred in this section, of which B, C, and D are under development
| 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 development. |
| D. | CCG Technology – - Clinical-Care Globalization technology –- Under Development 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
Kallo’s’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 of potential future products. We plan to evaluate partnership opportunities for further development and commercialization of these products.
| 1. | The company has proprietary Copyrighted Technology “EMR"EMR Integration Engine”Engine" that demonstrate the future direction for integrated solutions as well as current efforts that illustrate interoperability within the continuum of care.EMRcare. EMR Integration Engine is software, which connects all the other applications in or outside a hospital/clinic with the EMR system. This enables the doctor/nurse to seamlessly access information in other healthcare applications without moving from one computer to the next. |
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| 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. |
| 3. | CCG is our clinical-care globalization technology. This product is an effective way to capitalize on the growing “medical"medical tourism phenomenon “" - patients going to low-cost countries for elective medical procedures –, a fast-growing worldwide, multibillion-dollar industry actively promoted by many countries. CCG can be used by both the destination and home country of a patient to maintain complete and accurate records of the treatment history, avoiding errors due to incomplete patient data and lessening the burden and expense of corrective action on the home country when medical tourists return.return home. |
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| 4. | MC-Telehealth (Mobile Clinic with Telehealth system) is our mobile clinic long distance or Telehealth technology. Our product enables the remote transmission of standardized formats of data for laboratory information, diagnostic imaging, diagnosis and clinical notes. |
Target Market
Our primary target market for the point of care products is the Canadian health-care system including Walk-In Clinics/Physicians Offices, Independent Diagnostic Centers, Impendent Health Facilities, Laboratories,walk-in clinics / physicians offices, independent diagnostic centers, impendent health facilities, laboratories, and Hospitals.hospitals. Both the USUnited States and Canadian governments are moving towards requiring EMR records with the Canadian system at a more advanced stage of acceptance.
We are targeting other countries globally where Kallo isand actively pursuing business opportunities to provide professional services for eHealth. Point of Care products are a fundamental requirement as a means to have information in the digital form for eHealth.
OutOur target market for Mobile Clinics and MC-Telehealth systems is global and we have established several sales and marketing partnerships under “Business Associate”"Business Associate" Agreements either representing Kallo independently or as an organization. We are currently negotiating Mobile Clinic business in over 20 countries.
Intellectual Property and Research and Development
We continue our efforts in research and development through collaborations with Medicalmedical faculties in Canada and USAUnited States on an ongoing basis where Kalloour company stands to benefit from the Technologytechnology ownership of the treatment or diagnostic systems developed for commercial use.
During fiscal 2011,2013, we did incur expenses towards cost of resources (both management and technical) relating to research and development with considerable efforts in continuing our research and development work on the Mobile Clinic and Telehealth system, which would be rolled out in the near term in different geographies based on the needs and funding availability.
Competition
We compete with many entities that are engaged in the business of manufacturing and developing software designed to take medical information from many sources and depositing it into a single source as an electronic medical record for each patient. Many of our competitors have greater resources than we do and have long established by histories of successful operations. We are small provider and effectively are in the start-up phase of operations. As a result of we have little or no impact upon our competition.
Managements View of the market trend impact:Market Trend Impact:
Kallo ManagementOur management believes that the market trend in Canada, USAUnited States and globally isare continuing to reflect increased adoption of point of care technologies such as EMR and PACS. This is very evident from the market information given abovebelow in the section “Market"Market Trend for EMR and PACS”Positive Impact on Our Product".
The current trend in the market is highly favorable to our products and the timing of launch meets with the need and demand for the product in the market.
Market trendTrend and positive impactPositive Impact on our productOur Product
Kallo ManagementOur management believes that our EMR will offer customers a far richer integrated medical and clinical content delivered to the doctor at point of care, than any other system in terms of high-priority functionality. EMR is consistently rated among the leaders in all systems of its kind, offering us a significant quality advantage when competing for contracts. In addition, EMR’sEMR's Clinical Information System is flexible enough that it can be installed in smaller hospitals that are far less attractive to our major competitors, and tailored to the specific needs and policies of that institution. The EMR also provides a multi-lingual platform, which may give us a competitive advantage in the international markets.
Currently, the points of care technologies are tied to meaningful use and regulators require monitoring of the outcome of technology implementation. Our products have the meaningful use reporting systems built-in and all outcome measurements are done internally as a built-in feature, whereas most of our competitors depend on third-party software to fulfill this functionality.
Market trendTrend and negative impactNegative Impact on our productOur Product
Due to the relatively lengthy sales cycle involved in the healthcare information technology industry, and the fact that we are significantly smaller and have less financial resources than our competitors, we face an initial disadvantage in the U.S. market. We will have to continue developing new, dynamic and flexible marketing strategies to remain competitive.
We are also actively developing strategic alliances with partners who offer specialized services within the healthcare industry, such as management consultants, systems integrators, major engineering firms and outsourcing companies.
Government Regulation and Legislation
EMR is required to obtain any governmental approvals to operate in the healthcare technology market. It is important that governments and healthcare authorities continue to recognize the importance of healthcare reform and the use of information systems, since there rests the impetus for change, hence a healthy, growing market.
In the Canadian context, our products would require a preferred vendor status registration based on different provincial regulations which is generally seen as just a routine product and technology registration/endorsementendorsement.
Agreement with Kodiak Capital Group, LLC
On September 26, 2012, we entered into an Investment Agreement with Kodiak Capital Group, LLC ("Kodiak") whereby we could issue 50,000,000 shares in exchange for an option to sell up to $2,000,000 worth of our shares at a price equal to eighty percent (80%) of the lowest daily preceding five days Volume Weighted Average Price at the time of exercise and expires six months from inception. We recorded a stock subscription receivable (included in equity) in the amount of $100,000 which was determined to be the fair value of the option on September 26, 2012. On October 24, 2012, we filed an S-1 registration statement relating to the resale of up to 50,000,000 shares of common stock issuable to Kodiak for investment banking services pursuant to an investment agreement dated September 26, 2012. Our registration statement was declared effective on October 9, 2013.
On or about February 25, 2014, we "Put" 3,472,223 shares, valued at $250,000 to Kodiak.
The Investment Agreement terminated on April 9, 2014.
On July 15, 2014, we entered into the First Amendment to the Investment Agreement with Kodiak wherein it was agreed that we could "Put" to Kodiak up to 50,000,000 shares of our common stock provided that the investment amount, when taken together with all other "Put Notices," shall not exceed $2,000,000. The termination date will be December 15, 2015.
Employees
As of January 31, 2013,March 25, 2014, we have seven (7)five full time employees and two (2) part-time employees.
Warranties
We do not issue warranties in connection with our services. All of our third-party products are offered with a warranty provided by the supplier of that product.
Insurance
We do not maintain any insurance and do not intend to maintain insurance in the future. Because we do not have any insurance, if we are made a party of a products liability action, we may not have sufficient funds to defend the litigation. If that occurs a judgment could be rendered against us, itwhich could cause us to cease operations.
Other
Currently we have very a strong EULAEULAs (End User License Agreements) signed with our customers both in the pilot phase as well as go-live phase with patients to protect the company and from all such product liabilities. Moreover our original equipment manufacturers do cover us in all such product liabilities.
Executive Offices
Our administrative office is located at 15 Allstate Parkway,675 Cochrane Drive, Suite 600,630, Markham, Ontario, Canada L3R 5B4,0B8, our telephone number is (416) 246-9997. Our registered agent for service 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. We leasesubleased this space from RCNBilfinger RE Asset Management Limited Partnership Company,Inc. pursuant to a written lease with a term of 18 months.sublease expiring on January 31, 2017. Our monthly rentlease payment is approximately $6,000.$25,000.
MANAGEMENT
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 | 4950 | Chairman of the Board of Directors, Chief Executive |
15 Allstate Parkway,675 Cochrane Drive, Suite 600630
Markham, ONOntario, Canada L3R 5B40B8 | | Officer and Chief Financial Officer |
| | | |
| Vince Leitao | 5051 | President, Chief Operating Officer and a Director |
15 Allstate Parkway,675 Cochrane Drive, Suite 600630
Markham, ONOntario, Canada L3R 5B40B8 | | |
| | | |
| Lloyd A. Chiotti | 6465 | Director |
31 Sisman Avenue Aurora, ON, L4G 6R9 | | |
| | | |
| Samuel R Baker | 7778 | Corporate Secretary and a Director |
89 Shawnee Circle Toronto, ON, M2H 2X9 | | |
Background of officers and directors
John Cecil - Chairman of the Board of Directors and Chief Executive Office, Treasurer, Principal 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 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 is 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 board sessions with stakeholders of the customer to increase business value and support sales in revenue growth and design innovative technology solutions. From April 2007 to May 2008, Mr. Cecil was the Healthcare Director at Satyam Computer Service Ltd., in Toronto, Canada, a publicly traded company listed on the NYSE under the symbol “SAY”"SAY". He managed healthcare consulting practices and services.
Vince Leitao - President, Principal Executive Officer, Chief Operating Officer, and a Director
On October 27, 2009, Vince Leitao was appointed as President, Chief Operating Officer and a Director. Since October 27, 2009, Vince Leitao was President, principal executive officer and a director. Since September 2006, Mr. Leitao has been president of Goapharma Canada, Inc., located in Markham, Ontario, Canada, which he founded. Goapharma Canada Inc. is engaged in the business of producing and marketing specialty dermatology products for psoriasis and eczema. Prior to 2006, Mr. Leitao was vice president of sales for Genpharm/Genpharm / GenniumPharma divisions of E. Merck, Damsdart. From January 2001 to April 2004, Mr. Leitao was a director – sales for Genpharm and from April 1999 to December 2000, he served as a sales representative with Genpharm.
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 - Director
On September 22, 2011, Lloyd Chiotti was appointed to our board of directors. Lloyd Chiotti has held several senior management positions including Director of Information Services and a number of Regional General Manager rolesRoles within Operations with Enbridge Gas Distribution (formerly The Consumers Gas Company) for over 30 years. In addition to these responsibilities, he played a leadership role in helping the organization prepare for a new regulatory framework (moving from “Cost"Cost of Service”Service" regulation to “Incentive”"Incentive" regulation). Most recently he was appointed to the newly formed position of Director, Distribution Asset Management, responsible for overseeing the development of Enbridge Gas Distribution’sDistribution's Strategic Asset Plan. He is actively involved in the natural gas industry. He is currently the Chair of the Asset Management Task Force of the Canadian Gas Association and he is a member of the Distribution Working Committee of the International Gas Union . Union.
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 and Lloyd Chiotti who are not full time in the organization.
Involvement in Certain Legal Proceedings
During the past ten years, Messrs. Leitao, 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. |
Audit Committee and Charter
We have a separately designated audit committee of the board. Our board of directors performs audit committee functions. None of our directors are deemed independent. Three 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 have an external audit committee financial expert.
Code of Ethics
We have adopted a corporate code of ethics.ethics which was revised in August 2014. 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 an exhibitExhibit 14.2 to our 2007 Form 10-K.this registration statement.
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 an exhibit 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 2011,2013, 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.
The following table sets forth the compensation paid 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) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | (j) |
| | | | | | | Change in | | | | | | | | Change in | | |
| | | | | | | Pension | | | | | | | | Pension Value & | | |
| | | | | | | Value & | | | | | | | | Nonqualified | | |
| | | | | | Non-Equity | Nonqualified | | | | | | | Non-Equity | Deferred | | |
| | | | | | Incentive | Deferred | All | | | | | Stock | Option | Incentive Plan | Compensation | All Other | |
| Name and Principal | | | Salary | Bonus | Awards | Compensation | Earnings | Compensation | Totals |
| Position (1) | | Year | ($) | ($) | ($) | (S) | ($) | ($) | ($) |
| | | | | Stock | Option | Plan | Compensation | Other | | | | | | | | |
| Name and Principal | | Salary | Bonus | Awards | Compensation | Earnings | Compensation | Totals | |
| Position [1] | Year | ($) | ($) | ($)[1] | ($) | (S) | ($) | ($) | ($) | |
| John Cecil | 2012 | 183,248 | 0 | 1,891,773 | 0 | 0 | 0 | 2,075,021 | 2013 | 172,567 | 0 | 0 | 0 | 0 | 172,567 |
| Chairman & CEO | 2011 | 147,414 | 0 | 1,772,210 | 0 | 0 | 0 | 1,919,624 | 2012 | 183,248 | 0 | 1,891,773 | 0 | 0 | 0 | 2,075,021 |
| | | | | | | | | | | | | | | |
| Vince Leitao | 2012 | 183,248 | 0 | 1,707,210 | 0 | 0 | 0 | 1,890,458 | 2013 | 172,567 | 0 | 0 | 0 | 0 | 172,567 |
| President | 2011 | 147,414 | 0 | 548,900 | 0 | 0 | 0 | 696,314 | 2012 | 183,248 | 0 | 1,707,210 | 0 | 0 | 0 | 1,890,458 |
| | | | | | | | | | | | | | | |
| Samuel Baker | 2012 | 0 | 0 | 207,634 | 0 | 0 | 0 | 207,634 | 2013 | 0 | 0 | 0 | 0 | 0 | 0 |
| Secretary | 2011 | 6,000 | 0 | 299,400 | 0 | 0 | 0 | 305,400 | 2012 | 0 | 0 | 207,634 | 0 | 0 | 0 | 207,634 |
| | | | | | | | | |
| Leonard Steinmetz | 2012 | 0 | 0 | 0 | 0 | 0 | 0 | |
| Treasurer | 2011 | 0 | 0 | 0 | 0 | 0 | 0 | |
| Terminated (03/25/11) | | | | | | | | |
[1](1) | During the year ended December 31, 2012, 107,076,003 shares were issued to directors and officers and their family for a total amount of $4,313,040, of which $150,000 was contributed as cash by them and $4,163,040 was granted to them as stock-based compensation. During the year ended December 31, 2011, 48,500,000 shares were issued to directors and officers of the Company for a total amount of $2,425,000, of which $4,850 was contributed as cash by the directors and officers and $2,420,150 was granted to them as stock-based compensation. |
During the six months period ended June 30, 2014, 5,000,000 shares were granted to John Cecil, principal executive officer and chairman of the board of directors of the Company, as stock-based compensation and were valued at $200,000.
The values reported represent the issue date fair value of the shares calculated as the difference between the quoted stock price per share of between $0.04 and $0.05 per share at the time of issue and the issuance price of $0.0001 per share multiplied by the number of shares issued.
The following table sets forth information with respect to compensation paid by us to our directors during the last completed fiscal year December 31, 2012 .2013.
Director Compensation Table
| (a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (b) | (c) | (d) | (e) | (f) | (g) | (h) |
| | | | | Change in | | | | | | | Change in | | |
| | | | | Pension | | | | | | | Pension Value | | |
| | | | | Value and | | | Fees | | | | & Nonqualified | | |
| | | | | Nonqualified | | | Earned or | | | Non-Equity | Deferred | | |
| | Fees Earned | | Non-Equity | Deferred | All | | Paid in | Stock | Option | Incentive Plan | Compensation | All Other | |
| | or Paid in | Stock | Option | Incentive Plan | Compensation | Other | | Cash | Awards | Awards | Compensation | Earnings | Compensation | Total |
| Name | | ($) | ($) | ($) | ($) | ($) | ($) |
| | Cash | Awards | Compensation | Earnings | Compensation | Total | | | | | | |
| Name | ($) | ($) | ($) | ($) | |
| John Cecil | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| | | | | | |
| Vince Leitao | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| | | | | | |
| Lloyd Chiotti [1] | 0 | 346,056 | 0 | 0 | 346,056 | |
| | | | | | |
| Lloyd Chiotti | | 0 | 0 | 0 | 0 | 0 | 0 |
| Samuel Baker | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
[1] | During the year ended December 31, 2012, 107,076,003 shares were issued to directors and officers and their family for a total amount of $4,313,040, of which $150,000 was contributed as cash by them and $4,163,040 was granted to them as stock-based compensation. |
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 20112012 Non-Qualified Incentive Stock Option Plans. No options have been granted to our officers and directors thereunder.
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.
The following table sets forth, as of the date of this prospectus,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 Shares Owned | Percentage of Ownership |
| | | |
| John Cecil [2] | 86,612,857 | 24.19% |
| Vince Leitao [3] | 59,667,845 | 16.67% |
| Lloyd Chiotti | 22,071,344 | 6.17% |
| Samuel Baker [4] | 13,013,850 | 3.64% |
| | | |
| All Officers and Directors as a Group (4 persons) | 181,365,896 | 50.67% |
Name and Address Beneficial Owner [1] | Number of Shares Owned | Percentage of Ownership |
| | | |
| John Cecil [2] | 86,612,857 | 25.23% |
15 All State Parkway, Suite 600 Markham, ON L3R 5B4 | | |
| | | |
| Vince Leitao [3] | 59,667,845 | 17.38% |
15 All State Parkway, Suite 600 Markham, ON L3R 5B4 | | |
| | | |
| Lloyd Chiotti | 20,914,820 | 6.09% |
31 Sisman Avenue Aurora, ON, L4G 6R9 | | |
| | | |
| Samuel Baker [4] | 13,003,850 | 3.79% |
89 Shawnee Circle Toronto, ON, M2H 2X9 | | |
| | | |
| All Officers and Directors as a Group (4 people) | 195,507,206 | 52.49% |
| | | |
| Rajni Kassett | 21,244,075 | 9.01% |
67 Simms Drive Ajax, ON, L1T 3K1 | | |
| | | |
| Pearl Dome Inc. | 15,307,834 | 4.46% |
53 Division St. Oshawa, ON, L1G 5L8 | | |
| | | |
| Kodiak Capital Group LLC [5] | 52,000,000 | 15.23% |
| 260 Newport Center Dr. | | |
| Suite 100 | | |
| Newport Beach, CA 92660 | | |
[1] The persons named above may be deemed to be a “parent” and “promoter” of our company, within the meaning of such terms under the Securities Act of 1933, as amended, by virtue of his/its direct and indirect stock holdings.
| [1] | The persons named above may be deemed to be a "parent" and "promoter" of our company, within the meaning of such terms under the Securities Act of 1933, as amended, by virtue of his/its direct and indirect stock holdings. |
| [2] | Includes 17,600,000 shares of common stock owned by family members of John Cecil. |
| [3] | Includes 15,000,000 shares of common stock owned by family members of Vince Leitao. |
| [4] | Includes 410,000 shares of common stock owned by family members of Samuel Baker. |
[2] Includes 7,600,000 shares of common stock owned by Grace Cecil, the wife of John Cecil; 5,000,000 shares of common stock owned by Jonathan Cecil, the son of John Cecil; and 5,000,000 shares of common stock owned by Anna Shereen Cecil, the daughter of John Cecil.
[3] Includes 5,000,000 shares of common stock owned by M. Esperenca Leitao, the wife of Vince Leitao; 5,000,000 shares of common stock owned by Matthew J. Leitao, the son of Vince Leitao; and 5,000,000 shares of common stock owned by Jonathan A. Leitao, the son of Vince Leitao.
[4] Includes 400,000 shares of common stock owned by Carol Baker, the wife of Samuel Baker.
[5] Includes 50,000,000 shares being registered in this public offering and 2,000,000 shares currently held in escrow as a fee to Kodiak .
DESCRIPTION OF SECURITIES
Common Stock
Our authorized capital stock consists of 500,000,000 shares of common stock, par value $0.00001 per share. The holders of our common stock:
*- | have equal ratable rights to dividends from funds legally available if and when declared by our board of directors; |
*- | are entitled to share ratably in all of our assets available for distribution to holders of common stock upon liquidation, dissolution or winding up of our affairs; |
*- | do not have preemptive, subscription or conversion rights and there are no redemption or sinking fund provisions or rights; and |
* | - | are entitled to one non-cumulative vote per share on all matters on which stockholders may vote. |
All shares of common stock now outstanding are fully paid for and non-assessable and all shares of common stock which are the subject of this offering, when issued, will be fully paid for and non-assessable. We refer you to our Articles of Incorporation, Bylaws and the applicable statutes of the State of Nevada for a more complete description of the rights and liabilities of holders of our securities.
Non-cumulative voting
Holders of shares of our common stock do not have cumulative voting rights, which means that the holders of more than 50% of the outstanding shares, voting for the election of directors, can elect all of the directors to be elected, if they so choose, and, in that event, the holders of the remaining shares will not be able to elect any of our directors. After this offering is completed, assuming the sale ofwe "Put" all of the50,000,000 shares of common stock present stockholdersto Kodiak, Kodiak will own approximately 84.77%87.75% of our outstanding shares.
Cash dividends
As of the date of this prospectus, we have not paid any cash dividends to stockholders. The declaration of any future cash dividend will be at the discretion of our board of directors and will depend upon our earnings, if any, our capital requirements and financial position, our general economic conditions, and other pertinent conditions. It is our present intention not to pay any cash dividends in the foreseeable future, but rather to reinvest earnings, if any, in our business operations.
Preferred Stock
We are authorized to issue 100,000,000 shares of preferred stock with a par value of $0.00001 per share. The terms of the preferred shares are at the discretion of the board of directors. Currently no preferred shares are issued and outstanding.
Warrants
On October 25, 2010 we issued 1,580,000 warrants to acquire share of our common stock. Each warrant plus $0.50 allows a warrant holder to acquire one share of our common stock. The warrants were a component of 1,580,000 Units sold to five persons at a purchase price of $0.25 per Unit for a total of $370,000.00. Each Unit was comprised on one restricted share of common stock and one stock purchase warrant. Each warrant is exercisable for a period of one year from the effective date of a registration statement filed with the SEC. TheA registration statement has not been filed.(SEC file no. 333-184572) was declared effective by the SEC on October 9, 2013 and accordingly the exercise period of the stock purchase warrants expires on October 9, 2014.
Anti-takeover provisions
There are no Nevada anti-takeover provisions that may have the affecteffect of delaying or preventing a change in control.
Reports
After we complete this offering, we will not be required to furnish you with an annual report. Further, we will not voluntarily send you an annual report. We will beare currently required to file reports with the SEC under sectionpursuant to Section 13 of the Securities Act. The reports will beare filed electronically. The reports we will beare required to file are Forms 10-K, 10-Q, and 8-K. You may read copies of any materials we file with the SEC at the SEC’sSEC's Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet site that will contain copies of the reports we file electronically. The address for the Internet site is www.sec.gov.
Stock transfer agent
Our stock transfer agent for our securities is Pacific Stock Transfer Company, 4045 South Spencer Street, Suite 403, Las Vegas, NVNevada 89119 and its telephone number is (702) 361-3033.
In December 2006, we issued a total of 5,000,000 shares of pre-dividend restricted common stock to Herb Adams, Mary Kricfalusi, and John Dow our officers and directors in consideration of $50. On June 25, 2007, we completed our public offering of 490,500 pre-dividend shares of common stock and raised $122,625. On December 28, 2007, we sold 83,334 pre-dividend restricted shares of our common stock pursuant to the exemption contained in Reg. S of the Securities Act of 1933, as amended at an offering price of $0.60 per share for cash proceeds of $50,000. 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.
On December 30, 2009 we sold 150,000 restricted shares of common stock at $0.10 per share to our President for proceeds of $15,000.
On December 11, 2009, an agreement was entered into by the Company to acquire 100% of the issued and outstanding shares of Rophe Medical Technologies Inc. (“Rophe”) for cash consideration of $1,200,000 and 3,000,000 restricted shares of the Company’s common stock. This transaction was closed December 31, 2009 and we issued 3,000,000 restricted shares of our common stock valued at $365,000. Of these shares 1,200,000 shares went to John Cecil one of our directors, 1,200,000 shares to John’s wife Grace Cecil, 300,000 shares to Samuel Baker one of our directors and 300,000 to Samuel Baker’s wife Carol Baker.
Subsequently, the Rophe Acquisition payment terms were amended and 3,000,000 additional shares of common stock were issued in 2009 as payment for $400,000 with the shares issued to John Cecil (1,200,000 shares), Grace Cecil (1,200,000 shares), Samuel Baker (300,000 shares) and Carol Baker (300,000 shares).
During the year ended December 31, 2010, 13,500,0002013, 1,156,524 shares were issued to directors and officersLloyd Chiotti, a director of the Company, for a total amount of $3,375,000,$46,261, of which $1,350$46,261 was contributed as cash by the directors andfor repayment of short term loans payable.
As of December 31, 2013, we owe our officers and $3,373,650 was granted to them as stock based compensation, issued as follows: 3,000,000 shares to Leonard Steinmetz, 2,500,000 shares John Cecil, 5,000,000 shares to Vince Leitao, 2,000,000 shares to Mary Kricfalusidirectors $68,574 in accounts payable and 1,000,000 shares Samuel Baker.accrued liabilities.
In addition,As of June 30, 2014 and December 31, 2013, we owe one of our shareholders and directors $1,450 and officers agreed$1,450, respectively, in a non-interest bearing advance to forgive $604,774 of debts and compensation owing to them, as follows:
| | John Cecil | $ | 51,097 | |
| | Vince Leitao | $ | 85,394 | |
| | Sam Baker | $ | 56,254 | |
| | Mary Kricfalusi | $ | 237,048 | |
| | Herb Adams | $ | 174,981 | |
During the yearsix months period ended December 31, 2011, 58,500,000June 30, 2014, 5,000,000 shares were issued to John Cecil, our principal executive officer and chairman of our board of directors, as stock-based compensation and officerswere valued at $200,000. Further an additional, 2,765,400 shares were issued to Mr. Chiotti for cash of the Company for a total amount$138,270.
As of $3,125,000, of which $5,850 was contributed as cash by the directors andJune 30, 2014, we owe our officers and $3,119,150 was granted to them as stock based compensation, issued as follows: 31,500,000 shares to John Cecil, 11,000,000 shares to Vince Leitao, 6,000,000 shares to Samuel Baker, 5,000,000 to Mario D’Souza, 2,000,000 to Rajni Kassettdirectors $23,000 in accounts payable and 3,000,000 to Lloyd Chiotti.accrued liabilities.
On July 29, 2011, Watt International Inc. ("Watt") commenced a third party claim against Kallo concerning monies that Kallo allegedly owed to Watt for branding and internet services provided by Watt to Kallo. Watt is seeking damages in the amount of Canadian $161,673.67 plus unspecified "special" damage. Management is of the opinion that Watt has charged Kallo for services that Watt did not perform, and that Watt has duplicated charges for work that it performed and intends to defend itself vigorously in the suit. Management has recognized an accrual for the amount of the claim. An estimate could not be made of the unspecified damage.
As of March 14, 2012, we settled our dispute with Leonard Steinmetz, our former treasurer, principal financial officer, principal accounting officer, and a member of the board of directors. We agreed to resolve all of our differences by paying Mr. Steinmetz $130,000 in installments as follows: $25,000, beginning eight days from the receipt from the Occupational and Safety Administration (“OSHA”("OSHA") of its notice approving the withdrawal of Mr. Steinmetz’sSteinmetz's OSHA complaint with prejudice; $10,000 to be paid on or before the last business day of each of
the ten months following month of receipt of said notice from OSHA; and, a final installment of $5,000.00 or before the last business day of the eleventh month. In addition, we agreed, that within 21 days of receipt of said notice from OSHA, we are to issue 500,000 restricted shares of our common stock to Mr. Steinmetz. On May 2, 2012, the Occupational and Safety Administration approved Leonard Steinmetz’sSteinmetz's withdrawal of his complaint against us.
On July 29, 2011, Watt International Inc. (“Watt”) commenced a third party claim against Kallo concerning monies that Kallo allegedly owed to Watt for branding and internet services provided by Watt to Kallo. Watt is seeking damages in the amount of $161,673.67 plus unspecified “special” damage. Management is of the opinion that Watt has charged Kallo for services that Watt did not perform, and that Watt has duplicated charges for work that it performed and intends to defend itself vigorously in the suit. Management has recognized an accrual for the amount of the claim. An estimate could not be made of the unspecified “special” damage and hence no accrual was made thereof.
On December 20, 2012,Mansfield Communications Inc. (Mansfield) entered into a legal action against Kallo concerning monies allegedly owed by Kallo to Mansfield for media consultancy and communication services provided by Mansfield to Kallo (Mansfield Communications Inc., Plaintiff vs. Kallo Inc., Defendant filed a Statement of Claim in the Ontario Superior Court of Justice, Case No. CV-12-47061). Mansfield is seeking damagesOn March 25, 2014, we settled the foregoing matter in consideration of $55,000 which has been paid and the amount of $191,246.11 plus unspecified “special” damage. On January 30, 2013, Kallo filed a Statement of Defense. Management is of the opinion that Mansfieldcase has charged Kallo for services that Mansfield did not perform, and that Mansfield has duplicated charges for work that it performed and intends to defend itself vigorously in the suit. At this time, management cannot assess the final outcome of the claim. Management has recognized an accrual for an amount of $161,991. An estimate could not be made of the unspecified “special” damage and hence no accrual was made thereof.been dismissed.
Our financial statements for the periodsperiod ended December 31, 20112013 contained in this prospectus have been audited by MaloneBailey LLP, 9801 Westheimer Road, Houston, Texas 77042, as set forth in their report included in this prospectus and for the period ended December 31, 2012 have been audited by Schwartz Levitsky Feldman LLP, 2300 Yonge Street, Suite 1500, Toronto, Ontario, Canada M4P 1E4, as set forth in their report included in this prospectus, and our financial statements for the period ended December 31, 2010 contained in this prospectus have been audited by Collins Barrow Toronto LLP, Collins Barrow Place, 11 King Street West, Suite 700, Box 27, Toronto, Ontario, Canada M5H 4C7.prospectus. Their reports are given upon their authority as experts in accounting and auditing.
On February 6, 2012, Collins Barrow TorontoJune 3, 2014, we terminated Schwartz Levitsky Feldman LLP, Collins Barrow Place, 11 King2300 Yonge Street, West, Suite 700, Box 27,1500, Toronto, Ontario, Canada M5H 4C7 terminated its relationship with usM4P 1E4 as our auditor (See “Exhibit 16.3” attached hereto). Collins Barrow Toronto LLP advised us that itsindependent registered accounting firm. The decision to terminatedismiss Schwartz Levitsky Feldman LLP as our relationshipindependent registered public accounting firm was based its decision to cease doing US public company audits.approved by our board of directors on June 3, 2014. Except as noted in the paragraph immediately below, the reports of Collins Barrow Toronto LLP’sSchwartz Levitsky Feldman LLP on the financial statements for the yearyears ended December 31, 20102012 and for the period January 1, 2011 through September 30, 2011 did not contain an adverse opinion or disclaimer of opinion, and such reports were not qualified or modified as to uncertainty, audit scope, or accounting principle. Schwartz Levitsky Feldman LLP did not issue any report on any financial statements for the period January 1, 2013 to the present.
The reports of Collins Barrow TorontoSchwartz Levitsky Feldman LLP on our financial statements as of and for the yearyears ended December 31, 20102012 and for the period January 1, 2011 through September 30, 2011 contained an explanatory paragraph which noted that there was substantial doubt as to our ability to continue as a going concern as we had suffered negative working capital, had experienced negative cash flows from continuing operating activities and also due to uncertainty with respect to our ability to meet short-term cash requirements. Again, Schwartz Levitsky Feldman LLP did not issue any report on any financial statements for the period January 1, 2013 to the present.
During the yearyears ended December 31, 20102012 and 2011 and for the period January 1, 20112013 through September 30, 2011,March 31, 2014 and through February 6, 2012,June 3, 2014, we have not had any disagreements with Collins Barrow TorontoSchwartz Levitsky Feldman LLP on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to Collins Barrow Toronto LLP’sSchwartz Levitsky Feldman LLP's satisfaction, would have caused it to make reference to the subject matter of the disagreements in its reports on our consolidated financial statements for such years or in connection with its reports in any subsequent interim period through the date of dismissal.dismissal with the exception of the following:
DuringSchwartz Levitsky Feldman LLP failed to timely audit our financial statements for the period ended December 31, 2013. The auditor requested an opinion to the affect that there were no violations of the Foreign Corrupt Practices Act. We complied and had our securities attorney issue an opinion that there were no violations of the Foreign Corrupt Practices Act. Then, after receiving the requested opinion, the auditor decided that it would require a second opinion from an "independent" attorney. Again, we complied having retained a law firm in New York City, which specialized in the Foreign Corrupt Practices Act. Again, the opinion reflected there was no violation of the Foreign Corrupt Practices Act. After that, the auditor wanted the opinion from the New York City firm to contain additional language, which the independent lawyer felt that Schwartz Levitsky Feldman LLP was trying to influence the attorney's independent opinion. The auditor could not give us a definitive date or specific
conditions which would result in the issuance of its audit opinion of the December 31, 2013 financial statements. Under the circumstances we had no choice but to obtain the services of a new auditor. After retaining MaloneBailey LLP, MaloneBailey LLP was able to render an unqualified audit opinion. We have authorized Schwartz Levitsky Feldman LLP to respond fully to the inquiries of MaloneBailey LLP concerning the disagreement. Schwartz Levitsky Feldman LLP alleged that it did not receive an unqualified opinion by independent legal counsel to confirm that that there were no violations of the Foreign Corrupt Practices Act (See Exhibit 16.1 to Amendment No. 1 to Form 8-K filed with the SEC on June 13, 2014). However, Schwartz Levitsky Feldman LLP failed to disclose that in fact it received two opinions from two law firms that there were no violations, as they did not consider these to be independent and unqualified. Further, Schwartz Levitsky Feldman LLP did not conduct any independent investigation, as they were repeatedly informed by the Company that the Company's independent legal counsel in New York was conducting such an investigation.
Thereafter, MaloneBailey issued an unqualified audit opinion after having access to the same information that Schwartz Levitsky Feldman had access to and audited our financial statements for the year ended December 31, 20102013 and reviewed our Form 10-Q for the period ended March 31, 2014. With respect to the audit of the period from December 12, 2006 (inception) through December 31, 2013, we obtained a waiver from the Division of Corporate Finance, Chief Accountant's Office. The amounts from December 12, 2006 to December 31, 2013 are labelled "unaudited".
During the years ended December 31, 2012 and 2011 and through February 6, 2012,June 3, 2014, there were no reportable events, as defined in Item 304(a)(1)(v) of Regulation S-K.
On February 9, 2012,August 8, 2014, we delivered a copy of this amended report to Collins Barrow TorontoSchwartz Levitsky Feldman LLP. On February 10, 2012, Collins Barrow TorontoAugust 12, 2014, Schwartz Levitsky Feldman LLP replied (“responded thereto. Their response is filed herewith as Exhibit 16.1 hereto”). In its reply, Collins Barrow Toronto LLP agreed withto our statements exceptamended Form 8-K filed with the statementSEC on August 13, 2014. The foregoing response advised the SEC that Schwartz Levitsky Feldman LLP sought an unqualified opinion from the foregoing New York law firm which was not supplied and in addition they were repeatedly informed by the first paragraph relating to its decision to cease doing US public company audits advising us that it should include the caveat that under certain circumstances it would continue to do US public company audits. The letter we received from Collins Barrow Toronto LLP did not contain such a caveat and the letter is attached hereto as “Exhibit 16.2”. Further, Collins Barrow Toronto LLP disagreed with our statement that “we issued reports for the period January 1, 2011 through September 30, 2011”. They stateCompany that the onlyCompany's independent New York law firm was conducting an independent investigation in this matter which report issued by Collins Barrow was onalso not provided, and as a result Schwartz Levitsky Feldman LLP was unable to alleviate their concerns of a potential violation of the financial statements as ofForeign Corrupt Practices Act and therefore were unable to release their audit opinion for the year ended December 31, 2010. We concur that only one report was issued during the year ended December 31, 2010 and for the period January 1, 2011 through September 30, 2011.2013.
On February 10, 2012,June 3, 2014, we engaged Schwartz Levitsky FeldmanMaloneBailey LLP, 2300 Yonge Street, Suite 1500, Toronto, Ontario, Canada M4P 1E49801 Westheimer Road, Houston, Texas 77042, an independent registered public accounting firm, as our principal independent accountant with the approval of our board of directors. We have not consulted with Schwartz Levitsky FeldmanMaloneBailey LLP on any accounting issues priorwas previously our independent accountant from October 21, 2009 to engaging them as our new auditors.February 28, 2011.
During the two most recent fiscal years and through the date of engagement, we have not consulted with Schwartz Levitsky FeldmanMaloneBailey LLP regarding either:
| 1. | The application of accounting principles to any specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on our financial statements, and neither a written report was provided to us nor oral advice was provided that Schwartz Levitsky FeldmanMaloneBailey, LLP concluded was an important factor considered by us in reaching a decision as to the accounting, auditing or financial reporting issue; or |
| | |
| 2. | Any matter that was either subject of disagreement or event, as defined in Item 304(a)(1)(iv)(A) of Regulation S-K and the related instruction to Item 304 of Regulation S-K, or a reportable event, as that term is explained in Item 304(a)(1)(iv)(A) of Regulation S-K. |
The Law Office of Conrad C. Lysiak, P.S., 601 West First Avenue, Suite 903, Spokane, Washington 99201, telephone (509) 624-1475 has passed on the legality of the securities offered by this prospectus.
Our fiscal year end is December 31. We will provide audited financial statements to our stockholders on an annual basis; the statements will be prepared by a firm of Independent Public Accountants.
Our unaudited financial statements for the period ended June 30, 2014 and our audited financial statements for the years ending December 31, 20122013 and December 31, 20112012 immediately follow:
Financial Statement Index
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| F-1 |
| F-2 |
| F-3 |
| F-4 |
| F-5 |
| |
| | |
| F-11 |
| |
| F-2F-13 |
| F-3F-14 |
| F-4F-15 |
| F-5F-16 |
| F-6F-17 |
KALLO INC.
Consolidated Balance Sheets (Amounts expressed in US dollars)
(Unaudited)
| | | June 30, | | | December 31, | |
| ASSETS | | 2014 | | | 2013 | |
| Current Assets: | | | | | | |
| Cash | | $ | 37,137 | | | $ | 27,448 | |
| Other receivables | | | 8,776 | | | | 12,276 | |
| Prepaid expenses | | | 93,234 | | | | 25,396 | |
| Total Current Assets | | | 139,147 | | | | 65,120 | |
| | | | | | | | | |
| Deposit – long term | | | 53,514 | | | | - | |
| Copyrights | | | 865,000 | | | | 865,000 | |
| Equipment, net | | | 25,226 | | | | 47,973 | |
| TOTAL ASSETS | | $ | 1,082,887 | | | $ | 978,093 | |
| | | | | | | | | |
| LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY) | | | | | | | | |
| Current Liabilities: | | | | | | | | |
| Accounts payable and accrued liabilities | | $ | 920,780 | | | $ | 1,082,587 | |
| Accrued officers' salaries | | | 20,000 | | | | 20,000 | |
| Loans payable | | | 61,007 | | | | 61,203 | |
| Short term loans payable | | | 48,685 | | | | 74,791 | |
| Short term loans payable – related parties | | | 1,450 | | | | 1,450 | |
| Deposit for shares to be issued | | | - | | | | 9,560 | |
| Deferred revenue | | | 24,990 | | | | 24,990 | |
| Total Current Liabilities | | | 1,076,912 | | | | 1,274,581 | |
| | | | | | | | | |
| TOTAL LIABILITIES | | | 1,076,912 | | | | 1,274,581 | |
| | | | | | | | | |
| Commitments and Contingencies | | | | | | | | |
| | | | | | | | | |
| Stockholders' Equity (Deficiency) | | | | | | | | |
Preferred stock, $0.00001 par value, 100,000,000 shares authorized, none issued and outstanding | | | - | | | | - | |
Common stock, $0.00001 par value, 500,000,000 (December 31, 2013 – 500,000,000) shares authorized, 346,459,183 and 319,106,020 shares issued and outstanding, respectively. | | | 3,465 | | | | 3,191 | |
| Additional paid-in capital | | | 20,048,723 | | | | 18,669,367 | |
| Accumulated deficit | | | (20,046,213 | ) | | | (18,969,046 | ) |
| | | | | | | | | |
| Total Stockholders' Equity (Deficiency) | | | 5,975 | | | | (296,488 | ) |
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY) | | $ | 1,082,887 | | | $ | 978,093 | |
See accompanying notes to the unaudited consolidated financial statements
KALLO INC.
Consolidated Statements of Operations (Amounts expressed in US dollars)
(Unaudited)
| | | Three Months Ended | | | Six Months Ended | |
| | | June 30, | | | June 30, | |
| | | 2014 | | | 2013 | | | 2014 | | | 2013 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Expenses | | | | | | | | | | | | |
| General and administration | | $ | 372,407 | | | $ | 441,986 | | | $ | 905,157 | | | $ | 894,875 | |
| Selling and marketing | | | 18,299 | | | | 124,056 | | | | 142,435 | | | | 174,068 | |
| Foreign exchange loss (gain) | | | 24,789 | | | | (19,653 | ) | | | (7,111 | ) | | | (12,294 | ) |
| Depreciation | | | 11,374 | | | | 22,142 | | | | 22,747 | | | | 44,284 | |
| Interest and financing costs | | | 5,304 | | | | 4,533 | | | | 10,515 | | | | 7,494 | |
| Change in fair value on convertible promissory note | | | - | | | | (333,612 | ) | | | - | | | | (34,003 | ) |
Gain on extinguishment of convertible promissory note | | | - | | | | (46,667 | ) | | | - | | | | (46,667 | ) |
| Loss on extinguishment of short term loan payable | | | - | | | | - | | | | 3,424 | | | | - | |
| | | | 432,173 | | | | 192,785 | | | | 1,077,167 | | | | 1,027,757 | |
| | | | | | | | | | | | | | | | | |
| Net Loss | | $ | (432,173 | ) | | $ | (192,785 | ) | | $ | (1,077,167 | ) | | $ | (1,027,757 | ) |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Basic and diluted net loss per share | | $ | (0.00 | ) | | $ | (0.00 | ) | | $ | (0.00 | ) | | $ | (0.00 | ) |
| | | | | | | | | | | | | | | | | |
| Weighted average shares used in calculating | | | | | | | | | | | | | | | | |
| Basic and diluted net loss per share | | | 340,737,150 | | | | 296,720,662 | | | | 336,549,384 | | | | 294,063,703 | |
See accompanying notes to the unaudited consolidated financial statements
KALLO INC.
Consolidated Statements of Changes in Stockholders' Equity (Deficiency) For the six months ended June 30, 2014
(Amounts expressed in US dollars)
(Unaudited)
| | | Preferred Stock | | | Common Stock | | | Additional | | | | | | Stockholders' | |
| | | $0.00001 par value | | | $0.00001 par value | | | Paid-In | | | Accumulated | | | Equity | |
| | | Shares | | | Amount | | | Shares | | | Amount | | | Capital | | | Deficit | | | (Deficiency) | |
| | | | | | | | | | | | | | | | | | | | | | |
| Balance December 31, 2013 | | | - | | | $ | - | | | | 319,106,020 | | | $ | 3,191 | | | $ | 18,669,367 | | | $ | (18,969,046 | ) | | $ | (296,488 | ) |
| Issuance of common shares – Kodiak put | | | - | | | | - | | | | 3,472,223 | | | | 35 | | | | 249,948 | | | | - | | | | 249,983 | |
Shares issued to director, employees and others for services | | | - | | | | - | | | | 5,760,000 | | | | 58 | | | | 230,342 | | | | - | | | | 230,400 | |
Settlement of short term loans payable by common shares | | | - | | | | - | | | | 680,000 | | | | 7 | | | | 27,193 | | | | - | | | | 27,200 | |
| Issuance of common shares for cash | | | - | | | | - | | | | 17,440,940 | | | | 174 | | | | 871,873 | | | | - | | | | 872,047 | |
| Net Loss | | | - | | | | - | | | | - | | | | - | | | | - | | | | (1,077,167 | ) | | | (1,077,167 | ) |
| Balance June 30, 2014 | | | | | | | | | | $ | 346,459,183 | | | $ | 3,465 | | | $ | 20,048,723 | | | $ | (20,046,213 | ) | | $ | 5,975 | |
See accompanying notes to the unaudited consolidated financial statements
KALLO INC.
Consolidated Statements of Cash Flows (Amounts expressed in US dollars)
(Unaudited)
| | | Six Months Ended | |
| | | June 30, | |
| | | 2014 | | | 2013 | |
| | | | | | | |
| CASH FLOWS FROM OPERATING ACTIVITIES | | | | | | |
| Net Loss | | $ | (1,077,167 | ) | | $ | (1,027,757 | ) |
| Adjustment to reconcile net loss to cash used in operating activities: | | | | | | | | |
| Depreciation | | | 22,747 | | | | 44,284 | |
| Stock based compensation | | | 230,400 | | | | - | |
| Loss on extinguishment of short term loan payable | | | 3,424 | | | | - | |
| Change in fair value on convertible promissory note | | | - | | | | (34,003 | ) |
| Gain on extinguishment of convertible promissory note | | | - | | | | (46,667 | ) |
| Non-cash settlement of expenses | | | - | | | | 5,000 | |
| Changes in operating assets and liabilities: | | | | | | | | |
| Increase in other receivables | | | 3,500 | | | | (90,559 | ) |
| (Increase) decrease in prepaid expenses | | | (121,352 | ) | | | 62,236 | |
| Increase (decrease) in accounts payable and accrued liabilities | | | (164,333 | ) | | | 148,583 | |
| NET CASH USED IN OPERATING ACTIVITIES | | | (1,102,781 | ) | | | (938,883 | ) |
| | | | | | | | | |
| CASH FLOWS FROM FINANCING ACTIVITIES | | | | | | | | |
| Proceeds from sale of common stock, net | | | 1,112,470 | | | | 805,000 | |
| Repayment of obligations under capital leases | | | - | | | | (61,724 | ) |
| Repayment of convertible promissory note | | | - | | | | (20,001 | ) |
| Proceeds from loans payable | | | - | | | | 19,840 | |
| Repayment of loans payable | | | - | | | | (47,151 | ) |
| NET CASH PROVIDED BY FINANCING ACTIVITIES | | | 1,112,470 | | | | 695,964 | |
| NET (DECREASE) INCREASE IN CASH | | | 9,689 | | | | (242,919 | ) |
| CASH - BEGINNING OF PERIOD | | | 27,448 | | | | 318,445 | |
| CASH - END OF PERIOD | | $ | 37,137 | | | $ | 75,526 | |
| SUPPLEMENTAL CASH FLOW INFORMATION | | | | | | | | |
| Income tax paid | | $ | - | | | $ | - | |
| Interest paid | | $ | - | | | $ | - | |
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES | | | | | | | | |
| Conversion of loans payable into common shares | | $ | 23,776 | | | $ | - | |
See accompanying notes to the unaudited consolidated financial statements
KALLO INC.
Notes to Consolidated Financial Statements June 30, 2014
(Amounts expressed in US dollars)
(Unaudited)
NOTE 1 – BUSINESS AND GOING CONCERN
Organization
Kallo Inc. develops software designed to taking medical information from many sources, and then depositing it into a single source as an electronic medical record for each patient.
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 of $20,046,213 at June 30, 2014. The Company is expected to incur additional losses as it develops its products and marketing channels.
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, 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. This raises substantial doubt about the Company's ability to continue as a going concern. 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 accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 8-03 of Regulation S-X related to smaller reporting companies. These unaudited consolidated financial statements should be read in conjunction with the annual audited consolidated financial statements and notes, which are included as part of the Company's Form 10-K filed with the SEC for the year ended December 31, 2013.
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, 2013 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.
Deposit – long term represents prepayments of rent due at the end of our new office lease (see Note 8).
Recently Adopted Accounting Pronouncements
The company has limited operations and is considered to be in the development stage. During the quarter ended March 31, 2014, the Company has elected to early adopt Accounting Standards Update No. 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements.The adoption of this ASU allows the Company to remove the inception to date information and all references to development stage.
Other than noted above, we do not expect the adoption of recently issued accounting pronouncements to have a significant impact on our results of operations, financial position or cash flow.
KALLO INC.
Notes to Consolidated Financial Statements
June 30, 2014
(Amounts expressed in US dollars)
(Unaudited)
NOTE 3 – COMMON STOCK
On January 16, 2014, the holder of a promissory note converted the principal and interest outstanding of $23,776 into 680,000 shares. The fair value of the stock issued was $27,200 and therefore the Company experienced a loss on extinguishment of $3,424. The Company also issued 5,760,000 shares valued at $230,400 to various employees and a director as compensation for services rendered. During the six months period ended June 30, 2014, the Company issued 17,440,940 shares for cash of $872,047 ($9,560 was collected prior to December 31, 2013).
On September 26, 2012, the Company entered into a investment agreement with Kodiak Capital Group, LLC whereby the company could issue 2,000,000 shares in exchange for an option to sell up to $2,000,000 worth of Company shares at a price equal to 80% of the lowest daily preceding five days Volume Weighted Average Price at the time of exercise and expires six months from inception. The Company recorded a stock subscription receivable (included in equity) in the amount of $100,000 which was determined to be the fair value of the option on September 26, 2012. On July 15, 2014, the Company and Kodiak extended the agreement through December 31, 2015. During the six months period ended June 30, 2014, the Company put $249,983 and 3,472,223 shares were issued pursuant to the above Agreement.
NOTE 4 – WARRANTS
Warrant activity for the six months ended June 30, 2014 is as follows:
| | | | | | Weighted Average | |
| | | Number of Warrants | | | Exercise Price | |
| Balance, December 31, 2013 | | | 1,580,000 | | | $ | 0.50 | |
| Granted | | | - | | | | - | |
| Cancelled | | | - | | | | - | |
| Exercised | | | - | | | | - | |
Balance, June 30, 2014 (unaudited) | | | 1,580,000 | | | $ | 0.50 | |
Each warrant is exercisable for a period of one year from the effective date of a registration statement filed with the SEC. Such registration statement was declared effective on October 9, 2013.
NOTE 5 – RELATED PARTY TRANSACTIONS
During the six months period ended June 30, 2014, 5,000,000 shares were granted to a director and officer of the Company as stock-based compensation and were valued at $200,000. 760,000 shares were granted to four other employees as stock-based compensation and were valued, using the market closing price on the date of grant, at $30,400. In addition, 2,765,400 shares were issued to a director of the Company for cash of $138,270.
Included in short term loans payable is an amount due to a shareholder and director of the Company for the amount of $1,450.
Included in accounts payable and accrued liabilities – other is an amount of $23,300 due to directors and officers of the Company as at June 30, 2014.
NOTE 6 – LOAN PAYABLE
As at June 30, 2014, a loan payable of $61,007 to an unrelated party bears interest at 6% per annum, is unsecured and is payable in monthly installments of principal and interest in the amount of Canadian $7,235, all due within the next 12 months.
KALLO INC.
Notes to Consolidated Financial Statements
June 30, 2014
(Amounts expressed in US dollars)
(Unaudited)
NOTE 7 – SHORT TERM LOANS PAYABLE
| | | June 30, 2014 | | | December 31, 2013 | |
| | | | | | | |
| Promissory note bearing interest at 10% per annum, due January 10, 2014 | | $ | - | | | $ | 25,664 | |
| Promissory note bearing interest at 10% per annum, due January 15, 2014 | | | 25,086 | | | | 25,528 | |
| Non-interest bearing advances from director | | | 1,450 | | | | 1,450 | |
| Non-interest bearing short term funding from third parties | | | 23,599 | | | | 23,599 | |
| | | $ | 50,135 | | | $ | 76,241 | |
On October 10, 2013, the Company issued a promissory note agreeing to pay the principal amount of Canadian $25,000 plus interest at the rate of 10% per annum on January 10, 2014. Kallo did not pay on the due date and on January 16, 2014 the holder converted the principal and interest outstanding of $23,776 into 680,000 common shares.
On October 15, 2013, the Company issued a promissory note agreeing to pay the principal amount of Canadian $25,000 plus interest at the rate of 10% per annum on January 15, 2014. Kallo did not pay on the due date and the holder agreed to extend the due date by three additional periods of three months up to October 15, 2014. The amount outstanding as at June 30, 2014 was $25,086, including interest.
As at June 30, 2014, the balance of $1,450 represented an advance from a director which was non-interest bearing, unsecured and has no fixed repayment date.
As at June 30, 2014, the balance of $23,599 represented short term funding provided by third parties which are non-interest bearing, unsecured and have no fixed repayment date.
NOTE 8 – COMMITMENTS AND CONTINGENCIES
Sales commission agreement
On November 20, 2012, Kallo signed a memorandum of understanding with the Ministry of Health of the Republic of Ghana for the supply and implementation of a National Mobile Care program with Mobile Clinics and Clinical Command Centers integrated with the existing healthcare system and improve the healthcare delivery services to the rural and remote population of Ghana at large for a total project cost for National implementation and Maintenance support for five years of US$158,500,000 (the "Ghana Project"). The Ministry of Health of the Republic of Ghana and Kallo Inc. have agreed that a contract for the implementation of the Mobile Care projects will be signed when a number of financing and other conditions have been satisfied.
In respect of the Ghana Project, the Company has agreed with two third parties to pay sales commissions equal to $8,717,625 and 4.5% (subject to a maximum of $7,162,375) of the contract price respectively for facilitating and securing the Contract with the Ministry of Health of the Republic of Ghana, payable within 7 to 14 business days of receipt of payment for the Project by Kallo in proportion to the payments received by Kallo.
KALLO INC.
Notes to Consolidated Financial Statements
June 30, 2014
(Amounts expressed in US dollars)
(Unaudited)
NOTE 8 – COMMITMENTS AND CONTINGENCIES (continued)
Sales commission agreement (continued)
On January 23, 2014, Kallo Inc. announced the signing of a US$200,000,925 Supply Contract with the Ministry of Health and Public Hygiene of the Republic Of Guinea (the "Guinea Project").
Under the Supply Contract, Kallo will implement customized healthcare delivery solutions for the Republic of Guinea. The components of the solutions include, MobileCare, RuralCare, Hospital Information Systems, Telehealth Systems, Pharmacy Information, disaster management, air and surface patient transportation systems and clinical training.
In respect of the Guinea Project, the Company has agreed with two third parties in Guinea to pay sales commissions for facilitating and securing the Contract with the Ministry of Health of the Republic of Guinea as follows:
| - | $20,000,000, payable as to an advance of $300,000 immediately after the loan agreement for the Kallo MobileCare and RuralCare program is signed by the Minister of Finance of the Republic of Guinea and the remainder within 7 to 14 business days of receipt of payment for the Project by Kallo in proportion to the payments received by Kallo. |
| - | $4,000,000, payable within 7 to 14 business days of receipt of payment for the Project by Kallo in proportion to the payments received by Kallo. In addition, a performance incentive payment of $1,000,000 will be payable to three persons related to the third party in accordance to the same terms of payment described herein. |
On March 8, 2014, the Company has agreed with a third party to pay sales commissions equal to $25,000,000 for facilitating and securing the Contract with the Government of the Republic of Sierra Leone, payable within 7 to 14 business days of receipt of payment for the Project by Kallo in proportion to the payments received by Kallo. In addition, an incentive payment of $7,000,000 will also be payable if the Government of Sierra Leone approve the Project on or before August 15, 2014 in accordance to the same terms of payment described above.
New lease
On June 27, 2014, the Company entered into a sublease agreement to lease office facilities under an operating lease for a term of two and a half years. The Company's future base and additional rental payment obligations under the lease commitments are as follows:
| Year ending December 31, 2014 | | $ | 124,372 | |
| Year ending December 31, 2015 | | | 285,469 | |
| Year ending December 31, 2016 | | | 261,680 | |
| | | | 671,521 | |
NOTE 9 – SUBSEQUENT EVENTS
Share issuance
From July 1, 2014 through August 13, 2014, the Company has issued 6,539,233 shares for cash of $326,962.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders of
Kallo Inc.
(A Development Stage Company)
Markham, Ontario, Canada
We have audited the accompanying consolidated balance sheet of Kallo Inc. and its subsidiary (collectively the "Company") as of December 31, 2013 and the related consolidated statements of operations and comprehensive loss, changes in stockholders' equity (deficiency), and cash flows for the year then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, based on our audit, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Kallo Inc. and its subsidiary as of December 31, 2013 and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.
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 inception and had an accumulated deficit of $18,969,046 at December 31, 2013 that raises substantial doubt about its ability to continue as a going concern. Management's plans in regard to this matter are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
MALONEBAILEY, LLP | |
| Houston, Texas | |
| July 21, 2014 | |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders of
Kallo Inc.
(A Development Stage Company)
We have audited the accompanying consolidated balance sheetssheet of Kallo Inc. (a development stage company) (the "Company") as of December 31, 2012 and 2011 and the related consolidated statements of operations and comprehensive loss, changes in stockholders’stockholders' equity (deficiency), and cash flows for the years then ended and for the period from December 12, 2006 (inception) to December 31, 2012.ended. These consolidated financial statements are the responsibility of the Company’sCompany's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. The consolidated financial statements as of December 31, 2010, and for the period from December 12, 2006 (inception) to December 31, 2010, were audited by other auditors whose reports expressed unqualified opinions on those consolidated financial statements. Our opinion on the consolidated statements of operations and comprehensive loss, changes in stockholders’ equity (deficiency), and cash flows for the period from December 12, 2006 (inception) to December 31, 2012 insofar as it relates to the amounts for prior periods through December 31, 2010, is based solely on the reports of the other auditors.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’sCompany's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the report of other auditors, providesprovide a reasonable basis for our opinion.
In our opinion, based on our audits and the report of other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2012 and 2011 and the results of its operations and its cash flows for the yearyears then ended and for the period from December 12, 2006 (inception) to December 31, 2012, in conformity with generally accepted accounting principles in the United States of America.America.
As discussed in Note 15 to the consolidated statements the 2010 consolidated financial statements have been restated to correct an error in accounting for extinguishment of debt with related parties during the year ended December 31, 2010.
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 inception and had an accumulated deficit of $17,365,763 at December 31, 2012 that raises substantial doubt about its ability to continue as a going concern. Management’sManagement's plans in regard to this matter are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
| | SCHWARTZ LEVITSKY FELDMAN LLP |
| Toronto, Ontario, Canada | Chartered Accountants |
| March 26, 2013 | Licensed Public Accountants |
F-1-52-
KALLO INC.
(formerly Diamond Technologies, Inc.)
(A Development Stage Company)
Consolidated Balance Sheets As at December 31, 2013 and 2012
(Amounts expressed in US dollars)
| | | December 31, |
| ASSETS | | 2012 | | 2011 (Restated-Note 15) |
| Current Assets: | | | | |
| Cash | $ | 318,445 | $ | 15,821 |
| Other receivables | | 87,196 | | 37,571 |
| Prepaid expenses | | 132,817 | | 78,768 |
| Total Current Assets | | 538,458 | | 132,160 |
| | | | | |
| Copyrights (Note 8) | | 865,000 | | 865,000 |
| Equipment, net (Note 6) | | 77,541 | | 166,110 |
| TOTAL ASSETS | $ | 1,480,999 | $ | 1,163,270 |
| | | | | |
| LIABILITIES AND STOCKHOLDERS’ DEFICIENCY | | | | |
| Current Liabilities: | | | | |
| Accrued liabilities | $ | 993,277 | $ | 1,253,283 |
| Accrued officers’ salaries | | 55,000 | | 175,000 |
| Acquisition cost payable (Note 8) | | 525 | | 56,502 |
| Current portion of obligations under capital leases (Note 7) | | 108,268 | | 94,377 |
| Loans payable (Note 9) | | 109,044 | | - |
| Convertible promissory notes (Note 10) | | 200,767 | | - |
| Short term loans payable (Note 11) | | 65,283 | | - |
| Deferred revenue | | 24,990 | | - |
| Total Current Liabilities | | 1,557,154 | | 1,579,162 |
| | | | | |
| Obligations Under Capital Leases (Note 7) | | - | | 83,179 |
| Deposit for shares to be issued (Note 3) | | - | | 394,474 |
| TOTAL LIABILITIES | | 1,557,154 | | 2,056,815 |
| | | | | |
| Commitments and Contingencies (Notes 8 and 13) | | | | |
| Going Concern (Note 1) | | | | |
| Subsequent Events (Note 14) | | | | |
| Stockholders’ Deficiency (Note 3) | | | | |
Preferred stock, $0.00001 par value, 100,000,000 shares authorized, none issued and outstanding | | - | | - |
Common stock, $0.00001 par value, 500,000,000 (2011 – 500,000,000) shares authorized, 291,347,036 and 113,072,632 shares issued and outstanding at December 31, 2012 and 2011, respectively. | | 2,913 | | 1,131 |
| Additional paid-in capital | | 17,286,695 | | 9,467,296 |
| Deficit accumulated during the development stage | | (17,365,763) | | (10,361,972) |
| | | | | |
| Total Stockholders’ Deficiency | | (76,155) | | (893,545) |
| TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIENCY | $ | 1,480,999 | $ | 1,163,270 |
| | | | |
| ASSETS | | 2013 | | | 2012 | |
| Current Assets: | | | | | | |
| Cash | | $ | 27,448 | | | $ | 318,445 | |
| Other receivables | | | 12,276 | | | | 3,976 | |
| Prepaid expenses | | | 25,396 | | | | 137,817 | |
| Total Current Assets | | | 65,120 | | | | 460,238 | |
| | | | | | | | | |
| Copyrights | | | 865,000 | | | | 865,000 | |
| Equipment, net | | | 47,973 | | | | 77,541 | |
| TOTAL ASSETS | | $ | 978,093 | | | $ | 1,402,779 | |
| | | | | | | | | |
| LIABILITIES AND STOCKHOLDERS' DEFICIENCY | | | | | | | | |
| Current Liabilities: | | | | | | | | |
| Accounts payable and accrued liabilities | | $ | 1,082,587 | | | $ | 915,582 | |
| Accrued officers' salaries | | | 20,000 | | | | 55,000 | |
| Current portion of obligations under capital leases | | | - | | | | 108,268 | |
| Loans payable | | | 61,203 | | | | 109,044 | |
| Convertible promissory notes | | | - | | | | 200,767 | |
| Short term loans payable | | | 74,791 | | | | 18,977 | |
| Short term loans payable – related parties | | | 1,450 | | | | 46,306 | |
| Deposit for shares to be issued | | | 9,560 | | | | - | |
| Deferred revenue | | | 24,990 | | | | 24,990 | |
| Total Current Liabilities | | | 1,274,581 | | | | 1,478,934 | |
| | | | | | | | | |
| TOTAL LIABILITIES | | | 1,274,581 | | | | 1,478,934 | |
| | | | | | | | | |
| Commitments and Contingencies | | | | | | | | |
| | | | | | | | | |
| Stockholders' Deficiency: | | | | | | | | |
Preferred stock, $0.00001 par value, 100,000,000 shares authorized, none issued or outstanding | | | - | | | | - | |
Common stock, $0.00001 par value, 500,000,000 shares authorized, 319,106,020 and 291,347,036 shares issued and outstanding, respectively. | | | 3,191 | | | | 2,913 | |
| Additional paid-in capital | | | 18,669,367 | | | | 17,286,695 | |
| Deficit accumulated during the development stage | | | (18,969,046 | ) | | | (17,365,763 | ) |
| | | | | | | | | |
| Total Stockholders' Deficiency | | | (296,488 | ) | | | (76,155 | ) |
| TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY | | $ | 978,093 | | | $ | 1,402,779 | |
The accompanying notes are an integral part of these consolidated financial statements
F-2-53-
KALLO INC.
(formerly Diamond Technologies, Inc.)
(A Development Stage Company)
Consolidated Statements of Operations and Comprehensive Loss (Amounts expressed in US dollars)
| | | | | | | | | | For the Period | |
| | | | | | | For the Period | | For the Year | | | For the Year | | | December 12, | |
| | | For the Year | | For the Year | | December 12, | | Ended | | | Ended | | | 2006 (inception) | |
| | | Ended | | Ended | | 2006 (inception) | | December 31, | | | to December 31, | | | to December 31, | |
| | | December 31, | | to December 31, | | to December 31, | | 2013 | | | 2012 | | | 2013 | |
| | | 2012 | | 2011 | | 2012 (Restated – Note 15) | | | | | | | | (Unaudited) | |
| | | | | | | | | | | | | | | | |
| Revenue | $ | - | $ | - | $ | 15,887 | | $ | - | | | $ | - | | | $ | 15,887 | |
| | | | | | | | | | | | | | | | | | | |
| Cost of Revenue | | - | | - | | 12,840 | |
| Cost of Sales | | | | - | | | | - | | | | 12,840 | |
| Gross Profit | | - | | - | | 3,047 | | | - | | | | - | | | | 3,047 | |
| | | | | | | | | | | | | | | | | | | |
| Expenses | | | | | | | | | | | | | | | | | | |
| General and administration | | 6,265,546 | | 4,555,257 | | 15,089,288 | | | 1,374,871 | | | | 6,265,546 | | | | 16,428,660 | |
| Selling and marketing | | 419,702 | | 426,017 | | 938,559 | | | 359,659 | | | | 419,702 | | | | 1,298,218 | |
| Software development costs | | - | | 162,815 | | 824,292 | | | - | | | | - | | | | 824,292 | |
| Foreign exchange loss | | 14,376 | | (32,446) | | (10,308) | |
| Foreign exchange (gain) loss | | | | (28,188 | ) | | | 14,376 | | | | (38,496 | ) |
| Depreciation | | 88,569 | | 85,296 | | 195,880 | | | 29,568 | | | | 88,569 | | | | 225,448 | |
| Interest and financing costs | | 64,831 | | 140,761 | | 209,301 | | | 18,140 | | | | 64,831 | | | | 227,441 | |
| Change in fair value on convertible promissory notes | | 150,767 | | - | | 150,767 | | | (34,099 | ) | | | 150,767 | | | | 116,668 | |
| Gain on extinguishment of convertible promissory notes | | | | (116,668 | ) | | | - | | | | (116,668 | ) |
| Loss on disposal of equipment | | - | | - | | 6,530 | | | - | | | | - | | | | 6,530 | |
| | | 7,003,791 | | 5,337,700 | | 17,404,309 | | | 1,603,283 | | | | 7,003,791 | | | | 18,972,093 | |
| | | | | | | | | | | | | | | | | | | |
| Net Loss and comprehensive loss | $ | (7,003,791) | $ | (5,337,700) | $ | (17,401,262) | | $ | (1,603,283 | ) | | $ | (7,003,791 | ) | | $ | (18,969,046 | ) |
| | | | | | | | | | | | | | | | | | | |
| Loss per share - Basic and diluted net | $ | (0.040) | $ | (0.087) | | | | $ | (0.01 | ) | | $ | (0.04 | ) | | | | |
| | | | | | | | | | | | | | | | | | | |
Weighted average number of shares outstanding - Basic and diluted | | 176,907,227 | | 61,446,207 | | | | | 302,240,028 | | | | 176,907,227 | | | | | |
For the years ended December 31 20122013 and 2011,2012, there were 1,580,000 warrants outstanding, which could potentially dilute basic earnings per share in the future, but which were not included in diluted loss per share as their effect was anti-dilutive.
The accompanying notes are an integral part of these consolidated financial statements
KALLO INC.
(A Development Stage Company)
Consolidated Statements of Changes in Stockholders' Equity (Deficiency) For the period from December 12, 2006 (inception) to December 31, 2013
(Amounts expressed in US dollars)
| | | | | | | | | | | | Deficit | | | | |
| | | | | | | | | | | | Accumulated | | | | |
| | | Preferred Stock | | | Common Stock | | | Additional | | | During the | | | Total | |
| | | $.00001 par value | | | $.00001 par value | | | Paid-In | | | Development | | | Stockholders' | |
| | | Shares | | | Amount | | | Shares | | | Amount | | | Capital | | | Stage | | | Equity (Deficit) | |
| | | | | | | | | | | | | | | | | | | | | | |
| Balance December 12, 2006 (Inception) | | | - | | | $ | - | | | | - | | | $ | - | | | $ | - | | | $ | - | | | $ | - | |
| Issuance of common shares | | | - | | | | - | | | | 15,000,000 | | | | 150 | | | | (100 | ) | | | - | | | | 50 | |
| Net loss | | | - | | | | - | | | | - | | | | - | | | | - | | | | (18,500 | ) | | | (18,500 | ) |
| Balance December 31, 2006 (Unaudited) | | | - | | | | - | | | | 15,000,000 | | | | 150 | | | | (100 | ) | | | (18,500 | ) | | | (18,450 | ) |
| Issuance of common shares | | | - | | | | - | | | | 1,721,502 | | | | 17 | | | | 172,608 | | | | - | | | | 172,625 | |
| Net loss | | | - | | | | - | | | | - | | | | - | | | | - | | | | (232,602 | ) | | | (232,602 | ) |
| Balance December 31, 2007 (Unaudited) | | | - | | | | - | | | | 16,721,502 | | | | 167 | | | | 172,508 | | | | (251,102 | ) | | | (78,427 | ) |
| Net loss | | | - | | | | - | | | | - | | | | - | | | | - | | | | (65,770 | ) | | | (65,770 | ) |
| Balance December 31, 2008 (Unaudited) | | | - | | | | - | | | | 16,721,502 | | | | 167 | | | | 172,508 | | | | (316,872 | ) | | | (144,197 | ) |
| Shares issued for Rophe Acquisition | | | - | | | | - | | | | 6,000,000 | | | | 60 | | | | 765,240 | | | | - | | | | 765,300 | |
| Issuance of common shares | | | - | | | | - | | | | 150,000 | | | | 2 | | | | 14,998 | | | | - | | | | 15,000 | |
| Stock based compensation | | | - | | | | - | | | | - | | | | - | | | | 7,500 | | | | - | | | | 7,500 | |
| Net Loss | | | - | | | | - | | | | - | | | | - | | | | - | | | | (440,374 | ) | | | (440,374 | ) |
| Balance December 31, 2009 (Unaudited) | | | - | | | | - | | | | 22,871,502 | | | | 229 | | | | 960,246 | | | | (757,246 | ) | | | 203,229 | |
| Issuance of common shares | | | - | | | | - | | | | 1,133,664 | | | | 12 | | | | 170,038 | | | | - | | | | 170,050 | |
| Issuance of common shares | | | - | | | | - | | | | 1,580,000 | | | | 16 | | | | 277,364 | | | | - | | | | 277,380 | |
| Issuance of common share warrants | | | - | | | | - | | | | - | | | | - | | | | 117,620 | | | | - | | | | 117,620 | |
| Shares issued to officers and directors | | | - | | | | - | | | | 13,500,000 | | | | 135 | | | | 3,374,865 | | | | - | | | | 3,375,000 | |
| Net Loss | | | - | | | | - | | | | - | | | | - | | | | - | | | | (3,662,252 | ) | | | (3,662,252 | ) |
Balance December 31, 2010 (Unaudited) (As previously stated) | | | - | | | $ | - | | | | 39,085,166 | | | $ | 392 | | | $ | 4,900,133 | | | $ | (4,419,498 | ) | | $ | 481,027 | |
| Correction of error (Note 15) | | | - | | | | - | | | | - | | | | - | | | | 604,774 | | | | (604,774 | ) | | | - | |
| Balance December 31, 2010 (Unaudited) | | | - | | | $ | - | | | | 39,085,166 | | | $ | 392 | | | $ | 5,504,907 | | | $ | (5,024,272 | ) | | $ | 481,027 | |
| Issuance of common shares | | | - | | | | - | | | | 13,604,132 | | | | 136 | | | | 718,558 | | | | - | | | | 718,694 | |
Shares issued to officers, directors, employees and others | | | - | | | | - | | | | 58,500,000 | | | | 585 | | | | 3,124,415 | | | | - | | | | 3,125,000 | |
Shares issued for repayment of consulting fees | | | - | | | | - | | | | 1,000,000 | | | | 10 | | | | 69,990 | | | | - | | | | 70,000 | |
Settlement of accounts payable by common shares | | | - | | | | - | | | | 883,334 | | | | 8 | | | | 49,426 | | | | - | | | | 49,434 | |
| Net Loss | | | - | | | | - | | | | - | | | | - | | | | - | | | | (5,337,700 | ) | | | (5,337,700 | ) |
| Balance December 31, 2011 (Audited) | | | - | | | $ | - | | | | 113,072,632 | | | $ | 1,131 | | | $ | 9,467,296 | | | $ | (10,361,972 | ) | | $ | (893,545 | ) |
| Issuance of common shares | | | - | | | | - | | | | 52,589,910 | | | | 526 | | | | 2,628,971 | | | | - | | | | 2,629,497 | |
Shares issued to employees and others for Services | | | - | | | | - | | | | 117,834,494 | | | | 1,178 | | | | 4,745,238 | | | | - | | | | 4,746,416 | |
Shares issued for repayment of consulting Fees | | | - | | | | - | | | | 5,000,000 | | | | 50 | | | | 349,950 | | | | - | | | | 350,000 | |
Settlement of accounts payable by common shares | | | - | | | | - | | | | 350,000 | | | | 3 | | | | 35,424 | | | | - | | | | 35,427 | |
| Settlement of compensation to past officer | | | - | | | | - | | | | 500,000 | | | | 5 | | | | 59,995 | | | | - | | | | 60,000 | |
Commitment shares held in trust by Kodiak (Note 3) | | | - | | | | - | | | | 2,000,000 | | | | 20 | | | | 99,980 | | | | - | | | | 100,000 | |
| Receivable on stock subscription | | | - | | | | - | | | | - | | | | - | | | | (100,159 | ) | | | - | | | | (100,159 | ) |
| Net Loss | | | - | | | | - | | | | - | | | | - | | | | - | | | | (7,003,791 | ) | | | (7,003,791 | ) |
| Balance December 31, 2012 (Audited) | | | - | | | $ | - | | | | 291,347,036 | | | $ | 2,913 | | | $ | 17,286,695 | | | $ | (17,365,763 | ) | | $ | (76,155 | ) |
| Issuance of common shares | | | - | | | | - | | | | 26,402,460 | | | | 264 | | | | 1,319,860 | | | | - | | | | 1,320,124 | |
| Shares issued for consulting fees | | | - | | | | - | | | | 200,000 | | | | 2 | | | | 4,998 | | | | - | | | | 5,000 | |
Settlement of short term loans payable by common shares | | | - | | | | - | | | | 1,156,524 | | | | 12 | | | | 46,249 | | | | - | | | | 46,261 | |
Gain on extinguishment of loan payable to related party | | | - | | | | - | | | | - | | | | - | | | | 11,565 | | | | - | | | | 11,565 | |
| Net Loss | | | - | | | | - | | | | - | | | | - | | | | - | | | | (1,603,283 | ) | | | (1,603,283 | ) |
| Balance December 31, 2013 (Audited) | | | - | | | $ | - | | | | 319,106,020 | | | $ | 3,191 | | | $ | 18,669,367 | | | $ | (18,969,046 | ) | | $ | (296,488 | ) |
The accompanying notes are an integral part of these consolidated financial statements
F-3-55-
KALLO INC.
(formerly Diamond Technologies, Inc.)
(A Development Stage Company)
Consolidated Statements of ChangesCash Flows (Amounts expressed in Stockholders’ Equity (Deficiency)
For the period from December 12, 2006 (inception) through December 31, 2012US dollars)
| | | | | | | | | | Deficit | | | |
| | | | | | | | | | Accumulated | | | |
| | Preferred Stock | | Common Stock | | | Additional | | | During the | | | Total |
| | $.00001 par value | | $.00001 par value | | | Paid-In | | | Development | | | Stockholders’ |
| | Shares | | | Amount | | Shares | | | Amount | | | Capital | | | Stage | | | Equity (Deficit) |
| | | | | | | | | | | | | | | | | | | |
Balance December 12, 2006 (Inception) | - | | $ | - | | - | | $ | - | | $ | - | | $ | - | | $ | - |
| Issuance of common shares | - | | | - | | 5,000,000 | | | 150 | | | (100) | | | - | | | 50 |
| Net loss | - | | | - | | - | | | - | | | - | | | (18,500) | | | (18,500) |
| Balance December 31, 2006 | - | | | - | | 5,000,000 | | | 150 | | | (100) | | | (18,500) | | | (18,450) |
| Issuance of common shares | - | | | - | | 573,834 | | | 17 | | | 172,608 | | | - | | | 172,625 |
| Net loss | - | | | - | | - | | | - | | | - | | | (232,602) | | | (232,602) |
Balance December 31, 2007 (Audited) | - | | | - | | 5,573,834 | | | 167 | | | 172,508 | | | (251,102) | | | (78,427) |
| Three-for-one stock split | - | | | - | | 11,147,668 | | | - | | | - | | | - | | | - |
| Net loss | - | | | - | | - | | | - | | | - | | | (65,770) | | | (65,770) |
Balance December 31, 2008 (Audited) | - | | | - | | 16,721,502 | | | 167 | | | 172,508 | | | (316,872) | | | (144,197) |
| Shares issued for Rophe Acquisition | - | | | - | | 6,000,000 | | | 60 | | | 765,240 | | | - | | | 765,300 |
| Issuance of common shares | - | | | - | | 150,000 | | | 2 | | | 14,998 | | | - | | | 15,000 |
| Stock based compensation | - | | | - | | - | | | - | | | 7,500 | | | - | | | 7,500 |
| Net Loss | - | | | - | | - | | | - | | | - | | | (440,374) | | | (440,374) |
Balance December 31, 2009 (Audited) | - | | | - | | 22,871,502 | | | 229 | | | 960,246 | | | (757,246) | | | 203,229 |
| Issuance of common shares | - | | | - | | 1,133,664 | | | 12 | | | 170,038 | | | - | | | 170,050 |
| Issuance of common shares | - | | | - | | 1,580,000 | | | 16 | | | 277,364 | | | - | | | 277,380 |
| Issuance of common share warrants | - | | | - | | - | | | - | | | 117,620 | | | - | | | 117,620 |
| Shares issued to officers and directors | - | | | - | | 13,500,000 | | | 135 | | | 3,374,865 | | | - | | | 3,375,000 |
| Net Loss | - | | | - | | - | | | - | | | - | | | (3,662,252) | | | (3,662,252) |
Balance December 31, 2010 (Audited) (As previously stated) | - | | $ | - | | 39,085,166 | | $ | 392 | | $ | 4,900,133 | | $ | (4,419,498) | | $ | 481,027 |
| Correction of error (Note 15) | - | | | - | | - | | | - | | | 604,774 | | | (604,774) | | | - |
Balance December 31, 2010 (Audited) (As restated) | - | | $ | - | | 39,085,166 | | $ | 392 | | $ | 5,504,907 | | $ | (5,024,272) | | $ | 481,027 |
| Issuance of common shares | - | | | - | | 13,604,132 | | | 136 | | | 718,558 | | | - | | | 718,694 |
Shares issued to officers, directors, employees and others | - | | | - | | 58,500,000 | | | 585 | | | 3,124,415 | | | - | | | 3,125,000 |
Shares issued for repayment of consulting fees | - | | | - | | 1,000,000 | | | 10 | | | 69,990 | | | - | | | 70,000 |
Settlement of accounts payable by common shares | - | | | - | | 883,334 | | | 8 | | | 49,426 | | | - | | | 49,434 |
| Net Loss | - | | | - | | - | | | - | | | - | | | (5,337,700) | | | (5,337,700) |
Balance December 31, 2011 (Audited) (As restated) | - | | $ | - | | 113,072,632 | | $ | 1,131 | | $ | 9,467,296 | | $ | (10,361,972) | | $ | (893,545) |
| Issuance of common shares | - | | | - | | 52,589,910 | | | 526 | | | 2,628,971 | | | - | | | 2,629,497 |
Shares issued to employees and others for services | - | | | - | | 117,834,494 | | | 1,178 | | | 4,745,238 | | | - | | | 4,746,416 |
| Shares issued for repayment of consulting fees | - | | | - | | 5,000,000 | | | 50 | | | 349,950 | | | - | | | 350,000 |
Settlement of accounts payable by common shares | - | | | - | | 350,000 | | | 3 | | | 35,424 | | | - | | | 35,427 |
| Settlement of compensation to past officer | - | | | - | | 500,000 | | | 5 | | | 59,995 | | | - | | | 60,000 |
Commitment shares held in trust by Kodiak(Note 3) | - | | | - | | 2,000,000 | | | 20 | | | 99,980 | | | - | | | 100,000 |
| Receivable on stock subscription | - | | | - | | - | | | - | | | (100,159) | | | - | | | (100,159) |
| Net Loss | - | | | - | | - | | | - | | | - | | | (7,003,791) | | | (7,003,791) |
Balance December 31, 2012 (Audited) | - | | $ | - | | 291,347,036 | | $ | 2,913 | | $ | (17,286,695) | | $ | (17,365,763) | | $ | (76,155) |
| | | For the Year Ended December 31, 2013 | | | For the Year Ended December 31, 2012 | | | For the Period December 12, 2006 (inception) to December 31, 2013 (Unaudited) | |
| CASH FLOWS FROM OPERATING ACTIVITIES: | | | | | | | | | |
| Net loss | | $ | (1,603,283 | ) | | $ | (7,003,791 | ) | | $ | (18,969,046 | ) |
| Adjustments to reconcile net loss to net cash used in operating activities | | | | | | | | | | | | |
| Depreciation | | | 29,568 | | | | 88,569 | | | | 225,448 | |
| Stock-based compensation | | | 5,000 | | | | 4,729,531 | | | | 11,234,832 | |
| Write-off of deferred financing costs | | | - | | | | - | | | | 66,064 | |
| Extinguishment loss on revision of terms of loan conversion into shares | | | - | | | | - | | | | 37,404 | |
| Loss on disposal of equipment | | | - | | | | - | | | | 6,530 | |
| Non-cash interest accrued | | | 1,121 | | | | 5,390 | | | | 9,847 | |
| Fair value loss on inception date of convertible promissory note | | | - | | | | 203,868 | | | | 203,868 | |
| Change in fair value on convertible promissory notes | | | (34,099 | ) | | | (53,101 | ) | | | (87,200 | ) |
| Gain on extinguishment of convertible promissory notes | | | (116,668 | ) | | | - | | | | (116,668 | ) |
| Non-cash expenses | | | - | | | | 415,181 | | | | 428,414 | |
| Changes in operating assets and liabilities: | | | | | | | | | | | | |
| Decrease (Increase) in other receivables | | | (8,300 | ) | | | (49,625 | ) | | | (12,275 | ) |
| Decrease (Increase) in prepaid expenses | | | 112,421 | | | | (54,049 | ) | | | 36,371 | |
| Increase (Decrease) in accounts payable and accrued liabilities | | | 23,282 | | | | (232,220 | ) | | | 1,565,201 | |
| Increase in deferred revenue | | | - | | | | 24,990 | | | | 24,990 | |
| NET CASH USED IN OPERATING ACTIVITIES | | | (1,590,958 | ) | | | (1,925,257 | ) | | | (5,346,220 | ) |
| | | | | | | | | | | | | |
| CASH FLOWS FROM INVESTING ACTIVITIES: | | | | | | | | | | | | |
| Cash acquired in Rophe acquisition | | | - | | | | - | | | | 300 | |
| Purchase of equipment | | | - | | | | - | | | | (14,418 | ) |
| CASH USED IN BY INVESTING ACTIVITIES | | | - | | | | - | | | | (14,118 | ) |
| | | | | | | | | | | | | |
| CASH FLOWS FROM FINANCING ACTIVITIES: | | | | | | | | | | | | |
| Stockholder advances | | | 19,840 | | | | - | | | | 61,797 | |
| Proceeds from issuance of common stock | | | 1,290,124 | | | | 2,235,004 | | | | 5,436,342 | |
| Proceeds for shares to be issued | | | 9,560 | | | | - | | | | 9,560 | |
| Deferred financing costs | | | - | | | | - | | | | (26,064 | ) |
| Repayment of obligations under capital leases | | | (47,841 | ) | | | (69,288 | ) | | | (226,292 | ) |
| (Repayment of) Proceeds from convertible promissory notes | | | (20,000 | ) | | | 50,000 | | | | 30,000 | |
| Proceeds from loans payable | | | 48,278 | | | | 12,165 | | | | 102,443 | |
| CASH PROVIDED BY FINANCING ACTIVITIES | | | 1,299,961 | | | | 2,227,881 | | | | 5,387,786 | |
| | | | | | | | | | | | | |
| NET (DECREASE) INCREASE IN CASH | | | (290,997 | ) | | | 302,624 | | | | 27,448 | |
| CASH | | | | | | | | | | | | |
| Beginning of period | | | 318,445 | | | | 15,821 | | | | - | |
| End of period | | $ | 27,448 | | | $ | 318,445 | | | $ | 27,448 | |
| | | | | | | | | | | | | |
| SUPPLEMENTAL CASH FLOW INFORMATION: | | | | | | | | | | | | |
| Income tax paid | | $ | - | | | $ | - | | | | | |
| Interest paid | | $ | 18,090 | | | $ | 45,150 | | | | | |
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES | | | | | | | | | | | | |
| Accounts payable as partial consideration for Rophe acquisition | | $ | - | | | $ | - | | | $ | 100,000 | |
| Common stock issued as partial consideration for Rophe acquisition | | $ | - | | | $ | - | | | $ | 765,300 | |
| Acquisition of equipment under capital lease obligations | | $ | - | | | $ | - | | | $ | 265,706 | |
| Conversion of loans payable into common shares | | $ | 57,826 | | | $ | - | | | $ | 738,033 | |
| Common stock issued to third party for payment of debt | | $ | 30,000 | | | $ | - | | | $ | 30,000 | |
| Maturity of capital lease obligations, included in accounts payable | | $ | 108,268 | | | $ | - | | | $ | 108,268 | |
| Settlement of accounts payable by common shares | | $ | - | | | $ | 35,427 | | | $ | 84,861 | |
| Commitment shares held in trust by Kodiak | | $ | - | | | $ | 100,000 | | | $ | 100,000 | |
The accompanying notes are an integral part of these consolidated financial statements
F-4-56-
KALLO INC.
(formerly Diamond Technologies, Inc.)
(A Development Stage Company)
Consolidated Statements of Cash Flows
| | | For the Year Ended December 31, 2012 | | | For the Year Ended December 31, 2011 | | | For the Period December 12, 2006 (inception) to December 31, 2012 (Restated – Note 15) |
| CASH FLOWS FROM OPERATING ACTIVITIES: | | | | | | | | |
| Net loss | $ | (7,003,791) | | $ | (5,337,700) | | $ | (17,401,262) |
| Adjustments to reconcile net loss to net cash used in operating activities | | | | | | | | |
| Depreciation | | 88,569 | | | 85,296 | | | 195,880 |
| Stock-based compensation | | 4,729,531 | | | 3,119,150 | | | 11,265,331 |
| Write-off of deferred financing costs | | - | | | 66,064 | | | 66,064 |
| Extinguishment loss on revision of terms of loan conversion into shares | | - | | | 37,404 | | | 37,404 |
| Loss on disposal of equipment | | - | | | - | | | 6,530 |
| Non-cash interest accrued | | 5,390 | | | 3,336 | | | 8,726 |
| Non-cash derivative loss | | 203,868 | | | - | | | 203,868 |
| Change in fair value on convertible promissory notes | | (53,101) | | | - | | | (53,101) |
| Non-cash expenses | | 415,181 | | | 13,233 | | | 428,414 |
| Changes in operating assets and liabilities: | | | | | | | | |
| Increase in other receivables | | (49,625) | | | (37,571) | | | (87,196) |
| Increase in prepaid expenses | | (54,049) | | | (13,101) | | | (76,050) |
| Increase in accrued liabilities | | (232,220) | | | 1,080,656 | | | 1,625,140 |
| Increase in deferred revenue | | 24,990 | | | - | | | 24,990 |
| NET CASH USED IN OPERATING ACTIVITIES | | (1,925,257) | | | (983,233) | | | (3,755,262) |
| | | | | | | | | |
| CASH FLOWS FROM INVESTING ACTIVITIES: | | | | | | | | |
| Cash acquired in Rophe acquisition | | - | | | - | | | 300 |
| Purchase of equipment | | - | | | - | | | (14,418) |
| CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES | | - | | | - | | | (14,118) |
| | | | | | | | | |
| CASH FLOWS FROM FINANCING ACTIVITIES: | | | | | | | | |
| Stockholder advances (repayments) | | - | | | - | | | 41,957 |
| Proceeds from issuance of common stock | | 2,235,004 | | | 654,574 | | | 3,751,744 |
| Proceeds for shares to be issued | | - | | | 394,474 | | | 394,474 |
| Deferred financing costs | | - | | | - | | | (26,064) |
| Repayment of obligations under capital leases | | (69,288) | | | (109,163) | | | (178,451) |
| Proceeds from convertible promissory notes | | 50,000 | | | - | | | 50,000 |
| Proceeds from loans payable | | 12,165 | | | - | | | 54,165 |
| CASH PROVIDED BY FINANCING ACTIVITIES | | 2,227,881 | | | 939,885 | | | 4,087,825 |
| | | | | | | | | |
| NET (DECREASE) INCREASE IN CASH | | 302,624 | | | (43,348) | | | 318,445 |
| CASH | | | | | | | | |
| Beginning of period | | 15,821 | | | 59,169 | | | - |
| End of period | $ | 318,445 | | $ | 15,821 | | $ | 318,445 |
| | | | | | | | | |
| SUPPLEMENTAL CASH FLOW INFORMATION: | | | | | | | | |
| Income tax paid | $ | - | | $ | - | | | |
| Interest paid | $ | 45,150 | | $ | 51,957 | | | |
| | | | | | | | | |
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES | | | | | | | | |
| | | | | | | | | |
| Accounts payable as partial consideration for Rophe acquisition | $ | - | | $ | - | | $ | 100,000 |
| Common stock issued as partial consideration for Rophe acquisition | $ | - | | $ | - | | $ | 765,300 |
| Acquisition of equipment under capital lease obligations | $ | - | | $ | 40,747 | | $ | 265,706 |
| Conversion of loans payable into common shares | $ | - | | $ | 42,000 | | $ | 680,207 |
| Settlement of accounts payable by common shares | $ | 35,427 | | $ | 49,434 | | $ | 84,861 |
| Commitment shares held in trust by Kodiak | $ | 100,000 | | $ | - | | $ | 100,000 |
The accompanying notes are an integral part of these consolidated financial statements
F-5
KALLO INC.
(formerly Diamond Technologies, Inc.)
(A Development Stage Company)
Notes to Consolidated Financial Statements December 31, 2013 and 2012
(Amounts expressed in US dollars)
NOTE 1 - ORGANIZATION AND GOING CONCERN
Organization
On January 14, 2011, Kallo Inc. (the "Company" or "Kallo") was incorporated in Nevada and merged into Diamond Technologies Inc., at which point the Company changed its name to Kallo Inc.
Kallo Inc. (the “Company” or “Kallo”), formerly Diamond Technologies, Inc., a development stage company, was incorporated in Nevada on December 12, 2006. The Company originally offered media, inks, printing, and graphic design services to the large format digital printing industry. The Company’s fiscal year ends on December 31st. On December 31, 2009, Kallo entered into an agreement with Rophe Medical Technologies Inc. and its shareholders (collectively “Rophe”) wherein Kallo acquired all of the issued and outstanding shares of common stock of Rophe. As a result of the Rophe transaction, Kallo changed its business focus from selling printing equipment to manufacturing and developingdevelops software designed to taking medical information from many sources, and then depositing it into a single source as an electronic medical record for each patient.
On January 14, 2011, Kallo Inc. was incorporated in Nevada and merged into Diamond Technologies Inc., at which point the Company changed its name to Kallo Inc.
On December 10, 2010, the Company entered into a North American Authorized Agency Agreement (the “Agreement”) with Advanced Software Technologies, Inc., located in the Grand Cayman Islands (“AST”). Under the Agreement, the Company was appointed sales agent for AST and will be paid fees by AST for selling AST products. The Company has agreed to pay AST a total of $213,000 for modification of the AST products to comply with the requirements of the Canadian Electronic Health Record market. The AST technology is being incorporated into the Company’s medical information software currently in development. Delays in announcing EMR specifications 5.0 by Ontario and Canadian regulatory bodies has caused a delay in the marketing plans for launching AST products in the Canadian market despite our EMR having been announced as the official EMR of the paediatric section– Ontario Medical Association.
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 of $17,401,262$18,969,046 at December 31, 2012.2013. The Company will continueis expected to incur additional losses as it develops its products and marketing channels during 2013.channels.
The Company has met its historical working capital requirements from the sale of common shares and loans from an officer/stockholder.related party 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. This raises substantial doubt about the Company’sCompany's 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. After the year end, the Company raised $230,000. (Note 14)
F-6
KALLO INC.
(formerly Diamond Technologies, Inc.)
(A Development Stage Company)
Notes to Consolidated Financial Statements
NOTE 2 - ACCOUNTING POLICIES AND OPERATIONS
Basis of Presentation
The consolidated financial statements werehave been prepared using accounting principles generally accepted in the United States of America (“US GAAP”) as applicable to a development stage enterprise under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 915-205.
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.
Loss Per ShareCash
Cash includes cash on hand and highly liquid investments with a maturity of three months or less at acquisition.
KALLO INC.
(A Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2013 and 2012
(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 is computed by dividing the net loss for the year by the weighted average number of common and potentially dilutive common shares outstanding during the year, adjusted by any effects of warrants and options outstanding, if dilutive, that may add to the number of common shares during the year.year.
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 term intangiblelived assets, and equipment, measurement of non-monetary transactions and provision for penalties and interest on estimated payroll tax liabilities.
Equipment
Equipment comprises computer equipment and is stated at cost less accumulated depreciation. The cost of computer equipment is depreciated using the straight-line method over the estimated useful life of the related assets of between 3 - 5 years.
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.
F-7
KALLO INC.
(formerly Diamond Technologies, Inc.)
(A Development Stage Company)
Notes to Consolidated Financial Statements
NOTE 2 – ACCOUNTING POLICIES AND OPERATIONS (continued)
Software Development Costs (continued)
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.
KALLO INC.
(A Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2013 and 2012
(Amounts expressed in US dollars)
NOTE 2 – ACCOUNTING POLICIES AND OPERATIONS (continued)
Intangible Assets - Copyrights
Copyrights are stated at cost. According to the Canadian Intellectual Property laws in Canada, the life of a copyright is the author’sauthor's life, the remainder of the calendar year in which the author dies, and a period of 50 years following the end of that calendar year. As a result, the useful life of the copyrights are determined to be indefinite are not amortized but subject to testing for impairment. The Company reviews the value of the copyrights on an annual basis to determine if the value has been impaired. Based on its evaluations, there was no impairment of copyrights as at December 31, 20122013 and 2011.2012.
Impairment of Long-lived Assets
Long-lived assets comprise of equipment and copyrights. The Company accounts for impairment of long-lived assets in accordance with the guidance established in ASC 360, Accounting for the Impairment or Disposal of Long-Lived Assets, which requires the Company 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’sasset's (or asset group’s)group's) fair value. Management evaluated whether there are any adverse qualitative factors in respect to copyrights and equipment indicating that they might be impaired. Since there were indicators of impairment, Management reviewed its long-lived intangible assets and has determined that no impairment exists that relate to these assets through December 31, 2012.2013.
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's functional and reporting currency is the United States dollar. Occasional transactions 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.
-59-
F-8
KALLO INC.
(formerly Diamond Technologies, Inc.)
(A Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2013 and 2012
(Amounts expressed in US dollars)
NOTE 2 – ACCOUNTING POLICIES AND OPERATIONS (continued)
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.
The Company had no material adjustments to its liabilities for unrecognized income tax benefits according to the provisions of FASB ASC 740.
Foreign Currency Translation
The Company’s functional and reporting currency is the United States dollar. Occasional transactions 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.
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).
-60-
F-9
KALLO INC.
(formerly Diamond Technologies, Inc.)
(A Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2013 and 2012
(Amounts expressed in US dollars)
NOTE 2 – ACCOUNTING POLICIES AND OPERATIONS (continued)
Fair Value of Financial Instruments (continued)
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 reflect management’smanagement's own assumptions about the assumptions a market participant would use in pricing the asset or liability.
An 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.
The following is a summary of our financial instruments that are accounted for at fair value of cash, other receivablesby level within the fair value hierarchy at December 31, 2013 and accrued liabilities approximate their carrying amounts due to their short term nature. Cash is classified as Level 2 and other receivables and accrued liabilities classified as Level 3.2012:
| December 31, 2013 | | | | | | | | | | | | |
| | | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
| Assets: | | | | | | | | | | | | |
| Cash | | $ | 27,448 | | | $ | - | | | $ | - | | | $ | 27,448 | |
| December 31, 2012 | | | | | | | | | | | | |
| | | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
| Assets: | | | | | | | | | | | | |
| Cash | | $ | 318,445 | | | $ | - | | | $ | - | | | $ | 318,445 | |
| Liabilities: | | | | | | | | | | | | | | | | |
| Convertible promissory notes | | $ | 200,767 | | | $ | - | | | $ | - | | | $ | 200,767 | |
Stock-Based Compensation
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).
ContingenciesKALLO INC.
(A Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2013 and 2012
(Amounts expressed in US dollars)
NOTE 2 - ACCOUNTING POLICIES AND OPERATIONS (continued)
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. See Note 13.
Deferred Financing Costs
Deferred financing costs are capitalized and amortized, utilizing the effective interest method, as a component of interest expense over the terms of the respective financing arrangements. These deferred costs are included in other assets, net in our accompanying Consolidated Balance Sheets.
F-10
KALLO INC.
(formerly Diamond Technologies, Inc.)
(A Development Stage Company)
Notes to Consolidated Financial Statements
NOTE 2 - ACCOUNTING POLICIES AND OPERATIONS (continued)
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 employee's requisite service period that(generally the services are performed.vesting period of the equity grant).
Common Stock Purchase Warrants
The Company accounts for common stock purchase warrants at fair value in accordance with ASC 815-40 “DERIVATIVES"DERIVATIVES AND HEDGING.”" The Black-Scholes option pricing valuation method is used to determine fair value of these warrants consistent with ASC 718, “COMPENSATION"COMPENSATION - STOCK COMPENSATION.”" Use of this method requires that the Company make assumptions regarding stock volatility, dividend yields, expected term of the warrants and risk-free interest rates.
Convertible promissory note
Convertible promissory note is accounted for under FASB Codification ASC 815-15-25-4 (formerly SFAS 155). In accordance with the standard, the Company performs a fair value re-measurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation. The fair value has been defined as the common stock equivalent value, enhanced by the fair value of the default put plus the present value of the coupon. See Note 10.
Non-monetary transactions
The Company applies ASC 845, “Accounting"Accounting for Non-Monetary Transactions”Transactions", to account for services received through non-cash transactions based on the fair values of the services involved, where such values can be determined. If fair value of the services received cannot be determined, then the fair value of the shares given as consideration is used.
Revenue recognition
Revenue is 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 primarily consists of the fees the Company earns related to installation and consulting services. The Company recognizes revenue from professional services upon delivery or completion of performance.
Training services are recognized upon delivery of the training.
KALLO INC.
(A Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2013 and 2012
(Amounts expressed in US dollars)
NOTE 2 - ACCOUNTING POLICIES AND OPERATIONS (continued)
Deferred revenue
Deferred revenue represents amounts invoiced to customers for which the related revenue has not been recognized because one or more of the revenue recognition criteria have not been met. The current portion of the deferred revenue represents the amount that is expected to be recognized as revenue within one year of the consolidated balance sheet date.
Lease accounting
The Company evaluates each lease for classification as either a capital lease or an operating lease. If substantially all of 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 calls for a scheduled rent increase during the lease term, the Company recognizes the lease expense on a straight-line basis over the lease term.
The Company determines the straight-line rent expense impact 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 $65,484 and $251,844 and$396,858,, during the years ended December 31, 2013 and 2012 and2011,, respectively.
Recently Adopted Accounting Pronouncements
In May 2011,We do not expect the FASB issued ASU 2011-04, “Fair Value Measurement (Topic 820), Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS”. The amendment results in a consistent definition of fair value and ensures the fair value measurement and disclosure requirements are similar between GAAP and International Financial Reporting Standards (“IFRS”). This amendment changes certain fair value measurement principles and enhances the disclosure requirements particularly for Level 3 fair value measurements. This amendment will be effective for the Company on January 1, 2012. We adopted the amendments on January 1, 2012 on a prospective basis. The adoption of ASU No. 2011-04 had no material effectrecently issued accounting pronouncements to have a significant impact on our results of operations, financial statements.position or cash flow.
F-11
KALLO INC.
(formerly Diamond Technologies, Inc.)
(A Development Stage Company)
Notes to Consolidated Financial Statements
NOTE 2 – ACCOUNTING POLICIES AND OPERATIONS (continued)
Recently Adopted Accounting Pronouncements (continued)
In June 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2011-05, Presentation of Comprehensive Income, which revises the manner in which entities present comprehensive income in their financial statements. The ASU removes the presentation options in Accounting Standard Codification Topic 220 and requires entities to report components of comprehensive income in either 1) a continuous statement of comprehensive income or 2) two separate but consecutive statements. In December 2011, FASB issued Accounting Standards Update (“ASU”) No. 2011-12, “Comprehensive Income” which effectively defers the changes in ASU No. 2011-05, “Presentation of Comprehensive Income” that relate to the presentation of reclassification adjustments out of accumulated other comprehensive income to the first quarter of 2012 for the Company. We adopted the amendments on January 1, 2012 and presented a single continuous statement of comprehensive loss.
In September 2011, the FASB issued ASU No. 2011-08, Testing Goodwill for Impairment. The provisions of ASU No. 2011-08 permits an entity an option to first perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If an entity believes, as a result of its qualitative assessment, that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the quantitative impairment test is required. Otherwise, no further impairment testing is required. The provisions of ASU No. 2011-08 are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted provided that the entity has not yet performed its annual impairment test for goodwill. We adopted the new provisions of ASU No. 2011-08 for the year ended December 31, 2012. The adoption of ASU No. 2011-08 had no material effect on our financial statements.
In July2013 and 2012 the FASB issued ASU 2012-02, “Testing Indefinite-Lived Intangible Assets for Impairment”, which provides companies with the option to first assess qualitative factors in determining whether the existence of events and circumstances indicates that it is more likely than not that an indefinite-lived intangible asset is impaired. If, after assessing the totality of events and circumstances, an entity concludes that it is not more likely than not that an indefinite-lived intangible asset is impaired, then the entity is not required to take further action. However, if an entity concludes otherwise, then it is required to determine the fair value of the indefinite-lived intangible asset and perform the quantitative impairment test by comparing the fair value with the carrying value. Previously, companies were required to perform the quantitative impairment test at least annually. The new accounting guidance is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. The Company has early adopted this standard.
Recent Accounting Pronouncements
In December 2011, the FASB issued ASU 2011-11, “Balance Sheet (Topic 210), Disclosures about Offsetting Assets and Liabilities”. The guidance in this update requires the Company to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. The pronouncement is effective for fiscal years and interim periods beginning on or after January 1, 2013 with retrospective application for all comparative periods presented. The Company’s adoption of the new standard is not expected to have a material effect on the Company’s consolidated financial position or results of operations.
F-12
KALLO INC.
(formerly Diamond Technologies, Inc.)
(A Development Stage Company)
Notes to Consolidated Financial Statements
NOTE 2 – ACCOUNTING POLICIES AND OPERATIONS (continued)
Recent Accounting Pronouncements (continued)
In February 2013, the FASB issued ASU 2013-02, “Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income” which requires entities to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, entities are required to present, either on the face of the statement where net income is presented orexpressed in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under US GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required under US GAAP to be reclassified in their entirety to net income, entities are required to cross-reference to other disclosures required under US GAAP that provide additional detail on these amounts. This ASU is effective prospectively for reporting periods beginning after December 15, 2012. The Company is currently evaluating the impact of adopting this guidance.
In October 2012, the FASB issued ASU No. 2012-04, Technical Corrections and Improvements. The ASU clarifies the Codification or corrects unintended application of guidance and includes amendments identifying when the use of fair value should be linked to the definition of fair value in Topic 820, Fair Value Measurement. This ASU 2012-04 results in common principles and requirements for measuring fair value and for disclosing information about fair value measurements in accordance with U.S. GAAP and International Financial Reporting Standards. The ASU is effective for fiscal periods beginning after December 15, 2012. The Company plans to adopt this guidance beginning January 1, 2013.
In March 2013, FASB issued ASU No. ASU 2013-05,Foreign Currency Matters (Topic 830) Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity. The amendments in ASU 2013-05 provide guidance on releasing Cumulative Translation Adjustments when a reporting entity (parent) ceases to have a controlling financial interest in a subsidiary or group of assets that is a nonprofit activity or a business within a foreign entity. In addition, these amendments provide guidance on the release of cta in partial sales of equity method investments and in step acquisitions. The amendments are effective on a prospective basis for fiscal years and interim reporting periods within those years, beginning after December 15, 2013. The amendments should be applied prospectively to derecognition events occurring after the effective date. Prior periods should not be adjusted. Early adoption is permitted. If an entity elects to early adopt the amendments, it should apply them as of the beginning of the entity’s fiscal year of adoption. The Company plans to adopt this guidance beginning January 1, 2014.dollars)
NOTE 3 – COMMON STOCK
Common Stock
2006 and 2007
On December 12, 2006, the Company issued 5,000,000 (15,000,00015,000,000 shares post stock split) shares of common stock, par value $0.00001 per share, to its initial stockholders in exchange for $50 in cash. In 2007, the Company issued490,501 (1,471,502issued 1,471,502 shares post stock split) shares of common stock at $0.083333 per share for total proceeds of $122,625 and 83,333 (250,000250,000 shares post stock split) shares of common stock at $0.20 per share for total proceeds of $50,000.
2008
On February 8, 2008 the Board of Directors approved a 200% stock dividend effective on February 25, 2008. For accounting purposes this is treated as a three for one stock split. All references in the financial statements and related notes related to the number of shares and per share amounts of the common stock have been retroactively restated to reflect the impact of the February 25, 2008 transaction.
F-13
KALLO INC.
(formerly Diamond Technologies, Inc.)
(A Development Stage Company)
Notes to Consolidated Financial Statements
NOTE 3 – COMMON STOCK(continued)
Common Stock (continued)
2009
In December 2009, the Company issued 6,000,000 of the Company’sCompany's common shares valued at $765,300 as part of the consideration paid to acquire the outstanding shares of Rophe Medical Technologies Inc. (See Note 8).
On December 30, 2009, the Company issued 150,000 shares of its common stock at $0.10 per share to its president for proceeds of $15,000. Because the sale price was below the quoted stock price of $0.15 per share at the time, the Company considered $7,500 as compensation and recorded the amount as stock based compensation with a corresponding credit to additional paid-in-capital.
2010
During the year ended December 31, 2010, the Company issued 1,133,664 shares of its common stock at $0.15 per share for cash proceeds of $170,050.
On October 25, 2010, the Company issued 1,580,000 units at a price of $0.25 each for total proceeds of $395,000. Each unit consisted of one share of common stock and 1one stock purchase warrant exercisable for a period of one year from the effective date of the registration statement on or before December 31, 2011October 9, 2013 at the option of the holder, into one share of common stock at an exercise price of $0.50 per share.
During the year ended December 31, 2010, 13,500,000 shares were issued to directors and officers of the Company for a total amount of $3,375,000, of which $1,350 was contributed as cash by the directors and officers and $3,373,650 was granted to them as stock based compensation.
2011
On January 14, 2011, the Company issued 4,000,000 shares of its common stock at $0.0001 per share to its CEO for proceeds of $400. Because the sale price was below the quoted stock price of $0.10 per share at the time, the Company considered $399,600 as compensation and recorded the amount as stock based compensation with a corresponding credit to additional paid-in-capital.
On September 22, 2011, the Company issued 54,500,000 shares of its common stock at $0.0001 per share for proceeds of $5,450, including 38,500,000 shares to its officers. Because the sale price was below the quoted stock price of $0.05 per share at the time, the Company considered $2,719,550 as compensation and recorded the amount as stock based compensation with a corresponding credit to additional paid-in- capital.
During the year ended December 31, 2011, the Company issued 883,334 shares of its common stock to creditors in consideration of satisfaction of $49,434 in outstanding payables.
KALLO INC.
(A Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2013 and 2012
(Amounts expressed in US dollars)
NOTE 3 – COMMON STOCK (continued)
On October 24, 2011, the Company issued 1,000,000 shares of its common stock valued at $70,000 to a consultant for the provision of services relating to the marketing of the Company’sCompany's business and products to the public.
During the year ended December 31, 2011, the Company issued 13,604,132 shares of its common stock for cash proceeds of $718,694, which included the conversion of loans payable of $25,000 and $17,000 into common stock of the Company during the year ended December 31, 2011.$25,000.
2012
During the year ended December 31, 2012, the Company’s issued52,589,910Company's issued 52,589,910 shares of its common stock in consideration of $2,629,497, of which $394,474 was received as at December 31, 2011.
F-14
KALLO INC.
(formerly Diamond Technologies, Inc.)
(A Development Stage Company)
Notes to Consolidated Financial Statements
NOTE 3 – COMMON STOCK(continued)
Common Stock (continued)
During the quarter ended March 31, 2012, the Company issued 5,000,000 shares of its common stock valued at $350,000 to consultants for the provision of various services to the Company.
On June 1, 2012, the Company issued 500,000 restricted shares of its common stock to a past officer as compensation of $60,000 for past services rendered.
On July 20, 2012, the Company issued 350,000 restricted shares of common stock to a creditor in consideration of satisfaction for services rendered for a fair value of $35,427.
During the year ended December 31, 2012, the Company issued 117,834,494 restricted shares of its common stock at $0.0001 to various officers, employees and parties related to them in consideration of satisfaction of $11,564 in outstanding payables and as compensation for future services in the amount of $4,734,814. Because the sale price was below the quoted stock price per share of between $0.04 and $0.05 per share at the time, the Company considered $4,729,633 as compensation expense and $5,181 as non-cash expense and recorded the amount as stock based compensation and miscellaneous expense respectively with a corresponding credit to additional paid-in- capital.
On September 26, 2012, the Company entered into a investment agreement with Kodiak Capital Group, LLC (“Kodiak”("Kodiak") whereby the company issuedcould issue 2,000,000 shares of its common stock in exchange for an option to sell up to $2,000,000 worth of shares of the Company at a price equal to eighty percent (80%) of the lowest daily preceding five days Volume Weighted Average Price at the time of exercise and expires six months from inception. The Company recorded a stock subscription receivable (included in equity) in the amount of $100,000 which was determined to be the fair value of the option on September 26, 2012. On October 24, 2012, Kallo filed a prospectusan S-1 registration statement relating to the resale of up to 50,000,000 shares of common stock issuable to Kodiak for investment banking services pursuant to an Investment Agreement dated September 26th, 2012. Such registration statement was declared effective on October 9, 2013 and the agreement expired six months later. We are currently in discussions with Kodiak Capital Group, LLC to extend the investment agreement. Subsequent to December 31, 2013, the Company put $250,000 and 3,472,223 shares have been issued to date pursuant to the above Agreement. The fair value of the option was valued using the following assumptions and estimates in the binomial lattice valuation model: Expected life of 6 months, volatility of 230%, dividend yield of 0% and risk-free interest rate of 0.13%.
KALLO INC.
(A Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2013 and 2012
(Amounts expressed in US dollars)
NOTE 3 – COMMON STOCK (continued)
The Investment Agreement will terminate when any of the following events occur:
· | Kodiak has purchased an aggregate of $2,000,000 of Kallo common stock or six (6) months after the effective date; |
· | Kallo files or otherwise enters an order for relief in bankruptcy; or |
· | Kallo common stock ceases to be registered under the Securities Exchange Act of 1934 (the “Exchange Act”"Exchange Act"). |
On June 27, 2011, Kallo registered 10,000,000 shares of its Common Stock, par value $0.00001 per share, under a 2011 Non-Qualified Stock Option Plan (the “2011 Plan”), to be offered and sold to accounts of eligible persons of the Company under the Plan at a proposed maximum offering price per share 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, 2012,2013, 7,233,334 shares have been issued under this 2011 Non-Qualified Stock Option Plan, which is included in the 117,834,494 shares issued to employees and others for services mentioned above.
F-15
KALLO INC.
(formerly Diamond Technologies, Inc.)
(A Development Stage Company)
Notes to Consolidated Financial Statements
NOTE 3 – COMMON STOCK(continued)
Common Stock (continued)
On September 6, 2012, Kallo registered 50,000,000 shares of its Common Stock, par value $0.00001 per share, under a 2012 Non-Qualified Stock Option Plan (the “2012 Plan”) to be offered and sold to accounts of eligible persons of the Company under the Plan at a proposed maximum offering price per share of $0.04. This 2012 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, 2012,2013, no shares have been issued under this 2012 Non-Qualified Stock Option Plan.
On February 1, 2012,2013
During 2013, the BoardCompany issued 26,402,460 shares in consideration of Directors$1,320,124 ($30,000 of proceeds were paid by investors directly to lenders of the Company), 200,000 shares valued at $5,000 to a consultant as compensation and 1,156,524 shares as repayment for short term loans to a related party valued at $57,826. The fair value of the stock issued is $46,261. Therefore the company experienced a gain on extinguishment. Since this involved a related party, the gain is treated a capital contribution.
During 2013, the Company agreed to issue 500,000 commonreceived cash of $9,560 for shares to Mansfield Corporation Inc.be issued. The related shares were not yet issued as partial payment for services under the contract with Kallo. However, on January 11, 2013, as a result of the Statement of Claim filed by Mansfield against Kallo (Note 13), the Board of Directors of the Company decided to cancel the shares issued to Mansfield and return the 500,000 common shares to treasury.at December 31, 2013.
Stock Split
On February 8, 2008 the Board of Directors approved a three-for-one stock split effective February 25, 2008. All referencesKALLO INC.
(A Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2013 and 2012
(Amounts expressed in the consolidated financial statements and related notes related to the number of shares and per share amounts of the common stock have been retroactively restated to reflect the impact of this stock split.US dollars)
NOTE 4 – WARRANTS
Warrant activity for the years ended December 31,during 2013 and 2012 and 2011 areis as follows:
| | | | Weighted Average | | | | | Weighted Average | |
| | Number of Warrants | | Exercise Price | | Number of Warrants | | | Exercise Price | |
| Balance, December 31, 2010 | 1,580,000 | $ | 0.50 | |
| Balance, December 31, 2011 | | | | 1,580,000 | | | $ | 0.50 | |
| Granted | - | | - | | | - | | | | - | |
| Cancelled | - | | - | | | - | | | | - | |
| Exercised | - | | - | | | - | | | | - | |
| Balance, December 31, 2011 | 1,580,000 | $ | 0.50 | |
| Balance, December 31, 2012 | | | | 1,580,000 | | | $ | 0.50 | |
| Granted | - | | | | | - | | | | | |
| Balance, December 31, 2012 | 1,580,000 | $ | 0.50 | |
| Balance, December 31, 2013 | | | | 1,580,000 | | | $ | 0.50 | |
Each warrant is exercisable for a period of one year from the effective date of a registration statement filed with the SEC. Such registration statement was fileddeclared effective on October 24, 2012.9, 2013.
The value of the stock purchase warrants granted in 2010 was valued at $117,620 using the following assumptions and estimates in the Black-Scholes model: Expected life of 1.2 years, volatility of 100%, dividend yield of 0% and risk-free interest rate of 1.40%.
F-16
KALLO INC.
(formerly Diamond Technologies, Inc.)
(A Development Stage Company)
Notes to Consolidated Financial Statements
NOTE 5 – RELATED PARTY TRANSACTIONS
During the year ended December 31, 2012,2013, 1,156,524 shares (2012 - 107,076,003 sharesshares) were issued to directors and officers of the Company and their family for a total amount of $4,313,040,$46,261 (2012 - $4,313,040), of which $150,000$NIL (2012 - $150,000) was contributed as cash by them, $46,261 (2012 - $NIL) was for repayment of short term loans payable, and $4,163,040$NIL (2012 - $4,163,040) was granted to them as stock-based compensation.compensation (See Note 11). The debt outstanding was $57,826, therefore the company experienced a gain on debt extinguishment of $11,565. Since the gain involved a related party, it is treated as capital contribution.
Included in short term loans payable is an amount due to a shareholder and director of the Company for the amount of $36,450 (2011$1,450 (2012 - $NIL)$36,450) (See Note 11) and $9,856 (2011$NIL (2012 - $NIL)$9,856) due to another director and officer of the Company (See Note 11).
Included in accounts payable and in accrued liabilities – other is an amount of $28,118 (2011$68,574 (2012 - $NIL)$28,118) due to directors and officers of the Company as at December 31, 2012.2013. Other receivables include an amount of $3,576 (2011$NIL (2012 - $NIL)$3,576) due from a director and officer of the Company as at December 31, 2012.2013.
During the year ended December 31, 2011, 48,500,000 shares were issued
Transactions with related parties are measured at the exchange amount, which is the amount of consideration establishedKALLO INC.
(A Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2013 and agreed to by the related parties.2012
(Amounts expressed in US dollars)
NOTE 6 – EQUIPMENT
| | | December 31, 2012 | | December 31, 2011 | | 2013 | | | 2012 | |
| | | | | | | | | | | |
| Computer equipment under capital lease | $ | 223,683 | $ | 223,683 | | $ | 223,683 | | | $ | 223,683 | |
| Nexus computer equipment under capital lease | | 42,023 | | 42,023 | | | 42,023 | | | | 42,023 | |
| | | | | | | | | | | | | |
| Total Equipment | | 265,706 | | 265,706 | | | 265,706 | | | | 265,706 | |
| Less accumulated depreciation | | (188,165) | | (99,596) | | | (217,733 | ) | | | (188,165 | ) |
| | | | | | | | | | | | | |
| Equipment – net | $ | 77,541 | $ | 166,110 | | $ | 47,973 | | | $ | 77,541 | |
Depreciation expense forduring 2013, 2012 and the years ended December 31, 2012, 2011 and period from December 12, 2006 (date of inception) to December 31, 20122013 were $29,568, $88,569 $85,296 and $195,880$225,448 respectively.
During 2013, the Company increased its estimate of the useful lives of certain computer equipment to better reflect the period it plans to use the equipment before replacing them. This change had the effect of decreasing the net loss for 2013 by $47,973.
NOTE 7 – OBLIGATIONS UNDER CAPITAL LEASES
| | | 2013 | | | 2012 | |
| | | | | | | |
Obligation under capital lease to acquire specific equipment in monthly payments of $1,326 including interest at 10% per annum, expiring in November 2013 | | $ | - | | | $ | 21,688 | |
Obligation under capital lease to acquire specific equipment in monthly payments of $7,212 including interest at 10% per annum, expiring in October 2013 | | | - | | | | 86,580 | |
| | | | - | | | | 108,268 | |
| Less: current portion | | | - | | | | (108,268 | ) |
| | | $ | - | | | $ | - | |
-68-
F-17
KALLO INC.
(formerly Diamond Technologies, Inc.)
(A Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2013 and 2012
NOTE 7 – OBLIGATIONS UNDER CAPITAL LEASES
| | | December 31, 2012 | | December 31, 2011 |
| | | | | |
Obligation under capital lease to acquire specific equipment in monthly payments of $1,326 including interest at 10% per annum, expiring in November 2013 | $ | 21,688 | $ | 21,197 |
Obligation under capital lease to acquire specific equipment in monthly payments of $7,212 including interest at 10% per annum, expiring in October 2013 | | 86,580 | | 156,359 |
| | | 108,268 | | 177,556 |
| Less: current portion | | (108,268) | | (94,377) |
| | $ | - | $ | 83,179 |
Minimum lease payments on capital lease obligations are as follows:
| 2013 | $ | 108,540 |
| | | 108,540 |
| Less: imputed interest | | (272) |
| | $ | 108,268 |
NOTE 8 – ROPHE ACQUISITIONCOPYRIGHTS
On December 11, 2009, an agreement was entered into by the Company to acquire 100% of the issued and outstanding shares of Rophe Medical Technologies Inc. (“Rophe”("Rophe") for cash consideration of $1,200,000 and 3,000,000 of the Company’sCompany's common shares valued at $0.122 per share for total purchase price of $1,565,000 (the “Rophe Acquisition”"Rophe Acquisition"). The $1,200,000 was initially payable as follows: $50,000 within 30 days of the date of the agreement; $200,000 on March 31, 2010; $250,000 on April 30, 2010; $233,333 on launch of Project 1; $233,333 on launch of Project 2; and, $233,334 on launch of Project 3. This transaction was closed on December 31, 2009.
Subsequently, the Rophe Acquisition payment terms were amended and 3,000,000 additional shares of restricted common stock were issued in 2009 as payment for $400,000 with the remaining cash consideration as follows: $35,000 by March 5, 2010, $65,000 by March 31, 2010, $233,333 on launch of Project 1; $233,333 on launch of Project 2; and, $233,334 on launch of Project 3. As at December 31, 2012,2013, there is a payable in the amount of $56,502.$525 (2012 - $525) which is included in accounts payable and accrued liabilities. The 3,000,000 shares were considered issued as at the closing date of the acquisition and valued based on discounted market price per share at the date of acquisition and the total of 6,000,000 shares issued for the Rophe acquisition are restricted.
The total recorded acquisition price of $865,000 was allocated to the copyrights obtained in the acquisition as they were the only significant assets of Rophe, which did not have any operations. The copyrights relate to the following technologies: "EMR Integration Engine" to provide integrated solutions for interoperability within the continuum of care, "C&ID-IMS", an Internet-based solution for monitoring and managing Communicable and Infectious Disease information, "CCG", a clinical-care globalization technology and "MC-Telehealth", a mobile clinic long distance with Telehealth technology. The Company has not recorded the remaining contingent payment of $700,000 due to the uncertainty of the launch of Projects 1, 2 and 3.According3. According to the Canadian Intellectual Property laws, in Canada, the life of a copyright is the author’sauthor's life the remainder of the calendar year in which the author dies, and a period of 50 years following the end of that calendar year.plus fifty years. As a result, the useful life of the copyrights are determined to be indefinite are not amortized but subject to testing for impairment. The Company continues to develop these technologies for use in a diverse range of potential products and expect to make use of them in the Project mentioned in Note 16. The Company reviews the value of the copyrights on an annual basis to determine if the value has been impaired. Based on the remaining life of the copyrights and Management’sManagement's estimation of future profits, there was no impairment of copyrights as at December 31, 20122013 and 2011.
F-18
KALLO INC.
(formerly Diamond Technologies, Inc.)
(A Development Stage Company)
Notes to Consolidated Financial Statements2012.
NOTE 9 – LOAN PAYABLE
As at December 31, 2012,2013, a loan payable of $109,044$61,203 (2012 - $109,044) to an arm’s lengthunrelated party bears interest at 6% per annum, is unsecured and is payable in monthly installments of principal and interest in the amount of Canadian $7,232.50. Future scheduled repayments of principal are as follows:
| Within one year | $ | 109,044 |
| | $ | 109,044 |
| Within one year | | $ | 61,203 | |
| | | $ | 61,203 | |
NOTE 10 – CONVERTIBLE PROMISSORY NOTES
The convertible promissory notes arewere unsecured and bearbore interest at 3.25% per annum with all principal and accrued interest due and payable one year from the dates of execution of the Notes. The Notes arewere due as follows: $20,000 on April 23, 2013, $10,000 on July 5, 2013, $20,000 on August 22, 2013. The Holders may,could, in lieu of payment of the principal and interest, elect to convert such amount into common shares of the Company at the conversion price per share equal to 30% discount to the average of the previous three lowest trading days over the last 10 trading days prior to the Conversion Date. All shares converted on or after six months from the dates of execution of the notes shall bewould have been issued as free-trading, unrestricted shares. The Company maycould prepay these Notes at anytime without penalty and without the prior consent of the Holders.
KALLO INC.
(A Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2013 and 2012
(Amounts expressed in US dollars)
NOTE 10 – CONVERTIBLE PROMISSORY NOTES (continued)
At the commitment date, the Company elected to initially and subsequently measure in its entirety the convertible promissory notes at fair value by comparing the effective conversion price to the fair value of the Company’sCompany's stock. The Company recognized an initial fair value loss of $203,868 related to the debts on inception dates and recognized a gain of $53,101$87,200 related to change in fair values on the debts since their inception dates to December 31, 2012.the times of repayment of the notes. The number of common shares indexed to the financial instruments used in the above calculation were 2,472,089 and 10,000,000 as at inception date anddate.
During the year ended December 31, 2012 respectively.2013, the Company repaid $50,000 of the above promissory notes resulting in a gain on extinguishment of convertible promissory note of $116,668. As noted in Note 3, $30,000 was paid by an investor directly to the lender and is accordingly reflected in the Supplemental Schedule Of Non-Cash Investing And Financing Activities on the Consolidated Statement of Cash Flows.
| Cash received from convertible promissory notes | $ | 50,000 | | $ | 50,000 | |
| Fair value loss on inception date | | 203,868 | | | 203,868 | |
| Fair value of convertible promissory notes on inception date | | 253,868 | | | 253,868 | |
| Change in fair value | | (53,101) | |
| Change in fair value (gain) | | | | (53,101 | ) |
| Fair value as at December 31, 2012 | $ | 200,767 | | | 200,767 | |
| Repayment of convertible promissory note | | | | (50,000 | ) |
| Gain on extinguishment of convertible promissory note | | | | (116,668 | ) |
| Change in fair value (gain) | | | | (34,099 | ) |
| Fair value as at December 31, 2013 | | | $ | - | |
NOTE 11 – SHORT TERM LOANS PAYABLE
| | | 2013 | | | 2012 | |
| | | | | | | |
| Promissory note bearing interest at 10% per annum, due January 10, 2014 | | $ | 25,664 | | | $ | - | |
| Promissory note bearing interest at 10% per annum, due January 15, 2014 | | | 25,528 | | | | - | |
Promissory note to director bearing interest at 6% per annum, due July 31, 2012 | | | - | | | | 31,450 | |
| Non-interest bearing advances from director | | | 1,450 | | | | 5,000 | |
| Non-interest bearing advances from officer | | | - | | | | 9,856 | |
| Non-interest bearing short term funding from third parties | | | 23,599 | | | | 18,977 | |
| | | $ | 76,241 | | | $ | 65,283 | |
On October 10, 2013, the Company issued a promissory note agreeing to pay the principal amount of Canadian $25,000 (US$24,139) plus interest at the rate of 10% per annum on January 10, 2014. Kallo did not pay on the due date and on January 16, 2014, the holder agreed to convert the principal and interest outstanding into 680,000 common stock of the Company. The amount outstanding as at December 31, 2013 was $25,664, including interest.
On October 15, 2013, the Company issued a promissory note agreeing to pay the principal amount of Canadian $25,000 (US$24,139) plus interest at the rate of 10% per annum on January 15, 2014. Kallo did not pay on the due date and the holder agreed to extend the due date by an additional three months. The amount outstanding as at December 31, 2013 was $25,528, including interest.
KALLO INC.
(A Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2013 and 2012
(Amounts expressed in US dollars)
NOTE 11 – SHORT TERM LOANS PAYABLE (continued)
On July 9, 2012, the Company issued a promissory note to a director agreeing to pay the principal amount of Canadian $30,000 plus interest at the rate of 6% per annum on July 31, 2012. Kallo did not pay on the due date and the director advanced a further $5,000an additional $24,839 (2012 - $5,000) which iswas non-interest bearing, unsecured and has no fixed repayment date. The totalDuring the fourth quarter of 2013, the director has agreed to convert the amount of $36,450 remains$57,826, representing principal and interest, into 1,156,524 common stock of the Company, leaving $1,450 outstanding as at December 31, 2012.2013 (2012 - $36,450). The fair value of the common stock issued was $46,261, resulting in a gain on extinguishment of the loans payable of $11,565, which was included in additional paid-in capital (See Note 5).
An officer and a stockholder have agreed to provide short term funding to the Company by paying some of its expenses. The advances are non-interest bearing, unsecured and have no fixed repayment dates. As at December 31, 2012, $9,8562013, $NIL (2012 - $9,856) was owing to the officer and the stockholder.stockholder (See Note 5).
As at December 31, 2012,2013, the balance of $18,977$23,599 (2012 - $18,977) represented short term funding provided by third parties which are non-interest bearing, unsecured and have no fixed repayment date.
F-19
KALLO INC.
(formerly Diamond Technologies, Inc.)
(A Development Stage Company)
Notes to Consolidated Financial Statements
NOTE 12 – INCOME TAXES
The Company had no income taxes payable at December 31, 20122013 and 2011.2012.
The reconciliation of income tax provision computed at statutory rates to the reported income tax provision is as follows:
| | | Year ended December 31, | |
| | | 2012 | | 2011 | | 2013 | | | 2012 | |
| Net loss for the year | $ | (7,003,791) | $ | (5,337,700) | | $ | (1,603,283 | ) | | $ | (7,003,791 | ) |
| Effective statutory rate | | 34% | | 34% | | | 34 | % | | | 34 | % |
| Expected tax recovery | $ | (2,381,289) | $ | (1,814,818) | | $ | (545,116 | ) | | $ | (2,381,289 | ) |
| Net effects of non deductible items | | 1,608,041 | | 1,060,511 | |
| Valuation allowance | | 773,248 | | 754,307 | |
| Net effects of non deductible and allowable items | | | | (51,197 | ) | | | 1,608,041 | |
| Change in valuation allowance | | | | 596,313 | | | | 773,248 | |
| | $ | - | $ | - | | $ | - | | | $ | - | |
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:
| | | December 31, | |
| | | 2012 | | 2011 | | 2013 | | | 2012 | |
| Net operating loss carry forward | $ | 1,875,506 | $ | 984,718 | | $ | 2,538.950 | | | $ | 1,875,506 | |
| Equipment | | (153,616) | | (31,190) | | | (220,747 | ) | | | (153,616 | ) |
| Valuation allowance | | (1,721,889) | | (953,528) | | | (2,318.203 | ) | | | (1,721,889 | ) |
| Net deferred tax assets | $ | - | $ | - | |
| Deferred tax assets, net of valuation allowance | | | $ | - | | | $ | - | |
Net operating loss carry forwards totaled approximately $5,500,000$7,500,000 at December 31, 2012.2013. The net operating loss carry forwards will begin to expire in the year 20262028 if not utilized. After consideration of all the evidence, management has recorded a valuation allowance at December 31, 20122013 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.
KALLO INC.
(A Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2013 and 2012
(Amounts expressed in US dollars)
NOTE 13 – COMMITMENTS AND CONTINGENCIES
Commitments
Operating lease
The Company leases office facilities under non-cancelable operating leases. The Company’sCompany's obligations under non-cancelable lease commitments are as follows:
F-20
KALLO INC.
(formerly DiamondOn December 10, 2010, the Company entered into a North American Authorized Agency Agreement (the "Agreement") with Advanced Software Technologies, Inc.)
(A Development Stage Company)
Notes to Consolidated Financial Statements
NOTE 13 – COMMITMENTS AND CONTINGENCIES (continued)
Commitments (continued)
Capital lease
Minimum lease payments on capital lease obligations are as follows:
| 2013 | $ | 108,540 |
| | | 108,540 |
| Less: imputed interest | | (272) |
| | | |
| | $ | 108,268 |
Software development
As discussed, located in Note 1, the Grand Cayman Islands ("AST"). Under the Agreement, the Company was appointed sales agent for AST and will be paid fees by AST for selling AST products. The Company has agreed to pay AST a total of $213,000 for modification of the AST products to comply with the requirements of the Canadian Electronic Health Record market, of which $24,000 (2011$NIL (2012 - $104,504)$24,000) was paid in 2012.2013. The remaining balance of $56,496$63,543, included in accounts payable and accrued liabilities, is due in 2013.2014.
Contingencies
As of March 14, 2012, we settled our dispute with Leonard Steinmetz, our former treasurer, principal financial officer, principal accounting officer, and a member of the board of directors. We agreed to resolve all of our differences by paying Mr. Steinmetz $130,000 in installments as follows: $25,000, beginning eight days from the receipt from the Occupational and Safety Administration (“OSHA”) of its notice approving the withdrawal of Mr. Steinmetz’s OSHA complaint with prejudice; $10,000 to be paid on or before the last business day of each of the ten months following month of receipt of said notice from OSHA; and, a final installment of $5,000.00 or before the last business day of the eleventh month. In addition, we agreed, that within 21 days of receipt of said notice from OSHA, we are to issue 500,000 restricted shares of our common stock to Mr. Steinmetz. On May 2, 2012, the Occupational and Safety Administration approved Leonard Steinmetz’s withdrawal of his complaint against us.
On July 29, 2011, Watt International Inc. (“Watt”) commenced a third party claim against Kallo concerning monies that Kallo allegedly owed to Watt for branding and internet services provided by Watt to Kallo. Watt is seeking damages in the amount of Canadian $161,673.67 plus unspecified “special” damage. Management is of the opinion that Watt has charged Kallo for services that Watt did not perform, and that Watt has duplicated charges for work that it performed and intends to defend itself vigorously in the suit. Management has recognized an accrual for the amount of the claim.An estimate could not be made of the unspecified “special” damage and hence no accrual was made thereof. Management is therefore unable to estimate the possible loss or range of loss in excess of the amounts accrued, if any.
On December 20, 2012, Mansfield Communications Inc. (Mansfield) filed a Statement of Claim against Kallo concerning monies allegedly owed by Kallo to Mansfield for media consultancy and communication services provided by Mansfield to Kallo. Mansfield is seeking damages in the amount of Canadian $191,246.11 plus unspecified “special” damage. As a result of the claim, on January 11, 2013, Kallo has cancelled 500,000 common shares previously issued to Mansfield as partial payment for services during 2012. On January 30, 2013, Kallo filed a Statement of Defense. Management is of the opinion that Mansfield has charged Kallo for services that Mansfield did not perform, and that Mansfield has duplicated charges for work that it performed and intends to defend itself vigorously in the suit. Management has recognized an accrual for the amount of the claim. An estimate could not be made of the unspecified “special” damage and hence no accrual was made thereof. At this time, Management cannot assess the final outcome of this claim.
F-21
KALLO INC.
(formerly Diamond Technologies, Inc.)
(A Development Stage Company)
Notes to Consolidated Financial Statements
NOTE 13 – COMMITMENTS AND CONTINGENCIES (continued)
Contingent liability
The Company has calculated the estimated amount of withholding taxes on stock-based compensation based on valuation obtained from a third party. Should the amount payable be different from the estimated amount, the difference will be recorded in the period of payment. At this point, the Company cannot make an estimate of the potential loss that may arise from any liability for withholding taxes.
NOTE 14 – SUBSEQUENT EVENTS
New contractSales commission agreement
On November 20, 2012, Kallo signed a memorandum of understanding with the Ministry of Health of the Republic of Ghana for the supply and implementation of a National Mobile Care program with Mobile Clinics and Clinical Command Centers integrated with the existing healthcare system and improve the healthcare delivery services to the rural and remote population of Ghana at large for a total project cost for National implementation and Maintenance support for five years of US$158,500,000.
1. | 158,500,000 (the "Ghana Project"). The Ministry of Health of the Republic of Ghana and Kallo Inc. have agreed that a contract for the implementation of the Mobile Care projects will be signed when a number of financing and other conditions have been satisfied.
In respect of the Ghana Project, the Company has agreed with two third parties to pay sales commissions equal to $8,717,625 and 4.5% (subject to a maximum of $7,162,375) of the contract price respectively for facilitating and securing the Contract with the Ministry of Health of the Republic of Ghana, payable within 7 to 14 business days of receipt of payment for the Project by Kallo in proportion to the payments received by Kallo. In addition, an incentive payment of $3,000,000 will be payable to the first party mentioned above if the Government of Ghana approve the Project on or before December 20, 2013 in accordance to the same terms of payment described above. This did not happen and the $3,000,000 incentive payment will not be paid.
In respect of the Guinea Project mentioned in Note 16, the Company has agreed with two third parties in Guinea to pay sales commissions for facilitating and securing the Contract with the Ministry of Health of the Republic of Guinea as follows: | - | equal to $20,000,000, payable as to an advance of $300,000 immediately after the loan agreement for the Kallo MobileCare and RuralCare program is signed by the Minister of Finance of the Republic of GhanaGuinea and Kallo Inc. have agreed that a contractthe remainder within 7 to 14 business days of receipt of payment for the implementationProject by Kallo in proportion to the payments received by Kallo. |
| - | equal to $4,000,000, payable within 7 to 14 business days of receipt of payment for the Mobile Care projectsProject by Kallo in proportion to the payments received by Kallo. In addition, a performance incentive payment of $1,000,000 will be signed whenpayable to three persons related to the following conditions have been satisfied:third party in accordance to the same terms of payment described herein. |
-72- a) | Approval of the Credit Agreement by the Cabinet and Parliament of Republic of Ghana and the relevant KALLO INC. for the implementation of the projects; |
b) | Approval by the Ministry of Health of the detailed proposal for Mobile Care project submitted by Kallo Inc., dated 19 November 2012 which includes detailed technical specifications for the mobile clinics, training and maintenance support services. |
c) | The training program will include a certification process for Kallo Inc., affiliated Canadian and United States Of America Medical Teaching University and Applied Science Colleges. |
d) | Successful completion of “Value for Money” audit of the Contractor’s proposal and negotiations; |
e) | Approval of the contract by the Public Procurement Authority of Ghana. |
2. | That the National rollout overview and supply and training schedules will be mutually agreed, upon the acceptance of the indicative terms and condition of the loan by the Ministry of Finance and Economic Planning of the Republic of Ghana; |
3. | That Kallo’s financial proposals attached herein to be used by the Ministry of Finance and Economic Planning for consideration and value for money assessment; |
4. | That Party Kallo’s technical proposals shall be considered by a team of experts for assessment and negotiation |
F-22
KALLO INC. (formerly Diamond Technologies, Inc.)
(A Development Stage Company) Notes to Consolidated Financial Statements December 31, 2013 and 2012 (Amounts expressed in US dollars)
NOTE 13 – COMMITMENTS AND CONTINGENCIES (continued)
Contingencies
On July 29, 2011, Watt International Inc. ("Watt") commenced a third party claim against Kallo concerning monies that Kallo allegedly owed to Watt for branding and internet services provided by Watt to Kallo. Watt is seeking damages in the amount of Canadian $161,673.67 plus unspecified "special" damage. Management is of the opinion that Watt has charged Kallo for services that Watt did not perform, and that Watt has duplicated charges for work that it performed and intends to defend itself vigorously in the suit. Management has recognized an accrual for the amount of the claim. An estimate could not be made of the unspecified "special" damage and hence no accrual was made thereof. Management is therefore unable to estimate the possible loss or range of loss in excess of the amounts accrued, if any.
Contingent liability
The Company has calculated the estimated amount of withholding taxes on stock-based compensation based on valuation obtained from a third party. Should the amount payable be different from the estimated amount, the difference will be recorded in the period of payment. At this point, the Company cannot make an estimate of the potential loss that may arise from any liability for withholding taxes.
NOTE 14 – SUBSEQUENT EVENTS (continued)COMPARATIVES
New contract (continued)
5. Any disputes between the parties shall be resolved through negotiation and mediation by the appropriate authorities
6. That within 30 days after the signing of the MOU, Party A shall notify Party B by a written document his requirements and specifications which shall include andnot be limitedThe consolidated financial statements have been reclassified, where applicable, to conform to the following information:
a) | Feasibility study report |
b) | National geographic locations and demographic deployment schedules for Mobile Clinics and Clinical Command Centers |
c) | Different functional requirements of Mobile clinics for both rural and urban locations |
d) | Number of Mobile Clinics and Clinical Command Centers in each region |
e) | Current standards for medical equipment in hospital in Ghana, for example: the standard of radiation control of X-ray machine |
f) | Standards for electric appliancespresentation used in mobile clinics and for environmental protection, for example: power outlet and interface of electric appliances, busing standards for the protection for X -ray machine |
g) | Standards for waste-water treatment, medical waste treatment, operating-room and supply room of the Mobile Clinic |
h) | Human resources deployment in district level hospital for mobile clinic |
i) | Standards for contagions diseases isolation and sterilization in Ghana |
j) | Principal of accessory and spare-parts supply |
k) | Principle of medical consumables and medical equipment consumables |
Share issuance
On January22, 2013 and March 12, 2013, the Company raised $230,000 by issuing 4,600,000 restricted shares of common stock, for which cash has been fully received as at March 12, 2013.
Cancellation of shares
As a result of the claim by Mansfield (Note 13), on January 11, 2013, Kallo has cancelled 500,000 common shares previously issued to Mansfield as partial payment for services during 2012. Since this result from conditions that existed before the balance sheet date, the cancellation of the shares have been recognized in these financial statements.
F-23
KALLO INC.
(formerly Diamond Technologies, Inc.)
(A Development Stage Company)
Notes to Consolidated Financial Statementscurrent year.
NOTE 15 – CORRECTION OF PRIOR PERIOD ERROR
During the year ended December 31, 2010, stock-based compensation expense related to shares issued to directors and officers of $3,373,650 was reduced by an amount of $604,774 owed to directors and officers, which was forgiven, resulting in net stock-based compensation of $2,768,878 recognized in stockholders’stockholders' equity (deficiency).
In accordance with ASC 470-50-40-2, which states that extinguishment transactions between related parties may in essence be capital transactions, the forgiveness of obligations due to directors and officers should have been presented as a contribution to capital in the statements of changes in stockholders’stockholders' equity and in the statements of cash flows as a non-cash financing transaction.
As this error was made in a reporting period prior to the comparative period, the Balance Sheet balances as at December 31, 2010 were restated as follows:
| · | Additional Paid-In Capital was increased by $604,774 to record the forgiveness of obligations due to directors and officers which should have been treated as a capital transaction |
| · | Deficit accumulated during the development stage was increased by $604,774 to reverse the wrong entry made to stock-based compensation expense during 2010. |
KALLO INC. (A Development Stage Company) Notes to Consolidated Financial Statements December 31, 2013 and 2012 (Amounts expressed in US dollars)
NOTE 15 – CORRECTION OF PRIOR PERIOD ERROR (continued)
In addition, the Balance Sheet balances were still understated as at December 31, 2011, so this error resulted in the restatement of the following line items for the year ended December 31, 2011:
· | Additional Paid-In Capital was increased by $604,774 |
·Additional Paid-In Capital was increased by $604,774· | Deficit accumulated during the development stage was increased by $604,774 |
·Deficit accumulated during the development stage was increased by $604,774
The section below shows the restatement of each line item affected by the error:
Restatement of financial statements as a result of correction of an error
December 31, 2010 comparative year
| Financial statement line item (Balances affected) | Actual 2010 | Correction of Error | Restated Actual 2010 | | Actual 2010 | | | Correction of Error | | | Restated Actual 2010 | | | Balance sheet (extract) | | | | | | | | | | | | | | Shareholders’ Deficiency | | | | | | Shareholders' Deficiency | | | | | | | | | | | | Common stock | 392 | | 392 | | | 392 | | | | | | | 392 | | | Additional paid-in capital | 4,900,133 | 604,774 | 5,504,907 | | | 4,900,133 | | | | 604,774 | | | | 5,504,907 | | | Deficit accumulated during the development stage | (4,419,498) | (604,774) | (5,024,272) | | | (4,419,498 | ) | | | (604,774 | ) | | | (5,024,272 | ) | | Total Stockholders’ Equity (Deficiency) | 481,027 | - | 481,027 | | | Total Stockholders' Equity (Deficiency) | | | | 481,027 | | | | - | | | | 481,027 | |
December 31, 2011 comparative year | Financial statement line item (Balances affected) | | Actual 2011 | | | Correction of Error | | | Restated Actual 2011 | | | Balance sheet (extract) | | | | | | | | | | | Shareholders' Deficiency | | | | | | | | | | | Common stock | | | 1,131 | | | | | | | 1,131 | | | Additional paid-in capital | | | 8,862,522 | | | | 604,774 | | | | 9,467,296 | | | Deficit accumulated during the development stage | | | (9,757,198 | ) | | | (604,774 | ) | | | (10,361,972 | ) | | Total Stockholders' Deficiency | | | (893,545 | ) | | | - | | | | (893,545 | ) |
| Financial statement line item (Balances affected) | Actual 2011 | Correction of Error | Restated Actual 2011 | | Balance sheet (extract) | | | | | Shareholders’ Deficiency | | | | | Common stock | 1,131 | | 1,131 | | Additional paid-in capital | 8,862,522 | 604,774 | 9,467,296 | | Deficit accumulated during the development stage | (9,757,198) | (604,774) | (10,361,972) | | Total Stockholders’ Deficiency | (893,545) | - | (893,545) |
F-24NOTE 16 – SUBSEQUENT EVENTS
Conversion of short term loan payable
On January 16, 2014, the holder of a promissory note, in the amount of Canadian $25,000 due on January 10, 2014, agreed to convert the principal and interest outstanding into 680,000 common stock of the Company. The amount outstanding as at December 31, 2013 was $25,664, including interest (See Note 11).
Investment agreement with Kodiak
On February 17, 2014, Kallo elected to exercise its right pursuant to the investment agreement with Kodiak Capital Group, LLC to require Kodiak to purchase its shares. The Company put $250,000 for the issuance of 3,472,223 newly issued shares. The agreement with Kodiak, as discussed in Note 3, expired in April 2014, six months after the related S-1 registration statement was declared effective. The Company is currently in discussions with Kodiak to extend the investment agreement.
KALLO INC. (A Development Stage Company) Notes to Consolidated Financial Statements December 31, 2013 and 2012 (Amounts expressed in US dollars)
NOTE 16 – SUBSEQUENT EVENTS (continued)
Share issuance
On January 6, 2014, the Company issued 760,000 shares valued at $30,400 to various employees as compensation for services rendered. On June 10, 2014, the Company issued 5,000,000 shares valued at $200,000 to its CEO as compensation for services rendered. Through July 4, 2014, the Company has signed subscription agreements for the issuance of 13,365,540 shares in consideration of $668,277 cash.
New contract
On January 23, 2014, Kallo Inc. announced the signing of a US$200,000,925 (Two Hundred million nine hundred and twenty-five US dollars) Supply Contract with the Ministry of Health and Public Hygiene of the Republic Of Guinea (the "Guinea Project").
Under the Supply Contract, Kallo will implement customized healthcare delivery solutions for the Republic of Guinea. The components of the solutions include, MobileCare, RuralCare, Hospital Information Systems, Telehealth Systems, Pharmacy Information, disaster management, air and surface patient transportation systems and clinical training.
In respect of the Guinea Project mentioned above, the Company has agreed with two third parties in Guinea to pay sales commissions for facilitating and securing the Contract with the Ministry of Health of the Republic of Guinea as follows:
| - | equal to $20,000,000, payable as to an advance of $300,000 immediately after the loan agreement for the Kallo MobileCare and RuralCare program is signed by the Minister of Finance of the Republic of Guinea and the remained within 7 to 14 business days of receipt of payment for the Project by Kallo in proportion to the payments received by Kallo per agreement signed on December 6, 2013. |
| - | equal to $4,000,000, payable within 7 to 14 business days of receipt of payment for the Project by Kallo in proportion to the payments received by Kallo. In addition, a performance incentive payment of $1,000,000 will be payable to three persons related to the third party in accordance to the same terms of payment described herein per agreement signed on February 18, 2014. |
The Guinea Project will not begin until after the finalization of a formal loan agreement by the Government of the Republic of Guinea.
Sales commission agreement
On March 8, 2014, the Company has agreed with a third party to pay sales commissions equal to $25,000,000 for facilitating and securing the Contract with the Government of the Republic of Sierra Leone, payable within 7 to 14 business days of receipt of payment for the Project by Kallo in proportion to the payments received by Kallo. In addition, an incentive payment of $7,000,000 will also be payable if the Government of Sierra Leone approve the Project on or before August 15, 2014 in accordance to the same terms of payment described above.
New lease
Effective July 1, 2014, we entered into a new lease for office space. The lease expires on January 30, 2017 and the monthly rental is approximately $25,000 per month.
Until _______________________, 2013,2014, ninety days after the date of this prospectus, all dealers effecting transactions in our registered securities, whether or not participating in this distribution, may be required to deliver a prospectus. This is in addition to the obligation of dealers to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13.OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses of the offering (assuming all shares are sold), all of which are to be paid by the registrant, are as follows:
| SEC registration fee | | $ | 5,000 | | | Accounting/administrative fees and expenses | | | 20,000 | | | Blue Sky fees/expenses | | | 0 | | | Legal fees/expenses | | | 25,000 | | | Transfer Agent fees | | | 0 | | | TOTAL | | $ | 50,000 | |
| SEC registration fee | $ | 5,000 | | Printing expenses | | 0 | | Accounting/administrative fees and expenses | | 20,000 | | Blue Sky fees/expenses | | 0 | | Legal fees/expenses | | 25,000 | | Escrow fees/expenses | | 0 | | Transfer Agent fees | | 0 | | TOTAL | $ | 50,000 |
ITEM 14.INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The only statute, charter provision, bylaw, contract, or other arrangement under which any controlling person, director or officer of the Registrant is insured or indemnified in any manner against any liability which he may incur in his capacity as such, is as follows:
1.Article 4 of the Articles of Incorporation of the Company. 2.Article XI of the Bylaws of the Company. 3.Nevada Revised Statutes, Chapter 78.
The general effect of the foregoing is to indemnify a control person, officer or director from liability, thereby making the company responsible for any expenses or damages incurred by such control person, officer or director in any action brought against them based on their conduct in such capacity, provided they did not engage in fraud or criminal activity.
ITEM 15.RECENT SALES OF UNREGISTERED SECURITIES.
During the last three years, the registrant has sold the following securities that were not registered under the Securities Act of 1933, as follows:
On December 28, 2007, we sold 83,334 restricted shares of our common stock to MMB Trust located in Barbados in consideration of $50,000. The sale was made pursuant to the exemption from registration contained in Regulation S of the Securities Act of 1933, as amended. The transaction took place outside the United States of America with a non-US person.
On December 30, 2009, we sold 150,000 restricted shares of common stock to Vince Leitao.
On December 31, 2009, we issued 3,000,000 restricted shares of our common stock as follows:
| John Cecil | 1,200,000 | | Grace Cecil | 1,200,000 | | Samuel Baker | 300,000 | | Carol Baker | 300,000 |
in exchange for 300 shares of common stock of Rophe which constitute all of the issued and outstanding shares of Rophe common stock. Rophe thereby became our wholly owned subsidiary corporation. The shares of common stock were issued pursuant to Regulation S of the Securities Act of 1933, as amended, in that the sale of all the shares of common stock took place outside the United States of America with non-US persons.
On March16, 2010, the Rophe Acquisition payment terms were amended as follows:
$50,000 that was due by January 30, 2010 is to be paid $35,000 by March 5, 2010, and $15,000 by March 31, 2010. $200,000 that was due on March 31, 2010, and $250,000 that was due on April 30, 2010; of the total of $450,000, $400,000 was converted to 3,000,000 shares of common stock on March 16, 2010 and the remaining balance of $50,000 is payable March 31, 2010.
In our first quarter will sold 1,133,664 restricted shares through subscription agreement.
On August 23, 2010, we sold 11,500,000 restricted shares of common stock to the following officers and directors:
| Name | Number of Shares | Consideration | | | | | | Vince Leitao | 5,000,000 | $500.00 | | John Cecil | 2,500,000 | $250.00 | | Samuel Baker | 1,000,000 | $100.00 | | Leonard Steinmetz | 3,000,000 | $300.00 |
On August 25, 2010 we sold 2,000,000 shares of common stock to Mary Kricfalusi, one of our officers and directors in consideration of $200.00.
The foregoing shares were issued pursuant to the exemption from registration contained in Reg. S of the Securities Act of 1933, as amended in that the foregoing transactions took place outside the United States of America with non-US persons.
On October 25, 2010 we completed the sale of 1,580,000 Units to five persons at a purchase price of $0.25 per Unit for a total of $395,000.00. Each Unit was comprised on one restricted share of common stock and one stock purchase warrant. Each warrant is exercisable for a period of one year from the effective date of a registration statement filed with the SEC. The exercise price of each warrant is $0.50. The sales were made pursuant to the exemption from registration contained in Reg. S of the Securities Act of 1933 in that all sales were made outside the United States of America with non-US persons.
On January 14, 2011, we issued 4,000,000 restricted shares of common stock to John Cecil, our CEO and a member of the Board of Directors in consideration of the sum of $400.00.$400. The shares were issued pursuant to the exemption from registration contained in Reg. S of the Securities Act of 1933 in that the transaction took place outside the United States of America with a non-US person.
On September 22, 2011, we issued 13,604,132 restricted shares of common stock to 15 creditors of Kallo Inc. in consideration of satisfaction of $680,207 in outstanding debt.
On September 22, 2011, we issued restricted shares of common stock to the following individuals:
| | | John Cecil | | 27,500,000 | | | | | | Vince Leitao | | 11,000,000 | | | | | | Samuel Baker | | 6,000,000 | | | | | | Mario D’Souza | D'Souza | 5,000,000 | | | | | | Lloyd Chiotti | | 3,000,000 | | | | | | Rajni Kassett | | 2,000,000 | | |
The foregoing shares of common stock were issued pursuant to the exemption from registration contained in Reg. S of the Securities Act of 1933, as amended, in that all transactions took place outside the United States of America with non-US persons.
On February 1, 2012, our board of director approved the issuance of unregistered shares of common stock to the individuals listed below in the amounts set forth opposite each name:
Sonia Mirbaha - 87,200 shares - for services rendered Anil K. Goel - 606,181 shares - for settlement of dues Mansfield Corporation Inc. - 500,000 shares - for services rendered
The foregoing restricted shares of common stock were issued pursuant to the exemption from registration contained in Regulation S of the Securities Act of 1933, as amended in that each of the transactions took place outside the United States of America with non-US persons.
On February 29, 2012, our board of directors approved the issuance of 23,016,963 unregistered shares of common stock to 15 individuals in consideration of $1,150,848.15. The foregoing restricted shares of common stock were issued pursuant to the exemption from registration contained in Regulation S of the Securities Act of 1933, as amended, in that each of the transactions took place outside the United States of America with non-US persons.
During the quarter ended March 31, 2012, the Company issued 5,000,000 shares of its common stock valued at $350,000 to consultants for the provision of various services to the Company. The foregoing sales were made pursuant to the exemption from registration contained in Regulation S of the Securities Act of 1933, as amended, in that each of the transactions took place outside the United States of America with non-US persons. On February 3, 2012, the Company issued 500,000 shares of its common stock to creditors in consideration of satisfaction of $25,000 in outstanding payables. The foregoing sales were made pursuant to the exemption from registration contained in Regulation S of the Securities Act of 1933, as amended, in that each of the transactions took place outside the United States of America with non-US persons. During the quarter ended September 30, 2012, the Company issued 500,000 restricted shares of its common stock to a past officer as compensation for past services rendered. The foregoing sale was made pursuant to the exemption from registration contained in Regulation S of the Securities Act of 1933, as amended, in that the transactions took place outside the United States of America with non-US persons. During the quarter ended September 30, 2012, the Company issued 12,815,113 shares of its common stock for cash proceeds of $640,756. The foregoing sales were made pursuant to the exemption from registration contained in Regulation S of the Securities Act of 1933, as amended, in that each of the transactions took place outside the United States of America with non-US persons.
On July 20, 2012, the Company issued 350,000 restricted shares of common stock to a creditor in consideration of satisfaction for services rendered for a fair value of $24,500.The foregoing sale was made pursuant to the exemption from registration contained in Regulation S of the Securities Act of 1933, as amended, in that the transactions took place outside the United States of America with non-US persons.
On September 18, 2012, the Company sold 115,641,114 restricted shares of its common stock at $0.0001 to various officers and parties related to them in consideration of satisfaction of $11,564 in outstanding payables and as compensation for future services in the amount of $4,614,080. Because the sale price was below the quoted stock price per share of $0.04 per share at the time, the Company considered $4,614,080 as prepaid compensation which will be recognized as an expense over the lock up period of the restricted shares until August 31, 2013. The foregoing sales were made pursuant to the exemption from registration contained in Regulation S of the Securities Act of 1933, as amended, in that each of the transactions took place outside the United States of America with non-US persons.
During 2013, the Company issued 26,402,460 shares in consideration of $1,320,124 ($30,000 of proceeds were paid by investors directly to lenders of the Company), 200,000 shares valued at $5,000 to a consultant as compensation and 1,156,524 shares as repayment for short term loans to a related party valued at $57,826. The fair value of the stock issued is $46,261. Therefore the company experienced a gain on extinguishment. Since this involved a related party, the gain is treated a capital contribution.
During 2013, the Company received cash of $9,560 for shares to be issued. The related shares were not yet issued as at December 31, 2013.
On September 26, 2012,January 16, 2014, the holder of a promissory note converted the principal and interest outstanding of $23,776 into 680,000 shares. The fair value of the stock issued was $27,200 and therefore the Company experienced a loss on extinguishment of $3,424. The Company also issued 5,760,000 shares valued at $230,400 to various employees and a director as compensation for services rendered. During the six months period ended June 30, 2014, the Company issued 17,440,940 shares for cash of $872,047 ($9,560 was collected prior to December 31, 2013).
On July 15, 2014, the Company entered into an investment agreement with Kodiak Capital Group, LLC (“Kodiak”("Kodiak") whereby the company issuedwe will issue 2,000,000 shares of its common stock in exchange for an option to sell up to $2,000,000 worth of our shares of the Companycommon stock at a price equal to eighty percent (80%) of the lowest daily preceding five days Volume Weighted Average Price at the time of exercise and expires six months from inception. The CompanyWe recorded a subscription option asset in the amount of $100,000 which was determined to be the fair value of the option on September 26, 2012. On October 24, 2012, Kallo filed a prospectus relating to the resale of up to 50,000,000 shares of common stock issuable to Kodiak for investment banking services pursuant to an Investment Agreement dated September 26, 2012.July 15, 2014. The foregoing transaction with Kodiak werewas pursuant to the exemption contained in Section 4(2) of the Securities Act of 1933, as amended. Kodiak was furnished with the same information that could be found in a Form S-1 registration statement and Kodiak represented it was a sophisticated investor as that term is defined in court cases and releases issued by the Securities and Exchange Commission .Commission.
ITEM 16.EXHIBITS.
| | | Incorporated by reference | Filed | | Incorporated by reference | Filed | | Exhibit | Document Description | Form | Date | Number | herewith | Document Description | Form | Date | Number | herewith | | | | | | | | | | | | 2.1 | Articles of Merger. | 8-K | 1/21/11 | 2.1 | | Articles of Merger. | 8-K | 1/21/11 | 2.1 | | | | | | | | | | | | | 3.1 | Articles of Incorporation. | SB-2 | 3/05/07 | 3.1 | | Articles of Incorporation. | SB-2 | 3/05/07 | 3.1 | | | | | | | | | | | | | 3.2 | Bylaws. | SB-2 | 3/05/07 | 3.2 | | Bylaws. | SB-2 | 3/05/07 | 3.2 | | | | | | | | | | | | | 4.1 | Specimen Stock Certificate. | SB-2 | 3/05/07 | 4.1 | | Specimen Stock Certificate. | SB-2 | 3/05/07 | 4.1 | | | | | | | | | | | | | 5.1 | Opinion of The Law Office of Conrad C. Lysiak, P.S. | | | X | Opinion of The Law Office of Conrad C. Lysiak, P.S. | | | X | | | | | | | | | | | | 10.1 | Option Agreement. | SB-2 | 3/05/07 | 10.1 | | | | | | | | | | | 10.2 | Lease Agreement. | SB-2 | 3/05/07 | 10.1 | | | | | | | | | | | 10.3 | Agreement with Rophe Medical Technologies Inc. dated December 11, 2009. | 10-K | 3/31/10 | 10.2 | | Agreement with Rophe Medical Technologies Inc. dated December 11, 2009. | 10-K | 3/31/10 | 10.2 | | | | | | | | | | | | | 10.4 | Amended Agreement with Rophe Medical Technologies Inc. dated December 18, 2009. | 10-K | 3/31/10 | 10.3 | | Amended Agreement with Rophe Medical Technologies Inc. dated December 18, 2009. | 10-K | 3/31/10 | 10.3 | | | | | | | | | | 10.5 | | Amended Agreement with Rophe Medical Technologies Inc. dated March 16, 2010. | 10-K | 3/31/10 | 10.4 | | | | | | | | | | 10.6 | | Investment Agreement with Kodiak Capital Group, LLC. | S-1 | 10/24/12 | 10.6 | | | | | | | | |
| 10.18 | Amended Agreement with Jarr Capital Corp. | 8-K | 2/22/11 | 10.1 | | | | | | | | | | 10.19 | Termination of Employment Agreement with John Cecil. | 8-K | 2/22/11 | 10.2 | | | | | | | | | | 10.20 | Termination of Employment Agreement with Vince Leitao. | 8-K | 2/22/11 | 10.3 | | | | | | | | | | 10.21 | Termination of Employment Agreement with Samuel Baker. | 8-K | 2/22/11 | 10.4 | | | | | | | | | | 10.22 | Services Agreement with Buchanan Associates Computer Consulting Ltd. | 10-K | 5/18/11 | 10.1 | | | | | | | | | | 10.23 | Equipment Lease Agreement with Buchanan Associates Computer Consulting Ltd. | 10-K | 5/18/11 | 10.2 | | | | | | | | | | 10.24 | Agreement with Mansfield Communications Inc. | 10-K | 5/18/11 | 10.3 | | | | | | | | | | 10.25 | Agreement with Watt International Inc. | 10-K | 5/18/11 | 10.4 | | | | | | | | | | 10.26 | Pilot EMR Agreement with Nexus Health Management Inc. | 10-K | 5/18/11 | 10.5 | | | | | | | | | | 10.27 | 2011 Non-Qualified Stock Option Plan. | S-8 | 6/27/11 | 10.1 | | | | | | | | | | 10.28 | Multimedia Contractual Agreement with David Miller. | 8-K | 10/28/11 | 10.1 | | | | | | | | | | 10.29 | Strategic Alliance Agreement with Petro Data Management Services Limited and Gateway Global Fabrication Ltd. | 8-K | 11/02/11 | 10.1 | | | | | | | | | | 10.30 | Independent Contractor Agreement with Savers Drug Mart. | 8-K | 1/26/12 | 10.1 | | | | | | | | | | 10.31 | 2012 Non-Qualified Stock Option Plan. | S-8 | 9/06/12 | 10.1 | | | | | | | | | | 10.32 | Memorandum of Offering with Ministry of Health of Republic of Ghana. | S-1/A-3 | 6/26/13 | 10.32 | | | | | | | | | | 10.33 | Addendum to Investment Agreement with Kodiak. | S-1/A-4 | 7/31/13 | 10.33 | | | | | | | | | | 10.34 | Second Addendum to Investment Agreement with Kodiak. | | | | X | | | | | | | | | 14.2 | Code of Ethics. | | | | X | | | | | | | | | 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 | | | | | | | | | | 23.1 | Consent of Schwartz Levitsky Feldman LLP. | | | | X | | | | | | | | | 23.2 | Consent of MaloneBailey LLP. | | | | X | | | | | | | | | 23.3 | Consent of The Law Office of Conrad C. Lysiak, P.S. | | | | 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. | | | | X | | | | | | | | | 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 |
| | | | | | | | 10.5 | Amended Agreement with Rophe Medical Technologies Inc. dated March 16, 2010. | 10-K | 3/31/10 | 10.4 | | | | | | | | | | 10.6 | Investment Agreement with Kodiak Capital Group, LLC. | S-1 | 10/24/12 | 10.6 | | | | | | | | | | 10.7 | Consulting Agreement with Ten Associate LLC. | S-1 | 5/24/10 | 10.7 | | | | | | | | | | 10.8 | Employment Agreement with Leonard Steinmetz. | S-1 | 5/24/10 | 10.8 | | | | | | | | | | 10.9 | Employment Agreement with Samuel Baker. | S-1 | 5/24/10 | 10.9 | | | | | | | | | | 10.10 | Employment Agreement with John Cecil. | S-1 | 5/24/10 | 10.10 | | | | | | | | | | 10.11 | Employment Agreement with Mary Kricfalusi. | S-1 | 5/24/10 | 10.11 | | | | | | | | | | 10.12 | Employment Agreement with Vince Leitao. | S-1 | 5/24/10 | 10.12 | | | | | | | | | | 10.13 | Amended Consulting Agreement with Ten Associate LLC dated October 5, 2010. | 8-K | 10/14/10 | 10.13 | | | | | | | | | | 10.14 | Agreement with Jarr Capital Corp. | 8-K | 11/17/10 | 10.1 | | | | | | | | | | 10.15 | Agreement with Mary Kricfalusi. | 8-K | 11/19/10 | 10.1 | | | | | | | | | | 10.16 | Agreement with Herb Adams. | 8-K | 11/19/10 | 10.2 | | | | | | | | | | 10.17 | North American Authorized Agency Agreement with Advanced Software Technologies, Inc. | 8-K | 12/16/10 | 10.1 | | | | | | | | | | 10.18 | Amended Agreement with Jarr Capital Corp. | 8-K | 2/22/11 | 10.1 | | | | | | | | | | 10.19 | Termination of Employment Agreement with John Cecil. | 8-K | 2/22/11 | 10.2 | | | | | | | | | | 10.20 | Termination of Employment Agreement with Vince Leitao. | 8-K | 2/22/11 | 10.3 | | | | | | | | | | 10.21 | Termination of Employment Agreement with Samuel Baker. | 8-K | 2/22/11 | 10.4 | | | | | | | | | | 10.22 | Services Agreement with Buchanan Associates Computer Consulting Ltd. | 10-K | 5/18/11 | 10.1 | | | | | | | | | | 10.23 | Equipment Lease Agreement with Buchanan Associates Computer Consulting Ltd. | 10-K | 5/18/11 | 10.2 | | | | | | | | | | 10.24 | Agreement with Mansfield Communications Inc. | 10-K | 5/18/11 | 10.3 | |
| | | | | | | | 10.25 | Agreement with Watt International Inc. | 10-K | 5/18/11 | 10.4 | | | | | | | | | | 10.26 | Pilot EMR Agreement with Nexus Health Management Inc. | 10-K | 5/18/11 | 10.5 | | | | | | | | | | 10.27 | 2011 Non-Qualified Stock Option Plan. | S-8 | 6/27/11 | 10.1 | | | | | | | | | | 10.28 | Multimedia Contractual Agreement with David Miller. | 8-K | 10/28/11 | 10.1 | | | | | | | | | | 10.29 | Strategic Alliance Agreement with Petro Data Management Services Limited and Gateway Global Fabrication Ltd. | 8-K | 11/02/11 | 10.1 | | | | | | | | | | 10.30 | Independent Contractor Agreement with Savers Drug Mart. | 8-K | 1/26/12 | 10.1 | | | | | | | | | | 10.31 | 2012 Non-Qualified Stock Option Plan. | S-8 | 9//12 | 10.1 | | | | | | | | | | 14.1 | Code of Ethics. | 10-K | 4/15/08 | 14.1 | | | | | | | | | | 16.1 | Letter from Kempisty& Company. | 8-K | 10/27/09 | 16.1 | | | | | | | | | | 16.2 | Letter from MaloneBailey, LLP. | 8-K | 3/02/11 | 16.1 | | | | | | | | | | 21.1 | List of Subsidiary Companies. | 10-K | 3/31/10 | 21.1 | | | | | | | | | | 23.1 | Consent of Schwartz Levitsky Feldman LLP. | | | | X | | | | | | | | | 23.2 | Consent of The Law Office of Conrad C. Lysiak, P.S. | | | | 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 |
ITEM 17.UNDERTAKINGS.
A. The undersigned Registrant hereby undertakes:
| (1) | To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement to: |
(1)To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement to:
| (a) | include any prospectus required by Section 10(a)(3) of the Securities Act; |
(a)include any prospectus required by Section 10(a)(3) of the Securities Act;
| (b) | reflect in the prospectus any facts or events arising after the effective date of this registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in this registration statement. Notwithstanding the foregoing, any increase or decrease in the volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) under the Securities Act if, in the aggregate, the changes in volume and price represent no more than a 20% change in maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and |
(b)reflect in the prospectus any facts or events arising after the effective date of this registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in this registration statement. Notwithstanding the foregoing, any increase or decrease in the volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) under the Securities Act if, in the aggregate, the changes in volume and price represent no more than a 20% change in maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; and
| (c) | include any additional or changed material information with respect to the plan of distribution. |
(c)include any additional or changed material information with respect to the plan of distribution.
| (2) | That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered herein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. |
(2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered herein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
| (3) | To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. |
(3)To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
| (4) | To provide to the underwriters at the closing specified in the underwriting agreement certificates in such denominations and registered in such names as required by the underwriter to permit prompt delivery to each purchaser. |
(4)To provide to the underwriters at the closing specified in the underwriting agreement certificates in such denominations and registered in such names as required by the underwriter to permit prompt delivery to each purchaser.
| (5) | For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of a registration statement in reliance upon Rule 430A and contained in the form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of the registration statement as of the time it was declared effective. |
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| (6) | For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new Registration Statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. |
| (7) | For the purpose of determining liability under the Securities Act to any purchaser: |
| Each prospectus filed pursuant to Rule 424(b) under the Securities Act as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A (§§230.430A of this chapter), shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.
|
| (8) | For the purpose of determining liability of the registrant under the Securities Act to any purchaser in the initial distribution of securities: |
(5)For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of a registration statement in reliance upon Rule 430A and contained in the form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of the registration statement as of the time it was declared effective.
| The undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser: |
(6)For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new Registration Statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
| (a) | Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424 of this chapter; |
(7)For the purpose of determining liability under the Securities Act to any purchaser:
| (b) | Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant; |
Each prospectus filed pursuant to Rule 424(b) under the Securities Act as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A (§§230.430A of this chapter), shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.
| (c) | The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and |
(8)For the purpose of determining liability of the registrant under the Securities Act to any purchaser in the initial distribution of securities:
| (d) | Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser. |
The undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
B. | Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the small business issuer pursuant to the foregoing provisions, or otherwise, the small business issuer has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the small business issuer of expenses incurred or paid by a director, officer or controlling person of the small business issuer in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the small business issuer will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. |
(a)Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424 of this chapter;
(b)Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;
(c)The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and (d) Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
B.Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the small business issuer pursuant to the foregoing provisions, or otherwise, the small business issuer has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the small business issuer of expenses incurred or paid by a director, officer or controlling person of the small business issuer in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the small business issuer will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.C. | To provide to the underwriter at the closing specified in the Underwriting Agreement certificates in such denominations and registered in such names as required by the underwriter to permit prompt delivery to each purchaser. |
D. | The undersigned Registrant hereby undertakes that: |
C.To provide to the underwriter at the closing specified in the Underwriting Agreement certificates in such denominations and registered in such names as required by the underwriter to permit prompt delivery to each purchaser.
| (1) | For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. |
D.The undersigned Registrant hereby undertakes that:
| (2) | (1)For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.
(2)For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. |
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this amended registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Toronto, Province of Ontario, Canada on this 31st25th day of March, 2013.August, 2014.
| | KALLO INC. | | | (the “Registrant”"Registrant") | | | | | | | BY: | JOHN CECIL | | | | John Cecil | | | | Principal Executive Officer, Principal Financial | | | | Officer, Principal Accounting Officer, and a Chairman of the Board of Directors | | | | | | | BY: | VINCE LEITAO | | | | Vince Leitao | | | | President, Chief Operating Officer and a member of the Board of Directors |
In accordance with the Securities Act of 1933, as amended, this amended Form S-1 registration statement has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:
| Signature | Title | Date | | | | | JOHN CECIL | Principal Executive Officer, Principal | March 31, 2013August 25, 2014 | | John Cecil | Financial Officer, Principal Accounting Officer, | | | | and Chairman of the Board of Directors | | | | | | VINCE LEITAO | President, Chief Operating Officer and a member | March 31, 2013August 25, 2014 | | Vince Leitao | of the Board of Directors | | | | | | SAMUEL BAKER | Corporate Secretary and a member of the Board | March 31, 2013August 25, 2014 | | Samuel Baker | of Directors | | | | | | LLOYD A. CHIOTTI | Director | March 31, 2013August 25, 2014 | | Lloyd A. Chiotti | | |
EXHIBIT INDEX
| | | 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 | | | | | | | | | | 4.1 | Specimen Stock Certificate. | SB-2 | 3/05/07 | 4.1 | | | | | | | | | | 5.1 | Opinion of The Law Office of Conrad C. Lysiak, P.S. | | | | X | | | | | | | | | 10.1 | Option Agreement. | SB-2 | 3/05/07 | 10.1 | | | | | | | | | | 10.2 | Lease Agreement. | SB-2 | 3/05/07 | 10.1 | | | | | | | | | | 10.3 | Agreement with Rophe Medical Technologies Inc. dated December 11, 2009. | 10-K | 3/31/10 | 10.2 | | | | | | | | | | 10.4 | Amended Agreement with Rophe Medical Technologies Inc. dated December 18, 2009. | 10-K | 3/31/10 | 10.3 | | | | | | | | | | 10.5 | Amended Agreement with Rophe Medical Technologies Inc. dated March 16, 2010. | 10-K | 3/31/10 | 10.4 | | | | | | | | | | 10.6 | Investment Agreement with Kodiak Capital Group, LLC. | S-1 | 10/24/12 | 10.6 | | | | | | | | | | 10.7 | Consulting Agreement with Ten Associate LLC. | S-1 | 5/24/10 | 10.7 | | | | | | | | | | 10.8 | Employment Agreement with Leonard Steinmetz. | S-1 | 5/24/10 | 10.8 | | | | | | | | | | 10.9 | Employment Agreement with Samuel Baker. | S-1 | 5/24/10 | 10.9 | | | | | | | | | | 10.10 | Employment Agreement with John Cecil. | S-1 | 5/24/10 | 10.10 | | | | | | | | | | 10.11 | Employment Agreement with Mary Kricfalusi. | S-1 | 5/24/10 | 10.11 | | | | | | | | | | 10.12 | Employment Agreement with Vince Leitao. | S-1 | 5/24/10 | 10.12 | | | | | | | | | | 10.13 | Amended Consulting Agreement with Ten Associate LLC dated October 5, 2010. | 8-K | 10/14/10 | 10.13 | | | | | | | | | | 10.14 | Agreement with Jarr Capital Corp. | 8-K | 11/17/10 | 10.1 | | | | | | | | | | 10.15 | Agreement with Mary Kricfalusi. | 8-K | 11/19/10 | 10.1 | | | | | | | | | | 10.16 | Agreement with Herb Adams. | 8-K | 11/19/10 | 10.2 | |
| 10.17 | North American Authorized Agency Agreement with Advanced Software Technologies, Inc. | 8-K | 12/16/10 | 10.1 | | | | | | | | | | 10.18 | Amended Agreement with Jarr Capital Corp. | 8-K | 2/22/11 | 10.1 | | | | | | | | | | 10.19 | Termination of Employment Agreement with John Cecil. | 8-K | 2/22/11 | 10.2 | | | | | | | | | | 10.20 | Termination of Employment Agreement with Vince Leitao. | 8-K | 2/22/11 | 10.3 | | | | | | | | | | 10.21 | Termination of Employment Agreement with Samuel Baker. | 8-K | 2/22/11 | 10.4 | | | | | | | | | | 10.22 | Services Agreement with Buchanan Associates Computer Consulting Ltd. | 10-K | 5/18/11 | 10.1 | | | | | | | | | | 10.23 | Equipment Lease Agreement with Buchanan Associates Computer Consulting Ltd. | 10-K | 5/18/11 | 10.2 | | | | | | | | | | 10.24 | Agreement with Mansfield Communications Inc. | 10-K | 5/18/11 | 10.3 | | | | | | | | | | 10.25 | Agreement with Watt International Inc. | 10-K | 5/18/11 | 10.4 | | | | | | | | | | 10.26 | Pilot EMR Agreement with Nexus Health Management Inc. | 10-K | 5/18/11 | 10.5 | | | | | | | | | | 10.27 | 2011 Non-Qualified Stock Option Plan. | S-8 | 6/27/11 | 10.1 | | | | | | | | | | 10.28 | Multimedia Contractual Agreement with David Miller. | 8-K | 10/28/11 | 10.1 | | | | | | | | | | 10.29 | Strategic Alliance Agreement with Petro Data Management Services Limited and Gateway Global Fabrication Ltd. | 8-K | 11/02/11 | 10.1 | | | | | | | | | | 10.30 | Independent Contractor Agreement with Savers Drug Mart. | 8-K | 1/26/12 | 10.1 | | | | | | | | | | 10.31 | 2012 Non-Qualified Stock Option Plan. | S-8 | 9//12 | 10.1 | | | | | | | | | | 14.1 | Code of Ethics. | 10-K | 4/15/08 | 14.1 | | | | | | | | | | 16.1 | Letter from Kempisty& Company. | 8-K | 10/27/09 | 16.1 | | | | | | | | | | 16.2 | Letter from MaloneBailey, LLP. | 8-K | 3/02/11 | 16.1 | | | | | | | | | | 21.1 | List of Subsidiary Companies. | 10-K | 3/31/10 | 21.1 | | | | | | | | | | 23.1 | Consent of Schwartz Levitsky Feldman LLP. | | | | X | | | | | | | | | 23.2 | Consent of The Law Office of Conrad C. Lysiak, P.S. | | | | 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 |
EXHIBIT INDEX
| | | 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 | | | | | | | | | | 4.1 | Specimen Stock Certificate. | SB-2 | 3/05/07 | 4.1 | | | | | | | | | | 5.1 | Opinion of The Law Office of Conrad C. Lysiak, P.S. | | | | X | | | | | | | | | 10.3 | Agreement with Rophe Medical Technologies Inc. dated December 11, 2009. | 10-K | 3/31/10 | 10.2 | | | | | | | | | | 10.4 | Amended Agreement with Rophe Medical Technologies Inc. dated December 18, 2009. | 10-K | 3/31/10 | 10.3 | | | | | | | | | | 10.5 | Amended Agreement with Rophe Medical Technologies Inc. dated March 16, 2010. | 10-K | 3/31/10 | 10.4 | | | | | | | | | | 10.6 | Investment Agreement with Kodiak Capital Group, LLC. | S-1 | 10/24/12 | 10.6 | | | | | | | | | | 10.18 | Amended Agreement with Jarr Capital Corp. | 8-K | 2/22/11 | 10.1 | | | | | | | | | | 10.19 | Termination of Employment Agreement with John Cecil. | 8-K | 2/22/11 | 10.2 | | | | | | | | | | 10.20 | Termination of Employment Agreement with Vince Leitao. | 8-K | 2/22/11 | 10.3 | | | | | | | | | | 10.21 | Termination of Employment Agreement with Samuel Baker. | 8-K | 2/22/11 | 10.4 | | | | | | | | | | 10.22 | Services Agreement with Buchanan Associates Computer Consulting Ltd. | 10-K | 5/18/11 | 10.1 | | | | | | | | | | 10.23 | Equipment Lease Agreement with Buchanan Associates Computer Consulting Ltd. | 10-K | 5/18/11 | 10.2 | | | | | | | | | | 10.24 | Agreement with Mansfield Communications Inc. | 10-K | 5/18/11 | 10.3 | | | | | | | | | | 10.25 | Agreement with Watt International Inc. | 10-K | 5/18/11 | 10.4 | | | | | | | | | | 10.26 | Pilot EMR Agreement with Nexus Health Management Inc. | 10-K | 5/18/11 | 10.5 | | | | | | | | | | 10.27 | 2011 Non-Qualified Stock Option Plan. | S-8 | 6/27/11 | 10.1 | | | | | | | | | | 10.28 | Multimedia Contractual Agreement with David Miller. | 8-K | 10/28/11 | 10.1 | | | | | | | | | | 10.29 | Strategic Alliance Agreement with Petro Data Management Services Limited and Gateway Global Fabrication Ltd. | 8-K | 11/02/11 | 10.1 | |
| | | | | | | | 10.30 | Independent Contractor Agreement with Savers Drug Mart. | 8-K | 1/26/12 | 10.1 | | | | | | | | | | 10.31 | 2012 Non-Qualified Stock Option Plan. | S-8 | 9/06/12 | 10.1 | | | | | | | | | | 10.32 | Memorandum of Offering with Ministry of Health of Republic of Ghana. | S-1/A-3 | 6/26/13 | 10.32 | | | | | | | | | | 10.33 | Addendum to Investment Agreement with Kodiak. | S-1/A-4 | 7/31/13 | 10.33 | | | | | | | | | | 10.34 | Second Addendum to Investment Agreement with Kodiak. | | | | X | | | | | | | | | 14.2 | Code of Ethics. | | | | X | | | | | | | | | 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 | | | | | | | | | | 23.1 | Consent of Schwartz Levitsky Feldman LLP. | | | | X | | | | | | | | | 23.2 | Consent of MaloneBailey LLP. | | | | X | | | | | | | | | 23.3 | Consent of The Law Office of Conrad C. Lysiak, P.S. | | | | 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. | | | | X | | | | | | | | | 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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