UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q/A-1

☒
QUARTERLY REPORT UNDER TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2017
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 000-53183

KALLO INC.
(Exact name of registrant as specified in its charter)

NEVADA
(State or other jurisdiction of incorporation or organization)

225 Duncan Mills Road,
Suite 504
Toronto, Ontario
Canada M3B 3H9
(Address of principal executive offices, including zip code.)

(416) 246-9997
(Registrant's telephone number, including area code)

Indicate by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the last 90 days. YES ☒   NO ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES ☒     NO ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer, "accelerated filer," "non-accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer
☐
 
Accelerated Filer
☐
Non-accelerated Filer
☐
 
Smaller Reporting Company
☒
Emerging Growth Company
☐
     
(Do not check if smaller reporting company)
     

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐     NO ☒

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicated the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date : 9,907,548,954 as of October 14, 2017.
 


 
REASON FOR AMENDMENT
 
The sole purpose of this Amendment to the Registrant's Quarterly Report on Form 10-Q for the period ended March 31, 2017 is to furnish the Interactive Data File exhibits pursuant to Rule 405 of Regulation S-T. No other changes have been made to this Form 10-Q and this Amendment has not been updated to reflect events occurring subsequent to the filing of this Form 10-Q.
 
 
 
 
KALLO INC.
MARCH 31, 2017


TABLE OF CONTENTS

 
PAGE
   
PART I
3
   
Item 1.
Financial Statements.
3
     
 
Unaudited Consolidated Balance Sheets
3
     
 
Unaudited Consolidated Statements Of Operations
4
     
 
Unaudited Consolidated Statements Of Cash Flows
5
     
 
Notes to Unaudited Consolidated Financial Statements
6
     
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
11
     
Item 3.
Quantitative and Qualitative Disclosures about Market Risk.
14
     
Item 4.
Controls and Procedures.
15
     
PART II
15
   
Item 1.
Legal Proceedings.
15
     
Item 1A.
Risk Factors.
15
     
Item 6.
Exhibits.
16
     
Signatures
18
   
Exhibit Index
19









PART I – FINANCIAL INFORMATION

ITEM 1.                      FINANCIAL STATEMENTS.

KALLO INC.
Consolidated Balance Sheets
(Amounts expressed in US dollars)
(Unaudited)


   
March 31,
   
December 31,
 
   
2017
   
2016
 
ASSETS
           
Current Assets:
           
Prepaid expenses
 
$
35,748
   
$
57,011
 
Total Current Assets
   
35,748
     
57,011
 
                 
TOTAL ASSETS
 
$
35,748
   
$
57,011
 
                 
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
               
Current Liabilities:
               
Bank overdraft
 
$
244
   
$
211
 
Accounts payable and accrued liabilities
   
2,939,881
     
2,731,879
 
Derivative liabilities
   
245,936
     
270,581
 
Convertible promissory notes, net of discount of $2,678 and $8,872 respectively
   
314,498
     
324,586
 
Convertible loans payable – third parties
   
199,564
     
191,510
 
Short term loans payable
   
16,560
     
16,215
 
Convertible loans payable – related parties
   
664,290
     
615,163
 
Deferred lease inducement
   
-
     
1,260
 
Total Current Liabilities
   
4,380,973
     
4,151,405
 
TOTAL LIABILITIES
   
4,380,973
     
4,151,405
 
                 
Commitments and Contingencies
               
                 
Stockholders' Deficiency
               
Preferred stock, $0.00001 par value, 100,000,000 shares authorized,
95,000,000 Series A preferred shares issued and outstanding
   
950
     
950
 
Common stock, $0.00001 par value, 15,000,000,000 shares authorized,
8,819,548,954 and 8,098,742,772 shares issued and outstanding, respectively
   
88,196
     
80,988
 
Additional paid-in capital
   
31,019,568
     
30,965,822
 
Accumulated deficit
   
(35,453,939
)
   
(35,142,154
)
                 
Total Stockholders' Deficiency
   
(4,345,225
)
   
(4,094,394
)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY
 
$
35,748
   
$
57,011
 



See accompanying notes to the unaudited consolidated financial statements

KALLO INC.
Consolidated Statements of Operations
(Amounts expressed in US dollars)
(Unaudited)


   
Three months Ended
 
   
March 31,
 
   
2017
   
2016
 
             
             
Operating Expenses
           
General and administration
 
$
226,773
   
$
612,061
 
Selling and marketing
   
503
     
408
 
Depreciation
   
-
     
15,766
 
Operating loss
   
(227,276
)
   
(628,235
)
                 
Interest and financing costs
   
(58,393
)
   
(65,414
)
Foreign exchange loss
   
(29,451
)
   
(71,554
)
Change in fair value on derivative liabilities
   
3,335
     
(42,429
)
                 
Net Loss
 
$
(311,785
)
 
$
(807,632
)
                 
                 
Basic and diluted net loss per share
 
$
(0.00
)
 
$
(0.00
)
                 
Weighted average shares used in calculating
               
Basic and diluted net loss per share
   
8,527,758,784
     
6,322,786,890
 











See accompanying notes to the unaudited consolidated financial statements

KALLO INC.
Consolidated Statements of Cash Flows
(Amounts expressed in US dollars)
(Unaudited)

   
Three months Ended
 
   
March 31,
 
   
2017
   
2016
 
             
CASH FLOWS FROM OPERATING ACTIVITIES
           
Net Loss
 
$
(311,785
)
 
$
(807,632
)
Adjustment to reconcile net loss to cash used in operating activities:
               
Depreciation
   
-
     
15,766
 
Change in fair value on derivative liabilities
   
(3,335
)
   
42,429
 
Interest and penalties
   
50,219
     
577
 
Deferred lease inducement
   
(1,260
)
   
(2,771
)
Amortization of debt discount
   
6,194
     
64,651
 
Unrealized foreign exchange loss
   
8,134
     
50,319
 
Changes in operating assets and liabilities:
               
(Increase) decrease in prepaid expenses and deposit
   
21,263
     
46,364
 
Increase (decrease) in accounts payable and accrued liabilities
   
230,348
     
419,702
 
NET CASH USED IN OPERATING ACTIVITIES
   
(222
)
   
(170,595
)
                 
                 
CASH FLOWS FROM FINANCING ACTIVITIES
               
Proceeds from short term loans payable
   
189
     
-
 
Increase in bank indebtedness
   
33
     
-
 
Proceeds from other convertible notes ($150,556 from related parties in 2016)
   
-
     
180,556
 
NET CASH PROVIDED BY FINANCING ACTIVITIES
   
222
     
180,556
 
                 
Effect of exchange rate changes on cash
   
-
     
2,934
 
                 
NET (DECREASE) INCREASE IN CASH
   
-
     
12,895
 
CASH - BEGINNING OF PERIOD
   
-
     
4,998
 
CASH - END OF PERIOD
 
$
-
   
$
17,893
 
SUPPLEMENTAL CASH FLOW INFORMATION
               
Income tax paid
 
$
-
   
$
-
 
Interest paid
 
$
-
   
$
-
 
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES
               
Conversion of promissory notes into common shares
 
$
60,954
   
$
94,785
 
Convertible loan payable for expenses paid directly by lender
 
$
22,346
   
$
-
 

See accompanying notes to the unaudited consolidated financial statements

KALLO INC.
Notes to Consolidated Financial Statements
March 31, 2017
(Amounts expressed in US dollars)
(Unaudited)

NOTE 1 – BUSINESS AND GOING CONCERN

Organization

Kallo Inc. ("Kallo" or the "Company") develops customized health care solutions designed to improve or enhance the delivery of care in the countries and regions we serve .

Going Concern

The accompanying unaudited consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The amounts of assets and liabilities in the consolidated financial statements do not purport to represent realizable or settlement values. The Company has incurred operating losses since inception and has an accumulated deficit and a working capital deficit at March 31, 2017. The Company is expected to incur additional losses as it executes its go to market strategy . This raises substantial doubt about the Company's ability to continue as a going concern.

The Company has met its historical working capital requirements from the sale of common shares and short term loans. In order to not burden the Company, the officer/stockholder has agreed to provide funding to the Company to pay its annual audit fees, filing costs and legal fees as long as the board of directors deems it necessary. However, there can be no assurance that such financial support shall be ongoing or available on terms or conditions acceptable to the Company. These consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

NOTE 2 – ACCOUNTING POLICIES AND OPERATIONS

Basis of Presentation

The accompanying unaudited consolidated financial statements of the Company have been prepared in conformity with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 8-03 of Regulation S-X related to smaller reporting companies. These unaudited consolidated financial statements should be read in conjunction with the annual audited consolidated financial statements and notes, which are included as part of the Company's Form 10-K filed with the SEC for the year ended December 31, 2016.

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, 2016 as reported in the 10-K have been omitted. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, considered necessary for a fair presentation, have been included in the accompanying unaudited consolidated financial statements.

Recently Adopted Accounting Pronouncements

Management does not expect the adoption of recently issued accounting pronouncements to have a significant impact on our results of operations, financial position or cash flow.

NOTE 3 – COMMON STOCK

During the three months period ended March 31, 2017, the holders of promissory notes converted the principal and the related interest outstanding of $39,644 into 720,806,182 shares.  The fair value of the derivative liability associated with the notes that were converted, $21,310 was reclassified to equity upon conversion.  Therefore the Company recorded $60,954 in conjunction with the conversions.

During the three months period ended March 31, 2016, the holders of promissory notes converted the principal and the related interest outstanding of $53,805 into 1,197,396,933 shares. The fair value of the derivative liability associated with the notes that were converted, $40,980 was reclassified to equity upon conversion. Therefore the Company recorded $94,785 in conjunction with the conversions.
KALLO INC.
Notes to Consolidated Financial Statements
March 31, 2017
(Amounts expressed in US dollars)
(Unaudited)

NOTE 4 – RELATED PARTY TRANSACTIONS

During the three months period ended March 31, 2017, $22,346 was received from a director and an affiliate of the Company and is included in the convertible loans payable to related parties.

Included in accounts payable and accrued liabilities is an amount of $390,151 due to directors of the Company as at March 31, 2017.

NOTE 5 – CONVERTIBLE PROMISSORY NOTES AND DERIVATIVE LIABILITIES

The convertible promissory notes are unsecured and bear interest at between 8% and 12% per annum with all principal and accrued interest due and payable between one and two years from the dates of execution of the Notes. The Notes are due and were issued as disclosed in the following table. The Holders of the Notes can, 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 disclosed. The following table represents the remaining notes outstanding as at March 31, 2017:


Face amount
 
Interest rate
 
Due date
Conversion price per share
              
Promissory note of $100,000
   
10%
 
December 21, 2015
65% of lowest trading day over the last 15 trading days
Promissory note of $55,000
   
8%
 
February 5, 2016
60% of the lowest trading price over the last 15 trading days
Promissory note of $55,000
   
8%
 
July 9, 2016
65% of the lowest trading price over the last 15 trading days
Promissory note of $50,000
   
12%
 
February 3, 2017
65% of the lowest trading price over the last 25 trading days
Promissory note of $50,000
   
8%
 
June 8, 2017
65% of the lowest trading price over the last 20 trading days

During the period ended March 31, 2017, there were no new promissory notes.  On March 31, 2017, all the derivative liabilities were valued at $245,936 which resulted in a gain in fair value of $3,335 for the period ended March 31, 2017.  The debt discounts are amortized over the terms of the respective Notes and were $6,194 at March 31, 2017 and, together with interest and penalties of $23,362 on the promissory notes, are included in net finance charge of $58,393 for the period ended March 31, 2017 included in the consolidated statement of operations. The fair value of the embedded conversion feature is estimated at the end of each quarterly reporting period using the Multinomial lattice model.

The following table illustrates the fair value adjustments that were recorded related to the level 3 derivative liabilities, associated with the convertible promissory notes:

 
 
March 31,
 
 
 
2017
 
Fair value as at Beginning of Period
 
$
270,581
 
Elimination associated with conversion of promissory notes
   
(21,310
)
Change in fair value loss (gain)
   
(3,335
)
Fair value as at End of Period
 
$
245,936
 


KALLO INC.
Notes to Consolidated Financial Statements
March 31, 2017
(Amounts expressed in US dollars)
(Unaudited)

NOTE 5 – CONVERTIBLE PROMISSORY NOTES AND DERIVATIVE LIABILITIES (continued)

A summary of the promissory notes is as follows:

 
 
March 31,
   
March 31,
 
 
 
2017
   
2016
 
 
           
Balance as at Beginning of Period
 
$
324,586
   
$
229,377
 
Interest and Penalties
   
23,362
     
577
 
Converted into shares
   
(39,644
)
   
(53,805
)
Amortization of debt discount
   
6,194
     
64,651
 
Balance as at End of Period
 
$
314,498
   
$
240,800
 
Convertible notes – short term
   
(314,498
)
   
(199,102
)
Convertible notes – long term
 
$
-
   
$
41,698
 

Convertible promissory notes are accounted for at fair value by level within the fair value hierarchy at March 31, 2017 and December 31, 2016 as follows:

March 31, 2017
 
Level 1
   
Level 2
   
Level 3
   
Total
 
Liabilities:
                       
Derivative liabilities
 
$
-
   
$
-
   
$
245,936
   
$
245,936
 


December 31, 2016
 
Level 1
   
Level 2
   
Level 3
   
Total
 
Liabilities:
                       
Derivative liabilities
 
$
-
   
$
-
   
$
270,581
   
$
270,581
 

NOTE 6 – CONVERTIBLE LOANS PAYABLE

   
March 31,
2017
   
December 31,
2017
 
             
Convertible promissory notes bearing interest at 15% per annum – third party
 
$
199,564
   
$
191,510
 
Convertible promissory notes bearing interest at 15% per annum – related parties
   
664,290
     
615,163
 
   
$
863,854
   
$
806,673
 

During the three month period ended March 31, 2017, $22,346 was received in cash for Convertible loans payable which bear 15% interest per annum and are convertible at a fixed price at any time during the 1 year term.  The company has the option to pay the note at any time.  The company analyzed the conversion option for derivative accounting consideration under ASC Topic 815-40, Derivatives and Hedging – Contract in Entity's Own Stock and concluded that the embedded conversion was a derivative but the fair value of the feature was immaterial. The total outstanding notes from this debt offering is $863,854, including accrued interest, of which $664,290 is to from related parties. Interest of $26,857 on the convertible loans payable are included in net finance charge of $58,393 for the period ended March 31, 2017 included in the consolidated statement of operations.



KALLO INC.
Notes to Consolidated Financial Statements
March 31, 2017
(Amounts expressed in US dollars)
(Unaudited)

NOTE 7 – SHORT TERM LOANS PAYABLE

 
March 31,
2017
 
December 31,
2016
 
 
       
Non-interest bearing short term funding from third parties
 
$
16,560
   
$
16,215
 
 
 
$
16,560
   
$
16,215
 

As at March 31, 2017, the balance of $16,560 represented short term funding provided by third parties which are non-interest bearing, unsecured and have no fixed repayment date.  The amount in Canadian dollars is $22,016 which is subject to revaluation at the end of each quarter.

NOTE 8 – COMMITMENTS AND CONTINGENCIES

Sales commission agreement

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"). The Guinea Project is contingent on adequate financing to be obtained by the Government of the Republic of Guinea and this is still ongoing.

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 mentionned, 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 remainder within 7 to 14 business days of receipt of payment for the Project 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 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 October 13, 2017, Kallo notices of termination of the agreements with the above two third parties to be effective 30 days later.

Agreements with suppliers

The Company has entered into agreements with a number of service providers for licensing of software and other professional services to be rendered. The total remaining amount committed is $2,926,527.

Contingencies

On April 21, 2017, an ex-employee of Kallo obtained a judgement ordering Kallo to pay Canadian $ 135,959 for unpaid wages and expenses relating to services performed in 2016. The full amount has been accrued for in the financial statements of Kallo.
On October 24, 2016, a consultant obtained a judgement ordering Kallo to pay Canadian $25,000 for unpaid fees. The full amount has been accrued for in the financial statements of Kallo.


KALLO INC.
Notes to Consolidated Financial Statements
March 31, 2017
(Amounts expressed in US dollars)
(Unaudited)

NOTE 9 – SUBSEQUENT EVENTS

Convertible promissory notes

After March 31, 2017, promissory notes for a total of $320,000 were settled in cash by FE Pharmacy Inc. under the agreement mentioned below.

Convertible loans payable

After March 31, 2017, a total of $4,805 was received as advances against loans which will have the same terms as described in note 6.

Reverse stock split

On April 18, 2017, the Board of Directors approved a reverse stock split of the authorized and outstanding shares of common stock on a 1 for 600 basis, after which, the authorized number of common stock will decrease from 15,000,000,000 to 25,000,000. After the completion of the reverse stock split, the Board of Directors approved the increase of the authorized number of common stock from 25,000,000 to 1,150,000,000. As FINRA has not yet approved the reverse stock split yet, it is not effective yet. Therefore, the common share and per common share data in these financial statements and related notes hereto have not been retroactively adjusted to account for the effect of the reverse stock split for all periods presented prior to April 18, 2017.

After the approval of the reverse stock split by FINRA, the 9,907,548,954 common shares outstanding as at October 11, 2017 will be adjusted to 16,512,582 post reverse stock split common shares. Also, 1,086,186,667 post reverse stock split common shares will be issued to make whole for the shares issued after April 18, 2017, as detailed below.

Agreement with FE Pharmacy Inc.

On April 8, 2017, the Company entered into an agreement with FE Pharmacy Inc., a company controlled by a shareholder of Kallo and a related party, whereby in consideration for the issuance of 475,000,000 post reverse stock split common stock of Kallo, FE Pharmacy Inc. assumed and will pay all of the Company's outstanding indebtedness as at April 7, 2017. Because FINRA has not approved the reverse stock split yet, the 475,000,000 shares issued during the quarter ended June 30, 2017 will be reduced to 791,667 when the reverse stock split becomes effective and 474,208,333 additional post reverse stock split shares will be issued to make them whole again.

Subsequently, FE Pharmacy, Inc. settled Kallo's convertible promissory notes for a total of $320,000 in cash and Kallo's accounts payable for a total of $57,325 in cash.

Issuance of shares

On May 25, 2017, the Company approved the issuance of 595,000,000 post reverse stock split common stock to various directors and employees as compensation for services rendered and 16,000,000 post reverse stock split common stock to the controlling shareholder of FE Pharmacy Inc. and a related party as compensation for services rendered and for nominal cash. Because FINRA has not approved the reverse stock split yet, the 611,000,000 shares issued during the quarter ended June 30, 2017 will be reduced to 1,018,333 when the reverse stock split becomes effective and 609,981,667 additional post reverse stock split shares will be issued to make them whole again.

On July 5, 2017, the Company approved the issuance of 2,000,000 post reverse stock split common stock to a consultant for assistance in helping settle the outstanding convertible promissory notes of Kallo. Because FINRA has not approved the reverse stock split yet, the 2,000,000 shares issued during the quarter ended June 30, 2017 will be reduced to 3,333 when the reverse stock split becomes effective and 1,996,667 additional post reverse stock split shares will be issued to make them whole again.


ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

This section of the report includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like: believe, expect, estimate, anticipate, intend, project and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements, which apply only as of the date of this report. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or our predictions. All funds are reflected in United States dollars unless otherwise indicated.

There is substantial doubt that we can continue as an on-going business for the next twelve months unless we obtain additional capital to pay our bills. This is because we have generated no revenues from our operations during the last eight years. We have been able to remain in business as a result of investments, in debt or equity securities, by our officers and directors and by other unrelated parties. We expect to incur operating losses in the foreseeable future and our ability to continue as a going concern is dependent upon our ability to raise additional money through investments by others and achieve profitable operations. There is no assurance that we will be able to raise additional money or that additional money or that additional financing will be available to us on satisfactory terms or that we will be able to achieve profitable operations. The consolidated statements were prepared under the assumption that the 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'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 seven fiscal years, starting January 2010, our management and board of directors have raised funds through a personal and professional network of investors.  This has enabled product and business development, continued operations, and generation of customer interest.  In order to continue operations, management has contemplated several options to raise capital and sustain operations in the next 12 months. These options include, debt and equity offers to existing shareholders, debt and equity offers to independent investment professionals and through various other financing alternatives.  Management's opinion is that the combination of the three options along with the forecasted closing of at least one project will enable continued operations for the next 12 months.  There is no assurance that we will receive additional money from these options and our existing shareholders are under no legal duty to provide us with additional financing nor have our shareholders committed to provide us with additional financing.

On April 8, 2017, the Company entered into an agreement with FE Pharmacy Inc. whereby in consideration for the issuance of 475,000,000 post reverse stock split common stock of Kallo, FE Pharmacy Inc. will assume and pay all of the Company's outstanding indebtedness as at April 7, 2017. Management believes that with this agreement in place, it can concentrate on bringing the potential projects as detailed below to fruition and any additional funding can be met through one of the three options mentioned above.

On January 23, 2014, we 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.  On April 14, 2015, the Minister of Health and Public Hygiene, in a letter confirmed the selection of Kallo Inc., as supplier pursuant to the MobilCare TM Supply Contract, to design and build specialized hospitals in the regions of Conakry, Kindia, Labe, Kankan and Nzerekore, and asked Kallo to mobilize its technical teams for site visits to engage in preliminary studies for the construction of these hospitals. 

In addition to the primary supply contract, on April 6, 2015, the Government of Guinea signed an addendum to the agreement expanding the project by $54,916,600.


Under the Supply Contract, Kallo will implement an integrated healthcare delivery solution for the Republic of Guinea. The components of the solution include, MobileCare, RuralCare, Hospital Information Systems, Telehealth Systems, Pharmacy Information, disaster management, air and surface patient transportation systems and clinical training.

In 2017 the Government of Ghana has initiated several discussions with Kallo Inc., to revisit how the Ministry of Defense – Military Hospital requirements, the Ministry of Health healthcare infrastructure requirements and the Ministry of Education Teaching Hospital infrastructure requirements can be met using the Kallo Integrated Delivery Model. We feel that these meeting of the minds and Ghana's continued interest in the Kallo Integrated Delivery System, as the best solution for the nations healthcare infrastructure development, are very encouraging for our continued business in Ghana.

We are also having very active discussions with other neighboring countries in Africa such as Niger, South Africa, and Nigeria for further expansion of our businesses in the region.

In 2017, we have also initiated project negotiations in Canada with First Nations Healthcare to provide innovative solutions to increase accessibility and monitoring and management of medication from prescription to consumption with direct reporting to the provincial ministries.

Plan of Operation

The following plan of operation contains forward-looking statements, which involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth elsewhere in this document. Because of the speculative nature of our operations and the nature of the African countries we are attempting to do business with, there is no assurance that any of the planned operations will occur .

We continue to develop components of Kallo Integrated Delivery System:

Kallo Integrated Delivery System (KIDS)

☐
MobileCareTM – a mobile trailer that opens into a state of the art clinical setup in a vehicle equipped with the latest technology in healthcare.   More than just a facility, MobileCare TM can instantly connect the onboard physician with specialists for on-demand consultation via satellite through its Telehealth system. This is truly a holistic approach to delivering healthcare to the remotely located. For many rural communities, the nearest hospital, doctor or nurse may be hundreds of kilometers away. In many cases, this gap can be bridged using Telehealth technology that allows patients, nurses and doctors to talk as if they were in the same room .

☐
RuralCare TM – prefabricated modular healthcare units focused in rural areas where no roads infrastructure is available.  They are equipped to provide primary healthcare including X-Ray, ultrasound, surgery, pharmacy and lab services.  Ranging from 1,200 to 3,800 square feet, these clinics can be up and running in disaster zones or rural areas in as little as one week.  Similar to the MobileCare TM product, RuralCare TM also utilizes satellite communications to access the Telehealth system .

Kallo's healthcare mission is to "reach the unreached".  The end-to-end solution includes the following:

☐
Global response center – located in the Kallo headquarters in Canada, this is the escalation point for the coordination of delivery of Telehealth and eHealth support. It consists of both the Clinical Command Center and the Administrative Command Center .

☐
Regional response centers, Clinical and Administrative Command centers – located in the urban area hospitals and connected with satellite communications, these centers coordinate all aspects of the healthcare delivery solution with the Mobile clinics and Rural clinics including clinical services, Telehealth services, pharmacy and medical consumable coordination as well as escalations to the Global response center .

☐
Kallo University – provides education, training and development of local resources for all aspects of the healthcare delivery which includes clinical, engineering and administration .

☐
Emergency Medical Services – provides ground and air ambulance vehicles for emergency patient transport .  

Our end to end delivery solution is equipped with necessary medical equipment as per regional healthcare requirements. We also install our copyrighted software and third party software as required along with a 5 year support agreement renewable after the 5 year initial term that includes the medical equipment, software licenses, installation implementation and training.  This generates an ongoing revenue stream for service, maintenance, spare-parts, and consumables .

Sales Go-To-Market Strategy

Our Sales Go-To-Market Strategy is segmented based on the varying needs of our customers in the following three categories :

1.
Full solution with Kallo Integrated Delivery System (KIDS) – typically longer sales cycle and includes the end to end solution of Mobile Clinics, Rural Poly Clinics, Global and Regional response centers, Clinical and Administrative command centers, telehealth support, Kallo University training, pharmacy and medical consumable support and Emergency services with ground and air ambulance vehicles.  This solution is focused on the end to end healthcare needs of developing countries .

2.
Component Solutions – typically mid-term sales cycle and includes any of the components of the KIDS implementation without the full support structure.  This strategy is focused on augmenting healthcare support where needed, such as, disaster management, North American First Nations, medical equipment supply, installation and testing .

3.
Technology Solutions – typically short-term sales cycle and includes elements of the KIDS program that can enhance existing healthcare solutions.  These would include our Hospital Management System, Consulting services, Bio Medical support, Mobile or Fixed Clinic manufacturing, etc.  This strategy is focused on enhancing existing healthcare environments globally .

Need for additional capital

The Company has incurred operating losses since inception and has an accumulated deficit and a working capital deficit at March 31, 2017. The Company is expected to incur additional losses as it executes its go to market strategy. This raises substantial doubt about the Company's ability to continue as a going concern.

We cannot guarantee we will be successful in our business operations. Our business is subject to risks inherent in the establishment of a business enterprise, including limited capital resources and possible cost overruns due to price increases in services and products.

To become profitable and competitive, we 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

Revenues

We did not generate any revenues during the three months ended March 31, 2017 or 2016.

Expenses

During the three months ended March 31, 2017 we incurred total expenses of $311,785, including $177,865 in salaries and compensation, $58,393 in interest and financing costs, $29,451 in loss on foreign exchange and $49,411 as other expenses, net of $3,335 in gain in fair value of derivative liabilities whereas during the three months ended March 31, 2016 we incurred total expenses of $807,632, including $441,998 in salaries and compensation, $15,767 in depreciation, $55,571 in professional fees, $65,414 in interest and financing costs, $42,429 loss in change in fair value on derivative liabilities and $186,453 in other expenses.

The decrease in our total expenses for the three months ended March 31, 2017 from the comparative period is mainly due to a decrease in salaries and compensation of $264,133, a decrease in professional fees of $55,571, a decrease in interest and financing costs of $7,021 and a decrease in other expenses. The overall decrease in expenses reflect the slow down of the operations pending the finalization of new contracts. Several employees left the Company causing a significant reduction in salaries and compensation. The decrease in interest and financing costs is due to lower convertible promissory notes as these were converted into shares.

Net Loss

During the three months ended March 31, 2017 we did not generate any revenues and incurred a net loss of $311,785 compared to a net loss of $807,632 during the same period in 2016. The main reasons were the decreases in salaries and compensation and professional fees for the reasons discussed above.

Liquidity   and capital resources

As at March 31, 2017, the Company had current assets of $35,748 and current liabilities of $4,380,973, indicating working capital deficiency of $4,345,225. As of March 31, 2017, our total assets were $35,748 in prepaid expenses and our total liabilities were $4,380,973 comprised of $2,939,881 in accounts payable and accrued liabilities, $245,936 in derivative liabilities, $314,498 in convertible promissory notes, convertible loans payable of $863,854, short term loans of $16,560 and bank indebtedness of $244.

Cash used in operating activities amounted to $222 during the three months ended March 31, 2017, 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 current three months period ended March 31, 2017.

Cash provided by financing activities during the three months ended March 31, 2017 amounted to $222 and represented mainly proceeds from short term loans payable.

ITEM 3.                      QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.


ITEM 4.                      CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

We maintain "disclosure controls and procedures," as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act"), that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. We conducted an evaluation (the "Evaluation"), under the supervision and with the participation of our Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), of the effectiveness of the design and operation of our disclosure controls and procedures ("Disclosure Controls") as of the end of the period covered by this report pursuant to Rule 13a-15 of the Exchange Act. Based on this Evaluation, our CEO and CFO concluded that our Disclosure Controls were not effective as of the end of the period covered by this report due to lack of segregation of duties in financial reporting and presence of adjusting journal entries during the audit as well as insufficient controls over the financial close process and preparation of the financial statements identified by the auditors during the audit of the company's financial statements for the year ended December 31, 2016.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended March 31, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


PART II. OTHER INFORMATION

ITEM 1.                      LEGAL PROCEEDINGS.

There are no pending lawsuits.


ITEM 1A.                RISK FACTORS.

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.

 
 
 
 
 

 


ITEM 6.                      EXHIBITS.

The following documents are included herein:

 
 
Incorporated by reference
Filed
Exhibit
Document Description
Form
Date
Number
herewith
 
 
       
2.1
Articles of Merger
8-K
1/21/11
2.1
 
 
 
       
3.1
Articles of Incorporation
SB-2
3/05/07
3.1
 
 
 
       
3.2
Bylaws
SB-2
3/05/07
3.2
 
 
 
       
3.3
Amended Articles of Incorporation (11/23/2015)
8-K
12/02/15
3.1
 
 
 
       
4.1
Specimen Stock Certificate
SB-2
3/05/07
4.1
 
 
 
       
10.1
Agreement with Rophe Medical Technologies Inc. dated December 11, 2009
10-K
3/31/10
10.2
 
 
 
       
10.2
Amended Agreement with Rophe Medical Technologies Inc. dated December 18, 2009
10-K
3/31/10
10.3
 
 
 
       
10.3
Amended Agreement with Rophe Medical Technologies Inc. dated March 16, 2010
10-K
3/31/10
10.4
 
 
 
       
10.4
Investment Agreement with Kodiak Capital Group, LLC dated October 20, 2014
S-1
10/30/14
10.6
 
 
 
       
10.5
Amended Agreement with Jarr Capital Corp.
8-K
2/22/11
10.1
 
 
 
       
10.6
Termination of Employment Agreement with John Cecil
8-K
2/22/11
10.2
 
 
 
       
10.7
Termination of Employment Agreement with Vince Leitao
8-K
2/22/11
10.3
 
 
 
       
10.8
Termination of Employment Agreement with Samuel Baker
8-K
2/22/11
10.4
 
 
 
       
10.9
Services Agreement with Buchanan Associates Computer Consulting Ltd.
10-K
5/18/11
10.1
 
 
 
       
10.10
Equipment Lease Agreement with Buchanan Associates Computer Consulting Ltd.
10-K
5/18/11
10.2
 
 
 
       
10.11
Agreement with Mansfield Communications Inc.
10-K
5/18/11
10.3
 
 
 
       
10.12
Agreement with Watt International Inc.
10-K
5/18/11
10.4
 
 
 
       
10.13
Pilot EMR Agreement with Nexus Health Management Inc.
10-K
5/18/11
10.5
 
 
 
       
10.14
2011 Non-Qualified Stock Option Plan
S-8
6/27/11
10.1
 
 
 
       
10.15
Multimedia Contractual Agreement with David Miller
8-K
10/28/11
10.1
 
 
 
       
10.16
Strategic Alliance Agreement with Petro Data Management Services Limited and Gateway Global Fabrication Ltd.
8-K
11/02/11
10.1
 

10.17
Independent Contractor Agreement with Savers Drug Mart
8-K
1/26/12
10.1
 
           
10.18
2012 Non-Qualified Stock Option Plan
S-8
9/06/12
10.1
 
 
 
       
10.19
Memorandum of Offering with Ministry of Health of Republic of Ghana
S-1/A-3
6/26/13
10.32
 
 
 
       
10.20
Addendum to Investment Agreement with Kodiak
S-1/A-4
7/31/13
10.33
 
 
 
       
10.21
Second Addendum to Investment Agreement with Kodiak
S-1
8/25/14
10.34
 
 
 
       
10.22
Email from Kodiak
S-1/A-1
9/24/14
10.35
 
 
 
       
10.23
Email from Kodiak
S-1/A-1
9/24/14
10.36
 
 
 
       
14.1
Code of Ethics
S-1
8/25/14
14.2
 
 
 
       
16.1
Letter from Collins Barrow Toronto LLP
8-K/A-1
2/15/12
16.3
 
 
 
       
16.2
Letter from Schwartz Levitsky Feldman LLP
8-K/A-3
8/13/14
16.1
 
 
 
       
21.1
List of Subsidiary Companies
10-K
3/31/10
21.1
 
 
 
       
31.1
Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
     
X
 
 
       
32.1
Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
     
X
 
 
       
99.1
Audit Committee Charter
10-K
4/15/08
99.1
 
 
 
       
99.2
Disclosure Committee Charter
10-K
4/15/08
99.2
 
 
 
       
99.3
FCPA Code
S-1
8/25/14
99.3
 
 
 
       
99.4
Letter from Ministry of Health
8-K
6/08/15
99.2
 
 
 
       
99.5
Letter from Minister of Health and Public Hygiene
8-K
6/24/15
99.2
 
 
 
       
101.INS
XBRL Instance Document
     
X
 
 
       
101.SCH
XBRL Taxonomy Extension – Schema
     
X
 
 
       
101.CAL
XBRL Taxonomy Extension – Calculations
     
X
 
 
       
101.DEF
XBRL Taxonomy Extension – Definitions
     
X
 
 
       
101.LAB
XBRL Taxonomy Extension – Labels
     
X
 
 
       
101.PRE
XBRL Taxonomy Extension – Presentation
     
X






SIGNATURES

Pursuant to the requirements of the Securities Act of 1934, the registrant has duly caused this amended report to be signed on its behalf by the undersigned, thereunto duly authorized on this 13 th day of December, 2017.

 
KALLO INC.
 
(The "Registrant")
     
 
BY:
JOHN CECIL
   
John Cecil
   
President, Principal Executive Officer, Principal Financial Officer, Principal Accounting Officer, and a Chairman of the Board of Directors











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
 
 
 
       
3.3
Amended Articles of Incorporation (11/23/2015)
8-K
12/02/15
3.1
 
 
 
       
4.1
Specimen Stock Certificate
SB-2
3/05/07
4.1
 
 
 
       
10.1
Agreement with Rophe Medical Technologies Inc. dated December 11, 2009
10-K
3/31/10
10.2
 
 
 
       
10.2
Amended Agreement with Rophe Medical Technologies Inc. dated December 18, 2009
10-K
3/31/10
10.3
 
 
 
       
10.3
Amended Agreement with Rophe Medical Technologies Inc. dated March 16, 2010
10-K
3/31/10
10.4
 
 
 
       
10.4
Investment Agreement with Kodiak Capital Group, LLC dated October 20, 2014
S-1
10/30/14
10.6
 
 
 
       
10.5
Amended Agreement with Jarr Capital Corp.
8-K
2/22/11
10.1
 
 
 
       
10.6
Termination of Employment Agreement with John Cecil
8-K
2/22/11
10.2
 
 
 
       
10.7
Termination of Employment Agreement with Vince Leitao
8-K
2/22/11
10.3
 
 
 
       
10.8
Termination of Employment Agreement with Samuel Baker
8-K
2/22/11
10.4
 
 
 
       
10.9
Services Agreement with Buchanan Associates Computer Consulting Ltd.
10-K
5/18/11
10.1
 
 
 
       
10.10
Equipment Lease Agreement with Buchanan Associates Computer Consulting Ltd.
10-K
5/18/11
10.2
 
 
 
       
10.11
Agreement with Mansfield Communications Inc.
10-K
5/18/11
10.3
 
 
 
       
10.12
Agreement with Watt International Inc.
10-K
5/18/11
10.4
 
 
 
       
10.13
Pilot EMR Agreement with Nexus Health Management Inc.
10-K
5/18/11
10.5
 
 
 
       
10.14
2011 Non-Qualified Stock Option Plan
S-8
6/27/11
10.1
 
 
 
       
10.15
Multimedia Contractual Agreement with David Miller
8-K
10/28/11
10.1
 
 
 
       
10.16
Strategic Alliance Agreement with Petro Data Management Services Limited and Gateway Global Fabrication Ltd.
8-K
11/02/11
10.1
 

10.17
Independent Contractor Agreement with Savers Drug Mart
8-K
1/26/12
10.1
 
           
10.18
2012 Non-Qualified Stock Option Plan
S-8
9/06/12
10.1
 
 
 
       
10.19
Memorandum of Offering with Ministry of Health of Republic of Ghana
S-1/A-3
6/26/13
10.32
 
 
 
       
10.20
Addendum to Investment Agreement with Kodiak
S-1/A-4
7/31/13
10.33
 
 
 
       
10.21
Second Addendum to Investment Agreement with Kodiak
S-1
8/25/14
10.34
 
 
 
       
10.22
Email from Kodiak
S-1/A-1
9/24/14
10.35
 
 
 
       
10.23
Email from Kodiak
S-1/A-1
9/24/14
10.36
 
 
 
       
14.1
Code of Ethics
S-1
8/25/14
14.2
 
 
 
       
16.1
Letter from Collins Barrow Toronto LLP
8-K/A-1
2/15/12
16.3
 
 
 
       
16.2
Letter from Schwartz Levitsky Feldman LLP
8-K/A-3
8/13/14
16.1
 
 
 
       
21.1
List of Subsidiary Companies
10-K
3/31/10
21.1
 
 
 
       
31.1
Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
     
X
 
 
       
32.1
Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
     
X
 
 
       
99.1
Audit Committee Charter
10-K
4/15/08
99.1
 
 
 
       
99.2
Disclosure Committee Charter
10-K
4/15/08
99.2
 
 
 
       
99.3
FCPA Code
S-1
8/25/14
99.3
 
 
 
       
99.4
Letter from Ministry of Health
8-K
6/08/15
99.2
 
 
 
       
99.5
Letter from Minister of Health and Public Hygiene
8-K
6/24/15
99.2
 
 
 
       
101.INS
XBRL Instance Document
     
X
 
 
       
101.SCH
XBRL Taxonomy Extension – Schema
     
X
 
 
       
101.CAL
XBRL Taxonomy Extension – Calculations
     
X
 
 
       
101.DEF
XBRL Taxonomy Extension – Definitions
     
X
 
 
       
101.LAB
XBRL Taxonomy Extension – Labels
     
X
 
 
       
101.PRE
XBRL Taxonomy Extension – Presentation
     
X





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