Item 1.01 Entry into a Material Definitive
Agreement.
On December 18, 2020 we received executed copies
of the following contract documents for National Healthcare Projects from the Ministry of Health and the Ministry of Finance of
the Republic of Mozambique (the “Ministry”) as entered into between and among: the Ministries, Techno-Investment Module
Limited, a corporation domiciled in the Republic of Belarus with offices in Minsk, Republic of Belarus (“TIM”)
and Kallo, Inc. (the “Agreement”).
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National Healthcare Projects.
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Loan Agreement / Contract.
Under the terms of the Agreement, the Ministry
is seeking to borrow the sum of 1,305,256,575 Euros from TIM and the funds to be received by the Ministry are to be used primarily
to fund that certain healthcare project to be undertaken by Kallo with the Ministry solely within the Republic of Mozambique (the
“Healthcare Project”).
As envisioned, we are to provide certain services
to the Ministry of Health (“the Ministry”) subject to the terms and conditions set forth in the Agreement and TIM is
to loan certain funds to the Ministries.
Under the terms of the Agreement:
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the Agreement is governed by and subject to the laws of the Republic of Mozambique;
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in the event of any dispute, all disputed matters are to be resolved through mandatory
arbitration under the Rules of Arbitration of the International Chamber of Commerce which shall be conducted in London, England;
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all goods and services to be provided by Kallo are to be supplied in accordance with
the Technical Proposal Ref# AF/MZ/NOV-2020/TP-000101 and costs of all goods and services shall be as specified in the Financial
Proposal; Ref# AF/MZ/NOV-2020/FP-000101/ (both, collectively, as the Proposal Documents”);
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Kallo is solely responsible for the delivery to the Ministry, all goods that are to
be provided under the Agreement;
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Kallo assumes all risk of loss for the delivery of all goods to the Ministry and all
such goods are to be insured at Kallo’s sole expense and in a freely convertible currency;
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Kallo is solely responsible to complete tests and inspections of all goods to be delivered
to the Ministry and do so without any cost or expense to the Ministry;
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The Ministry has the right to require that Kallo carry out any one or more additional
tests that the Ministry may deem necessary to verify that the characteristics and performance of the goods delivered by Kallo comply
with technical specifications at the expense of the Ministry as set forth in the Agreement;
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upon delivery of goods to the Ministry by Kallo, satisfactory completion of all tests
and the approval and acceptance of the test results by the Ministry, the Ministry is to issue a “Notice of Acceptance”;
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the Ministry has the right to reject any goods provided by Kallo that fail to pass manufacturer’s
prescribed tests and/or inspection or do not conform to the specifications set forth in the Agreement or in any referenced understandings;
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all goods and services provided by Kallo under the Agreement are warranted by Kallo
to be suitable for the purposes set forth in the Agreement and are to conform to the specifications set forth therein.
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Notwithstanding any satisfactory test results, Kallo is not released from any of the
warranties made by Kallo under the Agreement and all warranties continue for a period of twelve (12) months from and after completion
of any “acceptance testing” by the Ministry;
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Kallo indemnifies and holds the Ministry harmless from and against any claims, suits,
and actions asserting any violation of any applicable patent claims, copyright claims, and both;
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except for criminal negligence or willful misconduct, Kallo is not responsible, whether
in contract, tort, or otherwise, for any indirect or consequential loss or damages suffered or incurred by the Ministry or other
persons affiliated with the Ministry and the aggregate liability of Kallo shall not exceed the purchase price of the goods acquired
from Kallo by the Ministry;
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in the event that Kallo fails to perform its obligations under the Agreement and such
failure is the result of an event of a force majeure, Kallo shall not be liable with the term “force majeure”
defined as an event or situation beyond the control of Kallo and which is not foreseeable, is unavoidable, and its origin is not
due to the negligence or lack of care von the part of Kallo;
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the Ministry has the right, upon notice to Kallo, to make changes within the general
scope of the Agreement and the same may result in a change to the contract price;
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in the event of any “change orders” the Agreement requires that Kallo and
the Ministry incorporate such “change orders” into an amendment to the Agreement;
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the Agreement and the rights duties set forth therein are not assignable by either of
the parties;
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all goods and services to be provided by Kallo to the Ministry are to be provided and
delivered in accordance with accepted commercial standards as provided by the Agreement; and
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TIM is to provide and deliver the sum of 1,305,256,575 Euros in four (4) equal payments
(the “Contract Payments”) as follows: (1) the first payment is expected to be made within ten (10) Banking days after
completion of the “Finance Process”; (2) the second payment is expected to be made within five (5) Banking days from
the delivery of the first payment; (3) the third payment is expected to be made within five (5) Banking days
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from the delivery of the second payment; and (4) the fourth payment is expected to be
made within five (5) Banking days from the delivery of the third payment.
Further, the Ministry, TIM and Kallo
have agreed that:
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Each of the Contract Payments is expected to be delivered to Kallo and Kallo will deliver
125,000,000 Euros of each payment to the Ministry’s National Food Security Program.
Overall, the Agreement and the transactions
contemplated by the Agreement involve significant risks and uncertainties. In that respect and in other respects, we cannot assure
you that any of the express written contractual understandings contained in the Agreement and any of the unwritten but implied
understandings not recited in the Agreement and those that we may enter into will be successfully undertaken. We have no prior
contractual experience working with the Republic of Mozambique or any persons at the Ministry except as set forth in the Agreement.
We also have no history or any track record
of entering into any agreement, joint venture or other arrangement with any foreign government that has resulted or allowed us
to generate revenues or, for that matter, any profits or positive cash flow from any such efforts. In that respect we clearly face
many unknown and uncontrollable variables that have the potential to significantly and adversely impact us financially.
While we have long sought to implement our
business plans by entering into agreements similar to that set forth in the Agreement, we have no track record and no experience
of successfully undertaking any business venture anywhere and at any time involving any such business activities. As a result,
we are facing all of the very significant risks and uncertainties associated with starting a new business.
We are dependent upon any revenues that we
may generate as a result of the Agreement and the goods and services that we contemplate providing the Ministry. There can be no
assurance that we will, in fact, successfully generate any revenues as set forth in the Agreement or if we do, that the revenues
that we generate will also result in us achieving and maintaining profitability and positive cash flow. We remain entirely dependent
upon the outcome of the Agreement and we cannot guarantee that the Agreement will allow us to achieve our contractual expectations
thereunder or otherwise that we can perform our obligations under the Agreement and do so on any basis that will allow us to achieve
and sustain profits, positive cash flow, or both, if ever.
We anticipate that if circumstances allow and
subject to our ability to implement the contemplated Agreement (and any further negotiations and understandings), we may have an
opportunity to demonstrate our ability to provide certain healthcare services within Mozambique. However, we cannot assure you
that we will achieve that or any other objective.
As we face these and other unknown risks, we
anticipate that even if we are successful in these efforts, we will be required to complete other negotiations with certain critically
important sub-contractors that we anticipate will likely be needed to allow us to perform our obligations under the Agreement.
We can not assure you that we will be successful in such negotiations or, if we are successful, that we later discover that we
face significant problems, financial losses and otherwise legal and financial challenges that we can not successfully overcome
or otherwise mitigate in any meaningful way.
In every respect,.there can be no assurance
that we will not face significant and unsurmountable additional challenges, delays and a multitude of risks and uncertainties as
we proceed further in any of these matters.
We also face certain legal risks in that the
Agreement is to be governed by the laws of Mozambique and not the laws of Ontario, Canada or the laws of any state within the United
States. In that respect, we may discover that the laws and jurisprudence of Mozambique (the “Local Laws”) is uncertain
and subject to uncertain and likely adverse political influence that may well preclude our ability to rely upon the Local Laws
and to assume that we can rely upon traditional notions of justice associated with contracts that are subject to Ontario, Canada
law or subject to the laws of state law in the United States. We are not likely able to limit or mitigate the risks of these uncertainties
and as a result, these risks likely will increase over time. In that event our stockholders would likely lose all or substantially
all of their investment.
We also face continuing political uncertainty
in that while we believe that the political and institutional environment in Mozambique is stable, there can be no assurance that
the environment may later become far less stable with the result that we face the loss of our entire investment together with significant
and protracted losses resulting thereby. In that event we likely would face significant and protracted financial losses.
We are also aware that in today’s more
uncertain COVID 19 environment, parties to a contract (and sub-contractors, vendors, and other necessary third parties) may assert
that they find it more difficult to perform their obligations as provided by any oral or written contractual understanding and
then assert, as a defense to their non-performance of their contractual obligations, that unforeseen circumstances prevent them
from fulfilling their obligations to the other party to any oral or written agreement or understanding. This defense, known as
the force majeure defense, is, in today’s environment, commonly asserted and we may encounter such an asserted
defense from one or more direct or indirect contractual parties that are necessary to the implementation of the purposes of each
and every oral or written agreement or understanding that we may have with any persons or entities that are or may be later directly
or indirectly involved.
The force majeure defense, if
successfully asserted, is commonly viewed as a complete defense. That is, it completely excuses the other party from performing
its contractual obligations. In that sense, we face a clear risk that all of our efforts and our performance of our contractual
obligations can easily result in our non-receipt of any performance by any counter party to any agreement or understanding that
we may have with anyone, including, but not limited to, the agreement and understandings with the Ministry and with TIM or both
of them and any other persons that may be sub-contractors to the Ministry or us in any of the tasks undertaken in connection with
the Agreement.
We also face political risks in all of the
undertakings involving the Agreement and all other oral and written agreements and understandings that we cannot likely mitigate
or reduce in any meaningful way. These and the ever-present risks of serious and material foreign exchange losses are also significant.
As a result, all of our efforts that we have taken in connection with the Agreement (and any agreement with necessary third parties,
vendors, and suppliers) may not result in any financial benefits to us and we will incur further significant financial losses thereby
with little or no prospect of recovering any sums that we have expended and later expend to achieve the goals as envisioned by
the Agreement.
For these reasons and based on our current
assessments, we cannot be certain that the purposes and goals set forth in the Agreement will be achieved and, in that context,
we may incur significant additional financial losses as a result of these developments. (See “Risk Factors Related to
the Agreement and Our Financial Condition” below.)