KALLO INC. Item 1.01 Entry into a Material Definitive Agreement.
On
The Letter Agreement sets forth our general understanding that followed our discussions with Accobiotech wherein Accobiotech has agreed to manufacture and supply certain COVID19 lgM/lgG and COVID-19 Antigen Rapid Test Kits for us under the label "KALLO" for our customers.
The Letter Agreement further recites that Accobiotech will collaborate and assist us in meeting the needs of our customers if and when we have a need for Accobiotech's services as an OEM supplier for us.
Accobiotech assured us that in furtherance of these plans: (1) Accobiotech has
created product packaging and inserts under the Kallo brand, and (2) Accobiotech
has sent certain Test Kits under the Kallo brand name to several of what we
currently believe may become, if circumstances and financial conditions allow,
our potential customers in
We anticipate that if circumstances allow and subject to successful further negotiations, the Letter Agreement, as a preliminary agreement may be followed with a definitive manufacturing and supply contract for COVID19 lgM/lgG and COVID-19 Antigen Rapid Test Kits under the "KALLO" brand for our anticipated customers (the "Anticipated Agreement"). We anticipate that if we are successful in working with Accobiotech and in securing an appropriate OEM supplier agreement with Accobiotech pursuant to a not yet negotiated Anticipated Agreement, we may, if circumstances allow, explore other opportunities to work with Accobiotech in other product areas. All of these plans are subject to then existing market conditions, other risks and uncertainties beyond our control, and our then existing financial resources.
While we are delighted that Accobiotech is willing to work with us and we are
pleased to enter into the Letter Agreement, we are aware that we face many
significant challenges ahead and we cannot assure you that we will be successful
in negotiating the Anticipated Agreement or, if we are successful, that we may
be able to utilize the Anticipated Agreement to supply any prospective customers
that we may secure, whether those customers are in
We are also aware that in today's more uncertain COVID-19 environment, parties to a contract 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 Accobiotech and any other persons that may be sub-contractors to Accobiotech in any of the matters that are the subject of the Letter Agreement (and any resulting Anticipated Agreement that we may or may not later enter into).
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In that event we may be facing the likelihood that the purposes of the Letter Agreement, the Anticipated Agreement, and any other oral or written agreement or understanding, as envisioned, cannot be undertaken or implemented in any feasible manner. We also cannot assure you that we will successfully enter into any Anticipated Agreement or, if we do, that the purposes of any later Anticipated Agreement will ever be achieved or, if achieved, that they will result in any financial benefit to us.
We also face political risks in all of the undertakings involving the Letter Agreement, the Anticipated Agreement, and all other oral and written agreements and understandings that we cannot 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 Letter Agreement (and any from any later Anticipated Agreement) may not result in any financial benefits to the Company and we will incur further significant financial losses thereby with little or no prospect of recovering any sums that we have expended to achieve the goals as envisioned by the Letter Agreement.
For these reasons and based on our current assessments, we cannot be certain that the purposes and goals set forth in the Letter 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 Letter Agreement and Our Financial Condition" below.)
Item 7.01 Regulation FD Disclosure.
As stated above, we entered into that certain Letter Agreement with Accobiotech
on
We are also aware that in today's more uncertain environment, parties to a contract may assert that they find it more difficult to perform their obligations as provided by the Letter Agreement 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 the Letter Agreement. 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 to the Letter Agreement and any resulting Anticipated Agreement.
In that event we may be facing the likelihood that the purposes of the Letter Agreement (and any later Anticipated Agreement), as envisioned, cannot be undertaken or implemented in any feasible manner. We also face political risks in all of undertakings involving the Letter Agreement (and any later Anticipated Agreement) that we cannot 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 Letter Agreement (and any later Anticipated Agreement) may not result in any financial benefits to the Company and we will incur further significant financial losses thereby with little or no prospect of recovering any sums that we have expended to achieve the goals as envisioned by the Letter Agreement.
For these reasons and based on our current assessments, there is a clear risk that the purposes and goals set forth in the Letter Agreement will be achieved and we anticipate that, in that and other instances, we may incur significant additional financial losses as a result of these developments. (See "Risk Factors Related to the Letter Agreement and Our Financial Condition" below.)
Risk Factors Related to the Letter Agreement and Our Financial Condition
When we entered into the Letter Agreement with Accobiotech, we believed that the Letter Agreement was an essential part of our corporate strategy. At the time that we entered into the Letter Agreement, we were aware that the Anticipated Agreement that we may enter into will likely require further negotiations to ensure that the rights and obligations of each party are more clearly memorialized so as to allow each of the parties a better understanding of the terms and conditions of the understandings and commitments that each party is giving to the other party. However and in the context of these recent developments and the current uncertain environment of the COVID-19 and the global pandemic, we are aware that we may not achieve any of our objectives as set forth in the Letter Agreement (and any later Anticipated Agreement).
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As we have said previously, our stockholders are reminded that our business strategy involves significant risks and uncertainties over which we have little or no control. These risks and uncertainties are far higher today given the current uncertain environment of the COVID-19 and the global pandemic.
Overall, we have no way to control or limit these risks and uncertainties and we
believe that the extent of the risks and uncertainties that we are facing as a
party to any agreement or understanding involving foreign entities and those
entities having operations in countries where current healthcare and disease
prevention practices are dramatically below the healthcare and disease
prevention practices found in
However and in addition to the above, these risks include, but are not limited to, the risks set forth in our most recent Annual Report on Form 10-K under Item 1A together with the following:
º In the unlikely event that, pursuant to the Letter Agreement (and any
Anticipated Agreement that we may enter into with Accobiotech and any other
persons), any financial transactions that were to occur, we face
significant and inherent exposure to foreign exchange rate losses in
connection with any revenues that we derive under any such agreement.
Currently, we do not have any ability to "hedge" against any foreign
exchange risks and we have no present plans to undertake any such activity
that would allow us to gain any ability to "hedge" against any such risks.
As a result, any revenues or funds that we receive resulting from any
agreements with foreign countries may, after giving effect to any exchange
rates, be dramatically reduced with the result that we will incur
significant and protracted losses and negative cash flow thereby.
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º Currently we are seriously delinquent in meeting our disclosure obligations
under Section 13 of the Securities Exchange Act of 1934, as amended (the
"1934 Act"). That is, we have not filed our Annual Report on Form 10-K for
the 2018 fiscal year and we have not filed our three (3) Quarterly Reports
on Form 10-Q for the first three (3) quarterly periods in fiscal 2019 and
we have not filed any such reports for the first two (2) quarters of fiscal
2020. More than that, there can be no assurance that we will obtain
sufficient funds in the future that will allow us to eliminate our existing
delinquencies and not incur additional delinquencies as well. Given these
circumstances, we face a clear and certain high risk that the Securities
and Exchange Commission could take adverse action against us to preclude
further trading in our Common Stock. In that event, any person who acquires
our Common Stock may be entirely unable to liquidate their investment. As a
result, any person who acquires our Common Stock or our Preferred Stock
should be prepared to lose their entire investment.
º There is no continuous and liquid trading market for our Common Stock and
there is no likelihood that any such trading market will ever develop or,
if it does develop, that it can be sustained.
º We have not achieved profitability, positive cash flow or both of them and
there can be no assurance that we will ever achieve profitability, positive
cash flow, or both of them in the future or if we do, that either or both
of them can be sustained.
º We have no history of paying dividends on our Common Stock and given our
lack of profitability and lack of positive cash flow, it is highly unlikely
that we will ever be paying any dividends at any time in the near future.
º We face significant operational and other risks in implementing the Letter
Agreement (and any later Anticipated Agreement) given the nature of the
parties to the Letter Agreement and the obvious and expensive challenges
involved in any undertakings that we may have in any foreign venture.
º We do not maintain any office or any managerial, legal, or other staff in
Malaysia and we have no present plans to do so. In the event of any dispute
or issues that arise relating to or involving the Letter Agreement and our
rights and obligations arising under the Letter Agreement or the subject
matter of the Letter Agreement and the transactions underlying the Letter
Agreement, or any or all of the above, we may find that it is very
difficult or impossible to protect our rights. In that event, we may
discover that despite all of our efforts, we will incur additional costs
and expenses with resulting and protracted significant losses thereby.
º We have not received any independent third party evaluation of the Letter
Agreement and the underlying transactions set forth in the Letter Agreement
and we have no present plans to secure any such evaluation. We may discover
that notwithstanding our efforts that we expended to secure the Letter
Agreement, the Letter Agreement (and any later Anticipated Agreement) may
not be feasible for any one or more reasons. We are aware that many
commercial transactions that were undertaken prior to the onset of the
current and unanticipated global pandemic are now not feasible because of
the dramatic changes resulting from the pandemic or other changes.
º For these reasons and in view of the high risks and continuing unmitigated
uncertainties involved, we cannot assure you that we will ever expect to
gain any financial or other benefits as a result of the Letter Agreement
(and any later Anticipated Agreement).
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º In the current unprecedented environment of COVID-19, we face even greater
risks and uncertainties in undertaking any business venture particularly
where the business that is to be conducted is located in a part of the
world where healthcare and disease prevention is far below the standards
found in Canada , the United States and Europe . As a result and to be clear,
we strongly believe that our strategy of undertaking and establishing
business ventures in other countries face significantly greater risks and
uncertainties that may cause us to increase our financial losses and lead
to further losses to stockholders who acquire our common stock, our
preferred stock, and any other security that we may issue. All of our
securities should be considered HIGH RISK investments. For these reasons,
any person who seeks to acquire our securities should be prepared to lose
all of their investment.
º The Letter Agreement and the activities envisioned by the Letter Agreement
are similar to any new business venture and for this reason we face all the
risks and uncertainties associated with starting a new business. All of our
securities should be considered HIGH RISK investments. For these reasons
and many others, holders of our Common Stock and holders of our Preferred
Stock should understand that our Common Stock and our Preferred Stock
should only be acquired by persons who can afford the total loss of their
investment.
Item 9. Exhibits.
Exhibit Number Description
99.42 Letter Agreement
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