KALLO INC. Item 1.01 Entry into a Material Definitive Agreement.
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and
1. National Healthcare Projects. 2. Loan Agreement / Contract.
Under the terms of the Agreement, the Ministry are seeking to borrow the sum of
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:
º the Agreement is governed by and subject to the laws of the State of
Eritrea ;
º 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 ;
º all goods and services to be provided by Kallo are to be supplied in
accordance with the Technical Proposal Ref# AF/ER/DEC-2020/TP-000103/ and
costs of all goods and services shall be as specified in the Financial
Proposal; Ref# AF/ER/DEC-2020/FP-000103/ (both, collectively, as the
Proposal Documents");
º Kallo is solely responsible for the delivery to the Ministry, all goods
that are to be provided under the Agreement;
º 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;
º 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;
º 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;
º 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";
º 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;
º 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.
º 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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º 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;
º 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;
º 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;
º 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;
º 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;
º the Agreement and the rights duties set forth therein are not assignable by
either of the parties;
º 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
º TIM is to provide and deliver the sum of 521,437,477 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 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:
º Each of the Contract Payments is expected to be delivered to Kallo and
Kallo will deliver 25,000,000 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
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 we may discover will 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 involving any such business activities. As a result, we are facing all of the 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.
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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
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.
There can be no assurance that we will not face 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
We also face continuing political uncertainty in that while we believe that the
political and institutional environment in
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 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.
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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.)
Item 7.01 Regulation FD Disclosure.
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 either as a vendor, supplier, or necessary third party (or as a party to the 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 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 in connection with the Agreement.
In that event we may be facing a very high likelihood that the purposes of the Agreement, as envisioned, cannot be undertaken or implemented in any financially or reasonable feasible manner. We also face significant and continuing political risks in all of undertakings involving the 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 and we likely will not be able to mitigate any such losses in any meaningful way.
As a result, all of our efforts that we have taken in connection with the Agreement may not result in any financial benefits to the Company and, in that event, we will likely incur further significant and protracted financial losses thereby with little or no prospect of recovering any sums that we have expended to achieve the goals as envisioned by the Agreement.
For these reasons and based on our current assessments, there is a clear risk that the purposes and goals set forth in the Agreement will not be achieved and we anticipate that, in that and other instances, we may incur significant and protracted additional financial losses as a result of these developments. (See "Risk Factors Related to the Agreement and Our Financial Condition" below.)
Risk Factors Related to the Agreement and Our Financial Condition
While we have long sought to enter into an agreement to provide the types of services set forth in the Agreement and we believe that such an agreement remains an essential part of our corporate strategy, we have no experience in providing the services set forth in the Agreement. As a result, it can be said that we are entering into a new business with all of the significant attendant risks and uncertainties associated with any new business venture. However and in this context 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 Agreement.
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.
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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 We need to raise a significant amount of additional capital to support our
current financial needs and the capital that we are likely to need if we
are to sustain our corporate existence and otherwise conduct our intended
business as contemplated by the Agreement and otherwise.
º At present we have not received any commitment from any capable and
qualified third party to provide a sufficient amount of additional funds
that will allow us to meet our current and projected needs and there can be
no assurance that we will receive a sufficient amount of funds at any time
in the near future or, if we do receive such funds, that the funds will be
provided on reasonable terms and in sufficient amounts and on a timely
basis given our current financial condition. If we are not successful in
obtaining such funds, in sufficient amounts, on reasonable terms, and on a
timely basis, any person who acquires our Common Stock, our Preferred
Stock, or both of them, will likely lose their entire investment.
º Holders of our Common Stock face an almost certain prospect of immediate
and substantial dilution since even if a qualified and capable prospective
investor were willing to assume the extraordinary risks involved in making
an investment into our Company, existing investors would very likely suffer
dilution in ownership, in destruction of the current book value per share,
and the destruction of the extent of their voting rights that likely would
be permanent and without recourse. Thus, any person who acquires our Common
Stock should be prepared to lose all or substantially of their investment.
º In the unlikely event that, pursuant to the Agreement, 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.
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 2019 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 three (3) 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.
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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
Agreement (and any later Anticipated Agreement) given the nature of the
parties to the Agreement and the obvious and expensive challenges involved
in any undertakings that we may have in any foreign venture.
º We have not received any independent third-party evaluation of the business
venture implicit in the Agreement and the underlying transactions set forth
therein and we have no present plans to secure any such evaluation. We may
discover that notwithstanding our efforts that we expended to secure the
Agreement, that the Agreement may not be financially 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. For this reason we may discover that
this project is not feasible and, in that event, we may incur significant
and protracted losses thereby.
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 Agreement. As a
result, we may incur further significant and protracted losses and negative
cash flow thereby.
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 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 9.01 Exhibits.
Exhibit Number Description
99.43 A National Healthcare Projects
99.43 B Loan Agreement / Contract
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