Kallo Inc. - Annual Report: 2015 (Form 10-K)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-K

[X]	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2015

Commission file number 000-53183

KALLO INC.

(Exact name of registrant as specified in its charter)

Nevada	98-0542529
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

675 Cochrane Drive, West Tower, Suite 630

Markham, Ontario, Canada   L3R 0B8

(Address of Principal Executive Offices)   (Zip Code)

(416) 246-9997

(Issuer's telephone number including area code)

Securities registered pursuant to Section 12(b) of the Act:	Securities registered pursuant to section 12(g) of the Act:
None (Title of Class)	Common Stock (Title of Class)

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes [   ]     No [X]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [X]     No [   ]

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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 past 90 days.   Yes [X]     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 [X]     No [   ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.   [   ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

	Large Accelerated Filer	[   ]	Accelerated Filer	[   ]
	Non-accelerated Filer	[   ]	Smaller Reporting Company	[X]
	(Do not check if a 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 [X]

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of June 30, 2015: $9,042,611

The registrant had 6,845,787,739 shares of common stock outstanding as of March 29, 2016.

 

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TABLE OF CONTENTS

		Page
	PART I	3
Item 1.	Business.	3
Item 1A.	Risk Factors.	6
Item 1B.	Unresolved Staff Comments.	7
Item 2.	Properties.	7
Item 3.	Legal Proceedings.	7
Item 4.	Mine Safety Disclosures.	7
	PART II	7
Item 5.	Market for Our Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.	7
Item 6.	Selected Financial Data.	8
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations.	9
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk.	15
Item 8.	Financial Statements and Supplementary Data.	16
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.	40
Item 9A.	Controls and Procedures.	41
Item 9B.	Other Information.	42
	PART III	42
Item 10.	Directors, Executive Officers and Corporate Governance.	42
Item 11.	Executive Compensation.	45
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.	47
Item 13.	Certain Relationships and Related Transactions, and Director Independence.	48
Item 14.	Principal Accountant Fees and Services.	48
	PART IV	50
Item 15.	Exhibits and Financial Statement Schedules.	50
Signatures		53
Exhibit Index		54

PART I

We were incorporated in the state of Nevada on December 12, 2006 as Printing Components Inc. and then changed our name to Diamond Technologies Inc. and then to our current name of Kallo Inc. On December 11, 2009, we merged with Kallo Technologies Inc. (formerly known as Rophe Medical Technologies Inc.), an Ontario corporation and its shareholders (collectively "Rophe") wherein we acquired all of the issued and outstanding shares of common stock of Rophe in exchange for 3,000,000 common shares and $1,200,000.

Upon acquiring Rophe, the focus of our business was to develop medical information technology software.  It has since expanded to the delivery and support of an end to end healthcare solution for developing countries and rural communities with the focus on improving all aspects of health care delivery.

Business Overview

Our end to end health care solution is called the Kallo Integrated Delivery System (KIDS) and consists of the following 3 components:

1.	Care Platforms

a.	These include the care facility platforms – MobileCareTM and RuralCareTM described in more detail in the MD&A section, Dialysis care and brick and mortar hospitals as well as the emergency medical services care both land and air transportation.

2.	Digital Technology

a.

This component of the business includes the Electronic Medical Records (EMR), Picture Archiving and Communication System (PACS), eLearning system, eGovernance solutions as well as our Tele-health solution that supports the Global and Regional response centers for real time support of medical emergencies.

3.	Education & Training

a.	This component includes the education and training for all aspects of healthcare management – clinical including clinical informatics, engineering including bio-medical, information and communications technology and health administration.

Each of these components are included in the full KIDS solution but can also be used as individual components to enhance an existing health care infrastructure.

Kallo's Copyrighted Technologies:

The following technologies are protected under Canadian and International copyrights and are authored by John Cecil and owned by Kallo Inc. Kallo Inc. has ownership rights of the products referred in this section, of which B, C, and D are under development

A.	M.C. Telehealth – Mobile Clinic Telehealth System – Developed and launched in November 2011.

B.	EMR Integration Engine – Electronic Medical Record Integration Engine - Under development.

C.	C&ID-IMS – Communicable and Infectious Disease Information Management System - Under Development

D.	CCG Technology – Clinical-Care Globalization technology – Under Development

The following is a summary of the information:

Number	Date of Filing	Place of Filing	Duration
1072203	November 3, 2009	Canada	Life of the Author, the remainder of the calendar year in which the author dies, and a period of 50 years following the end of that calendar year
1072204	November 3, 2009	Canada	Life of the Author, the remainder of the calendar year in which the author dies, and a period of 50 years following the end of that calendar year
1072205	November 3, 2009	Canada	Life of the Author, the remainder of the calendar year in which the author dies, and a period of 50 years following the end of that calendar year
1072543	November 17, 2009	Canada	Life of the Author, the remainder of the calendar year in which the author dies, and a period of 50 years following the end of that calendar year

Our Products in Development

Kallo's product portfolio includes three earlier stage products listed below, all of which highlight the broad applicability of our proprietary technologies to a diverse range of potential future products. We plan to evaluate partnership opportunities for further development and commercialization of these products.

1.

The company has proprietary Copyrighted Technology "EMR Integration Engine" that demonstrate the future direction for integrated solutions as well as current efforts that illustrate interoperability within the continuum of care. EMR Integration Engine is software, which connects all the other applications in or outside a hospital/clinic with the EMR system. This enables the doctor/nurse to seamlessly access information in other healthcare applications without moving from one computer to the next.

2.	C&ID-IMS is an Internet-based solution for monitoring and managing Communicable and Infectious Disease information. Our target markets are Health Organizations and Ministries of Health, hospitals and Center for Disease Control (CDC) & the World Health Organization (WHO) members around the globe.

3.

CCG is our clinical-care globalization technology. This product is an effective way to capitalize on the growing "medical tourism phenomenon " - patients going to low-cost countries for elective medical procedures –, a fast-growing worldwide, multibillion-dollar industry actively promoted by many countries. CCG can be used by both the destination and home country of a patient to maintain complete and accurate records of the treatment history, avoiding errors due to incomplete patient data and lessening the burden and expense of corrective action on the home country when medical tourists return home.

4.	MC-Telehealth (Mobile Clinic with Telehealth system) is our mobile clinic long distance or Telehealth technology. Our product enables the remote transmission of standardized formats of data for laboratory information, diagnostic imaging, diagnosis and clinical notes.

5.

KIDS (Kallo Integrated Delivery System), a Technology & process framework defines and describes the component parts of the various products and services that Kāllo is delivering to its clients, including the human resources component, and how these parts interact and relate to one another.  The framework also recognizes the need for collaboration with local care facilities, services and providers to support continuity of care and facilitate patient transport between facilities.

6.

KIDS (Kallo Integrated Delivery System) Global Tele-Health Ecosystems. The Tele-health Program encompasses the broad variety of Technologies and administrative processes needed to deliver virtual medical care, health promotion/prevention and other patient education to KIDS patients. The tele-health program facilitates synchronous and asynchronous interactions where patients or care providers are in different locations and includes scheduling, information delivery and care management services.

Target Market

Our primary target market for the Kallo Integrated Delivery System is global with the current focus in developing countries where health care services are limited.  We have established several sales and marketing partnership agreements under "Business Associate" section either representing Kallo independently or as an organization.  We are currently in various stages of our sales cycle with more than 10 countries.

Additionally, with the components of our KIDS solution, we are targeting markets where we can provide complimentary services to existing health care infrastructures.  These markets include the following:

·	Communicable & Infectious disease Information Management System – supporting World Health Organization (WHO) and Center for Disease Control (CDC); $200B market

·	Electronic Medical Records integration engine for Health Information Access Layer – focused on clinics, hospitals, IDC & IHC; $100B market

·	Clinical Care Globalization – focused on medical tourism; $40B market

·	Mobile Medical Clinics – focused on disaster recovery management and rural community health services for wide range of services, HIV monitoring, chemotherapy, acute care, dialysis, etc; $30B market

Intellectual Property and Research and Development

We continue our efforts in research and development through collaborations with medical faculties in Canada and the United States on an ongoing basis where our company stands to benefit from the technology ownership of the treatment or diagnostic systems developed for commercial use.

During 2015, we did incur expenses (both management and technical) relating to research and development with considerable efforts in continuing our research and development work on the Mobile Clinic and Telehealth system, which would be rolled out in the near term in different geographies based on the needs and funding availability. 

Competition

We compete with many entities in various sectors; mobile clinic and temporary medical facility manufacturers, health care equipment resellers, EMR developers, health care education providers, EMS contracted services, etc.  Our competitors tend to be focused on a component of our health care solution, but do have established histories in their particular area of expertise affording them a resource advantage.  We are effectively in the start-up phase of operations and as a result, we have little or no impact upon our competition.  Our differentiating factor however is our fully integrated solution.  In the opportunities that we have been engaged in, we have not encountered a competitor that offers the full end to end solution that we are proposing to our customers.

Managements View of the Market Trend

Our management believes that we are well positioned to assist in the global focus on improving health care delivery through our solution platforms.  Global spending on health care in 2013 totaled $7.2 trillion or 10.6% of global gross domestic product.  Health spending is expected to rise an average of 5.2% a year in 2014 – 2018 to $9.3 trillion.  A number of the driving factors of the increase, emerging market expansion, infrastructure improvements and treatment and technology advances, fall into our portfolio of products and services.  Other factors include the health needs of an aging and growing population as well as the rising prevalence of chronic diseases.  The most rapid growth is expected to be in the Middle East and Africa due, in part, to population growth and efforts to expand access to care.  All figures quoted from "World Industry Outlook: Healthcare and Pharmaceuticals, The Economist Intelligence Unit, May 2104".

In addition, of the eight Millennium Development Goals detailed by the United Nations, three of the initiatives are related to improvements in healthcare delivery.  They include Goal 4: Reduce Child Mortality, Goal 5: Improve Maternal Health, and Goal 6: Combat HIV/Aids, Malaria and Other Diseases.  These remain focus areas for global improvement.

The challenges that we have seen in the market are primarily due to the lengthy sales cycle involved in the healthcare sector.  Kallo has a detailed sales process which allows us to fully understand the customer needs prior to quoting a solution.  Once selected for the project, we work through the formal approval process of multiple government ministries.  This process of coordination of approvals, financing complexities and the possibility of electoral and cabinet changes creates significant forecasting challenges.

Government Regulation and Compliance

The healthcare regulations and standards vary widely in the geographic areas that we are focused in, with the primary concerns around patient health, safety, and privacy.  With rapid advances in clinical and technology changes, the increased scrutiny by governments, the media and consumers has created continual monitoring and increased regulation on drug and patient safety specifically.

Within the global market that we serve, North America has some of the most stringent regulations and standards for medical technology and pharmaceutical approvals.  As such, we have partnered with a number of major biomedical suppliers to ensure the highest standards of equipment.  We intend to utilize only the highest standards of product regardless of the market that we are serving.

Agreement with Kodiak Capital Group, LLC

On July 15, 2014, we entered into an Investment Agreement with Kodiak wherein it was agreed that we could "Put" to Kodiak up to 50,000,000 common shares provided that the investment amount, when taken together with all other "Put Notices", shall not exceed $2,000,000. The contract terminated December 31, 2015.

Employees

As of March 24, 2016, we have nineteen full time employees.

Warranties

We do not provide warranties in connection with our products or services.  Our third party products are supplied with the manufacturer's warranty and we offer additional coverage with a service agreement.

Insurance

We currently do not have insurance but do intend to insure the business as soon as fiscally possible.

Executive Offices

Our administrative office is located at 675 Cochrane Drive, Suite 630, Markham, Ontario, Canada, L3R 0B8, our telephone number is (416) 246-9997. We sublease this space from Bilfinger RE Asset Management Inc., pursuant to a written sublease expiring on January 31, 2017.  Our monthly lease payment is approximately $22,000. Our registered agent for services of process is the Corporation Trust Company of Nevada, located at 6100 Neil Road, Suite 500, Reno, Nevada 89511. Our fiscal year end is December 31^st.

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.

None.

Our properties consist mainly of leased office facilities. The executive offices of Kallo Inc. are located at 675 Cochrane Drive, Suite 630, Markham, Ontario, Canada, L3R 0B8, our telephone number is (416) 246-9997.

None.

None.

PART II

ITEM 5.

MARKET FOR OUR COMMON STOCK, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Our shares are traded on OTC Markets under the symbol "KALO". A summary of trading by quarter for 2015 and 2014 is as follows:

	Fiscal Year 2015		High Bid	Low Bid
		Fourth Quarter 10-1-15 to 12-31-15	$0.0011	$0.0001
		Third Quarter 7-1-15 to 9-30-15	$0.035	$0.0008
		Second Quarter 4-1-15 to 6-30-15	$0.15	$0.265
		First Quarter 1-1-15 to 3-31-15	$0.11	$0.0462

	Fiscal Year 2014		High Bid	Low Bid
		Fourth Quarter 10-1-14 to 12-31-14	$0.25	$0.025
		Third Quarter 7-1-14 to 9-30-14	$0.08	$0.0401
		Second Quarter 4-1-14 to 6-30-14	$0.11	$0.0301
		First Quarter 1-1-14 to 3-31-14	$0.45	$0.03

Dividends

We have not declared any cash dividends, nor do we intend to declare cash dividends at this point.  We are not subject to any legal restrictions respecting the payment of dividends, except that they may not be paid to render us insolvent.  Dividend policy will be based on our cash resources and needs and it is anticipated that all available cash will be needed for our operations in the foreseeable future.

A stock dividend was declared on February 11, 2008, wherein two additional common shares were issued for each one common share issued and outstanding as at February 25, 2008. We have not declared any other dividends.

Section 15(g) of the Securities Exchange Act of 1934

Our company's shares are covered by Section 15(g) of the Securities Exchange Act of 1934, as amended that imposes additional sales practice requirements on broker/dealers who sell such securities to persons other than established customers and accredited investors (generally institutions with assets in excess of $5,000,000 or individuals with net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouses). For transactions covered by the Rule, the broker/dealer must make a special suitability determination for the purchase and have received the purchaser's written agreement to the transaction prior to the sale. Consequently, the Rule may affect the ability of broker/dealers to sell our securities and also may affect your ability to sell your shares in the secondary market.

Section 15(g) also imposes additional sales practice requirements on broker/dealers who sell penny securities. These rules require a one page summary of certain essential items. The items include the risk of investing in penny stocks in both public offerings and secondary marketing; terms important to in understanding of the function of the penny stock market, such as "bid" and "offer" quotes, a dealers "spread" and broker/dealer compensation; the broker/dealer compensation, the broker/dealers duties to its customers, including the disclosures required by any other penny stock disclosure rules; the customers rights and remedies in causes of fraud in penny stock transactions; and, the FINRA's toll free telephone number and the central number of the North American Administrators Association, for information on the disciplinary history of broker/dealers and their associated persons.

Securities authorized for issuance under equity compensation plans

We currently have two equity compensation plans: the 2012 Non-Qualified Incentive Stock Option Plan and the 2011 Non-Qualified Incentive Stock Option Plan.

The 2012 Non-Qualified Incentive Stock Option Plan provides for the issuance of shares of our Common Stock for services rendered to us. The board of directors is vested with the power to determine the terms and conditions of the options. The Plan includes 50,000,000 shares of common stock.

The 2011 Non-Qualified Incentive Stock Option Plan provides for the issuance of shares of our Common Stock for services rendered to us. The board of directors is vested with the power to determine the terms and conditions of the shares. The Plan included 10,000,000 shares of common stock. On September 7, 2012, 7,233,334 shares have been issued under this 2011 Non-Qualified Stock Option Plan; and, 2,766,666 shares of common stock remain available under this plan.

Plan category	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)	Weighted-average exercise price of outstanding options, warrants and rights (b)	Number of securities remaining available for future issuance under equity compensation plans (excluding securities in column (a)) (c)
Equity compensation plans
approved by security holders	None	None	None
Equity compensation plans
not approved by securities holders	0	$0.0	52,766,666
Total	0	$0.0	52,766,666

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

ITEM 7.

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 seven 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 five 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. Management believes that the Company can be generating sufficient cash flow from operation from the several potential projects as detailed below within the next 3 months and any additional funding can be met through one of the three options mentioned.

On December 24, 2015, we received a purchase request from Chrispod Limited in response to a proposal we submitted to Chrispod Limited on December 1, 2015, for medical equipment for the Ministry of Health in Ghana for regional hospital use.  Chrispod Limited was awarded the contract on December 27^th, 2012 and it was recently reapproved by the Minister of Health for delivery in 2016.  Chrispod Limited has subcontracted Kallo for the delivery of the equipment as stated in our proposal and is currently awaiting final approval for the financing offer that was presented to the Minister of Finance.  The full contract is approved for $60,058,000 US dollars, of which the Kallo proposed component will be $21,753,801 US dollars.  The contract is in the final approval stage with the Minister of Finance.  Under this contract, Kallo will supply medical equipment and accessories and other essential hospital equipment.  Installation of the medical equipment is not included in the project scope.  There is no assurance any equipment will be sold to Chirspod Limited.

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.  No equipment has been sold under the terms of this supply contract.

On October 11, 2015, the Republic of Guinea held their presidential election and the incumbent Prof. Alpha Conde was re-elected as affirmed by the National Electoral Commission on October 17, 2015.  His formal inauguration occurred on December 14, 2015.  With his re-election, there have been a number of cabinet changes, including the appointment of Dr. Abdou Diallo as the Minister of Health in early January.  All of the project material has been provided to Dr. Diallo.

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.

The Government of Guinea has been looking into securing funding for the Kallo Integrated Delivery System ("KIDS") for US$ 200,000,925 and a financial institution has come to the stage of agreeing on the terms requested by the Government of Guinea based on their acceptable economic framework for such projects. We continue to be in contact with the newly appointed Minister of Health and expect to finalize the health strategy and implementation schedules between the financial institution and the Government of Guinea in the next 6 months. Once this process is complete, it would trigger the release of Kallo's down payment for the project initiation and production.  There is no assurance that the down payment will ever be made to us.

In anticipation of the start of the Supply Contract, Kallo has built a Clinical Command Centre and other infrastructure at its Head Office as well as hiring a team focused on building out the project and delivery plan for the Contract.

MobileCare™ supply contract includes:

1.	Mobile clinics                                        - (10)

2.	Clinical Command Centre - (1)

3.	Administration Centre -                                                      (1)

4.	Utility vehicles - (2)

5.	User training - (5 years)

6.	Professional and clinical training - (5 years)

7.	Hardware and software maintenance - (5years)

8.	Operations & management support - (5 years)

9.	Maintenance and continued educational support - (5 years)

10.	Supply chain management of medical equipment, consumables and spare parts - (5 years)

11.	Advanced and integrated software systems, including telehealth - (1 full system)

12.	Fixed Medical Hospital - (1)

13.	Ambulances - (20)

14.	Medical Helicopter - (1)

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 to include the addition of the following:

1.	Mobile Clinics (2)

2.	Utility Vehicle (1)

3.	Clinical, Pharmaceutical and Laboratory Equipment

4.	Networking & Communications Infrastructure

5.	Clinical Systems

6.	5-Year Service & Maintenance

7.	5-Year Education & Training by Kallo University

8.	Freight & Insurance

On November 5, 2014, the Minister of Health of Ghana, Hon. Dr. Kwaku Agyeman Mensah in an official letter to Kallo Inc. conveyed a confirmed acceptance and prioritization of Kallo MobileCare; Kallo RuralCare and Kallo DialysisCare programs for Ghana.

During the first quarter of 2015, the office of the Minister of Finance – Ghana has been presented an offer to finance healthcare projects in Ghana valued at Euros 850 million. 250 million euros is to be utilized for a nation-wide malaria vector larviciding program, and the balance 600 million euros is for the Nation wide deployment of Kallo MobileCare, RuralCare and DialysisCare programs from Kallo Inc. The office of the Minister of Finance – Ghana is reviewing the offer and as of the date of this report, no further updates on financing were available.

The Ministry has identified project sites for this project as follows:

	Polyclinic Urban-Urban	Polyclinic Rural- Rural	Total	CHPS
Greater Accra	3	1	4	0
Ashanti Region	2	1	3	0
Central Region	2	1	3	2
Northern Region	2	2	4	2
Upper East Region	1	2	3	2
Upper West Region	0	0	0	1
Western Region	2	3	5	0
Volta Region	1	1	2	2
Eastern Region	1	1	2	0
Brong-Ahafo Region	1	0	1	1
	15	12	27	10

There is no assurance that any of the foregoing projects will ever be initiated.

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.

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

·

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, MobileCareTM 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.

·

RuralCareTM – 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 MobileCareTM product, RuralCareTM also utilizes satellite communications to access the Telehealth system.

·	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 Services – provides ground and air ambulance vehicles for emergency 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.

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.

Our milestones during the next twelve months are:

1.

Develop our sales and marketing organization for the Component Solutions segment and expand the existing pipeline by building relationships with Government disaster recovery agencies as well as First Nations Leaders.  We are utilizing existing resources to execute this strategy and will expand as operational financing permits.

2.	Perform a market analysis of the demand for individual components of the solution and targeted audience for each of the components.  We are utilizing the expertise of existing resources to execute this strategy and will expand as operational financing permits.

3.	Continue to develop a pipeline of qualified opportunities for the full delivery solution with target to close and begin execution of the solution within the next 12 months.

Our plans for delivery of projects are unique to each opportunity but the core process can be emulated and specifics added based on the customers' requirements.

For a component delivery project such as our contract with Chrispod Limited for Ghana, the requirement is for the delivery of medical equipment, as well as other essential hospital equipment; beds, generators and elevator lifts.  Of which only the generators and elevator lifts require installation services.  With this solution, the delivery plan is focused around the coordination of manufacturer lead times, transportation offers and the management of importation and duties.  Installation services are coordinated between the manufacturer and the Kallo engineering team.  All of which are managed with detailed timeline reporting.

Our integrated healthcare delivery implementation plan for our full KIDS solution, such as for Guinea, begins with the detailed schedule for the delivery and training as agreed with the Government.  We are currently developing a full 36 month roll out strategy for all aspects of the delivery, highlighting any risks and mitigation plans for those risks.  Once the purchase order and payment are confirmed, the delivery plan includes a lead time of six months for production and landing of the first two mobile clinics.

In this period of six months from the date of purchase order confirmation to us the following will be completed for go live of the Healthcare Solution.

1.	Establish geographical coverage for Mobile Clinics based on hospitals to population ratio in specific rural areas of Guinea

2.	Establish the specialists support from teaching hospitals

3.	Finalize all in country support contracts

4.	Establish in country leadership for operational and administrative support

5.	Establish governance councils for operations, education and training

Our healthcare delivery solution with mobile clinics, clinical and administrative command centers deployed in an integrated model with the current healthcare delivery services will produce demonstrable impact in the community in terms of improved healthcare delivery within 12 months of implementation that would contribute to the flagship achievement by the current government to its merit.

Our plan and focus during the next twelve months include the delivery of our proposed project with Chrispod Limited and the Government of Ghana, beginning the first phase of implementation of our KIDS solution in Guinea and building out our go to market strategy as described in the Go-To-Market Strategy section.

New Business Developments

Ghana – In addition to the sub-contract from Chrispod Limited provided on December 24, 2015 and the direct Memorandum of Understanding signed on November 20, 2012, we are actively perusing the following opportunity:

·	Currently in discussions with Minister of Health to determine scope of a direct add on to the Chrispod Limited contract for medical equipment expansion for existing healthcare facilities across Ghana.  Request for proposal and decision is expected by end of May 2016.

Cameroon – From the proposal submitted on August 12, 2015, The Memorandum of Understanding process has been completed and approved by the Minister of Health and the Prime Minister's office.  Next step would include a detailed analysis of the healthcare infrastructure currently in place.  As part of the MOU, there is an immediate need for support of a sporting event taking place in Cameroon in late 2016.

Chad – Two alternative proposals both submitted on August 16, 2015 for either 12 Mobile Clinics or 1 Rural clinic to the Minister of National Security.  The proposals are currently in the review phase with the Government of Chad with a follow up meeting still to be determined.

There is no assurance any of the foregoing will materialize.

Results of operations

December 31, 2015 compared to December 31, 2014

Revenues

We did not generate any revenues during the year ended December 31, 2015 or 2014.  We are pursuing numerous sales opportunities.

Expenses

During the year ended December 31, 2015 we incurred total expenses of $8,964,960, including $4,804,831 in salaries and compensation, $76,457 in depreciation, $1,483,909 in professional fees, $230,165 in selling and marketing expenses, $948,607 in interest and financing costs, $97,890 gain in change in fair value on derivative liabilities, $355,508 in fixed asset impairment and $1,163,373 as other expenses. Our professional fees consist of legal, consulting, accounting and auditing fees.

During the year ended December 31, 2014 we incurred total expenses of $4,209,038.

The increase in our expenses for the year ended December 31, 2015 was primarily due to an increase in salaries and compensation of $3,532,151 including stock-based compensation of $3,701,600 issued to management and employees, an increase in professional fees of $751,046, an increase in interest and financing costs of $902,729, an increase in other expenses of $92,450, a decrease in selling and marketing expenses of $15,962 and a decrease in the impairment charge of $509,492. The increases are due to the increased hiring of full time employees and the consulting services to develop the work streams and project plan to execute on a major project as well as the financing charges to fund the business.  The increase in professional fees is mainly due to the cost of consulting services for both development of the project plan and financing requirements.

Net Loss

During the year ended December 31, 2015 we incurred a net loss of $8,964,960 compared to a net loss of $4,209,038 in 2014.

Liquidity and capital resources

As at December 31, 2015, we had current assets of $137,257, current liabilities of $2,029,819 and a working capital deficiency of $1,892,562. As of December 31, 2015, our total assets were $293,435 in cash, prepaid expenses, deposit – long term, equipment and our total liabilities were $2,054,370 comprised of $1,204,942 in accounts payable and accrued liabilities, loans payable of $15,730, derivative liabilities of $210,834, deferred lease inducement of $15,380 and convertible promissory notes of $582,933.

Cash used in operating activities amounted to $3,552,762 during fiscal 2015, primarily as a result of the net loss adjusted for non-cash items and various changes in operating assets and liabilities.

Cash used in investing activities of $225,033 consisted of purchase of equipment.

Cash provided by financing activities during the year amounted to $3,531,230 and represented mainly proceeds from sales of common stock of $2,663,272 and proceeds from convertible promissory notes of $921,498.

Summary of critical accounting policies

The accompanying consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles ("GAAP") and in accordance with the instructions to Form 10-K related to smaller reporting companies as promulgated by the Securities and Exchange Commission.

Copyrights are stated at cost. According to the Canadian Intellectual Property laws in Canada, the life of a copyright is the author's life, the remainder of the calendar year in which the author dies, and a period of 50 years following the end of that calendar year.  As a result, the useful life of the copyrights are determined to be indefinite are not amortized but subject to testing for impairment. The Company reviews the value of the copyrights on an annual basis to determine if the value has been impaired. Based on its evaluations, it was determined that the copyrights were impaired as at December 31, 2014 and fully reserved so no additional impairment as at December 31, 2015.

Long-lived assets comprise of equipment and copyrights. The Company accounts for impairment of long-lived assets in accordance with the guidance established in ASC 360, Accounting for the Impairment or Disposal of Long-Lived Assets, which requires the Company to evaluate a long-lived asset for recoverability when there is an event or circumstance that indicates the carrying value of the asset may not be recoverable. The Company follows the guidance of ASU 2012-02 and first assesses qualitative factors to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired as a basis for determining whether it is necessary to perform the quantitative impairment test. An impairment loss is recognized when the carrying amount of a long-lived asset or asset group is not recoverable (when carrying amount exceeds the gross, undiscounted cash flows from use and disposition) and is measured as the excess of the carrying amount over the asset's (or asset group's) fair value. Management evaluated whether there are any adverse qualitative factors in respect to copyrights and equipment indicating that they might be impaired. Since there were indicators of impairment, Management reviewed its long-lived intangible assets and has determined that the Clinical Command Center and the Infrastructure were impaired as at December 31, 2015.

The Company accounts for share-based compensation in accordance with ASC 718, Stock Compensation. Under the provisions of ASC 718, share-based compensation cost is measured at the grant date, based on the calculated fair value of the award, and is recognized as an expense for services rendered and over the employee's requisite service period (generally the vesting period of the equity grant).

The valuation of the Company's common stock issued to non-employees in exchange for services is valued at an estimated fair market value as determined by Management of the Company based upon trading prices of the Company's common stock on the dates of the stock transactions. The corresponding expense of the services rendered is recognized over the contractor's requisite service period (generally the vesting period of the equity grant).

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

INDEX

	PAGE
Report of Independent Registered Public Accounting Firm for December 31, 2015 and 2014	17
Consolidated Balance Sheets	18
Consolidated Statements of Operations	19
Consolidated Statements of Changes in Stockholders' Equity (Deficiency)	20
Consolidated Statements of Cash Flows	21
Notes to Consolidated Financial Statements	22 - 39

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders of

Kallo Inc.

Markham, Ontario, Canada

We have audited the accompanying consolidated balance sheets of Kallo Inc. and its subsidiary (collectively the "Company") as of December 31, 2015 and 2014 and the related consolidated statements of operations, changes in stockholders' deficiency, and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.  Accordingly, we express no such opinion.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, based on our audit, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Kallo Inc. and its subsidiary as of December 31, 2015 and 2014 and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.  As discussed in Note 1 to the consolidated financial statements, the Company has suffered recurring losses since inception and had an accumulated deficit of $32,143,044 at December 31, 2015 that raises substantial doubt about its ability to continue as a going concern.  Management's plans in regard to this matter are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

MALONEBAILEY, LLP
Houston, Texas
April 14, 2016

 

 

 

 

 

		2015				2014
ASSETS
Current Assets:
Cash		$	4,998			$	250,339
Other receivables			-				11,531
Deferred project costs			-				24,990
Prepaid expenses			132,259				122,022
Total Current Assets			137,257				408,882
Deposit – long term			20,627				49,220
Equipment, net			135,551				98,241
TOTAL ASSETS		$	293,435			$	556,343
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current Liabilities:
Accounts payable and accrued liabilities		$	1,204,942			$	924,494
Loans payable			-				56,112
Derivative liabilities			210,834				336,390
Convertible promissory notes net of discount of $69,568 and $248,825 respectively			204,826				16,175
Convertible loans payable – third parties			105,395				-
Short term loans payable			15,730				38,555
Convertible loans payable – related parties			272,712				-
Deferred lease inducement			15,380				35,181
Deferred revenue			-				24,990
Total Current Liabilities			2,029,819				1,431,897
Convertible promissory notes, net of discount $59,939 and NIL respectively			24,551
TOTAL LIABILITIES			2,054,370				1,431,897
Commitments and Contingencies
Stockholders' Deficiency:
Preferred stock, $0.00001 par value, 100,000,000 shares authorized, 95,000,000 Series A preferred shares issued or outstanding			950				950
Common stock, $0.00001 par value, 15,000,000,000 shares authorized, 5,648,390,746 and 382,156,160 shares issued and outstanding respectively.			56,485				3,822
Additional paid-in capital			30,324,674				22,297,758
Accumulated deficit			(32,143,044	)			(23,178,084	)
Total Stockholders' Deficiency			(1,760,935	)			(875,554	)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY		$	293,435			$	556,343

		For the Year				For the Year
		Ended				Ended
		December 31,				December 31,
		2015				2014
Expenses
General and administration			7,434,862				2,953,330
Selling and marketing			230,165				246,127
Foreign exchange (gain) loss			(66,093	)			(53,827	)
Depreciation			76,457				53,813
Interest and financing costs			948,607				45,878
Change in fair value on derivative liabilities			(97,890	)			95,293
Impairment of copyrights / Assets			355,508				865,000
Loss on extinguishment of short term loan payable			83,344				3,424
			8,964,960				4,209,038
Net Loss and comprehensive loss		$	(8,964,960	)		$	(4,209,038	)
Loss per share - Basic and diluted net		$	(0.01	)		$	(0.01	)
Weighted average number of shares outstanding - Basic and diluted			966,447,335				348,742,260

																						Deficit
																						Accumulated
		Preferred Stock								Common Stock								Additional				During the				Total
		$.00001 par value								$.00001 par value								Paid-In				Development				Stockholders'
		Shares				Amount				Shares				Amount				Capital				Stage				Equity (Deficit)
Balance December 31, 2013			-			$	-				319,106,020			$	3,191			$	18,669,367			$	(18,969,046	)		$	(296,488	)
Issuance of common shares – Kodiak put			-				-				8,472,223				85				481,498				-				481,583
Shares issued to directors, employees and others for services			95,000,000				950				7,560,000				76				721,904				-				722,930
Settlement of short term loans payable by common shares			-				-				680,000				7				27,193				-				27,200
Issuance of common shares for cash			-				-				45,637,917				456				2,281,439				-				2,281,895
Shares issued and issuable for consulting fees			-				-				700,000				7				116,357				-				116,364
Net Loss			-				-				-				-				-				(4,209,038	)			(4,209,038	)
Balance December 31, 2014			95,000,000				950				382,156,160				3,822				22,297,758				(23,178,084	)			(875,554	)
Issuance of common shares – Kodiak put			-				-				6,250,000				63				172,120				-				172,183
Shares issued to directors and employees			-				-				2,989,800,000				29,898				3,671,702				-				3,701,600
Shares issued for debt conversion			-				-				2,196,251,125				21,963				1,290,955				-				1,312,918
Issuance of common shares for cash			-				-				68,867,121				689				2,490,400				-				2,491,089
Shares issued for consulting services			-				-				3,508,500				35				230,392				-				230,427
Stock issued for settlement of Payables			-				-				1,557,840				15				171,347				-				171,362
Net Loss			-				-				-				-				-				(8,964,960	)			(8,964,960	)
Balance December 31, 2015			95,000,000			$	950				5,648,390,746			$	56,485			$	30,324,674			$	(32,143,044	)		$	(1,760,935	)

		For the Year Ended December 31, 2015				For the Year Ended December 31, 2014
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss		$	(8,964,960	)		$	(4,209,038	)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation			76,457				53,813
Stock-based compensation			3,701,600				722,930
Impairment of copyrights / assets			355,508				865,000
Debt forgiveness			-				(31,514	)
Loss on extinguishment of short term loan payable and accounts payable			83,344				3,424
Amortization of debt discount			780,364				16,175
Deferred lease inducement			(19,801	)			35,181
Change in fair value on derivative liabilities			(97,890	)			95,293
Interest and penalties on promissory notes			128,397				-
Unrealized foreign exchange gains			(60,981	)			(41,927	)
Non-cash consulting fees			230,427				116,364
Changes in operating assets and liabilities:
Decrease (Increase) in other receivables			11,531				745
Decrease (Increase) in deferred project cost			24,990				(24,990	)
Decrease (Increase) in prepaid expenses and deposits			18,357				(145,846	)
(Decrease) in deferred revenue			(24,990	)			-
Increase (Decrease) in accounts payable and accrued liabilities			204,885				(182,045	)
NET CASH USED IN OPERATING ACTIVITIES			(3,552,762	)			(2,726,435	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment			(225,033	)			(39,591	)
CASH USED IN BY INVESTING ACTIVITIES			(225,033	)			(39,591	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock			2,663,272				2,753,918
Proceeds from short term loans payable			-				-
Proceeds from convertible promissory notes			580,075				241,097
Proceeds from other convertible notes ($272,712 from related parties)			341,423				-
Repayment of loans payable			(53,540	)			-
CASH PROVIDED BY FINANCING ACTIVITIES			3,531,230				2,995,015
Effect of exchange rate changes on cash			1,224				(6,098	)
NET (DECREASE) INCREASE IN CASH			(245,341	)			222,891
CASH
Beginning of period			250,339				27,448
End of period		$	4,998			$	250,339
SUPPLEMENTAL CASH FLOW INFORMATION:
Income Tax paid		$	-			$	-
Interest paid		$	-			$	27,477
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Conversion of loans payable into common shares		$	-			$	27,200
Note issued for settlement of Accounts Payable		$	18,610			$	-
Short term loan transferred to convertible note		$	22,977			$	-
Accounts payable for equipment		$	244,243			$	64,490
Initial debt discount on convertible promissory notes		$	607,510			$	241,096
Stock issued for settlement of accounts payable		$	171,362			$	-
Conversion of promissory notes into common shares		$	1,312,918			$	-

	•	Quoted prices for identical or similar assets or liabilities in non-active markets (examples include corporate and municipal bonds which trade infrequently);
	•	Inputs other than quoted prices that are observable for substantially the full term of the asset or liability (examples include interest rate and currency swaps); and
	•	Inputs that are derived principally from or corroborated by observable market data for substantially the full term of the asset or liability (examples include certain securities and derivatives).

December 31, 2015
		Level 1				Level 2				Level 3				Total
Liabilities:
Derivative liability		$	-			$	-			$	210,834			$	210,834

December 31, 2014
		Level 1				Level 2				Level 3				Total
Liabilities:
Derivative liabilities		$	-			$	-			$	336,390			$	336,390

						Weighted Average
		Number of Warrants				Exercise Price
Balance, December 31, 2013			1,580,000			$	0.50
Granted			-				-
Expired			(1,580,000	)			-
Balance, December 31, 2014			-			$	-
Granted			-
Balance, December 31, 2015			-			$	-

		2015				2014
Computer equipment under capital lease		$	223,683			$	223,683
Nexus computer equipment under capital lease			42,023				42,023
Computer equipment			50,724				39,338
Computer software			37,210				9,577
Hardware & Installation			10,128				-
Office furniture and equipment			27,739				24,796
Leasehold improvement			55,072				30,370
Medical Equipment			13,274				-
Clinical Command Center			15,790				-
Infrastructure			7,911				-
Total Equipment			483,554				369,787
Less accumulated depreciation			(348,003	)			(271,546	)
Equipment – net		$	135,551			$	98,241

Original Face amount		Interest rate		Due date	Conversion price per share
Promissory note of $125,000			8%	December 1, 2015	75% of average of the previous two lowest trading days over the last 15 trading days
Promissory note of $100,000			10%	December 21, 2015	65% of lowest trading day over the last 15 trading days
Promissory note of $50,000			8%	October 5, 2015	60% of the lowest trading price over the last 15 trading days
Promissory note of $87,500			8%	January 15, 2016	70% of average of two lowest closing bid price over the last 15 trading days
Promissory note of $60,000			12%	February 3, 2017	60% of the lowest trading price over the last 25 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 $55,000			8%	July 9, 2017	65% of the lowest trading price over the last 20 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 $40,000			8%	July 13, 2016	60% of the lowest trading price over the last 15 trading days

		2015				2014
Balance as at Beginning of Period		$	16,175			$	-
New convertible promissory notes			633,611				265,000
Original issue discount			(53,536	)			(23,904	)
Penalties			114,914				-
Derivative liabilities			(607,510	)			(241,096	)
Converted into shares			(654,641	)			-
Amortization of debt discount			780,364				16,175
Balance as at end of period			229,377				16,175
Convertible notes – short term			(204,826	)			(16,175	)
Convertible notes – long term		$	24,551			$	-

		2015				2014
Fair value as at beginning of period		$	336,390			$	-
New promissory notes			607,510				386,187
Elimination associated with conversion of promissory notes			(635,176	)			-
Change in fair value (gain)			(97,890	)			(49,797	)
Fair value as at end of period		$	210,834			$	336,390

		2015				2014
Promissory note bearing interest at 10% per annum, due Nov. 15, 2015		$	-			$	25,020
Convertible promissory note bearing interest at 15% per annum –third party			105,395				-
Convertible promissory note bearing interest at 15% per annum – Related Party			272,712				-
Non-interest bearing short term funding from third parties			15,730				13,535
		$	393,837			$	38,555

		2015				2014
Net loss for the year		$	(8,964,960	)		$	(4,209,038	)
Effective statutory rate			34	%			34	%
Expected tax recovery		$	(3,048,086	)		$	(1,431,073	)
Net effects of non deductible and allowable items			1,742,542				29,697
Change in valuation allowance			1,305,544				1,401,376
		$	-			$	-

		2015				2014
Net operating loss carry forward		$	4,779,729			$	3,710,244
Equipment			118,771				9,335
Valuation allowance			(4,898,500	)			(3,719,579	)
Deferred tax assets, net of valuation allowance		$	-			$	-

2016		$	201,215
		$	201,215

2014		$	122,432
2015			209,965
		$	332,397

 

ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

On June 3, 2014, we terminated Schwartz Levitsky Feldman LLP, 2300 Yonge Street, Suite 1500, Toronto, Ontario, Canada M4P 1E4 as our independent registered accounting firm.  The decision to dismiss Schwartz Levitsky Feldman LLP as our independent registered public accounting firm was approved by our board of directors on June 3, 2014.  Except as noted in the paragraph immediately below, the reports of Schwartz Levitsky Feldman LLP on the financial statements for the years ended December 31, 2012 and 2011 did not contain an adverse opinion or disclaimer of opinion, and such reports were not qualified or modified as to uncertainty, audit scope, or accounting principle.  Schwartz Levitsky Feldman LLP did not issue any report on any financial statements for the period January 1, 2013 to the present.

The reports of Schwartz Levitsky Feldman LLP on our financial statements as of and for the years ended December 31, 2012 and 2011 contained an explanatory paragraph which noted that there was substantial doubt as to our ability to continue as a going concern as we had suffered negative working capital, had experienced negative cash flows from continuing operating activities and also due to uncertainty with respect to our ability to meet short-term cash requirements.

During the years ended December 31, 2012 and 2011 and for the period January 1, 2013 through March 31, 2014 and through June 3, 2014, we have not had any disagreements with Schwartz Levitsky Feldman LLP on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to Schwartz Levitsky Feldman LLP's satisfaction, would have caused it to make reference to the subject matter of the disagreements in its reports on our consolidated financial statements for such years or in connection with its reports in any subsequent interim period through the date of dismissal with the exception of the following:

Schwartz Levitsky Feldman LLP failed to timely audit our financial statements for the period ended December 31, 2013.  The auditor requested an opinion to the affect that there were no violations of the Foreign Corrupt Practices Act.  We complied and had our securities attorney issue an opinion that there were no violations of the Foreign Corrupt Practices Act.  Then, after receiving the requested opinion, the auditor decided that it would require a second opinion from an "independent" attorney. Again, we complied having retained a law firm in New York City, which specialized in the Foreign Corrupt Practices Act. Again, the opinion reflected there was no violation of the Foreign Corrupt Practices Act.  After that, the auditor wanted the opinion from the New York City firm to contain additional language, which the independent lawyer felt that Schwartz Levitsky Feldman LLP was trying to influence the attorney's independent opinion.  The auditor could not give us a definitive date or specific conditions which would result in the issuance of its audit opinion of the December 31, 2013 financial statements. Under the circumstances we had no choice but to obtain the services of a new auditor.  After retaining MaloneBailey LLP, MaloneBailey LLP was able to render an unqualified audit opinion.  We have authorized Schwartz Levitsky Feldman LLP to respond fully to the inquiries of MaloneBailey LLP concerning the disagreement. Schwartz Levitsky Feldman LLP alleged that it did not receive an unqualified opinion by independent legal counsel to confirm that that there were no violations of the Foreign Corrupt Practices Act (See Exhibit 16.1 to Amendment No. 1 to Form 8-K filed with the SEC on June 13, 2014).  However, Schwartz Levitsky Feldman LLP failed to disclose that in fact it received two opinions from two law firms that there were no violations, as they did not consider these to be independent and unqualified.  Further, Schwartz Levitsky Feldman LLP did not conduct any independent investigation, as they were repeatedly informed by the Company that the Company's independent legal counsel in New York was conducting such an investigation.

Thereafter, MaloneBailey issued an unqualified audit opinion after having access to the same information that Schwartz Levitsky Feldman had access to and audited our financial statements for the year ended December 31, 2013 and reviewed our Form 10-Q for the period ended March 31, 2014.  With respect to the audit of the period from December 12, 2006 (inception) through December 31, 2013, we obtained a waiver from the Division of Corporate Finance, Chief Accountant's Office.  The amounts from December 12, 2006 to December 31, 2013 are labelled "unaudited".

During the years ended December 31, 2012 and 2011 and through June 3, 2014, there were no reportable events, as defined in Item 304(a)(1)(v) of Regulation S-K.

On August 8, 2014, we delivered a copy of this amended report to Schwartz Levitsky Feldman LLP.  On August 12, 2014, Schwartz Levitsky Feldman LLP responded thereto.  Their response is filed herewith as Exhibit 16.1 to our amended Form 8-K filed with the SEC on August 13, 2014.  The foregoing response advised the SEC that Schwartz Levitsky Feldman LLP sought an unqualified opinion from the foregoing New York law firm which was not supplied and in addition they were repeatedly informed by the Company that the Company's independent New York law firm was conducting an independent investigation in this matter which report was also not provided, and as a result Schwartz Levitsky Feldman LLP was unable to alleviate their concerns of a potential violation of the Foreign Corrupt Practices Act and therefore were unable to release their audit opinion for the year ended December 31, 2013.

On June 3, 2014, we engaged MaloneBailey LLP, 9801 Westheimer Road, Houston, Texas 77042, an independent registered public accounting firm, as our principal independent accountant with the approval of our board of directors.  MaloneBailey LLP was previously our independent accountant from October 21, 2009 to February 28, 2011.

During the two most recent fiscal years and through the date of engagement, we have not consulted with MaloneBailey LLP regarding either:

1.	The application of accounting principles to any specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on our financial statements, and neither a written report was provided to us nor oral advice was provided that MaloneBailey, LLP concluded was an important factor considered by us in reaching a decision as to the accounting, auditing or financial reporting issue; or
2.	Any matter that was either subject of disagreement or event, as defined in Item 304(a)(1)(iv)(A) of Regulation S-K and the related instruction to Item 304 of Regulation S-K, or a reportable event, as that term is explained in Item 304(a)(1)(iv)(A) of Regulation S-K.

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.

Management's Report on Internal Control Over Financial Reporting.

Management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Exchange Act Rule 13a -15(f). The Company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Because of the inherent limitations due to, for example, the potential for human error or circumvention of controls, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures may deteriorate.

Management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control – Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Based on this evaluation, management concluded that the Company's internal control over financial reporting was not effective as of December 31, 2015. Material weakness identified included:

*	Lack of segregation of duties
*	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, 2015.

We have begun to take steps to remedy the foregoing material weaknesses, including the hiring of a Kallo badged VP of Finance to oversee the accounting and financial reporting process.

Changes in Internal Controls

There were no changes in our internal control over financial reporting during the quarter ended December 31, 2015 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

None.

PART III

Officers and Directors

Each of our directors serves until his or her successor is elected and qualified. Each of our officers is elected by the board of directors to a term of one (1) year and serves until his or her successor is duly elected and qualified, or until he or she is removed from office. The board of directors has no nominating, auditing or compensation committees.  It does have an audit committee comprised of the board of directors.

The names, addresses, ages and positions of our present officers and directors are set forth below:

Name and Address	Age	Position(s)
John Cecil	52	President, Chairman of the Board of Directors, Chief
675 Cochrane Drive, West Tower, Suite 630 Markham, ON L3R 0B8		Executive Officer and Chief Financial Officer

Lloyd A. Chiotti	67	Chief Operating Officer and Director
31 Sisman Avenue Aurora, ON, L4G 6R9
Samuel R Baker	80	Secretary and a Director
89 Shawnee Circle Toronto, ON, M2H 2X9

Background of officers and directors

John Cecil – President, Chairman of the Board of Directors, Chief Executive Officer, Treasurer, Principal Financial Officer and Principal Accounting Officer

On October 20, 2010, John Cecil was appointed Chairman of the Board of Directors, Chief Executive Officer and a Director. And as of March 25, 2011, John Cecil was appointed the treasurer, principal financial officer and principal accounting officer of Kallo Inc. Since December 31, 2009, John Cecil was on our board of directors.  Since December 2003 John Cecil has been the president of Rophe Medical Technologies Inc., in Toronto, Canada.  He is responsible for its research and development and the design and copyright of the company's technology.  From May 2008 to April 2009 Mr. Cecil was the Senior Healthcare Solutions Architect at SUN Microsystems Canada Inc., in Toronto, Canada, a publicly traded company listed on the NASDAQ under the symbol JAVA.  He was responsible for Innovative product positioning by workshops / white board sessions with stakeholders of the customer to increase business value and support sales in revenue growth and design innovative technology solutions.  From April 2007 to May 2008, Mr. Cecil was the Healthcare Director at Satyam Computer Service Ltd., in Toronto, Canada, a publicly traded company listed on the NYSE under the symbol "SAY".  He managed healthcare consulting practices and services.  On February 29, 2016, Mr Cecil was appointed to the position of President of Kallo Inc.

Samuel Baker - Secretary and a Director

On November 17, 2010, Samuel Baker was appointed Secretary and a member of our Board of Directors.  Since October 1997 Mr. Baker has been the Senior Lawyer at Baker Law Firm in Toronto, Canada. Since September 2008, Mr. Baker has been the director of Arehada Mining Limited.  Arehada Mining Limited operates a lead/zinc mine in Inner Mongolia, China.  It is a public company traded on the Toronto Stock Exchange, ticker symbol AHD.

Lloyd Chiotti - Director

On September 22, 2011, Lloyd Chiotti was appointed to our board of directors. In February 2015, Mr. Chiotti began full time with Kallo Inc. as the Executive Vice President.  He holds an Engineering degree and an MBA, both from the University of Toronto.  He worked with Enbridge Gas Distribution (formerly The Consumers Gas Company) for over 34 years.  Over the course of his career he held a number of senior management positions including Director of Information Services and a number of Regional General Manager roles within Operations.  In 2006 he joined the Engineering department to lead the Asset Management initiative as Director, Asset Management Strategy. In this capacity, he led a team which implemented an Asset Management system for gas distribution consistent with the international standard called PAS 55 (now ISO 55001). In 2010 he was appointed to the position of Director, Distribution Asset Management.  In this capacity, he was responsible for all distribution system planning and records management and led the development of a comprehensive methodology to develop risk based, long range asset management plans.  He was actively involved in the natural gas industry.  He served as Chair of the Asset Management Task Force of the Canadian Gas Association from 2006 to 2013 and served as a member of the Distribution Working Committee of the International Gas Union from 2007 to 2012.  Throughout his career he has also served on the Boards of a number of not-for-profit organizations including: President, Alternative Computer Training for the Disabled; Chair, United Way of Peel Campaign 1992; Chair of the Board, West Park Healthcare Centre Foundation; Vice-Chair of the Board, Junior Achievement of Toronto and Chair of the Board, Toronto Mendelssohn Choir.  He retired from Enbridge on October 1, 2013.

Conflicts of Interest

There is no conflict that we foresee as our officers and directors devote full time to the business and the operations of the company except for Samuel R. Baker who is not full time in the organization.

Involvement in Certain Legal Proceedings

During the past ten years, Messrs. Cecil, Baker, and Chiotti have not been the subject of the following events:

1.

A petition under the Federal bankruptcy laws or any state insolvency law was filed by or against, or a receiver, fiscal agent or similar officer was appointed by a court for the business or property of such person, or any partnership in which he was a general partner at or within two years before the time of such filing, or any corporation or business association of which he was an executive officer at or within two years before the time of such filing;

2.	Convicted in a criminal proceeding or is a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses);

3.	The subject of any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from, or otherwise limiting, the following activities;

i)

Acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator,  floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity;

ii)

Engaging in any type of business practice; or

iii)

Engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of Federal or State securities laws or Federal commodities laws;

4.

The subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any Federal or State authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity described in paragraph 3.i in the preceding paragraph or to be associated with persons engaged in any such activity;

5.	Was found by a court of competent jurisdiction in a civil action or by the Commission to have violated any Federal or State securities law, and the judgment in such civil action or finding by the Commission has not been subsequently reversed, suspended, or vacated;

6.

Was found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any Federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated;

7.	Was the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of:

i)

Any Federal or State securities or commodities law or regulation; or

ii)

Any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or

iii)

Any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or

8.

Was the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26)), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29)), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.

Audit Committee and Charter

We have a separately designated audit committee of the board. Our board of directors performs the audit committee functions. None of our directors are deemed independent. Two of our directors also hold positions as our officers. Our audit committee is responsible for: (1) selection and oversight of our independent accountant; (2) establishing procedures for the receipt, retention and treatment of complaints regarding accounting, internal controls and auditing matters; (3) establishing procedures for the confidential, anonymous submission by our employees of concerns regarding accounting and auditing matters; (4) engaging outside advisors; and, (5) funding for the outside auditory and any outside advisors engagement by the audit committee. A copy of our audit committee charter is filed as an exhibit to our 2007 Form 10-K.

Audit Committee Financial Expert

We do not have an external audit committee financial expert.

Code of Ethics

We have adopted a corporate code of ethics. We believe our code of ethics is reasonably designed to deter wrongdoing and promote honest and ethical conduct; provide full, fair, accurate, timely and understandable disclosure in public reports; comply with applicable laws; ensure prompt internal reporting of code violations; and provide accountability for adherence to the code. A copy of the code of ethics is filed as Exhibit 14.1 to our S-1 filed with the Securities and Exchange Commission on August 25, 2014.

Disclosure Committee and Committee Charter

We have a disclosure committee and disclosure committee charter. Our disclosure committee is comprised of all of our officers and directors. The purpose of the committee is to provide assistance to the Chief Executive Officer and the Chief Financial Officer in fulfilling their responsibilities regarding the identification and disclosure of material information about us, and the accuracy, completeness and timeliness of our financial reports. A copy of the disclosure committee charter is filed as Exhibit 99.2 to our 2007 Form 10-K.

Section 16(a) of the Securities Exchange Act of 1934

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our directors, officers and persons who beneficially owned more than ten percent of our common stock to file reports of ownership and changes in ownership of common stock.  Based solely upon a review of Forms 3, 4 and 5 furnished to us during the fiscal year 2014, all officers, directors, and persons who beneficially own more than ten percent of our common stock filed all reports required by Section 16(a) of the Securities Exchange Act of 1934, as amended. 

The following table sets forth the compensation paid by us during the last two fiscal years for our officers. This information includes the dollar value of base salaries, bonus awards and number of stock options granted, and certain other compensation, if any. The compensation discussed addresses all compensation awarded to, earned by, or paid to our named executive officers.

Summary Compensation Table

(a)	(b)	(c)	(d)	(e)	(f)	(g)	(h)	(i)	(j)
Name and Principal Position [1]	Year	Salary ($)	Bonus ($)	Stock Awards ($)[1]	Option Awards ($)	Non-Equity Incentive Plan Compensation (S)	Change in Pension Value & Nonqualified Deferred Compensation Earnings ($)	All Other Compensation ($)	Totals ($)
John Cecil	2015	132,902	0	1,950,000	0	0	0	0	2,082,902
Chairman & CEO	2014	160,941	0	412,785	0	0	0	43,154	616,880
Vince Leitao	2015	29,644	0	0	0	0	0	0	29,644
Former President (resigned 02/29/2016)	2014	160,941	0	60,796	0	0	0	0	221,737
Samuel Baker	2015	0	0	480,000	0	0	0	0	480,000
Secretary	2014	0	0	150,000	0	0	0	0	150,000
Lloyd Chiotti	2015	0	0	1,200,000	0	0	0	0	1,200,000
Director & EVP	2014	0	0	15,199	0	0	0	0	15,199

[1]	During the year ended December 31, 2015, 2,662,500,000 common shares were issued to directors and officers for a total amount of $3,630,000 of which $NIL was contributed as cash by them and $3,630,000 was granted to them as stock-based compensation.

The number of shares issued as compensation to each named executive officer for the year ended December 31, 2015 was as follows:

·	John Cecil – 1,560,000,000 common shares issued as compensation valued at $1,950,000

·	Samuel Baker - 315,000,000 common shares issued as compensation valued at $480,000

·	Lloyd Chiotti – 787,500,000 common shares issued as compensation valued at $1,200,000

The values reported represent the issue date fair value of the shares multiplied by the number of shares issued.

All compensation received by our officers and directors has been disclosed.

Option/SAR Grants

There are no stock option, retirement, pension, or profit sharing plans for the benefit of our officers and directors other than our 2012 and 2012 Non-Qualified Incentive Stock Option Plans.  No options have been granted to our officers and directors thereunder.

Long-Term Incentive Plan Awards

We do not have any long-term incentive plans that provide compensation intended to serve as incentive for performance.

Compensation of Directors

The members of our board of directors are not compensated for their services as directors. We no longer have employment contracts with our officers or directors.

Indemnification

Under our Bylaws, we may indemnify an officer or director who is made a party to any proceeding, including a lawsuit, because of his position, if he/she acted in good faith and in a manner he/she reasonably believed to be in our best interest. We may advance expenses incurred in defending a proceeding. To the extent that the officer or director is successful on the merits in a proceeding as to which he/she is to be indemnified, we must indemnify him/her against all expenses incurred, including attorney's fees. With respect to a derivative action, indemnity may be made only for expenses actually and reasonably incurred in defending the proceeding, and if the officer or director is judged liable, only by a court order. The indemnification is intended to be to the fullest extent permitted by the laws of the State of Nevada.

Regarding indemnification for liabilities arising under the Securities Act of 1933, which may be permitted to directors or officers under Nevada law, we are informed that, in the opinion of the Securities and Exchange Commission, indemnification is against public policy, as expressed in the Act and is, therefore, unenforceable.

ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

The following table sets forth, as of the date of this report, the total number of shares owned beneficially by each of our directors, officers and key employees, individually and as a group, and the present owners of 5% or more of our total outstanding shares. The stockholder listed below has direct ownership of his/her shares and possesses sole voting and dispositive power with respect to the shares.

Name and Address Beneficial Owner [1]	Number of Common Shares Owned	Percentage of Ownership	Number of Preferred Shares Owned	Percentage of Ownership
John Cecil [2]	1,651,612,857	29.24%	70,000,000	73.69%
15 Allstate Parkway, Suite 600 Markham, ON L3R 3B4
Lloyd Chiotti	827,546,891	14.65%	5,000,000	5.26%
31 Sisman Avenue Aurora, ON, L4G 6R9
Samuel Baker [3]	328,213,850	5.81%	-	-
255 Duncan Mill Road, Unit 504 Toronto, ON, M3B 3H9
All Officers and Directors as a Group (3 people)	2,807,33,598	49.70%	75,000,000	78.95%
Vince Leitao [4]	56,637,845	1.00%	20,000,000	21.05%
15 Allstate Parkway, Suite 600 Markham, ON L3R 3B4

 

[1]	The persons named above may be deemed to be a "parent" and "promoter" of our company, within the meaning of such terms under the Securities Act of 1933, as amended, by virtue of his/its direct and indirect stock holdings.
[2]	Includes 17,600,000 shares of common stock owned by family members of John Cecil.
[3]	Includes 410,000 shares of common stock owned by family members of Samuel Baker.
[4]	Includes 15,000,000 shares of common stock owned by family members of Vince Leitao.
[5]	Each preferred share is entitled to 100 votes.

During the year ended December 31, 2014, 5,000,000 common shares and 1,000,000 common shares were issued respectively to John Cecil, our Chief Executive Officer and Chairman of our Board of Directors and to Samuel Baker, our Secretary, as stock-based compensation and were valued at $200,000 and $150,000 respectively. Furthermore, 70,000,000 Series A Preferred shares, 20,000,000 Series A Preferred shares and 5,000,000 Series A Preferred shares were issued respectively to John Cecil, our Chief Executive Officer and Chairman of our Board of Directors, to Vince Leitao, our President and Chief Operating Officer and to Lloyd Chiotti, a Director, as stock-based compensation and were valued at $212,785, $60,796 and $15,199 respectively and an additional 6,304,633 shares were issued to Mr. Chiotti for cash of $315,232.

As at December 31, 2014, we owe our officers and directors $15,714 in accounts payable and accrued liabilities.

During the year ended December 31, 2015, 1,560,000,000 commons shares, 787,500,000 common shares and 315,000,000 common shares were issued respectively to John Cecil, Lloyd Chiotti and Samuel Baker, as stock based compensation and were valued at $1,950,000, $1,200,000 and $480,000 respectively.  An additional 6,470,914 common shares were issued to Mr. Chiotti for cash of $323,546 and an incremental $138,069 was provided as a short term loan.

As at December 31, 2015, we owe our officers and directors $7,873 in accounts payable and accrued liabilities,

The aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for our audit of annual financial statements and review of financial statements included in our Form 10-Qs or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years was:

	2015	$	149,446		MaloneBailey LLP
	2014	$	106,116		MaloneBailey LLP
	2014	$	65,557		Schwartz Levitsky Feldman LLP

The aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountants that are reasonably related to the performance of the audit or review of our financial statements and are not reported in the preceding paragraph:

	2015	$	0		MaloneBailey, LLP
	2014	$	0		MaloneBailey LLP
	2014	$	0		Schwartz Levitsky Feldman LLP

The aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning was:

	2015	$	0		MaloneBailey, LLP
	2014	$	0		MaloneBailey LLP
	2014	$	0		Schwartz Levitsky Feldman LLP

The aggregate fees billed in each of the last two fiscal years for the products and services provided by the principal accountant, other than the services reported in paragraphs (1), (2), and (3) was:

	2015	$	0		MaloneBailey LLP
	2014	$	0		MaloneBailey LLP
	2014	$	0		Schwartz Levitsky Feldman LLP

PART IV

		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	Option Agreement.	SB-2	3/05/07	10.1
10.2	Lease Agreement	SB-2	3/05/07	10.1
10.3	Agreement with Rophe Medical Technologies Inc. dated December 11, 2009.	10-K	3/31/10	10.2
10.4	Amended Agreement with Rophe Medical Technologies Inc. dated December 18, 2009.	10-K	3/31/10	10.3
10.5	Amended Agreement with Rophe Medical Technologies Inc. dated March 16, 2010.	10-K	3/31/10	10.4
10.6	Investment Agreement with Kodiak Capital Group, LLC.	S-1	10/29/14	10.6
10.7	Consulting Agreement with Ten Associate LLC.	S-1	5/24/10	10.7
10.8	Employment Agreement with Leonard Steinmetz.	S-1	5/24/10	10.8
10..9	Employment Agreement with Samuel Baker.	S-1	5/24/10	10.9
10.10	Employment Agreement with John Cecil.	S-1	5/24/10	10.10
10.11	Employment Agreement with Mary Kricfalusi.	S-1	5/24/10	10.11
10.12	Employment Agreement with Vince Leitao.	S-1	5/24/10	10.12
10.13	Amended Consulting Agreement with Ten Associate LLC dated October 5, 2010.	8-K	10/14/10	10.13
10.14	Agreement with Jarr Capital Corp.	8-K	11/17/10	10.1
10.15	Agreement with Mary Kricfalusi.	8-K	11/19/10	10.1
10.16	Agreement with Herb Adams.	8-K	11/19/10	10.2
10.17	North American Authorized Agency Agreement with Advanced Software Technologies, Inc.	8-K	12/16/10	10.1