Kallo, Inc. (OTCMKTS:KALO) Spikes on $200 Million Contract

Back in January Kallo Inc. (OTCMKTS:KALO) announced a supply contract worth $200 million with the Ministry of Health and Public Hygiene of the Republic of Guinea. The news was massive and it immediately attracted the attention of the market. In a single day the stock of the company run from less than 5 cents to a close at $0.28.

The lack of updates and virtually no information about the progress of the contract quickly drove investors away though and since June KALO often saw sessions with zero trades. The stock price also slumped and on October 22 the company registered its new 52-week low of $0.025 per share.

A few days later an 8-K Form was filed and it once again sparked a wave of enthusiastic buying. It revealed that on November 3 an official PR about the Guinea contract will be made. And surely enough yesterday KALO published a press release that gave investors some hope. Apparently financing arrangements for the implementation of the contract are nearing completion.

The news caused a real buying frenzy with investors shifting over 1.8 million shares. For comparison the average amount stands at 88 thousand. The buying pressure pushed the ticker to an intraday high of $0.25 but such prices proved to be a bit too much and at the time of the closing bell it was sitting at $0.12.

A contract for $200 million is a rare occurrence in the world of pennystocks but before you get too excited there are some facts that need to be addressed. First of all, KALO expects to begin production of the mobile clinics during the first quarter of 2015 with the first sets to be delivered during the second and third quarters.

In the meantime their financials could cause some issues. According to the latest quarterly report KALO have:

• $37 thousand cash
• $139 thousand total current assets
• $1 million total current liabilities
• ZERO revenues

With a significant working capital deficit and an accumulated deficit of over $20 million the balance sheet looks rather grim. In order to keep themselves in operations quite a lot of shares had to be issued. For the first half of the year KALO sold 17 million shares for $872 thousand in proceeds, or around $0.05 for each share. Between July 1 and August 13 another 6.5 million shares saw the light of day. If the people who got those shares decide to sell them on the market at the current price they stand to gain significant profits.

KALO still needs time to finalize the contract details not to mention that the program is scheduled to be completed 24 months after the first delivery. Further problems could arise from the fact that West Africa at the moment is under traveling restrictions due to the Ebola outbreak. In the short-term the various red flags around the company could cause its stock to slide down once again. Plan your investment carefully and only after doing extensive due diligence.