KGIC Announces Firm Commitments for Initial Closing of Preferred Share Offering

TORONTO, ONTARIO--(Marketwired - Jan. 6, 2016) - KGIC Inc. ("KGIC" or the "Company") (TSX VENTURE:LRN) is pleased to announce that it has received initial commitments for the first closing of its previously announced CDN$3 million preferred share offering (the "Offering"). The firm commitment is part of the process for Bank of Montreal to remove the existing loan facility from forbearance and convert the existing loan facility to a three (3) year term loan on mutually agreeable terms and conditions.

"This offering represents another step in the continued stabilization of the Company," said Dr. Alex MacGregor, the recently appointed CEO and director of KGIC. "The initial review of the Company's operations has confirmed my strong belief that there is a very real opportunity to restore this Company's position as a leader in the ESL education space and the proceeds of this Offering will give the Company's new management the resources to execute on its new plan of operation, restructure the existing Bank of Montreal loan facility and restore confidence in the Company's performance and reliability."

Under the proposed terms of the Offering, the Corporation will issue Series B preferred share units (the "Units") at a price of CDN$10.00 per Unit. Each Unit will be comprised of one Series B preferred share of the Company (a "Series B Preferred Share") and 125 common share purchase warrants (a "Warrant").

The net proceeds of the Offering will be used to fund the Company's working capital requirements. No portion of the net proceeds of the Offering will be used to repay any outstanding indebtedness (consisting of loans, credit facilities, and debentures) of the Company, including amounts owing to Bank of Montreal.

Subject to the receipt of all necessary approvals, the Company currently anticipates that the Series B Preferred Shares and Warrants will include the following terms:

SERIES B PREFERRED SHARES

• Mandatory cash redemption by the Company 36 months after issuance (the "Mandatory Redemption Date") in priority to the Series A preferred shares of the Company (the "Series A Preferred Shares") for an amount equal to the original issue price plus any accrued but unpaid dividends on the Series B Preferred Shares (the "Redemption Price").
• Optional cash redemption by the Company at any time prior to the Mandatory Redemption Date for an amount equal to the Redemption Price.
• No Payment in Kind (PIK) rights.
• Non-voting and non-convertible.
• Annual dividend rate of twelve percent (12%) of the issue price, to be declared and paid on a quarterly basis.
• No dividends shall be paid on any common shares or Series A Preferred Shares unless dividends are contemporaneously paid on the Series B Preferred Shares in the amount noted above.

WARRANTS