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.
- If $3 million is raised under the Offering, a total of 37,500,000 million common share purchase warrants will be issued (125 warrants per Unit x 300,000 Units).
- Each whole Warrant will entitle the holder to acquire one common share of the Company at a price of CDN$0.05 per share for a period of 36 months following the closing of the Offering.
- If at any time following the one year anniversary of the closing of the Offering, the closing price (or the average of the 'bid' and the 'ask', if not traded) of the common shares of the
Company exceeds CDN$0.25 per share for a period of 20 consecutive trading days, the Company may in its sole discretion elect to accelerate the expiry of the Warrants to the date that is 20 trading
days after the date of issuance of a news release announcing the new expiry date.
In connection with the Offering, the Company may pay finder's fees to certain arm's length finders in amounts determined by the board of directors of the Company, which fees may, subject to all
necessary approvals, be paid in cash or shares of the Company.
Completion of the Offering is subject to certain conditions including, but not limited to, the approval of the TSX Venture Exchange and the securities regulatory authorities. All securities issued
by the Company in connection with the Offering will be subject to a statutory four month hold period.
This news release does not constitute an offer to sell, or a solicitation of an offer to buy, any of the securities in the United States. The securities have not been and will not be registered
under the United States Securities Act of 1933, as amended (the "U.S. Securities Act") or any state securities laws and may not be offered or sold within the United States or to U.S. Persons unless
registered under the U.S. Securities Act and applicable state securities laws or an exemption from such registration is available.
About KGIC Inc.
KGIC owns and operates private English as a Second Language (ESL) Schools, Career Colleges and Community Colleges in Toronto, Vancouver and Victoria.
Forward-Looking Information and Statements
This news release includes certain forward-looking information and statements within the meaning of Canadian securities laws. Such forward-looking information and statements are not representative
of historical facts or information or current condition, but instead represent only the Company's beliefs regarding future events, plans or objectives, many of which, by their nature, are
inherently uncertain and outside of the Company's control. Generally, such forward-looking information or statements can be identified by the use of forward-looking terminology such as "plans",
"expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and
phrases or may contain statements that certain actions, events or results "may", "could", "would", "might" or "will be taken, "will continue", "will occur" or "will be achieved". The
forward-looking information contained herein includes information concerning the ability of Company to continue as a going concern. By identifying such information and statements in this manner,
the Company is alerting the reader that such information and statements are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity,
performance or achievements of the Company to be materially different from those expressed or implied by such information and statements.
Any number of important factors could cause actual results to differ materially from these forward-looking statements as well as future results including, but not limited to, risks relating to: the
Company's ability to raise sufficient additional capital, including the completion of all or any portion of the Offering, in order to allow it to continue as a going concern on terms acceptable to
the Company or at all; the Company's ability to service its outstanding indebtedness and the impact of that indebtedness on the Company's ability to raise additional capital, fund and maintain
operations or meet business objectives; the Company's ability to comply with the terms of the amended forbearance agreement with Bank of Montreal and the consequences of any breach or default
thereunder; the Company's ability to successfully exit forbearance; the Company's ability to negotiate, enter into and execute a definitive agreement with Bank of Montreal on terms acceptable to
the Company or at all to remove the Company's debt facilities from forbearance and convert the facilities into a term loan; the fact that new management and directors of the Company, including the
recently appointed Chief Executive Officer and Chairman, have had limited experience with the Company and its operations and have not had sufficient time to fully analyze all facets of the
Company's business; the impact of negative or unfavourable rumours in the marketplace on the Company's brands and student enrollment; any of the Company's announced or proposed acquisitions failing
to close or becoming delayed before closing; carrying on business and activities in international jurisdiction where Canadian laws do not apply; any loss of certain key personnel; levels of student
enrolment; delays in rolling out online education programs; delays to the completion of any planned initiatives or the inability to complete those initiatives; competition in the educational
services market; and currency fluctuations. Although the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in the
forward-looking information and statements, there may be other factors that cause results not to be as anticipated, estimated or intended. Although the Company believes that the assumptions and
factors used in preparing, and the expectations contained in, the forward-looking information and statements are reasonable, undue reliance should not be placed on such information and statements,
and no assurance or guarantee can be given that such forward-looking information and statements will prove to be accurate, as actual results and future events could differ materially from those
anticipated in such information and statements. Accordingly, readers should not place undue reliance on any forward-looking information or statements contained in this press release.
The forward-looking information contained in this press release is made as of the date hereof, and the Company does not undertake to update any forward-looking information that is contained or
referenced herein, whether as a result of new information, future events or otherwise, except in accordance with applicable securities laws. All subsequent written and oral forward looking
information and statements attributable to the Company or persons acting on its behalf is expressly qualified in its entirety by this notice.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy
of this release.
Dr. Alex MacGregor