KGIC Inc. Announces First Stage Closing of Convertible Debenture Private Placement Financing

TORONTO, ONTARIO--(Marketwired - May 10, 2016) -

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KGIC Inc. ("KGIC" or the "Company") (TSX VENTURE:LRN) is pleased to announce that it has completed the first stage closing of its non-brokered private placement of convertible secured subordinated debentures (the "Debentures") for gross proceeds of $1,825,000 in principal amount (the "Offering") under the terms specified in the May 2, 2016 press release. The initial completion of $1,825,000 in funding is also in accordance with a Memorandum of Understanding (the "MOU") dated April 7, 2016 between the Company and Bank of Montreal ("BMO"). The first stage closing meets the Company's financing requirements for the near term operational forecast. The Company is also pleased to announce that the previous Forbearance Agreement with BMO is terminated and the Company plans to complete final term loan agreements with BMO in accordance with the MOU and execute aggressively its new management plan.

The Offering was made pursuant to the grant of a "discretionary waiver" of the TSX Venture Exchange's ("TSXV") minimum $0.05 pricing requirement (the "Waiver") and is subject to acceptance by the TSXV. With respect to the Waiver, the Company may conduct a share consolidation of its outstanding common shares in such ratio as would result in a "post-consolidation" conversion price equal to or greater than $0.05 per common share (a "Consolidation") on or before the date that is six months following the closing date (the "Consolidation Deadline"). However, the Debentures may not be converted into common shares unless a Consolidation is completed on or before the Consolidation Deadline. If a Consolidation is not completed on or before the Consolidation Deadline, the conversion price will be deemed to be amended to $0.05 per common share in accordance with the TSXV's minimum pricing requirements and the interest rate on the Debentures will be increased to 12.5% per annum, retroactive from the date of issuance of the Debentures.

The Company intends to use the proceeds of the Offering to finance the Company's working capital requirements, with any remaining proceeds to be used to service existing obligations owed to the Company's senior secured creditors.

Pursuant to applicable Canadian securities laws, the Debentures (and the securities issuable upon conversion of the Debentures) will be subject to a hold period until September 7, 2016.