KGIC Inc. Announces Second Stage Closing of Ongoing Convertible Debenture Private Placement Financing - Seite 2

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 October 11, 2016.

Certain directors subscribed for $150,000 aggregate principal amount of Debentures under this second stage of the Offering. The participation of these parties in the Offering constitutes a "related party transaction" within the meaning of Multilateral Instrument 61-101 - Protection of Minority Security Holders in Special Transactions ("MI 61-101") and the policies of the TSXV. The Company is relying upon the exemptions from the formal valuation and minority shareholder approval requirements pursuant to sections 5.5(g) and 5.7(1)(e), respectively, of MI 61-101 on the basis that the board of directors of the Company, acting in good faith, and at least two-thirds of the Company's independent members of the board of directors, acting in good faith, have determined that the Company is in serious financial difficulty, that the Offering is designed to improve the Company's financial position and that the terms of the Offering are reasonable in the Company's circumstances.

The Company was not in a position to file a material change report more than twenty one days in advance of the closing of this tranche of the Offering as the details of participation of the interested parties were not known at such time.

The Offering remains subject to certain conditions including, but not limited to, the approval of the TSXV. The Offering was approved by the Board of Directors of the Company.

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.