KGIC Inc. Announces Third Quarter 2016 Financial Results

TORONTO, ON / ACCESSWIRE / December 2, 2016 / KGIC Inc. (OTC PINK: LGLTF) (TSXV: LRN) ("KGIC" or the "Company") today announced financial results for the third quarter ending on September 30, 2016. The Company's financial statements and management's discussion and analysis ("MD&A") for the third quarter ending on September 30, 2016 are available on SEDAR (www.sedar.com). The MD&A discusses both reported EBITDA and adjusted EBITDA that is designed to report normalized EBITDA that gives the reader a better sense of what are sustainable earnings. Financial references are in Canadian dollars unless otherwise specified.

"In the latest quarter, although management has successfully implemented its turnaround strategy and delivered a positive third quarter of recovery, the Company continues to face financial challenges and is heavily reliant on discretional funding by its senior lender" stated Alex MacGregor, President and Chief Executive Officer.

Financial Performance

The table below summarizes key metrics that compares three months results within the Company's school operations for September 30, 2016 and September 30, 2015:

The Company reported a net loss of $1.7 million for the third quarter of 2016 compared to a net loss of $2.5 million for the same period in 2015. Adjusted negative EBITDA was negative $1.35 million, for the third quarter of 2016 compared to negative $2.17 million, for the same period in 2015. In the third quarter of 2016, adjusted negative EBITDA was reduced by 38% over the same period in 2015.

The decline in tuition revenues of 38% in the third quarter of 2016 ($6.7 million), when compared to the same period in the prior year 2015 ($10.7 million), is partially attributable to a reduction in the number of schools and campus locations from twenty-eight campuses, as of June 30, 2015, to twenty-two campuses as of June 30 2016.

In addition, reduction in tuition revenue in the third quarter of 2016 is also attributable to the loss of students from the less lucrative markets and diversification into new lucrative markets. Management believes that improved relationships with student recruitment agencies coupled with implementation of the new marketing plan that diversifies student recruitment to China, India, and Brazil will improve both revenues and profitability. These initiatives are expected to increase tuition revenues as well as improve the bottom line due to lower recruitment commission rates in these new markets.

"Despite the Company's turnaround as evidenced in the last three consecutive quarters, it continues to experience challenging funding constraints due to its overleveraged capital structure. Management proposed a debt restructuring plan designed to improve the Company's debt-equity ratio, recapitalize the company, and provide the necessary funding to grow revenues.

"It is disappointing that the plan was rejected by a significant block of unsecured convertible debenture holders and a small group of preferred shareholders. The rejection of this plan, despite an independent fairness opinion conclusion in respect of the debt-restructuring offer, cast significant doubt on the Company's ability to operate as a going concern." stated Alex MacGregor, President and CEO.

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.

For further information, please contact:

Dr. Alex Macgregor
KGIC Inc.

T: (416) 969-9800
E: [email protected]

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.

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.

SOURCE: KGIC Inc.