KGIC Inc.
TSX VENTURE : LRN

May 02, 2016 08:30 ET

KGIC Inc. Announces 2015 Financial Results

TORONTO, ONTARIO--(Marketwired - May 2, 2016) - KGIC Inc. ("KGIC" or the "Company") (TSX VENTURE:LRN) today announced financial results for the year ended December 31, 2015. The Company's financial statements and management's discussion and analysis for the year ended December 31, 2015 are available on SEDAR (www.sedar.com). Financial references are in Canadian dollars unless otherwise specified.

"The Company implemented cost control measures to eliminate redundant expenses aimed at improving gross margins. The effect of these measures are evident in the trends when examining the Company's performance on a trailing five quarter basis within its school operations, demonstrating early stage progress in reducing unnecessary expenses and expanding gross margins," said Alex Macgregor, Chief Executive Officer.

School Operations Q4/15 Q3/15 Q2/15 Q1/15 Q4/14
Total revenue $ 8,284,424 $ 13,383,652 $ 11,021,929 $ 9,926,678 $ 11,306,083
Direct costs 7,489,660 11,654,191 10,077,011 9,221,882 12,670,992
Gross profit (loss) 794,764 1,729,461 944,918 704,796 (1,364,909 )
General and administrative expenses 3,406,024 4,819,662 6,371,150 5,578,766 7,989,029
Loss from school operations (2,611,260 ) (3,090,201 ) (5,426,232 ) (4,873,970 ) (9,353,938 )
Amortization in direct costs 683,138 346,884 354,837 355,860 347,900
Adjusted EBITDA $ (1,928,122 ) $ (2,743,317 ) $ (5,071,395 ) $ (4,518,110 ) $ (9,006,038 )

Further improvement is expected in 2016 as the third and fourth quarters of 2015 reflect only a partial contribution from the Optimization Plan implementation of which commenced in late August. Additional details of the Optimization Plan can be found in the press release dated August 26, 2015.

The following table summarizes and compares full results, year over year:
School operations 2015 2014 % Change
Revenue $ 42,616,683 $ 63,832,015 -33 %
Gross profit (loss) 4,173,939 16,791,049 -75 %
Loss from school operations (35,714,877 ) (17,942,618 ) -99 %
Adjusted EBITDA $ (14,260,944 ) $ (2,430,202 ) -487 %
The following table summarizes and compares three month results for the periods ended December 31, year over year:
School operations 2015 2014 % Change
Revenue $ 8,284,424 $ 11,306,083 -27 %
Gross Profit 794,764 (1,364,909 ) 158 %
Loss from school operations (2,611,260 ) (9,353,938 ) 72 %
Adjusted EBITDA $ (1,928,122 ) $ (9,006,038 ) 79 %

Forbearance Agreement Update and Exit Planning

On April 7, 2016 the Company entered into a Memorandum of Understanding (MOU) with BMO, under the MOU the Company Forbearance Agreement terminates upon raising a minimum of $1,825,000 by way of a partial closing of the Convertible Debenture offering. This Convertible Debenture offering was increased in size from $5,000,000 to $6,500,000 on April 26, 2016. The MOU has also specified that the interim $3,000,000 credit facility will be retired and the remaining $8,879,961 credit facility is converted to a term loan for a period of 4 years with payments of Interest only until December 31, 2016.

The Company has received $1,150,000 from investors to date for which the funds are held in trust until all terms of the financings are finalized. In addition, the Company has non-binding signed term sheets for an additional $5,275,000. The Company also received a total of $425,000 from a member of senior management of the Company in the form of a promissory note. The note bears 24% interest annually. The principal amount and accrued interest is due on the earlier of the one year anniversary and the date that the Company completes the proposed non-brokered private placement financing of convertible secured subordinated debentures for gross proceeds to the Company of at least $1,500,000.

Appointment of a Director

The Company announces that Ako Ufodike has been appointed as a director of the Company. Mr. Ufodike is a Finance Executive with over 20 years of professional experience spanning Telecoms, Banking, Utilities, Education, Oil and Gas and Consumer Packaged Goods with organizations including Bell Canada and Molson Coors.

Mr. Ufodike is currently CFO at Corridor Communication (CCIWireless). Prior to CCIWireless, Mr. Ufodike owned and managed a Calgary area accounting public practice firm - the Ufodike Professional Corporation. Mr. Ufodike has been responsible for structuring financing for projects in various sectors and has created value in several entrepreneurial and start-up ventures in which he has been involved. Mr. Ufodike was also co-founder and CFO for Jaguar Wireless a participant in the 2007 Canadian wireless spectrum auction. A Cornell MBA graduate, Mr. Ufodike is a Canadian FCGA, a US CPA, a UK FCCA and a Certified Fraud Examiner.

Mr. Ufodike has previously served on the board of a US listed company with mining assets in east Africa as well as on the board of several charities including Peel Literacy Guild as Treasurer and of the Black Business and professional Association and Imagination150! as Director. Mr. Ufodike also previously served as Treasurer for Scouts Canada Chinook Council and is currently the Chairman of the Community Council of Scouts Canada Chinook Council.

About KGIC Inc.

KGIC Inc. 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 relating to the Company's operating results. 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 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 complete any proposed recapitalization or restructuring activities (including the Optimization Plan referenced herein) on terms acceptable to the Company or at all and the expected cost savings related thereto; the fact that new management of the Company, including the recently appointed Chief Executive Officer, 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 and statements contained in this press release is made as of the date hereof, and the Company does not undertake to update any forward-looking information and/or statement 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.

Caution Regarding Non-IFRS Financial Measures - The Company references certain measures in this press release, which do not have a standardized meaning as prescribed by International Financial Reporting Standards ("IFRS") and are unlikely to be comparable to similar measures presented by other issuers. These non-IFRS measures have been presented in this press release in order to provide shareholders and potential investors with additional information regarding the Company, but should not be considered in isolation or as a substitute for, or more meaningful than, measures prepared in accordance with IFRS, such as net income (loss) or cash flow from operating activities. Please refer to the Company's Management's Discussion and Analysis as at and for the three and nine months ended September 30, 2015 for a reconciliation of these non-IFRS measure to measures prescribed by IFRS.

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.

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