KGIC gets commitments for planned C$3 million preferred units offering

Company to offer units of series B preferreds, common stock warrants

By Marisa Wong

Morgantown, W.Va., Jan. 6 – KGIC Inc. said it received initial commitments for the first closing of a planned C$3 million preferred share offering.

Under the proposed terms of the offering, the company will issue series B preferred share units at a price of C$10.00 per unit. Each unit will be comprised of one series B preferred share and 125 common share purchase warrants.

Subject to approval, the company currently anticipates that the series B preferreds will include the following terms:

• Mandatory cash redemption by the company 36 months after issuance in priority to the series A preferred shares for an amount equal to the original issue price plus any accrued dividends on the series B preferreds;

• Optional cash redemption by the company at any time prior to the mandatory redemption date for an amount equal to the redemption price above;

• No payment-in-kind rights;

• Non-voting and non-convertible;

• Annual dividend rate of 12% of the issue price, to be declared and paid on a quarterly basis; and

• No dividends shall be paid on any common shares or series A preferred shares unless dividends are contemporaneously paid on the series B preferreds in the amount noted above.

In addition, the company expects that the warrants will have the following terms:

• If C$3 million is raised under the offering, a total of 37.5 million common share purchase warrants will be issued;

• Each whole warrant will entitle the holder to acquire one common share at a price of C$0.05 per share for a period of 36 months following the closing of the offering; and

• If at any time following the one-year anniversary of the closing of the offering, the closing share price of the company exceeds C$0.25 per share for a period of 20 consecutive trading days, the company may 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.

The firm commitment is part of the process for Bank of Montreal to remove KGIC’s existing loan facility from forbearance and convert the existing loan to a three-year term loan, according to a press release.

Proceeds of the offering will be used to fund the company’s working capital requirements. No portion of the proceeds will be used to repay any outstanding debt, including amounts owed to Bank of Montreal.

Based in Toronto, KGIC owns and operates private English as a Second Language schools, career colleges and community colleges in Toronto, Vancouver, B.C., and Victoria, B.C.

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