Toronto, Ontario--(Newsfile Corp. - December 2, 2016) - KGIC Inc. (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:
Three months ended |
|
September 30,
2016 |
|
September 30,
2015 |
% Change |
Tuition revenue |
$ |
6,675,949 |
$ |
10,697,813 |
-38% |
Other income |
|
2,425,143 |
|
3,105,719 |
-22% |
Total revenue |
|
9,101,092 |
|
13,803,532 |
-34% |
Gross profit |
|
1,283,903 |
|
2,338,855 |
-45% |
General and administrative expenses |
|
3,007,831 |
|
4,854,530 |
-38% |
Loss from Continuing Operations before other items |
|
(1,723,928) |
|
(2,515,675) |
31% |
Adjusted EBITDA |
$ |
(1,350,889) |
$ |
(2,168,791) |
38% |
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 ($10.7million), 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:amacgregor@loyalistgroup.com
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.