Mr. Shawn Klerer reports

KGIC PROVIDES BUSINESS AND FINANCIAL UPDATE

KGIC Inc. is providing the following business and financial update to ensure timely and transparent information is provided to all stakeholders.

The company previously disclosed in its press releases dated Aug. 31, 2015, and Nov. 19, 2015, that lower-than-anticipated cash collections were the primary driver of negative variances to the cash flow forecast under the forbearance agreement with its senior lender. As of mid-December, this negative trend has continued and the company's cash position has now depleted to a level which will not likely allow the company to operate beyond Dec. 31, 2015, without additional financing.

As disclosed in the press release dated Nov. 19, 2015, the company had been in negotiations with its senior lender, as well as several existing and potential investors in order to determine if financing could be secured to repay a portion of the term loan acquisition facility in an amount sufficient to reach an agreement to exit forbearance with its senior lender prior to Dec. 31, 2015. These negotiations ultimately did not result in a proposal acceptable to all parties.

The company's viability and ability to continue as a going concern are dependent on securing additional capital. The company expects to formally engage Richter LLP as its financial adviser, and continues to actively seek to raise additional capital through debt, equity or other capital-raising efforts while also considering other strategic alternatives. There can be no assurance that the company will be able to successfully obtain financing, or that any sale of assets or other strategic alternative transactions can be successfully consummated.

"We needed to achieve a delicate balance between repaying senior debt to exit forbearance and funding working capital needs in order to put the company on a solid footing. Based on the negotiations which were under way, we believed that an acceptable transaction could be consummated. Ultimately, one of the key potential funding groups withdrew their proposal late last week, creating an unacceptable risk profile for the other potential funding groups. We are now working closely with Richter for a solution in order to minimize interruption to our day-to-day operation," said Shawn Klerer, chief executive officer.

We seek Safe Harbor.