Annual and Transition Report (foreign Private Issuer) (20-f)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 20-F

o REGISTRATION STATEMENT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended August 31, 2012

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

o SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report _____________________________________

Commission file number: 001-34021

CIBT EDUCATION GROUP INC.

(Exact name of Registrant as specified in its charter)

British Columbia, Canada

(Jurisdiction of incorporation or organization)

Suite 1200, 777 West Broadway, Vancouver, British Columbia, Canada, V5Z 4J7

(Address of principal executive offices)

Toby Chu, CEO, Phone: 604.871.9909, Fax: 604.871.9919, email: toby@cibt.net,

Suite 1200, 777 West Broadway, Vancouver, British Columbia, Canada, V5Z 4J7

(Name, Telephone, E-Mail and/or Facsimile number and Address of Company Contact Person)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Name of each exchange on which registered
Common shares		Toronto Stock Exchange, NYSE MKT LLC

Securities registered pursuant to Section 12(g) of the Act: None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None

Indicate the number of outstanding shares of each of the Registrant’s classes of capital of common stock as of the close of the period of this annual report, August 31, 2012: 71,949,344 Common Shares

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No þ

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes o No þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o Accelerated filer o Non-accelerated filer þ

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP o International Financial Reporting Standards as issued by the IASB þ Other o

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. Item 17 o Item 18 o

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes o No o

TABLE OF CONTENTS

PART I	5
ITEM 1. Identity of Directors, Senior Management and Advisors	5
ITEM 2. Offer Statistics and Expected Timetable	5
ITEM 3. Key Information	5
ITEM 4. Information on the Company	25
ITEM 4A. Unresolved Staff Comments	59
ITEM 5. Operating and Financial Review and Prospects	59
ITEM 6. Directors, Senior Management and Employees	82
ITEM 7. Major Shareholders and Related Party Transactions	98
ITEM 8. Financial Information	100
ITEM 9. The Offer and Listing	101
ITEM 10. Additional Information	102
ITEM 11. Quantitative and Qualitative Disclosures about Market Risk	118
ITEM 12. Description of Securities other than Equity Securities	118
PART II	118
ITEM 13. Defaults, Dividend Arrearages and Delinquencies	118
ITEM 14. Material Modifications to the Rights of Security Holders and Use of Proceeds	118
ITEM 15. Controls and Procedures	118
ITEM 16. [Reserved]	120
ITEM 16A. Audit Committee Financial Expert	120
ITEM 16B. Code of Ethics	121
ITEM 16C. Principal Accountant Fees and Services	122
ITEM 16D. Exemptions from the Listings Standard for Audit Committees	122
ITEM 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers	122
ITEM 16F. Change in Registrant’s Certifying Accountant	126
ITEM 16G. Corporate Governance	126
ITEM 16H. Mine Safety Disclosure	127
PART III	127
ITEM 17. Financial Statements	127
ITEM 18. Financial Statements	127
ITEM 19. Exhibits	129
SIGNATURES	131

NOTE REGARDING FORWARD-LOOKING STATEMENTS

This annual report, and any documents incorporated by reference in this annual report, may include “forward-looking statements”. To the extent that the information presented in this annual report discusses financial projections, information or expectations about our business plans, results of operations, products or markets, or otherwise makes statements about future events, such statements are forward-looking. Such forward-looking statements can be identified by the use of words such as “intends”, “anticipates”, “believes”, “estimates”, “projects”, “forecasts”, “expects”, “plans” and “proposes”. Although we believe the expectations reflected in these forward-looking statements are based on reasonable assumptions, there are a number of risks and uncertainties that could cause actual results to differ materially from such forward-looking statements. These include, among others, the risks and uncertainties outlined under the “Risk Factors” and “Operating and Financial Review and Prospects” sections of this annual report, many of which are beyond our control.

These forward-looking statements include, but are not limited to, the following:

●	statements contained in “Risk Factors”;

●

statements contained in “Operating and Financial Review and Prospects” and the notes to our consolidated financial statements, such as the potential impact of exchange rate fluctuations and potential changes in and effects of government regulation on our business; and estimates in our critical accounting policies;

●	statements contained in “Information on the Company” concerning our strengths, business strategies, competitiveness, teacher recruiting and retention and compliance with applicable law, rules and regulations; and

●	statements throughout concerning our legal structure and the regulation of our business.

Factors that could cause actual results to differ materially include, but are not limited to the following, which are discussed more fully in “Risk Factors”:

●	our anticipated strategies for growth;

●	our ability to manage our planned growth and integrate new business opportunities into our existing operations;

●	our need for additional capital to expand our operations;

●	our dependence on key personnel, CIBT center facility providers and educational service providers;

●	our ability to compete effectively with competitors that have greater financial, marketing and other resources;

●	risks involving the Chinese legal system, tax system, and foreign currency limitation; and

●	risks related to government regulations and approvals of private providers of educational services in China.

The forward-looking statements made in this annual report relate only to events or information as of the date on which the statements are made in this annual report. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events. You should read this annual report and the documents that we reference in this annual report and have filed as exhibits to the annual report with the understanding that our actual future results may be materially different from what we expect. You should not rely upon forward-looking statements as predictions of future events.

Other sections of this annual report include additional factors which could adversely impact our business and financial performance. Moreover, we operate in an evolving environment. New risk factors and uncertainties emerge from time to time and it is not possible for our management to predict all risk factors and uncertainties. We cannot assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

EXCHANGE RATES

Our consolidated financial statements and the financial information included in this annual report are presented in Canadian dollars (unless otherwise indicated), which is our reporting currency and our functional currency.

The following tables set out the exchange rates between the Canadian dollar and the U.S. dollar for the periods indicated. These rates are provided solely for your convenience and are not necessarily the exchange rates that we used in this annual report or will use in the preparation of our periodic reports or any other information to be provided to you. The source of these rates is the Federal Reserve Bank of New York. As of January 11, 2013, the Noon Buying Rate for the conversion of Canadian dollars to U.S. dollars was C$0.9841 to U.S. $1.00.

Exchange Rates for Previous Six Months

	High		Low		Average
December 2012		0.9951		0.9841		0.9895
November 2012		1.0029		0.9927		0.9970
October 2012		1.0003		0.9763		0.9872
September 2012		0.9901		0.9710		0.9783
August 2012		1.0061		0.9862		0.9924
July 2012		1.0215		1.0014		1.0142

Exchange Rates for Certain Financial Statement Periods

	Average
Year ended August 31, 2012		1.0090
Year ended August 31, 2011		0.9888
Year ended August 31, 2010		0.9579
Year ended August 31, 2009		0.8502
Year ended August 31, 2008		0.9937

PRESENTATION OF INFORMATION

As used in this annual report, unless the context clearly suggests otherwise, references to (i) “we”, “us”, “our”, the “Company” or “CIBT Education Group” mean CIBT Education Group Inc. (formerly Capital Alliance Group Inc. until November 14, 2007) and its subsidiaries; (ii) “CIBT” mean CIBT School of Business & Technology Corp., our wholly-owned subsidiary that operates primarily in China in the education programs and services business; (iii) “Sprott-Shaw” mean Sprott-Shaw Degree College Corp., our wholly-owned subsidiary that operates primarily in Canada in the education programs and services business; (iv) “IRIX” mean IRIX Design Group Inc., our 51% owned subsidiary that operates a multimedia service and advertising agency primarily in Canada; and (v) “KGIC Colleges” collectively mean (a) KGIC Business College (2010) Corp. and (b) KGIC Language College (2010) Corp., our wholly-owned subsidiaries that were organized in connection with the acquisition of substantially all of the operating assets of KGIC on March 15, 2010.

Our fiscal year end is August 31 st , which is the fiscal year end date commonly used in the educational services industry.

This annual report includes our audited consolidated financial statements as at and for the fiscal years ended August 31, 2012 and 2011. These financial statements have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS”), which we adopted for our fiscal year ended August 31, 2012 in accordance with Canadian securities regulatory requirements concerning financial reporting. Refer to Note 24 of our audited consolidated financial statements included in this annual report for an explanation concerning first time adoption of IFRS and its impact on our financial statements. All dollar amounts set out in these financial statements are presented in Canadian dollars.

All financial information set forth in this annual report is presented in Canadian dollars (unless otherwise indicated) and should be read in conjunction with our consolidated financial statements and the notes thereto included elsewhere in this annual report.

PART I

ITEM 1. Identity of Directors, Senior Management and Advisors

Not Applicable.

ITEM 2. Offer Statistics and Expected Timetable

Not Applicable.

ITEM 3. Key Information

A. Selected Financial Data

The selected consolidated financial data presented below has been derived from our audited consolidated financial statements as at and for the years ended August 31, 2012, 2011, 2010, 2009 and 2008. Our audited consolidated financial statements as at August 31, 2010, 2009 and 2008, and for the years ended August 31, 2010, 2009 and 2008 are not included in this annual report, but were previously filed with the SEC.

Our audited consolidated financial statements as at and for the fiscal years ended August 31, 2012 and 2011 are included in this annual report and have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS”), which we adopted for our fiscal year ended August 31, 2012 in accordance with Canadian securities regulatory requirements concerning financial reporting. Prior periods included in this “Item 3. Key Information – A. Selected Financial Data” were prepared in accordance with Canadian GAAP, with a reconciliation to U.S. GAAP. Information based on previous GAAP is not comparable to information prepared in accordance with IFRS. All dollar amounts set out in these financial statements are presented in Canadian dollars. Refer to Note 24 of our audited consolidated financial statements included in this annual report for an explanation concerning first time adoption of IFRS and its impact on our financial statements.

The selected consolidated financial data presented below is qualified in its entirety by, and should be read in conjunction with, our consolidated financial statements and notes thereto, as well as the discussion and analysis set forth under “Information on the Company” and “Operating and Financial Review and Prospects”.

IFRS

	Year Ended August 31, 2012			Year Ended August 31, 2011
Consolidated Income Statement Data (1)	(C$)			(C$)
Revenues		57,968,687			58,575,126
Direct costs		27,152,681			27,604,802
Other expenses		31,407,156			34,806,365
Income (loss) from operations		6,294,207			(2,349,172	)
Other income (expenses)		(104,292	)		(6,470,385	)
Income (loss) before income taxes		(695,442	)		(10,306,426	)
Income tax recovery (provision)		(118,446	)		843,505
Non-controlling interests		368,656			350,861
Net income (loss)		(813,888	)		(9,462,921	)
Basic and diluted earnings (loss) per share		(0.01	)		(0.14	)

	As at August 31, 2012			As at August 31, 2011
Consolidated Balance Sheet Data	(C$)			(C$)
Current assets		18,136,713			16,577,428
Current liabilities		24,850,224			21,428,041
Working capital (deficit)		(6,713,511	)		(4,850,613	)
Other assets		26,615,048			25,501,147
Total assets		44,751,761			42,078,575
Capital lease obligations		575,456			249,132
Long-term debt		31,520			34,232
Total liabilities		27,648,908			23,778,138
Share capital		48,182,766			48,182,766
Non-controlling interests		1,264,935			1,145,567
Total equity		17,102,853			18,300,437
Number of common shares outstanding		71,949,344			71,949,344

Canadian GAAP

	Year Ended August 31, 2010			Year Ended August 31, 2009			Year Ended August 31, 2008
Consolidated Income Statement Data (1)
Revenues		55,954,852			44,550,958			31,161,279
Direct costs		20,670,302			16,234,348			12,067,789
Other expenses		33,669,709			27,731,472			22,625,691
Income (loss) from operations		1,614,841			585,138			(3,532,201	)
Other income (expenses)		(3,027,643	)		193,213			(1,124,461	)
Income (loss) before income taxes		(1,412,802	)		778,351			(4,589,071	)
Income tax recovery (provision)		2,365,055			(285,241	)		(351,432	)
Non-controlling interests		(369,883	)		(477,103	)		(109,155	)
Net income (loss)		582,370			16,007			(5,049,678	)
Basic and diluted earnings (loss) per share		0.01			0.00			(0.09	)

(1)	We have not declared any dividends during the periods presented.

	As at August 31, 2010			As at August 31, 2009		As at August 31, 2008
Consolidated Balance Sheet Data	(C$)			(C$)		(C$)
Current assets		24,523,282			22,015,521		18,393,197
Current liabilities		26,359,720			21,574,878		18,217,681
Working capital (deficit)		(1,836,438	)		440,643		175,516
Other assets		30,446,056			25,506,171		25,424,368
Total assets		54,969,338			47,521,692		43,817,565
Capital lease obligations		222,810			291,220		176,143
Long-term debt		36,724			44,327		10,322
Non-controlling interests		1,327,126			1,198,606		1,345,065
Total liabilities and non-controlling interests		27,946,380			24,850,638		21,322,758
Share capital		47,709,836			44,350,606		44,350,606
Shareholders’ equity		27,022,958			22,671,054		22,494,807
Number of common shares outstanding		69,226,011			64,109,297		44,350,606

U.S. GAAP

	Year Ended August 31, 2010		Year Ended August 31, 2009		Year Ended August 31, 2008
Consolidated Income Statement Data (1)	(C$)		(C$)		(C$)
Revenues		55,954,852		44,550,958		31,161,279
Income (loss) from operations		1,614,841		585,138		(3,532,201	)
Net income(loss)		273,599		16,007		(5,905,655	)
Basic and diluted earnings (loss) per share		0.01		0.00		(0.10	)

(1)	We have not declared any dividends during the periods presented.

	As at August 31, 2010		As at August 31, 2009		As at August 31, 2008
Consolidated Balance Sheet Data
Total assets		54,690,276		47,521,692		43,817,565
Total liabilities and non-controlling interests		26,648,963		23,652,032		19,977,691
Share capital		47,709,836		44,350,606		44,350,606
Shareholders’ equity		28,041,313		23,869,660		23,839,874
Number of common shares outstanding		69,226,011		64,109,297		44,350,606

We have not declared or paid any dividends on our common shares since our inception and we do not anticipate paying any dividends on our common shares in the foreseeable future.

B. Capitalization and Indebtedness

Not Applicable.

C. Reasons for the Offer and Use of Proceeds

Not Applicable.

D. Risk Factors

Investing in our securities involves a high degree of risk. You should carefully consider the following risk factors, together with all of the other information included in this annual report, before you decide whether to invest in our securities.

Risks Related to Our Business

We have experienced losses and may not maintain profitability.

We experienced a loss during the years ended August 31, 2012 and 2011 and it is possible we will experience losses in the future. In addition, we expect that our operating expenses and business development expenses will increase as we enroll more students, acquire new schools and continue to expand our program offerings through our acquisitions. As a result, there can be no assurance we will be able to generate sufficient revenues to maintain profitability.

Our education business expansion plans are currently focused on establishing Global Learning Network Center classrooms (“GLN Centers”) at institutions overseas where we have established partnerships, which is an unproven business model.

Our focus on delivering programs and courses to students overseas has been to establish partnerships with overseas education institutions where we set up GLN Centers with video-conferencing technology. Sprott-Shaw, KGIC and CIBT then deliver their programs to overseas students at the remote GLN Centers from our studios located in Vancouver and Beijing, which streamlines our course offerings, generates economies of scale by reducing our overhead costs and we believe provides us with a competitive advantage by allowing us to offer a western style education, which is in high demand, to students in their home countries at a comparatively lower cost than establishing physical centers and hiring North American and European instructors to teach overseas. For our year ended August 31, 2012, we continued to teach numerous classes using the GLN Centers in China and our teaching studios in Vancouver and Beijing. Our management expects to further utilize the network to offer additional programs during the current fiscal year. However, if students from new programs do not accept this new method of education, or technological advances become too costly to implement within our existing infrastructure, we may be forced to deviate from or change our business model and revenues generated from our education business may be adversely impacted. Additionally, the GLN Center platform may impact our ability to encourage students to transfer to the Canadian campuses of our subsidiaries. Encouraging such conversion is one of our business objectives. This may result in a missed opportunity to derive greater tuition revenues through such conversions, thereby having an adverse impact on our business.

Delivering programs and courses through our GLN Centers exposes our schools to the risk of infringement of their intellectual property rights and to potential theft of their course content and materials.

The programs and courses delivered by our schools through our GLN Centers to students overseas are susceptible to theft by third parties and may result in the infringement of the intellectual property rights of our subsidiary schools. Technology exists to allow third parties to gain unauthorized access to video conferencing calls, and to course materials we make available to our students online. Although we have implemented sophisticated third party software that provides security to protect against unauthorized access, and we plan to continually upgrade our security software in step with changing advances in technology, we may be required to take further precautions in the future, which may be costly and time consuming to implement.

Despite our efforts, the risk of breach cannot be completely eliminated. For example, the security software we utilize may be unable to stay ahead of changing methods to breach such software. Policing unauthorized access to our technology and theft of our program and course content could prove to be costly if we are forced to pursue litigation to prevent unauthorized use of stolen program or course content. This could divert the attention of our management or materially disrupt the conduct of operations of our subsidiary schools, which may in turn impact our revenues, financial condition and results of operations.

If we are not able to continually enhance our online courses and services and adapt to rapid changes in technological demands and student needs, we may lose market share and our business could be adversely affected.

Widespread use of the Internet, video-conferencing and other technologies for educational delivery purposes is a relatively recent development. The market for live courses and services is characterized by rapid technological changes and innovations, as well as unpredictable product life cycles and user preferences. A portion of our revenues is derived from offering online courses and services. As such, we must be able to adapt quickly to changing student needs and preferences, technological advances and evolving Internet practices in order to compete successfully in the online education industry. Ongoing enhancement of our online offerings and technologies may entail significant expenses and technological risks. We may be unable to adapt to new or changing technologies, effectively integrate such new or changing technologies into our existing infrastructure, or fail to adapt to changes in the online video conferencing education market on a timely and cost-effective basis. We began offering online video conferencing courses in September 2008 through a GLN teaching studio located in Beijing, China and since that time we have expanded our teaching facilities with a GLN teaching studio built in Vancouver, Canada in March 2011 that we have been offering online conference courses from since its completion. However, if improvements to our online video conferencing offerings and technologies are not implemented on an ongoing basis, there are systems interruptions or our technologies and video conferencing offerings are not aligned with student expectations or preferences, our enrollment levels may be negatively affected, which may have an adverse impact on our profitability.

We will need additional capital to fully carry out our proposed expansion plan, and we may not be able to further implement our business strategy unless sufficient funds are raised, which could cause us to scale back our proposed plans or discontinue our expansion.

We estimate that we will require approximately $1,000,000 in order to carry out our expansion plan for fiscal 2013. This may require additional financing. We had cash and cash equivalents of approximately $7,964,476 and a working capital deficit of approximately $6,713,511 as at August 31, 2012. Sprott-Shaw also has a demand operating credit facility available in the amount of $1,500,000 with interest calculated at the prime rate plus 2%. As at August 31, 2012, the demand operating credit facility was not utilized. We plan to obtain the necessary additional funds from Sprott-Shaw’s unused credit facility, the sale of our securities or loans, if required. However, there can be no assurance that we will obtain the financing required, or at all. If we are not able to obtain the necessary additional financing, we may be forced to scale back our expansion plans or eliminate them altogether. Expending our cash resources on expansions could also negatively impact our current operations by reducing the amount of funds available to cover additional expenses that may arise in the future or offset losses should we suffer a decrease in revenues.

Historically, we have funded our operations primarily from the proceeds of share issuances. However, our ability to obtain additional financing is subject to a number of factors, including market conditions and their impact on the market price of our common shares, the downturn in the global economy and resulting impact on stock markets and investor sentiment, our competitive ability, investor acceptance of our business or our expansion plan, and the political and economic environments of countries where we are doing business. These factors may make the timing, amount, terms and conditions of additional financing unattractive or unavailable to us. If we are unable to raise additional financing, we will have to significantly reduce, delay or cancel our planned expansion activities. We cannot assure you that we will have sufficient resources to successfully conduct our expansion, or that we will be able to obtain any additional funding required, in which event we may not be able to continue our expansion or our expansion plan may fail. There can be no assurance that we will achieve our plans, or any of them.

The expansion of our business through acquisitions, joint ventures, and other strategic transactions creates risks that may reduce the benefits we anticipate receiving from these strategic transactions.

We intend to enter into acquisitions, joint ventures and other strategic transactions, directly or through our subsidiaries CIBT, Sprott-Shaw or the KGIC Colleges, as vehicles to acquire new campuses or schools to expand our education business in Canada, China and other countries. We are always seeking out new business acquisitions, partnership opportunities and joint ventures to expand our operations. Our management is unable to predict whether or when any other future strategic transactions will occur, including identifying suitable acquisition targets, partnership opportunities or joint venture partners, or the likelihood of any particular transaction being completed on terms and conditions that are favorable to us.

Acquisitions, joint ventures or other strategic transactions may present financial, managerial and operational challenges, including but not limited to maintaining the consistency of our teaching quality and our culture to ensure that our brand recognition does not suffer. We may be exposed to successor liability relating to prior actions involving a predecessor company, or contingent liabilities incurred before a strategic transaction. Liabilities associated with an acquisition or a strategic transaction could adversely affect our financial performance. Any failure to integrate new businesses or manage any new alliances successfully could adversely affect our reputation and financial performance.

The operations of any businesses acquired by us in the future are subject to their own risks, which we may not be able to manage successfully.

Our plan is to continue to expand our business through acquisitions that our management believes will complement and enhance our existing business, by acquiring businesses or assets that our management determines to be suitable, and as our resources allow. The financial results of any businesses acquired by us in the future may be subject to many of the same factors that affect our financial condition and results of operations, including the seasonal nature of the education business, exposure to currency exchange rate fluctuations, the competitive nature of the market or markets in which the acquired business operates, fluctuating levels of enrollment and regulatory, legislative and judicial developments. The financial results of any businesses acquired in the future could be materially adversely affected as a result of any of these or other related factors, which we may not be able to manage successfully, and which could have a material adverse effect on our results of operations and financial condition on a consolidated basis.

We may have only limited recourse for losses relating to an acquisition.

The due diligence conducted in connection with an acquisition made by us and the indemnification that may be provided in the related acquisition agreement may not be sufficient to protect us from, or compensate us for, losses resulting from such acquisition. Subject to certain exceptions, the seller may only be liable for misrepresentations or breaches of representations and warranties for several months from the closing date of the acquisition. A material loss associated with the acquisition for which there is no adequate remedy under the acquisition agreement that becomes known to us after that time could materially adversely affect our results of operations and financial condition and reduce the anticipated benefits of the acquisition.

We may not be able to improve the operating performance and financial results or lower the costs of services provided as planned.

While we believe that there usually are a number of opportunities to reduce operating costs and improve the financial results of businesses acquired by us, we cannot fully evaluate the feasibility of our plans until we control the acquired business. We may not be able to achieve our planned operating improvements, cost reductions or expected synergies in our expected time periods, if at all. In addition, some of the improvements we plan to implement may depend upon capital expenditure projects at the acquired business. Such capital projects may not be completed in our expected time periods, if at all, may not achieve the results that we have estimated or may have a cost substantially in excess of our planned amounts. This could materially adversely affect our results of operations and financial condition on a consolidated basis.

Failure to effectively and efficiently manage the expansion of our school network may materially and adversely affect our ability to capitalize on new business opportunities.

We plan to pursue a number of different strategies to expand our operations, including acquiring existing education institutions that align with our business plan, exporting our Sprott-Shaw and CIBT programs to Asia, expanding our network of agents who recruit students on our behalf, importing international students to Canada who will pay higher international fees, thereby generating more revenues than domestic students, enhancing our infrastructure in China and Canada, and expanding our presence worldwide through a combination of acquiring other businesses with established campuses or entering into joint ventures or partnerships with other educational institutions to expand the number of our GLN Centers.

We acquired Sprott-Shaw in December 2007 and have since expanded its program offerings and partnerships, and we acquired the assets of KGIC on March 15, 2010. The rapid pace at which we have expanded and plan to continue expanding in the future may place substantial demands on our management, faculty, operational, technological and other resources. In particular, we may face challenges in the following areas:

●	maintaining the consistency of our teaching quality and our culture to ensure that recognition of our brands does not suffer;

●	improving our existing operational, administrative and technological systems and our internal control over financial reporting;

●	recruiting, training and retaining additional qualified instructors and management personnel as well as other administrative and sales and marketing personnel, particularly as we expand into new markets; and

●	continuing to market the CIBT and Sprott-Shaw brands to recruit new students for existing and future learning centers.

We cannot assure you that we will be able to effectively and efficiently manage the growth of our operations. Any failure to effectively and efficiently manage our expansion may materially and adversely affect our ability to capitalize on new business opportunities or effectively run our existing operations, which in turn may have a material adverse impact on our business, our internal control over financial reporting, our financial condition and our results of operations.

Our students in Canada are subject to risks relating to financial aid and student loans. A substantial decrease in government student loans, or a significant increase in financing costs for our students, could have a material adverse affect on student enrollment and financial results.

Sprott-Shaw’s students in Canada are highly dependent on government-funded financial aid programs. Students apply for student loans on an annual basis. If there are changes to financial aid program regulations that restrict student eligibility or reduce funding levels for student loans, our enrollment and/or collection of student billings may suffer, causing revenues to decline. As a result, we are indirectly dependent upon and affected by government-funded financial aid programs that may be available to our students. The student loan lending criteria within British Columbia, Canada has become more stringent over the twelve months ended August 31, 2012. Sprott-Shaw has taken measures to reduce campus locations in remote areas, where campuses were unprofitable and were burdened with high levels of student loans, thereby reducing student enrollment counts. Additional stringency in student loan criteria in the future could reduce our enrollment counts further.

Students also receive a tax deduction for all or a portion of the amount of tuition paid by the student in a particular tax year, and an amount for textbooks (called an education tax credit) that is based on whether the student attended on a “full-time” or “part-time” basis, as set out in applicable Canadian and provincial income tax laws. The availability of these tax credits may impact the financial ability of our students to enroll in our programs and if such tax credits were to be eliminated or reduced, our enrollment levels may decline further, which could result in a decrease in our revenues.

If our campuses and education facilities in Canada are not certified as eligible educational institutions in accordance with the requirements of applicable student loan regulations at the federal and provincial levels, our students will not be eligible for student loans if they enroll in our programs and we could suffer from reduced enrollment levels, which would have a material adverse affect on our revenues.

As of August 31, 2012, approximately 43% of Sprott-Shaw’s students received a form of government student financial assistance. Private educational institutions must be certified on a campus by campus basis in order for their students to be eligible to apply for student loan and student grant funding. Certifications are valid for a period of up to five years, subject to review by the granting authority. There are also a number of administrative requirements that must be complied with in order to maintain an existing certification. Sprott-Shaw employs a manager of Student Services and two other staff members whose responsibilities include the oversight of each campus’ compliance program with the administrative requirements to maintain their student loan accreditations. In addition, Sprott-Shaw’s head office and StudentAid BC each conducts semi-annual audits to verify that the campuses are in compliance. However, there can be no assurance that our campuses will maintain their existing certifications and that any new campuses will be certified in the future. See “Operating and Financial Review and Prospects – Uncertainties of Government Policies” for more information on the certification process.

Our subsidiary, KGIC is required to submit audited financial statements related to programs being offered in Ontario to the Ministry of Training, Colleges and Universities (“MTCU”) for purposes of being granted MCTU accreditation. Traditionally the financial statements for KGIC have been consolidated across Canada. We submitted a proposal to submit standalone audited financial statements for programs in Ontario related to the MTCU accreditation only, and while the proposal is being reviewed, MTCU is allowing KGIC to retain its accreditation. For fiscal 2013, we will prepare standalone financial statements in accordance with MTCU requirements.

There is no guarantee that our currently certified facilities, such as the Sprott Shaw’s and KGIC’s facilities in British Columbia and Ontario, will continue to be certified in the future. Any loss of certification would be on a campus by campus basis, rather than on an entity-wide basis, which would reduce the impact on our operating results. Additionally, the requirements to obtain certification or maintain an existing certification may change, making it more difficult to become certified, limiting the number of certifications granted or increasing the number of administrative requirements to maintain an existing certification. If we were to lose certifications for a number of our campuses, our enrollment levels would in all likelihood decrease, which would negatively impact our financial condition, results of operations and the value of your investment in us.

If we are not able to continue to attract students to enroll in our courses, our revenues may decline and we may not be able to maintain profitability.

The success of our business depends primarily on the number of students enrolled in our courses and the amount of course fees that our students are willing to pay. Our ability to continue increasing our student enrollment levels without a significant decrease in course fees is critical to the continued success and growth of our business. This in turn will depend on several factors, including our ability to develop new programs and enhance existing programs to respond to changes in market trends and student demands, manage our growth while maintaining the consistency of our teaching quality, effectively market our programs to a broader base of prospective students, develop and license additional high-quality educational content and respond to competitive pressures. If we are unable to continue to attract students to enroll in our courses without a significant decrease in course fees, our financial condition, results of operations and cash flows could be materially adversely affected.

If we fail to develop and introduce new courses, services and products that meet our students’ expectations, our competitive position and ability to generate revenues may be materially and adversely affected.

Our core business is centered on providing our education programs and training services in Canada and in urban communities in China, the Philippines and other overseas areas where our subsidiary schools operate. As the growing trend toward urbanization is expected to result in more people seeking job and career advancement opportunities in urban areas, we may have to develop new courses, services and products to remain competitive and generate revenues. Unexpected technical, operational, logistical, regulatory or other problems could delay or prevent the introduction of one or more new programs or services. Moreover, we cannot assure you that any of these programs or services will match the quality or popularity of those developed by our competitors, achieve widespread market acceptance or generate the desired level of income.

An increase in interest rates could adversely affect our ability to attract and retain students.

Some of our students finance their education through private loans that are not subsidized. If our students’ employment circumstances are adversely affected by regional, national or global economic downturns, they may be more heavily dependent on student loans. Interest rates have reached relatively low levels in recent years, creating a favorable borrowing environment for students. However, in the event interest rates increase, our students may have to pay higher interest rates on their loans. Any future increase in interest rates will result in a corresponding increase in educational costs to our existing and prospective students, which could result in a significant reduction in our student population and revenues.

If we cannot maintain student enrollments, our results of operations may be adversely affected.

Our strategy for growth and profitability depends, in part, upon the retention of our students. While we provide certain services to our students in an effort to aid in retaining students and lower attrition rates, many of our students may face financial, personal, or family constraints that require them to withdraw within a term or at the end of a given term. Additionally, some students may decide to continue their education at a different institution. If for any reason we are unable to attract qualified new students, or are unable to effectively predict and manage student attrition, overall enrollment levels are likely to decline. If we cannot attract and retain our current students, our business, prospects, financial condition and results of operations may be adversely affected.

Our quarterly results of operations are likely to fluctuate based on our seasonal student enrollment patterns.

Our business is seasonal in nature. Sprott-Shaw and CIBT receive a large portion of their cash flows at the beginning of each new school year in September and cash flows increase again in the summer when KGIC generates revenue with its summer courses, which typically have high levels of enrollment. KGIC’s cash flows are received primarily in June due to the increase in student enrollments in its summer camp programs. Accordingly, our results in a given quarter may not be indicative of our results in any subsequent quarter or annually. Changes in our total student population may influence our quarterly results of operations. Our student population varies as a result of new student enrollments, graduations and student attrition.

Our institutes’ academic schedule generally does not affect our costs and our costs do not fluctuate significantly on a quarterly basis. Fluctuations in quarterly results, however, may impact management's ability to accurately project the available cash flows necessary to fund our operations. We expect quarterly fluctuations in results of operations to continue as a result of seasonal enrollment patterns. These patterns may change, however, as a result of new campus openings, new program offerings and increased enrollment of adult students. Our operating results have fluctuated in the past and may continue to fluctuate widely in the future.

The continued success and growth of our business depends upon recognition of our “CIBT”, “Sprott-Shaw”, and “KGIC” brands. If we are not able to maintain and enhance our brands, our business and operating results may be harmed.

We believe that our history of successful operations and innovative course offerings such as our 1+1 master’s degree and 2+2 bachelor’s degree programs and English as a Second Language (“ESL”) programs have increased recognition of our “CIBT”, “Sprott-Shaw” and “KGIC” brands and create a competitive advantage for us in our key markets. In the future, we will need to build upon this brand recognition to continue to attract potential students in the face of increased competition in the private education markets in Canada, China and other markets in which we operate. As we continue to expand our operations, maintaining the quality of our teaching and program offerings may be difficult to achieve.

We have engaged DDB Worldwide Communications Group Inc., a leading multi-national advertising agency, to provide branding services, launch a new advertising campaign and enhance existing brand recognition for our subsidiary schools. However, we cannot be certain our marketing efforts will continue to be successful. If we are unable to further enhance our brand recognition and increase awareness of our programs and services, our business, financial condition and results of operations may be adversely affected.

We operate in a highly competitive industry, and competitors with greater resources could harm our business, decrease market share and put downward pressure on our tuition rates.

The post-secondary education market is highly fragmented and competitive. We compete for students with traditional public and private colleges and universities, other not-for-profit schools, including those that offer online learning programs, and alternatives to higher education, such as employment and military service. Many public and private schools, colleges, and universities offer online programs. We expect to experience additional competition in the future as more colleges, universities, and for-profit schools offer an increasing number of online programs. Public institutions receive substantial government subsidies, and public and private non-profit institutions have access to government and foundation grants, tax-deductible contributions, and other financial resources generally not available to for-profit schools. Accordingly, public and private nonprofit institutions may have instructional and support resources superior to those in the for-profit sector, and public institutions can offer substantially lower tuition prices. Some of our competitors in both the public and private sectors also have substantially greater financial and other resources than us. We may not be able to compete successfully against current or future competitors and may face competitive pressures that could adversely affect our business, prospects, financial condition, and results of operations. These competitive factors could cause our enrollments, revenues, and profitability to significantly decrease.

Compliance with rules and requirements applicable to public companies may cause us to incur increased costs, which may negatively affect our results of operations.

Changing laws, regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act and related regulations implemented by the SEC, NYSE MKT LLC, Toronto Stock Exchange and Canadian securities regulators are creating uncertainty for public companies, increasing legal and financial compliance costs and making some activities more time consuming. We are currently evaluating and monitoring developments with respect to new and proposed rules and cannot predict or estimate the amount of additional costs we may incur or the timing of such costs. These laws, regulations and standards are subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing changes to our disclosure and governance practices. We intend to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities. If our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to practice, regulatory authorities may initiate legal proceedings against us and our business may be harmed. We also expect that these new rules and regulations will make it more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These factors could also make it more difficult for us to attract and retain qualified directors to sit on our board of directors (“Board of Directors”), particularly to serve on our audit committee and compensation committee, and qualified executive officers.

We conduct our business activities in various foreign jurisdictions, which exposes us to the risk of foreign investigations, claims and tax reviews.

Our activities involve business relationships with teaching colleges and business associates located in foreign jurisdictions. In addition, our goals over the next 12 months include expanding our CIBT GLN Centers and entering into licensing arrangements to offer our curriculum in some foreign jurisdictions. As a result, we could be involved in various foreign investigations, claims and tax reviews that arise in the course of our business activities. Each of these matters is subject to various uncertainties and it is possible that some of these matters may not be resolved in our favor. Applicable taxes include value added tax, corporate income tax (profits tax), and payroll (social) taxes. Matters of taxation, as well as other areas, are subject to review and investigation by governmental authorities who are often enabled by law to impose severe fines and penalties. Any regulatory uncertainty in taxation or other areas could negatively affect us through increased operating costs, which could have a material adverse effect on our results of operation and financial condition.

We may be unable to establish and maintain an effective system of internal control over financial reporting, and as a result we may be unable to accurately report our financial results or prevent fraud.

Section 404 of the Sarbanes-Oxley Act requires that we include a report from management on our internal control over financial reporting in our Annual Report on Form 20-F. In addition, our independent registered public accounting firm may in the future have to attest to and report on management’s assessment of the effectiveness of our internal control over financial reporting if we qualify as an “accelerated filer” or “large accelerated filer”, as such terms are defined in the Exchange Act and the general rules and regulations thereunder. Our management has in the past and may in the future conclude that our internal control over financial reporting is not effective. In the process of documenting and improving our controls over financial reporting, management has identified certain material weaknesses that existed in the design or operation of our internal control over financial reporting, including ineffective control over the financial reporting of subsidiaries; insufficient numbers of accounting and finance staff to service our business segments; and ineffective controls related to the period-end financial reporting process that impacts management’s ability to oversee the preparation of our consolidated financial statements. We are currently in the process of rectifying these deficiencies by engaging a technically skilled consultant to design effective internal control processes and procedures for our company, and by hiring and training additional staff with appropriate knowledge and skills to effectively work in the accounting and finance departments. In addition, other internal control issues may be discovered in the future which we may not be able to fully rectify. Moreover, even if our management concludes that our internal control over financial reporting is effective, our independent registered public accounting firm may disagree and may decline to attest to our management’s assessment or may issue an adverse opinion if required in the future. Any of these possible outcomes could result in an adverse reaction in the financial marketplace due to a loss of investor confidence in the reliability of our reporting processes, which could adversely affect the trading price of our common shares.

We may be negatively affected by the recent global financial market and economic crisis.

The ongoing global financial crisis has adversely affected the Canadian, United States and other world economies. To address the global financial crisis, the Chinese government adopted increasingly flexible macroeconomic policies, including an announced fiscal stimulus package, aimed at offsetting the slowdown brought about by the global financial crisis, and, as a result, China’s overall economy continued to grow rapidly. However, due to, among other things, concerns about inflation and the development of a bubble in China’s housing market resulting from the fast pace of growth of its economy, the government of China in 2010 and 2011 increased interest rates, which could negatively impact China’s overall economy. In addition, the ongoing global financial crisis affecting the banking system and financial markets has resulted in a severe tightening in credit markets, a low level of liquidity in many financial markets and increased volatility in credit and equity markets. If these conditions continue or worsen, our cost of borrowing may increase and it may become more difficult to obtain financing for our operations or investments, which may adversely affect our business operations and implementation of our growth strategy.

Because our assets are located outside of the United States and some of our directors and officers resides outside of the United States, it may be difficult for you to enforce your rights based on the United States federal securities laws against us and these officers and directors in the United States or to enforce judgments of United States courts against us in China or Canada.

Some of our directors and officers reside outside of the United States in China and Canada. In addition, our operating subsidiaries are located in China and Canada and substantially all of our assets are located outside of the United States. China does not have a treaty with the United States providing for the reciprocal recognition and enforcement of judgments of courts. It may therefore be difficult for investors in the United States to enforce their legal rights based on the civil liability provisions of the United States federal securities laws against us and these officers and directors in the courts of either Canada or China and, even if civil judgments are obtained in courts of the United States, to enforce such judgments in Canadian or Chinese courts. Further, it is unclear if extradition treaties now in effect between the United States and China would permit effective enforcement against us or our officers and directors of criminal penalties, under the United States federal securities laws or otherwise.

A portion of our Canadian business is generated through overseas recruitment activities which require students to apply for student visas, and this exposes us to the risk of visa and immigration policy changes.

We have greatly increased our overseas recruitment activity and plan to continue to increase international recruitment activity as a focus in the next year. International student recruitment is subject to uncertainty regarding the student’s application for a student visa. Should the government decrease the number of student visas it offers within foreign countries in which the Company actively recruits, it could have a material adverse effect on the Company’s results of operation and financial condition.

Risks Related to Doing Business in China

We are exposed to currency exchange risk which could cause our reported earnings or losses to fluctuate.

The value of the renminbi (“RMB”) against the Canadian dollar fluctuates and is affected by, among other things, changes in political and economic conditions in China as well as the global economy. On July 21, 2005, the Chinese government changed its decade-old policy of pegging the value of the RMB to the U.S. dollar. Under the new policy, the RMB is permitted to fluctuate within a narrow and managed zone against a group of foreign currencies. This change in policy has resulted in an appreciation of the RMB against the Canadian dollar during the year ended August 31, 2012. It is possible that the Chinese government could adopt a more flexible currency policy, which could increase the volatility of the exchange rate between the RMB and the U.S. dollar. We can offer no assurance that the RMB will be stable against the U.S. dollar or any other foreign currency.

Our functional and reporting currency is the Canadian dollar. However, a portion of our assets, liabilities, revenues and expenses are denominated in RMB. As our Chinese business grows, a greater portion of our revenues and costs are expected to be denominated in RMB. As a result, we are exposed to currency exchange risk on any assets, liabilities, revenues and expenses denominated in currencies other than the Canadian dollar, including the RMB. To the extent the Canadian dollar strengthens against foreign currencies, the translation of these foreign currency denominated transactions results in reduced revenue, operating expenses and net income or loss for our international operations. Similarly, to the extent that the Canadian dollar weakens against foreign currencies, the translation of these foreign currency denominated transactions results in increased revenue, operating expenses and net income or loss for our international operations. We do not currently engage in currency hedging transactions to offset fluctuating currency exchange rates.

We are subject to limitations on our ability to convert Chinese currency.

China's national currency, the RMB, is not a freely convertible currency. The Chinese government imposes controls on the conversion of RMB to foreign currencies and, in certain cases, the remittance of currencies out of China. As our Chinese business expands, we expect to derive an increasing amount of our revenues in RMB. Shortages in the availability of foreign currency may restrict the ability of our Chinese subsidiary and our affiliated entities to remit sufficient foreign currency to make payments to us, or otherwise satisfy their foreign currency denominated obligations.

Under existing Chinese foreign exchange regulations, payments of current account items, including profit distributions, interest payments and expenditures from trade-related transactions, can be made in foreign currencies without prior approval from the Chinese State Administration of Foreign Exchange, or “SAFE”, by complying with certain procedural requirements. However, approval from appropriate government authorities is required when RMB is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of bank loans denominated in foreign currencies. The Chinese government may also at its discretion restrict access in the future to foreign currencies for current account transactions. The foreign exchange control system may prevent us from obtaining sufficient foreign currency to satisfy our demands, which may adversely affect our business and development.

The SAFE restrictions on currency exchange may limit our ability to utilize our revenues effectively and the ability of our Chinese subsidiary to obtain financing.

A portion of our revenues and operating expenses are denominated in RMB. Restrictions on currency exchange imposed by the Chinese government may limit our ability to utilize revenues generated in RMB to fund our business activities outside China, if any, or expenditures denominated in foreign currencies. Under current Chinese regulations, RMB may be freely converted into foreign currency for payments relating to “current account transactions”, which include among other things dividend payments and payments for the import of goods and services, by complying with certain procedural requirements. Our Chinese subsidiary may also retain foreign exchange in their respective current account bank accounts.

However, conversion of RMB into foreign currencies and of foreign currencies into RMB, for payments relating to “capital account transactions”, which principally includes investments and loans, generally requires the approval of SAFE and other relevant Chinese governmental authorities. Restrictions on the convertibility of the RMB for capital account transactions could affect the ability of our Chinese subsidiary to make investments overseas or to obtain foreign exchange through debt or equity financing, including by means of loans or capital contributions from us.

Any existing and future restrictions on currency exchange may affect the ability of our Chinese subsidiary or affiliated entity to obtain foreign currencies, limit our ability to utilize revenues generated in RMB to fund our business activities outside China that are denominated in foreign currencies, or otherwise materially and adversely affect our business.

If we make equity compensation grants to persons who are Chinese citizens, they may be required to register with SAFE. We may also face regulatory uncertainties that could restrict our ability to adopt equity compensation plans for our directors and employees and other parties under Chinese laws.

On April 6, 2007, SAFE issued the “Operating Procedures for Administration of Domestic Individuals Participating in the Employee Stock Ownership Plan or Stock Option Plan of An Overseas Listed Company”, also known as “Circular 78.” It is not clear whether Circular 78 covers all forms of equity compensation plans or only those which provide for the granting of stock options. For any plans which are so covered and are adopted by a non-Chinese listed company, such as our company, after April 6, 2007, Circular 78 requires all participants who are Chinese citizens to register with and obtain approvals from SAFE prior to their participation in the plan. In addition, Circular 78 also requires Chinese citizens to register with SAFE and make the necessary applications and filings if they participated in an overseas listed company’s covered equity compensation plan prior to April 6, 2007. We believe that the registration and approval requirements contemplated in Circular 78 will be burdensome and time consuming.

In the future, we may adopt an equity incentive plan and make numerous stock option grants under the plan to our officers, directors and employees, some of whom may be Chinese citizens and may be required to register with SAFE. If it is determined that any of our equity compensation plans are subject to Circular 78, failure to comply with such provisions may subject us and participants of our equity incentive plan who are Chinese citizens to fines and legal sanctions and prevent us from being able to grant equity compensation to our Chinese employees. In that case, our ability to compensate our employees and directors through equity compensation would be hindered and our business operations may be adversely affected.

We depend upon the acquisition and maintenance of numerous approvals to conduct our business in China. Failure to obtain or renew these approvals will adversely affect our operation in China.

We are dependent upon certain approvals in China, including, without limitation, campus approvals, and program approvals, to conduct our business. While we believe that all steps necessary to obtain or maintain these approvals have been taken and will be taken, the failure to obtain or renew these approvals could have a material adverse impact on our business, results of operations and financial condition. It is also possible that new laws and regulations governing the education business in China will prohibit or restrict foreign investment in the education business generally, which could prevent us from obtaining or renewing our governmental approvals. Accordingly, we may have to cease our education business in China, which would significantly impact the scope of our operations and may materially adversely impact our results of operations.

The following permits and licenses we previously obtained have expired: our joint programs between CIBT and Western International University (“WIU”) expired on April 1, 2008; between CIBT and ITT Educational Service expired on August 31, 2007; and between CIBT and Beijing University of Technology (“BJUT”) expired on August 31, 2011. Our Boeing MBA program in cooperation with City University expired on June 1, 2007. Also our regular MBA program in cooperation with City University was terminated in October 2010.

During the application or renewal process for our licenses and permits, we will be evaluated and re-evaluated by the appropriate governmental authorities and must comply with the prevailing standards and regulations, which may change from time to time. In the event that we are not able to obtain or renew the certificates, permits and licenses, all or part of our operations may be suspended by the government, which would have a material adverse effect on our business and financial condition. Furthermore, if escalating compliance costs associated with governmental standards and regulations restrict or prohibit any part of our operations, it may materially adversely affect our results of operations and profitability.

The education sector, in which most of our business is conducted, is subject to extensive regulation in China. Our ability to conduct business is highly dependent on our compliance with the regulatory framework in China.

The Chinese government regulates all aspects of the education sector, including licensing of parties to perform various services, pricing of tuition and other fees, curriculum content and standards for the operations of schools and learning centers associated with foreign participation. The laws and regulations applicable to the education sector are in some aspects vague and uncertain, and often lack detailed implementing regulations. These laws and regulations are subject to change, and new laws and regulations may be adopted, some of which may have retroactive application or have a negative effect on our business. For example, in 2003, the Chinese government adopted a new regulatory framework for Chinese-foreign cooperation in education. This new framework may encourage institutions with more experience, better reputations, greater technological know-how and larger financial resources than we have to compete against us and limit our growth. In addition, because the Chinese government and the public view the conduct of educational institutions as a vital social service, there is considerable ongoing scrutiny of the education sector and its participants.

Chinese regulators have broad powers to regulate the tuition and other fees charged by schools and, as a result, can adversely impact the fees we receive from the provision of our services. While China’s regulatory framework provides that investors in private schools are entitled to receive a “reasonable return” on their investment, there is no clear guidance in law as to what this term means.

We must comply with China’s extensive regulations on private and foreign participation in the education sector. Although our corporate structure and business are designed to comply with the limitations on foreign investment and participation in the education sector, we cannot assure you that we will not be found to be in violation of any current or future Chinese laws and regulations.

According to the new company law of the People’s Republic of China (“PRC”) enacted January 1, 2006, the PRC corporations shall have a board of supervisors or a supervisor in addition to a board of directors. Our two subsidiaries in China, Beijing Fenghua Education Consulting Co., Ltd. and Weifang Jiahua Education Consulting Co., Ltd., currently have no supervisor or board of supervisors. Therefore, the State Administration of Industry and Commerce (“SAIC”) may request that either or both of the two subsidiaries revise their articles of association and establish a board of supervisors when they apply for renewal of their business licenses with the SAIC in the future.

According to the regulations on “Chinese-foreign Cooperation in Running a School” and the “Rules on Administration of Private Non-enterprise Unit Registration”, a Chinese-foreign cooperative joint venture school without legal person status requires approval from the Ministry of Education (“MOE”), a central state government authority in charge of foreign cooperation, or a certificate of Chinese-foreign cooperation in running a school from the provincial government. Our subsidiary schools operating in China have obtained all necessary approvals. However, there can be no assurance that such approvals will be obtained in the future. The inability of our subsidiary schools to obtain approvals in the future could have a material adverse effect on the operations of CIBT.

Chinese economic, political and social conditions, as well as changes in any government policies, laws and regulations, could adversely affect the overall economy in China or the prospects of the education market, which in turn could adversely affect our business.

A portion of our operations are conducted in China, and a significant amount of our revenues are derived from China. Accordingly, our business, financial condition, results of operations, prospects and certain transactions we may undertake are subject, to a significant extent, to economic, political and legal developments in China.

The Chinese economy differs from the economies of most developed countries in many respects, including the amount of government involvement, level of development, growth rate, control of foreign exchange and allocation of resources. While the Chinese economy has experienced significant growth in the past two to three decades, growth has been uneven, both geographically and among various sectors of the economy. Demand for our programs and services depends, in large part, on economic conditions in China. Any slowdown in China’s economic growth may cause our potential customers to delay or cancel their plans to participate in our educational services, which in turn could reduce our revenues.

Although the Chinese economy has been transitioning from a planned economy to a more market-oriented economy since the late 1970s, the Chinese government continues to play a significant role in regulating industry development by imposing industrial policies. The Chinese government also exercises significant control over China’s economic growth through the allocation of resources, controlling the incurrence and payment of foreign currency-denominated obligations, setting monetary policy and providing preferential treatment to particular industries or companies. Changes in any of these policies, laws and regulations could adversely affect the overall economy in China or the prospects of the education market, which could harm our business.

The Chinese government has implemented various measures to encourage foreign investment and sustainable economic growth and to guide the allocation of financial and other resources, which have for the most part had a positive effect on our business and growth. However, we cannot assure you that the Chinese government will not repeal or alter these measures or introduce new measures that will have a negative effect on us.

China’s social and political conditions are also not as stable as those of the United States and other developed countries. Any sudden changes to China’s political system or the occurrence of widespread social unrest could have negative effects on our business and results of operations. In addition, China has tumultuous relations with some of its neighbors, including India, and a significant further deterioration in such relations could have negative effects on the Chinese economy and lead to changes in governmental policies that could be adverse to our business interests.

Uncertainties with respect to the Chinese legal system could adversely affect us.

Our operations in China are governed by Chinese laws and regulations. The Chinese legal system is based on written statutes. Prior court decisions may be cited for reference but are not relied upon as precedents. Since 1979, Chinese legislation and regulations have significantly enhanced the protections afforded to various forms of foreign investments in China. However, China has not developed a fully integrated legal system and recently enacted laws and regulations may not sufficiently cover all aspects of economic activities in China. In particular, because these laws and regulations are relatively new, and because of the limited number of published decisions and their non-binding nature, the interpretation and enforcement of these laws and regulations involve uncertainties. Operating in China involves a high risk that restrictive rules and regulations could change at any time. Chinese authorities could assert that any portion or all of our existing or future ownership structure and business violate existing or future Chinese laws and regulations and require us to curtail or cease our operations in China.

In addition, the Chinese legal system is based in part on governmental policies and internal rules (some of which are not published on a timely basis, or at all) that may have a retroactive effect. As a result, we may not be aware of our violation of these policies and rules until after the occurrence of the violation. If Chinese authorities find us to be in violation of any Chinese laws or regulations, they would have broad discretion in dealing with such a violation, including, without limitation, the following:

●	levying fines;

●	revoking our business licenses and other approvals;

●	requiring us to restructure our ownership or operations; and

●	requiring us to discontinue any portion or all of our education business in China.

Our business, financial condition and results of operations may be adversely affected by the uncertainties of the Chinese legal system or any changes in the laws and regulations that are applicable to us.

We are subject to uncertainty related to the tax systems in China and any uncertainty in taxation could negatively affect our business, results of operations and financial condition.

Through our subsidiaries, we conduct a portion of our business in China. China currently has a number of laws related to various taxes imposed by both national and regional governmental authorities. Applicable taxes include value added tax, corporate income tax (profits tax), and payroll (social) taxes, together with others. In contrast to more developed market economies, laws related to these taxes have not been in force for a significant period, and interpretive regulations are often unclear or nonexistent. Often, there are differing opinions regarding legal interpretation, both among and within government ministries and organizations, resulting in uncertainties and areas of conflict. Matters of taxation, customs and currency control, as well as other areas, are subject to review and investigation by a number of governmental authorities, who are enabled by law to impose extremely severe fines and penalties. Any regulatory uncertainty in taxation or other areas could negatively affect us through increased operating costs, which could have a material adverse effect on our business, results of operations and financial condition.

We and our subsidiaries may not be able to enforce our agreements in China, which could have a negative impact on our operations.

Chinese law governs many of our material agreements. There are substantial uncertainties regarding the interpretation and application of Chinese laws and regulations that govern the enforcement and performance of our contractual arrangements. Although we use Chinese lawyers to assist us in preparing our agreements, there can be no assurance that we can enforce any of our material agreements or that remedies will be available outside of China.

China's system of laws and the enforcement of existing laws may not be as certain in implementation and interpretation as U.S. or other laws. The Chinese judiciary is relatively inexperienced in enforcing corporate and commercial law, leading to a higher than usual degree of uncertainty as to the outcome of any litigation. Even where adequate laws exist in China, it may be impossible to obtain swift and equitable enforcement of such laws. It is also difficult to enforce foreign judgments in China. The inability to enforce or obtain a remedy under any of our material agreements could have a material adverse impact on us and our results of operations.

Adverse changes in economic and political policies of the Chinese government could have a material adverse effect on the overall economic growth of China, which could adversely affect our business.

We expect to increase our operations within the education industry in China through our GLN Center platform. As such, our results of operations, financial condition and prospects will be affected, on an increasingly significant basis, by economic, political and legal developments in China. China’s economy differs from the economies of most developed countries in many respects, including the amount of government involvement, level of development, growth rate, control of foreign exchange and allocation of resources. The economy of China is a planned economy subject to five-year and annual plans adopted by the government that set down national economic development goals. Policies of the Chinese government can have significant impact on the country’s economic conditions. The Chinese government has confirmed that economic development will follow a model of a market economy under a socialist regime. We believe that in the future, the Chinese government will continue to strengthen its economic and trading relationships with foreign countries and business development in China will follow market forces.

However, a change in economic and political policies may adversely affect our business, prospects and financial condition, to a material extent. For example, on November 8, 2012, China had a planned change in government officials. Such measures may cause uncertainty as far as future economic policies are concerned. Any future changes in policy could in turn positively or adversely affect our results of operations and financial condition.

Our Chinese business may fail due to loss of our CIBT center facility providers and educational service providers.

We are heavily dependent on facilities and services provided by certain of our third party service providers, which we refer to as “educational service providers”, in China and the U.S. Since June 2007 we have started to establish mini-campuses, or “CIBT GLN Centers” to deliver our programs via video conferencing. We plan to continue to establish teaching locations in China in 2013, so we will be heavily dependent on facilities provided by certain third party universities or colleges, or “CIBT Center Facility Providers”, to set up our CIBT GLN Centers. There can be no assurance that the cooperation agreements with the educational service providers and CIBT Center Facility Providers will continue on terms acceptable to us or not be revoked by them. Also, our Chinese business is indirectly based on the success of our educational service providers and CIBT Center Facility Providers. If our existing agreements with our current educational service providers and CIBT Center Facility Providers are terminated or we decide not to renew them, we may be unable to enter into similar cooperation agreements with other parties to provide us with campuses, facilities, or services on acceptable terms, or at all, and this may materially and adversely affect our operations. For example, effective since August 31, 2012 our agreement with BJUT was terminated by mutual consent as a result of changes in market demand. The BJUT programs have been replaced with mass market programs, which have higher market demand at present. We continue to look toward mitigating our exposure to this risk through the use of subsidiary locations offering our internally developed educational content. We also continue to evaluate opportunities to expand the physical presence of our business through acquisitions that complement our existing subsidiary schools.

Due to various restrictions under Chinese laws on the distribution of dividends by our Chinese operating companies, we may not be able to pay dividends to our stockholders.

The Wholly-Foreign Owned Enterprise Law (1986), as amended and the Wholly-Foreign Owned Enterprise Law Implementing Rules (1990), as amended and the Company Law of the PRC (2006) contain the principal regulations governing dividend distributions by wholly foreign owned enterprises. Under these regulations, wholly foreign owned enterprises (“WFOE”), may pay dividends only out of their accumulated profits, if any, determined in accordance with Chinese accounting standards and regulations. Additionally, a WFOE is required to set aside a certain amount of its accumulated profits each year, if any, to fund certain reserve funds. These reserves are not distributable as cash dividends except in the event of liquidation and cannot be used for working capital purposes.

Furthermore, if our consolidated subsidiaries in China incur debt on their own in the future, the instruments governing the debt may restrict our ability to pay dividends or make other payments. If we or our consolidated subsidiaries are unable to receive all of the revenues from our operations as a result of the aforementioned contractual or dividend arrangements, we may be unable to pay dividends on our common shares.

Operating Risks

The slowdown of economic growth in Canada, China and elsewhere has and may continue to negatively affect our profitability and growth.

The economic downturn has reduced the demand for premium program offerings by students in China. As a result, CIBT’s revenue from its operations in China declined for the year ended August 31, 2012 to $3,098,086, from $4,206,757 for the prior year, and we transitioned out of our premium programs that were offered jointly with BJUT. The ongoing economic downturn may continue to have a material adverse impact on the demand for enrollment in all of our programs, not solely our premium offerings, which could in turn adversely impact our business and profitability. The Chinese economy has recently showed signs of retraction. If the economy of China begins to slow significantly, unemployment levels could increase which may impact the ability of our graduates to secure positions in the workforce, negatively impacting future enrollment levels.

In Canada, the economic downturn has impacted revenues for Sprott-Shaw, which also declined in the year ended August 31, 2012 as a result of, among other factors, reduced levels of enrollment due to the tightening of student loan lending criteria and reduced government training contracts as a result of reduced government spending due to general economic conditions. The economic downturn may continue to impact the demand for the educational programs offered by Sprott-Shaw and KGIC domestically in Canada. KGIC’s revenues increased as economies of scale and synergies were achieved by combining its operations with those of Sprott-Shaw. In addition, IRIX’s business may be negatively impacted as clients seek to reduce the amount spent on marketing and advertising campaigns and pursue fewer modes of advertising. Decreases in revenues generated by any of our subsidiaries due to the economic climate could materially adversely affect our results of operations, financial condition and cash flows.

Our operations are subject to various litigation risks that could increase our expenses, impact our profitability and lower the value of your investment in us.

Although we are not currently involved in any significant litigation, the nature of our operations exposes us to possible future litigation claims. There is a risk that any claim could be decided against us, which could harm our financial condition and results of operations. Similarly, the costs associated with defending against any claim could dramatically increase our expenses, as litigation is often very expensive. Possible litigation matters may include, but are not limited to, disputes stemming from cooperation agreements we or our subsidiaries entered into with other educational institutions, workers’ compensation, insurance coverage, property rights or injuries to students or faculty in our facilities. Should we become involved in any litigation we will be forced to direct our limited resources to settling or defending against or prosecuting the claim(s), which could impact our profitability and lower the value of your investment in us.

Loss of certain key personnel may adversely impact our business.

The success of our business will depend on the management skills of Toby Chu, our President and Chief Executive Officer, Patrick Dang, President of Sprott-Shaw, Sung Sub Lim, President of the KGIC Colleges and the relationships they and other key personnel have with educators, administrators and other business contacts they have in North America and abroad. The loss of the services of any of our key personnel could impair our ability to successfully manage our domestic and international business. We also depend on successfully recruiting and retaining qualified and experienced managers, sales persons and other personnel who can function effectively in Canada and abroad. In some cases, the market for these skilled employees is highly competitive. We may not be able to retain or recruit such personnel on acceptable terms to us, which could adversely affect our business prospects and financial condition.

Our success depends, in part, on our ability to keep pace with changing market needs.

Our success depends primarily on the number of students enrolled in our courses and the amount of course fees such students are willing to pay. Our ability to continue increasing our student enrollment levels without a significant decrease in course fees is critical to the continued success and growth of our business. This in turn will depend on several factors, including our ability to develop new programs and enhance existing programs to respond to changes in market trends and student demands, manage our growth while maintaining the consistency of our teaching quality, effectively market our programs to a broader base of prospective students, develop and license additional high-quality educational content and to respond to competitive pressures. If we are unable to continue to attract students to enroll in our courses without a significant decrease in course fees, our financial condition, results of operations and cash flows could be materially adversely affected.

Our agreement with The American Hotel and Lodging Association Educational Institute (“AHL-EI”) expires in December 2012 and will not be renewed, which could adversely affect our results of operations and financial condition for our China hotel program division.

CIBT was the sole distributor of licenses to use the educational programs created by AHL-EI until December 2012. CIBT distributed licenses to certain entities in China and other countries, including corporate organizations, academic institutions and hotel and education consulting companies. Our distribution license with AHL-EI expired in December 2012. We will continue to use AHL-EI content on a non-exclusive basis through our subsidiary, Sprott-Shaw, who has been delivering ALH-EI content for many years. Because we will continue to use the AHL-EI content, we expect our programs offering such curriculum to continue as planned. However, the non-exclusive nature of the programs could encourage more competition by others offering similar programs. If so, there is a risk that our revenues generated from our tourism management programs may decline, thereby adversely affecting our profitability.

The personal information that we collect may be vulnerable to breach, theft or loss, which could subject us to liability or adversely affect our reputation and operations.

Possession and use of personal information in our operations subjects us to risks and costs that could harm our business and reputation. We collect, use and retain large amounts of personal information regarding our students and their families, including personal and family financial data. We also collect and maintain personal information of our employees in the ordinary course of business. Although we use security and business controls to limit access and use of personal information, a third party may be able to circumvent those security and business controls, which could result in a breach of privacy of our students or employees. In addition, errors in the storage, use or transmission of personal information could result in a breach of student or employee privacy. Possession and use of personal information in our operations also subjects us to legislative and regulatory burdens that could require us to implement certain policies and procedures regarding identity theft related to student credit accounts, and could require us to make certain notifications about any data breaches, improper access or use of our data, which could in turn restrict our use of personal information under privacy laws. A violation of any laws or regulations relating to the collection or use of personal information could result in the imposition of fines against us. As a result, we may be required to expend significant resources to protect against the threat of these security breaches or to alleviate problems caused by these breaches. While we believe we take appropriate precautions and safety measures, there can be no assurances that a breach, loss or theft of any such personal information will not occur. Any breach, theft or loss of such personal information could have a material adverse effect on our financial condition, reputation and growth prospects and could result in liability under privacy statutes and legal action being taken against us.

Our multimedia services and advertising business may be adversely impacted by an economic downturn.

Multimedia and advertising companies, in general, are dependent upon economic conditions. Historically, advertising revenues have increased with the beginning of an economic recovery, principally with increases in advertising by the banking, financial, insurance and securities industries. Decreases in advertising revenues have historically corresponded with regional or national recessionary conditions. Advertising revenues from the real estate industry constituted a significant portion of IRIX’s overall revenues. A reduction in demand for advertising in the real estate and other industries could result from a decline in economic conditions and thus a decline in the amount spent on advertising in general. As a result, the results of operations of IRIX may be adversely impacted by a decline in economic conditions.

IRIX currently depends on a large portion of Asian clientele and the loss of, or a significant reduction in Asian clientele would significantly reduce our revenues from multimedia services and advertising, and adversely impact our consolidated operating results.

A large portion of our clientele in the multimedia services and advertising business are people of Asian descent in Vancouver, British Columbia, Canada, or are related to or affiliated with people of Asian descent in Vancouver, British Columbia, Canada. Should there be a downturn in the immigration environment in Vancouver, British Columbia, Canada, this could cause us to lose clients and negatively impact our advertising revenues. We may not be able to maintain our current Asian clientele. We cannot be certain that we can develop new clients or expand our existing client base. This could cause the operating results of IRIX to decline. Therefore, a loss of our Asian clients would materially reduce our revenues from our multimedia and advertising business and adversely impact our consolidated operating results and financial condition.

Risks Related to Our Common Shares

The issuance of shares upon the exercise of options and warrants may cause immediate dilution to our existing shareholders.

The issuance of shares upon the exercise of options may result in dilution to the interests of other stockholders. As of August 31, 2012, there were outstanding options to purchase up to 4,533,000 common shares in our authorized capital at exercise prices ranging from $0.24 to $0.80 per share, with expiry dates ranging from May 3, 2013 to January 6, 2017. A total of 1,460,500 outstanding options had vested and were exercisable as at August 31, 2012. As of August 31, 2012, there were outstanding warrants to purchase up to 2,756,833 common shares in our authorized capital at an exercise price of $0.35 per share, expiring on June 29, 2014 and July 11, 2014, all of which were exercisable as at August 31, 2012. If all outstanding options and warrants were exercised, our issued and outstanding share capital would increase by 7,289,833 common shares, or approximately 10.1% based on 71,949,344 shares of our common shares outstanding as of August 31, 2012. This would result in an immediate dilution to our existing shareholders. Conversion of the outstanding options and warrants may also depress the price of our common shares, which may cause investors or lenders to reconsider investing in us and thus adversely affect our financing efforts.

The market price for our common shares may be volatile.

The market price for our common shares may be volatile and subject to wide fluctuations in response to factors such as actual or anticipated fluctuations in our quarterly results of operations, changes in financial estimates by securities research analysts, changes in the economic performance or market valuations of other comparable companies, announcements by us or our competitors of material acquisitions, strategic partnerships, joint ventures or capital commitments, fluctuations of exchange rates between the RMB and Canadian dollar, intellectual property litigation, release of lock-up or other transfer restrictions on our outstanding common shares, and economic or political conditions in China. In addition, the performance and fluctuation in market prices of other companies with business operations located mainly in China that have listed their securities in the United States may affect the volatility in the price and trading volumes of our common shares. Furthermore, the securities markets have from time to time experienced significant price and volume fluctuations that are not related to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our common shares.

We may be classified as a passive foreign investment company, which could result in adverse U.S. federal income tax consequences to U.S. holders of our common shares.

We do not expect to be considered a “passive foreign investment company”, or PFIC, for U.S. federal income tax purposes for our current taxable year ending August 31, 2012. However, the application of the PFIC rules is subject to ambiguity in several respects, and, in addition, we must make a separate determination each taxable year as to whether we are a PFIC, which is made after the close of each taxable year. Accordingly, we cannot assure you that we will not be a PFIC for our current taxable year or any future taxable year. A non-U.S. corporation will be considered a PFIC for any taxable year if either (i) at least 75% of its gross income is passive income or (ii) at least 50% of the value of its assets is attributable to assets that produce or are held for the production of passive income. The market value of our assets generally will be determined based on the market price of our common shares, which is likely to fluctuate. In addition, the composition of our income and assets will be affected by how, and how quickly, we spend the cash we raise. If we were treated as a PFIC for any taxable year during which a U.S. person held a common share or common shares, certain adverse U.S. federal income tax consequences could apply to such U.S. person. See “Item 10E.Taxation—U.S. Federal Income Tax Consequences – Additional Rules that May Apply to U.S. Holders”.

We do not intend to pay dividends and there will be fewer ways in which you can make a gain on any investment in us.

We have never paid any cash dividends and currently do not intend to pay any dividends for the foreseeable future. To the extent that we require additional funding currently not provided for in our financing plan, our funding sources may likely prohibit the payment of dividends. Because we do not intend to declare dividends, any gain on an investment in us will need to come through appreciation of our stock price.

We indemnify our directors and officers against liability, and this indemnification could negatively affect our operating results.

In accordance with our articles of incorporation, we indemnify our officers and our directors for liability arising while they are carrying out their respective duties. Our articles of incorporation also allow for reimbursement of certain legal defenses. In addition to this, we insure our directors and officers against certain liabilities. The costs related to such indemnification and insurance coverage, if either one of them or both were to increase, could materially adversely affect our operating results and financial condition.

ITEM 4. Information on the Company

We were incorporated on November 17, 1986 under the Business Corporations Act (British Columbia). Our common shares are listed for trading in the United States on the NYSE MKT LLC and in Canada on the Toronto Stock Exchange, under the symbol “MBA”. Our common shares were listed for trading in Canada on the TSX Venture Exchange until May 26, 2010, when they were listed for trading on the Toronto Stock Exchange. Our fiscal year end is August 31st. We changed our name from Capital Alliance Group Inc. to CIBT Education Group Inc. on November 14, 2007.

Our head office is located at Suite 1200 – 777 West Broadway, Vancouver, British Columbia, Canada V5Z 4J7. Our telephone number is 604-871-9909. Our website is www.cibt.net. The information contained on this and our other websites is not a part of this annual report.

We are a provider of educational services including business management degree programs, career-oriented diploma programs, and language training services to students through our infrastructure located primarily in Canada and China, as well as other countries around the world. We deliver western-style education to students primarily from emerging Asian countries and in Canada, providing our graduates with increased earnings potential working for multinational companies in their home countries or abroad. In addition, we recruit international students to enroll at our Canadian campuses and other locations around the world and provide them with an enhanced learning experience, western credentials and overseas employment experience.

We operate our education programs and services business through the following subsidiaries:

1.	CIBT, which conducts operations primarily in China and in which we currently hold a 100% ownership interest;

2.	Sprott-Shaw, which operates primarily in Canada and with a presence in Asia and the Middle East, in which we acquired a 100% ownership interest on December 17, 2007; and

3.	the KGIC Colleges, which are comprised of KGIC Business College (2010) Corp. and KGIC Language College (2010) Corp., our wholly-owned subsidiaries that operate primarily in Canada, and were organized in connection with the acquisition of substantially all of the assets of KGIC on March 15, 2010.

In addition, we hold a 51% interest in IRIX, a multimedia service and advertising agency located in Vancouver, British Columbia, Canada, with a niche in providing advertising services to the Asian market.

We generate revenues mainly from tuition fees from our education and training business in China and Canada. A small portion of our revenues are generated from service fees of IRIX’s graphic design and advertising business. CIBT generated approximately 7% of our revenue in the 2011 fiscal year and approximately 5% in the 2012 fiscal year. Sprott-Shaw represented approximately 52% of our revenue in the 2011 fiscal year and 50% of revenue in the 2012 fiscal year. KGIC represented approximately 37% of our revenue in the 2011 fiscal year and 41% of our revenue in the 2012 fiscal year. Our strategy is to continue offering our current programs, update and develop new programs, and continue to evaluate cost cutting and consolidation activities. We currently have approximately 5,102 students in 46 locations (inclusive of campuses, CIBT Global Learning Network centers (“GLN Centers”) and licensees). On an annual basis we educated 11,436 students throughout the August 31, 2012 fiscal year. We have obtained all approvals from the Chinese authorities to conduct our education business in China and all approvals/accreditations from Canadian authorities to conduct our education business in Canada. There are a number of risk factors, described in detail under the section “Risk Factors” in this annual report, which may adversely affect our ability to begin and sustain profitable operations.

The following table sets forth certain information relating to our subsidiaries:

Subsidiary	Date of Incorporation	Country of Incorporation	Percentage of Ownership	Principal Business
CIBT	February 9, 1994	British Columbia, Canada	100%	Provider of education and training services primarily in China
Sprott-Shaw	December 7, 2007	British Columbia, Canada	100%	Holding company of Sprott-Shaw Community College, Sprott-Shaw Degree College and Sprott-Shaw International Language College and provider of education and training services primarily in Canada and parts of Asia
KGIC Business College (2010) Corp.	February 22, 2010	British Columbia, Canada	100%	Provider of business education and training services in Canada
KGIC Language College (2010) Corp.	February 22, 2010	British Columbia, Canada	100%	Provider of English language education and training services primarily in Canada
IRIX	October 5, 1994	British Columbia, Canada	51%	Provider of graphic design, marketing and advertising services in Canada, Hong Kong and the U.S.

A. History and Development of our Company

Since the beginning of our last completed fiscal year we have conducted the following:

In October 2011, we announced our launch in collaboration with the Open University of China of a Hospitality Management Program, allowing North American students to learn Chinese, earn a hospitality diploma or certificate from AHL-EI and complete a six month internship at 5-star hotels in China with pay and room and board provided.

In November 2011, we announced the launch of AHL-EI programs for hotel industry professionals in Hainan Province, China.

In January 2012, we announced that we entered into a curriculum licensing agreement with the Canadian Institute of Education to establish a GLN Center for CIE to offer Sprott-Shaw’s business and healthcare programs and KGIC’s English language programs to CIE’s students in the northern provinces of Iraq. The Canadian Institute of Education has also agreed to recruit students in Iraq for Sprott-Shaw and KGIC. Students will complete a portion of their studies in Iraq and then transfer to Sprott-Shaw or KGIC’s campuses to further their education and obtain work experience in Canada before returning to Iraq.

In February 2012, we announced an agreement with Beijing Language and Culture University to establish a GLN Center within the university’s Beijing campus. The GLN Center will deliver AHL-EI hospitality programs and KGIC language programs. The agreement also provides for students to transfer to KGIC and Sprott-Shaw for further studies.

In April 2012, we announced that CIBT signed an agreement with Whampoa University of Beijing to establish a GLN Center at its Beijing campus. The GLN Center will deliver AHL-EI hospitality programs and first aid, crisis management, and emergency response training programs.

In May 2012, we announced a program to repurchase our shares using the facilities of the Toronto Stock Exchange. See “Item 16E. Purchase of Equity Securities by the Issuer and Affiliated Purchasers” for further details.

In July 2012, we announced that the GLN platform had been enhanced to include the GLN desktop, which connects students around the world. The GLN desktop allows students to take courses remotely by connecting to teaching studios from their mobile devices and personal computers. The technology uses lower bandwidth, and therefore we believe it will allow us to expand our GLN Center platform to enter more emerging countries and remote regions in the future.

On January 9, 2013, we announced our entry into a non-binding letter agreement to acquire a 95% majority interest in the common shares of Linkman International Language Institute (“Linkman”). The proposed acquisition, if completed, will represent less than 1% of revenues generated for the year ended August 31, 2012, but will enhance our existing business plan for our operations in China. Completion of the acquisition is subject to our satisfactory due diligence review of Linkman, entry into a definitive share purchase agreement, the receipt of all necessary approvals and the satisfaction of all conditions. Linkman is a language training institution in China specializing in English language training for elementary and middle school students, and operates two campuses in the cities of Hangzhou and Xiaoshan, in Zhejiang Province. The company also offers high school and adult English training programs.

Over the next twelve months, our plans are to:

●	further integrate the assets and personnel of KGIC into our operations, especially KGIC’s network of international recruiting offices and agents in order to continue to grow Sprott-Shaw’s international student population;

●	evaluate and, if desirable, complete the acquisition of Linkman that was previously announced on January 9, 2013, integrate the business and assets acquired into our existing operations, and consider the potential acquisition of other assets or businesses that will support our current operations;

●	continue to consolidate and streamline the operations of CIBT, Sprott-Shaw and KGIC, which will include termination of redundant staff and resources among subsidiary schools;

●	continue building a network of new CIBT GLN Centers in additional Asian cities, and further develop our current program offerings, campuses and CIBT GLN Center locations;

●	increase revenues by increasing student enrollments at our campuses and CIBT GLN Center locations;

●	expand the presence of Sprott-Shaw and KGIC in Asia through our CIBT GLN Centers;

●	enhance our product offerings by increasing our focus on the college preparation market and high school preparation market;

●	increase the conversion rates of English language students at KGIC (and all of our other schools) who subsequently enroll in longer certificate or degree-granting programs at Sprott-Shaw and other schools within our system;

●	continue to develop closer marketing and cross-selling relationships between Sprott-Shaw, CIBT and KGIC in order to encourage more Chinese and foreign students to come to Sprott-Shaw’s Canadian campuses to study;

●	maintain strong relationships with our CIBT GLN Center and campus location facility and educational service providers, as well as with the Chinese authorities; and

●	continue to promote our businesses and brands.

Over the twelve months ending August 31, 2013, we estimate our expansion expenses will be approximately $1,000,000, including the acquisition of Linkman. As of August 31, 2012, we had $17,443,635 in deferred educational revenue and $7,964,476 in cash and cash equivalents on hand. We have sufficient cash and cash equivalents on hand to cover our current business commitments, but we may need additional capital to fully carry out our proposed expansion plan, and we may not be able to further implement our business strategy unless sufficient funds are raised, which could cause us to scale back or discontinue any expansion plans.

Capital Expenditures

Our capital expenditures in aggregate for the past two fiscal years beginning September 1, 2010 were $5,430,094, excluding acquisitions, and related primarily to the purchase of property and equipment and leasehold improvements. In addition, capital expenditures currently in progress relate to the same activities. In fiscal 2012, we expended a total of $1,618,793 to purchase property and equipment.

B. Business Overview

OVERVIEW

We are a provider of educational services including business management degree programs, career-oriented diploma programs, and language training services to students through our infrastructure located primarily in Canada and China, as well as other countries around the world. We deliver western-style education to students from emerging Asian countries and Canada, providing our graduates with increased earnings potential working for multinational companies in their home countries or abroad. In addition, we recruit international students to enroll at our Canadian campuses and other locations around the world and provide them with an enhanced learning experience, western credentials and overseas employment experience.

Our goal is to become the leading provider of western-style education in China and Asia, and the largest importer of students to study in Canada.

We deliver our education programs and training services in Canada, China and other countries by ways of:

(a)	Traditional Campus settings (that we call “campuses”);

(b)	Mini-campuses, or Centers, located in urban & remote locations (that we call “centers”);

(c)

GLN Centers located in partner institution campuses (where we enter into arrangements with other educational institutions and organizations in China, Canada and other countries in order to construct a facility within the partner institution’s facility to offer our curriculum and courses using video-conferencing technology);

(d)	Joint Program Schools (where we enter into arrangements with other educational institutions and organizations in China, Canada and other countries in order to share their facilities, resources and programs under a revenue sharing arrangement);

(e)	International recruiting offices (which house our recruitment personnel and marketing agents in foreign countries, which personnel recruit international students and provide student services to support them); and

(f)	Corporate offices (where administrative functions take place).

We operate our education programs and services business through three subsidiaries and industry brands, including: CIBT School of Business and Technology Corp. in China, Sprott-Shaw Degree College Corp. in Canada, and the KGIC Colleges (which includes KGIC Business College (2010) Corp. and KGIC Language College (2010) Corp.), both of which are also located in Canada. In addition, we also hold a 51% interest in IRIX, a multimedia services and advertising company located in Canada.

For a breakdown of our physical locations as at August 31, 2012, please see Table 1 below.

Table 1:

Subsidiary Name	Campuses	Centers	Joint Program Schools	International Recruiting Offices	Corporate Offices	Total
	Full scale teaching facility	Small scale teaching facilities	Programs offered at other academic institutions.	International marketing and recruiting offices	Headquarters and administrative offices
CIBT	1	4	25	0	3	33
Sprott-Shaw	13	3	1	0	1	18
KGIC Colleges	8	1	0	5	0	14
TOTAL	22	8	26	5	4	65

Our target students for our schools are recent high school graduates or adult persons working in urban centers. We believe that our core educational programs in business, hotel and tourism management, and healthcare represent large and growing markets with attractive employment opportunities.

We are a fully integrated provider of educational programs and services. We offer a wide range of education programs and training courses, including: college preparation courses, English language training and certification courses, and diploma and degree programs in business, healthcare, hotel management, information technology, automotive technical training, and corporate executive training. We are the largest trainer of practical nurses in Canada and also offer these programs in other countries. In addition, we offer bachelor’s of business administration programs in China and Canada. We create our own education programs and training services and also offer programs created by other institutions at our campuses and other locations. We seek to achieve continued growth in a manner that reinforces our reputation for providing high-quality career-oriented educational programs that advance the careers of our students. We teach our classes primarily in English and Chinese, and we have a strong track record for placing our students with multinational corporations in China and other countries.

In fiscal 2012, we added new program offerings for Children English and Hotel English, as well as preparatory programs to facilitate recruitment of students into North America. We discontinued a number of program offerings, including programs offered with BJUT and Automotive programs offered using the Wyotech curriculum.

During the year ended August 31, 2012, approximately 97% of our revenues were generated by our education programs and training services business through CIBT, Sprott-Shaw and the KGIC Colleges, with 5% earned by CIBT through its operations in China, 50% earned by Sprott-Shaw through its operations in Canada and abroad, and 41% earned by the KGIC Colleges through their operations in Canada and abroad. The remaining 3% of our revenues was derived from our multimedia services and advertising business, IRIX.

CIBT (China)

Through our subsidiary, CIBT, we have been active in the Chinese market since 1995, and we believe that we are one of the oldest Sino-foreign educational services companies operating in China today. We had a relatively long history of offering high-quality MBA programs, and are now diversifying into the mass market in China with additional career-oriented programs in business, hotel and tourism management, information technologies, automotive training, and English and other studies that we are importing from our subsidiaries in Canada, and through various curriculum licensing agreements from third parties. Within China, we develop new campuses through a three-step process. The first step is to enter into a collaborative agreement with an established post-secondary school or educational provider whereby we offer selected courses that are demand driven by the local market. The second step is to develop a CIBT center, which averages approximately 2,000 to 5,000 square feet of classroom space, through which we offer a more comprehensive course offering, using both on the ground instructors as well as sophisticated video conferencing technology. The third step is to develop a full-scale campus such as our three campuses in Beijing and two campuses in Weifang, China. We believe that our three step collaborative partnering process reduces business risk and provides us with a better assessment of each market, and that our partnering strategy reduces capital costs for new campus expansions, provides us access to a large pool of existing students, and establishes relationships with domestic partners (including state-owned universities) that allow us to operate more effectively under China’s regulatory environment.

We also provide recruitment services to Chinese students wishing to enroll in top tier universities and high schools in North America. In doing so, we offer preparatory programs to assist recruited student with their English language proficiency.

Sprott-Shaw

Sprott-Shaw is one of the oldest and largest career colleges in Canada, with an operating history spanning 107 years. We acquired Sprott-Shaw in December 2007. Sprott-Shaw provides a wide range of educational programs, including vocational training (primary diploma and certificate programs) in business, information technology, allied health, early childhood education, hotel and tourism, skilled trades, practical nursing, resident care attendant and international studies to both high school graduates and working adults in Canada. Sprott-Shaw is the largest trainer of practical nurses in Canada.

Sprott-Shaw is one of only a few for-profit colleges in Canada that is accredited to offer bachelor degrees by the Ministry of Education in British Columbia, Canada. We provide four-year bachelor degree programs in business to Canadian and international students through Sprott-Shaw Degree College in Canada. In addition, CIBT is now using this unique capability to attract additional students from China and other countries to study business programs at Sprott-Shaw’s facilities in Canada. Sprott-Shaw’s degree granting authority has proven to be a distinct competitive advantage for us in attracting students from China and other countries.

Sprott-Shaw currently operates a combined total of 18 locations, including 13 campuses, 3 centers, 1 joint program school and 1 corporate office, in Canada. Sprott-Shaw provides education services through its own leased locations, as well as through collaborative agreements and arrangements with a number of other organizations and institutions in the Philippines, Jamaica, Vietnam and Korea.

KGIC Colleges

KGIC is an English language college with campus locations throughout Canada and overseas recruitment agents across the globe. We acquired KGIC on March 15, 2010. KGIC is one of the largest private English language training schools and business colleges in Canada, with eight campuses in British Columbia, Ontario and Nova Scotia, Canada and five international recruiting offices in China, Japan, Korea, Taiwan, and Spain. These international recruiting offices conduct market research for strategic planning purposes, develop and support their respective networks of independent recruiting agents in order to obtain student enrollments, recruit directly for students, and also facilitate the implementation of joint programs with other institutions.

KGIC provides a range of education programs and training courses in the areas of business management, office management, and career training. It also provides a wide array of English language training courses including ESL, TESOL, power speaking and modern media, interpreting and translation, and various forms of English language test preparation, among others. For fiscal 2012, 65% of KGIC’s revenues were derived from English-related courses generally lasting four to twelve weeks, and 35% were from business and other programs generally lasting one year or less.

Through KGIC Press, KGIC also focuses on curriculum development to better service the changing trends of English learning for international students of various age groups. In-house development of academic and supplementary materials allows KGIC to update its curriculum content and incorporate feedback from instructors periodically in order to cater to changing students’ needs. This has led to a more efficient and structured publishing process over the years. As a result of KGIC Press, KGIC Colleges also operate in the areas of curriculum publishing, custom-designing of program materials for various groups and institutions, graphic design, copy editing and printing for all departments of the KGIC Colleges and its affiliates.

In fiscal 2012, we focused on streamlining our Canadian operations by combining certain job functions, teaching facilities, information technology departments, and program delivery processes, which has generated significant synergies for our business. In addition, we are utilizing KGIC’s well-established network of international recruiting offices to increase enrollments across our entire system of schools in the future.

Some of KGIC’s shorter-term English program students have converted into some of the longer-term programs offered by Sprott-Shaw (including Sprott-Shaw’s four-year bachelor degree program in business administration and one year diploma programs) thereby increasing their overall tenure within our system, and generating enhanced revenues and cash flow for our entire company. Since the completion of the acquisition, a number of KGIC English language students have already enrolled in Sprott-Shaw’s diploma and degree programs.

License Agreements

CIBT was the exclusive licensee (with the ability to sublicense) for the proprietary hotel curriculum of AHL-EI, for China. The license with AHL-EI expired in December 2012. CIBT plans to continue to offer programs based on the AHL-EI curriculum through its Sprott-Shaw subsidiary on a non-exclusive basis as well as other curriculum internally developed by Sprott-Shaw and KGIC, and to engage in recruitment activities for its Canadian campuses and other North American partner schools for a fee.

We are also the exclusive licensee in China for the Wyotech automotive technician curriculum which we license from Corinthian Colleges (NASDAQ: COCO) of the United States. This license expires in October 2015. In preparation for the Wyotech license expiration in 2015, we are now evaluating future opportunities to deliver this program with location-specific content, and we plan to phase out the Wyotech program as the expiry date draws closer.

Additional Educational Programs and International Network

Since there is a disparity between the English standards required by foreign education institutions and that of students in China, we offer international university preparatory programs that consist of six to nine months of English training as well as freshman course work to ease their way into the respective participating university as well as junior and high school preparation programs that consist of English training specifically tailored to subjects taught in junior or high schools in North America. For a full listing of these programs, please see “- Our Operations - Education Service Provider Locations”.

We also have a global network of over 4,000 student recruiting agents in 42 countries. This student recruiting agent network expands our outreach for a greater inflow of international students. Our five overseas recruitment offices engage in the recruitment of, and provide student services for, incoming international students. The infrastructure and student recruiting agent connections created took years to establish, and we believe that it will, therefore, give us an edge when competing on the global market.

Explanation of Student Counts

Throughout this annual report, we present information on student enrollments, and generally use two primary approaches to this issue: figures on total annual student starts and total student populations. A student start is defined as the total number of students who registered with and attended the school at any time during the fiscal year, while total student population is defined as the number of students currently registered at and attending a school on any specified date. We generally present information on student counts for CIBT based on total student populations, and for KGIC and Sprott-Shaw based on annual student starts.

The reason for this difference in reporting mechanisms is that CIBT generally offers programs in excess of one year in length. As a result, it is relatively simple to understand enrollment trends by taking a snapshot of the number of students taking classes at any given time, so total student population numbers are more meaningful for CIBT. However, KGIC offers mostly short term programs (in the range of four to twelve weeks), and Sprott-Shaw offers mostly diploma courses lasting less than one year. Due to the shorter-term nature of enrollment periods for students at KGIC and Sprott-Shaw, and the resulting fluctuations in enrollment numbers at any given point in time due to seasonality and other factors, we believe that the number of annual student starts (or annual throughput) is the most meaningful measure of enrollment trends for these schools, and we generally report enrollment figures for KGIC and Sprott-Shaw on this basis. For more information on enrollment numbers and trends, please see “- Our Operations - Student Enrollments”.

OUR OPERATIONS

Our Colleges

We offer our education programs and training services through the following colleges in China and Canada:

●	CIBT Beihai International College, China (associate degree granted by a Chinese college)

●	CIBT School of Business, China (business and vocational schools)

●	Sprott-Shaw Degree College Corp, Canada (Bachelor degree college/university)

●	Sprott-Shaw Community College, Canada (career and vocational college)

●	KGIC (2010) Language College, Canada (ESL and other English language school)

●	KGIC (2010) Business College, Canada (hotel and business school)

Please refer to Table 1 for a breakdown of our facilities.

Our Campuses, Centers, Locations and Programs

CIBT

CIBT provides education programs and services in China through the facilities listed below.

Subsidiary Name	Campuses	GLN Centers	Joint Program Schools	International Recruiting Offices	Corporate Offices	Total
CIBT	1	4	25	0	3	33

CIBT Campuses

CIBT operates one campus in China at CIBT Beihai International College, which is run through a facility rental/revenue sharing agreement. We do not own the campus.

Campus	Location
CIBT Beihai International College	Weifang, Shandong province, China

CIBT GLN Centers

Our CIBT GLN Center platform was launched in September 2008 as a video-conference based learning platform and education distribution network that has provided CIBT and its Asia-based academic partners with the ability to distribute Western education programs globally from a centralized location by utilizing real-time video conferencing technology. Our courses are taught from our teaching studios located in Beijing, China (opened in September 2008) and Vancouver, Canada (opened in March 2011). The infrastructure has facilitated the creation of a live, interactive learning environment and allowed us to increase our enrollment capacity by leveraging our existing resources.

We provide our programs and services in China at our CIBT GLN Centers which are organized within an established local university or college through cooperation agreements between us and the respective university or college. The cooperating university or college leases its facilities to us, while we renovate classrooms and provide video conferencing equipment. Each of these CIBT GLN Centers are equipped with video conferencing equipment to enhance the learning experience of students by connecting North American and European instructors with Chinese students in a live and real time video conference environment. Using video conferencing technology, we plan to centralize our programs at our Vancouver and Beijing studios, and reduce the need for instructors to travel abroad to CIBT GLN Center locations.

We currently operate four CIBT GLN Centers in China as described below.

Centers	CIBT GLN Centers	Location
Guangzhou CIBT GLN Center, China	Guangzhou University	Guangzhou, Guangdong Province, China
Jinhua CIBT GLN Center, China	Jinhua Career & Technical College	Jinhua, Zhejiang Province, China
Zhangzhou, CIBT GLN Center, China	Zhangzhou Normal University	Zhangzhou, Fujian Province, China
Weifang CIBT GLN Center, China	Weifang Technician College	Weifang, Shandong Province, China

CIBT has entered into signed agreements or memorandums of understanding with the following institutions to deliver CIBT programs using its video conferencing GLN at partners’ campuses:

Joint Program Schools	Location
Baotou Normal University	Baotou, Inner Mongolia
Beijing Gucheng Tourism Vocational College	Beijing
Beijing Language and Culture University	Beijing
China International Travel Service	Beijing
Chongqing Light Industry Polytechnic College	Chongqing
China Central Radio & TV University	Beijing
Grand Skylight Catic Hotel Beijing	Beijing
Guangzhou University, Guangdong Boya	Guangzhou, Guangdong
Guangdong Zhaoqing College	Zhaoqing, Guangdong
Guizhou Puruisiting Hotel Management Company	Guizhou
Guizhou Xingke Hotel Management Company	Guizhou
Hainan College of Business and Economics	Hainan
Hainan Labor Bureau HR Development	Hainan
Hangzhou Xingang Education Training Corporation	Hangzhou, Zhejiang
Zhejiang University	Zhejiang
Hebei Radio & TV University	Hebei
Henan Radio & TV University	Henan
Xiangxi Congwen Education Group	Xiangxi
Ningbo Vocational and Technology College	Ningbo
Nuoshan Investment Consulting Company	Nuoshan
Ordos Vocational High School	Inner Mongolia
Phoenix Hotel Management Company	Guangzhou, Guangdong
Shanghai Huamao Learning Institute	Shanghai
Hebei Normal University	Hebei
Taiyuan Foreign Language Association	Taiyuan, Shanxi
Whampoa University of Beijing	Beijing
Wuhan Chutian Education Consulting Company	Wuhan, Hubei
Yunnan Education Exchange Centre	Yunnan

CIBT Joint Program Schools

We have joint program schools at the 14 locations in China as listed below. The majority of these are related to offering our AHL-EI hotel and tourism programs.

Joint Program Schools	Location
CIBT AHL-EI Joint Program at Kunming Center	Kunming, Yunnan Province
CIBT AHL-EI Joint Program in Guizhou	Guizhou, Guizhou Province
CIBT AHL-EI Joint Program at Beijing Hospitality Institute	Beijing
CIBT AHL-EI Joint Program in Chongqing	Chongqing, Sichuan Province
CIBT AHL-EI Joint Program at Sichuan University-Suzhou	Suzhou, Jiangsu Province
CIBT AHL-EI Joint Program in Sichuan-Chengdu	Chengdu, Sichuan Province
CIBT AHL-EI Joint Program in Changsha	Changsha, Hunan Province
CIBT AHL-EI Joint Program in Shengyang	Shenyang, Liaoning Province
CIBT AHL-EI Joint Program in Sanya	Sanya, Hainan Province
CIBT AHL-EI Joint Program in Shenzhen	Shenzhen, Guangdong Province
CIBT AHL-EI Joint Program in Wuhan	Wuhan, Hubei Province
CIBT AHL-EI Joint Program in Zhengzhou	Zhengzhou, Henan Province
CIBT AHL-EI Joint Program in Shenzhen Fuyou	Shenzhen, Guangdong Province
CIBT AHL-EI Joint Program in Guangzhou	Guangzhou, Guangdong Province

CIBT Job Placement Center

Our full scale job placement center, named the Global Career Center, in Manila, Philippines was established in 2010 to seek out potential employers for our students. We employ operators at the Global Career Center to contact local companies to generate job postings for our students, then we recommend a list of our graduates that fit the profile of the job posting. Over the last fiscal year, the Global Career Center placed 495 graduates into industry jobs and had 4,650 job postings listed for our graduates. The Global Career Center is currently servicing students studying at Sprott-Shaw and CIBT. We plan to extend its services to a limited number of KGIC’s students in the future.

CIBT Corporate Offices

We operate CIBT through three corporate offices, including our global corporate headquarters office in Vancouver, British Columbia, Canada, and the two branch/regional offices in China listed below.

Offices	Location
Global Corporate Headquarters Office	Vancouver, British Columbia, Canada
Beijing Office	Beijing, China
Weifang Office	Weifang, Shandong Province, China

Sprott-Shaw

Sprott-Shaw provides education programs and services in Canada, the Philippines, Vietnam and Korea through the facilities listed below.

Subsidiary Name	Campuses	Centers	Joint Program Schools	International Recruiting Offices	Corporate Offices	Total
Sprott-Shaw	13	3	1	0	1	18

Sprott-Shaw Campuses

Sprott-Shaw provides its education programs and services in Canada at the 13 campuses listed below, as well as one additional shared campus with KGIC, which is also located in Vancouver (Downtown). All of Sprott-Shaw’s campuses are leased.

Campus	Location
Port Coquitlam Head Office	Port Coquitlam, British Columbia, Canada
Abbotsford	Abbotsford, British Columbia, Canada
East Vancouver	East Vancouver, British Columbia, Canada
Kamloops	Kamloops, British Columbia, Canada
Maple Ridge	Maple Ridge, British Columbia, Canada
Nanaimo	Nanaimo, British Columbia, Canada
New Westminster	New Westminster, British Columbia, Canada
Penticton	Penticton, British Columbia, Canada
Prince George	Prince George, British Columbia, Canada
Surrey	Surrey, British Columbia, Canada
Vancouver (Downtown)	Vancouver, British Columbia, Canada
Vernon	Vernon, British Columbia, Canada
Victoria	Victoria, British Columbia, Canada

Sprott-Shaw’s campuses in Chilliwack and Duncan were closed in November 2012, the campus in Vernon will be shut down in February 2013, the campus in Maple Ridge will be shut down in May 2013, and the campus in Prince George will be shut down in January 2014, as they were unprofitable and lost their student loan designations. Closing these locations will also Sprott-Shaw to consolidate its operations and resources.

Sprott-Shaw Centers

Sprott-Shaw provides a number of its programs through Sprott-Shaw centers located in the Philippines. As the number of our schools grows on a corporate-wide basis, it is our intention to provide Sprott-Shaw’s vocational (and potentially degree-granting) programs through collaborative alliances in many countries in Asia and potentially around the world. Currently we provide courses through three centers in the Philippines.

Centers	Facility Provider	Location
Quezon SSCC Center, Philippines	Far Eastern University	Quezon, Philippines
Manila SSCC Center, Philippines	Far Eastern University	Manila, Philippines
Silang SSCC Center, Philippines	Far Eastern University	Silang, Philippines

Sprott-Shaw Joint Program Schools

Sprott-Shaw is operating one joint program school in Jordan and has one additional joint program school in Vietnam in development. Joint program schools use Sprott-Shaw’s western curriculum to teach courses in their home country and provide Sprott-Shaw with a licensing fee.

Joint Program Schools	Location	Status
Sprott-Shaw Jordan Joint Program	Amman, Jordan	Operating
Sprott-Shaw Vietnam Joint Program	Hanoi, Vietnam	In Development

Sprott-Shaw Corporate Offices

Sprott-Shaw is operated out of a single corporate office of approximately 8,000 square feet in Port Coquitlam, British Columbia, Canada, which is located approximately 20 miles from our head office in downtown Vancouver, British Columbia, Canada. In addition to providing corporate administrative services at the Port Coquitlam location, the facility also includes space through which Sprott-Shaw provides its construction trades and electrical programs to Sprott-Shaw students.

KGIC Colleges

KGIC provides education programs and services in Canada through the facilities listed below.

Subsidiary Name	Campuses	CIBT Centers	Joint Program Schools	International Recruiting Offices	Corporate Offices	Total
KGIC Colleges	8	1	0	5	0	14

KGIC Campuses

KGIC provides its education programs and services in Canada at the 8 campuses listed below, one of which is shared with Sprott-Shaw located in Vancouver (Downtown), and all of which are leased.

Campus	Size (Square Feet)	Location
KGIC Vancouver Campus	22,295	Vancouver, British Columbia, Canada
KGIC Vancouver Business College Campus	14,071	Vancouver, British Columbia, Canada
KGIC & KGI Business College Victoria Campus	10,961	Victoria, British Columbia, Canada
KGIC Surrey Campus	9,152	Surrey, British Columbia, Canada
KGIC Toronto ESL Campus	12,435	Toronto, Ontario, Canada
KGIC Toronto Business Campus	8,610	Toronto, Ontario, Canada
KGIC & KGIBC Overflow Melville Campus	4,665	Vancouver, British Columbia, Canada
KGIC Halifax Campus	5,007	Halifax, Nova Scotia, Canada

KGIC Centers

KGIC plans to provide some of its programs through KGIC centers located primarily in foreign countries. Currently KGIC provides courses through one KGIC center located in the United States:

KGIC Center	Size (Square Feet)	Location
Northern State University – KGIC Center	1,200	Tahlequah, Oklahoma, United States

KGIC Joint Program Schools

KGIC is primarily a stand-alone English language training school, and secondarily a stand-alone business and hotel and tourism college. As a result, it has no joint program schools.

KGIC International Recruiting Offices

KGIC operates international recruiting offices, all of which are located in leased facilities, in the five countries listed below. Personnel in these international recruiting offices manage networks of international agents providing students for KGIC, and also recruit students directly for KGIC. They also assist in doing market research and evaluating the potential of establishing joint programs within their respective countries of operations. We share this network of international recruiting offices and international agents with CIBT and Sprott-Shaw, and we organize joint marketing efforts overseas to make full use of available resources. Continuing efforts to jointly market all subsidiary school programs could have a significant effect on future enrollments into our entire consolidated group of companies.

Recruiting Office	Location
KGIC International Office China	Beijing, China
KGIC International Office Japan	Tokyo, Japan
KGIC International Office Korea	Seoul, Korea
KGIC International Office Taiwan	Taipei, Taiwan
KGIC International Office Spain	Valencia, Spain

Educational Service Provider Locations

In addition to the Sprott-Shaw and KGIC campuses that we own in Canada, we generally employ a partnering strategy for our other campuses, centers and joint program schools (and this includes all of our educational locations in China) in order to physically deliver our educational services to our students. Accordingly, we have entered into numerous arrangements with organizations and institutions in China, Canada, Korea, Vietnam, Jamaica, Australia, New Zealand, Switzerland, the Netherlands, the United States, the United Kingdom, Iraq, Jordan and other countries, the terms of which range from offering our own programs and services, to delivering programs prepared by these institutions, to developing programs (and/or joint programs) for these institutions, and allowing student exchanges, through our University College Prep programs, with other educational institutions located around the world.

These educational service provider locations primarily serve as the international component of many of the programs that we offer. Our revenue sharing models differ greatly among these many different programs and locations, and some of them result in no direct payments of tuition at all to CIBT; rather, we enter into agreements to be paid student referral fees. We believe that this broad international network is a significant competitive advantage for our company, and provides our students with unique multinational educational opportunities offered by us.

While we do not own, lease or directly control many of these sites, it is our intention to continue expanding our network of international educational service provider locations as an accommodation to our students in order to facilitate their international educational desires.

The chart listed below details the full array of our relationships with international educational service providers, as well as the countries in which we have agreements and the programs offered therein.

Academic Partners List
Country	Academic Partner	Types of Programs	Subsidiary
Australia	La Trobe University	2+2 Bachelor Degree Program	CIBT
	William Blue College	2+2 Bachelor Degree Program	CIBT
	La Trobe University	University Prep Program	CIBT
	University of New South Wales	University Prep Program	CIBT
	University of Wollongong	University Prep Program	CIBT
	University of South Australia	University Prep Program	CIBT
	Macquarie University	University Prep Program	CIBT
Canada	Thompson Rivers University`	2+2 Bachelor Degree Program	CIBT
	Sprott-Shaw Degree College	2+2 Bachelor Degree Program	CIBT
	York University	University Prep Program	CIBT
	Seneca College, Toronto	University Prep Program	KGIC
	Centennial College, Toronto	University Prep Program	KGIC
	Algonquin College, Ottawa	University Prep Program	KGIC
	Sheridan College, Oakville, Toronto	University Prep Program	KGIC
	University of PEI	University Prep Program	KGIC
	University of New Brunswick	University Prep Program	KGIC
	University of Victoria, BC	University Prep Program	KGIC

Academic Partners List
Country	Academic Partner	Types of Programs	Subsidiary

China	Jinhua Career & Technical College	English Training, Business Program	CIBT
	Zhangzhou Normal University	English Training, Business Program	CIBT
	Weifang Technician College	Automotive Program	CIBT
	Weifang University	English Training, IT Programs, Automotive Training Programs, Corporate and Executive Training, Business Admin, Accounting Program	CIBT
	Kunming Youzi Training Centre	AHL-EI Program	CIBT
	Guizhou China Tourism Corp.	AHL-EI Program	CIBT
	Beijing Hospitality Institute	AHL-EI Program	CIBT
	Chongqing Jinxiuqiancheng Education Consulting Company Ltd.	AHL-EI Program	CIBT
	Sichuan University Suzhou Academy	AHL-EI Program	CIBT
	Changsha Liyou Education Consulting Company Ltd.	AHL-EI Program	CIBT
	Shenyang Bohiu Education Training Center	AHL-EI Program	CIBT
	Sanya Tech Vocational College	AHL-EI Program	CIBT
	Shenzhen Qijian International Hotel Training Institute	AHL-EI Program	CIBT
	Wuhan Jinhe Hotel Management Company Ltd.	AHL-EI Program	CIBT
	Zhengzhou Junyue Culture Media Company Ltd.	AHL-EI Program	CIBT
	Shenzhen Fuyou International Education Investment Company Ltd.	AHL-EI Program	CIBT
	CIBT Beijing School of Business	2+2 Business Program	SSDC
	Canadian-Jordanian Institute	Business Programs	SSDC
Jordan	Help University College	2+2 Bachelor Degree Program	CIBT
Malaysia	Hanze University Cronigen	2+2 Bachelor Degree Program	CIBT
Netherlands	UNITECH Institute of Technology	2+2 Bachelor Degree Program	CIBT
New Zealand	Maridian International Business & Arts College	2+2 Bachelor Degree Program	CIBT
Philippines	Far Eastern University	Allied Health Care, Hotel and Tourism Management	SSDC
	Manuel S. Enverga University Foundation	Allied Health Care, Hotel and Tourism Management	SSDC
	Treston International College	Hotel and Tourism Management, Accounting/information technology, international trade and business	SSDC
	University of Baguio	Hotel and Tourism Management	SSDC
	International Hotel Management School	2+2 Bachelor Degree Program	CIBT

Academic Partners List
Country	Academic Partner	Types of Programs	Subsidiary

Switzerland	The University of Portsmouth	2+2 Bachelor Degree Program	CIBT
United Kingdom	London Hotel School	2+2 Bachelor Degree Program	CIBT
	University of Derby	2+2 Bachelor Degree Program	CIBT
	Lancaster University	University Prep Program	CIBT
	Bangor University	University Prep Program	CIBT
	University of Essex	University Prep Program	CIBT
	Swansea University	University Prep Program	CIBT
	Portsmouth University	University Prep Program	CIBT
	California State University, Sacramento	2+2 Bachelor Degree Program	CIBT
United States	Detroit University Mercy	2+2 Bachelor Degree Program	CIBT
	Johnson and Wales University	2+2 Bachelor Degree Program	CIBT
	Purdue University	University Prep Program	CIBT
	University of California	University Prep Program	CIBT
	Michigan State University	University Prep Program	CIBT
	Detroit University Mercy	University Prep Program	CIBT
	Kansas State University	University Prep Program	CIBT
	Patten University	Pre-Masters Program	CIBT
	Northeastern State University Oklahoma	Pre-Masters Program	CIBT
	Wyotech Institute	Automotive Training Programs	CIBT
	National University, San Diego	University Prep Program	KGIC
	Antioch University	2+2 Business Program	SSDC
	Lawrence Technological University	Pre-EMBA Program	SSDC
	AHL-EI (American Hotel and Lodging Educational Institute)	Hotel and Tourism Management	SSDC

Our Educational Programs

We place great emphasis on the quality of our courses and learning materials, both in terms of substance and production quality to enhance course participants’ learning experience. Working together with our lecturers in each subject, we internally develop and produce the online lectures for all of our courses. We employ a variety of measures including substantive content review and content approval at various stages of the course development process by our experienced in-house personnel in order to create high-quality courses.

CIBT

CIBT offers accreditations and certifications in courses ranging from business to hospitality and tourism management training in China. It also offers English language programs and prep programs using the curriculum developed by KGIC. Certain information relating to CIBT’s programs in China is set forth below.

Name of Program	Duration of Program	Description
Automotive Technical Training Programs (auto training programs)	From three months to three years	CIBT’s auto training program is designed to teach students how to disassemble, inspect and assemble engines and accessories, cooling systems, transmissions and clutches, drive lines, and braking and suspension systems. Differing numbers of courses are provided depending on the duration of study. This program includes a short-term program (three months), a mid-term program (eighteen months) and a three-year program.
English Program	From one month to four months	CIBT’s English program is intended to assist students to develop listening and speaking skills and recognize and practice grammatical structures and sentence patterns. CIBT offers two different schedules for this program, a one month intensive program, or a weekends-only program that is conducted over the course of four months.
English Teacher Program	From three to nine months	CIBT provides a program to English instructors with high-intermediate to advanced proficiency in English. The program focuses on topics inspired by current language teaching approaches, methods and practices and is designed to meet the changing needs and interests of students.
Hotel Management Program	From one to three years	CIBT’s hotel management program is designed to teach students all aspects of hotel management, including rooms, food and beverage, culinary, marketing and sales, conferences and catering. CIBT offers general courses such as business communications and computer skills to ensure students meet industry demand regarding technical and interpersonal skills.
Accounting Program	Three years	CIBT’s accounting program gives students the financial and planning information to solve management problems and provides the necessary skills to help students develop, improve, and implement operating procedures in a management accounting context.

Sprott-Shaw

Sprott-Shaw offers accreditations and certifications in courses ranging from business to health sciences, trades and applied technology, international studies and English. Certain information relating to the programs provided by Sprott-Shaw in Canada, the Philippines and Jamaica is set forth below.

Name of Program	Duration of Program	Description
Business Program – Bachelor of Business Administration	Four years	The Bachelor of Business Administration provides concentrations in the following functional areas of business: Accounting, Finance, Production, Marketing, Industrial Relations, Law and Human Resources Management. Additional concentrations in Marketing and Human Resources are also available.
Bachelor of Business Administration – Accounting Concentration	Four years	Graduates of a Sprott-Shaw Bachelor of Business Administration – Accounting Concentration program are given transfer credits into the CGA (Certified General Accountant) Program up to Level 4.
Business Program – Diploma	12 to 45 weeks	Programs offered within the Faculty of Business include: Administrative Assistant, Legal Secretary, Medical Office Assistant, Advanced Business Management & E-Commerce, Business Administration, Business Office Concepts, Marketing & Sales Essentials, Payroll Administrator, Professional Business Management, Tourism Hospitality Management and Flight Attendant.
Advanced Diploma in Business Administration (ADBA)	Two Years	Students who would like to complete only the first two years of the BBA program may receive the Advanced Diploma in Business Administration (ADBA)
Health Sciences & Social Development – Diploma	27 to 50 weeks	The Faculty of Health Science & Social Development provides programs in: Community Support Worker (Assisted Living and Social Services), Early Childhood Education (Basic and Post-Basic), Pharmacy Technician, Practical Nursing, Resident Care Attendant and Spa Body Therapy.
Trades & Applied Technology – Diploma	26 weeks to 1 year	The Faculty of Trades & Applied Technology provides the following programs: Residential Construction Framing Technician, Construction Electrician – Level 1 and 2, and Electrical Apprentice Training.
International Studies	25 to 45 weeks	International Studies provide programs in International Hospitality Management, International Trade & Business Management, and International Trade Diploma.
Accelerated Programs	12 to 24 weeks	Accelerated Programs include Business Management & E-Commerce, Business Administration, Legal Secretary, Medical Office Assistant, Pharmacy Technician, Professional Business Management, Tourism and Hospitality Management, and Payroll Administrator.

KGIC

KGIC offers the following programs in the areas of language training, career training and publishing, primarily in Canada:

Name of Program	Duration of Program	Description
Advanced Business Management Diploma Program	52 weeks	This program formally integrates a student's academic studies with paid or unpaid work experience at companies in Canada, and is designed for those students who wish to gain practical experience in the field of business during their studies.
Business Management Diploma and Certification Programs	3 to 25 weeks	The Business Management Program offers both experienced professionals and newcomers to business the chance to prepare for a successful career. The global focus and broad selection of module topics provides students with a range of different specialties, thereby allowing them to discover which areas they are best suited to. Programs include field trips and expert industry guest speakers.
Interpreting and Translation – Korean Diploma Program	8 weeks	Interpreting and Translation - Korean (“IT-K”) is designed to provide students with the competitive edge they need to find employment in the international business field. Our translation programs are taught by a team of native Canadian English speakers and qualified Korean multi-lingual instructors, and include a one-on-one counseling component to discuss individual progress and performance.
Business Interpreting and Translation – Korean Diploma Program	4 weeks	Business Interpreting and Translation enables students to use interpreting and translation techniques to discuss common business topics, such as sales and marketing, in order to improve the quality of business communication and correspondence. This program offers extensive lessons in vocabulary, grammar, speaking, reading comprehension and writing. Content is tailored to Korean students to better prepare them for careers in the business world.
English Preparation for Teachers Certificate Program	4 weeks	English Preparation for Teachers is a program with targeted English development for ESL/EFL teachers. This program also serves as a refresher for practicing teachers, and builds classroom management language and corrects common grammatical errors.
Teaching English to Speakers of Other Languages Certificate Program	4 to 8 weeks	TESOL is the original program and the definitive course to learn how to teach English to speakers of other languages. This four week intensive program covers the four mains skills (listening, speaking, reading and writing), as well as the key systems (lexis, phonology and grammar) inherent in language teaching. On completion of this course graduates will have the knowledge and skills to step into the classroom as instructors.
TESOL for Children Diploma Program	4 to 8 weeks	TESOL for Children is a highly practical course that fully prepares its graduates for the challenging job of teaching English to children. This four week intensive program builds on the skills developed in TESOL as all of the TESOL subjects are explored from the perspective of teaching to children. On learning about physical, cognitive and emotional development, students can then apply that knowledge to teaching topics like reading, writing and phonics. The course also covers the effective use of games, songs, chants and drama to motivate children for long term learning. On completion of this course graduates will be ready to instruct children learning English as a second language in a wide variety of situations.

Name of Program	Duration of Program	Description
TESOL for Middle School Diploma Program	4 to 8 weeks	TESOL for Middle School is a demanding, yet practical course that prepares graduates to teach elementary, middle and high school students. This program builds upon the techniques and skills students learn in TESOL. Students prepare and deliver two content-based micro-teaching lessons in the areas of Science and Geography, then complete a final ESL/content-based integrated micro-teaching lesson. This program also features many opportunities for students to learn and practice their English speaking skills, especially the language commonly used in a classroom situation. This course also prepares students who wish to take the TKT Cambridge Exam, a test focusing on examining primary, secondary and adult learning teaching knowledge for teachers seeking employment in these areas.
TESOL-Adult Diploma Program	4 to 8 weeks	TESOL for Adults is a program that provides comprehensive teacher-training by blending theory and practical skills. This intensive program gives our trainees the opportunity to learn many types of teaching styles and techniques as a method of building confidence to teach English, and to provide students with a greater appreciation of the teaching profession. On completion of this course, graduates will have been guided through a process of becoming knowledgeable and dedicated instructors and meet the rising standards of professional development in the ESL industry.
TESOL-Advanced Diploma Program	4 to 8 weeks	TESOL Advanced is the program required to become a TESL Canada certified teacher, and requires a higher level of English proficiency, reflected by more challenging entrance requirements. The course uses the same curriculum and textbooks as the regular TESOL program, but the assessments are more challenging and the practicum requirement is for a higher number of teaching hours.
TESOL for Test Preparation Diploma Program	4 to 8 weeks	This course covers the methodology and planning that can be applied to teaching any standardized English language exam. Different types of tests and testing questions are examined in the four skills of reading, listening, speaking, and writing. The exam-specific sections of the course focus on two of the most important academic tests in English language proficiency: the TOEFL iBT and IELTS Academic exam. Course participants are required not only to demonstrate their ability to teach exam preparation classes, but also to show they understand the format, testing points, and scoring systems of these two tests.
Power Speaking and Modern Media Diploma & Certification Programs	4 to 8 weeks	The Power Speaking and Modern Media program offers training in public speaking and the media and is designed to improve communication skills while exploring the world of modern media. The program uses current events, popular culture, movies and television to help students express themselves with confidence, ease and accuracy. This program also offers students the chance to develop professional presentation skills. PMM students are offered the ACTFL OPic speaking test at the end of their program free of charge. KGIC is the only private language school in Canada licensed to administer this test.
International English Language Testing System (“IELTS”) Certificate Program	4 to 12 weeks	IELTS is the world's leading English test, used by organizations, government agencies, universities and colleges through-out the world. This program is designed to assist students in preparing for this test and to improve their overall English skills.

Name of Program	Duration of Program	Description
Test of English as a Foreign Language Certificate Program	4 to 8 weeks	The Test of English as a Foreign Language is designed to assist students to prepare for the TOEFL test and provides exercises in grammar, listening, reading and composition. TOEFL also includes one-on-one after school counseling, and immediate feedback and error correction. In addition, the program includes school placement counseling for students interested in attending university in North America.
First Certificate in English Cambridge (“FCE Cambridge”) Certificate Program	4 to 12 weeks	The program is an intensive test preparation program for the FCE Cambridge, focusing on building exam vocabulary and exam-taking techniques, and incorporating weekly progress testing. The program includes general language classes to build grammar, reading, writing, listening and speaking skills. Students focus on language used in everyday work, study and leisure settings.
Business English Diploma Program	4 to 12 weeks	The program is primarily a communications course targeting all students working in an English-speaking business environment. As a communications course, the program offers tips and recommendations on how to polish writing and speaking skills and focuses on business conversation, business issues and presentation skills.
Intermediate – English Preparation for Post-Secondary Education Certificate Program	4 to 8 weeks	This program trains students in university-specific skills such as speaking, academic reading and writing, listening and note-taking. Access to experienced and helpful teachers, informative Pathway Program advisors, and knowledgeable academic counselor are additional benefits of this I-EPE program. This program also offers high level training and preparation for KGIC’s English Preparation for Post-Secondary Education Certificate Program.
English Preparation for Post-Secondary Education Certificate Program	4, 8, or 12 weeks	This program is the official Pathway Program at KGIC. No official test score is needed to gain entry to select colleges and universities affiliated with KGIC. The program introduces students to intensive reading and writing practice including paraphrasing, summarizing and researching, and offers academic preparation covering all areas, including reading, writing, speaking, vocabulary, study skills and note taking. The program also includes a wide variety of college-level curriculum topics in each module. Monthly tests and academic counseling are provided to evaluate student progress, and assistance is provided with selecting and applying to KGIC Pathway colleges and universities in Canada and the United States.
English as a Second Language Program Adults	Weekly intakes	This program is designed to help students improve in all skill areas including grammar, reading, writing, speaking, listening and pronunciation. The flexibility offered by this program allows students to study at a level that directly corresponds to their ability in each skill area.
English as a Second Language Program Children and Juniors	2 months per level	KGIC incorporates Canadian public schools materials into this program by incorporating British Columbia elementary and secondary school books and English as a Second Language guidelines. This approach allows students to develop their English skills for academic purposes, so that the ability to speak, think and express themselves in the classroom all become part of their day-to-day communication abilities.
Global Leaders Summer Camp Surrey	2, 3 or 4 weeks	Students study grammar, reading and writing, listening and communication skills during morning classroom sessions, followed by afternoon participation in social activities, such as sports, media and arts clubs. The course emphasizes developing communication skills in a group setting, as well as on each individual’s presentation skills.
Toronto Summer Fun Toronto	2, 3, or 4 weeks	This program is designed as a summer program targeted at an international student population wishing to study English in Toronto during the day, and participate in organized social activities in the evening, giving students the opportunity to experience Canadian culture and socialize with each other.
Trailblazer Outdoor Adventure	4 weeks	A Trailblazer is a person who is looking for a personal adventure in a leadership role. Trailblazers challenge themselves to step outside their "comfort zone" and learn more about life, the wilderness, Canada, English and their personal abilities. The course is designed so that participants work together in different problem solving scenarios. Each Trailblazer learns to lead the group regardless of his or her age or nationality.

Our Lecturers

Our business requires that we hire lecturers and instructors with knowledge of the subjects taught as part of the programs offered by us.

Our course lecturers and instructors include academics from renowned higher education institutions in China and Canada and experienced practitioners within their respective fields. Our lecturers and instructors work with us to prepare the course content and lectures, while also serving as faculty members of various colleges and universities across China and Canada or working in their respective fields.

To ensure the quality of our lecturers and instructors, we have established stringent selection and retention criteria and have implemented ongoing monitoring and evaluation procedures. We seek to engage lecturers and instructors who have a strong command of their respective subject areas and good communication skills. Our internal quality control personnel regularly monitor the teaching quality of each lecturer and instructor. We also collect feedback on the lecturers and instructors from our course participants on a regular basis. We provide ongoing training for lecturers and instructors and help them improve their online presentation skills based on this feedback.

We pay our lecturers and instructors based on the number of hours of lectures or instruction they deliver, or on occasion, based on a course fee sharing arrangement primarily for some of our newer courses.

Although our lecturers and instructors participate in the creation and development of the course materials, in almost all cases, we own all copyrights to our courses and course materials pursuant to contracts with our lecturers and instructors.

Student Enrollment Statistics

During the fiscal year ended August 31, 2012, the number of student starts in China was 1,006, and the student population in programs offered by CIBT was 1,301, the number of annual student starts in programs offered by Sprott-Shaw was 3,006 and the number of annual student starts in programs offered by KGIC was 7,364. A student start is defined as the number of students who registered with the school (and took classes) at any time during the fiscal year. Student population is defined as the total number of students currently registered (and taking classes) at the school on any specified date.

Our education business in Canada is operated through our subsidiaries, Sprott-Shaw and KGIC, whose operating revenues contribute a significant amount of the Company’s total revenue. The majority of KGIC’s students take English programs range in duration from four to twelve weeks. Once their English program is finished and a new English student is enrolled, that new student will also count as a start, even though the total number of students actually taking classes at any given time (i.e. the total student population) has not increased. As a result, total student starts for a year for KGIC significantly exceeds the total student population at KGIC at any given time due to the relatively large percentage of KGIC students that are enrolled in shorter-term English programs. This is true to some degree for Sprott-Shaw as well, but not to the same extent as at KGIC.

In contrast, most of CIBT’s students are enrolled in courses that are one year (or longer) in length with the exception of the AHL-EI programs, so this phenomenon is not very pronounced at CIBT. Due to this anomaly, we generally report total student population figures (as opposed to total annual student start figures) for CIBT, but total annual student starts for KGIC and Sprott-Shaw. As a result, the reader must be careful to discern between the two terms when evaluating enrollment figures presented using these two different types of enrollment reporting mechanisms.

Presented below is a chart indicating total annual student starts, as well as total student population figures, for each of our subsidiaries in the education industry. Due to the higher proportion of shorter-term students at KGIC, the disparity between total annual student starts and total student populations is greater for KGIC than for the other two schools. Accordingly, it is our strategy going forward to encourage more English language students at KGIC to take longer-term (vocational and business) diploma and degree programs at Sprott-Shaw and potentially other schools that we own, which over time, due to the accumulation of these students into the total student population figures, should increase the total student population at KGIC. We believe this will have the effect of increasing our overall revenues and net income on a consolidated basis.

Subsidiary Name	Total Annual Student Starts (9/1/2011 – 8/31/2012)	Total Student Populations as at 8/31/2012
CIBT	1,006	1,301
SSDC	3,066	2,355
KGIC	7,364	1,446
Total	11,436	5,102

Student Graduation and Employment

We place a high priority on assisting our students in graduating from their programs of study and securing employment in their careers of choice. We believe that the employment of our students in their field of study is a key indicator of the success of our schools and the fulfillment of our educational mission. Our schools strive to share with each student the responsibility for the student’s long-term success. Our emphasis on providing personal support and assistance to our students is a hallmark of our educational model.

Several of our campuses have career services departments whose primary responsibility is to assist our students in identifying employment opportunities in their chosen fields of study after graduation. Career services staff members provide our students with a variety of career development instruction, which addresses, among other things, the preparation of resumes and cover letters, interviewing skills, networking and other essential job-search tools, as well as ongoing career service resources, which are generally available to both current students and alumni. In addition to our career services personnel, we have many externship coordinators who help students obtain externships that prepare them to compete in the employment market.

With a goal to increase job placements for our graduates, we started a call center in Manila, Philippines. Call center agents call employers in relevant industries seeking job openings for graduating students, then submit video resumes for the students.

Instructors

Our various schools employ both full time and part time instructors to teach their classes. The number of instructors employed is provided below.

	Full-time instructors	Part-time instructors	Total number of instructors
CIBT	10	3	13
Sprott-Shaw	34	144	178
KGIC	34	95	120
TOTAL	78	242	320

With respect to instructors, KGIC employs the highest percentage of full time instructors (28% versus 19% for Sprott-Shaw). In March 2012, a group of approximately 47 instructors at KGIC signed a collaborative agreement with KGIC. The increase in payroll for these instructors has been set at 2% per year. There are approximately 40 instructors at KGIC that are currently represented by a union.

Total Employees

In addition to instructors, the schools each employ a number of people to provide administration, student counseling, placement, bursar and registrar functions, as well as marketing, admissions and enrollment, financial aid processing and other clerical, administrative, managerial and executive functions. Figures for these additional employees are presented below as at August 31, 2012.

	Total Instructors	Administrative and Other Employees	Total Employees
CIBT	13	35	48
Sprott-Shaw	178	138	316
KGIC	129	71	200
TOTAL	320	244	564

In addition, our head office in Vancouver employs 10 full-time personnel who oversee our operations and carry out strategic planning, corporate communications, marketing, financing, human resources and information technology functions.

IRIX has a total of 16 employees working from our head office in Vancouver as follows:

Function	Number of Employees
Art Director	1
Office Manager	1
Marketing Managers	2
Project Manager	1
Designers	5
Copywriters	2
Web Developer	1
Account Executives	3

Marketing and Student Recruitment

We believe prospective students are attracted to our schools due to our brand name, the quality of our programs, our relatively long operating history in the private education sector, our extensive international network and our ability to provide training which is relevant in obtaining jobs from multinational corporations and other employers in China and elsewhere. Our subsidiaries employ a variety of marketing and recruiting methods to attract students and increase enrollments. CIBT uses recruitment channels such as recruiting agents, direct recruitment from government colleges and student referrals. CIBT also relies on Internet and newspaper advertising. Sprott-Shaw’s student recruitments are generated through a combination of recruiting agents and student referrals and Sprott Shaw relies on traditional marketing methods including radio, television, newspaper and bill board advertising. KGIC primarily relies on recruiting efforts through a network of overseas recruiting agents and government sponsorship programs as well as student referrals. Some of these recruiting methods are described below.

Recruiting Agents and Referrals . We use a wide network of educational recruiting agents who are engaged to actively promote our programs and recruit students. Historically, a large portion of our student enrollments have come from recruiting agents and word-of-mouth referrals. Our student enrollments have benefited and will continue to benefit by referrals from our extensive network of students and alumni and the successful academic and professional careers that many of them have achieved. The majority of our agents are non-exclusive to us and are paid a commission on a per-student basis. (U.S. readers should understand that in Canada and most foreign countries, recruiters are allowed to be compensated based on the numbers of students that they enroll, as no U.S. Title IV funding is involved for such students.) As a result, prohibitions on incentive compensation for student recruiters that exist in the United States do not apply to our operations and those of our subsidiaries. In addition, through the acquisition of KGIC, we now have four international recruiting offices in Japan, Korea, Taiwan and Spain which are staffed with in-house recruiters that manage the agent networks in their respective countries/territories and also perform direct recruiting activities. This is a significant new addition to our marketing capabilities and one which we believe may significantly increase the flow of international students to our campuses as KGIC is integrated into our network.

Existing Student Pools at Partner Facilities. A cornerstone of our expansion strategy in China and Asia has been to partner with established education providers (often large Chinese state-owned universities) through collaborative agreements and to co-locate on their sites. In doing so, we obtain ready access to a large pool of existing students, many of whom may enroll in our courses in order to obtain a western-style education and have greater opportunities to obtain jobs with multinational corporations operating in China or abroad. Such employers typically pay higher wages than Chinese domestic companies.

Job Placement and Externship Opportunities. A key value proposition for our students is that we maintain relationships among and have placed students with a large number of multinational companies and hotel chains as well as other employers. We actively recruit for jobs for our students, which most government-owned universities and many of our for-profit competitors in China do not. In addition, many of our programs include externships, often abroad, which can often lead to permanent employment with multinational employers and others. We believe that many of our students study with us because we provide job placement services and believe that this is also a key selling point for us.

Distribution of Marketing Materials . We participate in on-campus events, educational expos and conferences, as well as college and employment fairs where we set up “booths” and “information tables” to distribute informational brochures, posters and flyers and answer questions from prospective students about our schools and programs. We also conduct extensive free information sessions to introduce our programs to our target markets.

High School Recruiting Programs. We actively recruit students on high school campuses. This includes presentations to groups of students at high schools, with individual follow-up by telephoning potential students when needed.

Internet and Traditional Advertising . We advertise through our own websites and also on China’s and Canada’s leading portals. Our five international (KGIC) recruiting offices also advertise on the portals in their respective territories. We utilize a growing number of internet strategies, including the use of internet lead aggregators, search engine optimization, social media, Google AdWords and other internet advertising. We have been increasing our use of internet advertising over the past two years and we expect our use of this advertising method to continue to grow in the future. We currently also utilize a wide array of traditional media sources including national and regional newspapers, television, and radio. We also utilize bus signage and other transportation media, as well as other outdoor advertising displays.

Cross-Selling . As we gain footholds in many different markets, we use our programs in one market as an opportunity to advertise our programs in other markets. With a variety of programs aimed at different groups, our goal is to create a brand name that permeates every stage of our potential students’ educational, career and life progression, from English for adults, to vocational and career training at the diploma to bachelor’s to master’s degree levels. In addition, a core element of our marketing strategy is highlighting our English language program’s role in enabling students to differentiate themselves for college entrance examinations and to better compete in a competitive education system and job market. We also use our English language programs to establish an initial relationship with students and then introduce them to longer-term studies overseas or enrollment in other longer-term courses and programs that we offer, which both increases their tenure with us and also enhances their skill levels for advancement in the international marketplace. We believe that our ability to both cross-sell our programs and campuses as we grow our system and our ability to “up-sell” our growing base of English language students into longer-term programs is a competitive advantage for us, and may significantly increase profits over the long term.

Speeches and Seminars . Our management and our top instructors frequently give speeches at colleges, universities, and high schools and to student groups, parent groups and educational organizations. They also participate in educational seminars and workshops.

Chinese Government Quota System . The Chinese government operates a national recruitment system, which matches students to colleges based on the results of yearly nationwide examinations and the preferences of students. Currently, CIBT Beihai International College is part of that system, and in 2012, it received 321 student enrollments directly from the Chinese government quota system. Beihai’s ability to participate in this quota system is a direct result of our strategy to “partner” with existing state-owned universities in the Chinese marketplace. Over time, we believe that we may be able to acquire additional schools in China that may participate in the Chinese government quota system, which may provide an additional new stream of students for us in the future.

Competition

We face competition from providers of traditional education programs and training services, and expect to face increasing competition from existing competitors and new market entrants in the online education market, including the following:

●

U.S. or Canadian-based for-profit post-secondary and ESL education companies that also offer educational services in Canada. Examples of our competitors include the Eminata Group, a Vancouver based corporation that operates a number of different colleges, including CDI College and Vancouver Career College. We also face competition from a growing number of independent ESL schools that offer similar courses in Canada.

●	Canadian-based not-for-profit post-secondary education companies that offer university level educational services in Canada. An example is Capilano University, which offers a Bachelors of Business Administration degree to local and international students.

●

Chinese, U.S. or European-based for-profit post-secondary education companies that also offer western-style educational programs in China. Examples of our competitors include New Oriental Education and Technology Group, China Distance Education Holdings Ltd., China Education Alliance, Inc., and ChinaEdu Corp.

●

For-profit post-secondary education companies offering Chinese language training and professional training programs. This segment consists of thousands of small training companies operating schools with a few dozen to a few hundred students. This segment is the most significant competitor to our hotel programs. Examples of our competition in this segment include Flagship International Hotel Training Institute and Sinporo Training International.

●

Not-for-profit post-secondary education companies that offer western-style educational programs. These are typically joint ventures established between U.S. or European universities and Chinese universities, and are generally offered in the larger cities. There are currently a large number of these arrangements in China, and they pose the biggest competitive threat to the business programs we offer. For instance, in Beijing, both Yangtze River Business School and China Agriculture University/Luton University of the United Kingdom provide business programs which are comparable to those offered by us.

●

Not-for-profit post-secondary education companies that do not offer western-style educational programs. These are typically public schools run by the Chinese government. However, despite not offering programs based on the western education style, their programs are in high demand and they are one of our significant competitors.

●

Online education companies, whose offerings including download and self-study, language based one-on-one video conference teaching using low cost personal computers, and American and Canadian universities (such as Simon Fraser University and Richard Ivey School of Business) who use video conferencing equipment to deliver classes within their system of school, but do not operate outside of that system of schools. This segment competes indirectly with the GLN infrastructure.

We believe that the key competitive factors in our industry include the professional competence of our lecturers, price, quality, market recognition and brand name. Some of our present and future competitors may have longer operating histories, larger teams of professional staff and greater financial, technical, marketing and other resources. We may lose market share and our profitability may be materially and adversely affected, if we fail to compete effectively with our present and future competitors or to adjust effectively to changing market conditions and trends.

Governmental Regulations and Approvals

Our educational operations in China and Canada require approvals from various government authorities, including the following:

●	Ministry of Education - The Ministry of Education in China is the government’s national agency that is responsible for approvals of all Chinese and foreign bachelor’s and master’s degree programs offered in China.

●	Provincial Education Committees – A provincial committee provides provincial approvals to operate a campus or school in a Canadian province, as well as approvals for bachelor and master’s degree programs to be offered in the province.

●	Municipal Education Bureaus – A municipal education bureau provides municipal approvals to operate a campus or school in a Canadian city, as well as approvals for certificate, bachelor or master degree programs to be offered in the city.

Our educational services providers in other countries may also require differing levels of regulatory approvals.

CIBT

The Chinese government regulates the education services industry in China and the provision of our education services is subject to Chinese laws and regulations relating to the education services industry. This following sets forth a summary of the principal laws and regulations that affect our business activities in China.

Education Law of the PRC

On March 18, 1995, the National People’s Congress enacted the Education Law of the PRC, which governs all levels of the educational system in China, including pre-school, primary, secondary education and higher education. The legislation makes it compulsory for all children in the country to complete a minimum of nine years of schooling, up to middle school level. Primary and secondary school are free. The Education Law requires the government to formulate plans to develop the education system in China and to establish and operate schools and other educational institutions. In principle, under the Education Law, enterprises, social organizations and individuals are encouraged to operate schools and other types of educational organizations in accordance with Chinese laws and regulations; however, no organization or individual may establish or operate a school or any other educational institution with the sole purpose of earning a profit. However, private schools may be operated for “reasonable returns,” as described in more detail below.

Regulations on Chinese-Foreign Cooperation in Operating Schools

Chinese-foreign cooperation in operating schools or training programs is specifically governed by the Regulations on Operating Chinese-foreign Schools, promulgated by the State Council in 2003 in accordance with the Education Law, the Occupational Education Law and the Law for Promoting Private Education, and the Implementing Rules for the Regulations on Operating Chinese-foreign Schools, or the Implementing Rules, which were issued by the Ministry of Education in 2004.

The Regulations on Operating Chinese-foreign Schools and its Implementing Rules encourage substantive cooperation between overseas educational organizations with relevant qualifications and experience in providing high-quality education and Chinese educational organizations to jointly operate various types of schools in China, with such cooperation in the areas of higher education and occupational education being encouraged. Chinese-foreign cooperative schools are not permitted, however, to engage in compulsory education and military, police, political and other kinds of education that are of a special nature in China.

Approvals for Chinese-foreign Cooperation in Operating Schools are obtained from the relevant education authorities or the authorities that regulate labor and social welfare in China. We believe we have obtained all approvals for our Chinese-foreign cooperation institutes.

Provisions Regarding Mergers and Acquisitions of Domestic Enterprises by Foreign Investors

On August 8, 2006, six Chinese regulatory agencies, including the Chinese Securities Regulatory Commission, or CSRC, promulgated a rule entitled “Provisions regarding Mergers and Acquisitions of Domestic Enterprises by Foreign Investors,” or the new M&A rule, to more effectively regulate foreign investment in Chinese domestic enterprises. The new M&A rule provides that the Ministry of Commerce must be notified in advance of any change-of-control transaction in which a foreign investor takes control of a Chinese domestic enterprise and any of the following situations exists: (i) the transaction involves an important industry in China, (ii) the transaction may affect national “economic security,” or (iii) the Chinese domestic enterprise has a well-known trademark or historical Chinese trade name in China. Any merger or acquisition by foreign investors is subject to review and approval by the Ministry of Foreign Trade and Economic Cooperation or the authority in charge of such matters at the provincial level. The new M&A rule became effective on September 8, 2006 without retroactive effect. These regulations may have an adverse effect on our future acquisition plans in China.

Chinese Tax Regulations

On March 16, 2007, the National People’s Congress, which is the legislature of China, passed the Enterprise Income Tax Law (the “EIT Law”), which became effective on January 1, 2008. The EIT Law applies a uniform 25% enterprise income tax rate to both foreign-invested enterprises and domestic enterprises. There will be a transition period for the enterprises, whether foreign-invested or domestic, which currently receive preferential tax treatments granted by relevant tax authorities. Enterprises that are subject to an enterprise income tax rate lower than 25% may continue to enjoy the lower rate and gradually transfer to the new tax rate within five years after the effective date of the EIT Law. Enterprises that are currently entitled to exemptions or reductions from the standard income tax rate for a fixed term may continue to enjoy such treatment until the fixed term expires. Preferential tax treatments will continue to be granted to industries and projects that are strongly supported and encouraged by the state, and enterprises otherwise classified as “new and high technology enterprises strongly supported by the state” will be entitled to a 15% enterprise income tax rate. However, the EIT Law does not define this term. The EIT Law empowers the State Council to enact appropriate implementing rules and regulations. Based on the foregoing, CIBT’s tax rate is currently 25%.

Furthermore, unlike the Income Tax Law for Enterprises with Foreign Investment and Foreign Enterprise currently in effect, which specifically exempts withholding tax on any dividends payable to non-Chinese investors, the EIT Law provides that an income tax rate of 20% will normally be applicable to dividends payable to non-Chinese investors which are derived from sources within China, although such income tax may be exempted or reduced by the State Counsel of the Chinese or pursuant to a tax treaty between China and the jurisdictions in which our non-Chinese shareholders reside. It is unclear whether any dividends payable to non-Chinese investors will be deemed to be derived from sources within China and be subject to Chinese income tax. If we are required under the EIT Law to withhold income tax on dividends payable to our non-Chinese shareholders, the value of your investment may be materially and adversely affected.

Chinese Educational Approvals

The following table describes the approval we obtained for our CIBT Beihai International College campus in China. No government approvals are needed for our CIBT centers.

Campus	Location	Offered Programs in each campus	Approval Authority	Approval Date	Renewal Date
CIBT Beihai International College	Weifang, Shandong province	IT program, Business English program, CET program, Auto training program	Shandong Provincial Government	October 31, 2004	Renewal not required

Our management is satisfied that we have applied for all necessary approvals to carry on our education business in China. While we believe that we have taken all steps necessary to maintain the approvals for our programs in China, there is no assurance that we will be successful in renewing or maintaining these or any other approvals in the future. Failure to renew or maintain CIBT Beihai International College approval may have a material adverse effect on our business, results of operations and financial condition due to reduced enrollment as a result of being unable to offer training at the CIBT Beihai International College campus. See “Item 3. Key Information – Risk Factors – Risks Related to Doing Business in China”.

Sprott-Shaw and KGIC Colleges

Sprott-Shaw and the KGIC Colleges have obtained approvals or accreditations for their programs from the following authorities:

●

Private Career Training Institutions Agency (“PCTIA”): The PCTIA is the regulatory agency for private training institutions in the Province of British Columbia. PCTIA is given its authority by the Province of British Columbia, Canada, Ministry of Advanced Education, under the Private Career Training Institutions Act , Regulations, and Bylaws. PCTIA has responsibility under the Private Career Training Institutions Act to: provide consumer protection to the students and prospective students of registered institutions; establish standards of quality that must be met by accredited institutions; and establish and manage the Student Training Completion Fund.

●	College of Licensed Practical Nurses of British Columbia (“CLPNBC”): The CLPNBC is responsible for regulating the profession of Licensed Practical Nurses in the public interest

●	Ministry of Children and Families: The Ministry of Children and Families provides programs and services to ensure that healthy children and responsible families are living in safe, caring and inclusive communities.

●

Industry Training Authority (“ITA”): The ITA is a provincial crown agency. It was established in 2004 and is responsible for managing BC’s industry training system to develop the skilled workforce needed to ensure the competitiveness and economic prosperity of our businesses and the Province of British Columbia.

●

Degree Quality Assessment Board (“DQAB”): The DQAB was appointed by the Minister of Advanced Education and Labour Market Development who established criteria, in consultation with the board, to be applied when a private or out-of-province public institution applies for consent to provide degree programs or use the word “university” in British Columbia. The same program review criteria apply to new degree programs proposed by British Columbia public post-secondary institutions.

●	MTCU: In Ontario, MTCU is responsible for the administration of laws relating to education and skills training. KGIC has been granted temporary accreditation while it submits audited financial statements specifically related to MTCU programs.

In British Columbia, all vocational programs, over $1,000 and providing over 40 hours of instruction are accredited by PCTIA. Its Practical Nursing program is approved by CLPNBC. The Early Childhood Education program is approved by the Ministry of Children and Families. The Trades Programs are approved by ITA. All academic programs are approved by the DQAB and allowed under the Ministry of Advanced Education. In Ontario, the Minister of Education and the MTCU are responsible for the administration of laws relating to education and skills training. KGIC’s business programs delivered in Ontario are certified and regulated by MTCU.

The MTCU requires KGIC to submit audited financial statements related to programs being offered in Ontario under the MTCU accreditation. Traditionally the financial statements for KGIC have been consolidated across Canada. We submitted a proposal to submit standalone audited financial statements for programs in Ontario related to the MTCU accreditation only, and while the proposal is being reviewed, MTCU is allowing KGIC to retain its accreditation. For fiscal 2013, we will prepare standalone financial statements in accordance with MTCU requirements.

We believe that we have applied for and received all necessary approvals to carry on our education business in Canada. While we believe that we have taken all steps necessary to maintain the approvals, there is no assurance that we will be successful in renewing or maintaining these or any other approvals in the future. Failure to renew or maintain approvals may have a material adverse effect on our business, results of operations and financial condition due to reduced enrollment as a result of being unable to issue a recognized accreditation. See “Item 3. Key Information - Risk Factors”.

Seasonality

Our business is seasonal in nature due to enrollment patterns and it fluctuates with the school terms of each subsidiary. As a result, we experience spikes in cash flows in September, which is the typical starting date for a student of Sprott-Shaw, and in June, which is the busiest season for KGIC due to the significant increase in students through the summer camp programs. Accordingly, our results in a given quarter may not be indicative of our results in any subsequent quarter or annually.

Intellectual Property and Intangible Assets

Our trademarks, copyrights, domain names, trade secrets and other intellectual property rights distinguish our services from those of our competitors and contribute to our ability to compete in our target markets. We rely on a combination of copyright and trademark law, trade secret protection and confidentiality agreements with our employees, lecturers, business partners and others, to protect our intellectual property rights. In addition, we require our employees to enter into agreements with us under which they acknowledge that all inventions, trade secrets, works of authorship, developments and other processes made by them during their employment are our property and they should assign the same to us if we so require.

We, directly or through our subsidiaries, own the copyright to all of the contents of our websites, which include www.cibt.net, www.cibt.edu, www.cibt.ca, www.sprott-shaw.com, and www.kgic.ca. We also own the trademarks Sprott-Shaw, Sprott-Shaw Community College, Pitman Business College, Tourism Training Institute, Concordia Career College and Modus International Language Institute. To reduce replication and brand confusion, these brands are no longer in use: Pitman, Tourism Training Institute, Concordia Career College and Modus. Operations from these prior acquisitions were fully amalgamated into our Sprott-Shaw operation.

In addition, we own the following intangible assets, among others, related to our education programs and training services business, directly or indirectly through our subsidiaries:

●

licenses;

●	affiliation agreements;

●	recruiting agent agreements; and

●	course curriculum.

Our intellectual property is subject to risks of theft and other unauthorized use, and our ability to protect our intellectual property from unauthorized use is limited. In addition, we may be subject to claims that we have infringed the intellectual property rights of others. Our failure to protect our intellectual property rights may undermine our competitive position, and litigation to protect our intellectual property rights or defend against third-party allegations of infringement may be costly and ineffective.

Operations of IRIX

We own a 51% interest in IRIX which was founded on October 5, 1994 under the laws of British Columbia, Canada. IRIX is a full service agency offering one-stop-shop multimedia and advertising services. It was originally a marketing and advertising provider to us. Our original intention was to purchase IRIX to reduce our marketing costs and transform IRIX into our marketing department. Over the years, IRIX developed its own customer base by providing media design services to a broad base of clienteles in Canada.

Products and Services

IRIX provides a wide range of production and design services. The types of major services and the percentages of overall revenues of IRIX are summarized below.

Description	Percentage of Overall Revenues
Graphic Design	60%
Media Booking Agency	34%
Production Services for print, video, film and multimedia	5%
Marketing Consulting Service	1%

Marketing Strategy

IRIX targets small-size businesses that are looking to promote themselves in the marketplace through marketing of a defined image. IRIX focuses its marketing efforts on targeting clients in the following industries:

●	Real estate

●	Banking and Financial Services

●	Retail and Consumer Products

●	Food and Beverage Products

●	Manufacturing

Markets

IRIX conducts its operations in the U.S. (primarily in California), Canada (primarily in Vancouver, British Columbia) and Hong Kong, and services financial institutions (in the U.S.), the real estate sector (in Canada) and goods providers, food and beverage manufacturers and government agencies (in Hong Kong). IRIX presently concentrates on marketing and offering products and services to Vancouver real estate businesses.

There are risks and uncertainties inherent in the multimedia and advertising industry, which could adversely affect the financial condition of IRIX, including:

●	Low barriers to entry . It is relatively easy and inexpensive for competitors to enter this industry, and IRIX may face a number of new competitors.

●	Economic downturns . In the event of a downturn in the economy, expenditures on marketing products are often more likely to be reduced over other costs, which may adversely effect IRIX’s revenues.

●	Customer demography . A large portion of IRIX’s customers are Asian. Should there be a downturn in the immigration environment in Vancouver, this could adversely effect IRIX’s revenues and curtail our growth.

See “Item 3. Key Information - Risk Factors” for additional risks and uncertainties relating to the business of IRIX.

Competition

IRIX faces competition from a wide range of companies. The multimedia, advertising and graphic design market consists of many competitors, from world-wide or nation-wide advertising companies or agencies, to self-employed web designers or programmers. Many of these competitors have substantially greater financial and other resources. IRIX primarily competes with small-size Vancouver-based companies rather than large-size advertising companies or agencies.

IRIX’s products and services are distinguished by the quality of the products and services being offered and an emphasis on customer focus rather than low price. Therefore, aggressive price competition from existing or future competitors could result in the need to reduce prices or increase spending and could result in a decrease in our revenues and profitability.

IRIX’s competitors for the Asian market in Vancouver currently include five to ten firms, including Grapheme/Koo, Cossette Communications Group, Chinese Agency (Canada) Ltd, and Hamasaki Wong. Other advertising and graphic firms who compete in the real estate market include Traction Creative Communications and Switch United.

Employees

IRIX has a total of 16 employees working in its Vancouver office, including Alvina Leung, a director of IRIX, and Alvin Chu, the President of IRIX, as well as 14 other individuals employed as follows:

Function	Number of Employees
Art Director	1
Office Manager	1
Marketing Managers	2
Project Manager	1
Designers	5
Copywriters	2
Web Developer	1
Account Executives	3

IRIX has no staff members or office premises outside of Vancouver. All clients in Hong Kong and the U.S. are serviced by personnel in the Vancouver office.

Office

IRIX shares a leased office space in Vancouver with us, occupying 1,526 square feet at a cost of approximately $38,151 per year for the first three years, increasing to $39,678 per year for the last two years. IRIX does not own any real property.

Intellectual Property

IRIX owns the copyright to all of the contents of its website, www.irix-design.com.

C. Organizational Structure

We operate our education programs and services business through the following subsidiaries:

1.	CIBT, which conducts operations primarily in China and in which we currently hold a 100% ownership interest;

2.	Sprott-Shaw, which operates primarily in Canada and with a presence in Asia and the Middle East, in which we acquired a 100% ownership interest on December 17, 2007; and

The KGIC Colleges, which are comprised of KGIC Business College (2010) Corp. and KGIC Language College (2010) Corp., our wholly-owned subsidiaries that operate primarily in Canada, and which were organized in connection with the acquisition of substantially all of the assets of KGIC on March 15, 2010.

In addition, we hold a 51% interest in IRIX, a multimedia service and advertising agency located in Vancouver, British Columbia, Canada.

The following table sets forth certain information relating to our subsidiaries:

Subsidiary	Date of Incorporation	Country of Incorporation	Percentage of Ownership	Principal Business
CIBT	February 9, 1994	British Columbia, Canada	100%	Provide education and training services primarily in China through our CIBT education centers, CIBT Beihai International College, CIBT Wyotech Automotive Institute, CIBT-BJUT School of Business and Tourism Training Institute
Sprott-Shaw	December 7, 2007	British Columbia, Canada	100%	Holding company of Sprott-Shaw Community College, Sprott-Shaw Degree College and Sprott-Shaw International Language College and provider of education and training services primarily in Canada and parts of Asia
KGIC Business College (2010) Corp.	February 22, 2010	British Columbia, Canada	100%	Provide business education and training services primarily in Canada
KGIC Language College (2010) Corp.	February 22, 2010	British Columbia, Canada	100%	Provide English language education and training services primarily in Canada
IRIX	October 5, 1994	British Columbia, Canada	51%	Provide graphic design, marketing and advertising services in Canada, Hong Kong, and the U.S.

A chart of our organizational structure follows:

D. Property, Plant and Equipment

We currently rent our principal corporate office at 777 West Broadway, Suite 1200, Vancouver, British Columbia, Canada, V5Z 4J7. The office is comprised of 3,526 square feet of office space for which we pay annual rent of approximately $88,152. Our rental agreement has a 60 month term from November 1, 2009 to October 31, 2014 pursuant to which we will pay annual rent of $88,152 for the first three years, increasing to $91,680 per year for the last two years. We currently use about 2,000 square feet of the available office space, and record rent expenses of approximately $50,001 per year. The remaining 1,526 square feet is used by IRIX. IRIX will pay approximately $38,151 in annual rent expenses for the first three years, increasing to $39,678 per year for the last two years, under our current rent agreement.

Sprott-Shaw currently rents a corporate office at Suite 200, 1405 Broadway Street, Port Coquitlam, British Columbia, Canada, V3C 6L6. The office is comprised of 8,038 square feet of office space for which it pays annual rent of approximately $83,418. The rental agreement has an 82 month term from July 2009 to April 2016.

KGIC currently rents a corporate office at 1400 Robson Street, Suite 201, Vancouver, British Columbia, Canada. The office is comprised of 22,295 square feet of office space for which it pays rent of approximately $720,000 per year. The rental agreement expires on April 30, 2016.

We do not presently own any real property. The lease holdings of CIBT range in size from approximately 15,000 square feet to approximately 107,000 square feet. The lease holdings of Sprott-Shaw range in size from approximately 1,900 square feet to approximately 12,000 square feet. The lease holdings of KGIC range in size from approximately 4,800 square feet to approximately 21,000 square feet. The description of our business above provides information relating to these facilities.

ITEM 4A. Unresolved Staff Comments

Not applicable.

ITEM 5. Operating and Financial Review and Prospects

You should read the following discussion and analysis in conjunction with our audited consolidated financial statements as at August 31, 2012 and 2011 and for the years ended August 31, 2012 and 2011 and the notes thereto included in this annual report under Item 18. Our consolidated financial statements have been prepared in accordance with IFRS and are presented in Canadian dollars. Refer to Note 24 of our audited consolidated financial statements included in this annual report for an explanation concerning first time adoption of IFRS and its impact on our financial statements.

The following discussion and analysis contains certain forward-looking statements relating to, among other things, our plan of operations going forward. Our actual results may differ materially from our expectations set out in these statements due to a number of factors, including the factors set out under “Item 3. Key Information - Risk Factors”. See “Note Regarding Forward-Looking Statements” at the beginning of this annual report.

Overview

We are a fully integrated provider of educational programs and services. We deliver western-style education to students from emerging Asian countries and Canada, providing our graduates with increased earning potential working for multinational companies in their home countries or abroad. Our target students for our schools are recent high school graduates or adult persons working in urban centers. In addition, we recruit international students to enroll at our Canadian campuses and other locations around the world and provide them with an enhanced learning experience, western credentials and overseas employment experience.

We offer a wide range of education programs and training courses, including: college preparation courses, English language training and certification courses, and diploma and degree programs in business, healthcare, hotel management, information technology, automotive technical training, and corporate executive training. We are the largest trainer of practical nurses in Canada and also offer this program in other countries. In addition, we offer bachelor’s of business administration programs in China and Canada. We create our own education programs and training services and also offer programs created by other institutions at our campuses and other locations. Our infrastructure is located primarily in Canada and China, as well as other countries around the world.

Our goal is to become the leading provider of western-style education in China and Asia, and the largest recruiter of foreign students to study in Canada. We seek to achieve continued growth in a manner that reinforces our reputation for providing high-quality career-oriented educational programs that advance the careers of our students.

The table below sets forth our selected consolidated financial information for the periods indicated.

IFRS

	Year Ended August 31, 2012			Year Ended August 31, 2011
Consolidated Statement of Loss Data	(C$)			(C$)
Revenues		57,968,687			58,575,126
Direct costs		27,152,681			27,604,802
Other expenses		31,407,156			34,806,365
Income (loss) from operations		30,816,006			30,970,324
Other income (expenses)		(104,292	)		(6,470,385	)
Income (loss) before income taxes		(695,442	)		(10,306,426	)
Income tax recovery (provision)		(118,446	)		843,505
Non-controlling interests		368,656			350,861
Net income (loss)		(813,888	)		(9,462,921	)
Basic and diluted earnings (loss) per share (1)		(0.01	)		(0.14	)

Our revenues are defined as revenues net of refunds. Direct costs are comprised of: (a) partnership costs, teachers’ salaries and other teaching costs, textbook printing costs and sales tax for CIBT; (b) teachers’ salaries, other teaching costs and textbook printing costs for Sprott-Shaw; (c) teachers’ salaries, program development, homestay and dormitory fees, student supplies, textbooks, teaching supplies, and computer supplies/repair for KGIC; (d) agency fees paid to firms for recruiting international students; and (e) media acquisition cost for IRIX.

For the year ended August 31, 2012, we generated revenue of $57,968,687. Sprott-Shaw accounted for $29,109,427 or 50% of revenue, while KGIC accounted for $23,941,211 or 41%, CIBT accounted for $3,098,086 or 5%, and IRIX accounted for $1,819,963 or 3% of revenue. By industry segment, our education business generated $56,148,724 of our revenue (equivalent to 97%), while our design business generated $1,819,963 (equivalent to 3%).

This compares to revenue of $58,575,126 for the year ended August 31, 2011. Sprott-Shaw accounted for $30,619,935 or 52% of revenue, while CIBT accounted for $4,206,757 or 7%, KGIC accounted for $21,838,554 or 37%, and IRIX accounted for $1,909,880 or 3% of revenue. By industry segment, our education business generated $56,665,246 of our revenue (equivalent to 97%), while our design business generated $1,909,880 (equivalent to 3%).

We suffered a net loss of $813,888 for fiscal 2012, compared to a net loss of $9,462,921 for fiscal 2011. We recorded a deferred income tax expense of $88,291 and a current income tax expense of $30,155 for the year ended August 31, 2012, compared to a deferred income tax recovery benefits of $843,505 recognized for the year ended August 31, 2011.

We had cash of $7,964,476 as at August 31, 2012, compared to $6,456,568 as of August 31, 2011. Our working capital deficit was $6,713,511, compared to $4,850,613 as at August 31, 2011.

As at August 31, 2012, we held total assets of $44,751,761 and had a deficit of $34,561,006. This compares to total assets of $42,078,575 and a deficit of $33,378,462 as at August 31, 2011.

As of August 31, 2012 and 2011, we had 71,949,344 common shares issued and outstanding. There were also outstanding but unexercised options and warrants to purchase a total of 7,289,833 of our common shares as of August 31, 2012, and 5,621,833 as of August 31, 2011.

In the near future, our plans are to:

●	further integrate the assets and personnel of KGIC into our operations, especially KGIC’s network of international recruiting offices and agents in order to continue to grow Sprott-Shaw’s international student population;

●	consider the potential acquisition of other assets that will support our current operations and integrate any assets acquired into our operations;

●	continue to consolidate and streamline the operations of CIBT, Sprott-Shaw and KGIC, which will include termination of redundant staff and resources among subsidiary schools;

●	continue building a network of new CIBT GLN Centers in additional Asian cities, and further develop our current program offerings, campuses and CIBT GLN Center locations;

●	increase revenues by increasing student enrollments at our campuses and CIBT GLN Center locations;

●	expand the presence of Sprott-Shaw and KGIC in Asia through our CIBT GLN Centers;

●	enhance our product offerings by increasing our focus on the college preparation market and high school preparation market;

●	increase the conversion rates of English language students at KGIC (and all of our other schools) who subsequently enroll in longer certificate or degree-granting programs at Sprott-Shaw and other schools within our system;

●	continue to develop closer marketing and cross-selling relationships between Sprott-Shaw, CIBT and KGIC in order to encourage more Chinese and foreign students to come to Sprott-Shaw’s Canadian campuses to study;

●	maintain strong relationships with our CIBT GLN Center and campus location facility and educational service providers, as well as with the Chinese authorities; and

●	continue to promote our businesses and brands.

We estimate that our near-term expansion expenses will be approximately $1,000,000 over the twelve months ending August 31, 2013. As of August 31, 2012, we had $17,443,635 in deferred educational revenue and $7,964,476 in cash and cash equivalents on hand. We believe that we have sufficient cash and cash equivalents on hand to cover our current business commitments, but we may need additional capital to carry out our proposed expansion plan. We plan to obtain the necessary funds from equity or debt financings, as required; however, there can be no assurance that we will obtain such financing. If we are not able to obtain such additional financing, we may be forced to scale back our expansion plans or eliminate them altogether. There can be no assurance that we will achieve our plans, or any of them.

Our continued growth will depend on our ability to manage our current operations and carry out our long-term expansion plans. While we expect our expansion plan to generate revenue growth in the longer term, we expect to incur near-term losses.

A. Operating Results

Results of operations for the year ended August 31, 2012 compared to the year ended August 31, 2011

The following table summarizes selected financial information for the year ended August 31, 2012 and the year ended August 31, 2011 on a relative basis (as a percentage of revenues).

	Year Ended August 31, 2012			Percentage of Revenues			Year Ended August 31, 2011			Percentage of Revenues
	(C$)						(C$)
Revenues
- CIBT (education)		3,098,086			5	%		4,206,757			7	%
- Sprott-Shaw (education)		29,109,427			50	%		30,619,935			52	%
- KGIC (education)		23,941,211			41	%		21,838,554			37	%
- IRIX (advertising)		1,819,963			3	%		1,909,880			3	%
Revenues - Consolidated		57,968,687			100	%		58,575,126			100	%
Direct costs		27,152,681			47	%		27,604,802			47	%
Revenues net of direct costs		30,816,006			53	%		30,970,324			53	%
General and administrative expenses		29,598,356			51	%		32,858,532			56	%
Amortization and share-based payment expenses		1,760,024			3	%		1,717,471			28	%
Income (loss) before income taxes		(695,442	)		(1	%)		(10,306,426	)		(18	%)
Income tax (recovery) provision		(118,446	)		(	*)		843,505			1	%
Net income (loss)		(813,888	)		(1	%)		(9,462,921	)		(16	%)
Non-controlling interests		368,656			(	*)		350,861			(	*)

(*) Less than 1%.

Consolidated

We generated revenues of $57,968,687 for the year ended August 31, 2012, a decrease of $606,439 from revenues of $58,575,126 for the year ended August 31, 2011. Our net loss was $813,888 for the year ended August 31, 2012, compared to a higher net loss of $9,462,921 for the same period in 2011. The reduction in net loss of $8,649,033 is attributable to the following:

●	increases in revenues from international students studying at Sprott-Shaw and KGIC in Canada;

●	continued deployment of CIBT’s new business model to deliver mass market training programs as well as overseas study referrals to students in China;

●	a decrease in lease expense resulting from Sprott-Shaw’s reduction in the overall number of campuses in outlying regions and the from the combination of campuses by Sprott-Shaw and KGIC;

●	impairment charges in fiscal 2011 resulted in an increase to our net loss of $5,897,778 for fiscal 2011 (no impairment charges were incurred in fiscal year 2012);

●	a reduction in employees across the system attained through cost synergies as well as reorganization activities; and

●	continued streamlining of operations at each subsidiary resulting in general and administrative expenses decreasing by $3,260,176 (or 10%) in the year ended August 31, 2012 from the prior year.

Further growth in profitability is expected over the next few quarters. In fiscal 2013, we plan to reduce business development efforts in new markets such as Vietnam and Saudi Arabia, refresh the content of our existing programs, and continue with ongoing development of the GLN platform. Additional costs related to the transition to IFRS for financial reporting incurred in fiscal 2012 are also not expected in fiscal 2013. In addition, we granted stock options in fiscal year 2012, resulting in share based compensation expense of $178,564 (a non-cash expense) for the year ended August 31, 2012, compared to $59,896 for the year ended August 31, 2011. The increase in share based compensation expense is due to stock options granted to an expanded pool of senior employees of subsidiary schools to incentivize employees towards corporate growth and profitability. The increase in share based compensation has no effect on our cash flow, but resulted in a decrease to our reported profitability on our statement of operations for the year ended August 31, 2012.

CIBT

Revenues for CIBT during the year ended August 31, 2012 were $3,098,086 compared to $4,206,757 for the year ended August 31, 2011, a decrease of $1,108,671 or 26%. Revenues net of direct costs averaged a 46% margin during the year ended August 31, 2012, as compared to a 48% margin during the year ended August 31, 2011. CIBT student enrollment was 1,301 for the year ended August 31, 2012 compared to 1,601 for the year ended August 31, 2011, a decrease of 19%. Revenue per student enrolled averaged $2,381 for the year ended August 31, 2012 compared to $2,628 for the year ended August 31, 2011, a decrease of 9%. The changes in student population and average revenue per student were a result of fewer college aged individuals leading to lower enrollment levels generated this year from CIBT’s partnership with Beijing University of Technology. Our agreement with Beijing University of Technology was terminated effective August 31, 2011 by mutual consent due to changing market demands. CIBT’s programs offered at Beijing University of Technology are being phased out and replaced by mass market training programs as well as overseas study referrals.

The mass market training programs that have been or will be added into CIBT’s program offerings include hotel management programs and other internally developed programs. In addition, our new strategy for CIBT includes referring students for overseas studies at our wholly-owned subsidiaries, such as Sprott-Shaw and KGIC, and our other partner schools, including Northeastern State University of Oklahoma and Southpointe Academy of Greater Vancouver. Over the past year, CIBT has recruited a number of students to study in Canada and the United States and is planning to continue to grow this segment of its business, which is a simplified business model utilizing our existing infrastructure, extensive network and business connections established during CIBT’s 18 years of operations in China.

CIBT incurred a net loss of $275,781 for the year ended August 31, 2012, compared to a net loss of $6,068,769 for the year ended August 31, 2011. The decrease in net loss of $5,792,988 or 95% is attributable to the launch of a more profitable business model as described below, as well as the non-reoccurrence of one-time impairments of intangible assets that occurred in fiscal 2011.

CIBT student enrollment was 1,301 for the year ended August 31, 2012 compared to 1,601 for the year ended August 31, 2011. Revenue per student averaged $2,381 for the year ended August 31, 2012 compared to an average of $2,628 for the year ended August 31, 2011, a decrease of 9%. CIBT’s revenues net of direct costs averaged a 46% margin during the year ended August 31, 2012 compared to a 48% margin during the year ended August 31, 2011.

CIBT’s decreased revenues for the year ended August 31, 2012 was caused by a decrease in student enrollments that were previously derived from CIBT’s partnership with BJUT. Effective August 31, 2011 our agreement with BJUT was terminated by mutual consent due to market demand changes. CIBT’s programs offered at BJUT are being phased out and replaced by mass market training programs as well as overseas study referrals.

Such mass market training programs include internally developed programs such as Tourism and Hotel Management and Hotel English programs. In addition, our new strategy for CIBT includes overseas study referrals to wholly-owned subsidiaries such as Sprott-Shaw and KGIC as well as partner schools including Northeastern State University of Oklahoma and Southpointe Academy of Greater Vancouver. Over the past year, CIBT has recruited a number of students to study in Canada and the United States. We plan to continue to grow this segment of CIBT’s business, which is a simplified business model utilizing our existing infrastructure, extensive network and business connections established over our 18 years of operations in China.

Sprott-Shaw

Revenues for Sprott-Shaw during the year ended August 31, 2012 decreased by $1,510,508 or 5% to $29,109,427 from $30,619,935 for the year ended August 31, 2011. This decrease was due to Sprott-Shaw’s reduction of campuses in outlying regions. These measures have resulted in decreased revenue in outlying regions but improved profitability for the consolidated group, as the campuses that were closed were not profitable and heavily dependent on government funded training contracts. The decrease in revenue from campus reductions was mostly offset by the increased international student revenue from Sprott-Shaw’s International Department, which grew from $5,092,579 in fiscal year 2011 to $7,738,743 in fiscal year 2012 (a 52% growth rate). Sprott-Shaw generated a net loss of $45,553 for the year ended August 31, 2012, compared to net income of $316,712 for the year ended August 31, 2011, a decrease of $362,265.

Sprott-Shaw has undertaken a number of consolidation efforts to decrease its operating cost and improve its operational efficiency. These reorganization measures have included eliminating redundant infrastructure between itself and KGIC, merging certain campus locations, closing campuses located in outlying regions, and combining administration and accounting functions with our other subsidiaries. Subsidiary schools have also focused on increasing the number of student and graduate referrals amongst one another and with our partner schools. As a result of increasing streamlining resources, Sprott-Shaw’s general and administrative expenses decreased from $17,022,551 in the year ended August 31, 2011 to $14,782,348 in the year ended August 31, 2012.

In fiscal 2012, Sprott-Shaw was impacted by the decision to eliminate the Harmonized Sales Tax (“HST”) in British Columbia. The HST was enacted on July 1, 2010 to replace the prior system of a General Sales Tax and a Provincial Sales Tax (the “Prior Tax System”). The Prior Tax System will be reinstated in March 2013. Prior to the implementation of HST, the tax rate for most professional services was 5%. The HST has increased the sales tax rate to 12% with no recuperation available to offset as an input tax credit, due to the tax exempt nature of the education business in Canada. When abolishment of the HST takes effect in March 2013, the additional HST expense we have recorded will be offset and this expense will be reduced accordingly.

The Sprott-Shaw student enrollment was 2,355 for the year ended August 31, 2012 compared to 1,560 for the year ended August 31, 2011. Revenue per student averaged $12,361 for the year ended August 31, 2012 compared to an average of $19,628 for the year ended August 31, 2011, a decrease of 37%. Sprott-Shaw’s revenues net of direct costs averaged a 60% margin during the year ended August 31, 2012 compared to a 64% margin during the year ended August 31, 2011.

Average revenue per student decreased in the year ended August 31, 2012 due to Sprott-Shaw’s reduction in the number of campuses in outlying regions. These measures have resulted in decreased revenues overall, but have improved profitability for the consolidated group. The campuses that were closed were not profitable and heavily dependent on government funded training contracts. The decrease in revenue from campus reductions was mostly offset by increased revenue from international students in enrolling at Sprott-Shaw, which grew from $5,092,579 in fiscal 2011 to $7,738,743 (or 52%) in fiscal 2012. Sprott-Shaw’s net income before inter-corporate charges increased by $550,027 (or 42%) in the year ended August 31, 2012 compared to the same period last year. The increase in profitability was due to the reduction in operating locations and to overall reductions in operating costs through streamlining the operations of our subsidiaries.

Sprott-Shaw realized a net loss of $45,553 for the year ended August 31, 2012 compared to generating a net income of $316,712 for the year ended August 31, 2011. The decrease in earnings was due to an increase in inter-corporate charges resulting from the increased use by Sprott-Shaw of our head office services to assist with streamlining Sprott-Shaw’s operations and increasing international student recruitment.

KGIC

Revenues for KGIC increased to $23,941,211 for the year ended August 31, 2012 from $21,838,554, an increase of $2,102,657 or 10%. The growth in revenue is due to increased marketing activity and more favorable economic conditions in markets where KGIC recruits students, such as Japan and Brazil. KGIC’s revenues have also grown through our efforts to develop and utilize synergies with Sprott-Shaw and CIBT; students from Sprott-Shaw and CIBT who require additional English competencies are referred to KGIC for additional language training. In addition, KGIC expanded its marketing and business development efforts in China at reduced cost by utilizing CIBT’s existing infrastructure to grow its English language training business.

KGIC’s general and administrative expenses have increased from $8,603,106 in the year ended August 31, 2011 to $9,048,932 in the year ended August 31, 2012 in proportion with its revenue growth. KGIC has increased its budget for advertising and marketing efforts through increased personnel over the year ended August 31, 2012, which has paid off in increased revenue for the period. KGIC has undertaken a number of consolidation efforts to decrease other operating costs and increase operating margins. These reorganization measures have included termination of redundant personnel, procedures, and administrative functions between itself and Sprott-Shaw, merging of certain campuses and office locations, information technology infrastructure, and cross system referral of students and graduates among CIBT, Sprott-Shaw and KGIC.

The HST in British Columbia also affected KGIC’s earnings as a result of the higher tax rate, rising from 5% to 12%, applicable to KGIC’s goods and services. This increased sales tax is expected to be eliminated by March 2013, thereby saving KGIC additional expenses next year.

KGIC student enrollment was 1,446 for the year ended August 31, 2012 compared to 1,596 for the year ended August 31, 2011. Revenue per student averaged $16,557 for the year ended August 31, 2012 compared to an average of $13,683 for the year ended August 31, 2011, an increase of 21%. The growth in revenue generated by KGIC resulted from increased marketing activity and more favorable economic conditions in markets where KGIC recruits students, such as Japan and Brazil. KGIC’s revenues have also grown through synergies with Sprott-Shaw and CIBT. Students from Sprott-Shaw and CIBT who require additional English competencies are referred to KGIC. In addition, KGIC expanded its marketing and business development efforts in China at a reduced cost by utilizing CIBT’s existing infrastructure to grow its English language training business.

IRIX

Revenues for IRIX during the year ended August 31, 2012 were $1,819,963 compared to $1,909,880 for the year ended August 31, 2011, a decrease of $89,917 or 5%. The decrease in IRIX’s revenue is due to a minor slowdown in the economy in Vancouver, British Columbia which IRIX serves. IRIX’s revenues net of direct costs averaged a 47% margin during the year ended August 31, 2012 compared to a 48% margin during the year ended August 31, 2011.

Corporate

Our corporate operations generated a net loss of $872,607 for the year ended August 31, 2012, compared to a net loss of $3,409,047 for the year ended August 31, 2011. Expenses and other items impacting the corporate results of operations include general and administrative expenses, amortization and share-based compensation granted to our employees, officers and directors, each of which is discussed in further detail below.

General and Administrative Expenses

The following selected general and administrative expenses are for the consolidated group on a relative basis (as a percentage of revenues).

	Year Ended August 31, 2012		Percentage of Revenues			Year Ended August 31, 2011		Percentage of Revenues
	(C$)					(C$)
Revenues		57,968,687		100	%		58,575,126		100	%
Advertising		4,476,533		8	%		5,685,557		10	%
Consulting and management fees		1,949,316		3	%		1,964,726		3	%
Professional fees		1,457,404		3	%		1,369,960		2	%
Rent		5,757,553		10	%		6,219,394		11	%
Salaries and benefits		11,416,396		20	%		12,031,267		21	%
Other expenses		4,541,154		8	%		5,587,628		10	%
Total general and administrative expenses		29,598,356		51	%		32,858,532		56	%

Advertising costs decreased by $1,209,024 or 21% from $5,685,557 for the year ended August 31, 2011 to $4,476,533 for the year ended August 31, 2012. CIBT’s advertising costs decreased in fiscal 2012 compared to the prior year as CIBT has focused on building partnerships with institutions that provide advertising and recruitment services, thereby reducing the direct costs to CIBT.

KGIC’s advertising costs also decreased in the year ended August 31, 2012 compared to the prior year. KGIC is focusing on international recruitment and has increased the amount of its budge allocated for sales representatives and international recruitment agents, rather than directly advertising itself as KGIC has done in the past. Sprott-Shaw’s advertising costs decreased in fiscal 2012 as a result of closing outlying campuses, thereby eliminating the need to advertise in those areas. Sprott-Shaw has allocated its additional advertising budget to increasing its marketing efforts in areas where it operates more profitable campuses.

Consulting and management decreased from $1,964,726 for fiscal 2011 to $1,949,316 for fiscal 2012. The decrease is reflective of our efforts to streamline operations and reduce overhead expenditures.

Professional fees increased slightly from $1,369,960 for fiscal 2011 to $1,457,404 for fiscal 2012. The increase is due to additional fees incurred for the transition from Canadian GAAP to IFRS compliant financial statements under the financial reporting requirements in British Columbia, Canada.

Rent costs decreased from $6,219,394 for fiscal 2011 to $5,757,553 in fiscal 2012. The decrease is due to the reduction in the number of Sprott-Shaw campuses and the consolidation of campuses for Sprott-Shaw and KGIC. We expect to benefit from additional cost savings upon the expiration of two more leases for former Sprott-Shaw campuses. These leases expire in first quarter of fiscal 2013 and we anticipate will result in savings of approximately $108,946 annually.

Salaries and benefits for the year ended August 31, 2012 amounted to $11,416,396 as compared to $12,031,267 for the year ended August 31, 2011, a decrease of $614,871, or 5%.

Other expenses for the year ended August 31, 2012 totaled $4,541,154, a decrease of $1,046,474 or 19% as compared to $5,587,628 for the year ended August 31, 2011. Other expenses amounted to 8% of revenues and calculated on a monthly basis, other expenses were $378,430 per month for the year ended August 31, 2012, a decrease from the $465,636 per month incurred for the year ended August 31, 2011. The decrease is attributable to our ongoing efforts to streamline our operations across the consolidated group and reduce our operating costs.

Impairment

During fiscal 2011, we experienced declining revenues and income stemming from our business operations in China, in particular our Beijing operations. We were in discussions with the BJUT on the renewal of our agreement with BJUT which historically was not an issue. During the quarter ended May 31, 2011, we received notification from BJUT that the agreement would not be renewed. These negative events (declining revenues and income along with the non-renewal of the BJUT agreement) would have a severe impact on the future cash flows for CIBT’s operations in China. Accordingly, as at May 31, 2011, we performed an impairment test on indefinite life intangible assets and goodwill. Value in use was determined by discounting the future cash flows generated from the continuing use of the cash-generating units. The results of the impairment tests using the discounted net cash flow analysis as at May 31, 2011 are as follows:

●	Indefinite life intangible assets - the carrying value of the Beijing contracts exceeded their fair value by approximately $3,481,000.

●	Goodwill - the carrying value of the cash-generating units' goodwill was negative, or in other words, fully impaired which required a write-down of approximately $2,288,000.

As a result of these impairment tests, we recorded an impairment charge totaling $3,481,347 to the carrying value of intangible assets not subject to amortization (i.e. indefinite life intangible assets). The impairment charge is specific to the carrying amount of the intangibles relating to the BJUT agreement and related ancillary agreements, which forms part of the Chinese university agreements and contracts included in intangible assets not subject to amortization. Furthermore, we recorded an impairment charge of $2,287,905 to the carrying value of goodwill in fiscal 2011.

As at August 31, 2012, we performed the annual impairment tests on indefinite life intangible assets and goodwill, and concluded that the carrying value of indefinite life intangible assets and goodwill recorded as of that date was recoverable. Value in use was determined by discounting the future cash flows generated from the continuing use of the cash-generating units. Value in use as at August 31, 2012 was determined on a consistent basis with the prior period.

Amortization

Amortization of $1,581,460 for the year ended August 31, 2012 decreased by $76,115 from $1,657,575 for the year ended August 31, 2011.

Deferred Financing Fees

A total of $510,711 in deferred financing costs were expensed in fiscal 2011. The proposed financing by way of a fully underwritten registered offering in the United States was withdrawn due to poor market conditions. No such expense was recorded in fiscal 2012.

B. Liquidity and Capital Resources

Our operations have been financed through internal cash flows, debenture financing, and equity financing in the form of private placements, warrant exercises, and option exercises.

The following table is a summary of selected financial information for the periods indicated:

	As at August 31, 2012			As at August 31, 2011
Financial Position	(C$)			(C$)
Cash and cash equivalents		7,964,476			6,456,568
Working capital (deficit) (1)		(6,713,511	)		(4,850,613	)
Total assets		44,751,761			42,078,575
Long-term liabilities		2,798,684			2,350,097
Non-controlling interest		1,264,935			1,145,567
Shareholders’ equity		15,837,918			17,154,870

(1)	Working capital (deficit) is calculated as current assets minus current liabilities.

Our cash and cash equivalents as at August 31, 2012 totaled $7,964,476, an increase of $1,507,908 from $6,456,568 as at August 31, 2011. The increase was a result of enhanced accounts receivable collection practices, as well as reduced operating costs. Our working capital deficit was $6,713,511 as at August 31, 2012, compared to a working capital deficit of $4,850,613 as at August 31, 2011. The change in our working capital account reflects the normal business operating cycle of our education business, most of which follows a typical student enrollment season for this industry, being September each year. A substantial amount of our tuition fees are collected each year in the month of September for Sprott-Shaw and in June for KGIC, but are deferred and recognized as revenue earned as the courses and programs are delivered throughout the academic periods.

Our account receivables increased marginally by $110,610 in the year ended August 31, 2012 because of the increase in deferred education revenue. As recruitment organizations and governments refer students to us in the fall, some do not pay the full amount of tuition upfront, resulting in the accounts receivable balance. We have enhanced our efforts to collect on accounts receivable during the year ended August 31, 2012, as evidenced by the lower growth in accounts receivable compared to deferred revenue in the year ended August 31, 2012.

Long term debt decreased in the year ended August 31, 2012 as a result of principle repayments of debt obligations. Finance and operating leases have increased in the year ended August 31, 2012 as we renewed a number of campus leases in the past year and leased additional equipment to support the GLN technology platform.

We have a working capital deficit of $6,713,511. We expect to generate sufficient cash flows from operations to meet our operating requirements for fiscal 2013. Our operations have typically been financed through internal cash flow and equity financing in the form of private placements. We may pursue such financing avenues, or debt financing, in the event that our operations are insufficient to fund our working capital requirements for fiscal 2013. For details of our short-term and long-term contractual obligations, please see “Item 5. Operating and Financial Review and Prospects – F. Tabular Disclosure of Contractual Obligations”.

We estimate that we will need additional financing of approximately $1 million to carry out our proposed expansion plans for fiscal 2013, which are dependent on market conditions. If we undertake any expansion activities, we plan to obtain the necessary funds from equity or debt financings. However, there can be no assurance that we will obtain the financing required, or any at all. If we are not able to obtain the necessary additional financing, we may be forced to scale back our expansion plans or eliminate them altogether. There can be no assurance that we will achieve our plans, or any of them.

Operating Activities

Operating activities generated cash of $6,294,207 during the year ended August 31, 2012. Operating activities used cash during the year ended August 31, 2011 in the amount of $2,349,172.

For the year ended August 31, 2012, an increase in deferred revenues resulted in the use of cash by us in the net amount of $3,562,490, as Sprott-Shaw had high levels of enrollment in the fourth quarter. Income generated from new enrollments that is not immediately recognized as revenue but instead as deferred revenue in accordance with IFRS is reported as a liability on our balance sheet. However, it is an indication of strong enrollment for our educational business as tuition owed, but not yet collected, is recorded as a deferred education revenue. The increase in deferred education revenue at the end of fiscal 2012 indicates that revenue is expected to increase for the next fiscal year, in this case fiscal 2013.

Investing Activities

Investing activities used cash of $3,544,843 during the year ended August 31, 2012, compared to $2,085,251 used during the year ended August 31, 2011, primarily as a result of purchases of property and equipment, net assets acquired from other companies and curriculum development costs. In fiscal 2012 and 2011, we did not complete any major acquisitions.

Financing Activities

Financing activities used cash of $1,241,929 during the year ended August 31, 2012, as compared to using cash of $570,265 during the year ended August 31, 2011. Cash was used in fiscal 2012 primarily to repurchase of shares in the amount of $327,455 under our normal course issuer bid conducted using the facilities of the Toronto Stock Exchange; to repay long-term debt in the amount of $602,492; and as payment for the non-controlling minority interests in certain campus locations of our subsidiaries in the amount of $283,875.

Cash was used in fiscal 2011 primarily to repay debt in the amount of $607,164, as payment for the non-controlling minority interests in certain campus locations of our subsidiaries in the amount of $505,934, to expense deferred financing costs in the amount of $171,820 associated with our withdrawn registered offering in the United States, and for finance lease obligations in the amount of $105,753.

Our subsidiaries operating in China are subject to restrictions on transferring funds to our parent company in the form of dividends, loans, or advances. These restrictions require our subsidiaries to apply to the local foreign exchange administration in order to transfer the funds, which may be subject to taxes upon transfer. We do not anticipate this restriction will have any impact on our cash flows at present as our subsidiaries operating in China incurred losses in fiscal 2012 and have no amounts distributed as of August 31, 2012.

Capital Resources

We had cash and cash equivalents of $7,964,476 and our working capital deficit was $6,713,511 as of August 31, 2012. We expect to generate sufficient cash flows from operations to meet our operating requirements for fiscal 2012, although we may pursue additional financing options such as utilizing our line of credit or raising capital by way of a private placement. We may also consider reducing our discretionary spending. We may also seek to raise capital in the equity and debt markets to fund our expansion plans, as required. However, there can be no assurance that we will obtain the financing required, or any at all. Sprott-Shaw has a demand operating credit facility available in the amount of $1,500,000 with interest calculated at the prime rate plus 2%. As at August 31, 2012, the demand operating credit facility was not utilized.

Debt and Finance Lease Obligations

As at August 31, 2012, the long-term portion of our debt amounted to $31,520 and the current portion, classified as a current liability on our balance sheet, to $1,552,712. Also as at August 31, 2012, the long-term portion of finance lease obligations amounted to $575,456 and the current portion to $167,902.

Our debt relates to our subsidiary, Sprott-Shaw, is denominated in Canadian dollars, and is comprised of a demand term installment loan with a principal balance of $1,550,000 as at August 31, 2012, payable in monthly installments of $50,000 plus interest at a rate of prime plus 2%, due February 2015. In addition, Sprott Shaw has a promissory note of $34,232 as at August 31, 2012 payable at a rate of $460 per month including interest at a rate of 8.5% per annum, which is unsecured and due in October 2013. Sprott-Shaw also has available to it a demand operating credit facility in the amount of $1,500,00 with interest calculated at the prime rate plus 2%. As at August 31, 2012, the demand credit facility was not utilized.

The demand term installment loan and the demand credit facility are secured as further described in Note 12 of the audited financial statements for year ended August 31, 2012.

Financial Instruments

All financial instruments are initially recorded at fair value including transactions costs, except for transaction costs related to financial instruments classified as fair value through profit or loss which are expensed as incurred. Subsequent measurement of financial instruments is determined based on their classification.

Below is a summary of the classes of financial instruments included in our consolidated statement of financial position as well as our designation of such financial instruments:

Balance sheet item	Classification	Measurement basis

Cash and cash equivalents	Fair value through profit or loss	Fair value
Marketable securities	Available-for-sale	Fair value
Accounts receivable	Loans and receivables	Amortized cost
Due from related parties	Loans and receivables	Amortized cost
Accounts payable and accrued liabilities	Other liabilities	Amortized cost
Long-term debt	Other liabilities	Amortized cost
Due to related parties	Other liabilities	Amortized cost

Changes in financial instruments classified as fair value through profit or loss are recognized in net income (loss) in the period in which they arise. Changes in fair value that remain unrealized for available-for-sale financial instruments are recorded in other comprehensive income until realized or determined to be impaired, at which time the gain, loss or impairment is recognized in net income (loss) for the period.

The fair value hierarchy establishes three levels to classify the inputs to valuation techniques used to measure fair value. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices in markets that are not active, quoted prices for similar assets or liabilities in active markets, inputs other than quoted prices that are observable for the asset or liability (for example, interest rate and yield curves observable at commonly quoted intervals, forward pricing curves used to value currency and commodity contracts, and volatility measurements used to value option contracts), or inputs that are derived principally from or corroborated by observable market data or other means. Level 3 inputs are unobservable (supported by little or no market activity). The fair value hierarchy gives the highest priority to Level 1 inputs and the lowest priority to Level 3 inputs. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In assessing the fair value of a particular contract, the market participant would consider the credit risk of the counterparty to the contract.

Critical Accounting Policies

Our financial statements are impacted by the accounting policies used and the estimates and assumptions made by management during their preparation. A complete summary of these policies is included in Note 2 of the notes to our audited consolidated financial statements for the year ended August 31, 2012 included in this annual report. We have identified below the accounting policies that are of particular importance in the presentation of our financial position, results of operations and cash flows and which require the application of significant judgment by management.

Basis of Preparation and Statement of Compliance

The audited consolidated financial statements have been prepared in accordance with IFRS, and include the significant accounting policies described in Note 2 thereto. The consolidated financial statements for the year ended August 31, 2012 represent our initial presentation of our financial performance and financial position under IFRS, and were prepared in accordance with IFRS 1, First Time Adoption of IFRS , as discussed in Note 24. Comparative figures in the financial statements have been restated to consistently apply the same IFRS. Detailed disclosure of the effects of the transition to IFRS from Canadian GAAP can also be found in Note 24. The financial statements were prepared on a going concern basis, under the historical cost convention except for marketable securities classified as fair value through profit or loss.

Revenue Recognition

We recognize revenue when the amount of revenue can be reliably measured, if it is probable that future economic benefits will flow to the entity and specific criteria have been met for each of our activities as described below. Revenue is measured at the fair value of the consideration received or receivable.

The primary sources of the Company’s revenues are as follows:

(a) Educational programs and services

The educational programs and services consist of tuition fee (net of discounts) on course offerings by CIBT, Sprott-Shaw and KGIC. Tuition is paid in advance and is initially recorded as deferred revenue. Tuition revenue for educational programs and services is recognized proportionately as the instructions are delivered, and is reported net of scholarships, business taxes and related surcharges, and tuition refunds. Students are entitled to a short term course trial period which commences on the date the course begins. Partial tuition refunds are provided to students if they decide within the trial period that they no longer want to take the course. After the trial period, if a student withdraws from a class, no refunds will be provided and any collected but unearned portion of the fee is recognized at that time.

(b) Revenue sharing arrangement with education service providers

CIBT has entered into numerous educational delivery agreements with various educational service providers whereby a portion of the tuition fees, net of discounts, are paid to these educational service providers for the provision of facilities and/or teaching staff. For the majority of these revenue sharing arrangements, CIBT is considered the primary obligor and accordingly records the tuition fee revenues on a gross basis and the portion paid to the educational service providers is included in direct educational costs.

Business Combinations

We account for and record business combinations using the acquisition method of accounting. The purchase price of the acquisition is allocated to the tangible assets, liabilities, identifiable intangible assets acquired and non-controlling interest, if any, based on their estimated fair values as of the acquisition date. The excess of the purchase price over those fair values is recorded as goodwill. Acquisition-related expenses and restructuring costs are expensed as incurred.

When the consideration in an acquisition includes contingent consideration and the payment of which depends on the achievement of certain specified conditions post-acquisition, the contingent consideration is measured at its acquisition date fair value and included as part of the consideration transferred in a business combination. Changes in the fair value of the contingent consideration that qualify as measurement period adjustments are adjusted retrospectively, with corresponding adjustments against goodwill. Measurement period adjustments are adjustments that arise from additional information obtained during the measurement period (which is limited to one year from the acquisition date) about facts and circumstances that existed at the acquisition date.

Share-based Payments

We grant stock options to certain directors and employees to acquire shares in our common stock in accordance with the terms of our stock option plan. The fair value of options granted is recognized as a share-based payment expense with a corresponding increase in equity. The fair value is measured for each tranche at grant date and is recognized on a graded-vesting basis over the period during which the options vest. The fair value of the options granted is measured using the Black-Scholes option pricing model taking into account the terms and conditions upon which the options were granted and management’s estimate of forfeitures and expected volatility based on historical volatility. At each financial position reporting date, the amount recognized as an expense is adjusted to reflect the actual number of share options that vest.

We estimated the fair value of the January 6, 2012 stock option grant using the Black-Scholes option pricing model with the following assumptions at the time of the grant:

Expected life of the stock options	3.50 years
Risk-free interest rate	1.07%
Expected dividend yield	0.00%
Expected volatility *	63.46%

* Expected volatility assumptions used in the Black-Scholes option pricing models are based on historical average trading prices of our commons shares.

Income Taxes

As part of the process of preparing our consolidated financial statements, we are required to estimate our income taxes in each of the jurisdictions in which we operate. Significant judgment is required in determining our provision for income taxes and income tax assets and liabilities, including evaluating uncertainties in the application of accounting principles and complex tax laws.

Income tax expense represents current tax and deferred tax. We record current tax based on the taxable profits for the period which is calculated using tax rates that have been enacted or substantively enacted by the reporting date. Taxable profit differs from profit as reported in the consolidated statement of comprehensive income because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible.

We account for deferred income taxes using the asset and liability method. Under this method, deferred tax assets and liabilities are determined based on temporary differences between the financial reporting and tax basis of assets and liabilities, and measured using the substantively enacted tax rates and laws in effect when the differences are expected to reverse. The effect of a change in tax rates or tax legislation is recognized in the period of substantive enactment. Deferred tax assets, such as unused tax losses, income tax reductions, and certain items that have a tax basis but cannot be identified with an asset or liability on the statement of financial position, are recognized to the extent it is probable that taxable profit will be available against which the asset can be utilized.

Impairment of intangible assets

We review the carrying amount of intangible assets with a finite life each reporting period to determine whether events or changes in circumstances indicate that their carrying amounts may not be recoverable. Intangible assets with an infinite life and goodwill are reviewed and tested on an annual basis or whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable.

An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows (cash-generating units). The recoverable amount is the higher of an asset’s fair value less cost to sell or its value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash flows, the recoverable amount is determined for the cash-generating unit to which the asset belongs.

Impairment losses recognized in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.

Impairment of goodwill

We evaluate goodwill for impairment annually as of August 31st of each fiscal year end. For the purposes of impairment testing, goodwill is allocated to each of our cash-generating units (or groups of cash-generating units) that is expected to benefit from the synergies of the combination. A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata based on the carrying amount of each asset in the cash generating unit. Any impairment loss for goodwill is recognized directly in profit or loss in the consolidated statement of comprehensive income. An impairment loss recognized for goodwill is not reversed in subsequent periods.

Intangible Assets

Our indefinite life and finite life intangible assets are recorded at their cost which, for intangible assets acquired in business combinations, represents the acquisition date fair value.

Indefinite life intangible assets, which include accreditations, brand and trade names, and Chinese university partnership contracts, are not subject to amortization and are reviewed and tested for impairment annually or whenever events or changes in circumstances indicate that their carrying value may not be recoverable.

Finite life intangible assets, which include curriculum access contracts, acquired internally developed curriculum, and foreign university cooperating agreements are carried at cost less accumulated amortization and impairment losses. Amortization is calculated over the estimated useful life of the finite life intangible asset, with periods ranging from less than one year to fifteen years on a straight-line basis. Finite life intangible assets are tested for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable through future undiscounted net cash flows from the use or disposal of the related finite life intangible asset.

We did not recognize an impairment loss on intangible assets in fiscal 2012. The amount of impairment loss on intangible assets recorded in fiscal 2011 was $3,481,347.

Goodwill

Goodwill is the residual amount that results when the purchase price of an acquired business exceeds the sum of the amounts allocated to the identifiable assets acquired, less liabilities assumed, based on their fair value estimates. Goodwill is allocated as of the date of the business combination to our reporting units that are expected to benefit from the synergies of the business combination. A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata based on the carrying amount of each asset in the cash generating unit. Any impairment loss for goodwill is recognized directly in profit or loss in the consolidated statement of comprehensive income. An impairment loss recognized for goodwill is not reversed in subsequent periods. Management evaluates goodwill for impairment annually as of August 31 st . We did not recognize an impairment loss on goodwill for the year ended August 31, 2012 (fiscal 2011 - $2,287,905).

On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.

Foreign Currency Translation

CIBT in China maintains its accounting records in Chinese RMB, whereas our functional currency and that of our subsidiaries operating in Canada, such as KGIC and Sprott-Shaw, is the Canadian dollar. Our reporting currency is the Canadian dollar.

Our self-sustaining foreign operations are translated using the current rate method. Under this method, foreign denominated assets and liabilities are translated into their Canadian dollar equivalents using foreign exchange rates that prevailed at the balance sheet date; revenues and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during that period, in which case the exchange rates at the dates of the transactions are used. The resulting exchange rate differences are recognized in other comprehensive income and accumulated equity, and attributed to non-controlling interests as appropriate.

Property and Equipment

Property and equipment are carried at cost less accumulated depreciation and accumulated impairment losses. The initial cost of an asset comprises its purchase price and any costs directly attributable to bringing the asset into working condition for its intended purpose. Amortization is provided over the estimated useful lives of the assets as follows:

●	Leasehold improvements – straight-line over the lesser of five years and the remaining lease term; and

●	Furniture and equipment – 20% declining balance.

We review the carrying value of property and equipment for impairment whenever changes in events or circumstances indicate the recoverable value may be less than the carrying amount. The determination of whether impairment of property and equipment has occurred is based on undiscounted future net cash flows expected to be recovered from specific assets or groups of assets through use or future disposition. Impairment charges, when indicated, are charged to operations in the reporting period in which determination of impairment is made by management. The impairment charge is calculated by the excess of the carrying value over its fair value, with fair value being determined using a discounted cash flow analysis. We did not recognize impairment loss on property and equipment for the year ended August 31, 2012 (2011 - $128,526).

Future Accounting Standards

Standards issued but not yet effective up to the date of issuance of our consolidated financial statements, which we reasonably expect to be applicable at a future date, are listed below. We intend to adopt these standards when they become effective.

In the annual period beginning September 1, 2015, we will be required to adopt IFRS 9, Financial Instruments, which is the result of the first phase of the International Accounting Standards Board’s project to replace IAS 39, Financial Instruments: Recognition and Measurement. The new standard replaces the current multiple classification and measurement models for financial assets and liabilities with a single model that has only two classification categories: amortized cost and fair value. Management is currently evaluating the impact that this standard will have on the consolidated financial statements.

In the annual period beginning September 1, 2013, we will be required to adopt IFRS 10, Consolidated Financial Statements (“IFRS10”). IFRS 10 replaces the consolidation requirements in SIC-12, Consolidation - Special Purpose Entities and IAS 27, Consolidated and Separate Financial Statements. Earlier application of this standard is permitted. IFRS 10 builds on existing principles by identifying the concept of control as the determining factor in whether an entity should be included within the consolidated financial statements of the parent company. The standard provides additional guidance to assist in the determination of control. Management is currently evaluating the impact that this standard will have on the consolidated financial statements.

IFRS 12, Disclosure of Interests in Other Entities, establishes disclosure requirements for interests in other entities, such as subsidiaries, joint arrangements, and associates. The standard carries forward existing disclosures and introduces significant additional disclosure requirements that address the nature of, and risks associated with, an entity’s interests in other entities. Management has yet to assess the full impact of IFRS 12 and intends to adopt the standard beginning September 1, 2013.

In the annual period beginning September 1, 2013, we will be required to adopt IFRS 13, Fair Value Measurement. This standard establishes a single framework for all fair value measurements where fair value is required or permitted by IFRS. Management is currently evaluating the impact that this standard will have on the consolidated financial statements. The adoption of this standard is not expected to have a material impact on our consolidated financial statements.

In the annual period beginning September 1, 2013, we will be required to adopt the amendments to IFRS 7, Financial Instruments: Disclosures (“IFRS 7”). The amendment requires new disclosures relating to the offset of financial assets and financial liabilities that will enable the users of financial statements better compare financial statements prepared in accordance with IFRS and US Generally Accepted Accounting Principles. Management is currently evaluating the impact that this standard will have on the consolidated financial statements. The adoption of the amended standard is not expected to have a material impact on the consolidated financial statements.

In the annual period beginning September 1, 2012, we will be required to adopt the amendments to IAS 1, Presentation of Financial Statements as it relates to the presentation of other comprehensive income (“OCI”). The amendments to this standard do not change the nature of the items that are currently recognized in OCI, but requires presentational changes. Management is currently evaluating the impact that this standard will have on the consolidated financial statements. The adoption of this standard is not expected to have a material impact on our consolidated financial statements.

In the annual period beginning September 1, 2013, we will be required to adopt IAS 19 (Amendment), Employee Benefits, which revises recognition and measurement of post-employment benefits. This amended standard will modify accounting for termination benefits, including distinguishing benefits provided in exchange for service and benefits provided in exchange for the termination of employment and affect the recognition and measurement of termination benefits. The impact, if any, that this amended standard will have on our consolidated financial statements is not determinable at this time.

First-time Adoption of IFRS

In preparing these consolidated financial statements, we have applied the mandatory exceptions and selected some of the optional exemptions from full retrospective application of IFRS contained in IFRS 1. Below describes the effect of applying each in the transition from Canadian GAAP to IFRS as at September 1, 2010 (“the transition date”).

Mandatory exceptions – Hindsight was not used to create or revise estimates previously made under Canadian GAAP, except where necessary to reflect any difference in accounting policies or where there is objective evidence that those estimates were in error. When accounting for non-controlling interests total comprehensive income has been attributed to the owners of our company and to the non-controlling interests even if this results in the non-controlling interests ending with a deficit balance. In applying these exceptions, the only resulting impact on the consolidated financial statements was the requirement to attribute other comprehensive income between the owners of our company and the non-controlling interests. The remaining two mandatory exceptions required by IFRS 1 were not applicable to our company and therefore did not result in any impact to our financial statements on transition to IFRS:

●

Derecognition of financial assets and financial liabilities per IFRS 1 Appendix B2 – B3 was not applicable to our company as our financial instruments were reviewed and concluded to meet the recognition criteria of IAS 39 as of the transition date. As a result no changes in the accounting recognition for financial instruments was required on transition to IFRS; and

●	Hedge accounting per IFRS 1 Appendix B4-B6 was also not applicable as we did not have any hedging arrangements that would be impacted by this mandatory exception.

Business Combinations exemption – We elected to apply IFRS 3, Business Combinations , on a prospective basis to business combinations that occurred on or after September 1, 2010. IFRS 3 may be applied retrospectively or prospectively. The retrospective basis would require restatement of all business combinations that occurred prior to the transition date. Any goodwill arising from such business combinations before the transition date will not be adjusted from the carrying value previously determined under Canadian GAAP as a result of applying this exemption, except as required under IFRS 1. Upon adoption of IFRS, we revisited the accounting treatment for commissions paid to agents for the acquisition of student contracts and has determined that they represent valid contract costs, as defined in IAS 11, Construction contracts . As these costs represent an identifiable non-monetary asset without physical substance they have been classified as a finite life intangible asset in accordance with IAS 38, Intangible assets . Under previous Canadian GAAP we did not ascribe any of the fair value of the consideration paid in connection with business combinations to commissions paid to agents for the acquisition of student contracts as these costs did not meet the definition of an asset. In applying the exemption related to past business combinations contained in IFRS 1 we have recognized a $376,000 finite life intangible asset related to contract acquisition costs that were subsumed in the original measurement of goodwill when accounting for business combinations occurring prior to September 1, 2010. This resulted in a corresponding reduction in goodwill and opening retained earnings as at September 1, 2010.

Fair value or revaluation as deemed cost exemption – We have used the amount determined under a previous GAAP revaluation as the deemed cost for certain assets. We elected the exemption for certain assets which were written down under Canadian GAAP, as the revaluation was broadly comparable to fair value under IFRS. The carrying value of those assets on transition to IFRS is therefore, consistent with the Canadian GAAP carrying value on the transition date.

Cumulative translation differences exemption – As permitted by the IFRS 1 exemption for cumulative translation differences, we have deemed cumulative translation differences for foreign operations to be zero at the transition date. The cumulative translation loss as at September 1, 2010 was re-allocated from accumulated other comprehensive loss to deficit. As a result, a difference of $471,573 was recorded in deficit to reduce the foreign currency translation reserve to zero on September 1, 2010.

Share-based payment transactions exemption – IFRS 2, Share-Based Payments , encourages application of its provisions to equity instruments granted on or before November 7, 2002, but permits the application only to equity instruments granted after November 7, 2002 that had not vested by the transition date. We have elected not to apply IFRS 2 to awards that vested prior to September 1, 2010. The application of this exemption did not result in an IFRS transition adjustment. As discussed in the reconciliation note below, there was a difference in amounts recorded for share-based payments between Canadian GAAP and IFRS for the year ended August 31, 2011.

Leases exemption – We may determine whether an arrangement existing at the transition date contains a lease on the basis of facts and circumstances existing at that date. We have applied the transitional provisions in IFRIC 4, Determining Whether an Arrangement Contains a Lease . The application of this exemption did not result in an IFRS transition adjustment to the opening statement of financial position at September 1, 2010.

Impact of Foreign Currency Exchange Rate Fluctuations

We conduct business primarily in Canada and China, as well as certain other countries. This gives rise to significant exposure to market risks from changes in foreign currency exchange rates, particularly the RMB. Currently, we do not use derivative instruments or other measures to reduce our exposure to foreign currency risk. In addition, we are exposed to restrictions on Chinese currency exchange, which may affect our ability to repatriate profits from China.

Effective September 1, 2008, we changed our reporting currency from United States dollars to Canadian dollars with the Canadian dollar being our functional currency for all periods presented. We believe the Canadian dollar best reflects our most significant operations, being those of Sprott-Shaw, which are conducted primarily in Canadian dollars. We previously used the current rate method to translate all amounts presented to United States dollars. Under the current rate method, all assets and liabilities are translated to Canadian dollars using exchange rates in effect at the end of the reporting period; revenue, expenses and cash flows are translated at the average rate during the reporting period; and any associated gains and losses are recorded as other comprehensive income and accumulated in equity.

Included in the operating results for all relevant periods are exchange gains and losses arising on foreign currency translation of integrated operations as follows:

		Year Ended August 31, 2012				Year Ended August 31, 2011
Foreign exchange gains (losses)		$	5,874			$	10,771

Uncertainties of Government Policies

We are subject to government regulations in Canada and China, and there are uncertainties with respect to the Chinese legal system and economic and political policies in China. We manage all risk issues directly. Currently we are not aware of any contingent liabilities which involve us or any of our properties or subsidiaries.

Canada

The power to make laws is divided between the federal and provincial governments in Canada. As such, we are subject to changes in laws at the federal level and at the provincial level in the provinces in which we conduct our operations, including the province of British Columbia. Changes to the laws applicable to corporate entities will have an impact on our operations, though such changes may or may not be material.

As an educational services industry participant, our customers are students. In Canada, domestic students rely heavily on financial assistance in the form of government funded student loans and student grants provided by the federal, provincial and territorial governments. The student loan system is governed at the federal level by the Canada Student Financial Assistance Act , and at the provincial or territorial level by the applicable statute and regulations enacted in each province or territory. The student loan and grant program is a modified direct loan system that requires students to complete and submit an application demonstrating financial need, which if approved, will only be paid directly to qualified education institutions, who are required in turn to maintain certain records on behalf of students and submit information directly to the applicable government body or designated service provider of the government, including proof of enrollment, proof of attendance, completion of a minimum number of training hours per week and proof of residency for provincially administered funding.

As of August 31, 2012, approximately 43% of Sprott-Shaw’s students and no KGIC students received a form of government student financial assistance. For private educational institutions, such as Sprott-Shaw, each campus or physical educational facility must be certified separately by completing and submitting a separate application, following which the campus or physical educational facility enters into a memorandum of understanding with StudentAid BC, a branch of the Ministry of Advanced Education and Labors Market Development of British Columbia (the “Ministry”) that administers Canada student loans and Canada student grants on behalf of the Government of Canada, on an annual basis. A number of factors are considered in the certification process, including course descriptions, costs, duration, types of participants, type of certificates issued upon completion and lists of occupations for which training is given to students. Campuses must be re-certified after a change in ownership. Certifications are granted for a period of up to five years, subject to review by the granting authority. There is therefore no guarantee that our currently certified facilities will continue to be certified in the future. Additionally, the requirements to obtain certification may change, making it more difficult to become certified or limiting the number of certifications granted.

Prior to applying for certification of a particular campus, the campus must be registered to operate private training institutions in the province of British Columbia and have its programs approved. The registration and approval process is overseen by Private Career Training Institutions Agency (of BC) (the “Agency”), the regulatory agency for private training institutions in the province of British Columbia authorized by the Ministry. Private educational institutions must be registered if they offer any programs that exceed $1,000 in tuition and 40 hours in duration. Registration occurs by way of an application process that generally takes between one to two months to complete and involves submitting materials and information to the Agency along with application fees. A site visit/inspection may also be required by the Agency on a case by case basis.

All of Sprott-Shaw’s campuses are registered with the Agency. The campuses were certified prior to the acquisition of Sprott-Shaw Community College in December 2007, and were re-certified following the acquisition. None of Sprott-Shaw’s campuses have been denied their initial certifications or lost their existing certifications. Prior to the acquisition of KGIC on March 15, 2010, all of KGIC’s campuses were registered with the Agency to operate private training institutions in British Columbia, but KGIC’s language schools do not qualify for certification or student loan assistance as the student loan and student grant programs are not applicable to language schools. The business college operated by KGIC was certified in British Columbia and Ontario, and was re-certified after the acquisition. The KGIC Colleges have been registered with the Agency and had their programs approved.

There are a number of administrative requirements that each certified facility must abide by in order to maintain its certification for the student loan programs. Such administrative requirements pertain to student loan recipients only and include ensuring that minimum attendance levels are met, recording attendance, verifying proof of residency and notifying the government when enrollment ceases for any reason including graduation or voluntary termination. If a particular campus fails to comply with requirements, it may be subject to a review and may lose its certification, which would have an adverse impact on our ability to attract and retain students to any affected campus. Further, the loss of our ability to offer financial aid at any campus could have an adverse impact on our financial condition, results of operations and the value of your investment in us.

Sprott-Shaw employs a Manager of Student Services and two other staff members whose responsibilities include the oversight of each campus’ compliance program with the administrative requirements to maintain their student loan accreditations. In addition, Sprott-Shaw’s head office and StudentAid BC each conduct semi-annual audits to verify that the campuses are in compliance.

The administration of student loan and student grant programs, both federal and provincial, has changed a number of times since the program was implemented at the federal level in 1964. Any changes to the student loan and grant programs could impact the availability of financial assistance for our students, our enrollment levels and our revenues. Changes to the certification process could also affect our ability to have our current campuses or any newly acquired campuses or teaching facilities certified, which may also have an impact on our enrollment levels and our revenues.

China

China has not developed a fully integrated legal system and recently-enacted laws and regulations may not sufficiently cover all aspects of economic activities in China. China’s system of laws and the enforcement of existing laws may not be as certain in implementation and interpretation as in the U.S. or Canada. The Chinese judiciary is relatively inexperienced in enforcing corporate and commercial law, leading to a higher than usual degree of uncertainty as to the outcome of any litigation. If new laws and regulations governing the education business in China restrict foreign investment in the education system, we may not obtain or be able to renew our governmental approvals in the future, which may cause us to cease our education business in China, representing approximately 5% of our fiscal 2012 revenues.

On November 8, 2012, China had a planned change in their government officials. Such measures cause uncertainty in the level of economic activity in China, and the support of the education system in China, which in turn could positively or adversely affect our results of operations and financial condition.

A judgment of a U.S. court predicated solely upon civil liabilities may not be enforceable in China by a Chinese court. China does not have treaties with the U.S. providing for the reciprocal recognition and enforcement of judgments of courts. You may not be able to enforce foreign judgments based on the U.S. laws against us or our assets. It may be difficult for you to bring an action against us or our assets, even if you believe that your rights have been infringed under the U.S. securities laws.

In addition, there are capital controls in China and China still has many restrictions on the movement of money in and out of the country for anything except payments associated with exports and imports. At present, a company can repatriate up to 90 percent of profits from their China-based operations. A portion (at least 10 percent for “Wholly Owned Foreign Entities”), must be placed in a reserve account. As of August 31, 2012 there was no restricted amount in reserve. This reserve is capped at 50 percent of a company’s registered capital. To distribute the remainder, a company must obtain a board resolution authorizing distribution and file an application with China’s State Administration of Taxation or “SAT” that includes an annual audit, tax receipts and other documents as required. SAT will then issue a Foreign Enterprise Income Tax Payment Certificate which will enable the bank to exchange RMB into the desired currency for remission of funds. There is uncertainty as to repatriating this money.

C. Research and development, Patents and Licenses, etc.

We currently do not, nor have we in the past three years, engaged in any research and development activities.

D. Trend Information

Other than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events since the latest financial year that are reasonably likely to have a material adverse effect on our revenues, income, profitability, liquidity or capital resources, or that could cause the disclosed financial information to be not necessarily indicative of future operating results or financial condition.

E. Off-balance Sheet Arrangements

We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our stockholders.

F. Tabular Disclosure of Contractual Obligations

As at August 31, 2012, we had the following contractual obligations and commercial commitments:

	Payments Due by Period
Contractual Obligations	Total		Less Than 1 Year		1-5 Years		After 5 Years
Long-Term Debt Obligations (1)	$	1,670,862	$	1,639,342	$	31,520		-
Finance Lease Obligations (2)	$	888,895	$	221,990	$	666,905		-
Operating Leases (3)	$	12,287,776	$	3,847,039	$	8,365,796		74,941
TOTAL	$	14,847,533	$	5,708,371	$	9,064,221	$	74,941

(1)	Long-term debt obligations relate to term loans and promissory notes.

(2)	Capital lease obligations relate to capitalized leased assets.

(3)	Operating leases relate to leased office and campus premises.

As of August 31, 2012, the remaining principal balance relating to long-term debt was $31,520 (August 31, 2011 - $34,232) and the finance lease obligations totaled $575,456 (August 31, 2011 - $249,132). The current portion of long-term debt was $1,552,712 (August 31, 2011 - $2,152,492), which is consistently being paid down at a rate of $50,000 per month, and the amount of finance lease obligations was $167,902 (August 31, 2011 - $101,765).

Quantitative and Qualitative Disclosure About Market Risk

Exchange Rate Risk – We operate in Canada and China, and through our subsidiaries in China we generate revenues in Chinese RMB and incur operating costs which are payable in Chinese RMB, giving rise to exposure to market risks from changes in foreign currency rates. As we hold minor amounts of cash in US dollars, the exchange rate fluctuation between the Canadian dollar and US dollar will not have a material impact on our net income. As at August 31, 2012, we had a net working capital asset of 14,452,281 RMB or C$2,261,349 (August 31, 2011 – 14,767,581 RMB or C$2,267,401). Each 10% strengthening of the Canadian dollar against the RMB would decrease the value of net working capital by C$205,577 (August 31, 2011 – $206,127).

Capital control exists in China and China still has many restrictions on the movement of money in and out of the country for anything except payments associated with exports and imports. At present, a company can repatriate up to 90 percent of profits from their China-based operations. A portion (at least 10 percent for Wholly Owned Foreign Entities), must be placed in a reserve account. This reserve is capped at 50 percent of a company’s registered capital. To distribute the remainder, a company must obtain a board resolution authorizing distribution and file an application with China’s State Administration of Taxation (“SAT”) that includes an annual audit, tax receipts and other documents as required. SAT will then issue a Foreign Enterprise Income Tax Payment Certificate which will enable the bank to exchange Chinese RMB into the desired currency for remission of funds. As of August 31, 2012, the amount in the statutory reserve in China is $Nil.

Credit Risk – The financial instruments that potentially subject us to significant concentration of credit risk consist principally of cash and cash equivalents and accounts receivable. Our cash is on deposit at major financial institutions. Management is of the opinion that credit risk with respect to accounts receivable is limited due to the ongoing evaluations of our debts and the monitoring of our financial condition to ensure collections and to minimize losses. Accounts receivable as at August 31, 2012 in the amount of $8,624,143 is reported net of allowance for bad debts of $999,352 (August 31, 2011 – $914,358). The carrying amount of the assets included on the statement of financial position represents the maximum credit exposure.

Interest Rate Risk – We are exposed to interest rate risk on our cash and cash equivalents which earn interest at market rates, and we are exposed to interest rate risk on our demand term installment loan. A one point increase in the prime rate of interest would add approximately $30,000 of interest cost per annum to the demand term installment loan.

Liquidity Risk – We are exposed to liquidity risk in that we will not have sufficient cash resources to meet our financial obligations as they come due in the normal course of business. We manage our liquidity risk by monitoring our operating requirements and using our demand operating credit facility of $1,500,000 to ensure financial resources are available. We could look to capital financing which we have successfully raised in the past. However, there is no assurance that such financing will be available, and if available, on favorable terms. Management prepares budgets and cash forecasts to ensure that we have sufficient funds to fulfill our financial obligations.

Our capital structure consists of shareholders’ equity and long-term debt. We manage and adjust our capital structure in light of economic conditions and the risk characteristics of the underlying assets. We monitor our capital using various financial ratios and non-financial performance indicators. Our primary uses of capital are to finance working capital requirements, capital expenditures and acquisitions. We must comply, and we are currently in compliance, with certain financial ratio requirements in connection with our long-term debt.

We reported a net loss of $813,888 and had a net working capital deficit of $6,713,511. Our consolidated financial statements included in this annual report have been prepared assuming we will continue as a going concern. Although we have completed private placements in prior years, there can be no assurance that we will be able to continue to raise funds, in which case we may be unable to meet our obligations. However, we hold sufficient cash to support our operations in the next 12 months.

Our ability to continue as a going concern is dependent upon the ability to raise capital, the generation of positive cash flow, and the performance of the various educational programs that we offer and the success of the development for new programs. There is no certainty that such events will occur and that sources of financing will be obtained on terms acceptable to management. Whether and when we can attain profitability and positive cash flows is also uncertain. The accompanying financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern. Such adjustments could be material.

Inflation

In recent years, China has not experienced significant inflation, and therefore inflation has not had a significant impact on our business. According to the National Bureau of Statistics of China, the change in the Consumer Price Index in China was -0.7%, 3.3% and 5.4% in 2009, 2010 and 2011, respectively. The rate of inflation in November 2012 was 1.9%. Based on the upward change of the Consumer Price Index in 2011, the Chinese government announced measures to restrict bank lending and investment in China in order to reduce inflationary pressures on China’s economy, which has resulted in a decline in inflation in 2012. Such measures adopted by the Chinese government may not continue to be successful in reducing or slowing the rate of inflation in China in the future, and increased inflation in China in the future may adversely affect our business and financial results.

ITEM 6. Directors, Senior Management and Employees

A. Directors and Senior Management

Officers:

As of the date of this annual report, our senior officers are as set out in the table below.

Name	Age	Titles	Appointment Date
Toby Chu	51	President, Chief Executive Officer and Vice Chairman	May 11, 1994
Dennis Dan Huang	50	Corporate Secretary	June 28, 2010
Dennis Dan Huang	50	Chief Financial Officer	June 28, 2010
Patrick Dang	53	President of Sprott-Shaw	November 17, 2010
Sung Sub Lim	47	President of the KGIC Colleges	March 7, 2010

Directors:

The following table sets forth certain information relating to our directors as of the date of this annual report:

Name	Age	Appointment or Election Date
Toby Chu (3)(4)	51	May 11, 1994
Tony David (2)	72	July 28, 1998
Troy Rice (1)(3)	49	October 28, 2005
David Hsu (1)(2)(4)	70	February 27, 2006
Shane Weir (1)(3)	58	December 12, 2008
Derek Feng (1)(2)(4)	47	July 19, 2011

( 1)	Member of our audit committee

(2)	Member of our compensation committee

(3)	Member of our corporate governance committee

(4)	Member of executive committee

Senior Officers and Directors

Toby Chu, Director, Vice Chairman, President and Chief Executive Officer

Toby Chu has been a director, President and Chief Executive Officer of CIBT Education Group since 1994. Toby Chu is also a director, President and Chief Executive Officer of CIBT and a director of IRIX. In 1999, Mr. Chu founded SE Global Equities Corp., a former subsidiary of CIBT Education Group in the business of providing financial services and investment advice to private investors and companies. From 1995 to 1996 Toby Chu worked as a senior manager at Central Foods, Inc., a company in the business of food distribution. Mr. Chu has a diploma in business administration from Vancouver Community College in Vancouver, Canada.

Dennis Dan Huang, Chief Financial Officer and Corporate Secretary

Mr. Huang was appointed as our Chief Financial Officer and Secretary on June 28, 2010. He is also the Corporate Secretary of CIBT. Mr. Huang has been our Executive Vice President of Finance since December 2006. Prior to joining us, Mr. Huang was the President, Director, a Compliance Officer and an Investment Representative of StockTrade Securities Inc. (now First Trade Canada Capital Partners Inc.) from 2005 to 2006. From 2003 to 2004, Mr. Huang served as the Vice President and Chief Information Officer of ChinaEagle Network Inc., a company that provides information technology services to broker-dealers in China, and from 2000 to 2002, he served as General Manager for the Electronic Commerce Department of Guangdong Securities Inc., a broker-dealer in China. Mr. Huang is a designated Financial Management Advisor in Canada and a Senior Economist in Guangdong Province, China. He holds a Doctorate degree in Economics from Jinan University, located in Guangdong, China and a Bachelor of Science degree from Zhongshan University, also located in Guangdong, China.

Patrick Dang, President of Sprott-Shaw

Mr. Dang was appointed as the President of Sprott-Shaw on December 10, 2010. From November 17, 2010 to December 9, 2010, he was the Acting President of Sprott-Shaw. Mr. Dang has over 26 year of marketing and sales experience at senior levels of management, and over the past 15 years he has held senior positions at Sprott-Shaw, including VP for Marketing and VP for International Business and Product Development. During his tenure at Sprott-Shaw Community College, Mr. Dang was responsible for leading the companies marketing and sales directions including licensing of new partnership’s and joint ventures internationally. Through his vision and direction the college has enjoyed unprecedented levels of growth and expansion culminating in the growth in sales, revenues and profits alike. In fact, performances increased exponentially between 18% and 30% annually under his watchful eye. Mr. Dang personally directed the drive for international development, growth and expansion of the college leading to licenses and franchises being established in countries like Jordan and Oman in the Middle East, India, Hanoi and Ho Chi Min City in Vietnam, Beijing, Shanghai and Guang Dong Provinces in China.

Sung Sub Lim, President of the KGIC Colleges

Mr. Lim is the President of each of the KGIC Colleges. He founded KGIC in 1996 and grew the business from one facility with seven classrooms to eight campuses, six overseas staff offices, a staff of 204 and enrollment of over 5,000 students annually. Mr. Lim successfully developed a global network of recruiting agents and education partners in 30 countries as part of KGIC’s growth strategy. Mr. Lim holds Bachelor of Arts degrees majoring in Theatre and Film from Chung-Ang University and the Seoul Institute of the Arts in Korea.

Tony Haskell David, Director

Mr. David has been a director of CIBT Education Group since 1998. From 1979 to present Mr. David has been self-employed as an oral maxillofacial surgeon. He is a member of the Canadian Association of Oral and Maxillofacial Surgeons, the BC Association of Oral and Maxillofacial Surgeons, and the College of Dental Surgeons. Mr. David has a Master of Science degree in Physiology from the University of Oregon, and a Doctorate in Dental Medicine from the Washington University School of Dental Medicine in St. Louis, Missouri.

Troy Rice, Director

Mr. Rice has been a director of CIBT Education Group since 2005. He is also a director of CIBT. From 2002 to 2005, Mr. Rice served as Senior Vice President of Business Development at Universal Technical Institute, Inc. (NYSE: UTI), an automotive repair education company. From 2001 to 2002 Mr. Rice was Vice President at PetSmart, Inc. (NASDAQ: PETM), a supplier of pet supplies and products, and from 1995 to 2001, he was a Senior Vice President of Comfort Systems U.S.A. (NYSE: FIX). Mr. Rice received his Bachelor’s degree in accounting from the University of Iowa in 1985 and his MBA from Arizona State University in 1992. Mr. Rice is also a CPA in the state of Arizona.

David Hsu, Director

Mr. Hsu has been a director of CIBT Education Group since 2006. He is also a director of CIBT. Currently Mr. Hsu is also a co-founder, director and president of MedicineNet, Inc., an internet business that provides medical information online, and has held these positions since 1996. Mr. Hsu was also one of the founders of Multi-Fineline Electronix, Inc., a NASDAQ-listed company (MFLX), and served as a director since its inception in 1984 to 2004. From 2000 to 2003, Mr. Hsu served as a director of i-Cable Inc. (NASDAQ: ICAB), a provider of telecommunication services in Hong Kong. From 1980 to 2004, Mr. Hsu served as an associate professor and clinical faculty member at the Medical School of the University of California. From 1977 to 2004, Mr. Hsu operated a private practice in gastroenterology in California. Mr. Hsu obtained a Medical Doctorate from the Medical School of the University of Hamburg, Germany in 1967 and MBA from Pepperdine University of Malibu, California in 1987.

Shane Weir, Director

Mr. Weir has been a director of CIBT Education Group Inc. since 2008. Mr. Weir became a solicitor, barrister and notary public in Canada in 1978. He was admitted to the bars in England and Wales and in Hong Kong as a solicitor in 1992. He works as a solicitor at the law firm Weir & Associates in Hong Kong, a firm he organized in 1985. From 1989 to 1992, Mr. Weir was director of L&D Property Limited, a real estate brokerage firm in Hong Kong. He has lectured in both Canada and Hong Kong at the university level. Mr. Weir is also a registered investment advisor and is a director of Asia Pacific Investment Advisors Ltd., an investment management firm in Hong Kong, and e-Kong Group Limited, a company with operations in the telecommunications and technology industries in the United States, China, Hong Kong and Singapore.

Derek Feng, Director

Mr. Feng was appointed as a director of CIBT Education Group Inc. by the Board of Directors effective July 19, 2011 to replace David Warnock, who resigned as a director in July 2011. Mr. Feng was appointed as the Chairman and Interim CEO of ChinaCast Education Corporation on March 26, 2012 by their board of directors to address issues that arose during the tenure of his predecessor. Mr. Feng has held a number of positions at General Electric Company (“GE”) from 1999 to 2006, including Manager of Americas Business Development at GE Capital, Managing Director, Global Business Development at GE Equipment Management, General Manager, Global Business Development at GE Infrastructure, and the Global Head of Business Development at GE Industrial, a division that has operating businesses ranging from high tech instruments to equipment leasing. Mr. Feng was also an officer of GE Capital Corporation, the largest non-bank financial services company in the world. During his tenure at GE, he evaluated numerous acquisitions, dispositions, minority investments and joint venture opportunities globally. In 2006, Mr. Feng became the Executive Vice President of Strategy, Planning and Operations at Knowledge Universe, an education holding company with a network of more than 3,000 locations worldwide, employing over 40,000 education professionals, and operating early childhood education centers, international schools, colleges, large on-line schools and school management systems. Mr. Feng graduated from Tsinghua University in China with a Bachelor of Science degree in Electrical Engineering, followed by a Master of Business Administration degree from University of California, Los Angeles.

Other Directorships Currently Held

The following directors hold directorships in other public companies as set out below.

Name of Director	Other Directorship	Company
Toby Chu	Director	Evermount Ventures Inc.
Derek Feng	Director	ChinaCast Education Corporation
Shane Weir	Director	e-Kong Group Limited

Family Relationships

Toby Chu and Alvin Chu (a director and officer of IRIX) are brothers. Other than this relationship, there are no family relationships among our officers or directors.

Involvement in Certain Legal Proceedings

None of our directors, executive officers, promoters, control persons or director nominees have been involved in any of the following events during the past five years:

●	any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;

●	any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);

●	being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; or

●	being found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.

Arrangement or Understandings Concerning Directors or Senior Management

None.

B. Compensation

The summary compensation table below sets forth the total annual compensation paid or accrued by us to or for executive officers for the year ended August 31, 2012.

Summary Compensation Table

Name	Year (1)	Salary (C$)		Bonus (C$)		Stock Awards (C$)		Option Awards (C$) (2)		Non-Equity Incentive Plan Compensation (C$)		Nonqualified Deferred Compensation Earnings (C$)		Total (C$)
Toby Chu (3)	2012		297,606		-		-		59,400		-		-		357,006
Dennis Dan Huang (4)	2012		101,500		-		-		11,000		-		-		112,500
Patrick Dang (5)	2012		180,000		-				-		-		-		180,000
Alvin Chu (6)	2012		120,581		-		-		-		-		-		120,581
Sung Sub Lim (7)	2012		158,157		-		-		5,500		-		-		156,394

(1)	“2012” denotes for the fiscal year 2012 from September 1, 2011 to August 31, 2012.

(2)	The fair value of these options on the grant date has been calculated in accordance with Section 3870 of the Canadian Institute of Chartered Accountants Handbook (accounting fair value) using the Black-Scholes model.

(3)

Toby Chu is the President, Chief Executive Officer and a director of CIBT Education Group and the Chief Executive Officer and a director of CIBT. Mr. Chu is also a director of Sprott-Shaw, as well as a director and the secretary of IRIX. In 2012, options to purchase up to 440,000 common shares of CIBT Education Group Inc. were granted to Toby Chu for Mr. Chu’s services as an officer and are exercisable at a price of $0.24 per share until January 6, 2017, and options to purchase up to 100,000 common shares of CIBT Education Group Inc. were granted to Concordia Financial Management Corp., a company over which Mr. Chu exercises control, for Mr. Chu’s services as a director, exercisable at a price of $0.24 per share until January 6, 2017.

(4)	Dennis Dan Huang is the Chief Financial Officer and Corporate Secretary of CIBT Education Group. In 2012, options to purchase up to 100,000 common shares of CIBT Education Group Inc. were granted to Mr. Huang and are exercisable at a price of $0.24 per share until January 6, 2017.

(5)	Patrick Dang is the President of Sprott-Shaw.

(6)	Alvin Chu is the President and Chief Executive Officer of IRIX, and is Toby Chu’s brother.

(7)	Sung Sub Lim has been the President of KGIC since March 7, 2010. In 2012, options to purchase up to 50,000 common shares of CIBT Education Group Inc. were granted to Mr. Lim and are exercisable at a price of $0.24 per share until January 6, 2017.

Director Compensation

The following summary compensation table sets forth the total annual compensation paid or accrued by us to or for our directors for the year ended August 31, 2012.

Name	Year (1)	Salary (C$)			Bonus (C$)		Stock Awards (C$)		Option Awards (C$) (2)		Non-Equity Incentive Plan Compensation (C$)		Nonqualified Deferred Compensation Earnings (C$)		Total (C$)
Troy Rice (3)	2012		10,092	(9)		-		-		7,700		-		-		17,792
Tony David (4)	2012		10,092	(9)		-		-		7,700		-		-		17,792
Shane Weir (6)	2012		10,092	(9)		-		-		9,900		-		-		19,992
David Hsu (6)	2012		10,092	(9)		-		-		16,500		-		-		26,592
David Kong (7)	2012		5,046	(9)		-		-		-		-		-		5,046
Derek Feng (8)	2012		10,092	(9)		-		-		11,000		-		-		21,092

(1)	“2012” denotes for the fiscal year 2012 from September 1, 2011 to August 31, 2012.

(2)

The fair value of these options on the grant date has been calculated in accordance with Section 3870 of the Canadian Institute of Chartered Accountants Handbook (accounting fair value) using the Black-Scholes model. In fiscal 2012, options to purchase 70,000 common shares were granted to Tony David, 90,000 common shares to Shane Weir, 100,000 common shares to Derek Feng, and 150,000 common shares each to David Hsu and Troy Rice. Options granted to directors expire on January 6, 2017 and are exercisable at a price of $0.24 per share.

(3)	Troy Rice is a director of CIBT Education Group and CIBT and was previously Chief Operating Officer of CIBT.

(4)	Tony David is a director of CIBT Education Group.

(5)	Shane Weir is a director of CIBT Education Group.

(6)	David Hsu is a director and Chairman of CIBT Education Group and director of CIBT.

(7)	David Kong did not stand for re-election as a director of CIBT Education Group and ceased to be a director on December 16, 2011.

(8)	Derek Feng was appointed as a director of CIBT Education Group on July 19, 2011.

(9)	Directors received compensation of US$2,500 per calendar quarter for their services as directors in fiscal 2012 which was converted to Canadian dollars at the average rate of exchange for the period of US$1 = C$1.0092.

Director and Officer Stock Option Grants

Directors, officers and employees of CIBT Education Group and its subsidiaries, any other person or company engaged to provide ongoing management or consulting services for CIBT Education Group or for any entity controlled by it, and any person who is providing ongoing management or consulting services to CIBT Education Group or to any entity controlled by CIBT Education Group indirectly through a company that is providing management or consulting services, is eligible to receive stock options under the Current Plan. The Current Plan was approved by the Toronto Stock Exchange on December 30, 2010 and by the NYSE MKT LLC on January 13, 2011.

The purpose of the Current Plan is to attract, retain and motivate management, directors, employees and other service providers by providing them with an opportunity, through share options, to acquire an interest in our share capital and benefit from our growth.

The material terms of the Current Plan are as follows:

The term of any options granted under the Current Plan will be fixed by the compensation committee of the Board, or any other committee of the Board established to monitor and recommend on compensation matters, or in the absence of any such committee, the Board itself (the “Committee” ) at the time such options are granted, provided that options will not be permitted to exceed a term of ten years. Except where not permitted by the Toronto Stock Exchange, where an option expires during a black-out period, or within 10 business days following the end of a black out period, the term of the option will be extended to the date which is five business days following the last day of the black-out period.

2.	The Committee may place limits on the maximum number of shares which may be issuable pursuant to options granted under the Current Plan to any particular optionee or category of optionees.

The exercise price of any options granted under the Current Plan will be determined by the Committee, but shall not be less than the average closing trading price of our common shares on the five trading days (on which at least one board lot of the shares was traded) preceding the grant of such options (the “Market Price” ).

Options granted under the Current Plan will be subject to such vesting provisions as the Committee in its sole discretion shall determine. We may, during the term of any Option, give at least 30 days notice in writing to all of the optionees that (i) all options outstanding under the Current Plan that have not vested as at the time of the notice are immediately deemed vested, or (ii) all options outstanding under the Current Plan that have not been exercised shall cease and terminate and be of no further force and effect unless the optionees exercise such options before their termination on the 30th day after delivery of the notice.

5.	All options will be non-assignable and non-transferable.

We are restricted from issuing in any one year period, or having issuable at any time, to insiders more than 10% of our total issued and outstanding common shares when combined with all of our other security based compensation arrangements with insiders, unless we obtain disinterested shareholder approval pursuant to the policies of the Toronto Stock Exchange.

7.	If an optionee ceases to be a director or officer of us or our subsidiaries or a service provider, each option held by the optionee shall be exercisable in respect of that number of option shares that have vested pursuant to the terms of the option agreement governing such option as follows:

(a)

If the optionee, or in the case of an option granted to any optionee who satisfies the definition of service provider, the optionee’s employer, ceases to be employed or engaged by us and any of our subsidiaries (including by way of voluntary resignation or retirement as a director, officer or service provider), each option held by the optionee shall be exercisable in respect of that number of option shares that have vested pursuant to the terms of the option agreement governing such option at any time up to but not after the earlier of the expiry date of that option and the date which is 30 days after the optionee ceases to be a director or officer of us and our subsidiaries or service provider;

(b)

Notwithstanding paragraph (a) above, if the optionee ceases to be a director or officer of us and any of our subsidiaries or a service provider due to death or disability or, in the case of an optionee that is a company, the death or disability of the person who provides management or consulting services to us or to any subsidiary of us, each option held by the optionee shall be exercisable in respect of that number of option shares that have vested pursuant to the terms of the option agreement governing such option at any time up to but not after the earlier of the expiry date of that option and the date which is 12 months after the date of death or disability; and

(c)

Notwithstanding paragraph (a), if the optionee, or, in the case of an option granted to an optionee who satisfies the definition of service provider, the optionee’s employer:

(i)

ceases to be employed or engaged by us and any of our subsidiaries for cause, as that term is determined by the Board, or interpreted by the courts of the jurisdiction in which the optionee or optionee’s employer is employed or engaged if subject to court review;

(ii)

ceases to be a director or officer of us and any of our subsidiaries or a service provider by order of any securities commission, recognized stock exchange, or any regulatory body having jurisdiction to so order;

(iii)

ceases to provide investor relations services if the optionee’s primary function with us was the provision of such services; or

(iv)

ceases to be eligible to hold office as a director of us and any of our subsidiaries under the provisions of the applicable corporate statute,

each option held by the optionee shall be exercisable in respect of that number of option shares that have vested pursuant to the terms of the option agreement governing such option at any time up to but not after the earlier of the expiry date of that Option and the date on which the optionee ceases to be a director or officer of us and any of our subsidiaries or a service provider.

We may generally amend or terminate the terms and conditions of the Current Plan or any option agreement, as applicable, by resolution of the Committee and without seeking shareholder approval (the “ Amendment Procedure ”). Any amendment to the Current Plan will apply to options granted after the effective date of such amendment, provided that it may apply to any outstanding options with mutual consent from us and the optionees to whom such options have been granted. Disinterested shareholder approval will be required for the following types of amendments:

(a)

amendments that increase the number of shares or bonus shares issuable under the Current Plan, except such increases by operation of section 6 of the Current Plan;

(b)

any reduction in the option price of an option held by an insider at the time of the proposed amendment;

(c)

any extension of the expiry date of an option held by an insider at the time of the proposed extension; and

(d)

other amendments required to be approved by shareholders under applicable law or pursuant to the rules, regulations and policies of the Toronto Stock Exchange.

The Committee may grant stock appreciation rights to any optionee in conjunction with any grant of options. Each grant of stock appreciation rights shall be confirmed within the option agreement pertaining to such options. An optionee may only exercise a stock appreciation right at the same time, and to the same extent, that the option related thereto is exercisable. Upon the exercise by an optionee of any stock appreciation right, the corresponding portion of the related option shall be surrendered to us.

10.

The Committee may allot, issue and deliver common shares in our capital (“ Bonus Shares ”), from time to time in each calendar year, in such amounts as the Committee deems fit, in an aggregate annual amount of up to 2% of the number of issued and outstanding shares as at December 31 st of the year in respect of which the Bonus Shares are being issued, to those directors and officers of us or of any of our subsidiaries and service providers whom the Committee deems to have provided extraordinary contributions to our advancement. The Bonus Shares will be issued in consideration of the fair value of the extraordinary contribution to us by the recipient, as determined by the Committee, in its discretion, and shall be issued at a deemed price determined by the Committee at the time of issuance of such Bonus Shares, but such price shall not be less than the Market Price on the trading day immediately preceding the day on which the Bonus Shares are issued. No Bonus Shares shall be issued at a time when it is unlawful to fix the price for such Bonus Shares.

Whenever we issues common shares in our capital to all or substantially all of our shareholders by way of a stock dividend or other distribution, or subdivide all outstanding common shares into a greater number of common shares, or combine or consolidate all outstanding common shares into a lesser number of shares (each of such events being herein called a “ Share Reorganization ”) then effective immediately after the record date for such dividend or other distribution or the effective date of such subdivision, combination or consolidation, for each option:

(a)

the option price will be adjusted to a price per common share which is the product of:

(i)

the option price in effect immediately before that effective date or record date; and

(ii)

a fraction the numerator of which is the total number of common shares outstanding on that effective date or record date before giving effect to the Share Reorganization, and the denominator of which is the total number of common shares that are or would be outstanding immediately after such effective date or record date after giving effect to the Share Reorganization; and

(b)

the number of unissued option shares will be adjusted by multiplying (i) the number of unissued option shares immediately before such effective date or record date by (ii) a fraction which is the reciprocal of the fraction described in paragraph (a)(ii) above.

12.	Subject to the prior approval of the TSX, whenever we issue by way of a dividend or otherwise distribute to all or substantially all holders of our common shares:

(a)

shares in our capital, other than common shares;

(b)

evidences of indebtedness;

(c)

any cash or other assets, excluding cash dividends (other than cash dividends which the Board of Directors has determined to be outside the normal course); or

(d)

rights, options or warrants,

then to the extent that such dividend or distribution does not constitute a Share Reorganization (any of such non-excluded events being herein called a “ Special Distribution ”), and effective immediately after the record date at which holders of common shares are determined for purposes of the Special Distribution, for each option, the option price will be reduced, and the number of unissued option shares will be correspondingly increased, by such amount, if any, as is determined by the Committee in its sole and unfettered discretion to be appropriate in order to properly reflect any diminution in value of the common shares as a result of such Special Distribution.

13.	Whenever there is:

(a)

a reclassification of outstanding common shares, a change of common shares into other shares or securities, or any other capital reorganization of our company, other than as described in paragraphs 11 and 12 above;

(b)

a consolidation, merger or amalgamation of our company with or into another corporation resulting in a reclassification of outstanding common shares into other shares or securities or a change of our common shares into other shares or securities; or

(c)

a transaction whereby all or substantially all of our company’s undertaking and assets become the property of another corporation,

(any such event being herein called a “ Corporate Reorganization ”) the optionee will have an option to purchase (at the times, for the consideration, and subject to the terms and conditions set out in the Current Plan) and will accept on the exercise of such option, in lieu of the unissued option shares which the option holder would otherwise have been entitled to purchase, the kind and amount of shares or other securities or property that the option holder would have been entitled to receive as a result of the Corporate Reorganization if, on the effective date thereof, the option holder had been the holder of all unissued option shares.

14.

If a bona fide offer (an “ Offer ”) for common shares is made to our shareholders generally or to a class of shareholders which includes the optionee, which Offer, if accepted in whole or in part, would result in the offeror becoming a control person of our company, within the meaning of subsection 1(1) of the Securities Act (British Columbia), we shall, immediately upon receipt of notice of the Offer, notify each optionee of full particulars of the Offer, whereupon all options outstanding under the Current Plan that have not vested at the time of such Offer will become immediately vested and any such option may be exercised in whole or in part by the optionee so as to permit the optionee to tender the common shares received upon such exercise, pursuant to the Offer.

However, if:

(a)

the Offer is not completed within the time specified therein; or

(b)

all of the common shares tendered by the optionee pursuant to the Offer are not taken up or paid for by the offeror in respect thereof,

then the common shares received upon such exercise, or in the case of clause (b) above, the common shares that are not taken up and paid for, may be returned by the optionee to us and reinstated as authorized but unissued common shares and with respect to such returned common shares, the option shall be reinstated as if it had not been exercised and the terms upon which such common shares were to become vested pursuant to this section shall be reinstated. If any common shares are returned to us under this paragraph, we shall immediately refund the option price to the optionee for such common shares.

15.

If, at any time when an option granted under the Current Plan remains unexercised, an Offer is made by an offeror, the Committee may declare, upon notifying each optionee of full particulars of the Offer, that all options outstanding under the Current Plan that have not vested at the time of such declaration are immediately deemed vested and that all options outstanding under the Current Plan that have not been exercised shall cease and terminate and be of no further force and effect unless the optionees exercise such options before their termination on the date when common shares must be tendered pursuant to the Offer, provided the Offer is completed.

16.

In the event of a change of control (as defined in the Current Plan), all options outstanding under the Current Plan that have not vested at the time of such change of control will become immediately vested, whereupon optionees holding such options may immediately exercise in whole or in part such options. Furthermore, the Committee may, upon notifying each optionee of a change of control, declare that all options outstanding under the Current Plan that have not been exercised shall cease and terminate and be of no further force and effect unless the optionees exercise such options before their termination on the date on which the change of control occurs, provided such change of control does occur.

However, if the change of control does not occur, the common shares received upon such exercise may be returned by the optionee to us and we shall reinstate such returned common shares as authorized but unissued common shares, reinstate the option(s) in respect of such returned common shares as if it (they) had not been exercised and reinstate the terms upon which such common shares were to become vested pursuant to the relevant option agreement.

If any common shares are returned to us, we shall immediately refund the exercise price to the optionee for such common shares.

As at August 31, 2012, the following number of stock options were held by our directors and officers:

Name	Number of common shares underlying options held	Grant Date	Exercise or base price (C$/Share)	Expiration date
Toby Chu	10,000 200,000 (1) 440,000 100,000 (1)	May 3, 2010 March 1, 2011 January 6, 2012 January 6, 2012	0.80 0.42 0.24 0.24	May 2, 2013 March 1, 2016 January 6, 2017 January 6, 2017
Dennis Dan Huang (2)	100,000 100,000	October 14, 2010 January 6, 2012	0.54 0.24	October 13, 2013 January 6, 2017
Patrick Dang (3)	100,000	March 1, 2011	0.42	March 1, 2016
Alvin Chu	15,000	March 1, 2011	0.42	March 1, 2016
Sung Sub Lim	50,000	January 6, 2012	0.24	January 6, 2017
Troy Rice	10,000 100,000 150,000	May 3, 2010 March 1, 2011 January 6, 2012	0.80 0.42 0.24	May 2, 2013 March 1, 2016 January 6, 2017
Tony David	10,000 25,000 70,000	May 3, 2010 March 1, 2011 January 6, 2012	0.80 0.42 0.24	May 2, 2013 March 1, 2016 January 6, 2017
David Hsu	10,000 100,000 150,000	May 3, 2010 March 1, 2011 January 6, 2012	0.80 0.42 0.24	May 2, 2013 March 1, 2016 January 6, 2017
Shane Weir	10,000 90,000	May 3, 2010 January 6, 2012	0.80 0.24	May 2, 2013 January 6, 2017
David Kong (4)	50,000	August 9, 2010	0.60	August 8, 2013
Derek Feng (5)	100,000	January 6, 2012	0.24	January 6, 2017

(1)	Held by Concordia Financial Management Corp., over which Mr. Chu exercises control.

(2)	Mr. Huang became the Chief Financial Officer and Corporate Secretary of CIBT Education Group and of CIBT on June 28, 2010.

(3)	Mr. Dang was appointed as the President of Sprott-Shaw on December 10, 2010, and was its Acting President from November 17, 2010 to December 9, 2010.

(4)	Mr. Kong did not stand for re-election as a director and ceased to be one of our directors on December 16, 2011.

(5)	Mr. Feng was appointed as a director on July 19, 2011.

A copy of the Current Plan is filed as an exhibit to this Form 20-F.

Employment Agreements

The following description of the material terms of our employment agreements with our executive officers is not complete and is qualified in its entirety by reference to the agreements, copies of which are filed as exhibits to this annual report.

The services of Toby Chu, our president, chief executive officer and vice-chairman of our Board of Directors, are provided pursuant to an employment agreement for an indefinite term. During the most recently completed financial year, Mr. Chu was paid approximately $24,800 per month ($297,606 annually) pursuant to his employment agreement. Mr. Chu’s compensation may be reviewed upon request by him or us not more than once every two years starting January 1, 2005. The employment agreement may be terminated by Mr. Chu upon providing 90 days notice to us. We may terminate the agreement upon providing six months notice or the immediate payment, in full, to Mr. Chu of all amounts due or accruing to Mr. Chu plus a severance payment calculated by multiplying his monthly salary by the number of years (including the proportionate part of the year of termination) since the commencement of his employment with us. If Mr. Chu’s employment were to have ceased in 2012, Mr. Chu would receive a severance payment of approximately $496,000 based on his current monthly salary of $24,800. The agreement includes a provision for termination by us without prior notice upon the occurrence of certain events.

The services of Dennis Dan Huang, our chief financial officer and Corporate Secretary, are provided pursuant to an employment agreement dated July 1, 2011 for a 5 year term commencing July 1, 2011. Under the agreement, Mr. Huang is entitled to an annual salary of $100,000 with annual increases of 5% beginning July 1, 2012, subject to review, to pay him approximately $100,000 annually as compensation for his services. We or Mr. Huang may terminate the agreement by providing 6 months notice in writing. The agreement includes a provision for termination by us without prior notice upon the occurrence of certain events.

The services of Patrick Dang, President of Sprott-Shaw, are provided pursuant to an employment agreement dated December 10, 2010 for a 5 year term commencing November 17, 2010. Under the agreement, Mr. Dang is entitled to an annual salary of $180,000 and a bonus based on performance of the standalone audited Financial Statements of Sprott-Shaw Degree College Corp ending fiscal August 31, 2011. The bonus is subject to achieving certain thresholds, which were not met in fiscal 2011 and therefore no bonus was paid out fiscal 2012. Had the thresholds been met, the bonus would have been equal to 0.75% of Sprott-Shaw net profits, 0.50% of Sprott-Shaw EBITDA, and 0.25% of Sprott-Shaw Revenues. The revenue bonus is subject to EBITDA and net profit erosion. If EBITDA or net profit for Sprott-Shaw erode by more than a 0.5% variance, then the bonus formula for Revenue calculation will be adjusted to 0.125%.

The services of Sung Sub Lim, President of the KGIC Colleges, are provided pursuant to an employment agreement dated January 3, 2012 for a term of five years commencing September 1, 2011. Mr. Lim will be paid a consulting fee of $150,000 and a bonus payable if a target level of revenues and EBITDA of the KGIC Colleges are met for the KGIC Colleges at the end of each fiscal year, calculated based on 6% of EBITDA plus 0.1% of revenue if revenue is over 90% of the current year’s pre-approved target set by us and EBITA is over 80% of the current year’s pre-approved budget set by us. Mr. Lim may terminate the agreement upon six months’ prior written notice. KGIC Colleges may terminate the agreement in the event of dishonesty, non-performance, breach of a material term of the agreement by Mr. Lim, fraud, failure to achieve or maintain certain financial or performance goals, or if the executive engages in any behaviour or conduct considered to be detrimental to our business and reputation. Mr. Lim was not paid a bonus in fiscal 2012.

C. Board Practices

Our Board of Directors is comprised of six members, each of whom stands for re-election at the general meeting of shareholders which is held in each year. Directors are elected by a majority of the votes of our common shareholders present in person or represented by proxy at our annual meeting of shareholders and entitled to vote. Each director holds office until his or her term expires and his or her successor has been elected and qualified. Executive officers are appointed by and serve at the discretion of the Board of Directors.

The Board of Directors meets for a formal board meeting approximately four times per year o review and discuss our business activities, and to consider and if thought fit, to approve matters presented to the Board of Directors for approval, and to provide guidance to management. Additional meetings are conducted on an as needed basis. In addition, management informally provides updates to the Board of Directors at least once per quarter between formal meetings. In general, management consults with the Board of Directors when deemed appropriate to keep it informed regarding our affairs. All individuals who were our directors during the fiscal year ended August 31, 2012 attended each of the Board meetings held while such individual was a director, in person, via teleconference, video conference or personal representative. There were four Board meetings held during the financial year ended August 31, 2012.

Our Board of Directors and its committees oversee the management of our affairs in a number of ways, including the following:

●	reviewing and approving our overall business strategies and our annual business plan, our annual corporate budget and forecast, significant capital investments outside the approved budget, and succession planning;

●	assessing management’s performance against approved business plans and industry standards;

●	reviewing and approving continuous disclosure documents;

●	ensuring the effective operation of the Board of Directors; and

●	safeguarding shareholders’ equity interests through the optimum utilization of our capital resources.

The Board of Directors facilitates the exercise of independent supervision over management through various meetings and committees of the Board of Directors. At present, the Board of Directors has an audit committee, a compensation committee, an executive committee and a corporate governance committee. When necessary, the Board of Directors will strike a special committee of independent directors to deal with matters requiring independence. The composition of the Board of Directors is such that the independent directors have significant experience in business affairs and, as a result, these directors are able to provide significant and valuable independent supervision over management. Independent members of our Board of Directors meet at least once per year without management present.

In the event of a conflict of interest at a meeting of the Board of Directors, the conflicted director will in accordance with corporate law and in accordance with his fiduciary obligations as a director of our company, disclose the nature and extent of his interest to the meeting and abstain from voting on or against the approval of such participation.

We have not entered into any service contracts with our directors that provide for benefits upon termination of employment.

Audit Committee

We are required by the Business Corporations Act (British Columbia) to have an audit committee comprised of at least three directors, all of whom must be independent (i.e. not our officers or employees or officers or employees of any of our affiliates). Pursuant to National Instrument 52-110 Audit Committees in Canada, we have adopted a written charter setting out the duties and responsibilities of our audit committee.

The primary purpose of the audit committee is to assist the Board of Directors in fulfilling its responsibility to oversee management's conduct of our financial reporting process. This includes oversight and review of the following:

●	financial reporting and the accounting system,

●	our systems of internal control over financial reporting, and

●	the annual independent audit of our financial statements.

In discharging its oversight role, the audit committee is empowered to investigate any matter brought to its attention with full access to all of our books, records, facilities and personnel and the power to retain outside counsel, auditors or other experts for this purpose. The Board of Directors and the audit committee are in place to represent our shareholders; accordingly, the outside auditor is ultimately accountable to the Board of Directors and the audit committee.

The audit committee reviews the adequacy of its charter on an annual basis, and is required to approve the engagement of our external auditors in respect of all non-audit services.

Audit Committee Oversight

At no time since the commencement of our most recently completed financial year was a recommendation of the audit committee to nominate or compensate an external auditor not adopted by the Board of Directors.

Membership

The members of the audit committee are as follows, with Troy Rice acting as chairman:

Derek Feng	Independent (1)	Financially literate (1)
David Hsu	Independent (1)	Financially literate (1)
Troy Rice	Independent (1)	Financially literate (1)
Shane Weir	Independent (1)	Financially literate (1)

( 1)	As defined in National Instrument 52-110 Audit Committees , which sets out the requirement governing audit committees in Canada .

Corporate Governance Committee

The corporate governance committee assists the Board of Directors in fulfilling its oversight responsibilities relating to our governance and our relationship with senior management. The members of the corporate governance committee are Toby Chu, Troy Rice and Shane Weir (chair). The committee’s role includes developing and monitoring the effectiveness of our system of corporate governance and is responsible for appropriate corporate governance and proper delineation of the roles, duties and responsibilities of management, the Board of Directors and its committees. The corporate governance committee is responsible for recommending to the Board of Directors a set of corporate governance principles and reviewing these principles.

Compensation Committee

The members of the compensation committee are David Hsu (chair), Tony David and Derek Feng. All compensation of our officers and members of our Board of Directors is approved by a majority of the independent directors. All of the compensation committee members are independent directors.

The Board of Directors has established a compensation committee which, under the supervision of the Board of Directors, reviews and recommends the compensation for our executive officers. The committee also oversees our general compensation and benefits policies, our stock option plan and the grant of stock options. The compensation committee has adopted a charter which sets out its duties and the powers delegated to it by the Board of Directors.

A compensation consultant or advisor has not been retained, at any time since our most recently completed financial year, to assist the Board of Directors or the compensation committee in determining compensation for any of our directors or executive officers.

Executive Committee

The executive committee was formed in order to provide for expeditious decision making by the Board of Directors. The members of the executive committee are Toby Chu (chairman), Derek Feng and David Hsu. This committee has the same authority as our full Board of Directors, but excluding the ability to appoint new directors.

Compensation of Directors

See the table provided under “Item 6.B Directors, Senior Officers and Employees – Compensation”.

D. Employees

As of January 11, 2013, we engaged a total of 592 employees on a consolidated basis. The table below describes the number of employees engaged by each of our subsidiaries and our corporate operations, as well as the number of employees by functional area.

	CIBT Education Group Vancouver	CIBT China	IRIX Vancouver	Sprott-Shaw	KGIC Colleges	Total
Executive	3	1	1	6	3	14
Management	2	7	3	25	16	53
Other Staff	1	11	11	97	54	174
Instructors	-	10	-	178	163	351
TOTAL	6	29	15	306	236	592

The number of employees we engaged on a consolidated basis increased from 308 in fiscal 2008 to 480 in fiscal 2009, 652 in fiscal 2010, 712 in fiscal 2011, 721 in fiscal 2012, and 592 as of January 11, 2013. The increase in employees from fiscal 2008 to the present time is primarily due to our acquisition of Sprott-Shaw in December 2007, the acquisition of substantially all of the assets of KGIC on March 15, 2010 and the subsequent growth in KGIC following its acquisition.

E. Share Ownership

The following table sets forth the ownership information concerning the number of common shares owned beneficially as of January 11, 2013 by: (i) each of our directors and officers; and (iii) all our directors and officers as a group. Unless otherwise indicated, the shareholders listed possess voting and investment powers with respect to the shares shown.

As of January 11, 2013, there were 71,949,344 common shares issued and outstanding. The number of shares described below includes shares which the beneficial owner described has the right to acquire as specified in the notes below. Statements as to securities beneficially owned by officers and directors, or as to securities over which they exercise control or direction, are based upon information obtained from such directors and from records available to us.

Name of Beneficial Owner	Amount and Nature of Beneficial Ownership of Shares	Percent of Class
Toby Chu	5,300,247 (1)	7.4%
Dennis Huang	200,000 (2)	*
Patrick Dang	100,000 (3)	*
Alvin Chu	20,712 (4)	*
Sung Sub Lim	50,000 (5)	*
Tony David	797,085 (6)	1.1%
David Hsu	4,834,419 (7)	6.7%
Troy Rice	690,200 (8)	*
David Kong	279,500 (9)	*
Shane Weir	766,666 (10)	1.1%
Derek Feng	100,000 (11)	*
All Officers and Directors as a Group	13,138,829	18.3%

* Less than 1%.

(1)

Toby Chu is a director, Vice Chairman, President and Chief Executive Officer of us and CIBT and a director and secretary of IRIX. Mr. Chu’s direct holdings equal 397,900 common shares and options to purchase: (i) 10,000 common shares at $0.80 per share until May 2, 2013; and (ii) 440,000 common shares at an exercise price of $0.24 per share until January 6, 2017. The grant dates of these options were (a) May 3, 2010; and (b) January 6, 2012. Toby Chu also has voting and investment control over Concordia Financial Management Corp., a company that holds 3,952,347 common shares of CIBT Education Group, warrants to purchase 200,000 common shares at an exercise price of C$0.35 per share until July 11, 2014 and options to purchase: (i) 200,000 common shares at C$0.42 per share until March 1, 2016; and (ii) 100,000 common shares at C$0.24 per share until January 6, 2017. The grant dates of these options were (a) March 1, 2011; and (b) January 6, 2012. Concordia Financial Management Corp. also holds warrants to purchase 200,000 common shares at an exercise price of C$0.35 per common share until July 11, 2014.

(2)

Dennis Dan Huang is our Chief Financial Officer and Corporate Secretary, and the Chief Financial Officer and Corporate Secretary of CIBT. Mr. Huang’s security holdings includes options to purchase: (i) 100,000 common shares of CIBT Education Group at an exercise price of C$0.54 until October 13, 2013; and (ii) 100,000 common shares of CIBT Education Group at an exercise price of C$0.24 per share until January 6, 2017. The grant dates of these options were (a) October 14, 2010; and (b) January 6, 2012.

(3)	Patrick Dang is the President of Sprott-Shaw. Mr. Dang holds options to purchase 100,000 common shares at an exercise price of C$0.42 per common until March 1, 2016. The grant date of these options was March 1, 2011.

(4)

Alvin Chu is the President and Chief Executive Officer of IRIX and is the brother of Toby Chu. Mr. Chu’s security holdings include 5,712 common shares and options to purchase 15,000 common shares at an exercise price of C$0.42 per share until March 1, 2016. The grant date of these options was March 1, 2011.

(5)	Sung Sub Lim is the Vice President of each of the KGIC Colleges. Mr. Lim’s holdings include options to purchase 50,000 common shares at an exercise price of C$0.24 per share until January 6, 2017. The grant date of these options was January 6, 2012.

(6)

Tony David is a director of our company. His shareholdings include 264,418 common shares in his name and options to purchase common shares of CIBT Education Group as follows: (i) 10,000 common shares at C$0.80 per common share until May 2, 2013; (ii) 25,000 common shares at an exercise price of C$0.42 per share until March 1, 2016; and (iii) 70,000 common shares at an exercise price of C$0.24 per share until January 6, 2017. The dates of grant for these options were: (a) May 3, 2010; (b) March 1, 2011; and (c) January 6, 2012. Tony David also has voting and investment control over H Tony David Holdings Ltd., a company that holds 361,000 common shares of CIBT Education Group and warrants to purchase 66,667 common shares at an exercise price of C$0.35 per common share until July 11, 2014.

(7)

David Hsu is a director and Chairman of CIBT Education Group and CIBT. His shareholdings include 1,607,100 common shares in his own name and options to purchase: (i) 10,000 common shares at C$0.80 per common share until May 2, 2013; (ii) 100,000 common shares at an exercise price of C$0.42 per share until March 1, 2016; and (iii) 150,000 common shares at an exercise price of C$0.24 per share until January 6, 2017. The grant dates of these options were (a) May 3, 2010; (b) March 1, 2011; and (c) January 6, 2012. David Hsu also has voting and investment control over First International Management Ltd., a company that holds 200,000 common shares. Golden Field Company is a company controlled by David Hsu that holds 2,063,546 common shares and warrants to purchase 333,333 common shares at an exercise price of C$0.35 per share until July 11, 2014. An additional 370,440 common shares are held by Grande Dame Nevada LLC, a company controlled by David Hsu.

(8)

Troy Rice is a director of CIBT Education Group. His shareholdings include 430,200 common shares of CIBT Education Group and options to purchase: (i) 10,000 common shares at C$0.80 per common share until May 2, 2013; (ii) 100,000 common shares at an exercise price of C$0.42 per share until March 1, 2016; and (iii) 150,000 common shares at an exercise price of C$0.24 per share until January 6, 2017. The dates of grant for these options were: (a) May 3, 2010; (b) March 1, 2011; and (c) January 6, 2012.

(9)

David Kong was a director of CIBT Education Group until his resignation on December 16, 2011. His direct holdings include options to purchase 50,000 common shares at C$0.60 per common share until August 8, 2013. The grant date of the options was August 9, 2010. Mr. Kong also holds warrants to purchase 100,000 common shares at C$0.35 per common share until July 11, 2014. Mr. Kong also holds 129,500 common shares through Anaconda Investments Corp., a company controlled by Mr. Kong.

(10)

Shane Weir is a director of CIBT Education Group. He holds options to purchase: (a) 10,000 common shares at C$0.80 per common share until May 2, 2013; and (b) 90,000 common shares at C$0.24 per share until January 6, 2017. The grant dates of the options were (a) May 3, 2010 and (b) January 6, 2012. Concepts & Creations Ltd. is a company controlled by Shane Weir that holds 333,333 common shares of CIBT Education Group and warrants to purchase 333,333 common shares at C$0.35 per common share until July 11, 2014.

(11)	Derek Feng has been a director of CIBT Education Group since July 19, 2011. His holdings include options to purchase 100,000 common shares at C$0.24 per share until January 6, 2017. The grant date of the options was January 6, 2012.

Stock Option Plan

On December 17, 2010, our shareholders approved a “rolling” stock option and stock bonus plan (the “Current Plan”) that complies with the polices of the Toronto Stock Exchange whereby a maximum of 10% of our issued common shares, from time to time, may be reserved for issuance pursuant to the exercise of options. Directors and officers and employees of CIBT Education Group and its subsidiaries, any other person or company engaged to provide ongoing management or consulting services for CIBT Education Group or for any entity controlled by it, and any person who is providing ongoing management or consulting services to CIBT Education Group or to any entity controlled by CIBT Education Group indirectly through a company that is providing management or consulting services, is eligible to receive stock options under the Current Plan. The Current Plan was approved by the Toronto Stock Exchange on December 30, 2010 and by the NYSE MKT LLC on January 13, 2011.

The purpose of our stock option plan is to attract, retain and motivate our directors, officers, and employees. The Current Plan complies with the policies of the Toronto Stock Exchange. The material terms of our current stock option plan can be found under “Item 6. Directors, Senior Management and Employees – B. Compensation – Director and Officer Stock Option Grants” of this Form 20-F.

As at January 11, 2013, we had 71,949,344 issued and outstanding common shares. Also, as of January 11, 2013, a total of 4,533,000 options to purchase common shares were granted under the stock option plan and 2,661,934 options were available to be granted.

A summary of the plan details is below.

As of January 11, 2013
Number of Common Shares to be Issued upon Exercise of Outstanding Options	Weighted-Average Exercise Price of Outstanding Options (C$)	Number of Common Shares Remaining Available for Future Issuance under the Stock Option Plan
4,533,000	$0.31	2,661,934

Under the stock option plan, options will be awarded to directors, officers, and employees at the discretion of the Board of Directors, taking into consideration their remuneration, length of service, nature and quality of work performed by them.

ITEM 7. Major Shareholders and Related Party Transactions

As of January 11, 2013, there were 71,949,344 issued and outstanding common shares. To our knowledge, the only directors and officers owning, and only other persons owning, 5% or more of the outstanding shareholdings in us, directly or indirectly, or exercising control or direction over such shares (the “Major Shareholders”), are as provided in the table below (the “Table of Major Shareholders”).

Title of Class	Name of Beneficial Owner	Amount and Nature of Beneficial Ownership	Percent of Class (%)
Common shares	Toby Chu	5,300,247 (1)	7.4%
Common shares	David Hsu	4,834,419 (2)	6.7%
Common shares	MacKenzie Financial Corporation	4,770,900 (3)	6.6%
Common shares	Shane Corp.	10,794,558 (4) (5)	15.0%

(1)

Toby Chu is a director, Vice Chairman, President and Chief Executive Officer of us and CIBT and a director and secretary of IRIX. Mr. Chu’s direct holdings equal 397,900 common shares and options to purchase: (i) 10,000 common shares at $0.80 per share until May 2, 2013; and (ii) 440,000 common shares at an exercise price of $0.24 per share until January 6, 2017. The grant dates of these options were (a) May 3, 2010; and (b) January 6, 2012. Toby Chu also has voting and investment control over Concordia Financial Management Corp., a company that holds 3,952,347 common shares of CIBT Education Group, warrants to purchase 200,000 common shares at an exercise price of C$0.35 per share until July 11, 2014 and options to purchase: (i) 200,000 common shares at $0.42 per share until March 1, 2016; and (ii) 100,000 common shares at $0.24 per share until January 6, 2017. The grant dates of these options were (a) March 1, 2011; and (b) January 6, 2012. Concordia Financial Management Corp. also holds warrants to purchase 200,000 common shares at an exercise price of $0.35 per common share until July 11, 2014.

(2)

David Hsu is a director and Chairman of CIBT Education Group and CIBT. His shareholdings include 1,607,100 common shares in his own name and options to purchase: (i) 10,000 common shares at $0.80 per common share until May 2, 2013; (ii) 100,000 common shares at an exercise price of $0.42 per share until March 1, 2016; and (iii) 150,000 common shares at an exercise price of $0.24 per share until January 6, 2017. The grant dates of these options were (a) May 3, 2010; (b) March 1, 2011; and (c) January 6, 2012. David Hsu also has voting and investment control over First International Management Ltd., a company that holds 200,000 common shares. Golden Field Company is a company controlled by David Hsu that holds 2,063,546 common shares and warrants to purchase 333,333 common shares at an exercise price of C$0.35 per share until July 11, 2014. An additional 370,440 common shares are held by Grande Dame Nevada LLC, a company controlled by David Hsu.

(3)	The shareholdings of Mackenzie Financial Corporation are as of February 14, 2012 and include 4,770,900 common shares of CIBT Education Group.

(4)

Pursuant to CIBT’s ownership restructuring, Shane Corp. loaned US$5 million to CIBT and CIBT issued a debenture and share purchase warrants to Shane Corp. The debenture of US$5 million was to be due on April 24, 2010. However, Shane Corp. exercised its 5,361,667 share purchase warrants effective December 10, 2007 resulting in an aggregate exercise price payable to CIBT of US$5 million. CIBT and Shane Corp. agreed that Shane Corp. would pay the US$5 million exercise price payable to CIBT by surrendering the US$5 million debenture to CIBT. The exercise of the share purchase warrants by Shane Corp. reduced our ownership in CIBT to 78.1%. After the issuance of these 5,361,667 CIBT shares to Shane Corp., we acquired all of these newly issued shares in CIBT from Shane Corp. in exchange for the issuance of 10 million of our common shares, thereby increasing our ownership in CIBT from 78.1% to 100%. The address for Shane Corp. is c/o Camden Partners Holdings, LLC, 500 East Pratt Street, Suite 1200, Baltimore, MD, 21202. Shane Corp. is wholly-owned by Shane GP. Shane GP’s partners are the Camden Funds. David Warnock, one of our directors, is a member of the Board of Managers of Shane Corp. and is a party to a written employment agreement with Camden Partners Holdings, LLC, a diversified investment management firm that provides management services to the Camden Funds and their general partners. As a result of these relationships, David Warnock, Shane GP, Shane Corp. and the Camden Funds could be deemed to beneficially own the shares directly held by the others. Under this annual report, we assume Shane Corp.’s beneficial ownership includes 100,000 of our common shares directly held by the Camden Funds.

(5)

As of February 28, 2012, Shane Corp. directly held 10,794,558 common shares. As a result of the relationships described in note (4) to this table, Shane Corp. may be deemed to beneficially own an additional 10,459,865 common shares held directly by Camden Partners Strategic Fund III, L.P. and 434,693 common shares held directly by Camden Partners Strategic Fund III-A, L.P. All of the options granted to David Warnock as a director described in “Director and Officer Stock Option Grants” are excluded from the common shares reported as being beneficially owned by Shane Corp.

All of our common shares have identical voting rights. As of January 11, 2013, there were 136 holders of record of our common shares in total, including 27 U.S. holders, 94 Canadian holders and 15 holders in other countries. As of January 11, 2013, there were 71,949,344 of our common shares outstanding, including 17,548,137 common shares or 24.4% held by U.S. holders.

None of our Major Shareholders have different voting rights from other shareholders. We are not aware of any arrangement that may, at a subsequent date, result in a change of control of our company. We are not aware of any arrangement which might result in a change in control in the future. We are not directly or indirectly owned or controlled by another corporation or by any foreign government, or by any other natural or legal person, nor are there any arrangements which may result in a change of control of us.

The Major Shareholders or former Major Shareholders disclosed in past Form 20-F filings, with significant changes in percentage of ownership held in our common shares during the past three years are as follows:

●	Toby Chu’s ownership interest was 5% as of March 13, 2009, 5.4% as of February 24, 2011, 7.6% as of February 28, 2012, and 7.4% as of January 11, 2013.

●	David Hsu’s ownership interest was 6% as of March 13, 2009, 5.6% as of February 24, 2011, 6.4% as of February 28, 2012, and 6.7% as of January 11, 2013.

●	MacKenzie Financial Corporation’s ownership interest decreased from 8.8% as of February 25, 2010 to 6.9% as of December 31, 2010, to 6.6% as of February 28, 2012.

●	Shane Corp.’s ownership interest was 16% as of March 13, 2009, 15.6% as of February 24, 2011, and 15.0% as of February 28, 2012.

B. Related Party Transactions

In 2004, CIBT established a business venture with Weifang University and received a 60% interest in Beihai College from Weifang in consideration for funding Beihai College in the amount of $714,286 (5,000,000 RMB). Beihai College is a PRC government approved college which has been in operation since 2002. In consideration for retaining a 40% interest in Beihai College, Weifang has transferred finite life intangible assets consisting of its existing programs and student enrolments to the newly named CIBT Beihai International Management School and has also agreed to provide exclusive use of the Beihai College facilities at no cost for a period of seven years (subsequently amended to 15 years).

Effective July 1, 2007, the Chinese Government implemented a new cash management policy affecting Beihai College. The tuition fees collected by Beihai College are required to be remitted directly to the local treasury bureau of the Chinese Government as non-taxable administrative revenue when tuition fees are received, and the funds are held by the Chinese Government under the account of Weifang College. Weifang College can receive funds from the account by claiming expenditures under a pre-approved plan of budget submitted to the local treasury bureau. Beihai College then can claim funds for its operations from Weifang on an as-needed basis up to the amount of the tuition fees collected. As a Chinese-foreign cooperative joint venture school without legal person status, Beihai College is exempted from income tax and shall allocate 20% of its tuition income to a development fund used for program development purposes. CIBT, as foreign investor of Beihai College, shall pay 25% income tax on funds it claims from Weifang when it transfers such profit from Beihai College back to CIBT. As at August 31, 2012, Weifang owed $2,922,580 (August 31, 2011 – $2,592,660) to CIBT. In addition, as at August 31, 2012, CIBT owed $1,060,700 (August 31, 2011 – $1,103,538) to Weifang.

As at August 31, 2012, a balance of $38,917 (August 31, 2011 – $59,484) was owing to certain officers, employees, directors, relatives of directors, and private companies controlled by our officers and directors. The $38,917 balance is comprised of $966 (August 31, 2011 – $13,222) due to our officers and $37,951 (August 31, 2011 – $46,262) due to Alvin Chu, the President of IRIX, as a result of advances of funds loaned to IRIX by Alvin Chu.

As at August 31, 2012, a balance of $62,500 (August 31, 2011 – $100,000) was due from one of our directors as a result of subscribing for shares in our common stock pursuant to a private placement that was completed on July 13, 2011. $37,500 of the balance was repaid in fiscal 2012 and the remaining balance of $62,500 is being repaid on a periodic basis by the director.

During the year ended August 31, 2012 we and our subsidiaries incurred $1,015,772 (fiscal 2011 – $1,091,249) for management fees and salaries paid or payable to certain directors and officers employed by us, CIBT, Sprott-Shaw, KGIC and IRIX. We also issued stock options to directors and officers of us and our subsidiaries in the amount of $75,544 for the year ended August 31, 2012 (August 31, 2011 – $29,951).

Amounts due to related parties are non-interest bearing and have no fixed terms of repayment. Transactions with related parties are in the normal course of operations and are measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties. Related party transactions are not pre-approved unless they are deemed to be extraordinary transactions, in which case they would be pre-approved by the Board of Directors and any interested director would abstain from voting on such matters.

C. Interests of Experts and Counsel

Not Applicable.

ITEM 8. Financial Information

A. Consolidated Statements and Other Financial Information

Included in this annual report are our audited consolidated financial statements, together with related notes and the report of our independent auditor, as at and for the fiscal years ended August 31, 2012 and 2011. See “Item 18. Financial Statements”.

Legal Proceedings

Our management is not aware of any legal proceedings contemplated by any governmental authority against us, or of any material legal proceedings contemplated by any other party against us. None of our directors, officers or affiliates have (i) commenced legal proceedings against us, or (ii) have an adverse interest to us in any legal proceedings. Management is not aware of any other material legal proceedings that have been threatened against us.

Dividend Policy

We have not declared or paid any dividends in the past and have no plans to declare and pay dividends on our common shares for the foreseeable future. We currently intend to retain any available funds and any future earnings to operate and expand our business.

Our Board of Directors has discretion as to whether to declare and pay dividends to our shareholders. Even if our Board of Directors decides to pay dividends, the form, frequency and amount will depend upon our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors that the Board of Directors may deem relevant.

B. Significant Changes

Except as otherwise disclosed in this annual report, no significant changes have occurred since the date of our last fiscal year. See “Item 4. Information on the Company – A. History and Development of our Company” and “Item 4. Information on the Company – B. Business Overview”.

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ITEM 9. The Offer and Listing

A. Price History

Our common shares trade under the symbol “MBA” in Canada on the TSX since May 27, 2010 (previously on the TSX Venture Exchange), and in the U.S. on the NYSE MKT LLC since April 11, 2008.

As of January 11, 2013, the closing price of our common shares on the Toronto Stock Exchange was $0.20, and the high and low prices of our common shares were $0.20 and $0.20. Also as of January 11, 2013, the closing price of our common shares on the NYSE MKT LLC was US$0.19 and the high and low prices of our common shares were US$0.19 and US$0.19.

The information presented in the table below represents, for the indicated periods, the reported high and low prices of our common shares listed on the TSX Venture Exchange and Toronto Stock Exchange in Canadian Dollars, and the NYSE MKT LLC in U.S. dollars.

	TSX and TSX-V				Amex
	High		Low		High		Low
Annual Market Prices for fiscal year ended	(C$)		(C$)		(US$)		(US$)
August 31, 2012		0.35		0.17		0.30		0.12
August 31, 2011		0.25		0.25		0.26		0.26
August 31, 2010		0.92		0.52		0.87		0.48
August 31, 2009		1.61		0.35		1.45		0.28
August 31, 2008		2.59		1.38		2.33		1.30

Quarterly Market Prices for quarter ended
November 30, 2012		0.22		0.15		0.24		0.13
August 31, 2012		0.28		0.18		0.30		0.12
May 31, 2012		0.28		0.17		0.28		0.17
February 29, 2012		0.35		0.18		0.30		0.18
November 30, 2011		0.30		0.19		0.29		0.18
August 31, 2011		0.37		0.22		0.35		0.20
May 31, 2011		0.42		0.24		0.45		0.25
February 28, 2011		0.52		0.35		0.58		0.36
November 30, 2010		0.64		0.43		0.60		0.41

Monthly Market Prices
December 2012		0.25		0.17		0.25		0.15
November 2012		0.21		0.16		0.23		0.13
October 2012		0.21		0.15		0.21		0.15
September 2012		0.22		0.17		0.24		0.16
August 2012		0.25		0.18		0.22		0.17
July 2012		0.24		0.18		0.25		0.18

Approximate Number of Holders of our Common Shares

As of January 11, 2013, there were 71,949,344 of our common shares outstanding and 136 holders of record. Certain of our shares are held in “nominee” or “street” name; accordingly, we believe the number of beneficial owners is greater than the foregoing number.

B. Plan of Distribution

Not Applicable.

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C. Markets

Our common shares trade under the symbol “MBA” in Canada on the TSX (previously on the TSX Venture Exchange until May 26, 2010), and in the U.S. on the NYSE MKT LLC since April 11, 2008.

D. Selling Shareholders

Not Applicable.

E. Dilution

Not Applicable.

F. Expenses of the Issue

Not Applicable.

ITEM 10. Additional Information

A. Share Capital

Not Applicable.

B. Articles of Incorporation

We incorporate by reference into this annual report our articles of incorporation filed as Exhibit 1.2 to our Form 20-F registration statement on May 10, 2007 and a summary of certain provisions of our articles of incorporation in our Form 20-F registration statement on September 14, 2007, initially filed with the SEC on May 10, 2007.

C. Material Contracts.

The table below provides a description of the material terms of our material contracts. This description of our material contracts is not complete and is qualified in its entirety by reference to the agreements which are filed as exhibits to this annual report.

Agreement(s)

Description

Employment Agreement and Extension Agreements with Toby Chu

On January 1, 2003 we entered into a two year employment agreement with Toby Chu as President and Chief Executive Officer. The employment agreement includes non-compete provisions pursuant to which Mr. Chu has agreed not to engage in other business activities or serve as a director or officer of a company other entity in competition with us or our subsidiaries during his employment with us and for a period of 90 days after ceasing to serve in such capacities or be employed by us. Mr. Chu also agreed not to own or hold any securities resulting in an ownership interest in excess of 5% in any of our competitors whose securities are listed on a stock exchange or traded on an over the counter market.

We extended the employment agreement with Toby Chu by separate agreement dated January 1, 2005. Mr. Chu’s employment is for an indefinite term. Provisions were added to allow for termination only if mutually acceptable to both parties, and to allow the parties to review the financial terms of the agreement no more than once every two years upon request by either party. On April 19, 2007, we extended the agreement with the same provisions except that Mr. Chu has the option to terminate the agreement upon provided a 90-day notice to us or we may terminate the agreement upon providing a six-month notice to Mr. Chu. The agreement includes a provision for termination by us without prior notice upon the occurrence of certain events.

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Agreement(s)	Description
CIBT Centre Agreement with Weifang University	In May 2005, CIBT entered into an agreement with Weifang University to establish a CIBT Centre which began operating in August 2007. CIBT and Weifang University have also agreed to cooperate to provide joint educational programs, develop curriculum and course materials and train instructors.
Agreement to License Wyotech Automotive T echnology Programs	On October 24, 2005 CIBT entered into an agreement to license certain automotive technology programs from Titan Schools, Inc., dba Wyotech, to be provided in China. Wyotech is a provider of automotive certificate and diploma programs offered at its campuses in the United States. The license is for a period of ten years.
Agreement with Weifang Commercial School	In August 2007, CIBT signed an agreement with Weifang Commercial School to provide automotive maintenance, hotel management and accounting programs to Weifang Commercial School.
Agreement and Plan of Reorganization with Shane Corp.	On December 10, 2007 we and our subsidiary CIBT entered into an agreement and plan of reorganization with Shane Corp. in order to increase our ownership of CIBT. Under this agreement, we issued 10,000,000 common shares to Shane Corp. in exchange for 5,361,667 common shares in CIBT acquired by Shane Corp. upon the exercise of share purchase warrants. Following this, our total interest in CIBT was 100%.
Acquisition of Sprott-Shaw	Effective December 17, 2007, we acquired the primary assets and liabilities used in the operation of Sprott-Shaw Community College through Sprott-Shaw, our newly incorporated wholly owned subsidiary. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for further details.
CIBT Centre Agreement with Jinhua Career & Technical College	In January 2008 CIBT signed an agreement to establish a CIBT center in China at the Jinhua Career & Technical College in Jinhua City, China.
Acquisition of Tourism Training Institute	On April 30, 2008, we acquired the primary assets and liabilities used in the operation of Tourism Training Institute, an accredited institution based in Vancouver, Canada with branch offices in Beijing. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for further details.
Education Cooperation Agreement with Far Eastern University	In May 2008, Sprott-Shaw entered into an agreement with Far Eastern University in Manila, Philippines to offer courses at a second university campus. In 2008, we had entered into an agreement with the Far Eastern University and established a CIBT Education Center at Far Eastern University that offers our resident care attendant and practical nursing programs to students in English.
Memorandum of Understanding with Thompson Rivers University and Vancouver Community College	In June 2008, CIBT entered into a memorandum of understanding with Thompson Rivers University and Vancouver Community College to allow students completing a two-year business administration and computer sciences diploma program with CIBT in China to continue studies towards a baccalaureate degree at Thompson Rivers after successfully completing a nine to 12 month English upgrading and learning competency training program at Vancouver Community College.
Acquisition of Concordia Career College Ltd.	Effective September 4, 2008, we acquired certain assets used in the operation of Concordia Career College Ltd. through Sprott-Shaw, our newly incorporated wholly owned subsidiary. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for further details.
Acquisition of Pan Pacific International College Inc.	Effective December 12, 2008 we acquired certain property and assets, including intellectual property rights and regulatory approvals, and assumed certain obligations of Pan Pacific International College Inc., an English language college located in Victoria, Canada, targeting the Japanese and Latin American ESL student market.
CIBT Centre Agreement in Korea	On June 4 2009, CIBT entered into an agreement with Truenet Media Group Ltd. to establish a CIBT Education Center in Seoul, South Korea at National Cambridge College. After the CIBT Education Center is completed, it will offer CIBT’s International Foundation Program to students in Korea.

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Agreement(s)	Description
Memorandum of Understanding and Licensing Agreement with Thang Long University	In September 2009, we signed an agreement with a Canadian investment holdings company to license our brands CIBT School of Business and Sprott-Shaw Community College in Vietnam. In connection with this license, Sprott-Shaw entered into a memorandum of understanding dated September 16, 2009 with Thang Long University in Hanoi, Vietnam to develop programs aimed at preparing Vietnamese nursing graduates to work abroad by providing training that meets international nursing standards and developing their English language proficiency.
Cooperation Agreement with China Central Radio and Television University	On October 16, 2009 we signed an agreement with China Central Radio and Television University in Beijing, China to develop programs incorporating course content from CIBT’s operations in China, Sprott-Shaw’s operations, and programs offered by AHL-EI into China Central Radio and Television University’s programs. These programs will in turn be offered to a global audience through select CIBT and Sprott-Shaw locations in a number of countries, including Canada, the Philippines, South Korea, Jamaica and Vietnam.
Memorandum of Understanding with Hanoi Tourism College	On November 18, 2009 Sprott-Shaw signed a memorandum of understanding with Hanoi Tourism College in Hanoi, Vietnam that relates to a number of initiatives including delivery of Sprott-Shaw’s English language and hotel tourism management programs at Hanoi Tourism College, recruitment of qualified Vietnamese students by Hanoi Tourism College for enrollment at Sprott-Shaw campuses in Canada and CIBT campuses in China, and co-development of an internship program for the hotel tourism management program allowing students to intern with major hotels in Vietnam.
Acquisition of KGIC Language College (2010) Corp. and KGIC Business College (2010) Corp.	On March 15, 2010 we completed the acquisition of certain assets and assumption of certain liabilities of KGIC pursuant to an asset purchase agreement among our newly incorporated subsidiaries, the KGIC Colleges, and KGIC. KGIC operates English language training schools internationally and in the provinces of British Columbia, Ontario and Nova Scotia, Canada. See “Business – KGIC Colleges” for further details.
Memorandum of Understanding with Meridian International Business and Arts College	We entered into a Memorandum of Understanding with Meridian International Business and Arts College with an effective date of April 1, 2010 to deliver our English language training programs and university preparatory programs in the Philippines.
Cooperation Agreement with Open University of China	In January 2011, we announced entry into an agreement with OUC to launch a series of international hotel management education and training programs through OUC’s education system in China, including the AHL-EI program. The programs will be offered by establishing a GLN Center classroom at OUC.
Global Recruitment Agreement with Southpointe Academy	On February 23, 2011, we signed an agreement with Southpointe Academy, a private elementary and high school located in Delta, British Columbia, to act as the school’s exclusive recruiter of international and expatriate students. We have also agreed to co-develop academic preparation programs that we will launch overseas, designed to prepare prospective applicants for Southpointe Academy’s vigorous pre-entrance examinations and programs at the grade 10 to 12 level. We earn all tuition fees for each student we recruit for the academic preparation programs and a portion of the tuition fees for each student we recruit for enrollment at Southpointe Academy.
Cooperation Agreement with Yunnan International Exchange Center	On March 18, 2011, we entered into a cooperation agreement with the Yunnan International Exchange Center, a subsidiary of the Yunnan Provincial Department of Education, to cooperate on establishing a GLN Center classroom at the Yunnan International Exchange Center, as well as to recruit students to study at our subsidiary schools in Canada.
GLN Center Agreement with University of Zhejiang Continuing Studies and CIBT	In April 2011, we entered into an agreement with Zhejiang University, located in the city of Hangzhou, Zhejiang Province, to jointly launch programs in English Language Training and Hospitality Management, with the educational content to be provided by KGIC and the AHL-EI licensed curriculum.

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Agreement(s)	Description
GLN Center Agreement with Guangzhou University and CIBT Cooperation Agreement with Zhaoqing University and CIBT	In February 2011, we entered into an agreement with Guangzhou University and in March 2011 we entered into an agreement with Zhaoqing University, located in the Guangdong province of China, to establish GLN Center classrooms within each university’s campus and offer the following programs: Pre-Masters degree, TESOL, Tourism and Hospitality Management, Overseas Study Preparation, and Hotel Industry English programs.
GLN Center Agreement between CIBT and Hebei Normal University Foreign Language College	In July 2011, we entered into an agreement with Hebei Normal University Foreign Language College to jointly establish and offer educational programs in both English Language Training and Hotel and Tourism Management through our GLN Center classroom established at Hebei’s campus located in Hebei, China.
GLN Center Agreement CIBT and Henan Radio and Television University	In July 2011, we entered into an agreement with Henan Radio and Television University, a member of the Open University of China, to jointly offer educational programs in Hotel and Tourism Management by establishing a GLN Center classroom at Henan Radio and Television University, located in Henan Province, China.
GLN Center Agreement between CIBT and Hunan Radio and Television University	In August 2011, we entered into an agreement with Hunan Radio and Television University, a member of the Open University of China, to jointly offer Hotel and Tourism Management Programs by establishing a GLN Center classroom at Hunan Radio and Television University’s campus located in Hunan Province, China.
Agreement with Hainan Human Resources Training Center	In November 2011, we announced the launch of AHL-EI programs for hotel industry professionals in Hainan Province, China to be offered by the Hainan Human Resources Training Center.
Employment Agreement with Dennis Huang	On July 1, 2011, we entered into a five year employment agreement with Dennis Huang to act as our Chief Financial Officer. The employment agreement includes non-compete provisions pursuant to which Mr. Huang has agreed not to provide his services to any competing business in Canada or China during his employment with us and for a period of 6 months after ceasing to serve in such capacities or be employed by us. Mr. Huang also agreed not to own or hold any securities resulting in an ownership interest in excess of 5% in any of our competitors whose securities are listed on a stock exchange or traded on an over the counter market. Mr. Huang and we may terminate the agreement upon providing a six-month notice. The agreement includes a provision for termination by us without prior notice upon the occurrence of certain events.
Earn-Out Agreement with Vendors of KGIC	On January 3, 2012, we entered into an earn out agreement with the vendors of KGIC to pay a one-time earn out amount of $150,000 to the vendors in lieu of future earn-out amounts of up to $3.9 million that were payable to the vendors pursuant to the KGIC acquisition agreement had certain net revenue and EBITDA targets been met by KGIC in fiscal 2011.
GLN Center Agreement with the Canadian Institute of Education in Iraq	In January 2012, we entered into an agreement with the Canadian Institute of Education to establish a GLN Center offering Sprott-Shaw’s business and healthcare programs and KGIC’s English language programs to students in the northern provinces of Iraq. The Canadian Institute of Education has also agreed to recruit students in Iraq for Sprott-Shaw and KGIC. Students will complete a portion of their studies in Iraq and then transfer to Sprott-Shaw or KGIC’s campuses to further their education and obtain work experience in Canada before returning to Iraq.
GLN Center Agreement with Beijing Language and Culture University	In February 2012, we entered into an agreement with Beijing Language and Culture University to establish a GLN Center within the university’s Beijing campus. The GLN Center will deliver AHL-EI hospitality programs and KGIC language programs. The agreement also provides for students to transfer to KGIC and Sprott-Shaw for further studies.
GLN Center Agreement with Whampoa University of Beijing	In April 2012, we entered into an agreement with Whampoa University of Beijing to establish a GLN Center at its Beijing campus. The GLN Center will deliver AHL-EI hospitality programs and first aid, crisis management, and emergency response training programs.
Employment Agreement with Sung Sub Lim	On January 3, 2012 we entered into an employment agreement with Sung Sub Lim to serve as the President of KGIC for a term of five years, with such term having commenced on September 1, 2011. Mr. Lim will be paid a consulting fee of $150,000 and a bonus payable if a target level of revenues and EBITDA of the KGIC Colleges are met for the KGIC Colleges at the end of each fiscal year, calculated based on 6% of EBITDA plus 0.1% of revenue if revenue is over 90% of the current year’s pre-approved target set by us and EBITA is over 80% of the current year’s pre-approved budget set by us. Mr. Lim may terminate the agreement upon six months’ prior written notice. KGIC Colleges may terminate the agreement in the event of dishonesty, non-performance, breach of a material term of the agreement by Mr. Lim, fraud, failure to achieve or maintain certain financial or performance goals, or if the executive engages in any behaviour or conduct considered to be detrimental to our business and reputation. Mr. Lim was not paid a bonus in fiscal 2012.

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D. Exchange Controls.

Canadian Exchange Control Regulations

Limitations on the ability to acquire and hold our common shares may be imposed by the Competition Act (Canada). This legislation permits the Commissioner of Competition of Canada, or Commissioner, to review any acquisition of control over a significant interest in us. This legislation grants the Commissioner jurisdiction, for up to one year, to challenge this type of acquisition before the Canadian Competition Tribunal if the Commissioner believes that it would, or would be likely to, substantially reduce or prevent competition in any market in Canada.

This legislation also requires any person who intends to acquire our common shares to file a notification with the Canadian Competition Bureau if certain financial thresholds are exceeded, and that person would hold more than 20% of our common shares. If a person already owns 20% or more of our common shares, a notification must be filed when the acquisition would bring that person’s holdings to over 50%. Where a notification is required, the legislation prohibits completion of the acquisition until the expiration of a statutory waiting period, unless the Commissioner provides written notice that he or she does not intend to challenge the acquisition.

There is no law, governmental decree or regulation in Canada that restricts the export or import of capital, or which would affect the remittance of dividends or other payments by us to non-resident holders of our common shares, other than withholding tax requirements.

There is no limitation imposed by Canadian law or our notice of articles or articles on the right of non-residents to hold or vote our common shares, other than those imposed by the Investment Canada Act (Canada).

The Investment Canada Act requires each individual, government or agency thereof, corporation, partnership, trust or joint venture that is not a “Canadian” as defined in the Investment Canada Act, referred to in this discussion as a “non-Canadian” who commences a new business activity in Canada or acquires control of an existing Canadian business, where the establishment or acquisition of control is not a reviewable transaction, to file a notification with Industry Canada. The Investment Canada Act generally prohibits the implementation of a reviewable transaction by a non-Canadian unless after review the minister responsible for the Investment Canada Act is satisfied that the investment is likely to be of net benefit to Canada. Whether or not an investment is reviewable, the Investment Canada Act also provides for a review of investments that the Minister responsible for the Investment Canada Act, after consultation with the Minister of Public Safety and Emergency Procedures, considers could be injurious to Canadian national security. An investment in our common shares by a non-Canadian would be reviewable under the Investment Canada Act if it were an investment to acquire control of us and the value of our assets were $5 million or more. The Investment Canada Act provides for special review thresholds for World Trade Organization, or WTO, member country investors, including United States investors. Under the Investment Canada Act, an investment in our common shares by a non-Canadian who is a “WTO investor” (as defined in the Investment Canada Act) would be reviewable only if it were a direct investment (indirect acquisitions by or from WTO investors are not reviewable pursuant to Canada’s international commitments) to acquire control of us and the value of our assets was equal to or greater than a specified amount, which increases in stages. The specified amount is $330 million in 2012. The threshold amount is subject to an annual adjustment on January 1 st on the basis of a prescribed formula in the Investment Canada Act to reflect inflation and real growth within Canada. Pursuant to amendments to the Investment Canada Act that have received royal assent but have not yet been implemented, the threshold amount will be increased to $600 million and then raised to $1 billion over a four year period, and adjusted annually thereafter.

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The acquisition of a majority of the voting interests of an entity or of a majority of the undivided ownership interests in the voting shares of an entity that is a corporation is deemed to be acquisition of control of that entity. The acquisition of less than a majority but one-third or more of the voting shares of a corporation or of an equivalent undivided ownership interest in the voting shares of the corporation is presumed to be acquisition of control of that corporation unless it can be established that, on the acquisition, the corporation is not controlled in fact by the acquiror through the ownership of voting shares. The acquisition of less than one-third of the voting shares of a corporation or of an equivalent undivided ownership interest in the voting shares of the corporation is deemed not to be acquisition of control of that corporation. Certain transactions in relation to our common shares would be exempt from review from the Investment Canada Act, including:

●	acquisition of our common shares by a person in the ordinary course of that person’s business as a trader or dealer in securities;

●	acquisition or control of us in connection with the realization of security granted for a loan or other financial assistance and not for any purpose related to the provisions of the Investment Canada Act; and

●	acquisition or control of us by reason of an amalgamation, merger, consolidation or corporate reorganization following which the ultimate direct or indirect control in fact of us, through the ownership of voting interests, remains unchanged.

Chinese Exchange Control Regulations

China's national currency, the “Yuan” or “RMB”, is not a freely convertible currency. Effective January 1, 1994, the Chinese foreign exchange system underwent fundamental changes. This reform was stated to be in line with China's commitment to establish a socialist market economy and to lay the foundation for making the RMB convertible in the future. The currency reform is designed to turn the dual exchange rate system into a unified and managed floating exchange rate system.

A China Foreign Exchange Trading Centre was formed in April, 1994 to provide an interbank foreign exchange trading market whose main function is to facilitate the matching of long and short-term foreign exchange positions of the state-designated banks, and to provide clearing and settlement services. The People's Bank of China publishes the state managed exchange rate daily based on the daily average rate from the previous day's interbank trading market, after considering fluctuations in the international foreign exchange markets. Based on these floating exchange rates, the state-designated banks list their own exchange rates within permitted margins, and purchase or sell foreign exchange with their customers.

The State Administration of Foreign Exchange (“SAFE”) administers foreign exchange dealings and requires that they are transacted through designated financial institutions. All Foreign Investment Enterprises (“FIEs”) may buy and sell foreign currency from designated financial institutions in connection with current account transactions, including, but not limited to, profit repatriation. With respect to foreign exchange needed for capital account transactions, such as equity investments, all enterprises in China (including FIEs) are required to seek approval of the SAFE to exchange RMB into foreign currency. When applying for approval, such enterprises will be subject to review by the SAFE as to the source and nature of the RMB funds.

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According to the 1999 Circular on Relevant Questions Concerning the Remittance of Profits, Dividends and Bonuses out of China through Designated Foreign Exchange Banks, effective from October 1, 1999, an FIE is permitted to remit profits, dividends and bonuses out of China in proportion to the amount of registered capital that has been paid up, notwithstanding that its registered capital has not been paid up pursuant to its constitutional documents. We are subject to limitations on our ability to convert Chinese currency. Shortages in the availability of foreign currency may restrict the ability of our Chinese subsidiaries and our affiliated entities to remit sufficient foreign currency to pay dividends or other payments to us, or otherwise satisfy their foreign currency denominated obligations.

E. Taxation

Canadian Federal Income Tax Consequences

The following summary describes the principal Canadian federal income tax considerations generally applicable to a holder of our common shares who, for purposes of the Income Tax Act (Canada) (the “Canadian Tax Act”) and the Convention between Canada and the United States of America with Respect to Taxes on Income and on Capital (the “Convention”) and at all relevant times, is resident in the United States and was not and is not resident in Canada, deals at arm’s length and is not affiliated with us, holds our common shares as capital property, does not use or hold and is not deemed to use or hold our common shares in or in the course of carrying on business in Canada and is not a non-resident insurer and who otherwise qualifies for the full benefit of the Convention (a “United States Holder”).

This summary is based on the current provisions of the Convention, the Canadian Tax Act and the regulations thereunder, all specific proposals to amend the Canadian Tax Act and the regulations announced by the Minister of Finance (Canada) prior to the date hereof and our understanding of the administrative practices published in writing by the Canada Revenue Agency prior to the date hereof. On September 21, 2007, the Minister of Finance (Canada) and the United States Secretary of the Treasury signed the fifth protocol to the Convention (the “Protocol”) which includes amendments to many of the provisions of the Convention, including significant amendments to the limitation on benefits provision and treatment of fiscally transparent entities such as some United States limited liability companies. The Protocol was ratified by the United States government in December 2008 (it was ratified by the Canadian government in 2007) and came into force in 2010. United States Holders are urged to consult their own tax advisors to determine the impact of the Protocol and their entitlement to relief under the Convention based on their particular circumstances. This summary does not take into account or anticipate any other changes in the governing law, whether by judicial, governmental or legislative decision or action, nor does it take into account the tax legislation or considerations of any province, territory or non-Canadian (including U.S.) jurisdiction, which legislation or considerations may differ significantly from those described herein.

For the purposes of the Canadian Tax Act, the Canadian tax results of a United States Holder are to be determined using Canadian currency based on the relevant exchange rate applicable thereto.

This summary is of a general nature only and is not intended to be, and should not be interpreted as legal or tax advice to any prospective purchaser or holder of our common shares and no representation with respect to the Canadian federal income tax consequences to any such prospective purchaser is made. Accordingly, prospective purchasers and holders of our common shares should consult their own tax advisors with respect to their individual circumstances.

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Dividends

Generally, dividends paid by Canadian corporations to non-resident shareholders are subject to a withholding tax of 25% of the gross amount of such dividends. Pursuant to the Convention, the withholding tax rate on the gross amount of dividends paid to United States Holders may be reduced to 15% or, in the case of a United States Holder that is a U.S. corporation which beneficially owns at least 10% of the voting stock of the Canadian corporation paying the dividends, to 5% of the gross amount of such dividends.

Under the Convention, dividends paid to certain religious, scientific, charitable and other similar tax-exempt organizations and certain organizations that are resident in, and exempt from tax in, the United States are exempt from Canadian non-resident withholding tax, including any withholding tax levied in respect of dividends received on our common shares.

Disposition of Common Shares

In general, a United States Holder will not be subject to Canadian income tax on capital gains arising on the disposition of our common shares, unless such shares are “taxable Canadian property” within the meaning of the Canada Tax Act and no relief is afforded under the Convention. Generally, CIBT Education Group shares would be taxable Canadian property of a United States Holder if at any time during the sixty month period immediately preceding a disposition by the United States Holder of such shares, not less than 25% of the issued shares of any class or series of a class of shares of CIBT Education Group belonged to the United States Holder, to persons with whom the United States Holder did not deal at arm’s length (within the meaning of the Canadian Tax Act), or to the United States Holder and persons with whom the non-resident did not deal at arm’s length (within the meaning of the Canadian Tax Act). Even if our common shares are “taxable Canadian property” under the Canada Tax Act, under the Convention, a capital gain realized by a United States Holder will not be subject to Canadian tax unless the value of our common shares is derived principally from real property (as defined in the Convention) situated in Canada. CIBT Education Group does not believe the value of its shares is derived principally from real property situated in Canada.

U.S. Federal Income Tax Consequences

The following is a summary of the anticipated material U.S. federal income tax consequences to a U.S. Holder (as defined below) arising from and relating to the acquisition, ownership, and disposition of common shares.

This summary is for general information purposes only and does not purport to be a complete analysis or listing of all potential U.S. federal income tax consequences that may apply to a U.S. Holder as a result of the acquisition, ownership, and disposition of common shares. In addition, this summary does not take into account the individual facts and circumstances of any particular U.S. Holder that may affect the U.S. federal income tax consequences of the acquisition, ownership, and disposition of common shares. Accordingly, this summary is not intended to be, and should not be construed as, legal or U.S. federal income tax advice with respect to any U.S. Holder. Each U.S. Holder is encouraged to consult his own financial advisor, legal counsel, or accountant regarding the U.S. federal, U.S. state and local, and foreign tax consequences of the acquisition, ownership, and disposition of common shares.

Scope of this Disclosure

Authorities

This summary is based on the Internal Revenue Code of 1986, as amended (the “Code”), Treasury Regulations (whether final, temporary, or proposed), published rulings of the Internal Revenue Service (“IRS”), published administrative positions of the IRS, and U.S. court decisions that are applicable and, in each case, as in effect and available, as of the date of this Annual report. Any of the authorities on which this summary is based could be changed in a material and adverse manner at any time, and any such change could be applied on a retroactive basis. This summary does not discuss the potential effects, whether adverse or beneficial, of any proposed legislation that, if enacted, could be applied on a retroactive basis.

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U.S. Holders

For purposes of this summary, a “U.S. Holder” is a beneficial owner of common shares that, for U.S. federal income tax purposes, is (a) an individual who is a citizen or resident of the U.S., (b) a corporation, or any other entity classified as a corporation for U.S. federal income tax purposes, that is created or organized in or under the laws of the U.S. or any state in the U.S., including the District of Columbia, (c) an estate if the income of such estate is subject to U.S. federal income tax regardless of the source of such income, or (d) a trust if (i) such trust has validly elected to be treated as a U.S. person for U.S. federal income tax purposes or (ii) a U.S. court is able to exercise primary supervision over the administration of such trust and one or more U.S. persons have the authority to control all substantial decisions of such trust.

Non-U.S. Holders

For purposes of this summary, a “non-U.S. Holder” is a beneficial owner of our common shares other than a U.S. Holder. This summary does not address the U.S. federal income tax consequences of the acquisition, ownership, and disposition of our common shares to non-U.S. Holders. Accordingly, a non-U.S. Holder should consult its own financial advisor, legal counsel, or accountant regarding the U.S. federal, U.S. state and local, and foreign tax consequences (including the potential application of and operation of any tax treaties) of the acquisition, ownership, and disposition of our common shares.

U.S. Holders Subject to Special U.S. Federal Income Tax Rules Not Addressed

This summary does not address the U.S. federal income tax consequences of the acquisition, ownership, and disposition of our common shares to U.S. Holders that are subject to special provisions under the Code, including the following U.S. Holders: (a) U.S. Holders that are tax-exempt organizations, qualified retirement plans, individual retirement accounts, or other tax-deferred accounts; (b) U.S. Holders that are financial institutions, insurance companies, real estate investment trusts, or regulated investment companies; (c) U.S. Holders that are dealers in securities or currencies or U.S. Holders that are traders in securities that elect to apply a mark-to-market accounting method; (d) U.S. Holders that have a “functional currency” other than the U.S. dollar; (e) U.S. Holders that are liable for the alternative minimum tax under the Code; (f) U.S. Holders that own our common shares as part of a straddle, hedging transaction, conversion transaction, constructive sale, or other arrangement involving more than one position; (g) U.S. Holders that acquired our common shares in connection with the exercise of employee stock options or otherwise as compensation for services; (h) U.S. Holders that hold our common shares other than as a capital asset within the meaning of Section 1221 of the Code; (i) U.S. expatriates or former long-term residents of the U.S.; or (j) U.S. Holders that own, directly, indirectly, or by attribution, 10% or more, by voting power or value, of the outstanding shares of CIBT Education Group. U.S. Holders that are subject to special provisions under the Code, including U.S. Holders described immediately above, should consult their own financial advisor, legal counsel or accountant regarding the U.S. federal, U.S. state and local, and foreign tax consequences of the acquisition, ownership, and disposition of our common shares.

If an entity that is classified as a partnership (or “pass-through” entity) for U.S. federal income tax purposes holds our common shares, the U.S. federal income tax consequences to such partnership (or “pass-through” entity) and the partners of such partnership (or owners of such “pass-through” entity) generally will depend on the activities of the partnership (or “pass-through” entity) and the status of such partners (or owners). Partners of entities that are classified as partnerships (or owners of “pass-through” entities) for U.S. federal income tax purposes should consult their own financial advisor, legal counsel or accountant regarding the U.S. federal income tax consequences of the acquisition, ownership, and disposition of our common shares.

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Tax Consequences Other than U.S. Federal Income Tax Consequences Not Addressed

This summary does not address the U.S. state and local, U.S. federal estate and gift, or foreign tax consequences to U.S. Holders of the acquisition, ownership, and disposition of our common shares. Each U.S. Holder should consult its own financial advisor, legal counsel, or accountant regarding the U.S. state and local, U.S. federal estate and gift, and foreign tax consequences of the acquisition, ownership, and disposition of our common shares.

U.S. Federal Income Tax Consequences of the Acquisition, Ownership, and Disposition of Common Shares

Distributions on Common Shares

General Taxation of Distributions

A U.S. Holder that receives a distribution, including a constructive distribution, with respect to our common shares will be required to include the amount of such distribution in gross income as a dividend (without reduction for any foreign income tax withheld from such distribution) to the extent of the current or accumulated “earnings and profits” generated by us. To the extent that a distribution exceeds our current and accumulated “earnings and profits”, such distribution will be treated (a) first, as a tax-free return of capital to the extent of a U.S. Holder’s tax basis in our common shares and, (b) thereafter, as gain from the sale or exchange of such common shares. (See more detailed discussion at “Disposition of Common Shares” below). Dividends paid on our common shares generally will not be eligible for the “dividends received deduction.”

Reduced Tax Rates for Certain Dividends

For taxable years beginning before January 1, 2013, a dividend we pay to a shareholder will generally be taxed at the preferential tax rates applicable to long-term capital gains if (a) we are a “qualified foreign corporation” (as defined below), (b) the U.S. Holder receiving such dividend is an individual, estate, or trust, and (c) certain holding period requirements are met.

A company generally will be a “qualified foreign corporation” under Section 1(h)(11) of the Code (a “QFC”) if (a) the company is incorporated in a possession of the U.S., (b) the company is eligible for the benefits of the Canada-U.S. Tax Convention, or (c) its common shares are readily tradable on an established securities market in the U.S. However, even if the company satisfies one or more of such requirements, the company will not be treated as a QFC if the company is a “passive foreign investment company” (as defined below and which we refer to as a “PFIC”) for the taxable year during which the company pays a dividend or for the preceding taxable year.

As discussed below, CIBT Education Group believes that it qualified as a PFIC for the taxable year ended December 31, 2008, and based on current business plans and financial projections, we anticipate that we may qualify as a PFIC for subsequent taxable years. (See more detailed discussion at “Additional Rules that May Apply to U.S. Holders—Passive Foreign Investment Company” below).

If we are not a PFIC, but a U.S. Holder otherwise fails to qualify for the preferential tax rate applicable to dividends discussed above, a dividend paid by us to a U.S. Holder, including a U.S. Holder that is an individual, estate, or trust, generally will be taxed at ordinary income tax rates (and not at the preferential tax rates applicable to long-term capital gains). The dividend rules are complex, and each U.S. Holder should consult its own financial advisor, legal counsel, or accountant regarding the dividend rules.

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Distributions Paid in Foreign Currency

The amount of a distribution paid in foreign currency to a U.S. Holder whose “functional currency” is the U.S. dollar generally will be equal to the U.S. dollar value of such distribution based on the exchange rate applicable on the date of receipt. A U.S. Holder that does not convert foreign currency received as a distribution into U.S. dollars on the date of receipt generally will have a tax basis in such foreign currency equal to the U.S. dollar value of such foreign currency on the date of receipt. Such a U.S. Holder generally will recognize ordinary income or loss on the subsequent sale or other taxable disposition of such foreign currency (including an exchange for U.S. dollars).

Disposition of Common Shares

A U.S. Holder will recognize gain or loss on the sale or other taxable disposition of our common shares in an amount equal to the difference, if any, between (a) the amount of cash plus the fair market value of any property received and (b) such U.S. Holder’s tax basis in our common shares sold or otherwise disposed of. Subject to the PFIC rules discussed below, any such gain or loss generally will be capital gain or loss, which will be long-term capital gain or loss if our common shares are held for more than one year. Gain or loss recognized by a U.S. Holder on the sale or other taxable disposition of our common shares generally will be treated as “U.S. source” for purposes of applying the U.S. foreign tax credit rules, unless such gains are resourced as “foreign source” under an applicable income tax treaty, and an election is filed under the Code. (See more detailed discussion at “Foreign Tax Credit” below).

Preferential tax rates apply to long-term capital gains of a U.S. Holder that is an individual, estate, or trust. There are currently no preferential tax rates for long-term capital gains of a U.S. Holder that is a corporation. Deductions for capital losses are subject to significant limitations under the Code.

Additional Taxes After 2012

For taxable years beginning after December 31, 2012, certain U.S. holders that are individuals, estates or trusts and whose income exceeds certain thresholds generally will be subject to a 3.8 percent Medicare contribution tax on unearned income, including, among other things, dividends on, and capital gains from the sale or other taxable disposition of, our common shares, subject to certain limitations and exceptions. U.S. holders should consult their own tax advisors regarding the effect, if any, of such tax on their ownership and disposition of our common shares.

Foreign Tax Credit

A U.S. Holder who pays (whether directly or through withholding) foreign income tax with respect to dividends paid on our common shares generally will be entitled, at the election of such U.S. Holder, to receive either a deduction or a credit for such foreign income tax paid. Generally, a credit will reduce a U.S. Holder’s U.S. federal income tax liability on a dollar-for-dollar basis, whereas a deduction will reduce a U.S. Holder’s income subject to U.S. federal income tax. This election is made on a year-by-year basis and applies to all foreign taxes paid (whether directly or through withholding) by a U.S. Holder during a year.

Complex limitations apply to the foreign tax credit, including the general limitation that the credit cannot exceed the proportionate share of a U.S. Holder’s U.S. federal income tax liability that such U.S. Holder’s “foreign source” taxable income bears to such U.S. Holder’s worldwide taxable income. In applying this limitation, a U.S. Holder’s various items of income and deduction must be classified, under complex rules, as either “foreign source” or “U.S. source.” In addition, this limitation is calculated separately with respect to specific categories of income. Dividends paid by us will generally constitute “foreign source” income and will generally be categorized as “passive income.” The foreign tax credit rules are complex, and each U.S. Holder should consult its own financial advisor, legal counsel, or accountant regarding the foreign tax credit rules.

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Information Reporting; Backup Withholding Tax for Certain Payments

Under U.S. federal income tax laws and regulations, certain categories of U.S. Holders must file information returns with respect to their investment in, or involvement in, a foreign corporation. Penalties for failure to file certain of these information returns are substantial. U.S. Holders of common shares should consult with their own tax advisors regarding the requirements of filing information returns, and, if applicable, any mark-to-market or QEF election (each as defined below).

Payments made within the U.S., or by a U.S. payor or U.S. middleman, of dividends on, and proceeds arising from certain sales or other taxable dispositions of, our common shares generally will be subject to information reporting and backup withholding tax, at the rate of 28%, if a U.S. Holder (a) fails to furnish such U.S. Holder’s correct U.S. taxpayer identification number (generally on Form W-9), (b) furnishes an incorrect U.S. taxpayer identification number, (c) is notified by the IRS that such U.S. Holder has previously failed to properly report items subject to backup withholding tax, or (d) fails to certify, under penalty of perjury, that such U.S. Holder has furnished its correct U.S. taxpayer identification number and that the IRS has not notified such U.S. Holder that it is subject to backup withholding tax. However, U.S. Holders that are corporations generally are excluded from these information reporting and backup withholding tax rules. Any amounts withheld under the U.S. backup withholding tax rules will be allowed as a credit against a U.S. Holder’s U.S. federal income tax liability, if any, or will be refunded, if such U.S. Holder furnishes required information to the IRS. Each U.S. Holder should consult its own financial advisor, legal counsel, or accountant regarding the information reporting and backup withholding tax rules.

Additional Rules that May Apply to U.S. Holders

If we are a “controlled foreign corporation” under Section 957 of the Code (a “CFC”) or a PFIC , the preceding sections of this summary may not describe the U.S. federal income tax consequences to U.S. Holders of the acquisition, ownership, and disposition of our common shares.

Passive Foreign Investment Company

A company will generally be a PFIC under Section 1297 of the Code if, for a taxable year, (a) 75% or more of the gross income of the company for such taxable year is passive income or (b) 50% or more of the assets held by the company either produce passive income or are held for the production of passive income, based on the fair market value of such assets (or on the adjusted tax basis of such assets, if the company is not regularly traded on a public exchange or other market approved by the Secretary of the Treasury and either is a “controlled foreign corporation” or makes an election). “Gross income” generally means all revenues less cost of goods sold. “Passive income” includes, for example, dividends, interest, certain rents and royalties, certain gains from the sale of stock and securities, and certain gains from commodities transactions. However, for transactions entered into after December 31, 2004, gains arising from the sale of commodities generally are excluded from passive income if substantially all of a foreign corporation’s commodities are (a) stock in trade of such foreign corporation or other property of a kind which would properly be included in inventory of such foreign corporation, or property held by such foreign corporation primarily for sale to customers in the ordinary course of business, (b) property used in the trade or business of such foreign corporation that would be subject to the allowance for depreciation under Section 167 of the Code, or (c) supplies of a type regularly used or consumed by such foreign corporation in the ordinary course of its trade or business.

For purposes of the PFIC income test and asset test described above, if a company owns, directly or indirectly, 25% or more of the total value of the outstanding shares of another corporation, the company will be treated as if it (a) held a proportionate share of the assets of such other corporation and (b) received directly a proportionate share of the income of such other corporation. In addition, for purposes of the PFIC income test and asset test described above, “passive income” does not include any interest, dividends, rents, or royalties that are received or accrued by the company from a “related person” (as defined in Section 954(d)(3) of the Code), to the extent such items are properly allocable to the income of such related person that is not passive income.

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In addition, if the company is a PFIC and owns shares of another foreign corporation that also is a PFIC (a “Subsidiary PFIC”), under certain indirect ownership rules, a disposition of the shares of such other foreign corporation or a distribution received from such other foreign corporation generally will be treated as an indirect disposition by a U.S. Holder or an indirect distribution received by a U.S. Holder, subject to the rules of Section 1291 of the Code discussed below. To the extent that gain recognized on the actual disposition by a U.S. Holder of the common shares or income recognized by a U.S. Holder on an actual distribution received on the common shares was previously subject to U.S. federal income tax under these indirect ownership rules, such amount generally should not be subject to U.S. federal income tax.

We believe that we qualified as a PFIC for the taxable year ended December 31, 2008, and based on current business plans and financial projections, we anticipate that we may qualify as a PFIC for subsequent taxable years. The determination of whether we will be a PFIC for a taxable year depends, in part, on the application of complex U.S. federal income tax rules, which are subject to differing interpretations. In addition, whether we will be a PFIC for our current taxable year depends on our assets and income over the course of each such taxable year and, as a result, cannot be predicted with certainty as of the date of this annual report. Accordingly, there can be no assurance that the IRS will not challenge our determination concerning our PFIC status. Our management has made a determination that we are not a PFIC for the taxable year ended December 31, 2009.

Default PFIC Rules Under Section 1291 of the Code

If a company is a PFIC, the U.S. federal income tax consequences to a U.S. Holder of the acquisition, ownership, and disposition of our common shares will depend on whether such U.S. Holder makes an election to treat the company and each Subsidiary PFIC, if any, as a “qualified electing fund” or “QEF” under Section 1295 of the Code (a “QEF Election”) or a mark-to-market election under Section 1296 of the Code (a “Mark-to-Market Election”). A U.S. Holder that does not make either a QEF Election or a Mark-to-Market Election will be referred to in this summary as a “Non-Electing U.S. Holder.”

A Non-Electing U.S. Holder will be subject to the rules of Section 1291 of the Code with respect to (a) any gain recognized on the sale or other taxable disposition of our common shares and (b) any excess distribution paid on our common shares. A distribution generally will be an “excess distribution” to the extent that such distribution (together with all other distributions received in the current taxable year) exceeds 125% of the average distributions received during the three preceding taxable years (or during a U.S. Holder’s holding period for our common shares, if shorter).

Under Section 1291 of the Code, any gain recognized on the sale or other taxable disposition of our common shares, and any excess distribution paid on our common shares, must be ratably allocated to each day in a Non-Electing U.S. Holder’s holding period for our common shares. The amount of any such gain or excess distribution allocated to prior years of such Non-Electing U.S. Holder’s holding period for our common shares (other than years prior to the first taxable year of the company beginning after December 31, 1986 for which the company was not a PFIC) will be subject to U.S. federal income tax at the highest tax applicable to ordinary income in each such prior year. A Non-Electing U.S. Holder will be required to pay interest on the resulting tax liability for each such prior year, calculated as if such tax liability had been due in each such prior year. Such a Non-Electing U.S. Holder that is not a corporation must treat any such interest paid as “personal interest,” which is not deductible. The amount of any such gain or excess distribution allocated to the current year of such Non-Electing U.S. Holder’s holding period for our common shares will be treated as ordinary income in the current year, and no interest charge will be incurred with respect to the resulting tax liability for the current year.

If the company is a PFIC for any taxable year during which a Non-Electing U.S. Holder holds our common shares, the company will continue to be treated as a PFIC with respect to such Non-Electing U.S. Holder, regardless of whether the company ceases to be a PFIC in one or more subsequent years. A Non-Electing U.S. Holder may terminate this deemed PFIC status by electing to recognize gain (which will be taxed under the rules of Section 1291 of the Code discussed above) as if our common shares were sold on the last day of the last taxable year for which the company was a PFIC.

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QEF Election

A U.S. Holder that makes a QEF Election generally will not be subject to the rules of Section 1291 of the Code discussed above. However, a U.S. Holder that makes a QEF Election will be subject to U.S. federal income tax on such U.S. Holder’s pro rata share of (a) the net capital gain of the company and each Subsidiary PFIC, which will be taxed as long-term capital gain to such U.S. Holder, and (b) and the ordinary earnings of the company and each Subsidiary PFIC, which will be taxed as ordinary income to such U.S. Holder. Generally, “net capital gain” is the excess of (a) net long-term capital gain over (b) net short-term capital loss, and “ordinary earnings” are the excess of (a) “earnings and profits” over (b) net capital gain. A U.S. Holder that makes a QEF Election will be subject to U.S. federal income tax on such amounts for each taxable year in which the company is a PFIC, regardless of whether such amounts are actually distributed to such U.S. Holder by the company. However, a U.S. Holder that makes a QEF Election may, subject to certain limitations, elect to defer payment of current U.S. federal income tax on such amounts, subject to an interest charge. If such U.S. Holder is not a corporation, any such interest paid will be treated as “personal interest,” which is not deductible.

A U.S. Holder that makes a QEF Election generally (a) may receive a tax-free distribution from the company to the extent that such distribution represents “earnings and profits” of the company that were previously included in income by the U.S. Holder because of such QEF Election and (b) will adjust such U.S. Holder’s tax basis in our common shares to reflect the amount included in income or allowed as a tax-free distribution because of such QEF Election. In addition, a U.S. Holder that makes a QEF Election generally will recognize capital gain or loss on the sale or other taxable disposition of our common shares.

The procedure for making a QEF Election, and the U.S. federal income tax consequences of making a QEF Election, will depend on whether such QEF Election is timely. A QEF Election will be treated as “timely” if such QEF Election is made for the first year in the U.S. Holder’s holding period for our common shares in which the company was a PFIC. A U.S. Holder may make a timely QEF Election by filing the appropriate QEF Election documents at the time such U.S. Holder files a U.S. federal income tax return for such first year in respect of the company and each Subsidiary PFIC, if any. However, if the company was a PFIC in a prior year, then in addition to filing the QEF Election documents, a U.S. Holder must elect to recognize (a) gain (which will be taxed under the rules of Section 1291 of the Code discussed above) as if our common shares were sold on the qualification date or (b) if the company was also a CFC, such U.S. Holder’s pro rata share of the post-1986 “earnings and profits” of the company as of the qualification date. The “qualification date” is the first day of the first taxable year in which the company was a QEF with respect to such U.S. Holder. The election to recognize such gain or “earnings and profits” can only be made if such U.S. Holder’s holding period for our common shares includes the qualification date. By electing to recognize such gain or “earnings and profits,” such U.S. Holder will be deemed to have made a timely QEF Election. In addition, under very limited circumstances, a U.S. Holder may make a retroactive QEF Election if such U.S. Holder failed to file the QEF Election documents in a timely manner.

A QEF Election will apply to the taxable year for which such QEF Election is made and to all subsequent taxable years, unless such QEF Election is invalidated or terminated or the IRS consents to revocation of such QEF Election. If a U.S. Holder makes a QEF Election and, in a subsequent taxable year, the company ceases to be a PFIC, the QEF Election will remain in effect (although it will not be applicable) during those taxable years in which the company is not a PFIC. Accordingly, if the company becomes a PFIC in another subsequent taxable year, the QEF Election will be effective and the U.S. Holder will be subject to the QEF rules described above during any such subsequent taxable year in which the company qualifies as a PFIC. In addition, the QEF Election will remain in effect (although it will not be applicable) with respect to a U.S. Holder even after such U.S. Holder disposes of all of such U.S. Holder’s direct and indirect interest in our common shares. Accordingly, if such U.S. Holder reacquires an interest in the company, such U.S. Holder will be subject to the QEF rules described above for each taxable year in which the company is a PFIC.

Mark-to-Market Election

A U.S. Holder may make a Mark-to-Market Election only if our common shares are marketable stock. Our common shares generally will be “marketable stock” if our common shares are regularly traded on (a) a national securities exchange that is registered with the Securities and Exchange Commission, (b) the national market system established pursuant to section 11A of the Securities and Exchange Act of 1934, or (c) a foreign securities exchange that is regulated or supervised by a governmental authority of the country in which the market is located, provided that (i) such foreign exchange has trading volume, listing, financial disclosure, and other requirements and the laws of the country in which such foreign exchange is located, together with the rules of such foreign exchange, ensure that such requirements are actually enforced and (ii) the rules of such foreign exchange ensure active trading of listed stocks.

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A U.S. Holder that makes a Mark-to-Market Election generally will not be subject to the rules of Section 1291 of the Code discussed above. However, if a U.S. Holder makes a Mark-to-Market Election after the beginning of such U.S. Holder’s holding period for our common shares and such U.S. Holder has not made a timely QEF Election, the rules of Section 1291 of the Code discussed above will apply to certain dispositions of, and distributions on, our common shares.

A U.S. Holder that makes a Mark-to-Market Election will include in ordinary income, for each taxable year in which the company is a PFIC, an amount equal to the excess, if any, of (a) the fair market value of our common shares as of the close of such taxable year over (b) such U.S. Holder’s tax basis in our common shares. A U.S. Holder that makes a Mark-to-Market Election will be allowed a deduction in an amount equal to the lesser of (a) the excess, if any, of (i) such U.S. Holder’s adjusted tax basis in our common shares over (ii) the fair market value of our common shares as of the close of such taxable year or (b) the excess, if any, of (i) the amount included in ordinary income because of such Mark-to-Market Election for prior taxable years over (ii) the amount allowed as a deduction because of such Mark-to-Market Election for prior taxable years.

A U.S. Holder that makes a Mark-to-Market Election generally also will adjust such U.S. Holder’s tax basis in our common shares to reflect the amount included in gross income or allowed as a deduction because of such Mark-to-Market Election. In addition, upon a sale or other taxable disposition of our common shares, a U.S. Holder that makes a Mark-to-Market Election will recognize ordinary income or loss (not to exceed the excess, if any, of (a) the amount included in ordinary income because of such Mark-to-Market Election for prior taxable years over (b) the amount allowed as a deduction because of such Mark-to-Market Election for prior taxable years).

A Mark-to-Market Election applies to the taxable year in which such Mark-to-Market Election is made and to each subsequent taxable year, unless our common shares cease to be “marketable stock” or the IRS consents to revocation of such election. Each U.S. Holder should consult its own financial advisor, legal counsel, or accountant regarding the availability of, and procedure for making, a Mark-to-Market Election.

Although a U.S. Holder may be eligible to make a Mark-to-Market Election with respect to our common shares, no such election may be made with respect to the stock of any Subsidiary PFIC that such U.S. Holder is treated as owning because such stock is not marketable. Hence, the Mark-to-Market Election will not be effective to eliminate the interest charge described above.

Other PFIC Rules

Under Section 1291(f) of the Code, the IRS has issued proposed Treasury Regulations that, subject to certain exceptions, would cause a U.S. Holder that had not made a timely QEF Election to recognize gain (but not loss) upon certain transfers of our common shares that would otherwise be tax-deferred (e.g., gifts and exchanges pursuant to corporate reorganizations). However, the specific U.S. federal income tax consequences to a U.S. Holder may vary based on the manner in which our common shares are transferred.

Certain additional adverse rules will apply with respect to a U.S. Holder if the company is a PFIC, regardless of whether such U.S. Holder makes a QEF Election. For example under Section 1298(b)(6) of the Code, a U.S. Holder that uses our common shares as security for a loan will, except as may be provided in Treasury Regulations, be treated as having made a taxable disposition of our common shares.

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Special rules also apply to the amount of foreign tax credit that a U.S. Holder may claim on a distribution from a PFIC.

The PFIC rules are complex, and each U.S. Holder should consult its own financial advisor, legal counsel, or accountant regarding the PFIC rules and how the PFIC rules may affect the U.S. federal income tax consequences of the acquisition, ownership, and disposition of our common shares.

F. Dividends and Paying Agents

Not applicable.

G. Statements by Experts

Not applicable.

H. Documents on Display

We have filed with the SEC a registration statement on Form 20-F, including relevant exhibits under the Securities Exchange Act of 1934.

We are subject to the periodic reporting and other informational requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Under the Exchange Act, we are required to file reports and other information with the SEC. Specifically, we are required to file annually a Form 20-F no later than four months after the close of each fiscal year, which is August 31. Copies of reports and other information, when so filed, may be inspected without charge and may be obtained at prescribed rates at the public reference facilities maintained by the SEC at:

100 F Street, NE, Room 1580

Washington, DC 20549

The public may obtain information regarding the Washington, D.C. Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains a web site at www.sec.gov that contains reports, proxy and information statements, and other information regarding registrants that make electronic filings with the SEC.

As a foreign private issuer, we are exempt from the rules under the Exchange Act prescribing the furnishing and content of quarterly reports and proxy statements, and officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act.

I. Subsidiary Information

We operate our education programs and services business through the following subsidiaries:

1.	CIBT, which conducts operations primarily in China and in which we currently hold a 100% ownership interest;

2.	Sprott-Shaw, which operates primarily in Canada and with a presence in Asia and the Middle East, in which we acquired a 100% ownership interest on December 17, 2007; and

In addition, we hold a 51% interest in IRIX, a multimedia service and advertising agency located in Vancouver, British Columbia, Canada.

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ITEM 11. Quantitative and Qualitative Disclosures about Market Risk

Not applicable.

ITEM 12. Description of Securities other than Equity Securities

Not Applicable.

PART II

ITEM 13. Defaults, Dividend Arrearages and Delinquencies

None.

ITEM 14. Material Modifications to the Rights of Security Holders and Use of Proceeds

A. Modification of Instruments Defining Rights of Security Holders

None.

B. Modification or Issuance of Other Class of Securities

None.

C. Withdrawal or Substitution of Securities

None.

D. Change of Trustee or Paying Agent

None.

E. Use of Proceeds

Not Applicable.

ITEM 15. Controls and Procedures

A. Evaluation of Disclosure Controls and Procedures

We carried out, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as amended). Based on their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of August 31, 2012, our disclosure controls and procedures were not effective due to the material weaknesses described below.

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B. Management's Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining effective internal control over financial reporting. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

With the participation of our Chief Executive Officer and Chief Financial Officer, our management conducted an evaluation of the effectiveness of our internal control over financial reporting as of August 31, 2012, based on the framework and criteria established in Internal Control – Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

A material weakness is a significant deficiency, or combination of significant deficiencies, that result in more than a remote likelihood that a material misstatement of the annual or interim financial statements will occur and not be detected by management before the financial statements are published. Controls can potentially be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the control. The design of any system of controls also is based on part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

In our assessment of the effectiveness in internal control over financial reporting as of August 31, 2012, we determined that there were control deficiencies that constituted material weaknesses, as described below.

●

In the process of documenting and improving our controls over financial reporting, management has identified certain material weaknesses that existed in the design or operation of our internal control over financial reporting including ineffective control over the financing reporting of subsidiaries; insufficient staffing in accounting and finance in business segments; and ineffective controls related to the period-end financial reporting process that impacts management’s ability to oversee the preparation of the consolidated financial statements

Due to these material weaknesses, management concluded that our internal control over financial reporting was not effective as of August 31, 2012.

Remediation of Material Weaknesses

We are in the process of developing and implementing a remediation plan to address the material weaknesses as described above. During the year ended August 31, 2013, we plan to take the following actions to improve internal controls over financial reporting:

●	enhance our risk assessment, internal control design and documentation; and

●	develop and implement other procedures in the internal control function.

In light of the aforementioned material weaknesses, management conducted a thorough review of all significant or non-routine adjustments for the year ended August 31, 2012. As a result of this review, management believes that there are no material inaccuracies or omissions of material fact and, to the best its knowledge, believes that the consolidated financial statements for the year ended August 31, 2012 fairly present in all material respects our financial position and results of operations in conformity with IFRS.

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We have allocated additional resources, human capital, consultants, and management effort to our accounting processes which we believe will improve our internal control over financial reporting. We are currently in the process of rectifying these deficiencies and will be engaging an external consultant to design effective internal control processes and procedures for our company in fiscal 2013, and by hiring and training additional staff with appropriate knowledge and skills to effectively work in the accounting and finance departments. We plan to continue to invest in improving our internal control over financial reporting over the next fiscal year.

C. Attestation Report of the Registered Public Accounting Firm

This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Our management report was not subject to attestation by our registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit us to provide only management’s report in this annual report.

D. Changes in Internal Control

During the year ended August 31, 2012, we have allocated additional resources, human capital, consultants, and management effort to our accounting processes, which we expect will improve our internal control over financial reporting. We plan to continue to invest in improving our internal controls over financial reporting over the next fiscal year.

ITEM 16. [Reserved]

ITEM 16A. Audit Committee Financial Expert

Our audit committee is comprised of four members: Derek Feng, David Hsu, Troy Rice and Shane Weir. The Chairman of the Audit Committee is Troy Rice. Our Board of Directors has determined that all four members of our audit committee are financial experts as defined in paragraph (b) of Item 16A of the Form 20-F. All four members are considered to be independent as defined by the NYSE MKT LLC, in accordance with Rule 10A-3 to the Exchange Act. All members of the audit committee are financially literate.

The members of the Audit Committee are elected by the Board at its first meeting following the annual shareholders’ meeting to serve one year terms and are permitted to serve an unlimited number of consecutive terms. In addition to each member’s general business experience, the education and experience of each audit committee member that is relevant to the performance of his/her responsibilities as a committee member is as follows:

Derek Feng is currently Chairman/Interim CEO of ChinaCast Education Corporation and serves as an advisor to several companies. From 2006 to 2011, he was Executive Vice President, Strategy, Planning and Operations at Knowledge Universe, an education holding company with more than 40,000 employees in North America, Europe and Asia. Prior to joining Knowledge Universe, Mr. Feng held several executive positions at the General Electric Company including leading global business development at GE Industrial, a $33 billion revenue division of GE. Mr. Feng graduated from Tsinghua University in China in 1989 with a Bachelor’s degree in Industrial Automation and earned a Master of Business Administration degree from University of California, Los Angeles in 1992.

David Hsu obtained his Medical Doctorate from the Medical School of the University of Hamburg, Germany in 1967 and MBA from Pepperdine University of Malibu, California in 1987. Dr. Hsu is one of the founders of Multi-Fineline Electronix, Inc. (NASDAQ: MFLEX), a company that manufactures and assembles flexible circuits.

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Troy Rice served as Senior Vice President of Business Development at Universal Technical Institute, Inc. (NYSE: UTI), an automotive repair education company, from 2002 to 2005. From 2001 to 2002 Mr. Rice was Vice President at Petsmart, Inc. (NASDAQ: PETM), a supplier of pet supplies and products, and from 1995 to 2001, he was a Senior Vice President of Comfort Systems U.S.A. (NYSE: FIX), and has been the chief financial officer of five companies. Mr. Rice received his Bachelor’s degree in accounting from the University of Iowa in 1985 and his MBA from Arizona State University in 1992. Mr. Rice is also a Certified Public Accountant in the State of Arizona.

Shane Weir is a qualified solicitor and consultant with Weir & Associates, Solicitors & Notaries in Hong Kong. He received his LL.B from the University of Saskatchewan in 1977 and practices in areas of Business Law, Banking Law, Commercial Law, Finance, Immigration, Intellectual Property, Securities, Taxation, Telecoms, Trademarks, Entertainment Law, and Trusts and Estates. Mr. Weir is an independent non-executive director and a member of the audit committee of e-Kong Group Limited, a listed company in Hong Kong. He has more than 40 years of relevant experience and/or experience that assists in understanding and evaluating a company’s financial statements and other financial information.

An audit committee financial expert is not deemed an “expert” for any purpose, including without limitation for purposes of Section 11 of the Securities Act of 1933, as a result of being designated or identified as an audit committee financial expert. In addition, an audit committee financial expert has no greater duties, obligations or liability than the members of the audit committee and Board of Directors who are not designated as financial experts. The designation or identification of an audit committee financial expert does not affect the duties, obligations or liability of any other member of the audit committee or Board of Directors.

ITEM 16B. Code of Ethics

Our Board of Directors adopted a code of ethical conduct that sets out guidelines and expectations regarding the conduct on the part of our directors, officers and employees. Our code of ethical conduct, filed as Exhibit 11.1 to our Form 20-F annual report filed on January 2, 2008, is incorporated by reference into this annual report.

During the fiscal year ended August 31, 2012 we did not amend our code of ethical conduct and did not grant any waiver. If the provisions of our code of ethical conduct are amended, or if a waiver is granted, we will disclose such amendment or waiver.

We have an Insider Trading Policy (the “Policy”) which sets out guidelines and expectations regarding the conduct on the part of our directors, officers, employees, consultants and contractors, which provides additional measures regarding the acquisition or disposal of any of our securities. The Policy, filed as Exhibit 10.1 to our Form 20-F annual report filed on March 1, 2010, is incorporated by reference into this annual report.

The Board requires conflicts of interest to be disclosed to our corporate governance committee. In the event that conflicts of interest arise, a director who has such a conflict is required to disclose the conflict to the chairman of the Board and the chairman of the corporate governance committee. If the conflict cannot be avoided or resolved, the director must disclose the conflict to our board of directors and abstain from voting in connection with the subject of the conflict. In addition, in considering transactions and agreements in respect of which a director has a material interest, the Board will require that the interested person absent themselves from portions of Board or committee meetings so as to allow independent discussion of points in issue and the exercise of independent judgment.

Our audit committee has also established a “whistleblower” policy to encourage employees to raise any concerns about business conduct they may have.

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ITEM 16C. Principal Accountant Fees and Services

The table below sets forth the aggregate fees for professional services rendered by our principal accountants, Deloitte LLP for the fiscal years ended August 31, 2011 and 2012.

	For the year ended August 31, 2011		For the year ended August 31, 2012
	(C$)		(C$)
Audit Fees (1)		300,500		380,000
Audit-Related Fees (2)		199,200		149,000
Tax Fees (3)		58,362		60,050
All Other Fees (4)		18,000		0
Total		576,062		589,050

(1)

“Audit fees” means the aggregate fees billed for professional services rendered by our independent registered public accounting firm for the audit of our consolidated annual financial statements, the review of our comparative financial statements, the review of our Form 20-F annual report and consultation services for our changeover to IFRS.

(2)

“Audit-related fees” represents aggregate fees billed for professional services rendered by our independent registered public accounting firm for the assurance and related services that are reasonably related to the performance of the audit or review of our financial statements and are not reported under “Audit fees.”

(3)	“Tax fees” represents the aggregated fees billed for professional services rendered by our independent registered public accounting firm for tax compliance, tax advice, and tax planning services.

(4)	All other fees consist of fees billed which are not included under audit fees, audit related fees or tax fees. Such services for fiscal 2011 related to training services for our changeover to IFRS.

Audit Committee’s Pre-approval Process

Our audit committee reviews and pre-approves the scope and the cost of all audit and audit-related services performed by the independent auditors. There were no audit or audit-related fees for the last two fiscal years that were not pre-approved by our audit committee. All services described above provided by Deloitte LLP during the last two fiscal years were approved by our audit committee pursuant to Rule 2-01(c)(7)(i) of Regulation S-X. We have not yet adopted specific policies and procedures to pre-approve non-audit services.

Our audit committee approved all audit related, tax related and all other fees. The percentage of hours expended on the principal accountant’s engagement to audit our financial statements for the year ended August 31, 2012 that were attributable to work performed by persons other than the principal accountant’s full-time, permanent employees was nil.

ITEM 16D. Exemptions from the Listings Standard for Audit Committees

None.

ITEM 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers

The table below sets forth information relating to shares we repurchased pursuant to normal course issuer bids we conducted from July 1, 2006 to October 31, 2009 under the facilities of the TSX Venture Exchange, and under the facilities of the Toronto Stock Exchange from February 4, 2011 to February 3, 2012 and our current bid being conducted from February 21, 2012 to February 20, 2013. The current normal course issuer bid has been approved by the Toronto Stock Exchange, and allows us to repurchase up to 3,000,000 of our common shares, representing approximately 4% of the 71,949,344 issued and outstanding shares as of January 11, 2013. As at January 11, 2013, we had purchased a total of 1,637,000 common shares under the current normal course issuer bid.

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Subject to prescribed exceptions, under Toronto Stock Exchange policies we may purchase up to 4,566 common shares per day, representing 25% of the average daily trading volume of 18,264 common shares per day during the six months ending April 30, 2012. We may buy back common shares anytime during the 12-month period beginning on February 21, 2012 and ending on February 20, 2013 or on such earlier date as we may complete purchases pursuant to the normal course issuer bid, or provide notice of termination. Share purchases under the normal course issuer bid will be conducted through the facilities of the Toronto Stock Exchange and other Canadian marketplaces/alternative trading systems. The actual number of shares purchased, and the timing of any such purchases, will be determined by us, in accordance with the rules of the Toronto Stock Exchange.

We are conducting the normal course issuer bid because our management believes that purchases thereunder constitute a desirable use of our funds on the basis that recent market prices of our common shares do not, and at certain times during the course of the normal course issuer bid may not, fully reflect the value of our business and future business prospects. We did not purchase any of our common shares through a normal course issuer bid from November 1, 2009 to February 3, 2011.

	Total Number of Shares (or Units) Purchased	Average Price Paid per Share (or Unit) (C$)	Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be P urchased Under the Plans or Programs
July 1 to July 31, 2006	5,000	0.90	253,500	746,500 (1)
August 1 to August 31, 2006	20,000	0.88	273,500	726,500 (1)
September 1 to September 30, 2006	32,000	0.87	305,500	694,500 (1)
October 1 to October 31, 2006	44,000	0.81	349,500	650,500 (1) 1,000,000 (2)
November 1 to November 30, 2006	257,000	0.78	257,000	743,000 (2)
December 1 to December 31, 2006	119,396	0.78	376,396	366,604 (2)
January 1 to January 31, 2007	312,500	0.80	688,896	311,104 (2)
February 1 to February 28, 2007	N/A	N/A	N/A	N/A
March 1 to March 31, 2007	N/A	N/A	N/A	N/A
April 1 to April 30, 2007	N/A	N/A	N/A	N/A
May 1 to May 31, 2007	Nil	Nil	Nil	1,000,000 (3)
June 1 to June 30, 2007	644,300	1.51	644,300	355,700 (3)
July 1 to July 31, 2007	256,400	1.73	900,700	99,300 (3) 800,000 (4) 899,300 (3)
August 1 to August 31, 2007	29,000	1.68	929,700	870,300 (3)
September 1 to September 30, 2007	N/A	N/A	N/A	N/A
October 1 to October 31, 2007	N/A	N/A	N/A	N/A
November 1 to November 30, 2007	N/A	N/A	N/A	N/A
December 1 to December 31, 2007	N/A	N/A	N/A	N/A

123

	Total Number of Shares (or Units) Purchased	Average Price Paid per Share (or Unit) (C$)	Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be P urchased Under the Plans or Programs
January 1 to January 31, 2008	N/A	N/A	N/A	N/A
February 1 to February 28, 2008	N/A	N/A	N/A	N/A
March 1 to March 31, 2008	142,200	2.01	142,200	1,500,000 (5) 1,357,800 (5)
April 1 to April 30, 2008	376,200	2.14	518,400	981,600 (5)
May 1 to May 31, 2008	101,000	2.03	101,000	880,600 (5)
June 1 to June 30, 2008	36,000	1.90	554,400	844,600 (5)
July 1 to July 31, 2008	653,900	1.65	754,900	190,700 (5)
August 1 to August 31, 2008	178,900	1.51	733,300	11,800 (5)
September 1 to September 30, 2008	11,800	1.50	766,700	-
October 1 to October 31, 2008	163,500	0.48	163,500	1,000,000 (6) 836,500 (6)
November 1 to November 30, 2008	42,500	0.67	206,000	794,000 (6)
December 1 to December 31, 2008	108,000	0.42	314,000	686,000 (6)
January 1 to January 31, 2009	57,000	0.54	371,000	629,000 (6)
February 1 to February 28, 2009	26,000	0.59	397,000	626,400
March 1 to March 31, 2009	128,500	0.49	525,500	497,900
April 1 to April 30, 2009	61,500	0.58	587,000	436,400
May 1 to May 31, 2009	-	-	-	-
June 1 to June 30, 2009	5,500	0.56	592,500	430,900
July 1 to July 31, 2009	34,000	0.66	626,500	396,900
August 1 to August 31, 2009	32,500	0.55	659,000	364,400
September 1 to September 30, 2009	15,000	0.68	674,000	349,400
October 1 to October 31, 2009	20,000	0.70	694,000	329,400
November 1, 2009 to February 3, 2011	-	-	-	-
February 4 to February 28, 2011	5,000	0.40	5,000	2,995,000 (7)
March 1 to March 31, 2011	-	-	-	-
April 1 to April 30, 2011	41,000	0.27	46,000	2,954,000 (7)
May 1 to May 31, 2011	55,000	0.27	101,000	2,899,000 (7)
June 1 to June 30, 2011	-	-	-	-
July 1 to July 31, 2011	-	-	-	-

124

	Total Number of Shares (or Units) Purchased	Average Price Paid per Share (or Unit) (C$)	Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be P urchased Under the Plans or Pro
August 1 to August 31, 2011	-	-	-	-
September 1 to September 30, 2011	24,500	0.24	125,500	2,874,500 (7)
October 1 to October 31, 2011	29,500	0.23	155,000	2,845,000 (7)
November 1 to November 30, 2011	33,500	0.26	188,500	2,811,500 (7)
December 1 to December 31, 2012	80,000	0.24	268,500	2,731,500 (7)
January 1 to January 31, 2012	100,000	0.28	368,500	2,631,500 (7) (8)
February 1 to February 29, 2012	92,000	0.24	460,500	2,662,500 (7) (8) 2,917,000 (8) (9)
March 1 to March 31, 2012	167,500	0.22	628,000	2,749,500 (9)
April 1 to April 30, 2012	189,500	0.22	817,500	2,560,000 (9)
May 1 to May 31, 2012	171,500	0.25	989,000	2,388,500 (9)
June 1 to June 30, 2012	155,500	0.24	1,144,500	2,233,000 (9)
July 1 to July 31, 2012	118,000	0.23	1,262,500	2,115,000 (9)
August 1 to August 31, 2012	176,500	0.23	1,439,000	1,938,500 (9)
September 1 to September 30, 2012	91,500	0.20	1,530,500	1,847,000 (9)
October 1 to October 31, 2012	37,000	0.20	1,567,500	1,810,000 (9)
November 1 to November 30, 2012	179,000	0.19	1,746,500	1,631,000 (9)
December 1 to December 31, 2012	215,000	0.19	1,961,500	1,416,000 (9)

(1)

On October 5, 2005, we filed a Notice of Intention to Make a Normal Course Issuer Bid with the TSX Venture Exchange advising of our intention to purchase up to 1,000,000 of our common shares at market price through the facilities of the TSX Venture Exchange. This normal course issuer bid is being conducted through Peter N. Phipps at Wellington West Capital Inc. in Halifax, Nova Scotia and expired on October 6, 2006. We totally purchased 349,500 of our common shares pursuant to this normal course issuer bid conducted from October 5, 2005 to October 2006.

(2)

On October 16, 2006, we filed a Notice of Intention to Make a Normal Course Issuer Bid with the TSX Venture Exchange advising of our intention to purchase up to 1,000,000 of our common shares at market price through the facilities of the TSX Venture Exchange. This normal course issuer bid was conducted through Research Capital Corporation, of Vancouver, British Columbia, and was terminated in February 2007. Under this normal course issuer bid, we purchased a total of 688,896 of our common shares.

(3)

On May 18, 2007, we filed a Notice of Intention to Make a Normal Course Issuer Bid with the TSX Venture Exchange advising of our intention to purchase up to 1,000,000 of our common shares at market price through the facilities of the TSX Venture Exchange. This normal course issuer bid, which was conducted through Research Capital Corporation, of Vancouver, British Columbia, has been completely filled as of December 3, 2007.

(4)	On July 12, 2007, we sold 800,000 treasury shares acquired through the provisions of our normal course issuer bid to certain directors at C$1.61 per share (market price) for total proceeds of C$1,288,000. The average cost to us of the treasury shares was C$1.21 per share.

(5)

On March 24, 2008, we renewed our TSX normal course issuer bid allowing us to repurchase a total of 1.5 million of our common shares through the facilities of the TSX Venture Exchange. This normal course issuer bid, which was conducted through Canaccord Capital Corporation, was completely filled as of September 11, 2008.

(6)

On October 9, 2008, we renewed our TSX normal course issuer bid allowing for the repurchase of up to 1 million of our common shares at market price through the facilities of the TSX Venture Exchange. This TSX normal course issuer bid, which was conducted through Union Securities Ltd., expired on October 8, 2009. Under this normal course issuer bid, we purchased a total of 694,000 of our common shares.

(7)

On February 1, 2011, we obtained approval from the Toronto Stock Exchange to conduct a normal course issuer bid allowing for the repurchase of up to 3 million of our common shares at market price through the facilities of the Toronto Stock Exchange. This normal course issuer bid expired on February 3, 2012.

(8)	In February 2012, a total of 9,000 common shares were repurchased under the 2011 plan described in Note 7 above, and 83,000 common shares were repurchased under the 2012 plan described in Note 9 below.

(9)

On February 16, 2012, we obtained approval from the Toronto Stock Exchange to conduct a normal course issuer bid allowing for the repurchase of up to 3,000,000 of our common shares at market price through the facilities of the Toronto Stock Exchange. This normal course issuer bid commenced on February 21, 2012 and will expire on February 20, 2013.

125

ITEM 16F. Change in Registrant’s Certifying Accountant

Deloitte LLP has served as our independent auditor since the fiscal year ended August 31, 2009 to present. The principal accountant’s report on our financial statements for each of the past two years did not contain an adverse opinion or disclaimer of opinion, nor was it qualified or modified as to uncertainty, audit scope or accounting principles.

ITEM 16G. Corporate Governance

Our common shares are listed on the NYSE MKT LLC. Section 110 of the NYSE MKT LLC Company Guide permits the NYSE MKT LLC to consider the laws, customs and practices of foreign issuers in relation to certain NYSE MKT LLC listing criteria, and to grant exemptions from NYSE MKT LLC listing criteria based on these considerations. A company seeking relief under these provisions is required to provide written certification from independent local counsel that the non-complying practice is not prohibited by home country law. A description of the significant ways in which our corporate governance practices differ from those followed by domestic companies pursuant to NYSE MKT LLC standards follows:

Shareholder Meeting Quorum Requirement: The NYSE MKT LLC minimum quorum requirement for a shareholder meeting is one-third of the outstanding shares of common stock. In addition, a company listed on the NYSE MKT LLC is required to state its quorum requirement in its bylaws. Our quorum requirement is set forth in our Articles. A quorum for a meeting of our shareholders is one person who is, or who represents by proxy, one or more shareholders who, in the aggregate, hold at least 5% of the issued shares entitled to be voted at the meeting.

Proxy Delivery Requirement: The NYSE MKT LLC requires the solicitation of proxies and delivery of proxy statements for all shareholder meetings, and requires that these proxies shall be solicited pursuant to a proxy statement that conforms to SEC proxy rules. Our company is a “foreign private issuer” as defined in Rule 3b-4 under the Exchange Act, and our equity securities are accordingly exempt from the proxy rules set forth in Sections 14(a), 14(b), 14(c) and 14(f) of the Exchange Act. We solicit proxies in accordance with applicable rules and regulations in Canada.

Nominating Committee Requirement and Director Appointments: The NYSE MKT LLC requires that each company adopt a formal written charter or board resolutions addressing the process by which board nominees are to be selected or recommended for selection to a listed company’s nominating committee comprised solely of independent members, or by a majority of the independent directors of such company’s board of directors. At present, any member of our Board of Directors may nominate a candidate to act as a director. The Board of Directors as a whole reviews applications submitted by candidates and conducts interviews with candidates. In keeping with NYSE MKT LLC requirements, only the independent directors vote on the appointment of a candidate to our Board of Directors (apart from annual meetings where directors are elected to our Board of Directors by our shareholders to hold office for a term of one year or until the date of the next annual meeting). Under the Business Corporations Act (British Columbia), we may only appoint up to one-third of the current number of directors at a given time.

126

The foregoing is consistent with the laws, customs and practices in the province of British Columbia and the federal laws of Canada applicable in British Columbia.

In addition, we may from time to time seek relief from the NYSE MKT LLC corporate governance requirements on specific transactions under Section 110 of the NYSE MKT LLC Company Guide by providing written certification from independent local counsel that the non-complying practice is not prohibited by our home country law, in which case, we shall make the disclosure of such transactions available on our website. Information contained on our website is not part of this annual report.

ITEM 16H. Mine Safety Disclosure

Not applicable.

PART III

ITEM 17. Financial Statements

Not applicable.

ITEM 18. Financial Statements

We are furnishing the following consolidated financial statements and reports prepared in accordance with IFRS:

CIBT Education Group August 31, 2012 Consolidated Financial Statements, Expressed in Canadian Dollars unless otherwise stated

Report of Independent Registered Chartered Accountants, Deloitte LLP, dated December 2 , 2012	F-1
Consolidated Statements of Financial Position as at August 31, 2012 and 2011 and September 30, 2010	F-2
Consolidated Statements of Loss for the year ended August 31, 2012 and 2011	F-3
Consolidated Statements of Comprehensive Loss for the year ended August 31, 2012 and 2011	F-4
Consolidated Statements of Changes in Equity for the year ended August 31, 2012 and 2011	F-5
Consolidated Statements of Cash Flows for the year ended August 31, 2012 and 2011	F-6
Notes to Consolidated Financial Statements	F-7 to F-41

127

CIBT EDUCATION GROUP INC.

CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Canadian Dollars unless otherwise stated)

AUGUST 31, 2012

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

CONSOLIDATED STATEMENTS OF LOSS

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

CONSOLIDATED STATEMENTS OF CASH FLOWS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

128

Report of Independent Registered Chartered Accountants

To the Shareholders of CIBT Education Group Inc.,

We have audited the accompanying consolidated financial statements of CIBT Education Group Inc. (the “Company”), which comprise the consolidated statements of financial position as at August 31, 2012, August 31, 2011 and September 1, 2010, and the consolidated statements of loss and statements of comprehensive loss, statements of changes in equity, and statements of cash flows for the years ended August 31, 2012 and August 31, 2011, and a summary of significant accounting policies and other explanatory information.

Management's responsibility for the consolidated financial statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditor's responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of CIBT Education Group Inc. as at August 31, 2012, August 31, 2011 and September 1, 2010, and its financial performance and its cash flows for the years ended August 31, 2012, and August 31, 2011 in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.

/s/ Deloitte LLP

Independent Registered Chartered Accountants

December 2, 2012

Vancouver, Canada

F-1

CIBT EDUCATION GROUP INC.

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

EXPRESSED IN CANADIAN DOLLARS

	As at August 31, 2012			As at August 31, 2011			As at September 1, 2010

ASSETS

CURRENT
Cash and cash equivalents	$	7,964,476		$	6,456,568		$	11,511,835
Restricted cash		257,500			250,000			-
Accounts receivable (Note 3)		8,624,143			8,513,553			11,223,894
Marketable securities (Note 4)		-			-			60,000
Prepaid expenses		826,968			763,469			1,197,086
Inventory		463,626			593,838			530,467

TOTAL CURRENT ASSETS		18,136,713			16,577,428			24,523,282
DUE FROM RELATED PARTIES (Note 22)		62,500			100,000			143,721
PROPERTY AND EQUIPMENT (Note 5)		3,519,170			2,631,818			3,418,853
INTANGIBLE ASSETS (Notes 6 & 8)		12,248,526			12,171,161			15,726,084
GOODWILL (Notes 7 & 8)		8,485,791			8,335,791			10,623,696
DEFERRED OFFERING COSTS (Note 9)		-			-			400,252
DEFERRED INCOME TAX ASSETS (Note 16)		2,299,061			2,262,377			688,964

TOTAL ASSETS	$	44,751,761		$	42,078,575		$	55,524,852

LIABILITIES

CURRENT
Accounts payable and accrued liabilities (Note 10)	$	4,695,590		$	4,145,612		$	5,007,187
Provisions (Note 11)		427,814			587,638			122,188
Income taxes payable		523,654			499,905			522,921
Deferred educational revenue		17,443,635			13,881,145			17,836,047
Current portion of finance lease obligations (Note 12)		167,902			101,765			118,098
Current portion of long-term debt (Note 12)		1,552,712			2,152,492			2,757,164
Due to related parties (Note 22)		38,917			59,484			118,303

TOTAL CURRENT LIABILITIES		24,850,224			21,428,041			26,481,908

FINANCE LEASE OBLIGATIONS (Note 12)		575,456			249,132			222,810
LONG-TERM DEBT (Note 12)		31,520			34,232			36,724
DEFERRED INCOME TAX LIABILITIES (Note 16)		2,191,708			2,066,733			1,321,882

TOTAL LIABILITIES		27,648,908			23,778,138			28,063,324



SHARE CAPITAL (Note 13)		48,182,766			48,182,766			47,709,836
RESERVES		2,204,006			2,352,897			1,989,246
DEFICIT		(34,561,006	)		(33,378,462	)		(23,564,680	)
ACCUMULATED OTHER COMPREHENSIVE LOSS		12,152			(2,331	)		-

EQUITY ATTRIBUTABLE TO CIBT EDUCATION GROUP INC. SHAREHOLDERS		15,837,918			17,154,870			26,134,402

NON-CONTROLLING INTERESTS		1,264,935			1,145,567			1,327,126

TOTAL EQUITY		17,102,853			18,300,437			27,461,528

TOTAL LIABILITIES AND EQUITY	$	44,751,761		$	42,078,575		$	55,524,852

COMMITMENTS (Note 17)

Approved on behalf of the Board:

/s/ Toby Chu		/s/ Troy Rice
Toby Chu, Chief Executive Officer & Director		Troy Rice, Director

The accompanying notes are an integral part of these consolidated financial statements

F-2

CIBT EDUCATION GROUP INC.

CONSOLIDATED STATEMENTS OF LOSS

EXPRESSED IN CANADIAN DOLLARS

	Year Ended August 31, 2012			Year Ended August 31, 2011

REVENUES
Educational	$	56,148,724		$	56,665,246
Design and advertising		1,819,963			1,909,880

		57,968,687			58,575,126

DIRECT COSTS
Educational		26,187,799			26,608,343
Design and advertising		964,882			996,459

		27,152,681			27,604,802

OTHER EXPENSES
General and administrative (Note 20)		29,598,356			32,858,532
Amortization of property, equipment and intangible assets (excluding agency fees)		1,581,460			1,657,575
Share-based payment expense		178,564			59,896
Business development costs		48,776			230,362

		31,407,156			34,806,365


INTEREST AND OTHER INCOME		91,879			180,645
FOREIGN EXCHANGE GAIN		5,874			10,771
FINANCE COSTS		(144,899	)		(153,656	)
LOSS ON DISPOSAL OF ASSETS		(57,146	)		(39,656	)
IMPAIRMENT OF MARKETABLE SECURITIES (Note 4)		-			(60,000	)
IMPAIRMENT OF PROPERTY AND EQUIPMENT, INTANGIBLE ASSETS AND GOODWILL (Note 5 and 8)		-			(5,897,778	)
WRITE-OFF OF DEFERRED OFFERING COSTS (Note 9)		-			(510,711	)

LOSS BEFORE INCOME TAXES		(695,442	)		(10,306,426	)

INCOME TAX (Note 16)
Current income tax recovery (expense)		(30,155	)		14,943
Deferred income tax recovery (expense)		(88,291	)		828,562

		(118,446	)		843,505

NET LOSS	$	(813,888	)	$	(9,462,921	)


ATTRIBUTABLE TO:
CIBT Education Group Inc. shareholders	$	(1,182,544	)	$	(9,813,782	)
Non-controlling interests		368,656			350,861

NET LOSS	$	(813,888	)	$	(9,462,921	)


BASIC AND DILUTED LOSS PER COMMON SHARE	$	(0.01	)	$	(0.14	)


WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING BASIC AND DILUTED		68,966,130			67,229,127

The accompanying notes are an integral part of these consolidated financial statements

F-3

CIBT EDUCATION GROUP INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

EXPRESSED IN CANADIAN DOLLARS

	Year Ended August 31, 2012			Year Ended August 31, 2011

NET LOSS	$	(813,888	)	$	(9,462,921	)
OTHER COMPREHENSIVE LOSS:
Unrealized foreign exchange translation adjustment		49,070			(28,817	)

TOTAL COMPREHENSIVE LOSS:	$	(764,818	)	$	(9,491,738	)

ATTRIBUTABLE TO:
CIBT Education Group Inc. shareholders	$	(1,168,061	)	$	(9,816,113	)
Non-controlling interests		403,243			324,375

	$	(764,818	)	$	(9,491,738	)

The accompanying notes are an integral part of these consolidated financial statements

F-4

CIBT EDUCATION GROUP INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

EXPRESSED IN CANADIAN DOLLARS

	Share Capital					Reserves										Accumulated
																Other
	Number of							Share-								Comprehensive			Total			Non-
	Common		Dollar					Based		Treasury						Income			Shareholders’			Controlling			Total
	Shares		Amount			Warrants		Payments		Shares			Deficit			(Loss)			Equity			Interests			Equity

Balance, September 1, 2010		69,226,011	$	47,709,836		$	2,081,453	$	3,181,583	$	(3,273,790	)	$	(23,564,680	)	$	-		$	26,134,402		$	1,327,126		$	27,461,528

Unrealized foreign exchange translation adjustments		-		-			-		-		-			-			(2,331	)		(2,331	)		(26,486	)		(28,817	)

Net income (loss) for the year		-		-			-		-		-			(9,813,782	)		-			(9,813,782	)		350,861			(9,462,921	)

														(9,813,782	)		(2,331	)		(9,816,113	)		324,375			(9,491,738	)

Share-based payment expense		-		-			-		59,896		-			-			-			59,896			-			59,896

Payments to non-controlling interests		-		-			-		-		-			-			-			-			(505,934	)		(505,934	)

Purchase of treasury shares		-		-			-		-		(30,265	)		-			-			(30,265	)		-			(30,265	)

Shares and warrants issued for private placement, net of issue costs of $10,050		2,723,333		476,950			330,000		-		-			-			-			806,950			-			806,950

Fair value of agent’s warrants for private placement		-		(4,020	)		4,020		-		-			-			-			-			-			-

Balance, August 31, 2011		71,949,344		48,182,766			2,415,473		3,241,479		(3,304,055	)		(33,378,462	)		(2,331	)		17,154,870			1,145,567			18,300,437

Unrealized foreign exchange translation adjustments		-		-			-		-		-			-			14,483			14,483			34,587			49,070

Net income (loss) for the year		-		-			-		-		-			(1,182,544	)		-			(1,182,544	)		368,656			(813,888	)

														(1,182,544	)		14,483			(1,168,061	)		403,243			(764,818	)

Share-based payment expense		-		-			-		178,564		-			-			-			178,564			-			178,564

Payments to non-controlling interests		-		-			-		-		-			-			-			-			(283,875	)		(283,875	)

Purchase of treasury shares		-		-			-		-		(327,455	)		-			-			(327,455	)		-			(327,455	)

Balance, August 31, 2012		71,949,344	$	48,182,766		$	2,415,473	$	3,420,043	$	(3,631,510	)	$	(34,561,006	)	$	12,152		$	15,837,918		$	1,264,935		$	17,102,853

The accompanying notes are an integral part of these consolidated financial statements

F-5

CIBT EDUCATION GROUP INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

EXPRESSED IN CANADIAN DOLLARS

	Year Ended August 31, 2012			Year Ended August 31, 2011

CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES
Net (loss) income	$	(813,888	)	$	(9,462,921	)
Adjusted for items not involving cash:
- amortization of property, equipment and intangible assets (including agency fees)		2,821,423			2,558,542
- share-based payment expense		178,564			59,896
- income tax recovery		118,446			(828,562	)
- loss on disposal of assets		57,146			39,656
- impairment of marketable securities		-			60,000
- impairment of intangible assets and goodwill		-			5,897,778
- write-off of deferred offering costs		-			510,711
- advances from related parties		-			(58,819	)
		2,361,691			(1,223,719	)

Net changes in non-cash working capital items (Note 21)		3,932,516			(1,125,453	)

NET CASH FROM (USED IN) OPERATING ACTIVITIES		6,294,207			(2,349,172	)

CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES
Purchases of property and equipment		(1,618,793	)		(488,247	)
Restricted cash		(7,500	)		(250,000	)
Acquisition of business assets		(150,000	)		(50,000	)
Acquisition of intangible assets		(1,768,550	)		(1,297,004	)

NET CASH (USED IN) INVESTING ACTIVITIES		(3,544,843	)		(2,085,251	)

CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES
Proceeds from issuance of shares		-			806,950
Treasury share transactions		(327,455	)		(30,265	)
Advances from related parties		16,933			43,721
Non-controlling interest draws		(283,875	)		(505,934	)
Finance lease obligation		(45,040	)		(105,753	)
Long-term debt repayments		(602,492	)		(607,164	)
Deferred costs		-			(171,820	)

NET CASH (USED IN) FINANCING ACTIVITIES		(1,283,081	)		(570,265	)

EFFECTS OF EXCHANGE RATE CHANGES ON CASH		473			(50,579	)

NET INCREASE (DECREASE) IN CASH		1,507,908			(5,055,267	)

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR		6,456,568			11,511,835

CASH AND CASH EQUIVALENTS, END OF YEAR	$	7,964,476		$	6,456,568

CASH AND CASH EQUIVALENTS:
Cash in bank	$	7,651,536	$	5,381,795
Term deposits		312,940		1,074,773

	$	7,964,476	$	6,456,568


SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid	$	156,313	$	164,896
Income taxes paid	$	17,856	$	14,549

The accompanying notes are an integral part of these consolidated financial statements

F-6

CIBT EDUCATION GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

EXPRESSED IN CANADIAN DOLLARS

August 31, 2012

NOTE 1 – NATURE OF OPERATIONS

Nature of operations

CIBT Education Group Inc. (the “Company”) is an educational management organization headquartered in Vancouver, British Columbia, Canada. The Company’s current business operations include education and media communications. The Company currently has four principal business units/segments, being CIBT School of Business & Technology Corp. (“CIBT”), Sprott-Shaw Degree College Corp. (“SSDC”), KGIC Language College Corp. (“KGIC”), and IRIX Design Group Inc. (“IRIX”). The Company’s education business is conducted through CIBT and its subsidiaries in Asia, and through SSDC and KGIC in Canada. The Company operates its media communications business through IRIX and its subsidiaries. IRIX is based in Canada with representatives in Hong Kong and the United States.

The head office, principal address, and registered and records office of the Company are located at Suite 1200, 777 West Broadway, Vancouver, British Columbia, Canada.

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES

Basis of preparation and statement of compliance

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board, and include the significant accounting policies as described in Note 2. The policies set out below are consistently applied to all the periods presented unless otherwise noted below. Those accounting policies are based on the IFRS that are effective at August 31, 2012.

As these consolidated financial statements represent the Company’s initial presentation of its financial performance and financial position under IFRS, they were prepared in accordance with IFRS 1, First-time Adoption of IFRS , as discussed in Note 24. Comparative figures in the financial statements have been restated to consistently apply the same IFRS.

Detailed disclosures of the effects of transition to IFRS from Canadian GAAP can be found in Note 24. Items included in this note are reconciliations and descriptions of the effect of the transition from Canadian GAAP to IFRS on equity and comprehensive income, IFRS 1 exemptions and elections applied, an explanation of the transition to IFRS, details of significant changes in accounting policies, and presentation reclassifications.

These financial statements were prepared on a going-concern basis, under the historical cost convention except for marketable securities classified as at fair value through profit or loss.

The financial statements were approved by the Company’s Board of Directors and authorized for issue on December 2, 2012.

Principles of consolidation

The consolidated financial statements include the financial statements of the Company and all its majority-owned subsidiaries. All intercompany transactions, balances, revenues and expenses have been eliminated on consolidation.

Significant accounting judgements and key sources of estimate uncertainty

In the preparation of the consolidated financial statements and the application of the Company’s accounting policies, management is required to make judgements, estimates and assumptions that affect the carrying amounts of assets and liabilities and disclosure of contingent liabilities at the dates of the consolidated financial statements and the reported amounts of revenues and expenses during each reporting period. The estimates and associated assumptions are limited by the relevance of historical data and uncertainty of future events. Actual results could differ from those estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and further periods if the review affects both current and future periods.

F-7

CIBT EDUCATION GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

EXPRESSED IN CANADIAN DOLLARS

AUGUST 31, 2012

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (cont’d)

Significant accounting judgements and key sources of estimate uncertainty (cont’d)

The following are the critical judgements, apart from those involving estimates, that management made in the process of applying the Company’s key accounting policies and have the most significant effect on the amounts recognized in the consolidated financial statements.

Determination of functional currency

The functional currency for the Company and each of the Company’s subsidiaries is the currency of the primary economic environment in which an entity operates. This involves evaluating factors such as the currency used in the selling price of each entity’s services, the dominant currency that influences local competition and regulation, the currency that is used to pay local operating costs, the currency used to generate financing cash inflows and the level of operating and financing autonomy given to each entity by the Company. The evaluation of these factors has required the use of judgment and has resulted in the determination that the Canadian dollar and the Chinese renminbi are the appropriate functional currency for use by various entities.

Determination of cash-generating units

For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows (cash-generating units). In management’s judgment the Company has six cash-generating units based on the evaluation of the smallest discrete group of assets that generate cash inflows that are largely independent of the cash inflows from other assets or groups of assets.

Determination of discontinued operations

Management considers the significance of the line of business to the Company in deciding whether to present operations that have been abandoned or sold as discontinued operations in the statement of loss.

Recognition of deferred income tax assets

The decision to recognise a deferred tax asset is based on management’s judgement of whether it is considered probable that future taxable profits will be available against which unused tax losses, tax credits or deductible temporary differences can be utilized.

Assessment of indefinite life intangibles

CIBT holds three types of indefinite life intangible assets: Accreditations and registrations, brand-names and trade-names, and Chinese university agreements. Management reassess at each annual reporting period whether there have been any changes in the current marketplace or regulatory environment that would impact the conclusion that these are indefinite life intangibles. Management continues to conclude that there is no definite end to the cash flows to be generated from accreditations and registrations and brand-names and trade-names as at August 31, 2012.

Chinese university agreements are partnership contracts held through CIBT’s Chinese operations and have a contractual life of between 15 and 20 years with renewal clauses. Management individually reviews and assesses each university contract for appropriateness of classification as an indefinite lived intangible. Management’s history with each of these individual contracts is that they will be automatically renewed for a subsequent period after the initial contractual life and as a result, in management’s judgment, represent indefinite life intangible assets.

Significant areas that involve estimates include:

●	valuation of financial instruments;

●	fair value of stock options;

●	provision for doubtful accounts receivable;

●	useful lives of tangible and intangible assets;

●	depreciation and amortization of property and equipment;

●	amortization of intangible assets; and

●	assessing recoverability of goodwill and intangible assets

F-8

CIBT EDUCATION GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

EXPRESSED IN CANADIAN DOLLARS

AUGUST 31, 2012

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (cont’d)

Cash and cash equivalents

The Company considers only those investments that are highly liquid, readily convertible to cash with original maturities of three months or less at date of purchase as cash equivalents.

Restricted cash

Restricted cash represents Canadian dollar deposits in bank as collateral for the credit cards used in business operations.

Marketable securities

Marketable securities consist of common shares where, for all periods presented, the Company’s interest does not represent a position of control or significant influence. The Company classifies these shares as available for sale financial assets, and accordingly any revaluation gains and losses in fair value, other than impairment losses, are included in total comprehensive income or loss in investment revaluation reserve for the period until the asset is disposed of or any revaluation losses are determined to be permanent and recorded as impairment losses.

Inventory

Inventories, which are comprised primarily of textbooks and other education materials, are valued at the lower of cost and net realizable value, with cost being determined on a weighted average basis. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.

Property and equipment

Property and equipment are carried at cost less accumulated depreciation and accumulated impairment losses. The initial cost of an asset comprises its purchase price and any costs directly attributable to bringing the asset into working condition for its intended. Amortization is provided over the estimated useful lives of assets as follows:

●	Leasehold improvements – straight-line over the lesser of five years and remaining lease term;

●	Furniture and equipment – 20% declining balance.

Estimates of residual values and useful lives are reassessed annually and any change in estimate is taken into account in the determination of remaining depreciation charges. Depreciation commences on the date the asset is available for use and capable of operating in the manner intended by management.

An item of property and equipment is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in the statement of operations in the period in which the item is derecognized.

Foreign currency

Functional currency is the currency of the primary economic environment in which an entity operates. These consolidated financial statements are presented in Canadian dollars, which is the Company’s functional currency.

In preparing the financial statements of each individual subsidiary, transactions in currencies other than the entity's functional currency (foreign currencies) are recognized at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the dates those fair values are determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. Exchange differences on monetary items are recognized in profit or loss in the period in which they arise.

For the purposes of presenting consolidated financial statements, the assets and liabilities of the Company's foreign operations are translated into Canadian dollars using exchange rates prevailing at the end of each reporting period. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising, if any, are recognized in other comprehensive income and accumulated in equity (attributed to non-controlling interests as appropriate).

F-9

CIBT EDUCATION GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

EXPRESSED IN CANADIAN DOLLARS

AUGUST 31, 2012

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (cont’d)

Leases

Leases in which the Company assumes substantially all risks and rewards of ownership are classified as finance leases. Assets held under finance leases are recognized at the lower of the fair value and the present value of the minimum lease payments at inception of the lease, less accumulated depreciation and impairment losses. The corresponding liability to the lessor is included in the consolidated statement of financial position as a finance lease obligation. Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance expenses are recognized immediately in profit or loss.

Operating lease payments are recognized as an expense on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. In the event that lease incentives are received to enter into operating leases, such incentives are recognized as a liability. The aggregate benefit of incentives is recognized as a reduction of rental expense on a straight-line basis, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

Deferred offering costs

Offering costs incurred in connection with private debt financings are offset against the proceeds of the financing and amortized using the effective interest method. Offering costs incurred in connection with public equity market financings are offset against the proceeds of the financing and share capital is recorded net of offering costs. Previously capitalized amounts are charged to operations if the financing is not completed.

Intangible assets

The Company’s finite life and indefinite life intangible assets are recorded at their cost which, for intangible assets acquired in business combinations, represents the acquisition date fair value.

Indefinite life intangible assets include accreditations, brand and trade names, and Chinese university partnership contracts. The Company considers such assets to represent an ongoing benefit to the Company through an indefinite period of control of such assets and expected usage. Such intangible assets are not subject to amortization and are tested for impairment annually or where an indication of impairment exists as described under “Impairment of intangible assets and property and equipment” below.

Finite life intangible assets, which include curriculum access contracts, internally developed curriculum, agency fees, and foreign university cooperating agreements are carried at cost less accumulated amortization and impairment losses.

The Company capitalizes direct costs incurred in developing programs and curriculums for new courses as intangible assets with finite life. These costs are amortized to direct educational cost on a straight-line basis over the expected life of the course (ranging from three months to 48 months) upon commencement of the new courses. Costs relating to the ongoing development and maintenance of existing courses are expensed as incurred. For language programs in KGIC and SSDC, the Company engages a network of agents in foreign countries, who recruit and/or provide ongoing services to international students to attend the Company’s programs in Canada. Agency fees attributable to each student, are deferred as intangible assets and recognized proportionately over the instruction period for the student to match with the tuition fee revenues which are within a year.

Amortization is calculated over periods ranging from less than one year to fifteen years on a straight-line basis, being their estimated useful lives. The expected useful lives of assets are reviewed on an annual basis and, if necessary, changes in useful lives are accounted for prospectively. Finite life intangible assets are tested for impairment whenever events or changes in circumstances indicate the carry value may not be recoverable as described under “Impairment of intangible assets and property and equipment” below.

F-10

CIBT EDUCATION GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

EXPRESSED IN CANADIAN DOLLARS

AUGUST 31, 2012

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (cont’d)

Business combinations

Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition date fair values of the assets transferred by the Company, liabilities incurred by the Company to the former owners of the acquiree and the equity interests issued by the Company in exchange for control of the acquiree. Certain acquisition related costs are recognized in profit or loss as incurred.

At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognized at their fair value at the acquisition date, except that:

●	deferred tax assets or liabilities and liabilities or assets related to employee benefit arrangements are recognized and measured in accordance with IAS 12, Income Taxes and IAS 19, Employee Benefits , respectively;

●

liabilities or equity instruments related to share-based payment arrangements of the acquiree or share-based payment arrangements of the Company entered into to replace share-based payment arrangements of the acquiree are measured in accordance with IFRS 2, Share-Based Payment , at the acquisition date; and

●	assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5, Non-Current Assets Held for Sale and Discontinued Operations , are measured in accordance with that standard.

Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer's previously held equity interest in the acquiree (if any) over the net of the acquisition date amounts of the identifiable assets acquired and the liabilities assumed. If, after reassessment, the net of the acquisition date amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer's previously held interest in the acquiree (if any), the excess is recognized immediately in profit or loss as a bargain purchase gain.

Non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of the entity's net assets in the event of liquidation may be initially measured either at fair value or at the non-controlling interests' proportionate share of the recognized amounts of the acquiree's identifiable net assets. The choice of measurement basis is made on a transaction-by-transaction basis. Other types of non-controlling interests are measured at fair value or, when applicable, on the basis specified in another IFRS.

When the consideration transferred by the Company in a business combination includes assets or liabilities resulting from a contingent consideration arrangement, the contingent consideration is measured at its acquisition date fair value and included as part of the consideration transferred in a business combination. Changes in the fair value of the contingent consideration that qualify as measurement period adjustments are adjusted retrospectively, with corresponding adjustments against goodwill. Measurement period adjustments are adjustments that arise from additional information obtained during the measurement period (which is limited to one year from the acquisition date) about facts and circumstances that existed at the acquisition date.

The subsequent accounting for changes in the fair value of the contingent consideration that do not qualify as measurement period adjustments depends on how the contingent consideration is classified. Contingent consideration that is classified as equity is not re-measured at subsequent reporting dates and its subsequent settlement is accounted for within equity. Contingent consideration that is classified as an asset or a liability is re-measured at subsequent reporting dates in accordance with IAS 39, Financial Instruments: Recognition and Measurement , or IAS 37, Provisions, Contingent Liabilities and Contingent Assets , as appropriate, with the corresponding gain or loss being recognized in profit or loss.

When a business combination is achieved in stages, the Company's previously held equity interest in the acquiree is re-measured to fair value at the acquisition date (the date when the Company obtains control) and the resulting gain or loss, if any, is recognized in profit or loss. Amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognized in other comprehensive income are reclassified to profit or loss where such treatment would be appropriate if that interest were disposed of.

F-11

CIBT EDUCATION GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

EXPRESSED IN CANADIAN DOLLARS

AUGUST 31, 2012

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (cont’d)

Business combinations (cont’d)

If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Company reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period (see above), or additional assets or liabilities are recognized, to reflect new information obtained about facts and circumstances that existed at the acquisition date that, if known, would have affected the amounts recognized at that date.

Goodwill

Goodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition of the business less accumulated impairment losses, if any.

For the purposes of impairment testing, goodwill is allocated to each of the Company's cash-generating units (or groups of cash-generating units) that is expected to benefit from the synergies of the combination. A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata based on the carrying amount of each asset in the cash generating unit. Any impairment loss for goodwill is recognized directly in profit or loss in the consolidated statement of comprehensive income. An impairment loss recognized for goodwill is not reversed in subsequent periods. Management evaluates goodwill for impairment annually as of August 31.

On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.

Impairment of intangible assets and property and equipment

The carrying amount of property and equipment and intangible assets with a finite life are reviewed each reporting period to determine whether events or changes in circumstances indicate that their carrying amounts may not be recoverable. Intangible assets with an infinite life are reviewed and tested on an annual basis or whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable.

Provisions

Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. Where appropriate, the future cash flow estimates are adjusted to reflect risks specific to the liability.

If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money. Where discounting is used, the increase in the provision due to the passage of time is recognized within financing costs.

F-12

CIBT EDUCATION GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

EXPRESSED IN CANADIAN DOLLARS

AUGUST 31, 2012

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (cont’d)

Provisions (cont'd)

Contingent liabilities are possible obligations whose existence will only be confirmed by future events not wholly within the control of the Company. Contingent liabilities are not recognized in the financial statements, but are disclosed unless the possibility of an outflow of economic resources is considered remote.

Revenue recognition

The Company recognizes revenue when the amount of revenue can be reliably measured, if it is probable that future economic benefits will flow to the entity and specific criteria have been met for each of the Company’s activities as described below.

Revenue is measured at the fair value of the consideration received or receivable.

The primary sources of the Company’s revenues are as follows:

(a) Educational programs and services

The educational programs and services consist of tuition fee (net of discounts) on course offerings by CIBT, SSDC and KGIC. Tuition is paid in advance and is initially recorded as deferred revenue. Tuition revenue for educational programs and services is recognized proportionately as the instructions are delivered, and is reported net of scholarships, business taxes and related surcharges, and tuition refunds. Students are entitled to a short term course trial period which commences on the date the course begins. Partial tuition refunds are provided to students if they decide within the trial period that they no longer want to take the course. After the trial period, if a student withdraws from a class, no refunds will be provided and any collected but unearned portion of the fee is recognized at that time.

(b) Revenue sharing arrangement with education service providers

One of the Company’s subsidiaries, CIBT, has entered into numerous educational delivery agreements with various educational service providers whereby a portion of the tuition fees, net of discounts, are paid to these educational service providers for the provision of facilities and/or teaching staff. For the majority of these revenue sharing arrangements, CIBT is considered the primary obligor and accordingly records the tuition fee revenues on a gross basis and the portion paid to the educational service providers is included in direct educational costs.

Share-based payments

The Company grants stock options to certain directors and employees to acquire shares in the common stock of the Company in accordance with the terms of the Company’s stock option plan. The fair value of options granted is recognized as a share-based payment expense with a corresponding increase in equity. The fair value is measured for each tranche at grant date and is recognized on a graded-vesting basis over the period during which the options vest. The fair value of the options granted is measured using the Black-Scholes option pricing model taking into account the terms and conditions upon which the options were granted and management’s estimate of forfeitures and expected volatility based on historical volatility. At each financial position reporting date, the amount recognized as an expense is adjusted to reflect the actual number of share options that vest.

Income taxes

Income tax expense represents current tax and deferred tax. The Company records current tax based on the taxable profits for the period which is calculated using tax rates that have been enacted or substantively enacted by the reporting date. Taxable profit differs from profit as reported in the consolidated statement of comprehensive income because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible.

Deferred income taxes are accounted for using the liability method. Under this method, deferred tax assets and liabilities are determined based on temporary differences between the financial reporting and tax basis of assets and liabilities, and measured using the substantively enacted tax rates and laws in effect when the differences are expected to reverse. The effect of a change in tax rates or tax legislation is recognized in the period of substantive enactment. Deferred tax assets, such as unused tax losses, income tax reductions, and certain items that have a tax basis but cannot be identified with an asset or liability on the statement of financial position, are recognized to the extent it is probable that taxable profit will be available against which the asset can be utilized.

F-13

CIBT EDUCATION GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

EXPRESSED IN CANADIAN DOLLARS

AUGUST 31, 2012

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (cont’d)

Earnings per share

Basic earnings per share figures have been calculated by dividing net income (loss) by the weighted monthly average number of shares outstanding during the respective periods. The Company follows the treasury stock method for determining diluted earnings per share. This method assumes that proceeds received from in-the-money stock options and share purchase warrants are used to repurchase common shares at the average prevailing market rate during the reporting period. Anti-dilutive stock options and share purchase warrants are not considered in computing diluted earnings per share. The treasury shares are excluded from the calculation of earnings per share.

Financial Instruments

All financial instruments are initially recorded at fair value including transactions costs except for transaction costs related to financial instruments classified as fair value through profit or loss (“FVTPL”) which are expensed as incurred. Subsequent measurement of financial instruments is determined based on their classification.

The following is a summary of the classes of financial instruments included in the Company’s consolidated statement of financial position as well as their designation by the Company:

Balance sheet item	Classification	Measurement basis

Cash and cash equivalents	Fair value through profit or loss	Fair value
Marketable securities	Available-for-sale	Fair value
Accounts receivable	Loans and receivables	Amortized cost
Due from related parties	Loans and receivables	Amortized cost
Accounts payable and accrued liabilities	Other liabilities	Amortized cost
Long-term debt	Other liabilities	Amortized cost
Due to related parties	Other liabilities	Amortized cost

Changes in “FVTPL” financial instruments are recognized in net income (loss) in the period in which they arise. Changes in fair value that remain unrealized for available-for-sale financial instruments are recorded in other comprehensive income until realized or determined to be impaired at which time the gain, loss or impairment is recognized in net income (loss) for the period.

F-14

CIBT EDUCATION GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

EXPRESSED IN CANADIAN DOLLARS

AUGUST 31, 2012

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (cont’d)

Non-controlling interests

Non-controlling interests exist in less than wholly-owned subsidiaries and divisions of the Company and represent the outside interests’ share in the carrying values and operations of the subsidiaries and divisions.

The interests of the non-controlling shareholders is initially measured at either fair value or at the non-controlling interests’ proportionate share of the recognized amounts of the acquiree's identifiable net assets. Any subsequent income/loss, dividends and foreign translation adjustments attributable to the non-controlling interests is recognized as part of the non-controlling interests’ income or equity.

As of August 31, 2012, August 31, 2011 and September 1, 2010, the non-controlling interests were as follows:

Subsidiary / division	Non-controlling interest %

Beihai College	40.00 %
Sprott-Shaw Degree College Corp. – Surrey Campus	33.33 %
Irix Design Group Inc.	49.00 %

Accounting standards development

Standards issued but not yet effective up to the date of issuance of the Company’s consolidated financial statements are listed below. This listing is of standards and interpretations issued that the Company reasonably expects to be applicable at a future date. The Company intends to adopt these standards when they become effective.

In the annual period beginning September 1, 2015, the Company will be required to adopt IFRS 9, Financial Instruments , which is the result of the first phase of the IASB’s project to replace IAS 39, Financial Instruments: Recognition and Measurement . The new standard replaces the current multiple classification and measurement models for financial assets and liabilities with a single model that has only two classification categories: amortized cost and fair value. Management is currently evaluating the impact that this standard will have on the consolidated financial statements.

In the annual period beginning September 1, 2013, the Company will be required to adopt IFRS 10, Consolidated Financial Statements (“IFRS10”). IFRS 10 replaces the consolidation requirements in SIC-12, Consolidation - Special Purpose Entities and IAS 27, Consolidated and Separate Financial Statements . Earlier application of this standard is permitted. IFRS 10 builds on existing principles by identifying the concept of control as the determining factor in whether an entity should be included within the consolidated financial statements of the parent company. The standard provides additional guidance to assist in the determination of control. Management is currently evaluating the impact that this standard will have on the consolidated financial statements.

IFRS 12, Disclosure of Interests in Other Entities , establishes disclosure requirements for interests in other entities, such as subsidiaries, joint arrangements, and associates. The standard carries forward existing disclosures and introduces significant additional disclosure requirements that address the nature of, and risks associated with, an entity’s interests in other entities. Management has yet to assess the full impact of IFRS 12 and intends to adopt the standard beginning September 1, 2013.

In the annual period beginning September 1, 2013, the Company will be required to adopt IFRS 13, Fair Value Measurement . This standard establishes a single framework for all fair value measurements where fair value is required or permitted by IFRSs. Management is currently evaluating the impact that this standard will have on the consolidated financial statements. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements.

In the annual period beginning September 1, 2013, the Company will be required to adopt the amendments to IFRS 7, Financial Instruments: Disclosures (“IFRS 7”). The amendment requires new disclosures relating to the offset of financial assets and financial liabilities that will enable the users of financial statements better compare financial statements prepared in accordance with IFRS and US Generally Accepted Accounting Principles. Management is currently evaluating the impact that this standard will have on the consolidated financial statements. The adoption of the amended standard is not expected to have a material impact on the Company’s consolidated financial statements.

F-15

CIBT EDUCATION GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

EXPRESSED IN CANADIAN DOLLARS

AUGUST 31, 2012

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (cont’d)

Accounting standards development (cont’d)

In the annual period beginning September 1, 2012, the Company will be required to adopt the amendments to IAS 1, Presentation of Financial Statements as it relates to the presentation of other comprehensive income ("OCI"). The amendments to this standard do not change the nature of the items that are currently recognized in OCI, but requires presentational changes. Management is currently evaluating the impact that this standard will have on the consolidated financial statements. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements.

In the annual period beginning September 1, 2013, the Company will be required to adopt IAS 19 (Amendment), Employee Benefits , which revises recognition and measurement of post-employment benefits. This amended standard will modify accounting for termination benefits, including distinguishing benefits provided in exchange for service and benefits provided in exchange for the termination of employment and affect the recognition and measurement of termination benefits. The impact, if any, that this amended standard will have on the Company’s consolidated financial statements is not determinable at this time.

NOTE 3 – ACCOUNTS RECEIVABLE

Accounts receivable consisted of the following at August 31, 2012, August 31, 2011 and September 1, 2010:

	August 31, 2012			August 31, 2011			September 1, 2010

Trade receivables	$	9,623,495		$	9,427,911		$	10,759,227
Less: allowance for bad debts		(999,352	)		(914,358	)		(451,691	)
KGIC purchase price adjustment receivable		-			-			700,000
Other		-			-			216,358

	$	8,624,143		$	8,513,553		$	11,223,894

Aging of past due but not impaired	August 31, 2012		August 31, 2011		September 1, 2010

30 to 60 days	$	616,979	$	1,276,880	$	1,063,935
60 to 90 days		145,849		849,972		464,077

	$	762,828	$	2,126,852	$	1,528,012

Movement in the allowance for doubtful accounts	August 31, 2012			August 31, 2011

Beginning balance	$	914,358		$	451,691
Additions		879,723			1,243,943
Amounts written off during the year as uncollectible		(696,953	)		(781,276	)
Amounts recovered during the year		(97,776	)		-

Ending balance	$	999,352		$	914,358

NOTE 4 – MARKETABLE SECURITIES

At August 31, 2011 and September 1, 2010, marketable securities consist of 5,862,824 common shares, representing approximately 7% of NextMart Inc. (previously Sun New Media Inc., and formerly SEG) (“NextMart”). As at August 31, 2011, the Company determined that the market value of the securities was impaired therefore, the Company recorded a loss in available-for-sale NextMart shares of $60,000.

F-16

CIBT EDUCATION GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

EXPRESSED IN CANADIAN DOLLARS

AUGUST 31, 2012

NOTE 4 – MARKETABLE SECURITIES (cont'd)

The components of the Company’s investment in NextMart and the market price of the NextMart shares are as follows:

August 31, 2012 and August 31, 2011

September 1, 2010

Number of Shares

Carrying Value

Number of Shares

Carrying Value

Available-for-sale securities

5,862,824

60,000

Market price

2011 - US$0.01 per share *

2012 – no market data available

US$0.01 per share *

* Share price rounded to two decimal places

NOTE 5 – PROPERTY AND EQUIPMENT

	Furniture and equipment			Leasehold improvements			Equipment under finance lease			Total

Cost

September 1, 2010	$	3,725,295		$	2,805,483		$	524,524		$	7,055,302
Additions		364,537			132,848			153,325			650,710
Disposals		(265,319	)		(38,565	)		(115,753	)		(419,637	)
Foreign exchange adjustments		(2,852	)		(6,892	)		-			(9,744	)

August 31, 2011		3,821,661			2,892,874			562,096			7,276,631
Additions		576,368			1,042,425			469,702			2,088,495
Disposals		(154,928	)		(168,277	)		(84,639	)		(407,844	)
Foreign exchange adjustments		4,673			527			-			5,200

August 31, 2012	$	4,247,774		$	3,767,549		$	947,159		$	8,962,482

Depreciation and impairment loss

September 1, 2010	$	(1,795,625	)	$	(1,634,967	)	$	(205,857	)	$	(3,636,449	)
Depreciation for the year		(524,372	)		(586,470	)		(79,555	)		(1,190,397	)
Impairment loss		(128,526	)		-			-			(128,526	)
Disposals		241,281			4,568			61,365			307,214
Foreign exchange adjustments		2,776			569			-			3,345

August 31, 2011		(2,204,466	)		(2,216,300	)		(224,047	)		(4,644,813	)
Depreciation for the year		(515,481	)		(503,495	)		(97,629	)		(1,116,605	)
Disposals		116,092			133,916			68,489			318,497
Foreign exchange adjustments		(246	)		(145	)		-			(391	)

August 31, 2012	$	(2,604,101	)	$	(2,586,024	)	$	(253,187	)	$	(5,443,312	)

Net carrying amounts

At September 1, 2010	$	1,929,670		$	1,170,516		$	318,667		$	3,418,853

At August 31, 2011	$	1,617,195		$	676,574		$	338,049		$	2,631,818

At August 31, 2012	$	1,643,673		$	1,181,525		$	693,972		$	3,519,170

As a result of declining revenues and income stemming from the Company’s business operations in Beijing, China, and the non-renewal of the Beijing University of Technology (“BJUT”) agreement, the Company recorded an impairment charge of $128,526 for the carrying value of furniture and equipment relating to the Company’s business operations in Beijing, China as at August 31, 2011.

F-17

CIBT EDUCATION GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

EXPRESSED IN CANADIAN DOLLARS

AUGUST 31, 2012

NOTE 6 – INTANGIBLE ASSETS

Total intangible assets	August 31, 2012		August 31, 2011		September 1, 2010

Intangible assets with definite life	$	4,195,533	$	4,118,168	$	4,191,744
Intangible assets with indefinite life		8,052,993		8,052,993		11,534,340

Total intangible assets	$	12,248,526	$	12,171,161	$	15,726,084

Intangible assets with definite life	Agreements and contracts			Curriculum			Foreign cooperative agreements			Agency fees			Total

Cost

September 1, 2010	$	348,333		$	2,912,000		$	2,268,714		$	900,967		$	6,430,014
Additions		-			65,041			-			1,231,963			1,297,004
Disposals		-			-			-			-			-
Foreign exchange adjustments		-			-			(3,226	)		-			(3,226	)

August 31, 2011		348,333			2,977,041			2,265,488			2,132,930			7,723,792
Additions		-			229,106			-			1,539,444			1,768,550
Disposals		-			-			(1,048,000	)		-			(1,048,000	)
Foreign exchange adjustments		-			-			9,770			-			9,770

August 31, 2012	$	348,333		$	3,206,147		$	1,227,258		$	3,672,374		$	8,454,112

Accumulated amortization

September 1, 2010	$	(203,813	)	$	(400,800	)	$	(1,633,657	)	$	-		$	(2,238,270	)
Amortization		(64,153	)		(223,750	)		(179,275	)		(900,967	)		(1,368,145	)
Disposals		-			-			-			-			-
Foreign exchange adjustments		-			-			791			-			791

August 31, 2011		(267,966	)		(624,550	)		(1,812,141	)		(900,967	)		(3,605,624	)
Amortization		(60,264	)		(245,520	)		(159,071	)		(1,231,963	)		(1,696,818	)
Disposals		-			-			1,048,000			-			1,048,000
Foreign exchange adjustments		-			-			(4,137	)		-			(4,137	)

August 31, 2012	$	(328,230	)	$	(870,070	)	$	(927,349	)	$	(2,132,930	)	$	(4,258,579	)

Net carrying amounts

At September 1, 2010	$	144,520		$	2,511,200		$	635,057		$	900,967		$	4,191,744

At August 31, 2011	$	80,367		$	2,352,491		$	453,347		$	1,231,963		$	4,118,168

At August 31, 2012	$	20,103		$	2,336,077		$	299,909		$	1,539,444		$	4,195,533

Weighted average remaining useful life at August 31, 2012	0.33 years			9.44 years			5.16 years			0.99 years			3.52 years

Amortization of agency fees of $1,231,963 (2011 - $900,967) are presented in the statements of loss as Educational Direct Costs.

F-18

CIBT EDUCATION GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

EXPRESSED IN CANADIAN DOLLARS

AUGUST 31, 2012

NOTE 6 – INTANGIBLE ASSETS (cont'd)

Intangible assets with indefinite life
	Accreditations and registrations		Brand-names and trade-names		Chinese university agreements			Total

Cost

September 1, 2010	$	2,706,000	$	4,886,000	$	3,942,340		$	11,534,340
Impairment loss (Note 8)		-		-		(3,481,347	)		(3,481,347	)

August 31, 2011		2,706,000		4,886,000		460,993			8,052,993

August 31, 2012	$	2,706,000	$	4,886,000	$	460,993		$	8,052,993

NOTE 7 – GOODWILL

Goodwill consisted of the following at August 31, 2012, August 31, 2011 and September 1, 2010:

	August 31, 2012		August 31, 2011			September 1, 2010

Beginning balance	$	8,335,791	$	10,623,696		$	6,634,875
Additions during the year		150,000		-			3,988,821
Impairments during the year (Note 8)		-		(2,287,905	)		-

Ending balance	$	8,485,791	$	8,335,791		$	10,623,696

Allocation by cash-generating units or group of cash generating units is as follows:

	August 31, 2012		August 31, 2011		September 1, 2010

CIBT China (Note 8)		-		-		2,287,905
Sprott-Shaw Degree College Corp.		4,793,303		4,793,303		4,793,303
KGIC Language College Corp.		3,692,488		3,542,488		3,542,488

	$	8,485,791	$	8,335,791	$	10,623,696

F-19

CIBT EDUCATION GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

EXPRESSED IN CANADIAN DOLLARS

AUGUST 31, 2012

NOTE 8 – IMPAIRMENT OF INTANGIBLE ASSETS AND GOODWILL

During the three months ended May 31, 2011, the Company received notification from the BJUT that the agreement between the Company and BJUT would not be renewed. Up to this date, the Company was in discussions with BJUT on the renewal of the agreement which historically was not an issue. Accordingly, the Company recorded an impairment charge totalling $3,481,347 to the carrying value of intangible assets not subject to amortization (Note 6). The impairment charge is specific to the carrying amount of the intangibles relating to the Beijing University agreement and related ancillary agreements, which forms part of the Chinese university agreements and contracts included in intangible assets not subject to amortization. The Company also recorded a goodwill impairment of $2,287,905 for the goodwill during the three months ending May 31, 2011 from the impact of the BJUT agreement on future cash flows for the CIBT China group of CGUs (Note 7).

As at August 31, 2012 and August 31, 2011, the Company performed their annual impairment test on goodwill and indefinite lived intangible assets and concluded that the carrying value of goodwill and indefinite-lived intangible assets recorded as of that date was recoverable. Value in use was determined by discounting the future cash flows generated from the continuing use of the cash-generating units. Value in use as at August 31, 2012 was determined on a consistent basis with the prior period.

NOTE 9 – DEFERRED OFFERING COSTS

In connection with the Company’s planned financing by way of a registered offering of common shares, the Company filed a prospectus with the Securities and Exchange Commission on July 15, 2010. Direct costs totalling $600,252 were incurred in connection with the preparation and filing of the prospectus. On September 20, 2010, as a result of market conditions at the time, the Company withdrew the prospectus. The Company planned to re-file the prospectus, however, as a result of the delay and the need to update the prospectus on re-filing, the Company expensed $200,000 of the deferred offering costs, leaving a balance of $400,252 as at August 31, 2010.

Due to further delays with the planned financing during the year ended August 31, 2011, the Company expensed $510,711 of the deferred offering costs, leaving a nil balance as at August 31, 2011. Deferred offering costs consisted of the following at August 31, 2012, August 31, 2011 and September 1, 2010:

	August 31, 2012		August 31, 2011			September 1, 2010

Beginning balance	$	-	$	400,252		$	-
Additions during the year		-		110,459			600,252
Expensed during the year		-		(510,711	)		(200,000	)

Ending balance	$	-	$	-		$	400,252

NOTE 10 – ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts payable and accrued liabilities consisted of the following at August 31, 2012, August 31, 2011 and September 1, 2010:

	August 31, 2012		August 31, 2011		September 1, 2010

Trade accounts payable	$	3,033,474	$	2,215,833	$	2,704,039
Payroll and related liabilities		1,235,004		1,509,262		1,579,398
Purchase price payable		-		-		436,333
Tuition fees and grants payable		300,363		215,518		74,017
Others		126,749		204,999		213,400

	$	4,695,590	$	4,145,612	$	5,007,187

F-20

CIBT EDUCATION GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

EXPRESSED IN CANADIAN DOLLARS

AUGUST 31, 2012

NOTE 11 – PROVISIONS

The Company’s provisions are for onerous contracts and legal claims and severances. The provision for onerous contracts represents the present value of the future lease payments that the Company is presently obligated to make under non-cancellable onerous operating lease contracts, less contractual sublease revenues to be earned on the lease, where applicable. The provision may vary as a result of changes in the utilization of the leased premises and sub-lease arrangements where applicable. The unexpired terms of the leases range from three to 22 months.

Details of changes in the Company’s provisions balance are as follows:

	Onerous leases			Legal claims and severance			Total

Balance, August 31, 2010	$	122,188		$	-		$	122,188

Additional provisions recognized		117,644			338,924			456,568
Reductions arising from payments		(757	)		-			(757	)
Increase resulting from accretion of provision		4,548			-			4,548
Unwinding of discount and effect of changes in discount rate		5,091			-			5,091

Balance, August 31, 2011		248,714			338,924			587,638

Additional provisions recognized		1,548			262,788			264,336
Reductions arising from payments		-			(338,924	)		(338,924	)
Reductions resulting from accretion of provision		(82,064	)		-			(82,064	)
Unwinding of discount and effect of changes in discount rate		(3,172	)		-			(3,172	)

Balance, August 31, 2012	$	165,026		$	262,788		$	427,814

F-21

CIBT EDUCATION GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

EXPRESSED IN CANADIAN DOLLARS

AUGUST 31, 2012

NOTE 12 – LONG-TERM DEBT AND FINANCE LEASE OBLIGATIONS

Long-term debt

The carrying value of debt in SSDC is as follows:

	August 31, 2012			August 31, 2011			September 1, 2010

Demand term instalment loan, payable in monthly instalments of $50,000 plus interest at the prime rate plus 2%, due February 2015	$	1,550,000		$	2,150,000		$	2,750,000
Promissory note payable at $460 per month including interest at 8.5% per annum, unsecured, due October 2013		34,232			36,724			39,013
Promissory note payable at $505 per month including interest at 8% per annum, unsecured, due June 2011		-			-			4,875

		1,584,232			2,186,724			2,793,888
Less: current portion		(1,552,712	)		(2,152,492	)		(2,757,164	)

	$	31,520		$	34,232		$	36,724

In addition, SSDC has a demand operating credit facility available in the amount of $1,500,000 with interest calculated at the prime rate plus 2%. As at August 31, 2012, the demand operating facility was not utilized.

The demand operating credit facility and the demand term instalment loan is secured as follows:

●	first priority security interest in the assets of SSDC

●	assignment of fire and perils insurance on the property of SSDC

●	guarantee from KGIC on the bank indebtedness of SSDC

●	postponement of claims from the Company on advances to SSDC

The debt covenants, calculated using SSDC’s financial statements, of the demand term instalment loan are as follows:

●	the senior debt to earnings before interest, taxes, depreciation and amortization not to exceed 1.75 to 1.0 at any time

●	the adjusted current ratio is not less than 1.75 to 1.0 at any time

●	the adjusted fixed charge coverage ratio is not less than 1.2 to 1.0 at any time

The adjusted current ratio and the adjusted fixed charge coverage ratio are defined in accordance with the agreement between SSDC and the banking facility. As at August 31, 2012, none of the debt covenants have been violated, and the demand term instalment loan remains in good standing.

F-22

CIBT EDUCATION GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

EXPRESSED IN CANADIAN DOLLARS

AUGUST 31, 2012

NOTE 12 – LONG-TERM DEBT AND FINANCE LEASE OBLIGATIONS (cont’d)

Finance lease obligations

The Company has classified certain leases for equipment as finance leases on the basis that the lease term represents the major portion of the asset’s economic life and the minimum lease payments over the term of the lease amount to substantially all of the estimated fair value of the asset. The estimated future annual minimum lease payments for these assets are as follows:

	Minimum lease payments									Present value of minimum lease payments

	August 31, 2012			August 31, 2011			September 1, 2010			August 31, 2012		August 31, 2011		September 1, 2010

Not later than one year	$	221,990		$	133,068		$	147,257		$	167,902	$	101,765	$	118,098
Later than one year and not later than five years		666,905			289,846			262,441			575,456		249,132		222,810
Later than five years		-			-			-			-		-		-

		888,895			422,914			409,698			743,358		350,897		340,908
Less: future finance charges		(145,537	)		(72,017	)		(68,790	)		-		-		-

Present value of minimum lease payments		743,358			350,897			340,908		$	743,358	$	350,897	$	340,908

Less: current portion		(167,902	)		(101,765	)		(118,098	)

	$	575,456		$	249,132		$	222,810

NOTE 13 – SHARE CAPITAL

Authorized shares

Authorized share capital consists of 150,000,000 common shares without par value.

For the year ended August 31, 2011, the Company completed (in two tranches) a private placement of 2,723,333 units at $0.30 per unit for total proceeds of $817,000. Each unit consists of one common share and one share purchase warrant entitling the holder to purchase one additional common share of the Company at a price of $0.35 per share for a period of three years from the date of issuance. The first tranche of the private placement, consisting of 1,690,000 units, closed on June 29, 2011. On the first tranche, the Company incurred a finders’ fee consisting of a cash commission of $10,050 and finder’s warrants, exercisable for three years, entitling the holder to purchase 33,500 common shares at a price of $0.35 per share. The second tranche of the private placement, consisting of 1,033,333 units, closed on July 11, 2011. No finders’ fee was incurred for the second tranche.

F-23

CIBT EDUCATION GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

EXPRESSED IN CANADIAN DOLLARS

AUGUST 31, 2012

NOTE 13 – SHARE CAPITAL (cont'd)

Share purchase warrants

At August 31, 2012, the Company has 1,723,500 share purchase warrants outstanding exercisable at a price of $0.35 per share exercisable to June 29, 2014, and 1,033,333 share purchase warrants outstanding exercisable at a price of $0.35 per share exercisable to July 11, 2014.

The Company’s share purchase warrant activity is summarized as follows:

	Number of Warrants	Weighted Average Exercise Price ($)	Weighted Average Remaining Life

Balance, September 1, 2010	210,000	0.70	0.18 years

- warrants issued during the year	2,756,833	0.35
- warrants expired during the year	(210,000)	0.70

Balance, August 31, 2011	2,756,833	0.35	2.84 years

There was no share purchase warrant activity during the year ended August 31, 2012.

Details of share purchase warrants outstanding and exercisable as at August 31, 2012 are as follows:

Number of Warrants	Exercise Price	Expiry Date	Remaining Contractual Life

1,723,500	$0.35	June 29, 2014	1.85 years
1,033,333	$0.35	July 11, 2014	1.86 years

2,756,833

The fair value of each warrants granted is estimated at the time of the grant using the Black-Scholes option pricing model with weighted average assumptions for grants as follows:

	August 31, 2011			September 1, 2010

Exercise price	$	0.35		$	0.70
Expected dividend yield		0.00	%		0.00	%
Expected volatility		79.6	%		82.9	%
Risk-free interest rate		1.86	%		0.57	%
Expected life	3 years			1 year

F-24

CIBT EDUCATION GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

EXPRESSED IN CANADIAN DOLLARS

AUGUST 31, 2012

NOTE 13 – SHARE CAPITAL (cont'd)

Stock options

The Company has stock options outstanding to certain employees, officers and directors providing the right to purchase up to 4,533,000 shares at prices ranging from $0.24 per share to $0.80 per share exercisable for periods ending from May 3, 2013 to January 6, 2017.

The Company has in place a rolling stock option plan (the “Plan”) whereby a maximum of 10% of the issued and outstanding shares of the Company, from time to time, may be reserved for issuance pursuant to the exercise of options. The material terms of the Plan are as follows:

●	The term of any options granted under the Plan is fixed by the board of directors at the time the options are granted, to a maximum term of five years.

●	The exercise price of any options granted under the Plan is determined by the board of directors, but shall not be less than the last closing price on the TSX Exchange of the Company’s common shares preceding the grant of such options, less any permitted discount.

●	Unless otherwise imposed by the board of directors, no vesting requirement applies to options granted under the Plan but a four month hold period, commencing from the date of grant of an option, applies to all shares issued upon exercise of an option.

●	All options granted under the Plan are non-assignable and non-transferable.

●	If an option holder ceases to hold a position with the Company in which the option holder would be eligible to be granted an option (other then by reason of death), then the option granted shall expire on the 30 th day following the date that the option holder ceases to hold any such position.

The Company’s stock option activity is summarized as follows:

	Number of Options	Weighted Average Exercise Price ($)	Weighted Average Remaining Life

Balance, August 31, 2010	3,965,000	1.22	1.10 years

- options granted during the year	1,365,000	0.43
- options expired during the year	(2,465,000)	1.16

Balance, August 31, 2011	2,865,000	0.91	2.49 years

- options granted during the year	3,058,000	0.24
- options expired during the year	(1,390,000)	1.39

Balance, August 31, 2012	4,533,000	0.31	3.96 years

Details of options outstanding as at August 31, 2012 are as follows:

Number of Options	Exercise Price	Expiry Date	Remaining Contractual Life

60,000	$0.80	May 3, 2013	0.67 years
50,000	$0.60	August 8, 2013	0.94 years
100,000	$0.54	October 13, 2013	1.12 years
1,265,000	$0.42	March 1, 2016	3.50 years
3,058,000	$0.24	January 6, 2017	4.35 years

4,533,000

F-25

CIBT EDUCATION GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

EXPRESSED IN CANADIAN DOLLARS

AUGUST 31, 2012

NOTE 13 – SHARE CAPITAL (cont'd)

Share-based payment

Date Granted	Shares Granted	Exercise Price	Fair Value	Vesting Period

May 3, 2010	80,000	$0.80	$32,000	Vesting on grant date
August 9, 2010	50,000	$0.60	$15,000	Vesting on grant date
October 14, 2010	100,000	$0.54	$26,000	20% vesting on grant and 20% at end of 12, 24, 36 and 48 months
March 1, 2011	1,265,000	$0.42	$278,300	20% vesting on grant and 20% at end of 12, 24, 36 and 48 months
January 6, 2012	3,058,000	$0.24	$225,068	25% vesting on grant and 25% at end of each of 12, 24 and 36 months

The fair value of these options is estimated at the time of the grant using the Black-Scholes option pricing model with weighted average assumptions per grant for the years ended as follows:

	August 31, 2012			August 31, 2011

Expected life	3.50 years			4.85 years
Risk-free interest rate		1.07	%		2.52	%
Expected dividend yield		0.00	%		0.00	%
Expected volatility *		63.46	%		66.99	%

* Expected volatility assumptions used in the Black-Scholes option pricing models are based on historical average trading prices of the Company’s commons shares.

NOTE 14 – TREASURY SHARES

In accordance with TSX Exchange approval and the provisions of a normal course issuer bid, the Company from time to time acquires its own common shares into treasury.

Commencing February 15, 2012, and amended May 14, 2012, the Company received approval from the TSX to a normal course issuer bid to purchase for re-sale up to 3,000,000 (originally 725,000) of the Company’s common shares to a maximum aggregate acquisition cost of $1,000,000. As at August 31, 2012, a total of 3,813,024 common shares with an accumulated cost of $3,631,510 have been recorded as treasury shares held.

Details of changes in the Company’s treasury shares balance are as follows:

	Number		Value

Balance, August 31, 2010		2,399,024	$	3,273,790

Purchases of treasury shares		101,000		30,265

Balance, August 31, 2011		2,500,024		3,304,055

Purchases of treasury shares		1,313,000		327,455

Balance, August 31, 2012		3,813,024	$	3,631,510

F-26

CIBT EDUCATION GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

EXPRESSED IN CANADIAN DOLLARS

AUGUST 31, 2012

NOTE 15 – FINANCIAL INSTRUMENTS

The carrying value of cash and cash equivalents approximate their fair values due to the immediate or short-term nature of these instruments. The fair value of the Company’s marketable securities is based on quoted prices in an active market, a Level 1 valuation methodology.

The following table sets forth the Company’s financial assets and liabilities measured at fair value by level within the fair value hierarchy. As required by the guidance, assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

	Fair Value at August 31, 2012

	Total		Level 1		Level 2		Level 3

Assets:
Cash and cash equivalents	$	7,964,476	$	7,964,476	$	-	$	-

	Fair Value at August 31, 2011

	Total		Level 1		Level 2		Level 3

Assets:
Cash and cash equivalents	$	6,456,568	$	6,456,568	$	-	$	-

	Fair Value at September 1, 2010

	Total		Level 1		Level 2		Level 3

Assets:
Cash and cash equivalents	$	11,511,835	$	11,511,835	$	-	$	-
Marketable securities	$	60,000	$	60,000	$	-	$	-

NOTE 16 – INCOME TAXES

The Company’s operations are subject to income taxes primarily in Canada and China. Income tax provision (recovery) in these consolidated financial statements relates to CIBT’s domestic operations in China and to SSDC’s and KGIC’s domestic operations in Canada.

Statutory tax rates	2012			2011

China		25.00	%		25.00	%
Canada		25.50	%		27.17	%

F-27

CIBT EDUCATION GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

EXPRESSED IN CANADIAN DOLLARS

AUGUST 31, 2012

NOTE 16 – INCOME TAXES (cont’d)

The following table is a reconciliation of income tax expense (recovery), at the Canadian income tax rate and the amount of reported income tax expense in the Statements of Loss.

	Year Ended August 31, 2012			Year Ended August 31, 2011

Loss before taxes	$	(695,441	)	$	(10,306,426	)
Statutory Canadian income tax rate		25.50	%		27.17	%

Income tax recovery at statutory rate		(177,337	)		(2,800,256	)
Effect of differences in foreign tax rates		2,154			23,908
Non-deductible expenses, net		43,656			(33,200	)
Write-off of goodwill		-			697,119
Effect of differences between current year rate and rates used to measure deferred income taxes		-			115,002
Effect of differences in prior period tax returns as filed		46,266			(12,407	)
Change in deferred tax assets not recognized		281,652			1,338,628
Other		(77,945	)		(172,299	)

Income tax expense (recovery)	$	118,446		$	(843,505	)

Consisting of:
Current tax expense (recovery)	$	30,155	$	(14,943	)
Deferred tax expense (recovery)		88,291		(828,562	)

	$	118,446	$	(843,505	)

Effective January 1, 2011, the Canadian Federal corporate tax rate decreased from 18% to 16.5% and the British Columbia provincial tax decreased from 10.5% to 10%.

Effective January 1, 2012, the Canadian Federal corporate tax rate decreased from 16.5% to 15%. The overall reduction in tax rates has resulted in a decrease in the Company's statutory tax rate from 27.17% to 25.50%.

F-28

CIBT EDUCATION GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

EXPRESSED IN CANADIAN DOLLARS

AUGUST 31, 2012

NOTE 16 – INCOME TAXES (cont'd)

The following table shows deferred income taxes resulting from temporary differences between the carrying amounts of assets and liabilities for accounting purposes and the amount used for tax purposes, as well as tax loss carry-forwards.

	Year Ended August 31, 2012			Year Ended August 31, 2011

Deferred income tax assets
Canada
Non-capital loss carry-forwards	$	2,744,506		$	2,639,053
Share issuance costs		70,148			117,181
Property and equipment		9,569			9,446
Intangible assets		2,534			2,534
Reserves		41,257			63,247
Net capital losses		6,146			6,146
China
Property and equipment		5,105			5,249

Total deferred income tax assets	$	2,879,264		$	2,842,856

Deferred tax liabilities
Canada
Property and equipment	$	(24,673	)	$	(24,113	)
Goodwill and intangible assets		(2,626,885	)		(2,502,602	)
China
Property and equipment		(5,105	)		(5,249	)
Intangible assets		(115,248	)		(115,248	)

Total deferred income tax liabilities	$	(2,771,911	)	$	(2,647,212	)

Classified as:
Deferred tax assets, net	$	2,299,061		$	2,262,377
Deferred tax liabilities, net		(2,191,708	)		(2,066,733	)

Net deferred tax assets	$	107,353		$	195,644

Deductible temporary differences and unused tax losses for which a future benefit has not been recognized as a deferred tax asset include the following:

	August 31, 2012		August 31, 2011

Non-capital loss carry-forwards	$	5,945,705	$	5,064,413
Net capital loss carry-forwards		1,007,496		1,007,496
Investments		1,593,918		1,593,918
Property and equipment		98,252		194,961
Intangible assets		15,729		9,334

	$	8,661,100	$	7,870,122

The Company has income tax loss carry-forwards of $3,737,306 (2011 - $3,573,176) for Canadian tax purposes. These unrecognized tax losses will expire between 2014 to 2032.

The Company has net capital loss carry-forwards of $1,007,496 (2011 - $1,007,496) for Canadian tax purposes. These unrecognized tax losses are carried forward indefinitely.

The Company has income tax loss carry-forwards of $1,826,967 (2011 - $1,491,237) for China tax purposes. These unrecognized tax losses will expire between 2015 to 2017.

The Company has income tax loss carry-forwards of $381,432 for Philippines tax purposes. These unrecognized tax losses will expire between 2014 to 2015.

F-29

CIBT EDUCATION GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

EXPRESSED IN CANADIAN DOLLARS

AUGUST 31, 2012

NOTE 16 – INCOME TAXES (cont'd)

The Company has recognized $2,257,762 (2011 - $2,257,833) of deferred tax assets that are dependent on future taxable profits in excess of the profits arising from the reversal of existing taxable differences. In addition the Company has suffered a loss in the current and prior period in the tax jurisdictions to which the deferred tax assets relate. The Company has undertaken tax planning in the current and prior period which increases future taxable income and supports recognition of the deferred tax asset.

NOTE 17 – COMMITMENTS

CIBT entered into a lease agreement on behalf of the Company for the Company’s corporate office space in Vancouver, B.C., as renewed, for a 60 month term (from November 1, 2009 to October 31, 2014). Under the renewed lease agreement the minimum annual rate for the term of the lease is $88,150 for the first three years and $91,676 for the final two years plus taxes and operating costs. CIBT’s subsidiaries in China entered into various lease agreements. Both SSDC and KGIC are committed to payments consisting of office and campus premises rental and operating leases for equipment.

	Corporate (Canada)		CIBT (China)		SSDC		KGIC		Total

Not later than one year	$	91,088	$	130,945	$	1,233,197	$	2,391,809	$	3,847,039
Later than one year and not later than five years		106,956		136,088		2,556,547		5,641,146		8,440,737
Later than five years		-		-		-		-		-
	$	198,044	$	267,033	$	3,789,744	$	8,032,955	$	12,287,776

NOTE 18 – RISK MANAGEMENT

The Company is engaged in operations in the People’s Republic of China (“PRC”) and accordingly is exposed to political and economic risks associated with investing in the PRC as well as related industry risks. The Company is engaged primarily in service related industries. The Company generates revenues from multiple sources and from a broad customer/client base and accordingly is not exposed to significant credit concentration risk. The Company is not exposed to significant interest rate risk.

The Company conducts business in Canada, the United States, China and Hong Kong giving rise to significant exposure to market risks from changes in foreign currency rates. The financial risk is the risk to the Company's operations that arises from fluctuations in foreign exchange rates and the degree of volatility of these rates. Currently, the Company does not use derivative instruments or other measures to reduce its exposure to foreign currency risk. In addition, the Company is exposed to Chinese currency fluctuations and restrictions on Chinese currency exchange, which may affect the Company’s ability to repatriate profits from China.

Exchange rate risk

The Company operates in Canada and China, and through its subsidiaries in China the Company generates revenues in Chinese RMB and incurs operating costs which are payable in Chinese RMB, giving rise to exposure to market risks from changes in foreign currency rates. The Company also holds minor amount of cash in US dollars, the exchange rate fluctuation between Canadian dollar and US dollar will not have a material impact on net income. As at August 31, 2012, the Company had a net working capital asset of 14,452,281 RMB or C$2,261,349 (August 31, 2011 – 14,767,581 RMB or C$2,267,401). Each 10% strengthening of the Canadian dollar against the RMB would decrease the value of net working capital by C$205,577 (August 31, 2011 – $206,127).

Capital control exists in the People’s Republic of China. China still has many restrictions on the movement of money in and out of the country for anything except payments associated with exports and imports. At present, a company can repatriate up to 90 percent of profits from their China-based operations. A portion (at least 10 percent for Wholly Owned Foreign Entities), must be placed in a reserve account. This reserve is capped at 50 percent of a company’s registered capital. To distribute the remainder, a company must obtain a board resolution authorizing distribution and file an application with China’s State Administration of Taxation (“SAT”) that includes an annual audit, tax receipts and other documents as required. SAT will then issue a Foreign Enterprise Income Tax Payment Certificate which will enable the bank to exchange.

F-30

CIBT EDUCATION GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

EXPRESSED IN CANADIAN DOLLARS

AUGUST 31, 2012

NOTE 18 – RISK MANAGEMENT (cont'd)

Exchange rate risk (cont’d)

Chinese RMB into the desired currency for remission of funds. As of August 31, 2012, the amount in the statutory reserve in China is $Nil.

Credit risk

The financial instruments that potentially subject the Company to significant concentration of credit risk consist principally of cash and cash equivalents and accounts receivable. Cash is on deposit at major financial institutions. Management is of the opinion that credit risk with respect to accounts receivable is limited due to the ongoing evaluations of its debts and the monitoring of their financial condition to ensure collections and to minimize losses. Accounts receivable as at August 31, 2012 is reported net of allowance for bad debts of $999,352 (August 31, 2011 – $914,358; September 1, 2010 – $451,691). The carrying amount of the assets included on the statement of financial position represents the maximum credit exposure.

Interest rate risk

The Company is exposed to interest rate risk on its cash and cash equivalents which earn interest at market rates, and is exposed to interest rate risk on its demand term instalment loan. A one point increase in the prime rate of interest would add approximately $30,000 of interest cost per annum to the demand term instalment loan.

Liquidity risk

The Company is exposed to liquidity risk in that the Company will not have sufficient cash resources to meet its financial obligations as they come due in the normal course of business. The Company manages its liquidity risk by monitoring its operating requirements. As at August 31, 2012, the Company had $7,964,476 (August 31, 2011 – $6,456,568; September 1, 2010 – $11,511,835) of cash and cash equivalents. In addition, the Company has a demand operating credit facility of $1,500,000. The Company could look to capital financing which has it successfully raised in the past. However, there is no assurance that such financing will be available on favourable terms. Management prepares budgets and cash forecasts to ensure that the Company has sufficient funds to fulfill its financial obligations. CIBT is currently in a working capital deficit position, however the Company has positive cash balances as discussed above and realized positive cash flows from operating activities of $6,349,881 which supports the Company’s ability to cover its current operating needs.

The following table summarizes the obligations of the Company’s financial liabilities and operating commitments as at August 31, 2012:

	Not later than one year		Later than one year and not later than five years		Later than five years		Total

Accounts payable and accrued liabilities	$	4,695,590	$	-	$	-	$	4,695,590
Provisions		427,814		-		-		427,814
Income taxes payable		523,654		-		-		523,654
Finance leases (including interest)		221,990		666,905		-		888,895
Long-term debt (including interest)		1,639,342		31,520		-		1,670,862
Operating leases		3,847,039		8,365,796		74,941		12,287,776
	$	11,355,429	$	9,064,221	$	74,941	$	20,494,591

NOTE 19 – CAPITAL DISCLOSURES

The Company’s objectives in managing capital are to safeguard the Company’s normal operating requirements on an ongoing basis and to ensure sufficient liquidity to conduct its strategy of organic growth in conjunction with strategic acquisitions, and to utilize capital to provide an appropriate return on investment to its shareholders. The Company’s overall capital strategy remains unchanged from the prior periods. The capital structure of the Company consists of shareholders’ equity excluding NCI (August 31, 2012 - $15,837,918 ; August 31, 2011 - $17,154,870 ; September 1, 2010 - $26,134,402) and debt (August 31, 2012 - $1,584,232 ; August 31, 2011 - $2,186,724 ; September 1, 2010 - $2,793,888). The Company manages and adjusts its capital structure in light of economic conditions and the risk characteristics of the underlying assets. The Company monitors its capital using various financial ratios and non-financial performance indicators. The Company’s primary uses of capital are to finance working capital requirements, capital expenditures and acquisitions. The Company must comply, and is in compliance, with certain financial ratio requirements in connection with the long-term debt as at August 31, 2012 (refer to Note 12).

F-31

CIBT EDUCATION GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

EXPRESSED IN CANADIAN DOLLARS

AUGUST 31, 2012

NOTE 20 – GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative expenses are comprised of the following:

	Year Ended August 31, 2012		Year Ended August 31, 2011

Advertising	$	4,476,533	$	5,685,557
Bank charges and interest		386,937		395,050
Consulting and management fees		1,949,316		1,964,726
Directors insurance		27,500		45,439
Investor relations		126,968		99,062
Office and general		3,546,396		4,538,292
Professional fees		1,457,404		1,369,960
Regulatory fees		110,675		134,665
Rent		5,757,553		6,219,394
Salaries and benefits		11,416,396		12,031,267
Travel and promotion		342,678		375,120

	$	29,598,356	$	32,858,532

NOTE 21– NET CHANGES IN NON-CASH WORKING CAPITAL ITEMS

Net changes in non-cash working capital items are comprised of the following:

	Year Ended August 31, 2012			Year Ended August 31, 2011

Accounts receivable	$	(110,590	)	$	2,733,063
Prepaid expenses		(63,499	)		423,206
Inventory		130,212			(63,371	)
Accounts payable and accrued liabilities		549,978			(746,855	)
Provision		(159,824	)		465,450
Income taxes payable		23,749			(19,172	)
Deferred educational revenues		3,562,490			(3,917,774	)

	$	3,932,516		$	(1,125,453	)

The working capital items have been adjusted for the effects of non-cash changes and unrealized foreign exchange changes.

F-32

CIBT EDUCATION GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

EXPRESSED IN CANADIAN DOLLARS

AUGUST 31, 2012

NOTE 22 – RELATED PARTY TRANSACTIONS

Significant transactions between the Company and the following related parties:

	August 31, 2012		August 31, 2011		September 1, 2010

Accounts receivable - Weifang University (1)	$	2,922,580	$	2,592,660	$	1,547,344
Accounts payable - Weifang University (1)	$	1,060,700	$	1,103,538	$	135,814
Due to officers, employees and directors (2)	$	38,917	$	59,484	$	118,303
Due from officers, employees and directors (3)	$	62,500	$	100,000	$	143,721

CIBT has a business venture with Weifang University with a 60% interest in Beihai College. Beihai College is a PRC government approved college which has been in operation since 2002. Effective July 1, 2007, the Chinese Government implemented a new cash management policy affecting Beihai College. The tuition fees of Beihai College are required to be directly remitted to the local Chinese Government when tuition fees are received, and the funds are held by the Chinese Government under the account of Weifang. Beihai College can receive funds for its operations from Weifang on an as-needed basis up to the amount of the tuition fees collected.

As of August 31, 2012, the amount due to officers, employees and directors is comprised of $966 (August 31, 2011 – $13,222; September 1, 2010 – $38,014) due to officers of the Company and $37,951 (August 31, 2011 – $46,262; September 1, 2010 – $80,289) due to the President of IRIX. These amounts are non-interest bearing and have no fixed terms of repayment. Transactions with related party are in the normal course of operations and are measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties. Such amounts are included as part of the cash flows from operating activities in the Consolidated Statements of Cash Flow.

As at August 31, 2012, $62,500 was due from a director of the Company. As at August 31, 2011, a balance of $100,000 was due from the director of the Company. The amount is included as part of the cash flows from financing activities in the Consolidated Statements of Cash Flow. The September 1, 2010 amount of $143,721 was due from the President of SSDC, which was fully repaid during the three month period ended February 28, 2011.

The remuneration of directors and other members of key management personnel are as follows:

	Year Ended August 31, 2012		Year Ended August 31, 2011

Management fees and salaries	$	1,015,772	$	1,091,249
Share-based payments		75,544		29,951

	$	1,091,316	$	1,121,200

F-33

CIBT EDUCATION GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

EXPRESSED IN CANADIAN DOLLARS

AUGUST 31, 2012

NOTE 23 – SEGMENTED INFORMATION

The Company’s primary industry and geographic segments are in China where CIBT operates technical and career training schools, and in Canada where SSDC and KGIC operates technical and career training schools and IRIX conducts web design and advertising services. The Company’s corporate operations are also in Canada. Transactions between CIBT, SSDC, KGIC, IRIX and the Company (Corporate) are reported as inter-segment transactions, and are eliminated on consolidation. Inter-segment transactions are in the normal course of operations and are measured at the exchange amount, which is the amount of consideration established and agreed to by the parties. Information reported to the Company's Chief Executive Officer for the purposes of resource allocation and assessment of segment performance focuses on the Company's business segments by geographic segments.

Industry and Geographic Segments	Year Ended August 31, 2012
	CIBT (China)			SSDC (Canada)			KGIC (Canada)			IRIX (Canada)			Corporate (Canada)			Consolidated
Revenues
Educational	$	3,098,086		$	29,109,427		$	23,941,211		$	-		$	-		$	56,148,724
Design and advertising		-			-			-			1,819,963			-			1,819,963

	$	3,098,086		$	29,109,427		$	23,941,211		$	1,819,963		$	-		$	57,968,687

Revenues, net of direct costs	$	1,425,901		$	17,741,440		$	10,793,584		$	855,081		$	-		$	30,816,006

Other expenses and items:
General and administrative		(1,538,507	)		(14,782,348	)		(9,048,932	)		(972,831	)		(3,255,738	)		(29,598,356	)
Amortization		(180,462	)		(904,435	)		(342,883	)		(30,145	)		(123,535	)		(1,581,460	)
Share-based payment expense		-			-			-			-			(178,564	)		(178,564	)
Business development costs		(48,776	)		-			-			-			-			(48,776	)
Interest and other income		60,588			-			-			3,582			27,709			91,879
Foreign exchange gain (loss)		6,452			-			-			36			(614	)		5,874
Finance costs		-			(120,079	)		(24,820	)		-			-			(144,899	)
Gain (loss) on disposal of assets		-			(56,560	)		-			(586	)		-			(57,146	)
Income tax recovery (provision), net		(977	)		(43,746	)		(98,578	)		24,925			(70	)		(118,446	)
Inter-segment transactions		-			(1,879,825	)		(791,338	)		12,958			2,658,205			-

Net income (loss)	$	(275,781	)	$	(45,553	)	$	487,033		$	(106,980	)	$	(872,607	)	$	(813,888	)

Total assets	$	5,011,305		$	21,979,898		$	13,712,192		$	382,928		$	3,665,438		$	44,751,761

Property and equipment	$	462,848		$	1,763,087		$	1,054,991		$	141,345		$	96,899		$	3,519,170

Intangible assets	$	689,602		$	8,584,338		$	2,954,483		$	-		$	20,103		$	12,248,526

Goodwill	$	-		$	4,792,511		$	3,693,280		$	-		$	-		$	8,485,791

Total liabilities	$	1,459,860		$	17,757,967		$	7,543,866		$	432,395		$	454,820		$	27,648,908

Non-controlling interests	$	827,395		$	582,664		$	-		$	(145,124	)	$	-		$	1,264,935

Capital expenditures	$	163,277		$	790,846		$	526,384		$	16,982		$	121,304		$	1,618,793

F-34

CIBT EDUCATION GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

EXPRESSED IN CANADIAN DOLLARS

AUGUST 31, 2012

NOTE 23 – SEGMENTED INFORMATION (cont’d)

Industry and Geographic Segments	Year Ended August 31, 2011
	CIBT (China)			SSDC (Canada)			KGIC (Canada)			IRIX (Canada)			Corporate (Canada)			Consolidated
Revenues
Educational	$	4,206,757		$	30,619,935		$	21,838,554		$	-		$	-		$	56,665,246
Design and advertising		-			-			-			1,909,880			-			1,909,880

	$	4,206,757		$	30,619,935		$	21,838,554		$	1,909,880		$	-		$	58,575,126

Revenues, net of direct costs	$	2,036,548		$	18,862,579		$	9,157,776		$	913,421		$	-		$	30,970,324

Other expenses and items:
General and administrative		(2,449,039	)		(17,022,551	)		(8,603,106	)		(839,454	)		(3,944,382	)		(32,858,532	)
Amortization		(466,800	)		(800,404	)		(289,174	)		(29,106	)		(72,091	)		(1,657,575	)
Share-based payment expense		-			-			-			-			(59,896	)		(59,896	)
Business development costs		(230,362	)		-			-			-			-			(230,362	)
Interest and other income		176,775			-			-			3,870			-			180,645
Foreign exchange gain (loss)		21,648			-			-			(5,968	)		(4,909	)		10,771
Finance costs		-			(153,656	)		-			-			-			(153,656	)
Gain (loss) on disposal of assets		21,344			(60,505	)		-			(495	)		-			(39,656	)
Impairment of marketable securities		-			-			-			-			(60,000	)		(60,000	)
Impairment of long-lived assets and goodwill		(5,897,778	)		-			-			-			-			(5,897,778	)
Write-off of deferred finance fees		-			-			-			-			(510,711	)		(510,711	)
Income tax recovery (provision), net		698,430			458,782			22,333			28,532			(364,572	)		843,505
Discontinued operations		-			-			-			-			-			-
Inter-segment transactions		20,465			(967,533	)		(656,737	)		(3,709	)		1,607,514			-

Net (loss) income	$	(6,068,769	)	$	316,712		$	(368,908	)	$	67,091		$	(3,409,047	)	$	(9,462,921	)

Total assets	$	5,136,756		$	21,557,870		$	11,938,913		$	464,504		$	2,980,532		$	42,078,575

Property and equipment	$	439,753		$	1,672,908		$	315,968		$	164,323		$	38,866		$	2,631,818

Intangible assets	$	719,440		$	8,079,841		$	3,291,513		$	-		$	80,367		$	12,171,161

Goodwill	$	-		$	5,170,095		$	3,165,696		$	-		$	-		$	8,335,791

Total liabilities	$	1,423,526		$	15,209,591		$	6,238,883		$	422,479		$	483,659		$	23,778,138

Non-controlling interests	$	616,945		$	621,326		$	-		$	(92,704	)	$	-		$	1,145,567

Capital expenditures	$	163,147		$	191,863		$	65,393		$	22,461		$	45,383		$	488,247

F-35

CIBT EDUCATION GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

EXPRESSED IN CANADIAN DOLLARS

AUGUST 31, 2012

NOTE 24 – FIRST TIME ADOPTION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS

The Company has adopted IFRS on September 1, 2011, with a date of transition (“transition date”) of September 1, 2010, and this is the date on which the Company prepared its opening IFRS statement of financial position. Under IFRS 1, First-time Adoption of International Financial Reporting Standards (IFRS 1), the IFRS are applied retrospectively at the transition date, with all adjustments to assets and liabilities as stated under Canadian GAAP taken to retained earnings unless certain exemptions are applied.

Certain mandatory exceptions required by IFRS 1 have been adhered to during the transition to IFRS. Hindsight was not used to create or revise estimates previously made under Canadian GAAP, except where necessary to reflect any difference in accounting policies or where there is objective evidence that those estimates were in error. When accounting for non-controlling interests total comprehensive income has been attributed to the owners of the Company and to the non-controlling interests even if this results in the non-controlling interests ending with a deficit balance. In applying these exceptions that only resulting impact on the consolidated financial statements was the requirement to attribute other comprehensive income between the owners of the Company and the non-controlling interests.

The remaining two mandatory exceptions required by IFRS 1 were not applicable to the Company and therefore did not result in any impact to the Company’s financial statements on transition to IFRS:

●

Derecognition of financial assets and financial liabilities per IFRS 1 Appendix B2 – B3 was not applicable to the Company as its financial instruments were reviewed and concluded to meet the recognition criteria of IAS 39 as of September 1, 2010 transition date; as a result no changes in the accounting recognition for financial instruments was required on transition to IFRS; and

●	Hedge accounting per IFRS 1 Appendix B4-B6 was also not applicable to CIBT as the Company did not have any hedging arrangements that would be impacted by this mandatory exemption.

In preparing these consolidated financial statements, the Company has applied the mandatory exceptions and selected some of the optional exemptions from full retrospective application of IFRS. Below describes the IFRS 1 applied by the Company in the transition from Canadian GAAP to IFRS.

IFRS Exemptions Selected

Business combinations – The Company has elected to apply IFRS 3 on a prospective basis to business combinations that occur on or after September 1, 2010. IFRS 3, Business Combinations , may be applied retrospectively or prospectively. The retrospective basis would require restatement of all business combinations that occurred prior to the transition date. Any goodwill arising from such business combinations before the transition date will not be adjusted from the carrying value previously determined under Canadian GAAP as a result of applying these exemptions, except as required under IFRS 1. Please refer to discussion below under Comparative amounts for the result of application of this exemption to the opening statement of financial position at September 1, 2010.

Fair value or revaluation as deemed cost – The Company has used the amount determined under a previous GAAP revaluation as the deemed cost for certain assets. The Company elected the exemption for certain assets which were written down under Canadian GAAP, as the revaluation was broadly comparable to fair value under IFRS. The carrying value of those assets on transition to IFRS is therefore, consistent with the Canadian GAAP carrying value on the transition date.

Cumulative translation differences – As permitted by the IFRS 1 election for cumulative translation differences, the Company has deemed cumulative translation differences for foreign operations to be zero at the date of transition. Cumulative translation loss at September 1, 2010 was re-allocated from accumulated other comprehensive loss to deficit. As a result, a difference of $471,573 was recorded in deficit to reduce the foreign currency translation reserve to zero on September 1, 2010.

F-36

CIBT EDUCATION GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

EXPRESSED IN CANADIAN DOLLARS

AUGUST 31, 2012

NOTE 24 – FIRST TIME ADOPTION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS (cont’d)

Share-based payment transactions – IFRS 2, Share-Based Payments , encourages application of its provisions to equity instruments granted on or before November 7, 2002, but permits the application only to equity instruments granted after November 7, 2002 that had not vested by the transition date. The Company has elected not to apply IFRS 2 to awards that vested prior to September 1, 2010. The application of this exemption did not result in an IFRS transition adjustment. As discussed in the reconciliation note below, there was a difference in amounts recorded for share-based payments between Canadian GAAP and IFRS for the year ended August 31, 2011.

Leases – The Company may determine whether an arrangement existing at the date of transition to IFRS contains a lease, on the basis of facts and circumstances existing at that date. The Company has applied the transitional provisions in IFRIC 4, Determining Whether an Arrangement Contains a Lease . The application of this exemption did not result in an IFRS transition adjustment to the opening statement of financial position at September 1, 2010.

Reconciliation between Canadian GAAP and IFRS

IFRS 1 requires an entity to reconcile equity, comprehensive loss and cash flow for comparative periods. The Company’s adoption of IFRS did not have a significant impact on total operating, investing or financing cash flows in the prior periods and as such no reconciliation was provided. In preparing these consolidated financial statements, the Company has adjusted amounts reported previously in financial statements prepared in accordance with Canadian GAAP. An explanation of how the transition from Canadian GAAP to IFRS has affected the Company’s statements of financial position, net loss, and comprehensive loss is provided below:

F-37

CIBT EDUCATION GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

EXPRESSED IN CANADIAN DOLLARS

AUGUST 31, 2012

NOTE 24 – FIRST TIME ADOPTION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS (cont’d)

Reconciliation of Assets, Liabilities and Equity

The below table provides a summary of the adjustments to the Company’s statement of financial position at August 31, 2011 and September 1, 2010:

	Note	August 31, 2011			September 1, 2010

Total assets under Canadian GAAP		$	41,160,434		$	54,969,338
IFRS adjustments increase (decrease)
Adjustment for historical business combinations for previously unrecognized assets	g		(376,000	)		(376,000	)
Intangible assets - agency fees	c		1,231,963			900,967
Deferred tax asset - onerous contracts	f		62,178			30,547

Total assets under IFRS		$	42,078,575		$	55,524,852

Total liabilities under Canadian GAAP		$	22,124,793		$	26,619,254
IFRS adjustments increase (decrease)
Deferred tax impact from gross up of tax basis of intangible assets	h		1,096,640			1,096,640
Deferred tax impact resulting from intangible assets - agency fees	c		307,991			225,242
Onerous contracts	f		248,714			122,188

Total liabilities under IFRS		$	23,778,138		$	28,063,324

Total equity under Canadian GAAP		$	17,797,370		$	27,022,958
IFRS adjustments increase (decrease)
Adjustment for historical business combinations for previously unrecognized assets	g		(376,000	)		(376,000	)
Reclassification of non-controlling interests	b		1,238,271			1,327,126
Deferred tax impact from gross up of tax basis of intangible assets	h		(1,096,640	)		(1,096,640	)
Intangible assets - agency fees net of deferred taxes	c		923,972			675,725
Onerous contracts net of deferred taxes	f		(186,536	)		(91,641	)

Total equity under IFRS		$	18,300,437		$	27,461,528

F-38

CIBT EDUCATION GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

EXPRESSED IN CANADIAN DOLLARS

AUGUST 31, 2012

NOTE 24 – FIRST TIME ADOPTION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS (cont’d)

Reconciliation of Net Loss

The below table provides a summary of the adjustments to net loss for the year ended August 31, 2011:

	Note	Year Ended August 31, 2011

Net loss per Canadian GAAP		$	(10,091,064	)

IFRS adjustments
Share-based payments	a		31,226
Non-controlling interests	b		443,565
Intangible assets - agency fees	c		248,247
Onerous contracts	f		(94,895	)

		$	628,143

Total net loss under IFRS		$	(9,462,921	)

Net loss per IFRS attributable to CIBT Education Group Inc. shareholders		$	(9,813,782	)
Net loss per IFRS attributable to Non-controlling interests			350,861

Total net loss under IFRS		$	(9,462,921	)

Reconciliation of Comprehensive Loss

The below table provides a summary of the adjustments to comprehensive loss for the year ended August 31, 2011:

	Year Ended August 31, 2011

Comprehensive loss per Canadian GAAP	$	(10,093,395	)
IFRS adjustments differences to net loss (see table above)		628,143
Non-controlling interest share of unrealized foreign currency translation		(26,486	)

Total comprehensive loss under IFRS	$	(9,491,738	)

Comprehensive loss per IFRS attributable to CIBT Education Group Inc. shareholders	$	(9,816,113	)
Comprehensive loss per IFRS attributable to Non-controlling interests		324,375

Total comprehensive loss under IFRS	$	(9,491,738	)

F-39

CIBT EDUCATION GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

EXPRESSED IN CANADIAN DOLLARS

AUGUST 31, 2012

NOTE 24 – FIRST TIME ADOPTION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS (cont’d)

The items noted above in the reconciliations of the statement of financial position, net loss and comprehensive loss from Canadian GAAP to IFRS are described below.

a)	Share-based payments:

Under Canadian GAAP, the fair value of share-based awards with graded vesting are calculated as one grant and the resulting fair value is recognized on a straight-line basis over the vesting period. The Company had previously elected under Canadian GAAP to recognize forfeitures of awards as they occur.

Under IFRS, each tranche of an award with different vesting dates is considered a separate grant for calculation of fair value, and the resulting fair value is amortized over the vesting period of the respective tranches. Forfeitures are estimated on the date the award is granted and are revised for actual forfeitures based in subsequent periods.

Applying IFRS to share-based payments resulted in no adjustments on transition (September 1, 2010) and resulted in a decrease in share-based payment expense of $31,226 for the year ended August 31, 2011.

b)	Reclassification of non-controlling interests from liabilities:

The Company accounts for its investments in Beihai College, Sprott-Shaw Degree College Corp. – Surrey Campus, and IRIX Design Group Inc. using consolidation accounting, which results in 100% of the assets and liabilities of the investees being included in the financial statements. The other investors’ interest in the investees is presented as “non-controlling interests”. Under Canadian GAAP, the non-controlling interests are presented outside of equity whereas under IFRS the non-controlling interests are presented as equity, but presented separately from the parent’s shareholder equity.

c)	Intangible assets - agency fees:

Previously, the Company has expensed the commissions paid to agents as the services were incurred. Upon adoption of IFRS, the Company revisited the accounting treatment for the agency commissions and has deemed that they are qualified as intangible assets under IAS 38. The agency commissions are costs that relate directly to secure students enrolments (i.e. contracts) in the schools and are related to future activities on the contracts. The recoverability of the agency commissions is evidenced by the Company’s ability to enforce cancellation penalties. Thus, such costs will be amortized over the term of the programs that the students enroll, matching to the related revenues.

d)	Adjustment for deferred income taxes:

IAS 12, Income Taxes , is required to be applied retrospectively to all balances at transition date. The analysis performed did not identify any differences relating to the treatment of deferred income taxes under Canadian GAAP and IFRS. The IFRS adjustments relating to other IFRS at transition date created differences in deferred tax bases that have been accounted for in accordance with IAS 12.

e)	Reclassification of the equity section:

Under Canadian GAAP, the fair value of warrants are reclassified to contributed surplus when the warrants expire. Under IFRS, amounts recorded in warrant reserve are not reclassified on expiry.

f)	Onerous contracts:

Under IFRS, provisions for loss-making executory contracts under IAS 37 are recognized when the Company closed a campus before the end of the lease term. Such provisions were not recognized under Canadian GAAP since Canadian GAAP allowed that in the fair value measurement of the liability for these operating lease contracts, estimated sublease revenues could be applied to decreased the liability. Under IFRS only contractual sublease revenues may be applied to reduce the onerous lease provision.

F-40

CIBT EDUCATION GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

EXPRESSED IN CANADIAN DOLLARS

AUGUST 31, 2012

NOTE 24 – FIRST TIME ADOPTION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS (cont’d)

g)	Adjustment for historical business combinations for previously unrecognized assets:

The Company has elected to apply IFRS 3 on a prospective basis to business combinations that occur on or after September 1, 2010. As a condition under IFRS 1 for applying this exemption the Company must consider whether any previously unrecognized assets or liabilities would exist had the financial statements of the acquiree in previous business combinations been accounted for in accordance with IFRS. As discussed in (c) above, upon adoption of IFRS, the Company revisited the accounting treatment for commissions paid to agents as a finite life intangible asset in accordance with IAS 38. Under Canadian GAAP, the Company did not ascribe any of the fair value of the consideration paid in connection with a business combination that occurred prior to September 1, 2010 to commissions paid to agents for the acquisition of student contracts. In applying the IFRS 1 exemption, the Company has recognized a $376,000 finite life intangible asset related to contract acquisition costs that were subsumed in the original measurement of goodwill.

h)	Deferred tax impact from gross up of tax basis of intangible assets:

Under Canadian GAAP, there was a difference in the accounting versus tax basis relating to intangible assets classified as eligible capital expenditures as a result of a specific 25% gross up. IAS 12 does not provide support for the continued use of the 25% gross up, resulting in the difference on transition to IFRS.

Restatement from previously filed disclosures

In the course of preparing these consolidated financial statements, management identified errors in the application of IFRS in its previously reported consolidated statements of financial position as at September 1, 2010 and August 31, 2011 and the consolidated statement of loss for the year ended August 31, 2011. The reconciliations of the statements of financial position as at September 1, 2010 and August 31, 2011 and the consolidated statement of loss for the year ended August 31, 2011 above have been restated to reflect the correction of those non-material errors.

(i)

Management identified an error in the application of IAS 36 relating to the recognition of an impairment of goodwill. Management has determined that no goodwill impairment on CIBT China should have been recognized upon transition of IFRS on September 1, 2010. The impact is that goodwill in the previously reported opening statement of financial position was understated by $1.4 million with a corresponding impact on deficit. Rather the impairment of $1.4 million should have been recorded in the statement of loss for the year ended August 31, 2011, consistent with Canadian GAAP.

(ii)

The IFRS transition adjustments described above in the reconciliation for (f) onerous leases, (g) historical business combinations for previously unrecognized assets and (h) deferred tax impact from gross up of tax basis of intangible assets were not previously recorded/ reflected. The net impact of these omissions is $1.56 million and $1.66 million on deficit as at September 31, 2010 and August 31, 2011, respectively. The impact on the statement of loss was $94,895 for the year ended August 31, 2011.

F-41

ITEM 19. Exhibits

Exhibit Number	Description
1.1	Certificate of Incorporation (1)
1.2	Articles of Incorporation (1)
1.3	Certificate of change of name as filed with British Columbia, Canada on November 14, 2007 (2)
1.4	Notice of Articles (3)
4.1	Toby Chu Employment Agreement (2)
4.2	Employment Agreement with Sung Sub Lim
4.3	Acquisition Agreement for Concordia Career College (4)
4.4	Memorandum of Understanding with Thompson River University and Vancouver Career College (4)
4.5	Form of Cooperative Joint Program Agreements with Institutions for Hotel and Tourism Division (4)
4.6	Acquisition Agreement for Pan Pacific English College (4)
4.7	Education Program Cooperation Agreement with Far Eastern University (4)
4.8	Agreement between CIBT and Zhuzhou Technical College (4)
4.9	Agreement between CIBT and Jinhua Career & Technical College (4)
4.10	Agreement with Zhangzhou Normal University (4)
4.11	Education Program Cooperation Agreement between CIBT and National Cambridge College (4)
4.12	Memorandum of Understanding between Sprott-Shaw and Thang Long University (4)
4.13	Cooperation Agreement with China Central Radio and Television University (4)
4.14	Memorandum of Understanding between Sprott-Shaw and Hanoi Tourism College (4)
4.15	Assignment of License to CIBT Education Group (4)
4.16	Agreement with Weifang University regarding CIBT Beihai Center (4)
4.17	Agreement with Wyotech (1)
4.18	Agreement with Beijing University of Technology (1)
4.19	Agreement with ITT Educational Services, Inc. and Weifang University (1)
4.20	Acquisition Agreement of Sprott-Shaw (5)
4.21	Acquisition Agreement of Tourism Training Institute (5)
4.22	Acquisition Agreement of the KGIC Education Group of Companies (6)
4.23	Securities Purchase Agreement with Shane Corp. (1)
4.24	Agreement and Plan of Reorganization with Shane Corp. (3)
4.25	Memorandum of Understanding with Meridian International Business and Arts College (3)
4.26	Stock Option Plan (8)
4.27	Agreement with Open University of China (8)
4.28	Global Recruitment Agreement with Southpointe Academy (8)
4.29	Memorandum of Understanding with China Yunnan Radio and TV University (8)

129

Exhibit Number	Description
4.30	Cooperation Agreement with CIBT and Yunnan International Exchange Centre (8)
4.31	Cooperation Agreement with University of Zhejiang Continuing Studies and CIBT (8)
4.32	Cooperation Agreement with Guangzhou University and CIBT (8)
4.33	Cooperation Agreement with Zhaoqing University and CIBT (8)
4.34	Agreement between CIBT and Hebei Normal University Foreign Language College (8)
4.35	Cooperation Agreement between CIBT and Henan Radio and Television University (8)
4.36	Agreement between CIBT and Hunan Radio and Television University (8)
4.37	Agreement with Open University of China re: hospitality management (8)
4.38	Agreement with Hainan Human Resources Training Center (8)
4.39	Employment Agreement with Patrick Dang (8)
4.40	Employment Agreement with Dennis Huang (8)
4.41	Earn Out Agreement with KGIC Vendors (8)
4.42	Agreement with the Canadian Institute of Education (8)
4.43	Agreement with Beijing Language and Culture University (8)
4.44	Agreement with Whampoa University of Beijing
8.1	List of Subsidiaries:
	CIBT School of Business & Technology Corp. (British Columbia)
	Sprott Shaw Degree College Corp. (British Columbia)
	KGIC Colleges, comprised of two separate subsidiaries: KGIC Language College (2010) Corp. (British Columbia) and KGIC Business College (2010) Corp. (British Columbia)
	IRIX Design Group Inc. (British Columbia)
11.1	Code of Ethical Conduct (2)
11.2	Insider Trading Policy (4)
12.1	CEO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
12.2	CFO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
13.1	CEO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
13.2	CFO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(1)	Included as exhibits to our Form 20-FR filed May 10, 2007

(2)	Included as exhibits to our Form 20-F filed January 2, 2008

(3)	Included as an exhibit to our Form F-1 filed July 15, 2010

(4)	Included as an exhibit to our Form 20-F filed March 1, 2010

(5)	Included as exhibits to our Form 20-F filed March 17, 2009

(6)	Included as an exhibit to our Form 6-K filed March 19, 2010

(7)	Included as exhibits to our Form 20-F filed March 1, 2011

(8)	Included as exhibits to our Form 20-F filed March 1, 2012

130

SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

CIBT EDUCATION GROUP INC.

SIGNATURES	TITLE	DATE

/s/ Toby Chu	Director, President,	January 15, 2013
Toby Chu	Chief Executive Officer

/s/ Dennis Huang	Chief Financial Officer	January 15, 2013
Dennis Huang