- Amended Annual and Transition Report (foreign private issuer) (20-F/A)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 20-F/A

Amendment No. 1

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, 2011

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 Amex

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, 2011: 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 o Other þ

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 þ

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

Explanatory Note: This Amendment No. 1 to our annual report on Form 20-F/A (the “Amendment”) speaks as of the filing date of our Form 20-F for the fiscal year ended August 31, 2011, as filed with the Securities and Exchange Commission on March 1, 2012, except for the certifications, which speak as of the filing date of the Amendment.

This Amendment is being filed to amend the disclosure provided in our Selected Financial Data under Item 3 and our Financial Statements provided under Item 18. The amendments relate to the presentation of the “impairment long lived assets and goodwill”, “restructuring and integration costs” and “gain (loss) on disposal of assets” within Income (loss) from operations presented under Item 3 and the disclosure of the reporting currency in our financial statements filed under Item 18.

This Amendment does not, and does not purport to, amend, update or restate any other information or disclosure included in the Form 20-F and does not, and does not purport to, reflect any events that have occurred after the date of the initial filing of the Form 20-F.

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, 2011, 2010, 2009 and 2008, the two month transition period ended August 31, 2007 and the year ended June 30, 2007. Our audited consolidated financial statements as at August 31, 2009 and 2008, and for the year ended August 31, 2008, the two month transition period ended August 31, 2007 and the year ended June 30, 2007 are not included in this annual report, but have been filed with the SEC.

Our audited consolidated financial statements as at August 31, 2011 and 2010, and for the years ended August 31, 2011, 2010 and 2009 are included in this annual report and have been prepared in accordance with Canadian GAAP, and all dollar amounts set out in these financial statements are presented in Canadian dollars. Refer to Note 26 of our audited consolidated financial statements for the years ended August 31, 2011, 2010 and 2009 in this annual report for an explanation of the material differences between Canadian GAAP and U.S. GAAP applicable to the 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”.

On September 1, 2008, we changed our reporting currency from U.S. dollars to Canadian dollars to match our functional currency.

On June 26, 2008, we changed our fiscal year end from June 30 to August 31 to coincide with the year end of Sprott-Shaw, our major subsidiary, and the fiscal year end commonly used in the education industry.

We acquired Sprott-Shaw, our major subsidiary, in December 2007. In March 2010, we acquired through the KGIC Colleges, substantially all of the operating assets and assumed certain liabilities of KGIC, which operates in the education services business. Accordingly, the selected financial data set out below may not be comparable from period to period. See “Information on the Company - Overview” for more information on our acquisitions. 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”.

Canadian GAAP

	Year Ended August 31, 2011			Year Ended August 31, 2010			Year Ended August 31, 2009			Year Ended August 31, 2008			Two Months Ended August 31, 2007			Year Ended June 30, 2007
Consolidated Income Statement Data (1)	(C$)			(C$)			(C$)			(C$)			(C$)			(C$)
Revenues		58,575,126			55,954,852			44,550,958			31,161,279			1,166,769			9,303,448
Direct costs		21,430,791			20,670,302			16,234,348			12,067,789			547,266			4,587,634
Other expenses		41,216,072			33,669,709			27,731,472			22,625,691			1,152,735			5,839,938
Income (loss) from operations		(4,071,737	)		1,614,841			585,138			(3,532,201	)		(533,232	)		(1,124,124	)
Other income (expenses)		(6,470,385	)		(3,027,643	)		193,213			(1,124,461	)		(148,031	)		1,729,392
Income (loss) before income taxes		(10,542,122	)		(1,412,802	)		778,351			(4,589,071	)		(681,263	)		605,268
Income tax recovery (provision)		894,623			2,365,055			(285,241	)		(351,432	)		(32,508	)		(243,684	)
Non-controlling interests		(443,565	)		(369,883	)		(477,103	)		(109,155	)		65,334			(58,294	)
Net income (loss)		(10,091,064	)		582,370			16,007			(5,049,678	)		(648,437	)		303,290
Basic and diluted earnings (loss) per share		(0.15	)		0.01			0.00			(0.09	)		(0.01	)		0.01

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

U.S. GAAP

Consolidated Income Statement Data (1)	Amended, Year Ended August 31, 2011 (C$)		Amended, Year Ended August 31, 2010 (C$)		Amended, Year Ended August 31, 2009 (C$)		Year Ended August 31, 2008 (C$)			Two Months Ended August 31, 2007 (C$)			Year Ended June 30, 2007 (C$)
Revenues		58,575,126		55,954,852		44,550,958		31,161,279			1,166,769			9,303,448
Income (loss) from operations		(10,009,171)		(1,104,175)		585,138		(3,537,800	)		(533,232	)		(1,133,675	)
Net income(loss)		(10,211,769)		273,599		16,007		(5,905,655	)		(648,437	)		158
Basic and diluted earnings (loss) per share		(0.15)		0.01		0.00		(0.10	)		(0.01	)		(0.01	)

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

Canadian GAAP

Consolidated Balance Sheet Data	As at August 31, 2011 (C$)			As at August 31, 2010 (C$)			As at August 31, 2009 (C$)		As at August 31, 2008 (C$)		As at August 31, 2007 (C$)		As at June 30, 2007 (C$)
Current assets		16,577,428			24,523,282			22,015,521		18,393,197		17,732,653		15,232,534
Current liabilities		21,179,327			26,359,720			21,574,878		18,217,681		5,058,432		2,685,972
Working capital (deficit)		(4,601,899	)		(1,836,438	)		440,643		175,516		12,674,221		12,546,562
Other assets		24,583,006			30,446,056			25,506,171		25,424,368		6,594,395		6,072,375
Total assets		41,160,434			54,969,338			47,521,692		43,817,565		24,327,048		21,304,909
Capital lease obligations		249,132			222,810			291,220		176,143		65,370		68,513
Long-term debt		34,232			36,724			44,327		10,322		3,265,594		3,212,756
Non-controlling interests		1,238,271			1,327,126			1,198,606		1,345,065		1,043,996		653,982
Total liabilities and non-controlling interests		23,363,064			27,946,380			24,850,638		21,322,758		9,433,392		6,621,223
Share capital		48,182,766			47,709,836			44,350,606		44,350,606		26,861,878		26,851,807
Shareholders’ equity		17,797,370			27,022,958			22,671,054		22,494,807		14,893,656		14,683,686
Number of common shares outstanding		71,949,344			69,226,011			64,109,297		44,350,606		47,858,225		47,840,073

U.S. GAAP

	As at August 31, 2011		As at August 31, 2010		As at August 31, 2009		As at August 31, 2008		As at August 31, 2007		As at June 30, 2007
Consolidated Balance Sheet Data	(C$)		(C$)		(C$)		(C$)		(C$)		(C$)
Total assets		40,881,372		54,690,276		47,521,692		43,817,565		24,327,048		21,511,074
Total liabilities and non-controlling interests		22,275,207		26,648,963		23,652,032		19,977,691		9,638,785		6,824,450
Share capital		48,182,766		47,709,836		44,350,606		44,350,606		26,861,878		26,851,807
Shareholders’ equity		18,606,165		28,041,313		23,869,660		23,839,874		14,688,263		14,686,624
Number of common shares outstanding		71,949,344		69,226,011		64,109,297		44,350,606		47,858,225		47,840,073

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.

PART III

ITEM 18. Financial Statements

We are furnishing the following consolidated financial statements and reports:

CIBT Education Group August 31, 2011 Consolidated Financial Statements

Independent Auditors’ Report of Deloitte & Touche LLP, Independent Registered Chartered Accountants dated February 29, 2012	F-1
Consolidated balance sheets as of August 31, 2011 and 2010	F-2
Consolidated Statements of Income (Loss) and Comprehensive (Loss) Income for the year ended August 31, 2011, 2010 and 2009	F-3
Consolidated Statements of Accumulated Other Comprehensive Loss for the year ended August 31, 2011, 2010 and 2009	F-4
Consolidated Statements of Shareholders’ Equity for the year ended August 31, 2011, 2010 and 2009	F-5
Consolidated Statements of Cash Flows for the year ended August 31, 2011, 2010 and 2009	F-6
Notes to Consolidated Financial Statements	F-7

CIBT EDUCATION GROUP INC.

CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Canadian Dollars unless otherwise stated)

AUGUST 31, 2011

CONSOLIDATED BALANCE SHEETS

CONSOLIDATED STATEMENTS OF (LOSS) INCOME AND COMPREHENSIVE (LOSS) INCOME

CONSOLIDATED STATEMENTS OF ACCUMULATED OTHER COMPREHENSIVE LOSS

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

CONSOLIDATED STATEMENTS OF CASH FLOWS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 balance sheets as at August 31, 2011, and August 31, 2010, and the consolidated statements of income (loss) and comprehensive income (loss), accumulated other comprehensive loss, deficit, and cash flows for each of the years in the three-year period ended 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 Canadian generally accepted accounting principles, 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.

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. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. 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 the Company as at August 31, 2011 and August 31, 2010 and the results of its operations and cash flows for each of the years in the three-year period ended August 31, 2011 in accordance with Canadian generally accepted accounting principles.

/s/ Deloitte & Touche LLP

Deloitte & Touche LLP

Independent Registered Chartered Accountants

Vancouver, British Columbia

November 29, 2011 (except as to Note 26 which is as of February 29, 2012)

F-1

CIBT EDUCATION GROUP INC.

CONSOLIDATED BALANCE SHEETS

(Expressed in Canadian Dollars)

	August 31, 2011			August 31, 2010

ASSETS

CURRENT
Cash and cash equivalents	$	6,456,568		$	11,511,835
Restricted cash		250,000			-
Accounts receivable (Note 4)		8,513,553			11,223,894
Marketable securities (Note 5)		-			60,000
Prepaid expenses and other assets (Note 6)		763,469			1,197,086
Inventory		593,838			530,467

TOTAL CURRENT ASSETS		16,577,428			24,523,282
DUE FROM RELATED PARTIES (Note 23)		100,000			143,721
PROPERTYAND EQUIPMENT (Note 7)		2,631,818			3,418,853
INTANGIBLE ASSETS (Note 8)		10,939,198			14,825,117
GOODWILL (Note 9)		8,711,791			10,999,696
DEFERRED OFFERING COSTS (Note 10)		-			400,252
FUTURE INCOME TAX ASSETS (Note 17)		2,200,199			658,417

TOTAL ASSETS	$	41,160,434		$	54,969,338

LIABILITIES

CURRENT
Accounts payable and accrued liabilities (Note 11)	$	4,484,536		$	5,007,187
Income taxes payable		499,905			522,921
Deferred educational revenue		13,881,145			17,836,047
Capital lease obligations – current portion (Note 12)		101,765			118,098
Current portion of long-term debt (Note 12)		2,152,492			2,757,164
Due to related parties (Note 23)		59,484			118,303

TOTAL CURRENT LIABILITIES		21,179,327			26,359,720


FUTURE INCOME TAX LIABILITIES (Note 17)		662,102			-

CAPITAL LEASE OBLIGATIONS (Note 12)		249,132			222,810

LONG-TERM DEBT (Note 12)		34,232			36,724

TOTAL LIABILITIES		22,124,793			26,619,254

NON-CONTROLLING INTERESTS		1,238,271			1,327,126

SHAREHOLDERS’ EQUITY

SHARE CAPITAL (Note 13)		48,182,766			47,709,836
CONTRIBUTED SURPLUS		5,354,158			5,200,036
WARRANTS (Note 13)		334,020			63,000
TREASURY SHARES HELD (Note 14)		(3,304,055	)		(3,273,790	)
ACCUMULATED OTHER COMPREHENSIVE LOSS		(473,904	)		(471,573	)
DEFICIT		(32,295,615	)		(22,204,551	)

RETAINED EARNINGS AND ACCUMULATED OTHER COMPREHENSIVE INCOME		(32,769,519	)		(22,676,124	)
TOTAL SHAREHOLDERS’ EQUITY		17,797,370			27,022,958

TOTAL LIABILITIES, NON-CONTROLLING INTERESTS AND SHAREHOLDERS’ EQUITY	$	41,160,434		$	54,969,338

COMMITMENTS (Note 18)

SUBSEQUENT EVENTS (Note 25)

Approved on behalf of the Board:

“Toby Chu”		“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) INCOME AND COMPREHENSIVE (LOSS) INCOME

(Expressed in Canadian Dollars)

	Year Ended August 31, 2011			Year Ended August 31, 2010			Year Ended August 31, 2009

REVENUES
Educational	$	56,665,246		$	54,388,128		$	43,236,630
Design and advertising		1,909,880			1,566,724			1,314,328

		58,575,126			55,954,852			44,550,958

DIRECT COSTS
Educational		20,434,332			19,967,244			15,595,946
Design and advertising		996,459			703,058			638,402

		21,430,791			20,670,302			16,234,348

OTHER EXPENSES
General and administrative (Note 21)		39,237,013			31,899,806			25,513,613
Amortization of property, equipment and intangible assets		1,657,575			1,537,277			1,636,761
Stock-based compensation		91,122			232,626			581,098
Business development costs		230,362			-			-

		41,216,072			33,669,709			27,731,472

		(4,071,737	)		1,614,841			585,138

INTEREST AND OTHER INCOME		180,645			207,625			72,255
FOREIGN EXCHANGE GAIN (LOSS), NET		10,771			(96,677	)		162,537
LOSS ON DISPOSAL OF ASSETS		(39,656	)		(174,516	)		-
INTEREST ON LONG-TERM DEBT		(153,656	)		(92,346	)		(41,579	)
IMPAIRMENT OF MARKETABLE SECURITIES (Note 5)		(60,000	)		(127,229	)		-
IMPAIRMENT OF LONG-LIVED ASSETS AND GOODWILL
(Notes 7, 8 & 9)		(5,897,778	)		(2,000,000	)		-
WRITE-OFF OF DEFERRED OFFERING COSTS (Note 10)		(510,711	)		(200,000	)		-
RESTRUCTURING AND INTEGRATION COSTS (Note 16)		-			(544,500	)		-

LOSS BEFORE INCOME TAXES		(10,542,122	)		(1,412,802	)		778,351

INCOME TAX RECOVERY (PROVISION) (Note 17)
Current income tax recovery (provision)		14,943			(34,969	)		(116,415	)
Future income tax recovery		879,680			2,400,024			(168,826	)

		894,623			2,365,055			(285,241	)

(LOSS) INCOME AFTER INCOME TAXES		(9,647,499	)		952,253			493,110

NON-CONTROLLING INTERESTS		(443,565	)		(369,883	)		(477,103	)

NET (LOSS) INCOME	$	(10,091,064	)	$	582,370		$	16,007

BASIC AND DILUTED (LOSS) EARNINGS PER COMMON SHARE	$	(0.15	)	$	0.01		$	0.00

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
Basic		67,229,127			65,676,811			61,258,923
Diluted		67,229,127			66,017,145			61,292,967

COMPREHENSIVE (LOSS) INCOME
Net (loss) income	$	(10,091,064	)	$	582,370		$	16,007
Other comprehensive (loss) income
Unrealized foreign exchange translation adjustments		(2,331	)		(70,422	)		(43,827	)
Reclassification of losses on available-for-sale financial assets included in income		-			39,574			-

Comprehensive (loss) income	$	(10,093,395	)	$	551,522		$	(27,820	)

The accompanying notes are an integral part of these consolidated financial statements

F-3

CIBT EDUCATION GROUP INC.

CONSOLIDATED STATEMENTS OF ACCUMULATED OTHER COMPREHENSIVE LOSS

(Expressed in Canadian Dollars)

	Year Ended August 31, 2011			Year Ended August 31, 2010			Year Ended August 31, 2009

ACCUMULATED OTHER COMPREHENSIVE LOSS

Balance, beginning of year	$	(471,573	)	$	(440,725	)	$	(396,898	)
Unrealized translation adjustments		(2,331	)		(70,422	)		(4,253	)
Decrease in fair value of available-for-sale financial assets		-			-			(39,574	)
Reclassification of losses on available-for-sale financial assets to earnings		-			39,574			-

Balance, end of year	$	(473,904	)	$	(471,573	)	$	(440,725	)


ENDING BALANCE OF ACCUMULATED OTHER COMPREHENSIVE LOSS IS COMPRISED OF:

Unrealized translation adjustments	$	(473,904	)	$	(471,573	)	$	(401,151	)
Change in fair value of available-for-sale financial assets		-			-			(39,574	)

Balance, end of year	$	(473,904	)	$	(471,573	)	$	(440,725	)

The accompanying notes are an integral part of these consolidated financial statements

F-4

CIBT EDUCATION GROUP INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Expressed in Canadian Dollars)

	Share Capital														Accumulated
	Number of														Other
	Common Shares		Dollar Amount			Warrants			Surplus Contributed			Shares Treasury			Comprehensive Income (loss)			Deficit			Total Equity
Balance, August 31, 2008		64,109,297	$	44,350,606		$	-		$	4,363,779		$	(3,948,460	)	$	(396,898	)	$	(21,874,220	)	$	22,494,807
Stock-based compensation		-		-			-			581,098			-			-			-			581,098
Purchase of treasury shares		-		-			-			-			(377,031	)		-			-			(377,031	)
Unrealized translation adjustments		-		-			-			-			-			(4,253	)		-			(4,253	)
Change in fair value of available-for-sale financial assets		-		-			-			-			-			(39,574	)		-			(39,574	)
Charges on share purchase warrant extension		-		-			648,600			-			-			-			(648,600	)		-
Net income for the year		-		-			-			-			-			-			16,007			16,007

Balance, August 31, 2009		64,109,297		44,350,606			648,600			4,944,877			(4,325,491	)		(440,725	)		(22,506,813	)		22,671,054
Stock-based compensation		-		-			-			232,626			-			-			-			232,626
Reclassification of agent’s warrants		-		-			153,675			(153,675	)		-			-			-			-
Purchase of treasury shares		-		-			-			-			(29,674	)		-			-			(29,674	)
Treasury shares sold during the year		-		-			-			(501,267	)		1,081,375			-			(280,108	)		300,000
Shares issued for private placement, net of issue costs of $206,270		4,726,714		3,039,430			63,000			-			-			-			-			3,102,430
Shares issued for cash by exercise of options		390,000		319,800			-			(124,800	)		-			-			-			195,000
Warrants reclassified on expiry		-		-			(802,275	)		802,275			-			-			-			-
Unrealized translation adjustments		-		-			-			-			-			(70,422	)		-			(70,422	)
Reclassification of losses on available-for-sale financial assets to earnings		-		-			-			-			-			39,574			-			39,574
Net income for the year		-		-			-			-			-			-			582,370			582,370

Balance, August 31, 2010		69,226,011		47,709,836			63,000			5,200,036			(3,273,790	)		(471,573	)		(22,204,551	)		27,022,958
Stock-based compensation		-		-			-			91,122			-			-			-			91,122
Warrants reclassified on expiry		-		-			(63,000	)		63,000			-			-			-			-
Purchase of treasury shares		-		-			-			-			(30,265	)		-			-			(30,265	)
Unrealized translation adjustments		-		-			-			-			-			(2,331	)		-			(2,331	)
Shares and warrants issued for private placement, net of issue costs of $10,050		2,723,333		476,950			330,000			-			-			-			-			806,950

Fair value of agent’s warrants for private placement		-		(4,020	)		4,020			-			-			-			-			-
Net loss for the year		-		-			-			-			-			-			(10,091,064	)		(10,091,064	)

Balance, August 31, 2011		71,949,344	$	48,182,766		$	334,020		$	5,354,158		$	(3,304,055	)	$	(473,904	)	$	(32,295,615	)	$	17,797,370

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, 2011			Year Ended August 31, 2010			Year Ended August 31, 2009

CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES
Net (loss) income	$	(10,091,064	)	$	582,370		$	16,007
Adjusted for items not involving cash:
- amortization of property, equipment and intangible assets		1,657,575			1,537,277			1,636,761
- stock-based compensation		91,122			232,626			581,098
- amortization of deferred curriculum costs		-			295,903			41,816
- future income tax recovery		(879,680	)		(2,400,024	)		168,826
- loss on disposal of assets, net		39,656			174,516			-
- impairment of marketable securities		60,000			127,229			-
- impairment of long-lived assets and goodwill		5,897,778			2,000,000			-
- write-off of deferred offering costs		510,711			200,000			-
- non-controlling interests		443,565			369,883			477,103
- Advances from related parties		(58,819	)		-			-
Net changes in non-cash working capital items (Note 22)		(1,251,979	)		(1,091,831	)		(591,716	)

NET CASH FROM (USED IN) OPERATING ACTIVITIES		(3,581,135	)		2,027,949			2,329,895

CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES
Purchases of property and equipment		(488,247	)		(672,645	)		(753,097	)
Acquisition of net assets of business entities, net of cash acquired (Note 3)		(50,000	)		(4,973,148	)		(675,434	)
Curriculum development costs		(65,041	)		(106,454	)		(138,543	)
Restricted cash		(250,000	)		-			-
Disposal of controlling interest in AIMI, net of cash received (Note 3(b))		-			-			(401,980	)

NET CASH USED IN INVESTING ACTIVITIES		(853,288	)		(5,752,247	)		(1,969,054	)

CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES
Proceeds from issuance of shares and warrants, net of issue costs		806,950			3,297,430			-
Purchase of treasury shares		(30,265	)		(29,674	)		(377,031	)
Advances to related parties		43,721			19			(82,919	)
Non-controlling interest draws		(505,934	)		(217,434	)		(60,000	)
Capital Lease obligation repayments		(105,753	)		(85,190	)		(56,939	)
Loan principal repayments		(607,164	)		(432,551	)		(366,990	)
Loan principal advances		-			3,000,000			-
Deferred offering costs		(171,820	)		(538,891	)		-

NET CASH FROM (USED IN) FINANCING ACTIVITIES		(570,265	)		4,993,709			(943,879	)

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS		(50,579	)		(94,704	)		(12,571	)

NET (DECREASE) INCREASE IN CASH		(5,055,267	)		1,174,707			(595,609	)

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR		11,511,835			10,337,128			10,932,737

CASH AND CASH EQUIVALENTS, END OF YEAR	$	6,456,568		$	11,511,835		$	10,337,128

CASH AND CASH EQUIVALENTS:
Cash in bank	$	5,381,795		$	10,893,807		$	9,587,586
Term deposits		1,074,773			618,028			749,542

	$	6,456,568		$	11,511,835		$	10,337,128

SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid	$	164,896		$	71,937		$	49,237
Income taxes paid	$	14,549		$	8,139		$	31,198

The accompanying notes are an integral part of these consolidated financial statements

F-6

CIBT EDUCATION GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2011

(Expressed in Canadian Dollars)

NOTE 1 – NATURE OF OPERATIONS AND BASIS OF PRESENTATION

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”) (refer to Note 3(a)), 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.

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES

Basis of preparation

These financial statements are expressed in Canadian dollars and have been prepared in accordance with Canadian generally accepted accounting principles.

Use of estimates

The preparation of financial statements in conformity with Canadian generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant areas requiring the use of management estimates relate to the allowance for bad debts, valuation of property and equipment, intangible assets and goodwill, useful lives for amortization of assets and liabilities including intangible assets, and determination of fair value for equity-based transactions. Financial results as determined by actual events could differ from those estimates.

Principles of consolidation

The consolidated financial statements include the financial statements of the Company and all its majority-owned subsidiaries. All significant intercompany transactions and balances have been eliminated on consolidation.

Foreign currency translation

The CIBT subsidiaries in China maintain their accounting records in Chinese RMB. The functional currency of the parent company and other entities in Canada is the Canadian dollar and the Company’s reporting currency is the Canadian dollar. The Company’s 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 rates which approximate those in effect on the date of the transactions; and the resulting gains and losses from translation are accumulated in other comprehensive income (loss). An appropriate portion of the exchange gains and losses accumulated in other comprehensive income (loss) will be included in the determination of operating results for the period when there is a reduction in the net investment in the self sustaining operation.

The Company follows the temporal method of accounting for the translation of foreign currency transactions into Canadian dollars. Foreign currency denominated monetary assets and liabilities are translated at the rate of exchange in effect at the balance sheet date. Revenue and expense items in foreign currencies are translated at the rate of exchange in effect when the transactions occur. Exchange gains and losses recognized on foreign currency transactions and the translation of foreign currency balances at the balance sheet date are included in the determination of income (loss) for the period.

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.

F-7

CIBT EDUCATION GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2011

(Expressed in Canadian Dollars)

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (cont’d)

Marketable securities

Marketable securities consist of common shares of NextMart Inc. (previously Sun New Media Inc.) (“NextMart”), whose common shares are traded in the public equity markets. For all periods presented, the Company’s interest in NextMart does not represent a position of control or significant influence. This is classified as available for sale investment.

Inventory

Inventories, which primarily consists of printed books and other education materials, are valued at the lower of cost and net realizable value, with cost being determined on a weighted average basis.

Property and equipment

Property and equipment are recorded at cost. 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;

●	Computer equipment – 20% - 30% declining balance.

The carrying value of property and equipment is reviewed for impairment whenever changes in events or circumstances indicate the recoverable value may be less than the carrying amount. 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. The recognized impairment loss of $128,526 (2010: $Nil; 2009: $Nil) on property and equipment on August 31, 2011 in Note 7.

Curriculum development costs

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.

Deferred offering costs

The Company capitalizes direct costs incurred in connection with proposed private debt financings and public equity market financings. Offering costs in connection with private debt financings are offset against the proceeds of the financing and amortized using the effective interest method. Offering costs 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, which include accreditations, brand and trade names, and Chinese university partnership contracts are not subject to amortization and are tested for impairment annually or when indicated by changes in events or circumstances. An impairment of an indefinite life intangible asset is recorded when, and to the extent that, the carrying value of an indefinite life intangible asset exceeds the fair value of the related indefinite life intangible asset with fair values of the indefinite life intangible assets being determined pursuant to generally accepted valuation methodologies.

Finite life intangible assets, which include curriculum access contracts, internally developed curriculum, and foreign university cooperating agreements are carried at cost less accumulated amortization and impairments. Amortization is calculated over periods ranging from one to fifteen years on a straight-line basis, being their estimated useful lives. 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.

The Company recognized an impairment loss of $2,287,905 (2010: $2,000,000; 2009: $Nil) on other indefinite life intangible assets for the years ended August 31, 2011 in Note 8.

F-8

CIBT EDUCATION GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2011

(Expressed in Canadian Dollars)

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (cont’d)

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 values. Goodwill is allocated as of the date of the business combination to the Company’s reporting units that are expected to benefit from the synergies of the business combination. When the net of the amounts assigned to identifiable net assets exceeds the cost of the purchase (“negative goodwill”), the excess is eliminated, to the extent possible, by a pro-rata allocation to certain non-current assets, with the balance presented as an extraordinary gain. Goodwill is not amortized and is tested for impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. Specifically, goodwill impairment is determined using a two-step process. The first step compares the fair values of each reporting unit to its carrying amount, including goodwill. If the fair value of each reporting unit exceeds its carrying amount, goodwill is not considered to be impaired and the second step will not be required. If the carrying amount of a reporting unit exceeds its fair value, the second step compares the implied fair value of goodwill to the carrying value of a reporting unit’s goodwill.

The implied fair value of goodwill is determined in a manner similar to accounting for a business combination with the allocation of the assessed fair value determined in the first step to the assets and liabilities of the reporting unit. The excess of the fair value of the reporting unit over the amounts assigned to the assets and liabilities is the implied fair value of goodwill. An impairment loss is recognized for any excess in the carrying value of goodwill over the implied fair value of goodwill. Estimating fair value is performed by utilizing various valuation techniques, with the primary technique being a discounted cash flow. The Company performs the annual impairment tests on August 31 of each year. The Company recognized an impairment loss of $3,481,347 (2010: Nil; 2009: Nil) on goodwill for the years ended August 31, 2011 in Note 9.

Revenue recognition

The Company recognizes revenue when persuasive evidence of an arrangement exists, the risks and rewards of ownership pass to the purchaser, the selling price is fixed or determinable, and collectability is reasonably assured. 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 generally 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. Tuition refunds are provided to students if they decide within the trial period that they no longer want to take the course. Tuition refunds have been insignificant in fiscal years. After the trial period, if a student withdraws from a class, usually 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.

Stock-based compensation

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. When stock options are issued, the Company records the estimated fair value of the stock-based compensation awards as an expense over the requisite service period with a corresponding credit to contributed surplus. Fair values have been determined using the Black-Scholes option pricing model.

Agency fees

For language programs in KGIC and SSDC, the Company engages a network of agents in foreign countries, who recruit international students to attend the Company’s programs in Canada. The Company expenses agency costs as incurred, while tuition revenues are recognized over the instruction period. Such expenses are classified as part of the General and Administrative expenses (Note 21).

F-9

CIBT EDUCATION GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2011

(Expressed in Canadian Dollars)

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (cont’d)

Income taxes

The Company follows the liability method of tax allocation. Under this method, future tax assets and liabilities are determined based on 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. In the case of 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 balance sheet, the recognition of future income tax assets is determined by reference to the more likely than not realization of future income tax reductions.

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.

Comprehensive Income (loss)

Comprehensive income (loss) includes both net income (loss) and other comprehensive income (loss). Other comprehensive income (loss) includes realized and unrealized gains and losses on available-for-sale investments, and foreign currency gains and losses relating to translation of self-sustaining foreign operations.

Financial Instruments

The following is a summary of the classes of financial instruments included in the Company’s consolidated balance sheet as well as their designation by the Company:

Balance sheet item	Classification	Measurement basis

Cash and cash equivalents	Held-for-trading	Fair value
Restricted cash	Held-for-trading	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 fair value for held-for-trading financial instruments are recognized in net income (loss) for the period. 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 Company accounts for transaction costs directly attributable to the acquisition or issue of a financial asset or financial liability as follows:

●	For financial assets or liabilities classified as held for trading, all transaction costs are immediately charged to operations.

●	For all other financial assets or liabilities, all transactions costs are added to the carrying amount on initial classification.

Subsequently, amounts are subject to either effective interest amortization or fair market value adjustments.

F-10

CIBT EDUCATION GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2011

(Expressed in Canadian Dollars)

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (cont’d)

Financial Instruments (cont’d)

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.

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. As of August 31, 2011 and 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	%

Future accounting standards

In February 2008, the Canadian Accounting Standards Board confirmed fiscal years beginning on or after January 1, 2011 as the date that International Financial Reporting Standards (“IFRS”) will replace Canadian GAAP for publicly accountable enterprises, with a transition date one year earlier. Earlier adoption is permitted. The Company will issue its first IFRS annual consolidated financial statements for the fiscal year ending August 31, 2012, with restatement of comparative balance sheets as at August 31, 2011 and September 1, 2011 and statement of (loss) income for the year ended August 31, 2011. During the year ending August 31, 2012, the Company will issue interim consolidated IFRS financial statements prepared in accordance with IAS 34 – Interim Financial Reporting for the periods ending November 30, 2011, February 29, 2012 and May 31, 2012, with restatement of comparative balance sheets as at December 31, 2010 and January 1, 2010, and statements of (loss) income for the comparative periods presented.

NOTE 3 – ACQUISITIONS AND DISPOSALS

a) KGIC Language College Corp.

On March 15, 2010, the Company, through its newly incorporated wholly-owned subsidiary KGIC Language College Corp. (“KGIC”), completed the acquisition of KGIC Education Group Inc. The Company acquired, through KGIC (a newly incorporated wholly owned subsidiary of the Company), the primary assets and liabilities used in the operation of the KGIC group of schools (the “KGIC Assets”). The KGIC Assets will enable the Company to continue to operate the newly acquired business (the “KGIC Business”) which consists of English language training schools. KGIC’s existing management team will continue to operate KGIC under an executive management contract. KGIC operates private English language training schools and business colleges in Canada, with seven campuses in Canada, as well as training centres and branch offices in China, Brazil, Japan, Korea, Taiwan and Mexico.

As consideration, the final purchase price of $3,817,497 was paid by the Company to the selling parties during the year ended August 31, 2010 and 2011. In addition, the Company incurred transaction costs of $279,062.

The Company has agreed to pay a maximum of $3,917,810 of further consideration which will be paid and recognized upon the achievement of the following net revenue and EBITDA (earnings before interest, taxes, depreciation and amortization) milestones by the KGIC Business:

F-11

CIBT EDUCATION GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2011

(Expressed in Canadian Dollars)

NOTE 3 – ACQUISITIONS AND DISPOSALS (cont’d)

a) KGIC Language College Corp. (cont’d)

(a)	up to $958,905 in cash if the net revenue of the KGIC Business exceeds $16,109,588 and the EBITDA of the KGIC Business exceeds $1,284,930 for the period March 16, 2010 to February 28, 2011, such amount to be calculated according to a formula which is based upon the excess;

(b)	up to $958,905 in value of the Company’s shares if the net revenue of the KGIC Business exceeds $16,109,588 and the EBITDA of the KGIC Business exceeds $1,284,930 for the period March 16, 2010 to February 28, 2011, such amount to be calculated according to a formula which is based upon the excess;

(c)	up to $1,000,000 in cash if the net revenue of the KGIC Business exceeds $18,200,000 and the EBITDA of the KGIC Business exceeds $2,000,000 for the period March 1, 2011 to February 29, 2012, such amount to be calculated according to a formula which is based upon the excess; and

(d)	up to $1,000,000 in cash if the net revenue of the KGIC Business exceeds $23,000,000 and the EBITDA of the KGIC Business exceeds $3,450,000 for the period March 1, 2012 to February 28, 2013, such amount to be calculated according to a formula which is based upon the excess.

Based on the results of operations for the KGIC Business for the period March 16, 2010 to August 31, 2011, it is unlikely that the Company will be paying further consideration under items (a) and (b) above since all the milestones were not achieved by the KGIC Business for the period ended August 31, 2011.

The acquisition of KGIC, a business, has been accounted for using the purchase method with the preliminary fair value of the assets acquired and liabilities assumed on the acquisition date being as follows:

	Fair Value of Assets Acquired

Cash	$	19,744
Accounts receivable		809,750
Inventory		110,620
Prepaids and other current assets		258,872
Property and equipment		352,089
Intangible assets subject to amortization		1,610,000
Intangible assets not subject to amortization		1,230,000
Goodwill		3,542,488
Accounts payable and accrued liabilities		(361,562	)
Deferred revenue		(3,475,442	)

Net assets acquired equal to purchase price	$	4,096,559

Consideration comprised of:
Cash	$	3,817,497
Acquisition costs		279,062

Total consideration	$	4,096,559

b) Asia Interactive Media Inc.

On February 9, 2007, the Company loaned to Asia Interactive Media Inc. (“AIMI”), a US reporting company, US$150,000 in exchange for an 8% convertible promissory note due February 9, 2009. At any time before February 9, 2009, the Company had the right to convert all or a portion of the loan principal amount of the promissory note into common shares of AIMI at a conversion price of US$0.01 per share. As at February 9, 2007, AIMI had 5,000,000 common shares outstanding and the Company’s loan can be converted into 15,000,000 common shares of AIMI, representing a then 75% interest. On September 29, 2008, AIMI repaid the US$150,000 loan plus accrued interest of US$19,233 to the Company. In addition, members of the Company’s management team and Board of Directors resigned from AIMI’s Board of Directors on September 29, 2008. Accordingly, effective September 29, 2008, the Company ceased to consolidate AIMI.

F-12

CIBT EDUCATION GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2011

(Expressed in Canadian Dollars)

NOTE 3 – ACQUISITIONS AND DISPOSALS (cont’d)

c) Sprott-Shaw Degree College Corp.

Effective December 17, 2007, the Company acquired, through SSDC (a newly incorporated wholly owned subsidiary of the Company), the primary assets and liabilities used in the operation of the Sprott-Shaw Community College group of schools (the “SSCC Assets”).

During the year ended August 31, 2010, SSDC EBITDA exceeded the milestone thresholds in the original purchase agreement resulting in an additional purchase price payable of $386,333 which has been accrued and recorded as an accrued liability as at August 31, 2010, resulting in a corresponding increase in the original amount of goodwill attributed to the business combination. Subsequent to August 31, 2010, SSDC is not subject to any future performance contingency.

d) Concordia Career College / Modus International Language Institute

On September 4, 2008, the Company acquired the primary assets and liabilities used in the operation of Concordia Career College and Modus International Language Institute (collectively “Concordia Group” and the “Concordia Group Assets”). The operations of the Concordia Group have been integrated with SSDC’s operations in Canada. As consideration the Company agreed to pay a maximum of $150,000 to the vendors within 18 months after the close of the transaction if certain gross revenue and net profit targets were met by the Concordia Group within the 18 month period ending March 4, 2010.

During the year ended August 31, 2010, the Company came to an agreement with the vendors and paid a total of $60,000 of purchase consideration resulting in a corresponding increase in goodwill.

NOTE 4 – ACCOUNTS RECEIVABLE

Accounts receivable consisted of the following at August 31, 2011 and 2010:

	August 31, 2011			August 31, 2010

Trade receivables	$	9,427,911		$	10,759,227
Less: allowance for bad debts		(914,358	)		(451,691	)
KGIC purchase price adjustment receivable		-			700,000
Other		-			216,358

	$	8,513,553		$	11,223,894

Allowance for Bad Debts

Changes in the allowance for bad debts were as follows:

	August 31, 2011			August 31, 2010

Beginning balance	$	(451,691	)	$	(371,430	)
Charge during the year		(1,243,943	)		(778,569	)
Written-off during the year		781,276			698,308

Ending balance	$	(914,358	)	$	(451,691	)

F-13

CIBT EDUCATION GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2011

(Expressed in Canadian Dollars)

NOTE 5 – MARKETABLE SECURITIES

At August 31, 2011 and 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”). The Company has determined that the market value of the securities were permanently impaired therefore, during the year ended August 31, 2011 and 2010, the Company recorded a loss in connection with the impairment of the carrying value of the shares available-for-sale of $60,000 and $127,229, respectively. The components of the Company’s investment in NextMart and the market price of the NextMart shares are as follows:

	August 31, 2011				August 31, 2010
	Number of Shares		Carrying Value		Number of Shares		Carrying Value

Available-for-sale securities		5,862,824	$	-		5,862,824	$	60,000

		5,862,824	$	-		5,862,824	$	60,000

Market price	US$0.00 per share*				US$0.01 per share

*Share price rounded to two decimal places

NOTE 6 – PREPAID EXPENSES AND OTHER ASSETS

Prepaid expenses and other assets consisted of the following:

	August 31, 2011		August 31, 2010

Prepaid expenses and deposits	$	739,231	$	1,087,743
Tuition fees held by Far Eastern University		24,238		109,343

	$	763,469	$	1,197,086

NOTE 7 – PROPERTY AND EQUIPMENT

Property and equipment consisted of the following:

	August 31, 2011			August 31, 2010

Furniture and equipment	$	3,463,814		$	3,725,295
Leasehold improvements		1,827,167			2,805,483
Equipment under capital lease		562,096			524,524

		5,853,077			7,055,302

Accumulated amortization - furniture and equipment		(1,846,620	)		(1,795,625	)
Accumulated amortization - leasehold improvements		(1,150,592	)		(1,634,967	)
Accumulated amortization - equipment under capital lease		(224,047	)		(205,857	)

		(3,221,259	)		(3,636,449	)

	$	2,631,818		$	3,418,853

F-14

CIBT EDUCATION GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2011

(Expressed in Canadian Dollars)

NOTE 7 – PROPERTY AND EQUIPMENT (cont’d)

During the year ended August 31, 2011, the Company recorded amortization of property and equipment totalling $1,190,397 (2010: $1,131,255; 2009: $1,076,219).

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 (refer to Note 8), the Company recorded a net impairment charge of $128,526 for the carrying value of furniture and equipment and leasehold improvements relating to the Company’s business operations in Beijing, China as at August 31, 2011.

The Company acquired certain equipment by way of capital leases. These leases have expiry dates ending from April 2012 and November 2015.

	Straight-line Basis					Declining Balance Basis

	Amortization		Length	Residual Buyout Amount		Amortization		Declining Rate			Residual Buyout Amount

IRIX (a)	$	88,213	60 months	$	44,341	$	21,300		20	%	$	2
SSDC (b)						$	408,243		20	%	$	1,500

a)	Included in accumulated amortization as at August 31, 2011 is $24,717 (2010: $78,599; 2009: $60,353) relating to equipment under capital leases.

b)	Included in amortization expense for the current period is $60,075 (2010: $72,540; 2009: $58,131) relating to equipment under capital leases and included in accumulated amortization as at August 31, 2011 is $199,330 (2010: $127,258; 2009: $106,082) relating to equipment under capital leases.

F-15

CIBT EDUCATION GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2011

(Expressed in Canadian Dollars)

NOTE 8 – INTANGIBLE ASSETS

Intangible assets consisted of the following at August 31, 2011 and 2010:

				August 31, 2011
Amounts				Accumulated			Carrying
	Cost			Amortization			Value

Intangible assets with finite life

Beginning balance	$	5,529,047		$	(2,238,270	)	$	3,290,777

Additions during the current year		65,041			(467,178	)		(402,137	)
Foreign exchange adjustments		(3,226	)		791			(2,435	)

Ending balance	$	5,590,862		$	(2,704,657	)		2,886,205

Intangible assets with indefinite life

Beginning balance								11,534,340

Impairments during the current year								(3,481,347	)

Ending balance								8,052,993

Total intangible assets							$	10,939,198

				August 31, 2010
Amounts				Accumulated			Carrying
	Cost			Amortization			Value

Intangible assets with finite life

Beginning balance	$	4,323,588		$	(1,837,909	)	$	2,485,679

Additions during the current year		1,230,000			(406,022	)		823,978
Foreign exchange adjustments		(24,541	)		5,661			(18,880	)

Ending balance	$	5,529,047		$	(2,238,270	)		3,290,777

Intangible assets with indefinite life

Beginning balance								11,924,340

Additions during the current year								1,610,000
Impairments during the current year								(2,000,000	)

Ending balance								11,534,340

Total intangible assets							$	14,825,117

F-16

CIBT EDUCATION GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2011

(Expressed in Canadian Dollars)

NOTE 8 – INTANGIBLE ASSETS (cont’d)

	August 31, 2011
Amounts			Accumulated			Carrying
	Cost		Amortization			Value

Intangible assets with finite life

Agreements and contracts – curriculum access	$	348,333	$	(267,966	)	$	80,367
Acquired curriculum		2,912,000		(624,000	)		2,288,000
Internally developed curriculum		65,041		(550	)		64,491
Foreign university cooperative agreements and others		2,265,488		(1,812,141	)		453,347

	$	5,590,862	$	(2,704,657	)	$	2,886,205

Intangible assets with indefinite life

Accreditations and registrations						$	2,706,000
Brand and trade names							4,886,000
Chinese university agreements and contracts							460,993

						$	8,052,993

Total intangible assets						$	10,939,198

	August 31, 2010
Amounts			Accumulated			Carrying
	Cost		Amortization			Value

Intangible assets subject with finite life

Agreements and contracts – curriculum access	$	348,333	$	(203,813	)	$	144,520
Internally developed curriculum		2,912,000		(400,800	)		2,511,200
Foreign university cooperative agreements and others		2,268,714		(1,633,657	)		635,057

	$	5,529,047	$	(2,238,270	)	$	3,290,777

Intangible assets with indefinite life

Accreditations and registrations						$	2,706,000
Brand and trade names							4,886,000
Chinese university agreements and contracts							3,942,340

						$	11,534,340

Total intangible assets						$	14,825,117

During the year ended August 31, 2011, the Company recorded amortization of intangible assets totalling $467,178 (2010: $406,022; 2009: $560,542). As at August 31, 2010, the Company recorded an impairment charge totalling $2,000,000 to the carrying value of intangible assets not subject to amortization as a result of declining revenues and income stemming from the Company’s business operations in Beijing, China. The Company determined the fair value of the impaired long-lived assets based on a discounted net cash flow analysis. The $2,000,000 impairment charge affected the carrying amount of the intangibles relating to the BJUT agreement, which forms part of the Chinese university agreements and contracts asset category under intangible assets not subject to amortization.

F-17

CIBT EDUCATION GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2011

(Expressed in Canadian Dollars)

NOTE 8 – INTANGIBLE ASSETS (cont’d)

Effective August 31, 2011 the agreement between the Company and BJUT expired. Accordingly, the Company recorded an impairment charge totalling $3,481,347 to the carrying value of intangible assets not subject to amortization. The $3,481,347 impairment charge was 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.

NOTE 9 – GOODWILL

Goodwill consisted of the following:

	August 31, 2011			August 31, 2010

Beginning balance	$	10,999,696		$	7,010,875
Additions during the year		-			3,988,821
Impairments during the year		(2,287,905	)		-

Ending balance	$	8,711,791		$	10,999,696

As a result of declining revenues and income stemming from the Company’s business operations and business strategy changes in Beijing, China, and the expiration of the BJUT agreement (refer to Note 8), the Company recorded an impairment charge totalling $2,287,905 to the carrying value of goodwill in the year ended August 31, 2011. The Company determined the fair value of the reporting unit with a discounted future net cash flow analysis.

NOTE 10 – 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:

	August 31, 2011			August 31, 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

F-18

CIBT EDUCATION GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2011

(Expressed in Canadian Dollars)

NOTE 11 – ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts payable and accrued liabilities consisted of the following:

	August 31, 2011		August 31, 2010

Trade accounts payable	$	2,554,757	$	2,704,039
Payroll and related liabilities		1,509,262		1,579,398
Purchase price payable		-		436,333
Tuition fees and grants payable		215,518		74,017
Others		204,999		213,400

	$	4,484,536	$	5,007,187

NOTE 12 – LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS

Long-term Debt

The carrying value of debt in SSDC is as follows:

Demand term instalment loan, payable in monthly instalments of $50,000 plus interest at the prime rate plus 2%	$	2,750,000
Promissory note payable at $460 per month including interest at 8.5% per annum, unsecured, due October 2013		39,013
Promissory note payable at $505 per month including interest at 8% per annum, unsecured, due June 2011		4,875
		2,793,888
Less: current portion		(2,757,164	)

Balance at August 31, 2010	$	36,724

Demand term instalment loan, payable in monthly instalments of $50,000 plus interest at the prime rate plus 2%	$	2,150,000

Promissory note payable at $460 per month including interest at 8.5% per annum, unsecured, due October 2013		36,724

		2,186,724
Less: current portion		(2,152,492	)

Balance at August 31, 2011	$	34,232

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, 2011 and 2010, 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, 2011and 2010, none of the debt covenants have been violated, and the demand term instalment loan remains in good standing.

F-19

CIBT EDUCATION GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2011

(Expressed in Canadian Dollars)

NOTE 12 – LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS (cont’d)

Although the demand term instalment loan may be called for payment on demand, principal repayments due over the next five years based on scheduled repayment amounts are as follows:

For the years ending August 31,	2012	$	552,492
	2013		602,712
	2014		631,520
	2015		400,000
	2016		-

		$	2,186,724

Capital Leases

The following is a schedule of future minimum lease payments classified as capital lease at August 31, 2011 together with the balance of the obligation for assets under the capital lease as identified in Note 7:

For the years ending August 31,	2012	$	133,068
	2013		107,227
	2014		101,963
	2015		27,836
	2016		52,819

			422,913
Less: amount representing interest			(72,016	)

			350,897
Less: current portion			(101,765	)

		$	249,132

NOTE 13 – SHARE CAPITAL

Authorized share capital consists of 150,000,000 common shares without par value.

	Number		Value
Issued and outstanding

Balance at August 31, 2009		64,109,297	$	44,350,606

- for private placement at $0.70 per share		4,726,714		3,308,700
- fees and commissions for private placement		-		(206,270	)
- fair value of agent’s warrants for private placement		-		(63,000	)
- for cash by exercise of options at $0.50 per share		390,000		195,000
- contributed surplus reallocated on exercise of stock options		-		124,800

Balance at August 31, 2010		69,226,011		47,709,836

- for private placement at $0.30 per share		2,723,333		817,000
- fees and commissions for private placement		-		(10,050	)
- fair value of warrants for private placement		-		(330,000	)
- fair value of agent’s warrants for private placement		-		(4,020	)

Balance at August 31, 2011		71,949,344	$	48,182,766

F-20

CIBT EDUCATION GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2011

(Expressed in Canadian Dollars)

NOTE 13 – SHARE CAPITAL (cont’d)

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.

On October 27, 2009, the Company negotiated a non-brokered private placement to raise $3,000,000 by the issuance of common shares of the Company at a price of $0.70 per share. The financing was undertaken with several purchasers, including institutional investors, in two tranches. Finders’ fees were payable in connection with a portion of the financing. On November 4, 2009, the Company closed the first tranche of the non-brokered private placement. Under the first tranche closing, the Company raised $2,100,000 by the issuance of 3,000,000 common shares at a price of $0.70 per share. The Company incurred a finders’ fee consisting of a cash commission of $105,000 and finder’s warrants, exercisable for one year, entitling the holder to purchase 210,000 common shares at a price of $0.70 per share under the first tranche closing. On November 24, 2009, the Company closed the second tranche of the non-brokered private placement. Under the second tranche closing, the Company raised $1,208,700 by the issuance of 1,726,714 common shares at a price of $0.70 per share. The Company incurred a finders’ fee consisting of a cash commission of $101,270 under the second tranche closing. Total proceeds of $3,308,700 were raised in the non-brokered private placement, an oversubscription of $308,700 from the original $3,000,000 announced on October 27, 2009.

Share purchase warrants

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, August 31, 2009	5,211,919	1.43	0.38 years

- warrants issued	210,000	0.70
- warrants expired	(5,211,919)	1.43

Balance, August 31, 2010	210,000	0.70	0.18 years

- warrants issued	2,756,833	0.35
- warrants expired	(210,000)	0.70

Balance, August 31, 2011	2,756,833	0.35	2.84 years

F-21

CIBT EDUCATION GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2011

(Expressed in Canadian Dollars)

NOTE 13 – SHARE CAPITAL (cont’d)

Details of warrants outstanding and exercisable as at August 31, 2011 are as follows:

Number of Warrants	Exercise Price	Expiry Date	Remaining Contractual Life

1,723,500	$0.35	June 29, 2014	2.83 years
1,033,333	$0.35	July 11, 2014	2.86 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	August 31, 2010	August 31, 2009

Exercise price	$0.35	$0.70	$1.43
Expected dividend yield	0.00%	0.00%	0.00%
Expected volatility	79.6%	82.9%	42.8%
Risk-free interest rate	1.86%	0.57%	3.64%
Expected life	3 years	1 year	2 years

Stock options

The Company has stock options outstanding to certain employees, officers and directors providing the right to purchase up to 2,865,000 shares at prices ranging from $0.42 per share to $1.53 per share exercisable for periods ending from January 21, 2012 to March 1, 2016.

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 than 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.

F-22

CIBT EDUCATION GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2011

(Expressed in Canadian Dollars)

NOTE 13 – SHARE CAPITAL (cont’d)

The Company’s stock option activity is summarized as follows:

	Number of Options	Weighted Average Exercise Price ($)	Weighted Average Remaining Life
Balance, August 31,2008	4,535,000	1.18	2.57 years
- options granted during the year	210,000	0.51
- options expired during the year	(495,000)	1.00

Balance, August 31, 2009	4,250,000	1.17	1.87 years

- options granted during the year	130,000	0.72
- options expired during the year	(25,000)	0.50
- options exercised during the year	(390,000)	0.50

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

Details of options outstanding as at August 31, 2011 are as follows:

Number of Options	Exercise Price	Expiry Date	Remaining Contractual Life

190,000	$0.51	January 21, 2012	0.39 years
1,200,000	$1.53	June 21, 2012	0.81 years
60,000	$0.80	May 2, 2013	1.67 years
50,000	$0.60	August 8, 2013	1.94 years
100,000	$0.54	October 13, 2013	2.12 years
1,265,000	$0.42	March 1, 2016	4.50 years

2,865,000	$0.91 Average Price

Stock-based compensation

	Shares Granted	Per Share Price	Fair Value	Vesting Period

May 3, 2010	80,000	$0.80	$32,000	Vesting on grant date

August 9, 2011	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

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 for grants as follows:

Black-Scholes Weighted Average Assumptions	August 31, 2011	August 31, 2010	August 31, 2009

Expected life	4.85 years	3.00 years	3,00 years
Risk-free interest rate	2.52%	2.11%	1.385
Expected dividend yield	0.00%	0.00%	0.00%
Expected volatility	66.99%	75.33%	75.00%

F-23

CIBT EDUCATION GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2011

(Expressed in Canadian Dollars)

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. By agreement dated October 1, 2009, effective October 1, 2009 and December 31, 2009 respectively, the Company sold 592,104 and 197,368 treasury shares acquired through the provisions of the Company’s normal course issuer bid to the CEO of the Company at $0.38 per share (October 1, 2009 market price) in consideration for the settlement of a total of $300,000 owing to the CEO. These treasury shares had an average cost to the Company of approximately $1.37 per share as acquire via various purchases through 2008 and 2009. The excess of the cost of these treasury shares over the proceeds received was $781,375 of which $501,267 was charged to contributed surplus on elimination of previously recorded treasury share transaction gains and the residual $280,108 was charged to deficit during the year ended August 31, 2010.

On February 1, 2011, the Company received approval from the TSX to a normal course issuer bid to purchase for re-sale up to 3,000,000 of the Company’s common shares to a maximum aggregate acquisition cost of $1,000,000. The Company may purchase up to 6,706 common shares per day from February 4, 2011 to February 3, 2012, being the expiry date of the normal course issuer bid. The Company may terminate the normal course issuer bid at any time prior to February 3, 2012 by providing a notice of termination to the TSX. As at August 31, 2011, 2,500,024 common shares with an accumulated cost of $3,304,055 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, 2009		3,146,496		$	4,325,491

Purchases of treasury shares		42,000			29,674
Carrying value of treasury shares sold during the year		(789,472	)		(1,081,375	)

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

NOTE 15 – FINANCIAL INSTRUMENTS

The carrying value of cash and cash equivalents, accounts receivable, and accounts payable and accrued liabilities 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 fair value of long term debt approximates book value since the interest rate is based on a floating rate. It is impractical to determine the fair value of the amounts due to related parties with sufficient reliability due to the nature of the financial instruments, the absence of secondary markets and the significant cost of obtaining outside appraisals. Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

F-24

CIBT EDUCATION GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2011

(Expressed in Canadian Dollars)

NOTE 15 – FINANCIAL INSTRUMENTS (cont’d)

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.

	Total		Level 1		Level 2		Level 3

Assets:
Cash and cash equivalents	$	6, 456,568	$	6, 456,568	$	-	$	-
Restricted cash		250,000		250,000		-		-

	Fair Value at August 31, 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		-		-

The Company’s cash is classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices. The Company’s marketable securities are valued using quoted market prices in active markets and as such are classified within Level 1 of the fair value hierarchy. The fair value of the marketable securities is calculated as the quoted market price multiplied by the quantity of shares held by the Company.

NOTE 16 – RESTRUCTURING AND INTEGRATION COSTS

The acquisition of the KGIC Assets and the KGIC Business required considerable management time to restructure KGIC’s existing operational structure in order to integrate the KGIC operations into the Company’s operating structure. Since the acquisition date on March 15, 2010, direct management time and costs from the Corporate business segment and from the SSDC business segment was incurred to facilitate the restructuring and the integration process. From March 16, 2010 to August 31, 2010, a total of $544,500 in costs were incurred and has been classified as restructuring and integration costs in these consolidated financial statements.

F-25

CIBT EDUCATION GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2011

(Expressed in Canadian Dollars)

NOTE 17 – INCOME TAXES

The Company’s operations are subject to income taxes primarily in Canada and China. The applicable statutory income tax rate in China is 25 % and the statutory rate applicable to the Company in Canada is 27.17% (2010: 29.00%; 2009: 30.17%). As part of a tax loss utilization strategy, the Company recorded the tax benefits of future tax loss carry-forwards available to the Company.

The following table is a reconciliation of income tax recovery, at the Canadian income tax rate and the amount of reported income tax expense in the Statements of Income (Loss).

	Year Ended August 31, 2011			Year Ended August 31, 2010			Year Ended August 31, 2009

Loss before taxes	$	(10,542,122	)	$	(1,412,802	)	$	778,351
Statutory Canadian income tax rate		27.17	%		29.00	%		30.17	%

Income tax recovery at statutory rate		(2,863,943	)		(409,713	)		234,828
Effect of differences in foreign tax rates		23,908			-			(37,166	)
Expired non-capital loss carry-forwards		-			297,968			927,069
Write-off of long-lived assets		697,119			-			-
Non-deductible expenses, net		(33,200	)		(47,622	)		49,954
Differences between current year rate and rates used to measure future income taxes		119,439			(164,393	)		9,644
Changes in corporate tax rates		-			-			170,313
Differences in prior period tax returns as filed		(12,407	)		169,563			(213,282	)
Other taxes		-			-			19,263
Change in valuation allowance		1,338,628			(2,256,328	)		(871,472	)
Other		(164,167	)		45,470			(3,910	)

Income tax recovery	$	(894,623	)	$	(2,365,055	)	$	285,241

F-26

CIBT EDUCATION GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2011

(Expressed in Canadian Dollars)

NOTE 17 – INCOME TAXES (cont’d)

The following table shows future 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, 2011			Year Ended August 31, 2010

Future income tax assets
Canada
Non-capital loss carry-forwards	$	3,542,938		$	2,638,203
Share issuance costs		117,181			107,329
Investments		398,479			390,979
Property and equipment		19,073			82,422
Intangible assets		4,867			14,207
Deferred revenues		-			227,746
Others		6,146			-
China
Non-capital loss carry-forwards		372,809			262,898
Property and equipment		43,111			23,205

Total future income tax assets before valuation allowance		4,504,606			3,746,989
Less: valuation allowance		(1,714,406	)		(375,777	)

		2,790,200			3,371,212

Future income tax liabilities
Canada
Property and equipment		(24,116	)		(238,873	)
Intangible assets		(1,107,488	)		(2,369,600	)
China
Property and equipment		(5,249	)		(104,322	)
Intangible assets		(115,246	)		-

		(1,252,098	)		(2,712,795	)

Classified as:
Future income tax asset, net		2,200,199			658,417
Future income tax liabilities, net		(662,102	)		-

	$	1,538,097		$	658,417

F-27

CIBT EDUCATION GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2011

(Expressed in Canadian Dollars)

NOTE 17 – INCOME TAXES (cont’d)

The following table details the movement in the valuation allowance.

	Year Ended August 31, 2011			Year Ended August 31, 2010

Beginning balance	$	375,777		$	2,632,105

Current period tax losses and temporary differences		1,014,646			498,812
Expired tax losses during the period		-			(297,968	)
Impact of change in statutory rates on opening balance		-			-
Differences in prior period tax returns as filed		(122,051	)		169,563
Tax benefit of non-capital losses (recognized) provided		446,033			(2,626,735	)

		1,338,628			(2,256,328	)

Ending balance	$	1,714,405		$	375,777

The Company has non-capital losses available to offset future taxable income which are detailed in the following table together with the year of expiry.

Year of Expiry	China		Canada		Total

2014	$	179,009	$	1,396,407	$	1,575,416
2015		462,390		928,481		1,390,871
2016		849,838		-		849,838
2026		-		587,698		587,698
2027		-		860,134		860,134
2028		-		2,043,607		2,043,607
2029		-		2,211,918		2,211,918
2030		-		1,864,392		1,864,392
2031		-		4,244,463		4,244,463

	$	1,491,237	$	14,137,101	$	15,628,338

NOTE 18 – 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.

For the years ending August 31,	Corporate (Canada)		CIBT (China)		SSDC		KGIC		Total

2012	$	88,150	$	110,686	$	1,220,376	$	1,891,981	$	3,311,193
2013		91,088		114,021		667,271		1,971,133		2,843,513
2014		91,676		133,538		392,102		1,624,050		2,241,366
2015		15,279		-		192,351		1,542,548		1,750,178
2016		-		-		143,594		700,145		843,739

	$	286,193	$	358,245	$	2,615,694	$	7,729,855	$	10,989,989

F-28

CIBT EDUCATION GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2011

(Expressed in Canadian Dollars)

NOTE 19 – 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 manages all risk issues directly. The Company is engaged primarily in service related industries and manages related industry risk issues directly. 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.

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, 2011 is reported net of allowance for bad debts of $914,358 (August 31, 2010: $451,691). The carrying amount of the assets included on the balance sheet 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 and using its demand operating credit facility of $1,500,000 (refer to Note 12) to ensure financial resources are available. 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.

The following table summarizes the obligations of the Company’s financial liabilities and operating commitments as at August 31, 2011:

	Less than 1 year		1 – 3 years		4- 5 years		Greater than 5 years		Total

Accounts payable and accrued liabilities	$	4,484,536	$	-	$	-	$	-	$	4,484,536
Income taxes payable		499,905		-		-		-		499,905
Capital leases *		101,765		199,352		49,780		-		350,897
Long-term debt *		2,152,492		34,232		-		-		2,186,724
Operating leases		3,311,193		6,835,059		843,737		-		10,989,989

	$	10,549,891	$	7,068,643	$	893,517	$	-	$	18,512,051

* Amounts include interest.

F-29

CIBT EDUCATION GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2011

(Expressed in Canadian Dollars)

NOTE 20 – 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 and long-term debt. 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 currently in compliance, with certain financial ratio requirements in connection with the long-term debt (refer to Note 12).

The Company reported a net loss of $10,091,064 and generated negative cash flow used in operating activities. The Company had a net working capital deficit of $4,601,899. These consolidated financial statements have been prepared assuming the Company will continue as a going concern. Although the Company has completed private placements, there can be no assurance that the Company will be able to continue to raise funds, in which case the Company may be unable to meet its obligations. However, the Company holds sufficient cash to support its operations in the next 12 months.

The Company’s 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 they 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 the Company 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 the Company be unable to continue as a going concern. Such adjustments could be material.

NOTE 21 – GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative expenses are comprised of the following:

	Year Ended August 31, 2011		Year Ended August 31, 2010		Year Ended August 31, 2009

Advertising & agency fees	$	12,190,564	$	8,700,663	$	5,699,158
Bank charges and interest		395,050		347,265		198,838
Consulting and management fees		1,964,726		1,380,305		1,230,128
Directors insurance		45,439		79,889		79,074
Investor relations		99,062		95,187		49,892
Office and general		4,538,292		4,055,573		3,557,686
Professional fees		1,369,960		1,940,634		1,544,022
Regulatory fees		134,665		240,688		58,149
Rent		6,092,868		4,108,635		3,019,407
Salaries and benefits		12,031,267		10,645,586		9,631,436
Travel and promotion		375,120		305,381		445,823

	$	39,237,013	$	31,899,806	$	25,513,613

The results of KGIC were consolidated from March 15, 2010, the acquisition date and therefore about five and a half month was included in the year ended August 31, 2010, expenses compared to 12 months in the year ended August 31, 2011.

F-30

CIBT EDUCATION GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2011

(Expressed in Canadian Dollars)

NOTE 22 – 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, 2011			Year Ended August 31, 2010			Year Ended August 31, 2009

Accounts receivable	$	2,733,063		$	(2,846,521	)	$	(4,162,671	)
Prepaid expenses and other assets		423,206			2,470,624			(150,779	)
Inventory		(63,371	)		58,131			119,894
Accounts payable and accrued liabilities		(407,931	)		(255,373	)		666,307
Income taxes payable		(19,172	)		65,186			30,669
Deferred educational revenues		(3,917,774	)		(583,878	)		2,875,843
Other asset		-			-			29,021

	$	(1,251,979	)	$	(1,091,831	)	$	(591,716	)

NOTE 23 – RELATED PARTY TRANSACTIONS

Significant transactions between the Company and the following related parties:

	Year Ended August 31, 2011		Year Ended August 31, 2010		Year Ended August 31, 2009

Accounts receivable - Weifang University (1)	$	2,592,660	$	1,547,344	$	2,008,503
Accounts payable - Weifang University (1)	$	1,103,538	$	135,814	$	790,564
Due to officers, employees and directors (2)	$	59,484	$	118,303	$	418,304
Due from officers, employees and directors (3)	$	100,000	$	143,721	$	143,741
Management fees, salaries and bonuses	$	1,091,249	$	1,772,472	$	1,538,411

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 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, 2011, the amount due to officers, employees and directors is comprised of $13,222 (August 31, 2010: $38,014) due to officers of the Company and $46,262 (August 31, 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, 2011, a balance of $100,000 was due from a 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 August 31, 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.

F-31

CIBT EDUCATION GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2011

(Expressed in Canadian Dollars)

NOTE 24 – 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.

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		$	19,929,317		$	14,265,049		$	913,421		$	-		$	37,144,335
Other expenses and items:
General and administrative		(2,428,574	)		(18,096,580	)		(13,930,101	)		(837,163	)		(3,944,595	)		(39,237,013	)
Amortization		(466,800	)		(800,404	)		(289,174	)		(29,106	)		(72,091	)		(1,657,575	)
Stock-based compensation		-			-			-			-			(91,122	)		(91,122	)
Business development costs		(230,362	)		-			-			-			-			(230,362	)
Interest and other income		176,775			-			-			3,870			-			180,645
Foreign exchange gain (loss), net		21,648			-			-			(5,968	)		(4,909	)		10,771
Gain (loss) on disposal of assets		21,344			(60,505	)		-			(495	)		-			(39,656	)
Interest on long-term debt		-			(153,656	)		-			-			-			(153,656	)
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	)
Restructuring and integration costs		-			-			-			-			-			-
Income tax recovery (provision), net		698,430			483,361			48,872			28,532			(364,572	)		894,623
Non-controlling interests		(54,553	)		(389,012	)		-			-			-			(443,565	)
Inter-segment transactions		-			(1,058,554	)		(543,173	)		(6,000	)		1,607,727			-

Net income (loss)	$	(6,123,322	)	$	(146,033	)	$	(448,527	)	$	67,091		$	(3,440,273	)	$	(10,091,064	)

Total assets	$	5,136,756		$	22,118,314		$	11,195,200		$	449,368		$	2,260,796		$	41,160,434

Property and equipment	$	439,753		$	1,672,908		$	315,968		$	164,323		$	38,866		$	2,631,818

Intangible assets	$	719,440		$	7,596,891		$	2,542,500		$	-		$	80,367		$	10,939,198

Goodwill	$	-		$	5,169,303		$	3,542,488		$	-		$	-		$	8,711,791

Non-controlling interests	$	616,945		$	621,326		$	-		$	-		$	-		$	1,238,271

Capital expenditures	$	163,147		$	191,863		$	65,393		$	22,461		$	45,383		$	488,247

F-32

CIBT EDUCATION GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2011

(Expressed in Canadian Dollars)

NOTE 24 – SEGMENTED INFORMATION (cont’d)

Industry and Geographic Segments	Year Ended August 31, 2010
	CIBT (China)			SSDC (Canada)			KGIC (Canada) ***			IRIX (Canada)			Corporate (Canada)			Consolidated
Revenues
Educational	$	7,166,099		$	36,919,922		$	10,302,107		$	-		$	-		$	54,388,128
Design and advertising		-			-			-			1,566,724			-			1,566,724

	$	7,166,099		$	36,919,922		$	10,302,107		$	1,566,724		$	-		$	55,954,852

Revenues, net of direct costs	$	3,388,780		$	25,168,370		$	5,863,734		$	863,666		$	-		$	35,284,550
Other expenses and items:
General and administrative		(3,230,571	)		(18,325,086	)		(5,277,510	)		(802,856	)		(4,263,783	)		(31,899,806	)
Amortization		(491,813	)		(829,453	)		(127,923	)		(26,496	)		(61,592	)		(1,537,277	)
Stock-based compensation		-			-			-			-			(232,626	)		(232,626	)
Business development costs		-			-			-			-			-			-
Interest and other income		204,815			-			-			2,203			607			207,625
Foreign exchange gain (loss), net		(86,729	)		-			-			(2,714	)		(7,234	)		(96,677	)
Gain (loss) on disposal of assets		(56,412	)		(118,104	)		-			-			-			(174,516	)
Interest on long-term debt		-			(92,346	)		-			-			-			(92,346	)
Impairment of marketable securities		-			-			-			-			(127,229	)		(127,229	)
Impairment of long-lived assets and goodwill		(2,000,000	)		-			-			-			-			(2,000,000	)
Write-off of deferred finance fees		-			-			-			-			(200,000	)		(200,000	)
Restructuring and integration costs		-			(297,000	)		(100,000	)		-			(147,500	)		(544,500	)
Income tax recovery (provision), net		606,441			(844,002	)		(6,392	)		(13,396	)		2,622,404			2,365,055
Non-controlling interests		136,056			(505,939	)		-			-			-			(369,883	)
Inter-segment transactions		-			(3,149,040	)		(267,361	)		22,531			3,393,870			-

Net income (loss)	$	(1,529,433	)	$	1,007,400		$	84,548		$	42,938		$	976,917		$	582,370

Total assets	$	13,360,396		$	28,981,989		$	10,043,093		$	298,819		$	2,285,041		$	54,969,338

Property and equipment	$	816,903		$	2,185,124		$	329,749		$	81,767		$	5,310		$	3,418,853

Intangible assets	$	4,243,306		$	7,688,680		$	2,752,500		$	-		$	140,631		$	14,825,117

Goodwill	$	2,287,905		$	5,169,303		$	3,542,488		$	-		$	-		$	10,999,696

Non-controlling interests	$	588,878		$	738,248		$	-		$	-		$	-		$	1,327,126

Capital expenditures	$	90,482		$	556,992		$	18,083		$	7,088		$	-		$	672,645

*** The results of KGIC were consolidated from March 15, 2010, the acquisition date and therefore about five and a half month of operating results were included in the year ended August 31, 2010.

F-33

CIBT EDUCATION GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2011

(Expressed in Canadian Dollars)

NOTE 24 – SEGMENTED INFORMATION (cont’d)

Industry and Geographic Segments	Year Ended August 31, 2009
	CIBT (China)			SSDC (Canada)			IRIX (Canada)			Corporate (Canada)			Consolidated
Revenues
Educational	$	9,576,706		$	33,659,924		$	-		$	-		$	43,236,630
Design and advertising		-			-			1,314,328			-			1,314,328

	$	9,576,706		$	33,659,924		$	1,314,328		$	-		$	44,550,958

Revenues, net of direct costs	$	5,201,160		$	22,439,524		$	675,926		$	-		$	28,316,610
Other expenses and items:
Amortization		(651,813	)		(893,541	)		(29,484	)		(61,923	)		(1,636,761	)
General and administrative		(4,156,649	)		(17,333,591	)		(790,260	)		(3,233,113	)		(25,513,613	)
Stock-based compensation		-			-			-			(581,098	)		(581,098	)
Interest on long-term debt		-			(41,579	)		-			-			(41,579	)
Foreign exchange gain (loss)		119,462			-			19,608			23,467			162,537
Loss on disposal of assets		-			-			-			-			-
Impairment of marketable securities		-			-			-			-			-
Impairment of intangible assets		-			-			-			-			-
Write-off of deferred finance fees		-			-			-			-			-
Restructuring and integration costs		-			-			-			-			-
Non-controlling interests		(2,295	)		(474,808	)		-			-			(477,103	)
Other income		45,831			-			9			26,415			72,255
Income tax recovery (provision), net		4,115			(289,356	)		-			-			(285,241	)
Inter-segment transactions		-			(2,342,337	)		73,420			2,268,917			-

Net income (loss)	$	559,811		$	1,064,312		$	(50,781	)	$	(1,557,335	)	$	16,007

Total assets	$	16,643,989		$	29,861,938		$	217,610		$	798,155		$	47,521,692

Property and equipment	$	1,287,078		$	2,343,921		$	101,175		$	6,638		$	3,738,812

Intangible assets	$	6,325,324		$	7,883,800		$	-		$	200,895		$	14,410,019

Goodwill	$	2,287,905		$	4,722,970		$	-		$	-		$	7,010,875

Non-controlling interests	$	748,863		$	449,743		$	-		$	-		$	1,198,606

Capital expenditures	$	304,347		$	443,953		$	4,797		$	-		$	753,097

F-34

CIBT EDUCATION GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2011

(Expressed in Canadian Dollars)

NOTE 25 – SUBSEQUENT EVENTS

On November 2, 2011, the Company received $30,000 in funds owing from a director the Company (refer to Note 23). The remaining balance of $70,000 is anticipated to be repaid by the director of the Company before December 31, 2011.

NOTE 26 – DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES

These consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles (“Canadian GAAP”), which differs in certain respects from United States generally accepted accounting principles (“US GAAP”).

(a)	The effect of the differences between Canadian GAAP and US GAAP on the significant captions on the Company’s consolidated balance sheets, statement of (loss) income and comprehensive (loss) income and cash flows is summarized as follows:

Consolidated Balance Sheets	August 31, 2011			August 31, 2010

Total assets under Canadian GAAP	$	41,160,434		$	54,969,338
(c) Acquisition costs		(279,062	)		(279,062	)
Total assets under US GAAP	$	40,881,372		$	54,690,276

Total liabilities under Canadian GAAP	$	22,124,793		$	26,619,254
(b) Income tax uncertainties – unrecognized tax benefits		(18,352	)		(10,960	)
(b) Income tax uncertainties – accrual for interest and penalties		168,766			40,669
Total liabilities under US GAAP		22,275,207			26,648,963

Non-controlling interest under Canadian GAAP		1,238,271			1,327,126
(d) Non-controlling interest in subsidiaries		(1,238,271	)		(1,327,126	)
Non-controlling interest under US GAAP		-			-

Total shareholders' equity under Canadian GAAP		17,797,370			27,022,958
(b) Income tax uncertainties – unrecognized tax benefits		18,352			10,960
(b) Income tax uncertainties – accrual for interest and penalties		(168,766	)		(40,669	)
(c) Acquisition costs		(279,062	)		(279,062	)
(d) Non-controlling interest in subsidiaries		1,238,271			1,327,126
Total shareholder’s equity under US GAAP		18,606,165			28,041,313

Total liabilities and shareholders' equity under US GAAP	$	40,881,372		$	54,690,276

F-35

CIBT EDUCATION GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2011

(Expressed in Canadian Dollars)

NOTE 26 – DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (cont’d)

(a) (cont’d)

Consolidated Statements of (Loss) Income and Comprehensive (Loss) Income	Year Ended August 31, 2011			Year Ended August 31, 2010			Year Ended August 31, 2009

Net (loss) income under Canadian GAAP	$	(10,091,064	)	$	582,370		$	16,007

(b) Income tax uncertainties – unrecognized tax benefits		7,392			10,960			-
(b) Income tax uncertainties – accrual for interest and penalties		(128,097	)		(40,669	)		-

(c) Acquisition costs		-			(279,062	)		-

Net (loss) income under US GAAP	$	(10,211,769	)	$	273,599		$	16,007
Basic and diluted (loss) income per share under US GAAP	$	(0.15	)	$	0.00		$	0.00

Consolidated Statements of Cash Flows	Year Ended August 31, 2011			Year Ended August 31, 2010			Year Ended August 31, 2009
Net cash provided by (used in) operating activities under Canadian and US GAAP	$	(3,581,135	)	$	2,027,949		$	2,329,895
Net cash used in investing activities under Canadian GAAP		(853,288	)	$	(5,752,247	)	$	(1,969,054	)
(d) Disposal of controlling interest in variable interest entity, net of cash received		-			-			401,980
Net cash used in investing activities under US GAAP	$	(853,288	)	$	(5,752,247	)	$	(1,567,074	)
Net cash provided by (used in) financing activities under Canadian GAAP	$	(570,265	)	$	4,993,709		$	(943,879	)
(d) Disposal of controlling interest in variable interest entity, net of cash received		-			-			(401,980	)
Net cash provided by (used in) financing activities under US GAAP	$	(570,265	)	$	4,993,709		$	(1,345,859	)
Effect of exchange rate changes under Canadian and US GAAP	$	(50,579	)	$	(94,704	)	$	(12,571	)

F-36

CIBT EDUCATION GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2011

(Expressed in Canadian Dollars)

NOTE 26 – DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (cont’d)

(a) (cont’d)

Presentation differences between Canadian to US GAAP are:	Year Ended August 31, 2011		Year Ended August 31, 2010		Year Ended August 31, 2009

Direct costs – Canadian GAAP	$	21,430,791	$	20,670,302	$	16,234,348
Amortization for the year		1,657,575		1,537,277		1,636,761

Direct costs – US GAAP	$	23,088,366	$	22,207,579	$	17,871,109

(b) Income Taxes

Under Canadian GAAP, the Company identified and accrued for certain tax filing positions in China that were reflected in income taxes payable in the consolidated financial statements. Under US GAAP, the Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more likely than not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the relevant tax authority. The following additional disclosures represent changes from the most recent annual financial statements and are required under US GAAP.

F-37

CIBT EDUCATION GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2011

(Expressed in Canadian Dollars)

NOTE 26 – DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (cont’d)

(b) Income Taxes (cont’d)

As required under US GAAP, disclosure of the beginning and ending amount of unrecognized tax benefit is as follows:

	Year Ended August 31, 2011			Year Ended August 31, 2010			Year Ended August 31, 2009

Balance, beginning of period	$	398,396		$	409,356		$	293,181
Additions based on tax positions related to the current period		-			-			214,925
Additions for tax positions of prior periods								-
Reductions for tax positions of prior periods		-			-			(98,463	)
Settlements		-			-			-
Effect of foreign currency movements		(7,392	)		(10,960	)		(287	)
Balance, end of period	$	391,004		$	398,396		$	409,356

As at August 31, 2011, $251,727 of the $391,004 of unrecognized tax benefits will, if ultimately recognized, impact the Company’s effective tax rate.

Under Canadian GAAP, the Company accrued accumulatively $116,237 relating to interest and penalties.

Interest and penalties under US GAAP is as follows:

	Year Ended August 31, 2011			Year Ended August 31, 2010			Year Ended August 31, 2 009

Balance, beginning of period	$	156,906		$	116,237		$	52,214
Accrual for interest and penalties during the period		130,025			79,674			67,279
Effect of foreign currency movements		(1,928	)		(39,005	)		(3,256	)
Balance, end of period	$	285,003		$	156,906		$	116,237

As of August 31, 2011, the Company’s tax years from 2004 to 2011 remain open to audit in various taxing jurisdictions.

F-38

CIBT EDUCATION GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2011

(Expressed in Canadian Dollars)

NOTE 26 – DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (cont’d)

Under Canadian GAAP, the Company accounts for the acquisition-related costs as part of the total purchase price of the acquisition. Under US GAAP, upon the adoption of ASC 805 on September 1, 2009, the Company accounts for the acquisition-related costs as expenses in the periods in which the costs are incurred and the services are received.

The acquired curriculum and software have a weighted average amortization period of 10 and 3 years, respectively. The goodwill acquired in the acquisition consists of synergies expected to be achieved through vertical integration and cost reductions. As part of the acquisition the Company acquired accreditations and registrations that are deemed to have an indefinite life, as disclosed in Note 3. Certain accreditations acquired are assessed and renewed every 3-5 years.

Also upon the adoption of ASC 805, an asset or liability resulting from a contingent consideration arrangement will be recognized at its acquisition date fair value. The contingent consideration arrangement between the Company and KGIC is disclosed in Note 3. The estimated fair value of the contingent consideration was determined to be not significant and was determined based on the present value of estimated future payments. The estimate of future payments was determined based on management’s expectations for net revenue and EBITDA from KGIC over the contingent consideration period.

US GAAP requires the disclosure of certain pro forma information when one or more business combinations are completed. The following table presents unaudited pro forma results of operations for informational purposes, assuming that the Company had acquired KGIC at the beginning of the year ended August 31, 2010 and 2009.

	Year Ended			Year Ended
	August 31, 2010 (unaudited)			August 31, 2009 (unaudited)

Revenues	$	61,090,584		$	59,429,104

Net earnings	$	(1,269,760	)	$	(1,155,238	)

Pro forma basic earnings per share	$	(0.02	)	$	(0.02	)

Pro forma diluted earnings per share	$	(0.02	)	$	(0.02	)

(d) Non-Controlling Interest

Effective September 1, 2010, the Company has adopted the amendments to FASB ASC 810, “Non-controlling Interest in a Subsidiary”. This topic requires that non-controlling interests be presented in the equity section, but separate from the Company’s equity. ASC 810 also requires that a reconciliation at the beginning and end of the period of the carrying amount of total equity, equity attributable to the parent, and equity attributable to non-controlling interest be presented. In addition, the Company also reclassified, in its Statement of Cash Flow, prior-period payments related to changes in its ownership interest in a consolidated subsidiary from investing to financing activities as required by ASC 810.

F-39

CIBT EDUCATION GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2011

(Expressed in Canadian Dollars)

NOTE 26 – DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (cont’d)

(d) Non-Controlling Interest (cont’d)

The Company has previously absorbed losses attributed to the non-controlling interest. The following table illustrates what the net income (loss) of the parent and earnings per share would have been had the losses been applied to the non-controlling interest.

	Year Ended			Year Ended		Year Ended
	August 31, 2011			August 31, 2010		August 31, 2009

Net income (loss) under US GAAP attributed to the owners of the parent and non-controlling interest	$	(10,688,209	)	$	252,559	$	40,890

Basic and diluted income (loss) per share under US GAAP attributed to the owners of the parent and non-controlling interest	$	(0.15	)	$	0.00	$	0.00

(e) Accounting for Share Purchase Warrants

Under Canadian GAAP, the Company accounts for unit private placement issuances containing both common shares and share purchase warrants using the residual method whereby the Company records the net proceeds received into common shares with no amount allocated to contributed surplus. The effect if any, of reconciling potential differences in accounting for unit private placement issuances between Canadian GAAP and US GAAP has not been included in this reconciliation as it would have no impact on reported total assets, total liabilities, net shareholders’ equity, net income (loss) or cash flows for any period presented. Under the FASB ASC 505, “Equity”, the Company would be required to apportion the unit private placement proceeds on a relative fair value basis between the common shares and warrants issued. Please refer to Note 13 for share purchase warrant activity and the details of the warrants outstanding and exercisable as at August 31, 2011.

(f) Earnings Per Common Share

The following is a reconciliation from basic earnings (loss) per common share to diluted earnings (loss) per common share:

	Year Ended			Year Ended		Year Ended
	August 31, 2011			August 31, 2010		August 31, 2009

Net (loss) income under US GAAP	$	(10,211,769	)	$	273,599	$	16,007

Weighted average common shares basic		67,229,127			65,676,811		61,258,923
Effect of dilutive stock options and warrants		-			340,334		34,044

Weighted average common shares diluted		67,229,127			66,017,145		61,292,967

Basic and diluted income (loss) per common share	$	(0.15	)	$	0.00	$	0.00

F-40

CIBT EDUCATION GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2011

(Expressed in Canadian Dollars)

NOTE 26 – DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (cont’d)

(f) Earnings Per Common Share (cont’d)

For the years ended August 31, 2011, 2010 and 2009, 2,865,000, 3,627,105, and 4,215,956 options, respectively, are not included in the determination of diluted EPS. These options have a weighted average exercise price of $0.91, $1.28 and $1.18, respectively; and a weighted average remaining life of 2.49, 1.16 and 1.89 years, respectively. These securities could potentially dilute basic EPS in the future; however .they were not included in the computation of diluted EPS because to do so would have been anti dilutive for the periods presented.

For the years ended August 31, 2011, 31, 2010, and 2009 2,756,833, 207,561, and 5,211,919 warrants respectively were not included in the determination of diluted EPS. These warrants have a weighted average exercise price of $0.35, $0.70, and $1.43 respectively; and a weighted average remaining life of 2.84, 0.18, and 0.38 respectively. These securities could potentially dilute basic EPS in the future; however, they were not included in the computation of diluted EPS because to do so would have been anti dilutive for the periods presented.

There are no transactions occurring after August 31, 2011 that would have changed the number of common shares or potential common shares outstanding if the transaction had occurred before the end of the period.

(g) Stock-Based Compensation

Additional disclosure requirements under US GAAP, ASC 718 - The Company estimated a nil forfeiture rate by considering the historical employee turnover rates and expectations about the future, and will subsequently adjust compensation cost for differences between expectations and actual experience.

There is no income tax benefit recognized in the income statement for share-based compensation arrangements as stock based compensation is not deductible for Canadian tax purposes.

F-41

CIBT EDUCATION GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2011

(Expressed in Canadian Dollars)

NOTE 26 – DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (cont’d)

(g) Stock-Based Compensation (cont’d)

The fair value of each option award is estimated on the date of grant using the Black-Scholes option pricing model using the assumptions noted in Note 12 and as follows. Volatility is determined using the average weekly trading prices for periods prior to measurement approximating the estimated life of the option. Expected dividends are estimated to be zero based on historical experience and expectations of future dividends to be paid. The life of an option is estimated to equal the term of the option. Finally, the risk free rate used in the Black-Scholes option pricing model is based on the Bank of Canada bond yield rate as this most closely approximates the Company’s risk free rate of borrowing.

	Year Ended		Year Ended		Year Ended
	August 31, 2011		August 31, 2010		August 31, 2009

Stock option aggregate intrinsic value	$	-	$	8,400	$	67,400

Weighted average grant-date fair value of options granted	$	304,300	$	47,000	$	52,500

Total intrinsic value of options exercised	$	-	$	89,700	$	-

Total cash received from options
exercised	$	-	$	195,000	$	-

A summary of the status of the Company’s non-vested stock options is summarized as follows:

Nonvested Stock Options	Options			Weighted Average Grant Date Fair Value per Option ($)

Nonvested at August 31, 2008		1,877,500			0.64
Granted		210,000			0.25
Vested		(1,306,250	)		0.59


Nonvested at August 31, 2009		781,250			0.25
Granted		130,000			0.36
Vested		(911,250	)		0.49

Nonvested at August 31, 2010		-			-
Granted		1,365,000			0.22
Vested		(253,000	)		0.22

Nonvested and expected to vest at August 31, 2011		1,112,000			0.22

As of August 31, 2011, there was $182,378 of total unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the Plan. That cost is expected to be recognized over a weighted-average period of 3.03 years. The total fair value of shares vested during the years ended August 31, 2011, 2010 and 2009 was $98,670, $682,688 and $676,388, respectively.

F-42

CIBT EDUCATION GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2011

(Expressed in Canadian Dollars)

NOTE 26 – DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (cont’d)

(h) Intangible Assets

The weighted average amortization period for intangibles subject to amortization is as follows: Agreements and contracts – curriculum access 1.33 years; Internally developed curriculum 9.92; acquired curriculum 10.45 years; Foreign university cooperative agreements and others 5 years.

Amortization expenses that will be incurred over the next five years for intangible assets that are subject to amortization are as follows:

For the years ending August 31	2011	$	447,660
	2012		355,175
	2013		263,784
	2014		263,784
	2015		263,784
		$	1,594,187

(i) Cash and cash equivalents

The Company’s subsidiary in China is subject to certain currency transfer restrictions imposed by the Chinese government. Under the existing Chinese foreign exchange regulations, payments of current account items, including profit distribution, 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, by complying with certain procedural requirements. However, approval from appropriate government authorities is required when Chinese 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.

(j) Advertising expense

Costs incurred for advertising are expensed as incurred. Advertising expense for the years ended August 31, 2011, 2010 and 2009, was approximately $3,065,494, $3,161,796 and $3,050,835, respectively, and is included in general and administrative expenses in the accompanying consolidated statements of (loss) income.

(k) Adoption of New Accounting Pronouncements

In April 2008, the FASB issued ASC 350-30, “General Intangible Assets Other than Goodwill”. In determining the useful life of intangible assets, ASC 350-30 removes the requirement to consider whether an intangible asset can be renewed without substantial cost of material modifications to the existing terms and conditions and, instead, requires an entity to consider its own historical experience in renewing similar arrangements. ASC 350-30 also requires expanded disclosure related to the determination of intangible asset useful lives. ASC 350-30 was effective for financial statements issued for fiscal years beginning after December 15, 2008. The Company adopted ASC 350-30 on September 1, 2009 and the adoption did not have a material impact on the consolidated financial statements.

F-43

CIBT EDUCATION GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2011

(Expressed in Canadian Dollars)

NOTE 26 – DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (cont’d)

(l) Adoption of New Accounting Pronouncements (cont’d)

In May 2008, the FASB issued ASC 470-20, “Debt with Conversion and Other Options”. ASC 470-20 requires issuers of convertible debt instruments that may be settled in cash to separately account for the liability and equity components in a manner that will reflect the entity’s nonconvertible debt borrowing rate when interest cost is recognized in periods subsequent to adoption. Upon adoption of ASC 470-20, the Company will allocate a portion of the proceeds received from the issuance of convertible notes between a liability and equity component by determining the fair value of the liability component using the Company’s non-convertible debt borrowing rate. The difference between the proceeds of the notes and the fair value of the liability component will be recorded as a discount on the debt with a corresponding offset to paid-in-capital. The resulting discount will be accreted by recording additional non-cash interest expense over the expected life of the convertible notes using the effective interest rate method. The provisions of ASC 470-20 are to be applied retrospectively to all periods presented upon adoption and are effective for fiscal years beginning after December 15, 2008 and interim periods within those fiscal years. The Company currently does not have any convertible debt instruments and, accordingly, the adoption of ASC 470-20 on September 1, 2009 did not have any impact on the Company’s consolidated financial statements.

In June 2009, the FASB issued accounting standards related to its accounting standards codification of the hierarchy of generally accepted accounting principles. The new standard is the sole source of authoritative generally accepted accounting principles of the United States (“U.S. GAAP”) to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. The Codification superseded non-SEC accounting and reporting standards. All accounting literature that is not in the Codification, not issued by the SEC and not otherwise grandfathered is non-authoritative. The new standard became effective for the Company on September 1, 2009. Applying the guidance in the accounting standards codification did not have a material impact on the Company’s consolidated financial statements.

In January 2010, the FASB issued Accounting Standards Update (ASU) 2010-06, which amends the guidance on fair value to add new requirements for disclosures about transfers into and out of Levels 1 and 2 and separate disclosures about purchases, sales, issuances, and settlements relating to Level 3 measurements. It also clarifies existing fair value disclosures about the level of disaggregation and about inputs and valuation techniques used to measure fair value. The new guidance is effective for the first reporting period beginning after December 15, 2009, except for the requirement to provide the Level 3 activity of purchases, sales, issuances, and settlements on a gross basis, which will be effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. Applying the guidance did have a material impact on the Company’s consolidated financial statements.

In April 2010, the FASB issued ASU No. 2010-13, “Compensation-Stock Compensation (Topic 718): Effect of Denominating the Exercise Price of a Share-Based Payment Award in the Currency of the Market in Which the Underlying Equity Security Trades”. ASU No. 2010-13 clarifies that an employee share-based payment award with an exercise price denominated in the currency of a market in which a substantial portion of the entity’s equity securities trades should not be considered to contain a condition that is not a market, performance, or service condition. Therefore, an entity would not classify such an award as a liability if it otherwise qualifies as equity. The provision of ASU No. 2010-13 is effective on January 1, 2011. Early adoption is permitted. Adoption of the provisions of ASU No. 2010-13 is did not have a material effect on the Company’s consolidated financial statements.

In December 2010, the FASB issued ASU No. 2010-28 related to goodwill and intangible assets. Under current guidance, testing for goodwill impairment is a two-step test. When a goodwill impairment test is performed, an entity must assess whether the carrying amount of a reporting unit exceeds its fair value (Step 1). If it does, an entity must perform an additional test to determine whether goodwill has been impaired and to calculate the amount of that impairment (Step 2). The objective of ASU No 2010-28 is to address circumstances in which entities have reporting units with zero or negative carrying amounts. The amendments in this guidance modify Step 1 of the goodwill impairment test for reporting units with zero or negative carrying amounts to require an entity to perform Step 2 of the goodwill impairment test if it is more likely than not that a goodwill impairment exists after considering certain qualitative characteristics, as described in this guidance. This guidance became effective for the Company in fiscal years, and interim periods within those years, beginning after December 15, 2010. The implementation of this accounting standard did not have a material impact on the Company’s consolidated financial statements.

F-44

CIBT EDUCATION GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2011

(Expressed in Canadian Dollars)

NOTE 26 – DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (cont’d)

(l) Adoption of New Accounting Pronouncements (cont’d)

Also, in December 2010, the FASB issued ASU No. 2010-29 related to financial statement disclosures for business combinations entered into after the beginning of the first annual reporting period beginning on or after December 15, 2010. The amendments in this guidance specify that if a public entity presents comparative financial statements, the entity should disclose revenue and earnings of the combined entity as though the business combination(s) that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period only. These amendments also expand the supplemental pro forma disclosures under current guidance for business combinations to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings. The amendments in this update are effective prospectively for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2010. The Company has implemented this standard, as applicable, to the related business combination disclosures.

(m) Recently Issued Accounting Pronouncements

In May 2011, the FASB issued Accounting Standards Update (ASU) No. 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs . ASU No. 2011-04 clarifies some existing concepts, eliminates wording differences between U.S. GAAP and International Financial Reporting Standards (“IFRS”), and in some limited cases, changes some principles to achieve convergence between U.S. GAAP and IFRS. ASU No. 2011-04 results in a consistent definition of fair value and common requirements for measurement of and disclosure about fair value between U.S. GAAP and IFRS. ASU No. 2011-04 also expands the disclosures for fair value measurements that are estimated using significant unobservable (Level 3) inputs. The provisions of ASU No. 2011-04 will become effective for us on January 1, 2012 and are to be applied prospectively. We do not expect the adoption of the provisions of ASU No. 2011-04 to have a material effect on our consolidated financial statements and we do not expect to materially modify or expand our financial statement footnote disclosures.

In June 2011, the FASB issued ASU No. 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income . ASU No. 2011-05 requires an entity to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income, or in two separate but consecutive statements. ASU No. 2011-05 eliminates the option to present components of other comprehensive income as part of the statement of stockholders’ equity. The presentation requirements will become effective for us on January 1, 2012. As ASU No. 2011-05 applies to financial statement presentation matters, the adoption of ASU No. 2011-05 will not affect our consolidated financial statements and we believe our current presentation of comprehensive income complies with the new presentation requirements.

In September 2011, the FASB issued ASU 2011-08 which is intended to simplify how an entity tests goodwill for impairment. Under the revised guidance, an entity has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, an entity determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is unnecessary. However, if an entity concludes otherwise, then it is required to perform the first step of the two-step impairment test by calculating the fair value of the reporting unit and comparing the fair value with the carrying amount of the reporting unit. If the carrying amount of a reporting unit exceeds its fair value, then the entity is required to perform the second step of the goodwill impairment test to measure the amount of the impairment loss, if any. Under the amendments in this update, an entity has the option to bypass the qualitative assessment for any reporting unit in any period and proceed directly to performing the first step of the two-step goodwill impairment test. An entity may resume performing the qualitative assessment in any subsequent period. ASU 2011-08 is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted, including for annual and interim goodwill impairment tests performed as of a date before September 15, 2011, if an entity’s financial statements for the most recent annual or interim period have not yet been issued. The Company has elected to early adopt ASU 2011-08 for the purposes of performing its annual goodwill impairment test for its fiscal year ended January 1, 2012. The Company’s measurement date for the annual goodwill test is as of the first day of its fourth fiscal quarter. The implementation of this accounting standard will not have a material impact on the Company’s consolidated financial statements.

The Company will transition to IFRS on September 1, 2011 and will no longer be required to prepare a reconciliation to US AAP. Accordingly, the Company has not assessed the impact of adopting future US GAAP accounting pronouncements with an application date of September 1, 2011 or beyond in its financial statements and disclosures.

F-45

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 (3)
4.3	Employment Agreement with Steve Sohn (3)
4.4	Acquisition Agreement for Concordia Career College (4)
4.5	Memorandum of Understanding with Thompson River University and Vancouver Career College (4)
4.6	Form of Cooperative Joint Program Agreements with Institutions for Hotel and Tourism Division (4)
4.7	Acquisition Agreement for Pan Pacific English College (4)
4.8	Memorandum of Understanding between Sprott-Shaw and the Ministry of Labour and Social Security of Jamaica (4)
4.9	Memorandum of Understanding between Sprott-Shaw, Brown’s Town College and the Ministry of Labour and Social Security of Jamaica (4)
4.10	Education Program Cooperation Agreement with Far Eastern University (4)
4.11	Agreement between CIBT and Zhuzhou Technical College (4)
4.12	Agreement between CIBT and Jinhua Career & Technical College (4)
4.13	Agreement with Zhangzhou Normal University (4)
4.14	Education Program Cooperation Agreement between CIBT and National Cambridge College (4)
4.15	Memorandum of Understanding between Sprott-Shaw and Thang Long University (4)
4.16	Cooperation Agreement with China Central Radio and Television University (4)
4.17	Memorandum of Understanding between Sprott-Shaw and Hanoi Tourism College (4)
4.18	License granted by AHL-EI (4)
4.19	Assignment of License to CIBT Education Group (4)
4.20	Agreement with Weifang University regarding CIBT Beihai Center (4)

4.21	Agreement with Wyotech (1)
4.22	Agreement with Beijing University of Technology (1)
4.23	Agreement with ITT Educational Services, Inc. and Weifang University (1)
4.24	Acquisition Agreement of Sprott-Shaw (5)
4.25	Acquisition Agreement of Tourism Training Institute (5)
4.26	Acquisition Agreement of the KGIC Education Group of Companies (6)
4.27	Securities Purchase Agreement with Shane Corp. (1)
4.28	Agreement and Plan of Reorganization with Shane Corp. (3)
4.29	Memorandum of Understanding with Meridian International Business and Arts College (3)
4.30	Stock Option Plan (7)
4.31	Agreement with Open University of China (7)
4.32	Global Recruitment Agreement with Southpointe Academy (7)
4.33	Memorandum of Understanding with China Yunnan Radio and TV University (7)
4.34	Cooperation Agreement with CIBT and Yunnan International Exchange Centre (7)
4.35	Cooperation Agreement with University of Zhejiang Continuing Studies and CIBT (7)
4.36	Cooperation Agreement with Guangzhou University and CIBT (7)
4.37	Cooperation Agreement with Zhaoqing University and CIBT (7)
4.38	Agreement between CIBT and Hebei Normal University Foreign Language College (7)
4.39	Cooperation Agreement between CIBT and Henan Radio and Television University (7)
4.40	Agreement between CIBT and Hunan Radio and Television University (7)
4.41	Agreement with Open University of China re: hospitality management (7)
4.42	Agreement with Hainan Human Resources Training Center (7)
4.43	Employment Agreement with Patrick Dang (7)
4.44	Employment Agreement with Dennis Huang (7)
4.45	Earn Out Agreement with KGIC Vendors (7)
4.46	Agreement with the Canadian Institute of Education (7)
4.47	Agreement with Beijing Language and Culture University (7)
8.1	List of Subsidiaries (3)
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, 2012
*	Filed hereto

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, Chief Executive Officer	June 15, 2012
Toby Chu	Director, President, Chief Executive Officer	June 15, 2012

/s/ Dennis Huang	Chief Financial Officer	June 15, 2012
Dennis Huang	Chief Financial Officer	June 15, 2012

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