20-F 1 cibt-20f.htm FORM 20-F cibt-20f.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 20-F
 
o REGISTRATION STATEMENT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the fiscal year ended August 31, 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
 
 
 

 

TABLE OF CONTENTS
 
 
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1

 

NOTE REGARDING FORWARD-LOOKING STATEMENTS
 
This annual report, and any documents incorporated by reference in this annual report, may include “forward-looking statements”. To the extent that the information presented in this annual report discusses financial projections, information or expectations about our business plans, results of operations, products or markets, or otherwise makes statements about future events, such statements are forward-looking. Such forward-looking statements can be identified by the use of words such as “intends”, “anticipates”, “believes”, “estimates”, “projects”, “forecasts”, “expects”, “plans” and “proposes”. Although we believe the expectations reflected in these forward-looking statements are based on reasonable assumptions, there are a number of risks and uncertainties that could cause actual results to differ materially from such forward-looking statements. These include, among others, the risks and uncertainties outlined under the “Risk Factors” and “Operating and Financial Review and Prospects” sections of this annual report, many of which are beyond our control.
 
These forward-looking statements include, but are not limited to, the following:
 
  
statements contained in “Risk Factors”;
 
  
statements contained in “Operating and Financial Review and Prospects” and the notes to our consolidated financial statements, such as the potential impact of exchange rate fluctuations and potential changes in and effects of government regulation on our business; and estimates in our critical accounting policies;
 
  
statements contained in “Information on the Company” concerning our strengths, business strategies, competitiveness, teacher recruiting and retention and compliance with applicable law, rules and regulations; and
 
  
statements throughout concerning our legal structure and the regulation of our business.
 
Factors that could cause actual results to differ materially include, but are not limited to the following, which are discussed more fully in “Risk Factors”:
 
  
our anticipated strategies for growth;
 
  
our ability to manage our planned growth and integrate new business opportunities into our existing operations;
 
  
our need for additional capital to expand our operations;
 
  
our dependence on key personnel, CIBT center facility providers and educational service providers;
 
  
our ability to compete effectively with competitors that have greater financial, marketing and other resources;
 
  
risks involving the Chinese legal system, tax system, and foreign currency limitation; and
 
  
risks related to government regulations and approvals of private providers of educational services in China.
 
The forward-looking statements made in this annual report relate only to events or information as of the date on which the statements are made in this annual report. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events. You should read this annual report and the documents that we reference in this annual report and have filed as exhibits to the annual report with the understanding that our actual future results may be materially different from what we expect. You should not rely upon forward-looking statements as predictions of future events.
 
Other sections of this annual report include additional factors which could adversely impact our business and financial performance. Moreover, we operate in an evolving environment. New risk factors and uncertainties emerge from time to time and it is not possible for our management to predict all risk factors and uncertainties. We cannot assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.
 
 
2

 
 
EXCHANGE RATES
 
On September 1, 2008, we changed our reporting currency from the U.S. dollar to the Canadian dollar to match our functional currency. Accordingly, our consolidated financial statements and the financial information included in this annual report are presented in Canadian dollars (unless otherwise indicated).
 
The following table sets out exchange rates, between the Canadian dollar and the U.S. dollar for the periods indicated. These rates are provided solely for your convenience and are not necessarily the exchange rates that we used in this annual report or will use in the preparation of our periodic reports or any other information to be provided to you.  The source of these rates is the Federal Reserve Bank of New York.  As of February 28, 2012, the Noon Buying Rate for the conversion of Canadian dollars to U.S. dollars was C$0.9956 to U.S. $1.00.
 
Exchange Rates for Previous Six Months
 
 
High
Low
Average
January 2012
1.0272
0.9986
1.0130
December 2011
1.0403
1.0106
1.0235
November 2011
1.0487
1.0125
1.0246
October 2011
1.0440
0.9932
1.0187
September 2011
1.0389
0.9751
1.0021
August 2011
0.9909
0.9577
0.9816
 
Exchange Rates for Certain Financial Statement Periods
 
 
Average
Year ended August 31, 2011
1.0256
Year ended August 31, 2010
0.9579
Year ended August 31, 2009
0.8502
Year ended August 31, 2008
0.9937
Two months ended August 31, 2007
0.9427
Year ended June 30, 2007
0.8873
 
 
3

 
 
PRESENTATION OF INFORMATION
 
As used in this annual report, unless the context clearly suggests otherwise, references to (i) “we”, “us”, “our”, the “Company” or “CIBT Education Group” mean CIBT Education Group Inc. (formerly Capital Alliance Group Inc. until November 14, 2007) and its subsidiaries; (ii) “CIBT” mean CIBT School of Business & Technology Corp., our wholly-owned subsidiary that operates primarily in China in the education programs and services business; (iii) “Sprott-Shaw” mean Sprott-Shaw Degree College Corp., our wholly-owned subsidiary that operates primarily in Canada in the education programs and services business; (iv) “IRIX” mean IRIX Design Group Inc., our 51% owned subsidiary that operates a multimedia service and advertising agency primarily in Canada; and (v) “KGIC Colleges” collectively mean (a) KGIC Business College (2010) Corp. and (b) KGIC Language College (2010) Corp., our wholly-owned subsidiaries that were organized in connection with the acquisition of substantially all of the operating assets of KGIC on March 15, 2010.
 
In June 2008, we changed our fiscal year end from June 30 to August 31 to coincide with the fiscal year end date commonly used in the educational services industry and with the year end of Sprott-Shaw, our major subsidiary.
 
Accordingly, this annual report includes our audited consolidated financial statements for the years ended August 31, 2011, 2010 and 2009 and as at August 31, 2011 and 2010. These financial statements have been prepared in accordance with Canadian generally accepted accounting principles (“Canadian GAAP”), which differ in certain significant respects from U.S. generally accepted accounting principles (“U.S. GAAP”). Refer to Note 26 of our audited consolidated financial statements included in this annual report for an explanation of the material differences between Canadian GAAP and U.S. GAAP affecting these financial statements.
 
All financial information set forth in this annual report is presented in Canadian dollars (unless otherwise indicated) and should be read in conjunction with our consolidated financial statements and the notes thereto included elsewhere in this annual report.
 
On March 15, 2010, we acquired, through the KGIC Colleges, substantially all of the assets and assumed certain liabilities of KGIC, which operates in the education services business.  The results of the KGIC Colleges have only been consolidated into the financial statements included in this annual report for the relevant periods subsequent to the date of its acquisition.  See “Information on the Company - Overview – KGIC Colleges” for more information.
 
 
4

 

 
 
Not Applicable.
 
 
Not Applicable.
 
 
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 and 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”.
 
 
5

 
 
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)
 
Year Ended
August 31,
2011
(C$)
   
Year Ended
August 31,
2010
(C$)
   
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
   
(4,071,737)
      1,614,841       585,138       (3,532,201 )     (533,232 )     (1,124,124 )
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.
 
 
6

 
 
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.
 
 
7

 
 
B.  Capitalization and Indebtedness
 
Not Applicable.
 
C.  Reasons for the Offer and Use of Proceeds
 
Not Applicable.
 
D.  Risk Factors
 
Investing in our securities involves a high degree of risk.  You should carefully consider the following risk factors, together with all of the other information included in this annual report, before you decide whether to invest in our securities.  The risks and uncertainties described below are not the only risks and uncertainties facing us in the future.  Additional risks and uncertainties not presently known or that are currently considered to be immaterial may also materially and adversely affect our business operations or stock price.  If any of the following risks or uncertainties occurs, our business, financial condition, operating results and future growth prospects could materially suffer.  In that event, the trading price of our securities could decline and you may lose all or part of your investment.
 
Risks Related to Our Business
 
We have experienced losses and may not maintain profitability.
 
Although we have had profitable quarterly and annual periods in the past, we experienced losses for the year ended August 31, 2011 and it is possible we will experience losses in the future. In addition, we expect that our operating expenses and business development expenses will increase as we enroll more students, acquire new schools and continue to expand our program offerings through our acquisitions. As a result, there can be no assurance we will be able to generate sufficient revenues to maintain profitability.
 
Our education business expansion plans are currently focused on establishing Global Learning Network Center classrooms (“GLN Centers”) at institutions overseas where we have established partnerships, which is an unproven business model.
 
Our focus on delivering programs and courses to students overseas has been to establish partnerships with overseas education institutions where we set up GLN Centers with video-conferencing technology. Sprott-Shaw, KGIC and CIBT then deliver their programs to overseas students at the remote GLN Centers from our studios located in Vancouver and Beijing, which streamlines our course offerings, generates economies of scale by reducing our overhead costs and we believe provides us with a competitive advantage by allowing us to offer a western style education, which is in high demand, to students in their home countries at a comparatively lower cost than establishing physical centers and hiring North American and European instructors to teach overseas. For our year ended August 31, 2011, we taught several classes using the GLN Centers and our management expects further use of the network in the current fiscal year. However, if students do not accept this new method of education, or technological advances become too costly to implement within our existing infrastructure, we may be forced to deviate from or change our business model and revenues generated from our education business may be adversely impacted.
 
Delivering programs and courses through our GLN Centers exposes our schools to the risk of infringement of their intellectual property rights and to potential theft of their course content and materials.
 
The programs and courses delivered by our schools through our GLN Centers to students overseas are susceptible to theft by third parties and may result in the infringement of the intellectual property rights of our subsidiary schools. Technology exists to allow third parties to gain unauthorized access to video conferencing calls, and to course materials we make available to our students online. Although we have implemented sophisticated third party software that provides security to protect against unauthorized access, and we plan to continually upgrade our security software in step with changing advances in technology, we may be required to take further precautions in the future, which may be costly and time consuming to implement.
 
Despite our efforts, the risk of breach cannot be completely eliminated. For example, the security software we utilize may be unable to stay ahead of changing methods to breach such software. Policing unauthorized access to our technology and theft of our program and course content could prove to be costly if we are forced to pursue litigation to prevent unauthorized use of stolen program or course content. This could divert the attention of our management or materially disrupt the conduct of operations of our subsidiary schools, which may in turn impact our revenues, financial condition and results of operations.
 
 
8

 
 
If we are not able to continually enhance our online courses and services and adapt to rapid changes in technological demands and student needs, we may lose market share and our business could be adversely affected.
 
Widespread use of the Internet, video-conferencing and other technologies for educational delivery purposes is a relatively recent occurrence, and the market for live course and services is characterized by rapid technological changes and innovations, as well as unpredictable product life cycles and user preferences. A portion of our revenues is derived from online courses and services. As such, we must be able to adapt quickly to changing student needs and preferences, technological advances and evolving Internet practices in order to compete successfully in the online education industry. Ongoing enhancement of our online offerings and technologies may entail significant expenses and technological risks. We may be unable to use new technologies effectively and we may fail to adapt to changes in the online video conferencing education market on a timely and cost-effective basis. We began offering online video conferencing courses in September 2008 through a GLN teaching studio located in Beijing, China and since that time we have expanded our teaching facilities with a GLN teaching studio built in Vancouver, Canada in March 2011. However, if improvements to our online video conferencing offerings and technologies are not implemented on an ongoing basis, there are systems interruptions or our technologies and video conferencing offerings are not aligned with student expectations or preferences, our enrollment levels may be negatively affected, which may have an adverse impact on our profitability.
 
We will need additional capital to fully carry out our proposed expansion plan, and we may not be able to further implement our business strategy unless sufficient funds are raised, which could cause us to scale back our proposed plans or discontinue our expansion.
 
We estimate that we will require approximately $1,000,000 in order to carry out our expansion plan for fiscal 2012.  This may require additional financing. We had cash and cash equivalents of approximately $6,456,568 and a working capital deficit of approximately $4,601,899 as of August 31, 2011.  We plan to obtain the necessary additional funds from the sale of our securities or loans, if required.  However, there can be no assurance that we will obtain the financing required, or at all.  If we are not able to obtain the necessary additional financing, we may be forced to scale back our expansion plans or eliminate them altogether.  Expending our cash resources on expansions could also negatively impact our current operations by reducing the amount of funds available to cover additional expenses that may arise in the future or offset losses should we suffer a decrease in revenues.
 
Historically, we have funded our operations primarily from the proceeds of share issuances.  However, our ability to obtain additional financing is subject to a number of factors, including market conditions and their impact on the market price of our common shares, the downturn in the global economy and resulting impact on stock markets and investor sentiment, our competitive ability, investor acceptance of our business or our expansion plan, and the political and economic environments of countries where we are doing business.  These factors may make the timing, amount, terms and conditions of additional financing unattractive or unavailable to us.  If we are unable to raise additional financing, we will have to significantly reduce, delay or cancel our planned expansion activities.  We cannot assure you that we will have sufficient resources to successfully conduct our expansion, or that we will be able to obtain any additional funding required, in which event we may not be able to continue our expansion or our expansion plan may fail.  There can be no assurance that we will achieve our plans, or any of them.
 
The expansion of our business through acquisitions, joint ventures, and other strategic transactions creates risks that may reduce the benefits we anticipate from these strategic transactions.
 
We intend to enter into acquisitions, joint ventures and other strategic transactions, directly or through our subsidiaries CIBT, Sprott-Shaw or the KGIC Colleges, as vehicles to acquire new campuses or schools to expand our education business in China and other countries.  We are always seeking out new business acquisitions, partnership opportunities and joint ventures to expand our operations.  Our management is unable to predict whether or when any other future strategic transactions will occur, including identifying suitable acquisition targets, partnership opportunities or joint venture partners, or the likelihood of any particular transaction being completed on terms and conditions that are favorable to us.
 
Acquisitions, joint ventures or other strategic transactions may present financial, managerial and operational challenges, including but not limited to maintaining the consistency of our teaching quality and our culture to ensure that our brand recognition does not suffer.  We may be exposed to successor liability relating to prior actions involving a predecessor company, or contingent liabilities incurred before a strategic transaction.  Liabilities associated with an acquisition or a strategic transaction could adversely affect our financial performance.  Any failure to integrate new businesses or manage any new alliances successfully could adversely affect our reputation and financial performance.
 
The operations of any businesses acquired by us are subject to their own risks, which we may not be able to manage successfully.
 
The financial results of any businesses acquired by us may be subject to many of the same factors that affect our financial condition and results of operations, including the seasonal nature of the education business, exposure to currency exchange rate fluctuations, the competitive nature of the market or markets in which the acquired business operates, fluctuating levels of enrollment and regulatory, legislative and judicial developments.  The financial results of any businesses acquired could be materially adversely affected as a result of any of these or other related factors, which we may not be able to manage successfully, and which could have a material adverse effect on our results of operations and financial condition on a consolidated basis.
 
 
9

 
 
We may have only limited recourse for losses relating to an acquisition.
 
The due diligence conducted in connection with an acquisition made by us and the indemnification that may be provided in the related acquisition agreement may not be sufficient to protect us from, or compensate us for, losses resulting from such acquisition.  Subject to certain exceptions, the seller may only be liable for misrepresentations or breaches of representations and warranties for several months from the closing date of the acquisition.  A material loss associated with the acquisition for which there is no adequate remedy under the acquisition agreement that becomes known to us after that time could materially adversely affect our results of operations and financial condition and reduce the anticipated benefits of the acquisition.
 
We may not be able to improve the operating performance and financial results or lower the costs of services provided as planned.
 
While we believe that there usually are a number of opportunities to reduce operating costs and improve the financial results of businesses acquired by us, we cannot fully evaluate the feasibility of our plans until we control the acquired business.  We may not be able to achieve our planned operating improvements, cost reductions or expected synergies in our expected time periods, if at all.  In addition, some of the improvements we plan to implement may depend upon capital expenditure projects at the acquired business.  Such capital projects may not be completed in our expected time periods, if at all, may not achieve the results that we have estimated or may have a cost substantially in excess of our planned amounts.  This could materially adversely affect our results of operations and financial condition on a consolidated basis.
 
Failure to effectively and efficiently manage the expansion of our school network may materially and adversely affect our ability to capitalize on new business opportunities.
 
We plan to pursue a number of different strategies to expand our operations, including acquiring existing education institutions that align with our business plan, exporting our Sprott-Shaw and CIBT programs to Asia, expanding our network of agents who recruit students on our behalf, importing international students to Canada who will pay higher international fees, thereby generating more revenues than domestic students, enhancing our infrastructure in China and Canada, and expanding our presence worldwide through a combination of acquiring other businesses with established campuses or entering into joint ventures or partnerships with other educational institutions to expand the number of our GLN Centers.
 
We acquired Sprott-Shaw in December 2007 and have since expanded its program offerings and partnerships, and we acquired the assets of KGIC on March 15, 2010.  The rapid pace at which we have expanded and plan to continue expanding in the future may place substantial demands on our management, faculty, operational, technological and other resources.  In particular, we may face challenges in the following areas:
 
  
controlling costs and developing operating efficiencies to manage the financial side of our expansion;
 
  
maintaining the consistency of our teaching quality and our culture to ensure that recognition of our brands does not suffer;
 
  
improving our existing operational, administrative and technological systems and our internal control over financial reporting;
 
  
recruiting, training and retaining additional qualified instructors and management personnel as well as other administrative and sales and marketing personnel, particularly as we expand into new markets;
 
  
continuing to market the CIBT and Sprott-Shaw brands to recruit new students for existing and future learning centers; and
 
  
obtaining the necessary government approvals to operate in new countries.
 
We cannot assure you that we will be able to effectively and efficiently manage the growth of our operations.  Any failure to effectively and efficiently manage our expansion may materially and adversely affect our ability to capitalize on new business opportunities or effectively run our existing operations, which in turn may have a material adverse impact on our business, our internal control over financial reporting, our financial condition and our results of operations.
 
 
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Our students in Canada are subject to risks relating to financial aid and student loans.  A substantial decrease in government student loans, or a significant increase in financing costs for our students, could have a material adverse affect on student enrollment and financial results.
 
Sprott-Shaw’s students in Canada are highly dependent on government-funded financial aid programs. Students apply for student loans on an annual basis. If there are changes to financial aid program regulations that restrict student eligibility or reduce funding levels for student loans, our enrollment and/or collection of student billings may suffer, causing revenues to decline. As a result, we are indirectly dependent upon and affected by government-funded financial aid programs that may be available to our students. The student loan lending criteria within British Columbia, Canada has become more stringent over the twelve months ended August 31, 2011. To align its operations with the new guidelines, Sprott-Shaw has modified its marketing and recruitment policies and shut down unprofitable campuses that have high rates of student loan defaults.
 
Students also receive a tax deduction for all or a portion of the amount of tuition paid by the individual in a particular tax year, and an amount for textbooks (called an education tax credit) that is based on whether the student attended on a “full-time” or “part-time” basis, as set out in applicable Canadian and provincial income tax laws. The availability of these tax credits may impact the financial ability of our students to enroll in our programs and if such tax credits were to be eliminated or reduced, our enrollment levels may decline, which could result in a decrease in our revenues.
 
If we are not able to have our campuses and education facilities in Canada certified as eligible educational institutions in accordance with the requirements of applicable student loan regulations at the federal and provincial levels, our students will not be eligible for student loans if they enroll in our programs and we could suffer from reduced enrollment levels, which would have a material adverse affect on our revenues.
 
As of August 31, 2011, approximately 54% of Sprott-Shaw’s students received a form of government student financial assistance.  Private educational institutions must be certified on a campus by campus basis in order for their students to be eligible to apply for student loan and student grant funding. Certifications are valid for a period of up to five years, subject to review by the granting authority. There are also a number of administrative requirements that must be complied with in order to maintain an existing certification. Sprott-Shaw employs a manager of Student Services and two other staff members whose responsibilities include the oversight of each campus’ compliance program with the administrative requirements to maintain their student loan accreditations.  In addition, Sprott-Shaw’s head office and StudentAid BC each conducts semi-annual audits to verify that the campuses are in compliance. However, there can be no assurance that our campuses will be certified in the future or will maintain their existing certifications.  See “Operating and Financial Review and Prospects – Uncertainties of Government Policies” for more information on the certification process.
 
There is therefore no guarantee that our currently certified facilities will continue to be certified in the future. Any loss of certification would be on a campus by campus basis, rather than on an entity-wide basis, which would reduce the impact on our operating results.  Additionally, the requirements to obtain certification or maintain an existing certification may change, making it more difficult to become certified, limiting the number of certifications granted or increasing the number of administrative requirements to maintain an existing certification. If we were to lose certifications for a number of our campuses, our enrollment levels would in all likelihood decrease, which would negatively impact our financial condition, results of operations and the value of your investment in us.
 
If we are not able to continue to attract students to enroll in our courses, our revenues may decline and we may not be able to maintain profitability.
 
The success of our business depends primarily on the number of students enrolled in our courses and the amount of course fees that our students are willing to pay.  Our ability to continue increasing our student enrollment levels without a significant decrease in course fees is critical to the continued success and growth of our business.  This in turn will depend on several factors, including our ability to develop new programs and enhance existing programs to respond to changes in market trends and student demands, manage our growth while maintaining the consistency of our teaching quality, effectively market our programs to a broader base of prospective students, develop and license additional high-quality educational content and respond to competitive pressures.  If we are unable to continue to attract students to enroll in our courses without a significant decrease in course fees, our financial condition, results of operations and cash flows could be materially adversely affected.
 
If we fail to develop and introduce new courses, services and products that meet our students’ expectations, our competitive position and ability to generate revenues may be materially and adversely affected.
 
Our core business is centered on providing our education programs and training services in Canada and in urban communities in China, the Philippines and other overseas areas where our subsidiary schools operate. As the growing trend toward urbanization is expected to result in more people seeking job and career advancement opportunities in urban areas, we may have to develop new courses, services and products to remain competitive and generate revenues.  Unexpected technical, operational, logistical, regulatory or other problems could delay or prevent the introduction of one or more new programs or services.  Moreover, we cannot assure you that any of these programs or services will match the quality or popularity of those developed by our competitors, achieve widespread market acceptance or generate the desired level of income.
 
 
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An increase in interest rates could adversely affect our ability to attract and retain students.
 
Some of our students finance their education through private loans that are not subsidized. If our students’ employment circumstances are adversely affected by regional, national or global economic downturns, they may be more heavily dependent on student loans. Interest rates have reached relatively low levels in recent years, creating a favorable borrowing environment for students. However, in the event interest rates increase, our students may have to pay higher interest rates on their loans. Any future increase in interest rates will result in a corresponding increase in educational costs to our existing and prospective students, which could result in a significant reduction in our student population and revenues.
 
If we cannot maintain student enrollments, our results of operations may be adversely affected.
 
Our strategy for growth and profitability depends, in part, upon the retention of our students. While we provide certain services to our students in an effort to aid in retaining students and lower attrition rates, many of our students may face financial, personal, or family constraints that require them to withdraw within a term or at the end of a given term. Additionally, some students may decide to continue their education at a different institution. If for any reason we are unable to attract qualified new students, or are unable to effectively predict and manage student attrition, overall enrollment levels are likely to decline. If we cannot attract and retain our current students, our business, prospects, financial condition and results of operations may be adversely affected.
 
Our quarterly results of operations are likely to fluctuate based on our seasonal student enrollment patterns.
 
Our business is seasonal in nature. Sprott-Shaw and CIBT receive the bulk of their cash flows at the beginning of each new school term.  KGIC’s cash flows are received primarily in June due to the increase in student enrollments in its summer camp programs. Accordingly, our results in a given quarter may not be indicative of our results in any subsequent quarter or annually. Changes in our total student population may influence our quarterly results of operations.  Our student population varies as a result of new student enrollments, graduations and student attrition.
 
Our institutes’ academic schedule generally does not affect our costs and our costs do not fluctuate significantly on a quarterly basis.  Fluctuations in quarterly results, however, may impact management's ability to accurately project the available cash flows necessary for operating and growing expenses through internal funding.  We expect quarterly fluctuations in results of operations to continue as a result of seasonal enrollment patterns.  These patterns may change, however, as a result of new campus openings, new program offerings and increased enrollment of adult students.  Our operating results have fluctuated and may continue to fluctuate widely.
 
The continued success and growth of our business depends upon recognition of our “CIBT”, “Sprott-Shaw”, and “KGIC” brands.  If we are not able to maintain and enhance our brands, our business and operating results may be harmed.
 
We believe that our history of successful operations and innovative course offerings such as our 1+1 master’s degree and 2+2 bachelor’s degree programs and English as a Second Language (“ESL”) programs have increased recognition of our “CIBT”, “Sprott-Shaw” and “KGIC” brands and create a competitive advantage for us in our key markets.  In the future, we will need to build upon this brand recognition to continue to attract potential students in the face of increased competition in the private education markets in Canada, China and other markets in which we operate.  As we continue to expand our operations, maintaining the quality of our teaching and program offerings may be difficult to achieve.
 
We have initiated campaigns to promote our brands, but we cannot be certain that these efforts will continue to be successful.  If we are unable to further enhance our brand recognition and increase awareness of our programs and services, our business, financial condition and results of operations may be adversely affected.
 
We operate in a highly competitive industry, and competitors with greater resources could harm our business, decrease market share and put downward pressure on our tuition rates.
 
The post-secondary education market is highly fragmented and competitive.  We compete for students with traditional public and private colleges and universities, other not-for-profit schools, including those that offer online learning programs, and alternatives to higher education, such as employment and military service.  Many public and private schools, colleges, and universities offer online programs.  We expect to experience additional competition in the future as more colleges, universities, and for-profit schools offer an increasing number of online programs.  Public institutions receive substantial government subsidies, and public and private non-profit institutions have access to government and foundation grants, tax-deductible contributions, and other financial resources generally not available to for-profit schools.  Accordingly, public and private nonprofit institutions may have instructional and support resources superior to those in the for-profit sector, and public institutions can offer substantially lower tuition prices.  Some of our competitors in both the public and private sectors also have substantially greater financial and other resources than us.  We may not be able to compete successfully against current or future competitors and may face competitive pressures that could adversely affect our business, prospects, financial condition, and results of operations.  These competitive factors could cause our enrollments, revenues, and profitability to significantly decrease.
 
 
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Compliance with rules and requirements applicable to public companies may cause us to incur increased costs, which may negatively affect our results of operations.
 
Changing laws, regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act and related regulations implemented by the SEC, NYSE Amex, Toronto Stock Exchange and Canadian securities regulators are creating uncertainty for public companies, increasing legal and financial compliance costs and making some activities more time consuming.  We are currently evaluating and monitoring developments with respect to new and proposed rules and cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.  These laws, regulations and standards are subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies.  This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices.  We intend to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities.  If our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to practice, regulatory authorities may initiate legal proceedings against us and our business may be harmed.  We also expect that these new rules and regulations will make it more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage.  These factors could also make it more difficult for us to attract and retain qualified directors to sit on our board of directors (“Board of Directors”), particularly to serve on our audit committee and compensation committee, and qualified executive officers.
 
We may be negatively affected by increased operating costs as a result of KGIC’s unionization.
 
KGIC is currently in negotiation with a union representing approximately 40 ESL teachers from KGIC. Discussions have not been concluded at this time and it is expected that reaching an agreement may take 3 to 6 months. When an agreement is reached, if any, we could be negatively impacted by increased operating costs, which could have a material adverse effect on our results of operation and financial condition. Assuming a bargaining agreement with the teachers union is reached, the net increase to payroll expenses forecast by management at this time would not be significant on a consolidated basis.
 
We conduct our business activities in various foreign jurisdictions, which exposes us to the risk of foreign investigations, claims and tax reviews.
 
Our activities involve business relationships with teaching colleges and business associates located in foreign jurisdictions.  In addition, our goals over the next 12 months include expanding our presence in some foreign jurisdictions.  As a result, we could be involved in various foreign investigations, claims and tax reviews that arise in the course of our business activities.  Each of these matters is subject to various uncertainties and it is possible that some of these matters may not be resolved in our favor.  Applicable taxes include value added tax, corporate income tax (profits tax), and payroll (social) taxes.  Matters of taxation, as well as other areas, are subject to review and investigation by governmental authorities who are often enabled by law to impose severe fines and penalties.  Any regulatory uncertainty in taxation or other areas could negatively affect us through increased operating costs, which could have a material adverse effect on our results of operation and financial condition.
 
We may be unable to establish and maintain an effective system of internal control over financial reporting, and as a result we may be unable to accurately report our financial results or prevent fraud.
 
Section 404 of the Sarbanes-Oxley Act requires that we include a report from management on our internal control over financial reporting in our Annual Report on Form 20-F.  In addition, our independent registered public accounting firm may in the future have to attest to and report on management’s assessment of the effectiveness of our internal control over financial reporting if we qualify as an “accelerated filer” or “large accelerated filer”, as such terms are defined in the Exchange Act and the general rules and regulations thereunder. Our management has in the past and may in the future conclude that our internal control over financial reporting is not effective.  In the process of documenting and improving our controls over financial reporting in the last three years, management has identified certain material weaknesses that existed in the design or operation of our internal control over financial reporting, including ineffective control over the financial reporting of recently acquired subsidiaries; insufficient numbers of accounting and finance staff to service our business segments; and ineffective controls related to the period-end financial reporting process that impacts management’s ability to oversee the preparation of our consolidated financial statements. We are currently in the process of rectifying these deficiencies. In addition, other internal control issues may be discovered in the future which we may not be able to fully rectify.  Moreover, even if our management concludes that our internal control over financial reporting is effective, our independent registered public accounting firm may disagree and may decline to attest to our management’s assessment or may issue an adverse opinion if required in the future.  Any of these possible outcomes could result in an adverse reaction in the financial marketplace due to a loss of investor confidence in the reliability of our reporting processes, which could adversely affect the trading price of our common shares.
 
 
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We may be negatively affected by the recent global financial market and economic crisis.
 
The ongoing global financial crisis has adversely affected the Canadian, United States and other world economies.  To address the global financial crisis, the Chinese government adopted increasingly flexible macroeconomic policies, including an announced fiscal stimulus package, aimed at offsetting the slowdown brought about by the global financial crisis, and, as a result, China’s overall economy continued to grow rapidly.  However, due to, among other things, concerns about inflation and the development of a bubble in China’s housing market resulting from the fast pace of growth of its economy, the government of China in 2010 and 2011  increased interest rates, which could negatively impact China’s overall economy. In addition, the ongoing global financial crisis affecting the banking system and financial markets has resulted in a severe tightening in credit markets, a low level of liquidity in many financial markets and increased volatility in credit and equity markets.  If these conditions continue or worsen, our cost of borrowing may increase and it may become more difficult to obtain financing for our operations or investments, which may adversely affect our business operations and implementation of our growth strategy.
 
Because our assets are located outside of the United States and some of our directors and officers resides outside of the United States, it may be difficult for you to enforce your rights based on the United States federal securities laws against us and these officers and directors in the United States or to enforce judgments of United States courts against us in China or Canada.
 
Some of our directors and officers reside outside of the United States in China and Canada.  In addition, our operating subsidiaries are located in China and Canada and substantially all of our assets are located outside of the United States.  China does not have a treaty with the United States providing for the reciprocal recognition and enforcement of judgments of courts.  It may therefore be difficult for investors in the United States to enforce their legal rights based on the civil liability provisions of the United States federal securities laws against us and these officers and directors in the courts of either Canada or China and, even if civil judgments are obtained in courts of the United States, to enforce such judgments in Canadian or Chinese courts.  Further, it is unclear if extradition treaties now in effect between the United States and China would permit effective enforcement against us or our officers and directors of criminal penalties, under the United States federal securities laws or otherwise.
 
Risks Related to Doing Business in China
 
We are exposed to currency exchange risk which could cause our reported earnings or losses to fluctuate.
 
The value of the renminbi (“RMB”) against the Canadian dollar fluctuates and is affected by, among other things, changes in political and economic conditions in China as well as the global economy.  On July 21, 2005, the Chinese government changed its decade-old policy of pegging the value of the RMB to the U.S. dollar.  Under the new policy, the RMB is permitted to fluctuate within a narrow and managed zone against a group of foreign currencies.  This change in policy has resulted in a depreciation of the RMB against the Canadian dollar during the year ended August 31, 2011.  It is possible that the Chinese government could adopt a more flexible currency policy, which could increase the volatility of the exchange rate between the RMB and the U.S. dollar.  We can offer no assurance that the RMB will be stable against the U.S. dollar or any other foreign currency.
 
Our functional and reporting currency is the Canadian dollar.  However, a substantial amount of our assets, liabilities, revenues and expenses are denominated in RMB.  As our Chinese business grows, a greater portion of our revenues and costs are expected to be denominated in RMB.  As a result, we are exposed to currency exchange risk on any assets and liabilities and revenues and expenses denominated in currencies other than the Canadian dollar, including the RMB.  To the extent the Canadian dollar strengthens against foreign currencies, the translation of these foreign currency denominated transactions results in reduced revenue, operating expenses and net income or loss for our international operations.  Similarly, to the extent the Canadian dollar weakens against foreign currencies, the translation of these foreign currency denominated transactions results in increased revenue, operating expenses and net income or loss for our international operations.  We do not currently engage in currency hedging transactions to offset fluctuating currency exchange rates.
 
 
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We are subject to limitations on our ability to convert Chinese currency.
 
China's national currency, the RMB, is not a freely convertible currency.  The Chinese government imposes controls on the conversion of RMB to foreign currencies and, in certain cases, the remittance of currencies out of China.  As our Chinese business expands, we expect to derive an increasing amount of our revenues in RMB.  Shortages in the availability of foreign currency may restrict the ability of our Chinese subsidiary and our affiliated entities to remit sufficient foreign currency to make payments to us, or otherwise satisfy their foreign currency denominated obligations.
 
Under existing Chinese foreign exchange regulations, payments of current account items, including profit distributions, interest payments and expenditures from trade-related transactions, can be made in foreign currencies without prior approval from the Chinese State Administration of Foreign Exchange, or “SAFE”, by complying with certain procedural requirements.  However, approval from appropriate government authorities is required when RMB is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of bank loans denominated in foreign currencies.  The Chinese government may also at its discretion restrict access in the future to foreign currencies for current account transactions.  The foreign exchange control system may prevent us from obtaining sufficient foreign currency to satisfy our demands, which may adversely affect our business and development.
 
The SAFE restrictions on currency exchange may limit our ability to utilize our revenues effectively and the ability of our Chinese subsidiary to obtain financing.
 
A significant amount of our revenues and operating expenses are denominated in RMB.  Restrictions on currency exchange imposed by the Chinese government may limit our ability to utilize revenues generated in RMB to fund our business activities outside China, if any, or expenditures denominated in foreign currencies.  Under current Chinese regulations, RMB may be freely converted into foreign currency for payments relating to “current account transactions”, which include among other things dividend payments and payments for the import of goods and services, by complying with certain procedural requirements.  Our Chinese subsidiary may also retain foreign exchange in their respective current account bank accounts, subject to a cap set by SAFE or its local counterpart, for use in payment of international current account transactions.
 
However, conversion of RMB into foreign currencies and of foreign currencies into RMB, for payments relating to “capital account transactions”, which principally includes investments and loans, generally requires the approval of SAFE and other relevant Chinese governmental authorities.  Restrictions on the convertibility of the RMB for capital account transactions could affect the ability of our Chinese subsidiary to make investments overseas or to obtain foreign exchange through debt or equity financing, including by means of loans or capital contributions from us.
 
Any existing and future restrictions on currency exchange may affect the ability of our Chinese subsidiary or affiliated entity to obtain foreign currencies, limit our ability to utilize revenues generated in RMB to fund our business activities outside China that are denominated in foreign currencies, or otherwise materially and adversely affect our business.
 
If we make equity compensation grants to persons who are Chinese citizens, they may be required to register with SAFE.  We may also face regulatory uncertainties that could restrict our ability to adopt equity compensation plans for our directors and employees and other parties under Chinese laws.
 
On April 6, 2007, SAFE issued the “Operating Procedures for Administration of Domestic Individuals Participating in the Employee Stock Ownership Plan or Stock Option Plan of An Overseas Listed Company, also known as “Circular 78.”  It is not clear whether Circular 78 covers all forms of equity compensation plans or only those which provide for the granting of stock options.  For any plans which are so covered and are adopted by a non-Chinese listed company, such as our company, after April 6, 2007, Circular 78 requires all participants who are Chinese citizens to register with and obtain approvals from SAFE prior to their participation in the plan.  In addition, Circular 78 also requires Chinese citizens to register with SAFE and make the necessary applications and filings if they participated in an overseas listed company’s covered equity compensation plan prior to April 6, 2007.  We believe that the registration and approval requirements contemplated in Circular 78 will be burdensome and time consuming.
 
In the future, we may adopt an equity incentive plan and make numerous stock option grants under the plan to our officers, directors and employees, some of whom may be Chinese citizens and may be required to register with SAFE.  If it is determined that any of our equity compensation plans are subject to Circular 78, failure to comply with such provisions may subject us and participants of our equity incentive plan who are Chinese citizens to fines and legal sanctions and prevent us from being able to grant equity compensation to our Chinese employees.  In that case, our ability to compensate our employees and directors through equity compensation would be hindered and our business operations may be adversely affected.
 
 
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We depend upon the acquisition and maintenance of numerous approvals to conduct our business in China.  Failure to obtain or renew these approvals will adversely affect our operation in China.
 
We are dependent upon certain approvals in China, including, without limitation, campus approvals, and program approvals, to conduct our business.  While we believe that all steps necessary to obtain or maintain these approvals have been taken and will be taken, the failure to obtain or renew these approvals could have a material adverse impact on our business, results of operations and financial condition.  It is also possible that new laws and regulations governing the education business in China will prohibit or restrict foreign investment in the education business generally, which could prevent us from obtaining or renewing our governmental approvals.  Accordingly, we may have to cease our education business in China, which would significantly impact the scope of our operations and may materially adversely impact our results of operations.
 
The following permits and licenses we previously obtained have expired: our joint programs between CIBT and Western International University (“WIU”) expired on April 1, 2008; and between CIBT and ITT Educational Service expired on August 31, 2007.  Our Boeing MBA program in cooperation with City University expired on June 1, 2007.  Also our regular MBA program in cooperation with City University was terminated in October 2010.
 
During the application or renewal process for our licenses and permits, we will be evaluated and re-evaluated by the appropriate governmental authorities and must comply with the prevailing standards and regulations, which may change from time to time.  In the event that we are not able to obtain or renew the certificates, permits and licenses, all or part of our operations may be suspended by the government, which would have a material adverse effect on our business and financial condition.  Furthermore, if escalating compliance costs associated with governmental standards and regulations restrict or prohibit any part of our operations, it may materially adversely affect our results of operations and profitability.
 
The education sector, in which most of our business is conducted, is subject to extensive regulation in China, and our ability to conduct business is highly dependent on our compliance with these regulatory frameworks.
 
The Chinese government regulates all aspects of the education sector, including licensing of parties to perform various services, pricing of tuition and other fees, curriculum content and standards for the operations of schools and learning centers associated with foreign participation.  The laws and regulations applicable to the education sector are in some aspects vague and uncertain, and often lack detailed implementing regulations.  These laws and regulations are subject to change, and new laws and regulations may be adopted, some of which may have retroactive application or have a negative effect on our business.  For example, in 2003, the Chinese government adopted a new regulatory framework for Chinese-foreign cooperation in education.  This new framework may encourage institutions with more experience, better reputations, greater technological know-how and larger financial resources than we have to compete against us and limit our growth.  In addition, because the Chinese government and the public view the conduct of educational institutions as a vital social service, there is considerable ongoing scrutiny of the education sector and its participants.
 
Chinese regulators have broad powers to regulate the tuition and other fees charged by schools and, as a result, can adversely impact the fees we receive from the provision of our services.  While China’s regulatory framework provides that investors in private schools are entitled to receive a “reasonable return” on their investment, there is no clear guidance in law as to what this term means.
 
We must comply with China’s extensive regulations on private and foreign participation in the education sector.  Although our corporate structure and business are designed to comply with the limitations on foreign investment and participation in the education sector, we cannot assure you that we will not be found to be in violation of any current or future Chinese laws and regulations.
 
According to the new company law of the People’s Republic of China (“PRC”) enacted January 1, 2006, the PRC corporations shall have a board of supervisors or a supervisor in addition to a board of directors.  Our two subsidiaries in China, Beijing Fenghua Education Consulting Co., Ltd. and Weifang Jiahua Education Consulting Co., Ltd., currently have no supervisor or board of supervisors. Therefore, the State Administration of Industry and Commerce (“SAIC”) may request that either or both of the two subsidiaries revise their articles of association and establish a board of supervisors when they apply for renewal of their business licenses with the SAIC in the future.
 
According to the regulations on “Chinese-foreign Cooperation in Running a School” and the “Rules on Administration of Private Non-enterprise Unit Registration”, a Chinese-foreign cooperative joint venture school without legal person status requires approval from the Ministry of Education (“MOE”), a central state government authority in charge of foreign cooperation, or a certificate of Chinese-foreign cooperation in running a school from the provincial government. One of our subsidiaries, Beihai International College of Weifang University (“Beihai Weifang School”) is operating as a Chinese-foreign cooperative joint venture school without legal person status according to an official confirmation letter issued by the People’s Government of Shandong Province on December 31, 2004. Beihai Weifang School has since obtained its approval to operate as a Chinese-foreign cooperative joint venture school from the Shangdong provincial government.
 
 
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Chinese economic, political and social conditions, as well as changes in any government policies, laws and regulations, could adversely affect the overall economy in China or the prospects of the education market, which in turn could adversely affect our business.
 
A significant amount of our operations are conducted in China, and a significant amount of our revenues are derived from China. Accordingly, our business, financial condition, results of operations, prospects and certain transactions we may undertake are subject, to a significant extent, to economic, political and legal developments in China.
 
The Chinese economy differs from the economies of most developed countries in many respects, including the amount of government involvement, level of development, growth rate, control of foreign exchange and allocation of resources. While the Chinese economy has experienced significant growth in the past two to three decades, growth has been uneven, both geographically and among various sectors of the economy. Demand for our programs and services depends, in large part, on economic conditions in China. Any slowdown in China’s economic growth may cause our potential customers to delay or cancel their plans to participate in our educational services, which in turn could reduce our revenues.
 
Although the Chinese economy has been transitioning from a planned economy to a more market-oriented economy since the late 1970s, the Chinese government continues to play a significant role in regulating industry development by imposing industrial policies. The Chinese government also exercises significant control over China’s economic growth through the allocation of resources, controlling the incurrence and payment of foreign currency-denominated obligations, setting monetary policy and providing preferential treatment to particular industries or companies. Changes in any of these policies, laws and regulations could adversely affect the overall economy in China or the prospects of the education market, which could harm our business.
 
The Chinese government has implemented various measures to encourage foreign investment and sustainable economic growth and to guide the allocation of financial and other resources, which have for the most part had a positive effect on our business and growth. However, we cannot assure you that the Chinese government will not repeal or alter these measures or introduce new measures that will have a negative effect on us.
 
China’s social and political conditions are also not as stable as those of the United States and other developed countries. Any sudden changes to China’s political system or the occurrence of widespread social unrest could have negative effects on our business and results of operations. In addition, China has tumultuous relations with some of its neighbors, including India, and a significant further deterioration in such relations could have negative effects on the Chinese economy and lead to changes in governmental policies that could be adverse to our business interests.
 
Uncertainties with respect to the Chinese legal system could adversely affect us.
 
Our operations in China are governed by Chinese laws and regulations. The Chinese legal system is based on written statutes. Prior court decisions may be cited for reference but are not relied upon as precedents. Since 1979, Chinese legislation and regulations have significantly enhanced the protections afforded to various forms of foreign investments in China. However, China has not developed a fully integrated legal system and recently enacted laws and regulations may not sufficiently cover all aspects of economic activities in China. In particular, because these laws and regulations are relatively new, and because of the limited number of published decisions and their non-binding nature, the interpretation and enforcement of these laws and regulations involve uncertainties. Operating in China involves a high risk that restrictive rules and regulations could change at any time.  Chinese authorities could assert that any portion or all of our existing or future ownership structure and business violate existing or future Chinese laws and regulations and require us to curtail or cease our operations in China.
 
In addition, the Chinese legal system is based in part on governmental policies and internal rules (some of which are not published on a timely basis, or at all) that may have a retroactive effect. As a result, we may not be aware of our violation of these policies and rules until after the occurrence of the violation. If Chinese authorities find us to be in violation of any Chinese laws or regulations, they would have broad discretion in dealing with such a violation, including, without limitation, the following:
 
  
levying fines;
 
  
revoking our business licenses and other approvals;
 
  
requiring us to restructure our ownership or operations; and
 
  
requiring us to discontinue any portion or all of our education business in China.
 
Our business, financial condition and results of operations may be adversely affected by the uncertainties of the Chinese legal system or any changes in the laws and regulations that are applicable to us.
 
 
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We are subject to uncertainty related to the tax systems in China and any uncertainty in taxation could negatively affect our business, results of operations and financial condition.
 
Through our subsidiaries, we conduct a significant amount of our business in China. China currently has a number of laws related to various taxes imposed by both national and regional governmental authorities. Applicable taxes include value added tax, corporate income tax (profits tax), and payroll (social) taxes, together with others.  In contrast to more developed market economies, laws related to these taxes have not been in force for a significant period, and interpretive regulations are often unclear or nonexistent. Often, there are differing opinions regarding legal interpretation, both among and within government ministries and organizations, resulting in uncertainties and areas of conflict.  Matters of taxation, customs and currency control, as well as other areas, are subject to review and investigation by a number of governmental authorities, who are enabled by law to impose extremely severe fines and penalties.  Any regulatory uncertainty in taxation or other areas could negatively affect us through increased operating costs, which could have a material adverse effect on our business, results of operations and financial condition.
 
We and our subsidiaries may not be able to enforce our agreements in China, which could have a negative impact on our operations.
 
Chinese law governs many of our material agreements. There are substantial uncertainties regarding the interpretation and application of Chinese laws and regulations that govern the enforcement and performance of our contractual arrangements. Although we use Chinese lawyers to assist us in preparing our agreements, there can be no assurance that we can enforce any of our material agreements or that remedies will be available outside of China.
 
China's system of laws and the enforcement of existing laws may not be as certain in implementation and interpretation as U.S. or other laws. The Chinese judiciary is relatively inexperienced in enforcing corporate and commercial law, leading to a higher than usual degree of uncertainty as to the outcome of any litigation. Even where adequate laws exist in China, it may be impossible to obtain swift and equitable enforcement of such laws.  It is also difficult to enforce foreign judgments in China.  The inability to enforce or obtain a remedy under any of our material agreements could have a material adverse impact on us and our results of operations.
 
Adverse changes in economic and political policies of the Chinese government could have a material adverse effect on the overall economic growth of China, which could adversely affect our business.
 
We expect to increase our operations as an education service provider in China.  As such, our results of operations, financial condition and prospects will be affected, on an increasingly significant basis, by economic, political and legal developments in China. China’s economy differs from the economies of most developed countries in many respects, including the amount of government involvement, level of development, growth rate, control of foreign exchange and allocation of resources. The economy of China is a planned economy subject to five-year and annual plans adopted by the government that set down national economic development goals. Policies of the Chinese government can have significant impact on the country’s economic conditions. The Chinese government has confirmed that economic development will follow a model of a market economy under a socialist regime.  We believe that in the future, the Chinese government will continue to strengthen its economic and trading relationships with foreign countries and business development in China will follow market forces.
 
However, a change in economic and political policies may adversely affect our business, prospects and financial condition, to a material extent. For example, since early 2005, the Chinese government has implemented certain measures to control the pace of economic growth. Such measures may cause a decrease in the level of economic activity in China, which in turn could adversely affect our results of operations and financial condition.
 
Our Chinese business may fail due to loss of our CIBT center facility providers and educational service providers.
 
We are heavily dependent on facilities and services provided by certain of our third party service providers, which we refer to as “educational service providers”, in China and the U.S. Since June 2007 we have started to establish mini-campuses, or “CIBT GLN Centers” to deliver our programs via video conferencing.  We plan to continue to establish teaching locations in China in 2012, so we will be heavily dependent on facilities provided by certain third party universities or colleges, or “CIBT Center Facility Providers”, to set up our CIBT GLN Centers. There can be no assurance that the cooperation agreements with the educational service providers and CIBT Center Facility Providers will continue on terms acceptable to us or not be revoked by them. Also, our Chinese business is indirectly based on the success of our educational service providers and CIBT Center Facility Providers. If we lose our current educational service providers and CIBT Center Facility Providers, we may be unable to enter into similar cooperation agreements with other parties to provide us with campuses, facilities, or services on acceptable terms, or at all, and this may materially and adversely affect our operations.
 
 
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Due to various restrictions under Chinese laws on the distribution of dividends by our Chinese operating companies, we may not be able to pay dividends to our stockholders.
 
The Wholly-Foreign Owned Enterprise Law (1986), as amended and the Wholly-Foreign Owned Enterprise Law Implementing Rules (1990), as amended and the Company Law of the PRC (2006) contain the principal regulations governing dividend distributions by wholly foreign owned enterprises. Under these regulations, wholly foreign owned enterprises (“WFOE”), may pay dividends only out of their accumulated profits, if any, determined in accordance with Chinese accounting standards and regulations.  Additionally, a WFOE is required to set aside a certain amount of its accumulated profits each year, if any, to fund certain reserve funds.  These reserves are not distributable as cash dividends except in the event of liquidation and cannot be used for working capital purposes.
 
Furthermore, if our consolidated subsidiaries in China incur debt on their own in the future, the instruments governing the debt may restrict our ability to pay dividends or make other payments.  If we or our consolidated subsidiaries are unable to receive all of the revenues from our operations as a result of the aforementioned contractual or dividend arrangements, we may be unable to pay dividends on our common shares.
 
Operating Risks
 
The slowdown of economic growth in Canada, China and elsewhere has and may continue to negatively affect our profitability and growth.
 
The economic downturn has reduced the demand for premium program offerings by students in China. As a result, CIBT’s revenue declined in the year ended August 31, 2011, and the company transitioned out of its premium programs that were offered jointly with Beijing University of Technology (“BJUT”). The ongoing economic downturn may continue to have a material adverse impact on the demand for enrollment in all of our programs, not solely our premium offerings, which could in turn adversely impact our business and profitability. The Chinese economy has recently showed signs of retraction. If the economy of China begins to slow significantly, unemployment levels could increase which may impact the ability of our graduates to secure positions in the workforce, negatively impacting future enrollment levels.
 
In Canada, the economic downturn has impacted revenues for Sprott-Shaw, which also declined in the year ended August 31, 2011 as a result of, among other factors, reduced levels of enrollment. The economic downturn may continue to impact the demand for the educational programs offered by Sprott-Shaw. There is also no guarantee that KGIC’s revenues will not be impacted by economic conditions in the future. KGIC’s revenues increased as economies of scale and synergies were achieved by combining its operations with those of Sprott-Shaw, and as a full 12 months of operations were included in the results for the year ended August 31, 2011, compared to only five and a half months included in the year ended August 31, 2010. In addition, IRIX’s business may be negatively impacted as clients seek to reduce the amount spent on marketing and advertising campaigns and pursue fewer modes of advertising. Decreases in revenues generated by any of our subsidiaries due to the economic climate could materially adversely affect our results of operations, financial condition and cash flows.
 
Our operations are subject to various litigation risks that could increase our expenses, impact our profitability and lower the value of your investment in us.
 
Although we are not currently involved in any litigation, the nature of our operations exposes us to possible future litigation claims. There is a risk that any claim could be decided against us, which could harm our financial condition and results of operations. Similarly, the costs associated with defending against any claim could dramatically increase our expenses, as litigation is often very expensive. Possible litigation matters may include, but are not limited to, disputes stemming from cooperation agreements we or our subsidiaries entered into with other educational institutions, workers’ compensation, insurance coverage, property rights or injuries to students or faculty in our facilities. Should we become involved in any litigation we will be forced to direct our limited resources to settling or defending against or prosecuting the claim(s), which could impact our profitability and lower the value of your investment in us.
 
Loss of certain key personnel may adversely impact our business.
 
The success of our business will depend on the management skills of Toby Chu, our President and Chief Executive Officer, Patrick Dang, President of Sprott-Shaw, Sung Sub Lim, President of the KGIC Colleges and the relationships they and other key personnel have with educators, administrators and other business contacts they have in North America and abroad. The loss of the services of any of our key personnel could impair our ability to successfully manage our domestic and international business. We also depend on successfully recruiting and retaining qualified and experienced managers, sales persons and other personnel who can function effectively in Canada and abroad. In some cases, the market for these skilled employees is highly competitive. We may not be able to retain or recruit such personnel on acceptable terms to us, which could adversely affect our business prospects and financial condition.
 
 
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Our success depends, in part, on our ability to keep pace with changing market needs.
 
Our success depends primarily on the number of students enrolled in our courses and the amount of course fees such students are willing to pay. Our ability to continue increasing our student enrollment levels without a significant decrease in course fees is critical to the continued success and growth of our business. This in turn will depend on several factors, including our ability to develop new programs and enhance existing programs to respond to changes in market trends and student demands, manage our growth while maintaining the consistency of our teaching quality, effectively market our programs to a broader base of prospective students, develop and license additional high-quality educational content and to respond to competitive pressures. If we are unable to continue to attract students to enroll in our courses without a significant decrease in course fees, our financial condition, results of operations and cash flows could be materially adversely affected.
 
The American Hotel and Lodging Association Educational Institute (“AHL-EI”) may not renew their agreement with us, which could materially adversely affect our results of operations and financial condition.
 
CIBT is the sole distributor of a license to the educational programs created by AHL-EI which it acquired from a third party in 2008 by way of assignment, and has sublicensed to certain entities in China and other countries. These entities include corporate organizations, academic institutions and hotel and education consulting companies. The licenses range in term from two years or until terminated by the parties in accordance with the terms of the licenses.  Our license with AHL-EI expires in December 2012. In exchange for a nominal licensing fee, we are able to offer the AHL-EI curriculum to our students through certain of programs offered by our subsidiary schools. Students enrolled in courses based on the AHL-EI curriculum purchase course materials prepared by AHL-EI, thereby generating revenues for AHL-EI. Although our management does not anticipate we will encounter any difficulties with renewing the license, there can be no assurance that we will be able to renew or what the cost of renewal will be. If we are unable to renew this license, it is likely that enrollment levels at certain of our centers and other locations would decline, which would result in a decrease in revenues unless we are able to secure another license with an equally well-regarded but different provider of hotel and tourism management programs.
 
The personal information that we collect may be vulnerable to breach, theft or loss, which could subject us to liability or adversely affect our reputation and operations.
 
Possession and use of personal information in our operations subjects us to risks and costs that could harm our business and reputation.  We collect, use and retain large amounts of personal information regarding our students and their families, including personal and family financial data.  We also collect and maintain personal information of our employees in the ordinary course of business.  Although we use security and business controls to limit access and use of personal information, a third party may be able to circumvent those security and business controls, which could result in a breach of student or employee privacy.  In addition, errors in the storage, use or transmission of personal information could result in a breach of student or employee privacy.  Possession and use of personal information in our operations also subjects us to legislative and regulatory burdens that could require us to implement certain policies and procedures, regarding the identity theft related to student credit accounts, and could require us to make certain notifications of data breaches and restrict our use of personal information.  A violation of any laws or regulations relating to the collection or use of personal information could result in the imposition of fines against us.  As a result, we may be required to expend significant resources to protect against the threat of these security breaches or to alleviate problems caused by these breaches.  While we believe we take appropriate precautions and safety measures, there can be no assurances that a breach, loss or theft of any such personal information will not occur.  Any breach, theft or loss of such personal information could have a material adverse effect on our financial condition, reputation and growth prospects and result in liability under privacy statutes and legal actions against us.
 
Our multimedia services and advertising business may be adversely impacted by an economic downturn.
 
Multimedia and advertising companies, in general, are dependent upon economic conditions.  Historically, advertising revenues have increased with the beginning of an economic recovery, principally with increases in advertising by the banking, financial, insurance and securities industries.  Decreases in advertising revenues have historically corresponded with regional or national recessionary conditions.  Advertising revenues from the real estate industry constituted a significant portion of IRIX’s overall revenues.  A reduction in demand for advertising in the real estate and other industries could result from a decline in economic conditions and thus a decline in the amount spent on advertising in general.  As a result, the results of operations of IRIX may be adversely impacted by a decline in economic conditions.
 
IRIX currently depends on a large portion of Asian clientele and the loss of, or a significant reduction in Asian clientele would significantly reduce our revenues from multimedia services and advertising, and adversely impact our consolidated operating results.
 
A large portion of our clientele in the multimedia services and advertising business are people of Asian descent in Vancouver, British Columbia, Canada, or are related to or affiliated with people of Asian descent in Vancouver, British Columbia, Canada.  Should there be a downturn in the immigration environment in Vancouver, British Columbia, Canada, this could cause us to lose clients and negatively impact our advertising revenues.  We may not be able to maintain our current Asian clientele.  We cannot be certain that we can develop new clients or expand our existing client base.  This could cause the operating results of IRIX to decline.  Therefore, a loss of our Asian clients would materially reduce our revenues from our multimedia and advertising business and adversely impact our consolidated operating results and financial condition.
 
 
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Risks Related to Our Common Shares
 
The issuance of shares upon the exercise of options and warrants may cause immediate dilution to our existing shareholders.
 
The issuance of shares upon the exercise of options may result in dilution to the interests of other stockholders.  As of August 31, 2011, there were outstanding options to purchase 2,865,000 shares of our common stock at exercise prices ranging from $0.42 to $1.53 per share, with expiry dates ranging from January 21, 2012 to March 1, 2016. A total of 1,753,000 outstanding options were exercisable as at August 31, 2011. As of August 31, 2011, there were outstanding warrants to purchase 2,756,833 shares of our common stock at an exercise price of $0.35 per share, expiring on June 29, 2014 and July 11, 2014; all of these outstanding warrants were exercisable as at August 31, 2011. If all outstanding options and warrants were exercised, our issued and outstanding share capital would increase by 5,621,833 shares, or approximately 7.8% based on 71,949,344 shares of our common shares outstanding as of August 31, 2011. This would result in an immediate dilution to our existing shareholders.  Conversion of the outstanding options and warrants may also depress the price of our common shares, which may cause investors or lenders to reconsider investing in us and thus adversely affect our financing efforts.
 
The market price for our common shares may be volatile.
 
The market price for our common shares may be volatile and subject to wide fluctuations in response to factors such as actual or anticipated fluctuations in our quarterly results of operations, changes in financial estimates by securities research analysts, changes in the economic performance or market valuations of other comparable companies, announcements by us or our competitors of material acquisitions, strategic partnerships, joint ventures or capital commitments, fluctuations of exchange rates between RMB and Canadian dollar, intellectual property litigation, release of lock-up or other transfer restrictions on our outstanding shares or common shares, and economic or political conditions in China. In addition, the performance, and fluctuation in market prices, of other companies with business operations located mainly in China that have listed their securities in the United States may affect the volatility in the price and trading volumes of our common shares.  Furthermore, the securities markets have from time to time experienced significant price and volume fluctuations that are not related to the operating performance of particular companies.  These market fluctuations may also materially and adversely affect the market price of our common shares.
 
We may be classified as a passive foreign investment company, which could result in adverse U.S. federal income tax consequences to U.S. holders of our common shares.
 
We do not expect to be considered a “passive foreign investment company”, or PFIC, for U.S. federal income tax purposes for our current taxable year ending August 31, 2011.  However, the application of the PFIC rules is subject to ambiguity in several respects, and, in addition, we must make a separate determination each taxable year as to whether we are a PFIC (after the close of each taxable year).  Accordingly, we cannot assure you that we will not be a PFIC for our current taxable year or any future taxable year.  A non-U.S. corporation will be considered a PFIC for any taxable year if either (i) at least 75% of its gross income is passive income or (ii) at least 50% of the value of its assets is attributable to assets that produce or are held for the production of passive income.  The market value of our assets generally will be determined based on the market price of our common shares, which is likely to fluctuate.  In addition, the composition of our income and assets will be affected by how, and how quickly, we spend the cash we raise.  If we were treated as a PFIC for any taxable year during which a U.S. person held a common share or common shares, certain adverse U.S. federal income tax consequences could apply to such U.S. person.  See “Item 10E.Taxation—U.S. Federal Income Tax Consequences – Additional Rules that May Apply to U.S. Holders”.
 
We do not intend to pay dividends and there will be fewer ways in which you can make a gain on any investment in us.
 
We have never paid any cash dividends and currently do not intend to pay any dividends for the foreseeable future.  To the extent that we require additional funding currently not provided for in our financing plan, our funding sources may likely prohibit the payment of dividends.  Because we do not intend to declare dividends, any gain on an investment in us will need to come through appreciation of our stock price.
 
We indemnify our directors and officers against liability, and this indemnification could negatively affect our operating results.
 
In accordance with our articles of incorporation, we indemnify our officers and our directors for liability arising while they are carrying out their respective duties.  Our articles of incorporation also allow for reimbursement of certain legal defenses.  In addition to this, we insure our directors and officers against certain liabilities. The costs related to such indemnification and insurance coverage, if either one of them or both were to increase, could materially adversely affect our operating results and financial condition.
 
Fluctuation and impairment of marketable securities will materially impact our net income and thus, our stock price.
 
From time to time, we may hold marketable securities.  We are required to value our marketable securities holdings at market value, instead of at the lower of cost and market value.  Fluctuation of the market price of marketable securities could adversely impact our net income.  The quoted market value of these securities may decline significantly since they were acquired which may result in us recognizing a substantial impairment of the carrying value of the securities to recognize the lower market value of our investment under our valuation method.
 
We have no control over the market price of marketable securities in other companies we may hold and cannot predict the possible impact to our financial results.  A decline in the price of these securities may produce a material decrease in our net income and thus, our stock price.
 
 
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We were incorporated on November 17, 1986 under the Business Corporations Act (British Columbia).  Our common shares are listed for trading in the United States on the NYSE Amex and in Canada on the Toronto Stock Exchange, under the symbol “MBA”.  Our common shares were listed for trading in Canada on the TSX Venture Exchange until May 26, 2010, when they were listed for trading on the Toronto Stock Exchange.  Our fiscal year end is August 31st.  We changed our name from Capital Alliance Group Inc. on November 14, 2007.
 
Our head office is located at Suite 1200 – 777 West Broadway, Vancouver, British Columbia, Canada V5Z 4J7.  Our telephone number is 604-871-9909.  Our website is www.cibt.net.  The information contained on this and our other websites is not a part of this annual report.
 
We are a provider of educational services including business management degree programs, career-oriented diploma programs, and language training services to students through our infrastructure located primarily in Canada and China, as well as other countries around the world. We deliver western-style education to students from emerging Asian countries and Canada, providing our graduates with increased earnings potential working for multinational companies in their home countries or abroad. In addition, we recruit international students to enroll at our Canadian campuses and other locations around the world and provide them with an enhanced learning experience, western credentials and overseas employment experience.
 
We operate our education programs and services business through the following subsidiaries:
 
1. 
CIBT, which conducts operations primarily in China and in which we currently hold a 100% ownership interest;
 
2. 
Sprott-Shaw, which operates primarily in Canada and with a presence in Asia and the Middle East, in which we acquired a 100% ownership interest on December 17, 2007; and
 
3. 
The KGIC Colleges, which are comprised of KGIC Business College (2010) Corp. and KGIC Language College (2010) Corp., our wholly-owned subsidiaries that operate primarily in Canada, and were organized in connection with the acquisition of substantially all of the assets of KGIC on March 15, 2010.
 
In addition, we hold a 51% interest in IRIX, a multimedia service and advertising agency located in Vancouver, British Columbia, Canada, with a niche in providing advertising services to the Asian market.
 
We generate revenues mainly from tuition fees from our education and training business in China and Canada. A small portion of our revenues are generated from service fees of IRIX’s graphic design and advertising business. CIBT generated approximately 13% of our revenue in the 2010 fiscal year and approximately 7% in the 2011 fiscal year. Sprott-Shaw represented approximately 66% of our revenue in the 2010 fiscal year and 52% of revenue in the 2011 fiscal year. KGIC represented approximately 18% of our revenue in the 2010 fiscal year and 37% of our revenue in the 2011 fiscal year. Our strategy is to continue offering our current programs, update and develop new programs, and continue to evaluate cost cutting and consolidation activities. We currently have approximately 5,126 students in 55 locations (inclusive of campuses, CIBT Global Learning Network centers (“GLN Centers”) and licensees). On an annual basis we educated 11,301 students throughout the fiscal year. We have obtained all approvals from the Chinese authorities to conduct our education business in China and all approvals/accreditations from Canadian authorities to conduct our education business in Canada. There are a number of risk factors, described in detail under the section “Risk Factors” in this annual report, which may adversely affect our ability to begin and sustain profitable operations.
 
The following table sets forth certain information relating to our subsidiaries:
 
Subsidiary
Date of Incorporation
Country of Incorporation
Percentage of Ownership
Principal Business
CIBT
February 9, 1994
British Columbia, Canada
100%
Provide education and training services primarily in China through our CIBT GLN Centers, CIBT Beihai International College, CIBT Wyotech Automotive Institute, CIBT-BJUT School of Business and Tourism Training Institute
Sprott-Shaw
December 7, 2007
British Columbia, Canada
100%
Holding company of Sprott-Shaw Community College, Sprott-Shaw Degree College and Sprott-Shaw International Language College and provider of education and training services primarily in Canada and parts of Asia
KGIC Business College (2010) Corp.
February 22, 2010
British Columbia, Canada
100%
Provide business education and training services in Canada
KGIC Language College (2010) Corp.
February 22, 2010
British Columbia, Canada
100%
Provide English language education and training services primarily in Canada
IRIX
October 5, 1994
British Columbia, Canada
51%
Provide graphic design, marketing and advertising services in Canada, Hong Kong and the U.S.
 
 
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A.  History and Development of our Company
 
Since the beginning of our last completed fiscal year we have conducted the following:
 
In September 2010, we announced plans to establish a full scale job placement call center in Manila, Philippines to seek out potential employers for our students. As of March 30, 2011, we successfully placed 1,743 students in employment positions in the Greater Vancouver Area and 1,116 students in Asia. The call center also resulted in 33 Sprott-Shaw graduates being hired for permanent positions in the Greater Vancouver Area, and 29 graduates in Asia. Graduates utilizing this service secured positions in the fields of health care, business administration and community support.
 
In October 2010, we launched our global learning center platform, a video-conference based learning platform and education distribution network that has provided CIBT and its Asia-based academic partners with the ability to distribute Western education programs globally from a centralized location by utilizing real-time video conferencing technology. Our courses are taught from our teaching studios located in Beijing, China (opened in October 2010) and Vancouver, Canada (opened in March 2011). From the launch in October 2010 to the end of 2011, we have established a Global Learning Network (“GLN”) of over 26 GLN Centers through partnerships with other institutions where we broadcast our courses to students. Our GLN Centers are located primarily in emerging Asian countries, including China, South Korea, Vietnam, the Middle East and the Philippines. The infrastructure has facilitated the creation of a live, interactive learning environment and allowed us to increase our enrollment capacity by leveraging our existing resources.
 
In October 2010, we entered into an agreement with Northeastern State University (NSU) in Oklahoma to establish a global learning center at NSU’s campus and agreed to work towards offering transfer credits and exchange programs to allow our students to further their studies at NSU.
 
In November 2010, we entered into agreements with additional institutions in China to expand our hotel and tourism course offerings, including providing the AHL-EI program, hotel management programs, hospitality English training programs and 2+2 degree programs in hospitality management.
 
In November 2010, Sprott-Shaw entered into agreements with certain state owned universities in Vietnam to provide English language and medical English training, allied health and travel tourism management programs, and student recruitment initiatives for studying in Canada.
 
In January 2011, we announced entry into an agreement with Open University of China (OUC) to launch a series of international hotel management education and training programs through OUC’s education system in China.
 
In February 2011, we announced that certain Sprott-Shaw course offerings were included in a pilot project jointly launched by the Government of British Columbia and Citizenship and Immigration Canada that offers Post-Graduation Work Permits to international student graduates from a select list of post-secondary institutions in British Columbia, further limited to only certain qualified course offerings at such selected institutions. The programs allows graduates of the qualified programs to apply for work permits equivalent in length to the duration of the qualified program.
 
In February 2011, we signed an agreement with Southpointe Academy, a private elementary and high school located in Delta, British Columbia, to act as the school’s exclusive recruiter of international and expatriate students. We have also agreed to co-develop academic preparation programs that we will launch overseas, designed to prepare prospective applicants for Southpointe Academy’s vigorous pre-entrance examinations and programs at the grade 10 to 12 level. We earn all tuition fees for each student we recruit for the academic preparation programs and a portion of the tuition fees for each student we recruit for enrollment at Southpointe Academy.
 
In April 2011, we announced the launch of a GLN Center classroom at Yunnan Open University, a division of the Open University of China, offering an English Teacher Certification program (“TESOL”) and Hotel and Hospitality Management training.
 
 
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In April 2011, we announced the entry into a joint cooperation agreement with the Yunnan International Exchange Center, a subsidiary of the Yunnan Provincial Department of Education, to cooperate on establishing a GLN Center classroom at the Yunnan International Exchange Center, as well as to recruit students to study at our subsidiary schools in Canada.
 
In June 2011, we entered into an agreement with Zhejiang University, located in the city of Hangzhou, Zhejiang Province, to jointly launch programs in English Language Training and Hospitality Management, with the educational content to be provided by KGIC and the AHL-EI licensed curriculum.
 
In July 2011, we completed a non-brokered private placement and raised $817,000 by issuing a total of 2,723,333 units at a price of $0.30 per unit. Each unit is comprised of one common share and one share purchase warrant entitling the holder to purchase one common share for a three year period at a price of $0.35. The financing was undertaken with several purchasers, including institutional and accredited investors, in two tranches.  We paid a finder’s fee of $10,050 in cash and issued a finder’s warrant for the purchase of 33,500 common shares exercisable for a three year period at a price of $0.35 per share in connection with the private placement. The proceeds were earmarked for business development, potential acquisition opportunities and general working capital purposes.
 
In July 2011, we entered into agreements with Guangzhou University and Zhaoqing University, located in the Guangdong province of China, to establish GLN Center classrooms within each university’s campus and offer the following programs: Pre-Masters degree, TESOL, Tourism and Hospitality Management, Overseas Study Preparation, and Hotel Industry English programs. The GLN Center within Guangzhou University’s Higher Education Mega Center located in Guangzhou, China was completed in January 2012.
 
In July 2011, Mr. Derek Feng joined our board of directors and Mr. David Warnock resigned. Mr. Feng held a number of executive level positions with various subsidiaries of General Electric Company from 1999 to 2006, as further described in his bio under “Item 6, Directors, Senior Management and Employees – Directors and Senior Management”.
 
In July 2011, we entered into an agreement with Hebei Normal University Foreign Language College to jointly establish and offer educational programs in both English Language Training and Hotel and Tourism Management through our GLN Center classroom established at Hebei’s campus located in Hebei, China.
 
In July 2011, we entered into an agreement with Henan Radio and Television University, a member of the Open University of China, to jointly offer educational programs in Hotel and Tourism Management by establishing a GLN Center classroom at Henan Radio and Television University, located in Henan Province, China.
 
In August 2011, we announced that Sprott-Shaw entered into an agreement with the Certified General Accountants Association of British Columbia that will allow Sprott-Shaw’s Bachelor of Business Administration graduates to receive credit recognition for four out of the five levels required to complete the Certified General Accountant designation.
 
In August 2011, we entered into an agreement with Hunan Radio and Television University, a member of the Open University of China, to jointly offer Hotel and Tourism Management Programs by establishing a GLN Center classroom at Hunan Radio and Television University’s campus located in Hunan Province, China.
 
In October 2011, we announced our launch in collaboration with the Open University of China of a Hospitality Management Program, allowing North American students to learn Chinese, earn a hospitality diploma or certificate from AHL-EI and complete a six month internship at 5-star hotels in China with pay and room and board provided.
 
In November 2011, we announced the launch of AHL-EI programs for hotel industry professionals in Hainan Province, China.
 
In January 2012, we announced that we entered into an agreement with the Canadian Institute of Education to establish a GLN Center offering Sprott-Shaw’s business and healthcare programs and KGIC’s English language programs to students in the northern provinces of Iraq. The Canadian Institute of Education has also agreed to recruit students in Iraq for Sprott-Shaw and KGIC. Students will complete a portion of their studies in Iraq and then transfer to Sprott-Shaw or KGIC’s campuses to further their education and obtain work experience in Canada before returning to Iraq.
 
 
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In February 2012, we announced an agreement with Beijing Language and Culture University to establish a GLN Center within the university’s Beijing campus. The GLN Center will deliver AHL-EI hospitality programs and KGIC language programs. The agreement also provides for students to transfer to KGIC and Sprott-Shaw for further studies.
 
Over the next twelve months, our plans are to:
 
  
further integrate the assets and personnel of KGIC into our operations, especially KGIC’s network of international recruiting offices and agents;
 
  
integrate any other assets or businesses acquired into our operations;
 
  
continue to consolidate and streamline the operations of CIBT, Sprott-Shaw and KGIC;
 
  
continue building a network of new GLN Centers in additional Asian cities;
 
  
increase revenues by increasing student enrollments at our campuses and CIBT center locations;
 
  
expand the presence of Sprott-Shaw and KGIC in Asia through its CIBT GLN Centers;
 
  
enhance our product offerings by increasing our focus on the college preparation market and implementing a new Certified General Accountant program combined with a  Bachelor degree in Canada and Asia;
 
  
increase the number of English language students at KGIC (and all of our other schools) who subsequently enroll in certificate or degree-granting, programs at Sprott-Shaw and other schools within our system;
 
  
continue to develop closer marketing and cross-selling relationships between Sprott-Shaw, CIBT and KGIC in order to encourage more Chinese and foreign students to come to Sprott-Shaw’s Canadian campuses to study;
 
  
maintain  strong relationships with our CIBT center and campus location facility and educational service providers, as well as with the Chinese authorities; and
 
  
continue to promote our businesses and brands.
 
Over the twelve months ending August 31, 2012, we estimate our expansion expenses will be approximately $1,000,000. We had cash and cash equivalents of approximately $6,456,568 and a working capital deficit of approximately $4,601,899 as of August 31, 2011. Therefore, we may need additional capital to fully carry out our proposed expansion plan. There can be no assurance that we will be able to obtain any additional financing required.  If we are not able to obtain additional financing, we may be required to scale back our expansion plans or eliminate them altogether.  There can be no assurance that we will achieve our plans, or any of them.
 
Capital Expenditures
 
Our capital expenditures in aggregate for the past three fiscal years starting September 1, 2008 were $2,778,617, excluding acquisitions, and related primarily to the purchase of property and equipment and leasehold improvements.  In addition, capital expenditures currently in progress relate to the same activities.  In fiscal 2011, we expended a total of $488,247 to purchase property and equipment.
 
 
25

 
 
B.  Business Overview
 
OVERVIEW
 
We are a provider of educational services including business management degree programs, career-oriented diploma programs, and language training services to students through our infrastructure located primarily in Canada and China, as well as other countries around the world. We deliver western-style education to students from emerging Asian countries and Canada, providing our graduates with increased earnings potential working for multinational companies in their home countries or abroad. In addition, we recruit international students to enroll at our Canadian campuses and other locations around the world and provide them with an enhanced learning experience, western credentials and overseas employment experience.
 
Our goal is to become the leading provider of western-style education in China and Asia, and the largest importer of students to study in Canada.
 
We deliver our education programs and training services in Canada, China and other countries by ways of:
 
(a) 
Traditional Campus settings (that we call “campuses”);
 
(b) 
Mini-campuses, or Centers, located in urban & remote locations (that we call “centers”);
 
(c) 
GLN Centers located in partner institution campuses (where we enter into arrangements with other educational institutions and organizations in China, Canada and other countries in order to construct a facility within the partner institution’s facility to offer our curriculum and courses using video-conferencing technology);
 
(d) 
Joint Program Schools (where we enter into arrangements with other educational institutions and organizations in China, Canada and other countries in order to share their facilities, resources and programs under a revenue sharing arrangement);
 
(e) 
International recruiting offices (which house our recruitment personnel and marketing agents in foreign countries, which personnel recruit international students and provide student services to support them); and
 
(f) 
Corporate offices (where administrative functions take place).
 
We operate our education programs and services business through three subsidiaries and industry brands, including: CIBT School of Business and Technology Corp. in China, Sprott-Shaw Degree College Corp. in Canada, and the KGIC Colleges (which includes KGIC Business College (2010) Corp. and KGIC Language College (2010) Corp.), both of which are also located in Canada. In addition, we also hold a 51% interest in IRIX, a multimedia services and advertising company located in Canada.
 
For a breakdown of our physical locations as at August 31, 2011, please see Table 1 below.
 
Table 1:
 
Subsidiary Name
Campuses
Centers
Joint Program Schools
International Recruiting Offices
Corporate Offices
Total
 
Full scale
teaching
facility
Small scale
teaching
facilities
Programs offered at
other academic
institutions.
International
marketing and
recruiting offices
Headquarters and
administrative
offices
 
CIBT
4
4
22
0
3
33
Sprott-Shaw
13
5
2
0
1
21
KGIC Colleges
8
0
0
4
0
12
TOTAL
25
9
24
4
4
66
 
 
26

 
 
Our target students for our schools are recent high school graduates or adult persons working in urban centers.  We believe that our core educational programs in business, hotel and tourism management, and healthcare represent large and growing markets with attractive employment opportunities.
 
We are a fully integrated provider of educational programs and services.  We offer a wide range of education programs and training courses, including: college preparation courses, English language training and certification courses, and diploma and degree programs in business, healthcare, hotel management, information technology, automotive technical training, and corporate executive training.  We are the largest trainer of practical nurses in Canada and also offer these programs in other countries.  In addition, we offer bachelor’s of business administration programs in China and Canada. We create our own education programs and training services and also offer programs created by other institutions at our campuses and other locations.  We seek to achieve continued growth in a manner that reinforces our reputation for providing high-quality career-oriented educational programs that advance the careers of our students.  We teach our classes primarily in English and Chinese, and we have a strong track record for placing our students with multinational corporations in China and other countries.
 
In fiscal 2011, we added a new program offering, the Hotel Management program offered by CIBT, and we discontinued a number of program offerings, including the Russian program offered by CIBT in China at the BJUT campus, and the ESL program offered by Sprott-Shaw. The Russian program was discontinued as a result of the expiry of our agreement with BJUT in fiscal 2011, while all ESL program offerings are now being offered through KGIC.
 
During the year ended August 31, 2011, approximately 97% of our revenues were generated by our education programs and training services business through CIBT, Sprott-Shaw and the KGIC Colleges, with 7% earned by CIBT through its operations in China, 52% earned by Sprott-Shaw through its operations in Canada and abroad, and 37% earned by the KGIC Colleges through their operations in Canada and abroad.  The remaining 3% of our revenues was derived from our multimedia services and advertising business, IRIX.
 
CIBT (China)
 
Through our subsidiary, CIBT, we have been active in the Chinese market since 1995, and we believe that we are one of the oldest Sino-foreign educational services companies operating in China today.  We had a relatively long history of offering high-quality MBA programs, and are now diversifying into the mass market in China with additional career-oriented programs in business, hotel and tourism management, information technologies, automotive training, and English and other studies that we are importing from our subsidiaries in Canada, and through various curriculum licensing agreements from third parties.  Within China, we develop new campuses through a three step process.  The first step is to enter into a collaborative agreement with an established post-secondary school or educational provider whereby we offer selected courses that are demand driven by the local market.  The second step is to develop a CIBT center, which averages approximately 2,000 to 5,000 square feet of classroom space, through which we offer a more comprehensive course offering, using both on the ground instructors as well as sophisticated video conferencing technology.  The third step is to develop a full-scale campus such as our three campuses in Beijing and two campuses in Weifang, China.  We believe that our three step collaborative partnering process reduces business risk and provides us with a better assessment of each market, and that our partnering strategy reduces capital costs for new campus expansions, provides us access to a large pool of existing students, and establishes relationships with domestic partners (including state-owned universities) that allow us to operate more effectively under China’s regulatory environment.
 
We also provide 1+1 master’s degree programs in business and 2+2 bachelor’s degree programs in business to Chinese students, where a portion of their studies occur at a CIBT campus in China and the remainder in Canada or another English speaking country abroad.
 
Sprott-Shaw
 
In December 2007 we bought Sprott-Shaw Community College and Sprott-Shaw Degree College, which comprise our Sprott-Shaw subsidiary. Sprott-Shaw is one of the oldest and largest career colleges in Canada, with an operating history spanning 107 years.  Sprott-Shaw provides a wide range of educational programs, including vocational training (primary diploma and certificate programs) in business, information technology, allied health, early childhood education, hotel and tourism, skilled trades, practical nursing, resident care attendant and international studies to both high school graduates and working adults in Canada.  It also provides English language training to the large immigrant population (primarily of Asian descent) living in British Columbia, Canada.  Its extensive library of career-oriented coursework is now being used by CIBT to offer vocational programs targeted towards the mass market in China, and for export to other countries in Asia.  Sprott-Shaw is the largest trainer of practical nurses in Canada and has an affiliation with Far Eastern University in the Philippines to train resident care attendants who may ultimately find work in Canada or other countries.
 
Sprott-Shaw is one of only a few for-profit colleges in Canada that is accredited to offer bachelor degrees by the Ministry of Education in British Columbia, Canada.  We provide four-year bachelor degree programs in business to Canadian and international students through Sprott-Shaw Degree College in Canada.  In addition, CIBT is now using this unique capability to attract additional students from China and other countries to study business programs at Sprott-Shaw’s facilities in Canada. We believe that Sprott-Shaw’s degree granting authority is a distinct competitive advantage for us in attracting students from China and other countries.
 
In addition to China and Canada, Sprott-Shaw is currently teaching allied health care programs to students in the Philippines; resident care attendant and hotel management programs to students in Jamaica; and English language and allied healthcare programs to students in Vietnam.
 
Sprott-Shaw currently operates a combined total of 21 locations, including 13 campuses, 5 centers, 2 joint program schools and 1 corporate office, in Canada. Sprott-Shaw provides education services through its own leased locations, as well as through collaborative agreements and arrangements with a number of other organizations and institutions in the Philippines, Jamaica, Vietnam and Korea.
 
 
27

 
 
KGIC Colleges
 
On March 15, 2010, we acquired from KGIC substantially all of the operating assets of KGIC pursuant to an asset purchase agreement dated March 15, 2010 among the KGIC Colleges and KGIC. The maximum purchase price was $9 million, consisting of $5 million payable in cash at closing (subject to a negative working capital adjustment) and a maximum of $4 million to be paid pursuant to an earn-out agreement if certain revenue and EBITDA milestones are achieved by the KGIC Colleges over the next three years.  See “Operating and Financial Review and Prospects – Significant Transactions Affecting Our Results – KGIC Acquisition” for more information.
 
Our KGIC subsidiary is one of the largest private English language training schools and business colleges in Canada, with eight campuses in British Columbia, Ontario and Nova Scotia, Canada and six international recruiting offices in China, Japan, Korea, Taiwan, Spain and Mexico. These international recruiting offices conduct market research for strategic planning purposes, develop and support their respective networks of independent recruiting agents in order to obtain student enrollments, they recruit directly for students, and also facilitate the implementation of joint programs with other institutions.
 
KGIC provides a range of education programs and training courses in the areas of business management, office management, and career training. It also provides a wide array of English language training courses including ESL, TESOL, power speaking and modern media, interpreting and translation, and various forms of English language test preparation, among others. For fiscal 2011, 65% of KGIC’s revenues were derived from English-related courses generally lasting four to twelve weeks, and 35% were from business and other programs generally lasting one year or less.
 
Through KGIC Press, KGIC also focuses on curriculum development to better service the changing trends of English learning for international students of various age groups. In-house development of academic and supplementary materials allows KGIC to update its curriculum content and incorporate feedback from instructors periodically in order to cater to changing students’ needs.  This has led to a more efficient and structured publishing process over the years. As a result of KGIC Press, KGIC Colleges also operate in the areas of curriculum publishing, custom-designing of program materials for various groups and institutions, graphic design, copy editing and printing for all departments of the KGIC Colleges and its affiliates.
 
In fiscal 2011, we began implementing a reorganization plan to streamline our Canadian operations by combining certain job functions, teaching facilities and program delivery processes, which has generate significant synergies for our business. In addition, we believe that we may be able to utilize KGIC’s well-established network of international recruiting offices to increase enrollments across our entire system of schools in the future.
 
We further believe that many of KGIC’s shorter-term English program students may desire to convert into some of the longer-term programs offered by Sprott-Shaw (including Sprott-Shaw’s four-year bachelor degree program in business administration and one year diploma programs) thereby increasing their overall tenure within our system, and generating enhanced revenues and cash flow for our entire company. Since the completion of the acquisition, a number of KGIC English language students have already enrolled in Sprott-Shaw’s diploma and degree programs.
 
 
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License Agreements
 
In addition to offering our own programs, CIBT is also the exclusive licensee (with the ability to sublicense) for the entire proprietary hotel curriculum of AHL-EI, for China and the Philippines. In exchange for a nominal licensing fee, we are able to offer the AHL-EI curriculum to our students through certain programs. Students enrolled in courses based on the AHL-EI curriculum purchase course materials prepared by AHL-EI, thereby generating revenues for AHL-EI. Our license with AHL-EI will expire in December 2012. We expect to renew the license on or before the expiration date of our current license. AHL-EI is a well-respected program for hotel and tourism management in the United States. CIBT acquired these licenses as part of its acquisition of the Tourism Training Institute in 2008. CIBT uses these licenses to teach its own students, and has also sublicensed these rights to certain entities in China and other countries. These entities include corporate organizations, academic institutions and hotel and educational consulting companies.  In addition, CIBT has the first right of refusal for the AHL-EI exclusive licenses for the countries of Thailand and Vietnam.
 
We are also the exclusive licensee in China for the Wyotech automotive technician curriculum which we license from Corinthian Colleges (NASDAQ: COCO) of the United States. This license expires in October 2015.  Wyotech is one the oldest and largest providers of high-end automotive training technician schools in North America. We believe that relationships such as these with well known western-oriented industry brands provide CIBT with a significant competitive advantage as CIBT seeks to grow its business in China, Asia and other countries.
 
Additional Educational Programs and International Network
 
In order to further our reputation as a differentiated educational institution that offers students a wide array of multinational educational offerings, we also offer 1+1 master’s and 2+2 bachelor’s degree programs which provide students the opportunity to take approximately half of their coursework at a CIBT facility in China and the second half at a foreign university with one of the offshore educational service providers with whom we have hosting agreements. Since there is a disparity between the English standards required by foreign post-secondary institutions and that of students in China, we also offer international university preparatory programs that consist of six to nine months of English training as well as freshman course work to ease their way into the respective participating university. For a full listing of these programs, please see “- Our Operations - Education Service Provider Locations”.
 
We also have a global network of over 2,500 student recruiting agents in 42 countries. This student recruiting agent network expands our outreach for a greater inflow of international students.  Our six overseas recruitment offices engage in the recruitment of, and provide student services for, incoming international students.  The infrastructure and student recruiting agent connections created took years to establish, and we believe that it will, therefore, give us an edge when competing on the global market.
 
Explanation of Student Counts
 
Throughout this annual report, we present information on student enrollments, and generally use two primary approaches to this issue: figures on total annual student starts and total student populations. A student start is defined as the total number of students who registered with and attended the school at any time during the fiscal year, while total student population is defined as the number of students currently registered at and attending a school on any specified date. We generally present information on student counts for CIBT based on total student populations, and for KGIC and Sprott-Shaw based on annual student starts.
 
The reason for this difference in reporting mechanisms is that CIBT generally offers programs in excess of one year in length. As a result, it is relatively simple to understand enrollment trends by taking a snapshot of the number of students taking classes at any given time, so total student population numbers are more meaningful for CIBT. However, KGIC offers mostly short term programs (in the range of four to twelve weeks), and Sprott-Shaw offers mostly diploma courses lasting less than one year. Due to the shorter-term nature of enrollment periods for students at KGIC and Sprott-Shaw, and the resulting fluctuations in enrollment numbers at any given point in time due to seasonality and other factors, we believe that the number of annual student starts (or annual throughput) is the most meaningful measure of enrollment trends for these schools, and generally reports enrollment figures for KGIC and Sprott-Shaw on this basis. For more information on enrollment numbers and trends, please see “- Our Operations - Student Enrollments”.
 
 
29

 
 
OUR OPERATIONS
 
Our Colleges
 
We offer our education programs and training services through the following colleges in China and Canada:
 
  
CIBT Beihai International College, China (associate degree granted by a Chinese college)
 
  
CIBT School of Business, China (business and vocational schools)
 
  
CIBT Wyotech Automotive Institute, China (automotive, diesel and marine technician school)
 
  
Sprott-Shaw Degree College Corp, Canada (Bachelor degree college/university)
 
  
Sprott-Shaw Community College, Canada (career and vocational college)
 
  
KGIC (2010) Language College, Canada (ESL and other English language school)
 
  
KGIC (2010) Business College, Canada (hotel and business school)
 
Please refer to Table 1 for a breakdown of our facilities.
 
Our Campuses, Centers, Locations and Programs
 
CIBT
 
CIBT provides education programs and services in China through the facilities listed below:
 
Subsidiary Name
Campuses
Centers
Joint Program Schools
International Recruiting Offices
Corporate Offices
Total
CIBT
4
4
22
0
3
33
 
 
30

 
 
CIBT Campuses
 
CIBT has four campuses as listed below. All campuses are run through facility rental/revenue sharing agreements.  We do not own any of these campuses.
 
Campus
Location
Beijing University of Technology West Campus
Beijing, China
Shuanglong CIBT Campus
Beijing, China
CIBT Beihai International College
Weifang, Shandong province, China
CIBT Wyotech Automotive Institute
Weifang, Shandong province, China
 
CIBT Centers
 
We also provide our programs and services in China at our CIBT mini-campus centers which are organized within an established local university or college through cooperation agreements between us and the respective university or college.  The cooperating university or college leases its facilities to us, while we renovate classrooms and provide video conferencing equipment.  Each of these CIBT centers are equipped with video conferencing equipment to enhance the learning experience of students by connecting North American and European instructors with Chinese students in a live and real time video conference environment.  Using video conferencing technology, we plan to centralize our programs at our Beijing studio headquarters, and reduce the need for instructors to be present at the mini-campus locations.
 
We currently operate four CIBT centers in China as described below.
 
Centers
CIBT Center Facility Provider
Location
Weifang CIBT Center, China
Weifang Commercial School
Weifang, Shandong Province, China
Jinhua CIBT Center, China
Jinhua Career & Technical College
Jinhua, Zhejiang Province, China
Zhangzhou, CIBT Center, China
Zhangzhou Normal University
Zhangzhou, Fujian Province, China
Weifang CIBT Center, China
Weifang Technician College
Weifang, Shandong Province, China
 
 
31

 
 
CIBT Joint Program Schools
 
We have joint program schools at the 14 locations in China as listed below. The majority of these are related to our AHL-EI hotel and tourism programs.
 
Joint Program Schools
Location
CIBT AHL-EI Joint Program at Kunming Center
Kunming, Yunnan Province
CIBT AHL-EI Joint Program in Guizhou
Guizhou, Guizhou Province
CIBT AHL-EI Joint Program at Beijing Hospitality Institute
Beijing
CIBT AHL-EI Joint Program in Chongqing
Chongqing, Sichuan Province
CIBT AHL-EI Joint Program at Sichuan University-Suzhou
Suzhou, Jiangsu Province
CIBT AHL-EI Joint Program in Sichuan-Chengdu
Chengdu, Sichuan Province
CIBT AHL-EI Joint Program in Changsha
Changsha, Hunan Province
CIBT AHL-EI Joint Program in Shengyang
Shenyang, Liaoning Province
CIBT AHL-EI Joint Program in Sanya
Sanya, Hainan Province
CIBT AHL-EI Joint Program in Shenzhen
Shenzhen, Guangdong Province
CIBT AHL-EI Joint Program in Wuhan
Wuhan,  Hubei Province
CIBT AHL-EI Joint Program in Zhengzhou
Zhengzhou, Henan Province
CIBT AHL-EI Joint Program in Shenzhen Fuyou
Shenzhen, Guangdong Province
CIBT AHL-EI Joint Program in Guangzhou
Guangzhou, Guangdong Province
 
 
32

 
 
CIBT GLN Partners
 
CIBT provides its programs and services in China at its CIBT GLN Centers which are organized within an established local university or college through cooperation agreements between us and the respective university or college.  The cooperating university or college provides its facilities to CIBT while CIBT renovates classrooms and provides video conferencing equipment.  Each of these CIBT GLN Centers are equipped with video conferencing equipment to enhance the learning experience of students by connecting North American instructors with Chinese students in a live and real time video conference environment.  Using video conferencing technology, CIBT plans to centralize its programs at its Vancouver and Beijing studios, and reduce the need for instructors to travel abroad to CIBT GLN Center locations.
 
In 2011, CIBT signed agreements or memorandums of understanding with the following institutions to deliver CIBT programs using its video conferencing GLN at partners’ campuses:

Joint Program Schools
Location
Baotou Normal University
Baotou, Inner Mongolia
Beijing Gucheng Tourism Vocational College
Beijing
China International Travel Service
Beijing
Chongqing Light Industry Polytechnic College
Chongqing
China Central Radio & TV University
Beijing
Grand Skylight Catic Hotel Beijing
Beijing
Guangzhou University, Guangdong Boya
Guangzhou, Guangdong
Guangdong Zhaoqing College
Zhaoqing, Guangdong
Guizhou Puruisiting Hotel Management Company
Guizhou
Guizhou Xingke Hotel Management Company
Guizhou
Hainan College of Business and Economics
Hainan
Hainan Labor Bureau HR Development
Hainan
Hangzhou Xingang Education Training Corporation
Hangzhou, Zhejiang
Zhejiang University
Zhejiang
Hebei Radio & TV University
Hebei
Henan Radio & TV University
Henan
Xiangxi Congwen Education Group
Xiangxi
Ningbo Vocational and Technology College
Ningbo
Nuoshan Investment Consulting Company
Nuoshan
Ordos Vocational High School
Inner Mongolia
Phoenix Hotel Management Company
Guangzhou, Guangdong
Shanghai Huamao Learning Institute
Shanghai
Hebei Normal University
Hebei
Taiyuan Foreign Language Association
Taiyuan, Shanxi
Wuhan Chutian Education Consulting Company
Wuhan, Hubei
Yunnan Education Exchange Centre
Yunnan
 
 
33

 
 
CIBT Job Placement Center
 
In 2010, we established a full scale job placement center, named the Global Career Center, in Manila, Philippines to seek out potential employers for our students. We employ operators at the Global Career Center to contact local companies to generate job postings for our students, then we recommend a list of our graduates that fit the profile of the job posting. In its first year of operations, the Global Career Center placed 196 graduates into industry jobs and generated 3,423 job postings for our graduates. The Global Career Center is currently servicing Sprott-Shaw’s and CIBT’s students. We plan to extend its services to KGIC’s students in the future.
 
CIBT Corporate Offices
 
We operate CIBT through three corporate offices, including our global corporate headquarters office in Vancouver, British Columbia, Canada, and the two branch/regional offices in China listed below.
 
Offices
Location
Global Corporate Headquarters Office
Vancouver, British Columbia, Canada
Beijing Office
Beijing, China
Weifang Office
Weifang, Shandong Province, China
 
Sprott-Shaw
 
Sprott-Shaw provides education programs and services in Canada, the Philippines, Jamaica, Vietnam and Korea through the facilities listed below.
 
Subsidiary Name
Campuses
Centers
Joint Program Schools
International Recruiting Offices
Corporate Offices
Total
Sprott-Shaw
13
5
2
0
1
21
 
Sprott-Shaw Campuses
 
Sprott-Shaw provides its education programs and services in Canada at the 13 campuses listed below, as well as one additional shared campus with KGIC, which is also located in Vancouver (Downtown). All of Sprott-Shaw’s campuses are leased.
 
Campus
Location
Abbotsford
Abbotsford, British Columbia, Canada
East Vancouver
East Vancouver, British Columbia, Canada
Kamloops
Kamloops, British Columbia, Canada
Kelowna
Kelowna, British Columbia, Canada
Maple Ridge
Maple Ridge, British Columbia, Canada
Nanaimo
Nanaimo, British Columbia, Canada
New Westminster
New Westminster, British Columbia, Canada
Penticton
Penticton, British Columbia, Canada
Prince George
Prince George, British Columbia, Canada
Surrey
Surrey, British Columbia, Canada
Vancouver (Downtown)
Vancouver, British Columbia, Canada
Vernon
Vernon, British Columbia, Canada
Victoria
Victoria, British Columbia, Canada
 
Sprott-Shaw’s campuses in Prince George and Vernon will be shut down in June 2012 as they were unprofitable, allowing Sprott-Shaw to consolidate its operations and resources.
 
 
34

 
 
Sprott-Shaw Centers
 
Sprott-Shaw provides a number of its programs through Sprott-Shaw centers located primarily in foreign countries. As the number of our schools grows on a corporate-wide basis, it is our intention to provide Sprott-Shaw’s vocational (and potentially degree-granting) programs through collaborative alliances in many countries in Asia and potentially around the world. Currently we provide courses through one Sprott-Shaw center in Canada, three centers in the Philippines and one center in Jamaica.
 
Centers
Facility Provider
Location
SSCC Career Coaching Center, Canada
Sprott-Shaw Community College
Surrey, Canada
Quezon SSCC Center, Philippines
Far Eastern University
Quezon, Philippines
Manila SSCC Center, Philippines
Far Eastern University
Manila, Philippines
Silang SSCC Center, Philippines
Far Eastern University
Silang, Philippines
Brown’s Town SSCC Center, Jamaica
Brown’s Town Community College
Browns Town, St. Ann, Jamaica
 
Sprott-Shaw Joint Program Schools
 
SSDC also has joint program schools under development at the following locations:

Joint Program Schools
Location
Sprott-Shaw Vietnam Joint Program
Hanoi, Vietnam
Sprott-Shaw Jordan Joint Program
Amman, Jordan
 
Sprott-Shaw Corporate Offices
 
Sprott-Shaw is operated out of a single corporate office of approximately 8,000 square feet in Port Coquitlam, British Columbia, Canada, which is located approximately 20 miles from our head office in downtown Vancouver, British Columbia, Canada. In addition to providing corporate administrative services at the Port Coquitlam location, the facility also includes space through which Sprott-Shaw provides its construction trades and electrical programs to Sprott-Shaw students.
 
 
35

 
 
KGIC Colleges
 
KGIC provides education programs and services in Canada through the facilities listed below.
 
Subsidiary Name
Campuses
CIBT Centers
Joint Program Schools
International Recruiting Offices
Corporate Offices
Total
KGIC Colleges
8
0
0
4
0
12
 
KGIC Campuses
 
KGIC provides its education programs and services in Canada at the 8 campuses listed below, one of which is shared with Sprott-Shaw located in Vancouver (Downtown), and all of which are leased.
 
Campus
Size (Square Feet)
Location
KGIC Vancouver Campus
22,295
Vancouver, British Columbia, Canada
KGIC Vancouver Business College Campus
14,071
Vancouver, British Columbia, Canada
KGIC & KGI Business College Victoria  Campus
10,961
Victoria, British Columbia, Canada
KGIC Surrey Campus
9,152
Surrey, British Columbia, Canada
KGIC Toronto ESL Campus
12,435
Toronto, Ontario, Canada
KGIC Toronto Business Campus
8,610
Toronto, Ontario, Canada
KGIC Canada TESOL Campus
8,208
Vancouver, British Columbia, Canada
KGIC Halifax Campus
5,007
Halifax, Nova Scotia, Canada
 
KGIC Centers
 
KGIC does not operate any KGIC centers. It is currently contemplated that all educational services provided by KGIC currently or in the future will be conducted at either the existing KGIC campuses in Canada, or at Sprott-Shaw campuses and/or centers to be developed and operated by Sprott-Shaw in Canada or other countries.
 
KGIC Joint Program Schools
 
KGIC is primarily a stand-alone English language training school, and secondarily a stand-alone business and hotel and tourism college. As a result, it has no joint program schools.
 
KGIC International Recruiting Offices
 
KGIC operates international recruiting offices in the four countries listed below. Personnel in these international recruiting offices manage networks of international agents providing students for KGIC, and also recruit students directly for KGIC. They also assist in doing market research and evaluating the potential of establishing joint programs within their respective countries of operations. We intend to utilize this network of international recruiting offices and international agents in order to provide international students for not only KGIC, but also for enrollment into CIBT’s and Sprott-Shaw’s programs. In this regard, we believe that the addition of this strong international recruiting network may have a significant effect on future enrollments into our entire consolidated group of companies. All international recruiting offices listed below are located in leased facilities.
 
Recruiting Office
Location
KGIC International Office Japan
Tokyo, Japan
KGIC International Office Korea
Seoul, Korea
KGIC International Office Taiwan
Taipei, Taiwan
KGIC International Office Spain
Valencia, Spain
 
 
36

 
 
Educational Service Provider Locations
 
In addition to the Sprott-Shaw and KGIC campuses that we own in Canada, we generally employ a partnering strategy for our other campuses, centers and joint program schools (and this includes all of our educational locations in China) in order to physically deliver our educational services to our students. Accordingly, we have entered into numerous arrangements with organizations and institutions in China, Canada, Korea, Vietnam, Jamaica, Australia, New Zealand, Switzerland, the Netherlands, the Unites States, the United Kingdom, and other countries, the terms of which range from offering our own programs and services, to delivering programs prepared by these institutions, to developing programs (and/or joint programs) for these institutions, and allowing student exchanges, through our 1+1 master’s, 2+2 bachelor’s and University College Prep programs, with other educational institutions located around the world.
 
These institutions and the joint programs and arrangements that we have arranged with them serve as the primary basis for providing our 1+1 master’s and 2+2 bachelor’s degree programs, as well as many of our college preparation and hotel and tourism  programs that we offer around the world (including in China). These do not include the Sprott-Shaw and KGIC campuses in Canada that we own directly (as we are essentially our own educational service provider site hosts there), but do include all of our CIBT and Sprott-Shaw centers, as well as joint program schools, as described above. These educational service provider locations primarily serve as the international component of many of the programs that we offer. Our revenue sharing models differ greatly among these many different programs and locations, and some of them result in no direct payments of tuition at all to CIBT (although we are beginning to enter into` negotiations with some of these providers in order to obtain referral fees for students that we refer to them; however, the potential outcomes of such negotiations cannot be predicted at this time and should not be relied upon as a potential future source of revenues by any reader of this annual report). Nevertheless, we believe that this broad international network is a significant competitive advantage for our company, and provides our students with unique multinational educational opportunities offered by us.
 
While we do not own, lease or directly control many of these sites, it is our intention to continue expanding our network of international educational service provider locations as an accommodation to our students in order to facilitate their international educational desires, while also seeking to acquire additional offshore institutions in order to retain as large a percentage of student tuition payments as possible within institutions that we own or control directly (or with which we may negotiate referral fees in the future). Our acquisition of Sprott-Shaw was the first step in the process of owning our own destination offshore educational facilities, subsequent to which we have continued to expand our international network of third party institutions in order to provide the widest possible array of international educational offerings to our students.
 
The chart listed below details the full array of our relationships with international educational service providers, as well as the countries in which we have agreements and the programs offered therein.
 
 
37

 
 
Academic Partners List
Country
Academic Partner
Types of Programs
Subsidiary
Australia
La Trobe University
2+2 Bachelor Degree Program
CIBT
William Blue College
2+2 Bachelor Degree Program
CIBT
La Trobe University
University Prep Program
CIBT
University of New South Wales
University Prep Program
CIBT
University of Wollongong
University Prep Program
CIBT
University of South Australia
University Prep Program
CIBT
Macquarie University
University Prep Program
CIBT
Canada
Thompson Rivers University`
2+2 Bachelor Degree Program
CIBT
Sprott-Shaw Degree College
2+2 Bachelor Degree Program
CIBT
York University
University Prep Program
CIBT
University of PEI
University Prep Program
KGIC
Saint Mary’s University
University Prep Program
KGIC
Laurentian University
University Prep Program
KGIC
Mount Saint Vincent University
University Prep Program
KGIC
Thompson Rivers University
University Prep Program
KGIC
Fairleigh Dickinson University
University Prep Program
KGIC
DeVry University
University Prep Program
KGIC
China
Weifang Commercial School
Business Program
CIBT
Jinhua Career & Technical College
English Training, Business Program
CIBT
Zhangzhou Normal University
English Training, Business Program
AHL-EI Program
CIBT
Weifang Technician College
English Training, Business Program
CIBT
Weifang University
English Training, IT Programs,
Automotive Training Programs,
Corporate and Executive Training,
Business English Training,
AHL-EI Program,
Accounting Program
CIBT
Kunming Youzi Training Centre
AHL-EI Program
CIBT
Guizhou China Tourism Corp.
AHL-EI Program
CIBT
Beijing Hospitality Institute
AHL-EI Program
CIBT
Chongqing Jinxiuqiancheng Education Consulting Company Ltd.
AHL-EI Program
CIBT
Sichuan University Suzhou Academy
AHL-EI Program
CIBT
Changsha Liyou Education Consulting Company Ltd.
AHL-EI Program
CIBT
Shenyang Bohiu Education Training Center
AHL-EI Program
CIBT
Sanya Tech Vocational College
AHL-EI Program
CIBT
Shenzhen Qijian International Hotel Training Institute
AHL-EI Program
CIBT
Wuhan Jinhe Hotel Management Company Ltd.
AHL-EI Program
CIBT
Zhengzhou Junyue Culture Media Company Ltd.
AHL-EI Program
CIBT
Shenzhen Fuyou International Education Investment Company Ltd.
AHL-EI Program
CIBT
CIBT Beijing School of Business
2+2 Business Program
Sprott-Shaw
 
 
38

 
 
  Academic Partners List  
 
Country
 
Academic Partner
 
Types of Programs
 
Subsidiary
Jordan
Canadian-Jordanian Institute
Business Programs
Sprott-Shaw
Malaysia
Help University College
2+2 Bachelor Degree Program
CIBT
Netherlands
Hanze University Cronigen
2+2 Bachelor Degree Program
CIBT
New Zealand
UNITECH Institute of Technology
2+2 Bachelor Degree Program
CIBT
Philippines
Maridian International Business & Arts College
2+2 Bachelor Degree Program
CIBT
Far Eastern University
Allied Health Care, Hotel and Tourism Management
Sprott-Shaw
Manuel S. Enverga University Foundation
Allied Health Care, Hotel and Tourism Management
Sprott-Shaw
Treston International College
Hotel and Tourism Management, Accounting/information technology, international trade and business
Sprott-Shaw
University of Baguio
Hotel and Tourism Management
Sprott-Shaw
Switzerland
International Hotel Management School
2+2 Bachelor Degree Program
CIBT
U.K.
The University of Portsmouth
2+2 Bachelor Degree Program
CIBT
London Hotel School
2+2 Bachelor Degree Program
CIBT
University of Derby
2+2 Bachelor Degree Program
CIBT
Lancaster University
University Prep Program
CIBT
Bangor University
University Prep Program
CIBT
University of Essex
University Prep Program
CIBT
Swansea University
University Prep Program
CIBT
Portsmouth University
University Prep Program
CIBT
U.S.
California State University, Sacramento
2+2 Bachelor Degree Program
CIBT
Detroit University Mercy
2+2 Bachelor Degree Program
CIBT
Johnson and Wales University
2+2 Bachelor Degree Program
CIBT
Purdue University
University Prep Program
CIBT
University of California
University Prep Program
CIBT
Michigan State University
University Prep Program
CIBT
Detroit University Mercy
University Prep Program
CIBT
Kansas State University
University Prep Program
CIBT
Patten University
Pre-Masters Program
CIBT
Northeastern State University Oklahoma
Pre-Masters Program
CIBT
Wyotech Institute
Automotive Training Programs
CIBT
National University, San Diego
University Prep Program
KGIC
Antioch University
2+2 Business Program
Sprott-Shaw
Lawrence Technological University
Pre-EMBA Program
Sprott-Shaw
AHL-EI (American Hotel and Lodging Association Educational Institute)
Hotel and Tourism Management
Sprott-Shaw
 
 
39

 
 
Our Educational Programs
 
We place great emphasis on the quality of our courses and learning materials, both in terms of substance and production quality to enhance course participants’ learning experience.  Working together with our lecturers in each subject, we internally develop and produce the online lectures for all of our courses.  We employ a variety of measures including substantive content review and content approval at various stages of the course development process by our experienced in-house personnel in order to create high-quality courses.
 
CIBT
 
CIBT offers accreditations and certifications in courses ranging from business to information technology and automotive technical training in China.  It also offers a Corporate and Executive Training program and a Business English program to managers or senior officers working with domestic, foreign or international companies or government departments in China.
 
Certain information relating to CIBT’s programs in China are set out below:
 
Name of Program
Duration of Program
Description
Information Technology Program (IT program)
Three years
CIBT offers IT diplomas in multimedia design, software engineering and applied service management.  The IT program consists of 20 courses.
Automotive Technical Training Programs (auto training programs)
From three months to three years
CIBT’s auto training program is designed to teach students how to disassemble, inspect and assemble engines and accessories, cooling systems, transmissions and clutches, drive lines, and braking and suspension systems. Differing numbers of courses are provided depending on the duration of study. This program includes a short-term program (three months), a mid-term program (eighteen months) and a three-year program.
Corporate and Executive Training Program (CET program)
Three years
The CET program aims to provide managers or senior officers with organizational and interpersonal skills that will allow them to work effectively with others and adapt to a culturally diverse business environment. Students will learn American management skills and modern business dynamics to develop their capacity to work under pressure and build leadership and coaching skills.
2+2 Program or 1+1 Program (Joint Program)
Two years or
four years
We offer two cooperative international bachelor degree programs, the 2+2 Program and the 1+1 Program. The 2+2 Program allows students to spend two years studying at our Shuanglong CIBT campus before completing the final two years at one of our overseas educational service providers’ campuses. The 1+1 Program allows students to study for one year at our Shuanglong CIBT campus and then spend the final year at one of our overseas educational service providers’ campuses.
English Program
From one month
to four months
CIBT’s English program is intended to assist students to develop listening and speaking skills and recognize and practice grammatical structures and sentence patterns.  CIBT offers two different schedules for this program, a one month intensive program, or a weekends-only program that is conducted over the course of four months.
English Teacher Program
From three to nine months
CIBT provides a program to English instructors with high-intermediate to advanced proficiency in English.  The program focuses on topics inspired by current language teaching approaches, methods and practices and is designed to meet the changing needs and interests of students.
Business English Program
Three years
CIBT offers a diploma program in business English. The business English program focuses on business conversation, business issues, presentation skills and business document writing.
Hotel Management Program
From one to three years
CIBT’s hotel management program is designed to teach students all aspects of hotel management, including rooms, food and beverage, culinary, marketing and sales, conferences and catering. CIBT offers general courses such as business communications and computer skills to ensure students meet industry demand regarding technical and interpersonal skills.
Accounting Program
Three years
CIBT’s accounting program gives students the financial and planning information to solve management problems and provides the necessary skills to help students develop, improve, and implement operating procedures in a management accounting context.
 
 
40

 
 
Sprott-Shaw
 
Sprott-Shaw offers accreditations and certifications in courses ranging from business to health sciences, trades and applied technology, international studies and English.  Certain information relating to the programs provided by Sprott-Shaw in Canada, the Philippines and Jamaica are set forth below:
 
Name of Program
Duration of Program
Description
Business Program – BBA
Four years
The Bachelor of Business Administration provides full coverage of the following functional areas of business: Accounting, Finance, Production, Marketing, Industrial Relations, Law and Human Resources Management.  Additional concentrations in Marketing and Human Resources are also available.
Certified General Accountant Program
Four years
The Certified General Accountant Program in combination with the Bachelor Degree in Accounting offered by us allows students to complete this combined accounting program in four years rather than the usual six years required to complete both programs.
Business Program – Diploma
12 to 45 weeks
Programs offered within the Faculty of Business include: Administrative Assistant, Legal Secretary, Medical Office Assistant, Advanced Business Management & E-Commerce, Business Administration, Business Office Concepts, Marketing & Sales Essentials, Payroll Administrator, Professional Business Management, Tourism Hospitality Management and Flight Attendant.
Health Sciences & Social Development – Diploma
27 to 50 weeks
The Faculty of Health Science & Social Development provides programs in: Community Support Worker (Assisted Living and Social Services), Early Childhood Education (Basic and Post-Basic), Pharmacy Technician, Practical Nursing, Resident Care Attendant and Spa Body Therapy.
Trades & Applied Technology – Diploma
26 weeks to 1 year
The Faculty of Trades & Applied Technology provides the following programs: Residential Construction Framing Technician, Construction Electrician – Level 1 and 2, and Electrical Apprentice Training.
International Studies
25 to 45 weeks
International Studies provide programs in International Hospitality Management, International Trade & Business Management, and International Trade Diploma.
Accelerated Programs
12 to 24 weeks
Accelerated Programs include Business Management & E-Commerce, Business Administration, Legal Secretary, Medical Office Assistant, Pharmacy Technician, Professional Business Management, Tourism and Hospitality Management, and Payroll Administrator.
 
 
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KGIC
 
KGIC offers the following programs in the areas of language training, career training and publishing, primarily in Canada:
 
Name of Program
Duration of Program
Description
Business Management Diploma and Certification Programs
3 to 25 weeks
The Business Management Diploma and Certification Programs offer both experienced professionals and newcomers to business training in areas of business, including accounting, finance and marketing.  Programs include field trips and expert industry guest speakers.  There is also an opportunity for a practicum.
Hotel Management AHL-EI Diploma and Certification Programs
8 to 36 weeks
The Hotel Management Diploma and Certification Programs offers students training in hotel management, including rooms, food and beverage, and marketing and sales. The program uses world-recognized AHL-EI curriculum taught by AHL-EI accredited instructors. In addition to a diploma, students receive AHL-EI certificates throughout the program for completion of modules.  There is also an opportunity for a practicum.
International Office Management Diploma Program
12 to 16 weeks
The International Office Management Diploma Program offers training in the use of office technology, office management skills, and communication skills. This program prepares students for the world of business, office administration, or small business management. The office management program is offered in three main course components: Office Management, Business English, and Information Technology.
Interpreting and Translation Diploma Programs (ITDP)
8 weeks
The Interpreting and Translation Diploma Programs offer training in interpreting and translating English, Korean and Japanese languages. The translation programs are taught by a team of native Canadian English speakers and qualified Korean and Japanese multi-lingual instructors. A bonus component includes one-on-one counseling to discuss individual progress and performance.
English Preparation for Interpreting and Translation Program
4 weeks
English Preparation for Interpreting and Translation is a preparation program designed to prepare students for the advanced ITDP-Korean program and offers training in interpreting and translating English and Korean languages.
Power Speaking and Modern Media Program
4 to 8 weeks
The Power Speaking and Modern Media (PMM) program offers training in public speaking and the media and are designed to improve communication skills while exploring the world of modern media. PMM uses current events, popular culture, movies and television to help students express themselves with confidence, ease and accuracy. This program also offers students the chance to develop professional presentation skills. Bonus component includes direct error correction, videotaping and feedback during role-plays and presentation exercises.
IELTS International English Language Testing Program
4 to 12 weeks
IELTS is the world's leading English language testing program, used by organizations, government agencies, universities and colleges through-out the world. This program is designed to assist students in preparing for this test and to improve their overall English skills.
TOEFL Test of English as a Foreign Language
4 to 8 weeks
The Test of English as a Foreign Language is designed to assist students to prepare for the TOEFL test and provides exercises in grammar, listening, reading and composition. TOEFL also includes one-on-one after school counseling, and immediate feedback and error correction. Bonus component includes school placement counseling for students interested in attending university in North America.
First Certificate in English Cambridge Program
4 to 12 weeks
The FCE Cambridge test preparation program is designed for students to practice listening and reading comprehension, writing, speaking, grammar, vocabulary and phrasal verbs and improve their general English skills through exam relevant content such as real English used in everyday work, study and leisure situations.
Advanced Business Management Diploma Program
52 weeks
The Advanced Business Management Diploma Program formally integrates a student's academic studies with paid or unpaid work experience in partner companies.
Advanced Hotel Management AHL-EI Diploma Program
60 weeks
The Advanced Hotel Management Diploma Program is a co-operative education option that includes all the components of the Hotel Management Diploma Program but also offers students an opportunity to gain experience in the work place.
English as a Second Language Program
Weekly intakes
The English program is designed to help students improve in all skill areas including grammar, reading, writing, speaking, listening and pronunciation.  With a unique flexible level structure, the KGIC system allows students to study at a level that directly corresponds to their ability in each skill area.
Business English Diploma Program
4 to 12 weeks
The program is primarily a communications course targeting all students working in an English-speaking business environment. As a communications course, the program offers the traditional polishing of writing and speaking skills and focuses on business conversation, business issues and presentation skills.
 
 
42

 
 
Our Lecturers
 
Our business requires that we hire lecturers and instructors with knowledge of the subjects taught as part of the programs offered by us.
 
Our course lecturers and instructors include academics from renowned higher education institutions in China and Canada and experienced practitioners within their respective fields.  Our lecturers and instructors work with us to prepare the course content and lectures, while also serving as faculty members of various colleges and universities across China and Canada or working in their respective fields.
 
To ensure the quality of our lecturers and instructors, we have established stringent selection and retention criteria and have implemented ongoing monitoring and evaluation procedures.  We seek to engage lecturers and instructors who have a strong command of their respective subject areas and good communication skills.  Our internal quality control personnel regularly monitor the teaching quality of each lecturer and instructor.  We also collect feedback on the lecturers and instructors from our course participants on a regular basis.  We provide ongoing training for lecturers and instructors and help them improve their online presentation skills based on this feedback.
 
We pay our lecturers and instructors fees in either of two ways: the first and most common way is to pay them based on the number of hours of lectures or instruction they deliver, and the second and less common way is a course fee sharing arrangement primarily for some of our newer courses.
 
Although our lecturers and instructors participate in the creation and development of the course materials, in almost all cases, we own all copyrights to our courses and course materials pursuant to contracts with our lecturers and instructors.
 
Student Enrollment Statistics
 
During the fiscal year ended August 31, 2011, the number of student starts in China was 1,808, and the student population in programs offered by CIBT was 1,970, the number of annual student starts in programs offered by Sprott-Shaw was 2,740 and the number of annual student starts in programs offered by KGIC was 6,753.  A student start is defined as the number of students who registered with the school (and took classes) at any time during the fiscal year.  Student population is defined as the total number of students currently registered (and taking classes) at the school on any specified date.
 
We acquired Sprott-Shaw in December 2007 and KGIC in March 2010, which resulted in a significant growth in the number of students enrolled in our programs. With respect to KGIC, a large number of its students take English programs that can run anywhere from four to twelve weeks. Once their English program is finished and a new English student is enrolled, that new student will also count as a start, even though the total number of students actually taking classes at a given time (i.e. total student population) has not increased. As a result, total student starts for a year for KGIC significantly exceeds the total student population at KGIC at any given time due to the relatively large percentage of KGIC students that are enrolled in shorter-term English programs. This is true to some extent at Sprott-Shaw as well, but not approaching the same level as at KGIC.
 
In contrast, most of CIBT’s students are enrolled in courses that are one year (or longer) in length with the exception of the AHL-EI programs, so this phenomenon is not very pronounced at CIBT. Due to this anomaly, we generally report total student population figures (as opposed to total annual student start figures) for CIBT, but total annual student starts for KGIC and Sprott-Shaw. As a result, the reader must be careful to discern between the two terms when evaluating enrollment figures presented using these two different types of enrollment reporting mechanisms.
 
 
43

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

Subsidiary Name
 
Total Annual 
Student Starts
(9/1/2010 –
8/31/2011)
   
Total Student Populations
as at
8/31/2011
 
CIBT
    1,808       1,970  
SSDC
    2,740       1,560  
KGIC
    6,753       1,596  
Total
    11,301       5,126  
 
Tuition Fees
 
CIBT
 
Tuition fees for CIBT’s various programs in China are as follows:
 
Name of Program
Duration of Program
Tuition Fee(1) ($)
Information Technology Program (IT program)
Three years
$1,800 per year
Automotive Technical Training Programs (auto training programs)
Three Months to Three Years
Wyotech Institute(2) programs: $315 for three months program;
$2,100 for eighteen month program;
Weifang University program: $1,800 per year
Corporate and Executive Training Program (CET program)
Three years
$1,800 per year
2+2 Program or 1+1 Program(3)
Two years or four years
$5,500 per year for 2+2 Program
$3,800 per year for 1+1 Program
Some students will continue their studies in Sprott-Shaw’s business programs
English Program
From one month to four months
$50 to $80 per month
English Teach Program
From three months to nine months
$50 per month
Business English Program
Three years
$1,800 per year
Hotel Management Program
From one to three years
From $80 per course to $4,100 per year
Accounting Program
Three years
$1,800 per year
 
(1)  
Tuition fees are shown on a gross basis in Canadian Dollars.
 
(2)  
Wyotech Institute is a subsidiary of Corinthian Colleges, Inc. (NASDAQ: COCO).
 
(3)  
We only receive payment of tuition for our 1+1 master’s and 2+2 bachelor’s degree programs for the periods of time that the students actually spend at a CIBT owned/operated institution. The portion of tuition revenue related to the time that the student spends overseas at the facilities of an educational service provider are retained by that educational service provider, and CIBT does not share in any of those revenues. However, CIBT is negotiating with some of its educational service providers to obtain a referral fee for students sent to these overseas institutions.
 
 
44

 
 
Sprott-Shaw
 
Tuition fees for Sprott-Shaw’s various programs in Canada are as follows:
 
Name of Program
Duration of Program
Approximate Tuition Fees
Business Program – BBA
Four years
$2,880 per semester for local students; $4,000 per semester for international students (less a 20% agency fee)
Certified General Accountant Program
Four years
$6,450 per semester for local students
Business Program – Diploma
12 to 45 weeks
$203/week
Health Sciences & Social Development – Diploma
27 to 50 weeks
$256/week
Trades & Applied Technology – Diploma
26 weeks to 1 year
$280/week
International Studies
25 to 45 weeks
$203/week
Accelerated Programs
12 to 24 weeks
$203/week
 
KGIC Colleges
 
Tuition fees for the KGIC Colleges’ various programs in Canada are as follows:
 
Name of Program
Duration of Program
Approximate Tuition Fees
Business Management Diploma Programs
3 to 25 weeks
$1,000 for 3 weeks to $7,000 for
25 weeks
Hotel Management AHL-EI Diploma Program
8 to 36 weeks
$2,860 for 8 weeks to $11,460 for
36 weeks
International Office Management Diploma Program
3 to 16 weeks
$940 for 3 weeks to $3,690 for
16 weeks
Interpreting and Translation Diploma Programs
8 weeks
$2,880
English Preparation for Interpreting and Translation Program
4 weeks
$1,500
Power Speaking and Modern Media Program
8 weeks
$2,880
IELTS English Testing Program
4 to 12 weeks
$1,260 for 4 weeks to $3,590 for
12 weeks
TOEFL Test of English as a Foreign Language
4 to 8 weeks
$1,320 for 4 weeks to $2,640 for
8 weeks
First Certificate in English Cambridge Program
4 to 12 weeks
$1,260 for 4 weeks to $3,590 for
12 weeks
Advanced Business Management Diploma Program
52 weeks
$7,000
Advanced Hotel Management AHL-EI Diploma Program
60 weeks
$11,460
English as a Second Language Programs
4 to 73 weeks
$1,260 for 4 weeks to $12,850 for
52 weeks
Power Writing and Journalism Program
8 weeks
$2,880
Power Speaking and Modern Media Program
4 to 8 weeks
$1,440 for 4 weeks to $2,880 for 8 weeks
Business English Diploma Programs
4 to 12 weeks
$1,500 for 4 weeks to $3,690 for
12 weeks
 
 
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Student Graduation and Employment
 
We place a high priority on assisting our students in graduating from their programs of study and securing employment in their careers of choice. We believe that the employment of our students in their field of study is a key indicator of the success of our schools and the fulfillment of our educational mission. Our schools strive to share with each student the responsibility for the student’s long-term success. Our emphasis on providing personal support and assistance to our students is a hallmark of our educational model.
 
Several of our campuses have career services departments whose primary responsibility is to assist our students in identifying employment opportunities in their chosen fields of study after graduation. Career services staff members provide our students with a variety of career development instruction, which addresses, among other things, the preparation of resumes and cover letters, interviewing skills, networking and other essential job-search tools, as well as ongoing career service resources, which are generally available to both current students and alumni. In addition to our career services personnel, we have many externship coordinators who help students obtain externships that prepare them to compete in the employment market.
 
With a goal to increase job placements for our graduates, we started a call center in Manila, Philippines.  Call center agents call employers in relevant industries seeking job openings for graduating students, then submit video resumes for the students.
 
The retention rate of students at CIBT is generally high (around 95%) as there is a cultural element attached to education in China and CIBT’s students pay for an entire year of classes at the start of the academic year. KGIC’s student retention rate is 97.5% as KGIC’s programs are short term in duration (ESL programs can be as short as one month) and there are generally no drop outs as a result. Sprott-Shaw’s retention rate is approximately 84%, as program lengths are also relatively short (less than one year) and students are generally financially prepared for their course of studies and, therefore, generally do not have to drop-out due to financial difficulties.
 
Instructors
 
Our various schools employ both full time and part time instructors to teach their classes, and the number of instructors are provided below.
 
 
Full-time instructors
Part-time instructors
Total number of instructors
CIBT
5
30
35
Sprott-Shaw
52
206
258
KGIC
42
135
177
TOTAL
99
371
470
 
With respect to instructors, KGIC employs the highest percentage of full time instructors (100% versus 36% for Sprott-Shaw). We are in the process of converting the status of more KGIC instructors to part-time status and believe that this may significantly lower the cost structure of KGIC, and increase both KGIC’s as well as the consolidated CIBT school group’s overall profitability. In November 2010, a group of approximately 50 instructors at KGIC joined a union. There are approximately 40 instructors at KGIC that are currently represented by a union. However, discussions with the union have not been concluded and no agreement has been entered into with the union as of the date of this annual report. Assuming a bargaining agreement with the teachers union is reached, the net increase to payroll expenses forecast by management at this time would not be significant on a consolidated basis.
 
Total Employees
 
In addition to instructors, the schools each employ a number of people to provide administration, student counseling, placement, bursar and registrar functions, as well as marketing, admissions and enrollment, financial aid processing and other clerical, administrative, managerial and executive functions. Figures for these additional employees are presented below as at August 31, 2011.
 
 
Total Instructors
Administrative and Other Employees
Total Employees
CIBT
35
60
95
Sprott-Shaw
258
122
380
KGIC
177
60
237
TOTAL
470
242
712
 
In addition, our head office in Vancouver employs seven full-time personnel who oversee our operations and carry out strategic planning, corporate communications, marketing, financing, human resources and information technology functions.
 
 
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Marketing and Student Recruitment
 
We believe prospective students are attracted to our schools due to our brand name, the quality of our programs, our relatively long operating history in the private education sector, our extensive international network and our ability to provide training which is relevant in obtaining jobs from multinational corporations and other employers in China and elsewhere. Our subsidiaries employ a variety of marketing and recruiting methods to attract students and increase enrollments. CIBT uses recruitment channels such as recruiting agents, direct recruitment from government colleges and student referrals.  CIBT also relies on Internet and newspaper advertising.  Sprott-Shaw’s student recruitments are generated through a combination of recruiting agents and student referrals and Sprott Shaw relies on traditional marketing methods including radio, television, newspaper and bill board advertising.  KGIC primarily relies on recruiting efforts through a network of overseas recruiting agents and government sponsorship programs as well as student referrals.  Some of these recruiting methods are described below.
 
Recruiting Agents and Referrals. We use a wide network of educational recruiting agents who are engaged to actively promote our programs and recruit students.  Historically, a large portion of our student enrollments have come from recruiting agents and word-of-mouth referrals.  Our student enrollments have benefited and will continue to benefit by referrals from our extensive network of students and alumni and the successful academic and professional careers that many of them have achieved.  The majority of our agents are non-exclusive to us and are paid a commission on a per-student basis.  (U.S. readers should understand that in Canada and most foreign countries, recruiters are allowed to be compensated based on the numbers of students that they enroll, as no U.S. Title IV funding is involved for such students.) As a result, prohibitions on incentive compensation for student recruiters that exist in the United States do not apply to our operations and those of our subsidiaries. In addition, through the acquisition of KGIC, we now have four international recruiting offices in Japan, Korea, Taiwan and Spain which are staffed with in-house recruiters that manage the agent networks in their respective countries/territories and also perform direct recruiting activities. This is a significant new addition to our marketing capabilities and one which we believe may significantly increase the flow of international students to our campuses as KGIC is integrated into our network.
 
Existing Student Pools at Partner Facilities.  A cornerstone of our expansion strategy in China and Asia has been to partner with established education providers (often large Chinese state-owned universities) through collaborative agreements and to co-locate on their sites.  In doing so, we obtain ready access to a large pool of existing students, many of whom may enroll in our courses in order to obtain a western-style education and have greater opportunities to obtain jobs with  multinational corporations operating in China or abroad. Such employers typically pay higher wages than Chinese domestic companies.
 
Job Placement and Externship Opportunities.  A key value proposition for our students is that we maintain relationships among and have placed students with a large number of multinational companies and hotel chains as well as other employers.  We actively recruit for jobs for our students, which most government-owned universities and many of our for-profit competitors in China do not.  In addition, many of our programs include externships, often abroad, which can often lead to permanent employment with multinational employers and others.  We believe that many of our students study with us because we provide job placement services and believe that this is also a key selling point for us.
 
Distribution of Marketing Materials.  We participate in on-campus events, educational expos and conferences, as well as college and employment fairs where we set up “booths” and “information tables” to distribute informational brochures, posters and flyers and answer questions from prospective students about our schools and programs.  We also conduct extensive free information sessions to introduce our programs to our target markets.
 
 
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High School Recruiting Programs.  We actively recruit students on high school campuses.  This includes presentations to groups of students at high schools, with individual follow-up by telephoning potential students when needed.
 
Internet and Traditional Advertising.  We advertise through our own websites and also on China’s and Canada’s leading portals.  Our six international (KGIC) recruiting offices also advertise on the portals in their respective territories. We utilize a growing number of internet strategies, including the use of internet lead aggregators.  We have been using internet advertising over the past two years and we expect this to be a larger portion of our advertising mix in the future. We currently also utilize a wide array of traditional media sources including national and regional newspapers, television, and radio. We also utilize bus signage and other transportation media, as well as other outdoor advertising displays.
 
Cross-Selling.  As we gain footholds in many different markets, we use our programs in one market as an opportunity to advertise our programs in other markets.  With a variety of programs aimed at different groups, our goal is to create a brand name that permeates every stage of our potential students’ educational, career and life progression, from English for adults, to vocational and career training at the diploma to bachelor’s to master’s degree levels.  In addition, a core element of our marketing strategy is highlighting our English language program’s role in enabling students to differentiate themselves for college entrance examinations and to better compete in a competitive education system and job market.  We also use our English language programs to establish an initial relationship with students and then introduce them to longer-term studies overseas or enrollment in other longer-term courses and programs that we offer, which both increases their tenure with us and also enhances their skill levels for advancement in the international marketplace. We believe that our ability to both cross-sell our programs and campuses as we grow our system and our ability to “up-sell” our growing base of English language students into longer-term programs is a competitive advantage for us, and may significantly increase profits over the long term.
 
Speeches and Seminars.  Our management and our top instructors frequently give speeches at colleges, universities, and high schools and to student groups, parent groups and educational organizations. They also participate in educational seminars and workshops.
 
Chinese Government Quota System.  The Chinese government operates a national recruitment system, which matches students to colleges based on the results of yearly nationwide examinations and the preferences of students. Currently, CIBT Beihai International College is part of that system, and in 2011, it received 321 student enrollments directly from the Chinese government quota system. Beihai’s ability to participate in this quota system is a direct result of our strategy to “partner” with existing state-owned universities in the Chinese marketplace. Over time, we believe that we may be able to acquire additional schools in China that may participate in the Chinese government quota system, which may provide an additional new stream of students for us in the future.
 
 
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Competition
 
We face competition from providers of traditional education programs and training services, and expect to face increasing competition from existing competitors and new market entrants in the online education market, including the following:
 
  
U.S. or Canadian-based for-profit post-secondary and ESL education companies that also offer educational services in Canada.  Examples of our competitors include the Eminata Group, a Vancouver based corporation that operates a number of different colleges, including CDI College and Vancouver Career College.  We also face competition from a growing number of independent ESL schools that offer similar courses in Canada.
 
  
Chinese, U.S. or European-based for-profit post-secondary education companies that also offer western-style educational programs in China.  Examples of our competitors include New Oriental Education and Technology Group, China Distance Education Holdings Ltd., China Education Alliance, Inc., and ChinaEdu Corp.
 
  
For-profit post-secondary education companies offering Chinese language training and professional training programs.  This segment consists of thousands of small training companies operating schools with a few dozen to a few hundred students.  This segment is the most significant competitor to our IT and Automotive Technical Training programs.  Examples of our competition in this segment include Nllt School and Aptech School (IT program). In Weifang alone, there are three other schools that offer automotive technical training programs: North China Auto School, Lan Xiang Career College, and DAZhong Auto School.
 
  
Not-for-profit post-secondary education companies that offer western-style educational programs.  These are typically joint ventures established between U.S. or European universities and Chinese universities, and are generally offered in the larger cities.  There are currently a large number of these arrangements in China, and they pose the biggest competitive threat to the business programs we offer.  For instance, in Beijing, both Yangtze River Business School and China Agriculture University/Luton University of the United Kingdom provide business programs which are comparable to those offered by us.
 
  
Not-for-profit post-secondary education companies that do not offer western-style educational programs. These are typically public schools run by the Chinese government.  However, despite not offering programs based on the western education style, their programs are in high demand and they are one of our significant competitors.
 
  
Online education companies, whose offerings including download and self-study, language based one-on-one video conference teaching using low cost personal computers, and American and Canadian universities (such as Simon Fraser University and Richard Ivey School of Business) who use video conferencing equipment to deliver classes within their system of school, but do not operate outside of that system of schools.  This segment competes indirectly with the GLN infrastructure.
 
We believe that the key competitive factors in our industry include the professional competence of our lecturers, price, quality, market recognition and brand name.  Some of our present and future competitors may have longer operating histories, larger teams of professional staff and greater financial, technical, marketing and other resources. We may lose market share and our profitability may be materially and adversely affected, if we fail to compete effectively with our present and future competitors or to adjust effectively to changing market conditions and trends.
 
Governmental Regulations and Approvals
 
Our educational operations in China and Canada require approvals from various government authorities, including the following:
 
  
Ministry of Education - The Ministry of Education in China is the government’s national agency that is responsible for approvals of all Chinese and foreign bachelor’s and master’s degree programs offered in China.
 
  
Provincial Education Committees – A provincial committee provides provincial approvals to operate a campus or school in a Canadian province, as well as approvals for bachelor and master’s degree programs to be offered in the province.
 
  
Municipal Education Bureaus – A municipal education bureau provides municipal approvals to operate a campus or school in a Canadian city, as well as approvals for certificate, bachelor or master degree programs to be offered in the city.
 
Our educational services providers in other countries may also require differing levels of regulatory approvals.
 
 
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CIBT
 
The Chinese government regulates the education services industry in China and the provision of our education services is subject to Chinese laws and regulations relating to the education services industry.  This following sets forth a summary of the principal laws and regulations that affect our business activities in China.
 
Education Law of the PRC
 
On March 18, 1995, the National People’s Congress enacted the Education Law of the PRC, which governs all levels of the educational system in China, including pre-school, primary, secondary education and higher education.  The legislation makes it compulsory for all children in the country to complete a minimum of nine years of schooling, up to middle school level.  Primary and secondary school are free. The Education Law requires the government to formulate plans to develop the education system in China and to establish and operate schools and other educational institutions. In principle, under the Education Law, enterprises, social organizations and individuals are encouraged to operate schools and other types of educational organizations in accordance with Chinese laws and regulations; however, no organization or individual may establish or operate a school or any other educational institution with the sole purpose of earning a profit. However, private schools may be operated for “reasonable returns,” as described in more detail below.
 
Regulations on Chinese-Foreign Cooperation in Operating Schools
 
Chinese-foreign cooperation in operating schools or training programs is specifically governed by the Regulations on Operating Chinese-foreign Schools, promulgated by the State Council in 2003 in accordance with the Education Law, the Occupational Education Law and the Law for Promoting Private Education, and the Implementing Rules for the Regulations on Operating Chinese-foreign Schools, or the Implementing Rules, which were issued by the Ministry of Education in 2004.
 
The Regulations on Operating Chinese-foreign Schools and its Implementing Rules encourage substantive cooperation between overseas educational organizations with relevant qualifications and experience in providing high-quality education and Chinese educational organizations to jointly operate various types of schools in China, with such cooperation in the areas of higher education and occupational education being encouraged. Chinese-foreign cooperative schools are not permitted, however, to engage in compulsory education and military, police, political and other kinds of education that are of a special nature in China.
 
Approvals for Chinese-foreign Cooperation in Operating Schools are obtained from the relevant education authorities or the authorities that regulate labor and social welfare in China. We believe we have obtained all approvals for our Chinese-foreign cooperation institutes.
 
Provisions Regarding Mergers and Acquisitions of Domestic Enterprises by Foreign Investors
 
On August 8, 2006, six Chinese regulatory agencies, including the Chinese Securities Regulatory Commission, or CSRC, promulgated a rule entitled “Provisions regarding Mergers and Acquisitions of Domestic Enterprises by Foreign Investors,” or the new M&A rule, to more effectively regulate foreign investment in Chinese domestic enterprises. The new M&A rule provides that the Ministry of Commerce must be notified in advance of any change-of-control transaction in which a foreign investor takes control of a Chinese domestic enterprise and any of the following situations exists: (i) the transaction involves an important industry in China, (ii) the transaction may affect national “economic security,” or (iii) the Chinese domestic enterprise has a well-known trademark or historical Chinese trade name in China. Any merger or acquisition by foreign investors is subject to review and approval by the Ministry of Foreign Trade and Economic Cooperation or the authority in charge of such matters at the provincial level. The new M&A rule became effective on September 8, 2006 without retroactive effect. These regulations may have an adverse effect on our future acquisition plans in China.
 
 
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Chinese Tax Regulations
 
On March 16, 2007, the National People’s Congress, which is the legislature of China, passed the Enterprise Income Tax Law (the “EIT Law”), which became effective on January 1, 2008. The EIT Law applies a uniform 25% enterprise income tax rate to both foreign-invested enterprises and domestic enterprises. There will be a transition period for the enterprises, whether foreign-invested or domestic, which currently receive preferential tax treatments granted by relevant tax authorities. Enterprises that are subject to an enterprise income tax rate lower than 25% may continue to enjoy the lower rate and gradually transfer to the new tax rate within five years after the effective date of the EIT Law. Enterprises that are currently entitled to exemptions or reductions from the standard income tax rate for a fixed term may continue to enjoy such treatment until the fixed term expires. Preferential tax treatments will continue to be granted to industries and projects that are strongly supported and encouraged by the state, and enterprises otherwise classified as “new and high technology enterprises strongly supported by the state” will be entitled to a 15% enterprise income tax rate. However, the EIT Law does not define this term. The EIT Law empowers the State Council to enact appropriate implementing rules and regulations.  Based on the foregoing, CIBT’s tax rate is currently 25%.
 
Furthermore, unlike the Income Tax Law for Enterprises with Foreign Investment and Foreign Enterprise currently in effect, which specifically exempts withholding tax on any dividends payable to non-Chinese investors, the EIT Law provides that an income tax rate of 20% will normally be applicable to dividends payable to non-Chinese investors which are derived from sources within China, although such income tax may be exempted or reduced by the State Counsel of the Chinese or pursuant to a tax treaty between China and the jurisdictions in which our non-Chinese shareholders reside. It is unclear whether any dividends payable to non-Chinese investors will be deemed to be derived from sources within China and be subject to Chinese income tax. If we are required under the EIT Law to withhold income tax on dividends payable to our non-Chinese shareholders, the value of your investment may be materially and adversely affected.
 
Chinese Educational Approvals
 
The following table describes approvals we have obtained for each of our campuses and for the programs offered at each campus in China. No government approvals are needed for our CIBT centers.
 
Campus
Location
Offered Programs in each campus
Approval Authority
Approval Date
Renewal Date
Shuanglong CIBT Campus
Beijing China
2+2, 1+1, Business program
Beijing Education Committee
December 19, 1999
Renewal not required 1
Beijing University of Technology West Campus
Beijing, Capital of China
Business program – bachelor degree, 2+2, 1+1,
Beijing Education Committee
December 29, 1999
Renewal not required 1
CIBT Beihai International College
Weifang, Shandong province
IT program, Business English program, CET program, Auto training program
Shandong Provincial Government
October 31, 2004
Renewal not required
CIBT WyoTech Automotive Institute
Weifang, Shandong province
Auto training program
Shandong Education Committee
December 14, 2006
Renewal not required1
 
(1)  
We do not need to renew the government issued approval, but we are required to obtain a new approval for each new educational service provider.
 
Our management is satisfied that we have applied for all necessary approvals to carry on our education business in China. While we believe that we have taken all steps necessary to maintain the approvals for our programs in China, there is no assurance that we will be successful in renewing or maintaining these or any other approvals in the future. Failure to renew or maintain the MBA or other approvals may have a material adverse effect on our business, results of operations and financial condition due to reduced enrollment as a result of being unable to issue a Chinese recognized Masters degree or other accreditation. See “Item 3. Key Information - Risk Factors”.
 
 
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Sprott-Shaw and KGIC Colleges
 
Sprott-Shaw and the KGIC Colleges have obtained approvals or accreditations for their programs from the following authorities:
 
  
Private Career Training Institutions Agency (“PCTIA”): The PCTIA is the regulatory agency for private training institutions in the Province of British Columbia. PCTIA is given its authority by the Province of British Columbia, Canada, Ministry of Advanced Education, under the Private Career Training Institutions Act, Regulations, and Bylaws. PCTIA has responsibility under the Private Career Training Institutions Act to: provide consumer protection to the students and prospective students of registered institutions; establish standards of quality that must be met by accredited institutions; and establish and manage the Student Training Completion Fund.
 
  
College of Licensed Practical Nurses of British Columbia (“CLPNBC”): The CLPNBC is responsible for regulating the profession of Licensed Practical Nurses in the public interest
 
  
Ministry of Children and Families: The Ministry of Children and Families provides programs and services to ensure that healthy children and responsible families are living in safe, caring and inclusive communities.
 
  
Industry Training Authority (“ITA”): The ITA is a provincial crown agency. It was established in 2004 and is responsible for managing BC’s industry training system to develop the skilled workforce needed to ensure the competitiveness and economic prosperity of our businesses and the Province of British Columbia.
 
  
Degree Quality Assessment Board (“DQAB”): The DQAB was appointed by the Minister of Advanced Education and Labour Market Development who established criteria, in consultation with the board, to be applied when a private or out-of-province public institution applies for consent to provide degree programs or use the word “university” in British Columbia. The same program review criteria apply to new degree programs proposed by British Columbia public post-secondary institutions.
 
  
Ministry of Training, Colleges and Universities (“MTCU”): In Ontario, MTCU is responsible for the administration of laws relating to education and skills training.
 
In British Columbia, all vocational programs, over $1,000 and providing over 40 hours of instruction are accredited by PCTIA. Its Practical Nursing program is approved by CLPNBC. The Early Childhood Education program is approved by the Ministry of Children and Families. The Trades Programs are approved by ITA. All academic programs are approved by the DQAB and allowed under the Ministry of Advanced Education. In Ontario, the Minister of Education and the MTCU are responsible for the administration of laws relating to education and skills training. KGIC’s business programs delivered in Ontario are certified and regulated by MTCU.
 
We believe that we have applied for and received all necessary approvals to carry on our education business in Canada. While we believe that we have taken all steps necessary to maintain the approvals, there is no assurance that we will be successful in renewing or maintaining these or any other approvals in the future. Failure to renew or maintain approvals may have a material adverse effect on our business, results of operations and financial condition due to reduced enrollment as a result of being unable to issue a recognized accreditation. See “Item 3. Key Information - Risk Factors”.
 
 
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Seasonality
 
Our business is seasonal in nature due to enrollment patterns and it fluctuates with the school terms of each subsidiary. As a result, we experience spikes in revenues in September, which is the typical starting date for a student of Sprott-Shaw, and in June, which is the busiest season for KGIC due to the significant increase in students through the summer camp programs. Accordingly, our results in a given quarter may not be indicative of our results in any subsequent quarter or annually.
 
Intellectual Property and Intangible Assets
 
Our trademarks, copyrights, domain names, trade secrets and other intellectual property rights distinguish our services from those of our competitors and contribute to our ability to compete in our target markets. We rely on a combination of copyright and trademark law, trade secret protection and confidentiality agreements with our employees, lecturers, business partners and others, to protect our intellectual property rights. In addition, we require our employees to enter into agreements with us under which they acknowledge that all inventions, trade secrets, works of authorship, developments and other processes made by them during their employment are our property and they should assign the same to us if we so require.
 
We, directly or through our subsidiaries, own the copyright to all of the contents of our websites, which include www.cibt.net, www.cibt.edu, www.cibt.ca, www.sprott-shaw.com, and www.kgic.ca. We also own the trademarks Sprott-Shaw, Sprott-Shaw Community College, Pitman Business College, Tourism Training Institute, Concordia Career College and Modus International Language Institute.  To reduce replication and brand confusion, these brands are no longer in use: Pitman, Tourism Training Institute, Concordia Career College and Modus.  Operations from these prior acquisitions were fully amalgamated into our Sprott-Shaw operation.
 
In addition, we own the following intangible assets, among others, related to our education programs and training services business, directly or indirectly through our subsidiaries:
 
  
licenses;
 
  
affiliation agreements;
 
  
recruiting agent agreements; and
 
  
course curriculum.
 
Our intellectual property is subject to risks of theft and other unauthorized use, and our ability to protect our intellectual property from unauthorized use is limited. In addition, we may be subject to claims that we have infringed the intellectual property rights of others. Our failure to protect our intellectual property rights may undermine our competitive position, and litigation to protect our intellectual property rights or defend against third-party allegations of infringement may be costly and ineffective.
 
Operations of IRIX
 
We own a 51% interest in IRIX which was founded on October 5, 1994 under the laws of British Columbia, Canada.  IRIX is a full service agency offering one-stop-shop multimedia and advertising services.  It was originally a marketing and advertising provider to us.  Our original intention was to purchase IRIX to reduce our marketing costs and transform IRIX into our marketing department.  Over the years, IRIX developed its own customer base by providing media design services to a broad base of clienteles in Canada.
 
 
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Products and Services
 
IRIX provides a wide range of production and design services. The types of major services and the percentages of overall revenues of IRIX are summarized below.
 
Description
Percentage of Overall Revenues
Graphic Design
45%
Marketing Consulting Service
15%
Production Services for print, video, film and multimedia
10%
Media Booking Agency
20%
Interior Design and Conceptual Space Design
5%
Interior Design and Product Design
2%
Other Services
3%
 
Marketing Strategy
 
IRIX targets small-size businesses that are looking to promote themselves in the marketplace through marketing of a defined image. IRIX focuses its marketing efforts on targeting clients in the following industries:
 
  
Real estate
 
  
Banking and Financial Services
 
  
Retail and Consumer Products
 
  
Food and Beverage Products
 
  
Manufacturing
 
Markets
 
IRIX conducts its operations in the U.S. (primarily in California), Canada (primarily in Vancouver, British Columbia) and Hong Kong and services financial institutions (in the U.S.), the real estate sector (in Canada) and goods providers, food and beverage manufacturers and government agencies (in Hong Kong). IRIX presently concentrates on marketing and offering products and services to Vancouver real estate businesses.
 
There are risks and uncertainties inherent in the multimedia and advertising industry, which could adversely affect the financial condition of IRIX, including:
 
  
Low barriers to entry. It is relatively easy and inexpensive for competitors to enter this industry, and IRIX may face a number of new competitors.
 
  
Economic downturns. In the event of a downturn in the economy, expenditures on marketing products are often more likely to be reduced over other costs, which may adversely effect IRIX’s revenues.
 
  
Customer demography. A large portion of IRIX’s customers are Asian. Should there be a downturn in the immigration environment in Vancouver, this could adversely effect IRIX’s revenues and curtail our growth.
 
See “Item 3. Key Information - Risk Factors” for additional risks and uncertainties relating to the business of IRIX.
 
 
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Competition
 
IRIX faces competition from a wide range of companies.  The multimedia, advertising and graphic design market consists of many competitors, from world-wide or nation-wide advertising companies or agencies, to self-employed web designers or programmers. Many of these competitors have substantially greater financial and other resources. IRIX primarily competes with small-size Vancouver-based companies rather than large-size advertising companies or agencies.
 
IRIX’s products and services are distinguished by the quality of the products and services being offered and an emphasis on customer focus rather than low price. Therefore, aggressive price competition from existing or future competitors could result in the need to reduce prices or increase spending and could result in a decrease in our revenues and profitability.
 
IRIX’s competitors for the Asian market in Vancouver currently include five to ten firms, including Grapheme/Koo, Cossette Communications Group, Chinese Agency (Canada) Ltd, and Hamasaki Wong.  Other advertising and graphic firms who compete in the real estate market include Traction Creative Communications and Fleming Creative Group.
 
Employees
 
IRIX has a total of 14 employees working in its Vancouver office, including Alvina Leung, a director of IRIX, and Alvin Chu, the President of IRIX, as well as 12 other individuals employed as follows:
 
Function
Number of Employees
Marketing Director/Manager
2
Project Manager
1
Designers
5
Copywriter
1
Web Development
1
Account Executives
2
 
IRIX has no staff members or office premises outside of Vancouver. All clients in Hong Kong and the U.S. are serviced by personnel in the Vancouver office.
 
Office
 
IRIX shares a leased office space in Vancouver with us, occupying 1,526 square feet at a cost of approximately $38,151 per year for the first three years, increasing to $39,678 per year for the last two years . IRIX does not own any real property.
 
Intellectual Property
 
IRIX owns the copyright to all of the contents of its website, www.irix-design.com.
 
 
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C.  Organizational Structure
 
We operate our education programs and services business through the following subsidiaries:
 
1. 
CIBT, which conducts operations primarily in China and in which we currently hold a 100% ownership interest;
 
2. 
Sprott-Shaw, which operates primarily in Canada and with a presence in Asia and the Middle East, in which we acquired a 100% ownership interest on December 17, 2007; and
 
3. 
The KGIC Colleges, which are comprised of KGIC Business College (2010) Corp. and KGIC Language College (2010) Corp., our wholly-owned subsidiaries that operate primarily in Canada, and which were organized in connection with the acquisition of substantially all of the assets of KGIC on March 15, 2010.
 
In addition, we hold a 51% interest in IRIX, a multimedia service and advertising agency located in Vancouver, British Columbia, Canada.
 
The following table sets forth certain information relating to our subsidiaries:
 
Subsidiary
Date of Incorporation
Country of Incorporation
Percentage of Ownership
Principal Business
CIBT
February 9, 1994
British Columbia, Canada
100%
Provide education and training services primarily in China through our CIBT education centers, CIBT Beihai International College, CIBT Wyotech Automotive Institute, CIBT-BJUT School of Business and Tourism Training Institute
Sprott-Shaw
December 7, 2007
British Columbia, Canada
100%
Holding company of Sprott-Shaw Community College, Sprott-Shaw Degree College and Sprott-Shaw International Language College and provider of education and training services primarily in Canada and parts of Asia
KGIC Business College (2010) Corp.
February 22, 2010
British Columbia, Canada
100%
Provide business education and training services primarily in Canada
KGIC Language College (2010) Corp.
February 22, 2010
British Columbia, Canada
100%
Provide English language education and training services primarily in Canada
IRIX
October 5, 1994
British Columbia, Canada
51%
Provide graphic design, marketing and advertising services in Canada, Hong Kong, and the U.S.
 
 
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A chart of our organizational structure follows:
 

 
 
 
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D.  Property, Plant and Equipment
 
We currently rent our principal corporate office at 777 West Broadway, Suite 1200, Vancouver, British Columbia, Canada, V5Z 4J7. The office is comprised of 3,526 square feet of office space for which we pay annual rent of approximately $88,152. Our rental agreement has a 60 month term from November 1, 2009 to October 31, 2014 pursuant to which we will pay annual rent of $88,152 for the first three years, increasing to $91,680 per year for the last two years. We currently use about 2,000 square feet of the available office space, and record rent expenses of approximately $50,001 per year. The remaining 1,526 square feet is used by IRIX. IRIX will pay approximately $38,151 in annual rent expenses for the first three years, increasing to $39,678 per year for the last two years, under our current rent agreement.
 
Sprott-Shaw currently rents a corporate office at Suite 200, 1405 Broadway Street, Port Coquitlam, British Columbia, Canada, V3C 6L6. The office is comprised of 8,038 square feet of office space for which it pays annual rent of approximately $83,418. The rental agreement has an 82 month term from July 2009 to April 2016.
 
KGIC currently rents a corporate office at 1188 West Georgia Street, Suite 450, Vancouver, British Columbia, Canada.  The office is comprised of 8,200 square feet of office space for which it pays rent of approximately $25,028 per month.  The rental agreement expires on June 30, 2012.
 
We do not presently own any real property. The lease holdings of CIBT range in size from approximately 15,000 square feet to approximately 107,000 square feet. The lease holdings of Sprott-Shaw range in size from approximately 1,900 square feet to approximately 12,000 square feet. The lease holdings of KGIC range in size from approximately 4,800 square feet to approximately 21,000 square feet. The description of our business above provides information relating to these facilities.
 
 
Not applicable.
 
 
You should read the following discussion and analysis in conjunction with our audited consolidated financial statements as at August 31, 2011 and 2010 and for the years ended August 31, 2011, 2010 and 2009 and the notes thereto included in this annual report under Item 18.  Our consolidated financial statements have been prepared in accordance with Canadian GAAP and are presented in Canadian dollars. Refer to Note 26 of our audited consolidated financial statements included in this annual report for an explanation of the material differences between Canadian GAAP and U.S. GAAP applicable to the financial statements.
 
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.
 
On March 15, 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.  The results of the KGIC Colleges have only been consolidated into the financial statements included in this annual for the relevant periods subsequent to the date of its acquisition.  See “Information on the Company - Overview – KGIC Colleges” for more information.
 
The following discussion and analysis contains certain forward-looking statements relating to, among other things, our plan of operations going forward. Our actual results may differ materially from our expectations set out in these statements due to a number of factors, including the factors set out under “Item 3.  Key Information - Risk Factors”.  See “Note Regarding Forward-Looking Statements” at the beginning of this annual report.
 
 
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Overview
 
We are a fully integrated provider of educational programs and services.  We deliver western-style education to students from emerging Asian countries and Canada, providing our graduates with increased earning potential working for multinational companies in their home countries or abroad. Our target students for our schools are recent high school graduates or adult persons working in urban centers.  In addition, we recruit international students to enroll at our Canadian campuses and other locations around the world and provide them with an enhanced learning experience, western credentials and overseas employment experience.
 
We offer a wide range of education programs and training courses, including: college preparation courses, English language training and certification courses, and diploma and degree programs in business, healthcare, hotel management, information technology, automotive technical training, and corporate executive training.  We are the largest trainer of practical nurses in Canada and also offer this program in other countries.  In addition, we offer bachelor’s of business administration programs in China and Canada. We create our own education programs and training services and also offer programs created by other institutions at our campuses and other locations.  Our infrastructure is located primarily in Canada and China, as well as other countries around the world.
 
Our goal is to become the leading provider of western-style education in China and Asia, and the largest recruiter of foreign students to study in Canada. We seek to achieve continued growth in a manner that reinforces our reputation for providing high-quality career-oriented educational programs that advance the careers of our students.
 
Note that our financial statements for the year ended August 31, 2009 included the operations of CIBT in China, Sprott-Shaw in Canada and IRIX, a multimedia service and advertising company located in Canada in which we hold a 51% interest. In addition to the foregoing operations, our financial statements for the year ended August 31, 2010 include the operations of KGIC, our wholly owned subsidiary that we acquired on March 15, 2010.
 
The table below sets forth our selected consolidated financial information for the periods indicated.
 
Canadian GAAP
 
   
Year Ended
August 31,
2011
   
Year Ended
August 31,
2010
   
Year Ended
August 31,
2009
 
Consolidated Income Statement Data
  (C$)     (C$)    
(C$)
 
Revenues
    58,575,126       55,954,852       44,550,958  
Direct costs
    21,430,791       20,670,302       16,234,348  
Other expenses
    41,216,072       33,669,709       27,731,472  
Income (loss) from operations
    (4,071,737 )     1,614,841       585,138  
Other income (expenses)
    (6,470,385 )     (3,027,643 )     193,213  
Income (loss) before income taxes
    (10,542,122 )     (1,412,802 )     778,351  
Income tax recovery (provision)
    894,623       2,365,055       (285,241 )
Non-controlling interests
    (443,565 )     (369,883 )     (477,103 )
Net income (loss)
    (443,565 )     582,370       16,007  
Basic and diluted earnings (loss) per share(1)
    (0.15 )     0.01       0.00  
 
 
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Our revenues are defined as revenues net of refunds.  Direct costs are comprised of: (a) partnership costs, teachers’ salaries and other teaching costs, textbook printing costs and sales tax for CIBT; (b) teachers’ salaries, other teaching costs and textbook printing costs for Sprott-Shaw; (c) teachers’ salaries, program development, homestay and dormitory fees, student supplies, textbooks, teaching supplies, and computer supplies/repair for KGIC; and (d) media acquisition cost for IRIX.
 
For the year ended August 31, 2011, we generated revenue of $58,575,126. Sprott-Shaw accounted for $30,619,935 or 52% of revenue, while CIBT accounted for $4,206,757 or 7%, KGIC accounted for $21,838,554 or 37%, and IRIX accounted for $1,909,880 or 3% of revenue.  By industry segment, our education business generated $56,665,246 of our revenue (equivalent to 97%), while our design business generated $1,909,880 (equivalent to 3%).
 
This compares to revenue of $55,954,852 for the year ended August 31, 2010.  Sprott-Shaw accounted for $36,919,922 or 66% of revenue, while CIBT accounted for $7,166,099 or 13%, KGIC accounted for $10,302,107 or 18%, and IRIX accounted for $1,566,742 or 3% of revenue.  By industry segment, our education business generated $54,388,128 of our revenue (equivalent to 97%), while our design business generated $1,566,724 (equivalent to 3%).
 
For the year ended August 31, 2009, we generated revenue of $44,550,958. Sprott-Shaw accounted for $33,659,924 or 76% of revenue, while CIBT accounted for $9,576,706 or 21% and IRIX accounted for $1,314,328 or 3% of revenue. By industry segment, our education business generated $43,236,630 of our revenue (equivalent to 97%), while our design business generated $1,314,328 (equivalent to 3%).
 
We suffered a net loss of $10,091,064 for fiscal 2011.  This compares to net income of $582,370 for the year ended August 31, 2010 and $16,007 for the year ended August 31, 2009. We recognized a future income tax recovery of $879,680 and recorded a current income tax provision of $14,943 for the year ended August 31, 2011 compared to a net future income tax recovery benefits of $2,365,055 recognized for the year ended August 31, 2010.
 
We had cash of $6,456,568 as of August 31, 2011 compared to $11,511,835 as of August 31, 2010 and $10,337,128 as of August 31, 2009.  Our working capital deficit was $4,601,899 as at August 31, 2011, compared to $1,836,438 as at August 31, 2010, and working capital of $440,643 as at August 31, 2009.
 
As at August 31, 2011, we had total assets of $41,160,434 and an accumulated deficit of $32,295,615. This compares to total assets of $54,969,338 and an accumulated deficit of $22,204,551 as at August 31, 2010, and total assets of $47,521,692 and an accumulated deficit of $22,506,813 as at August 31, 2009.
 
As of August 31, 2011, we had 71,949,344 common shares issued and outstanding, and outstanding and unexercised options and warrants to purchase a total of 5,621,833 of our common shares.

 
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In the near future, our plans are to:
 
  
further integrate the assets and personnel of KGIC into our operations, especially its network of international agents and recruiting offices;
 
  
integrate any other assets or businesses acquired into our operations;
 
  
continue to consolidate and streamline the operations of CIBT, Sprott-Shaw and KGIC;
 
  
further develop our current programs, campuses and CIBT center locations;
 
  
continue building a network of new GLN Centers in additional Asian cities;
 
  
increase revenues by increasing student enrollments at our campuses and CIBT center locations;
 
  
enhance our product offerings by increasing our focus on the college preparation market and implementing a new Certified General Accountant program combined with a  Bachelors degree in Canada and Asia;
 
  
increase the number of English language students at KGIC and all of our schools who subsequently enroll in certificate or degree-granting programs at Sprott-Shaw and other schools within our system;
 
  
continue to develop closer marketing and cross-selling relationships between Sprott-Shaw, CIBT and KGIC in order to encourage more Chinese and foreign students to come to Sprott-Shaw’s Canadian campuses to study;
 
  
maintain  strong relationships with our CIBT center and campus location facility and educational service providers, as well as the Chinese authorities; and
 
  
continue to promote our businesses and brands.
 
In addition to our cash and cash equivalents of approximately $6.5 million as of August 31, 2011, we estimate that we will need financing of approximately $1 million to carry out our near-term proposed expansion plans.  We plan to obtain the necessary funds from equity or debt financings, as required; however, there can be no assurance that we will obtain such financing.  If we are not able to obtain such additional financing, we may be forced to scale back our expansion plans or eliminate them altogether.  There can be no assurance that we will achieve our plans, or any of them.
 
Our continued growth will depend on our ability to manage our current operations and carry out our long-term expansion plans.  While we expect our expansion plan to generate revenue growth in the longer term, we expect to incur near-term losses.
 
 
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A.  Operating Results
 
Results of operations for the year ended August 31, 2011 compared to the year ended August 31, 2010
 
The following table summarizes selected financial information for the year ended August 31, 2011 and the year ended August 31, 2010 on a relative basis (as a percentage of revenues).
 
   
Year Ended
August 31,
2011
   
Percentage
of
Revenues
   
Year Ended
August 31,
2010
   
Percentage
of
Revenues
 
   
(C$)
         
(C$)
       
Revenues
                       
  – CIBT (education)
    4,206,757       7 %     7,166,099       13 %
  – Sprott-Shaw (education)
    30,619,935       52 %     36,919,922       66 %
  – KGIC (education)
    21,838,554       37 %     10,302,107       18 %
  – IRIX (advertising)
    1,909,880       3 %     1,566,724       3 %
Revenues –  Consolidated
    58,575,126       100 %     55,954,852       100 %
Direct costs
    21,430,791       37 %     20,670,302       37 %
Revenues net of direct costs
    37,144,335       63 %     35,284,550       63 %
General and administrative expenses
    39,467,375       67 %     31,899,806       57 %
Amortization and stock-based compensation expenses
    1,748,697       3 %     1,537,277       3 %
Income (loss) before income taxes
    (10,542,122 )     (18 %)     (1,412,802 )     (3 )%
Income tax (recovery) provision
    894,623       2 %     2,365,055       4 %
Non-controlling interests
    (443,565 )     ( *)     (369,883 )     ( *)
Net income (loss)
    (10,091,064 )     (17 %)     582,370       1 %
 
* Less than 1%.
 
Consolidated
 
We generated revenues of $58,575,126 for the year ended August 31, 2011, an increase of $2,620,274 from revenues of $55,954,852 for the year ended August 31, 2010. Our net loss was $10,091,064 for the year ended August 31, 2011, compared to a net income of $582,370 for the same period in 2010, a decrease of $10,673,434.
 
 
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CIBT
 
Revenues for CIBT during the year ended August 31, 2011 were $4,206,757 compared to $7,166,099 for the year ended August 31, 2010, a decrease of 41%.  Revenues net of direct costs averaged a 48% margin during the year ended August 31, 2011, as compared to a 47% margin during the year ended August 31, 2010.  CIBT student enrollment was 1,808 for the year ended August 31, 2011 compared to 1,765 for the year ended August 31, 2010, a decrease of 2%.  Revenue per student enrolled averaged $2,327 for the year ended August 31, 2011 compared to $4,060 for the year ended August 31, 2010, a decrease of 43%.  The changes in student population and average revenue per student was a result of fewer college aged individuals leading to lower enrollment levels this year as compared to the previous year and the expiry of the agreement between Beijing University of Technology for CIBT to offer a premium program.
 
CIBT generated a net loss of $6,123,322 for the year ended August 31, 2011 compared to $ 1,529,433 for the year ended August 31, 2010.  A significant reason for the net loss position was a $5,897,778 impairment of intangible assets.  An impairment of intangible assets is not cash related.  As one of CIBT’s premium programs with Beijing University of Technology had expired, an impairment charge of $3,481,347 was recorded. Further, as a result of declining revenues and income stemming from CIBT’s business operations in Beijing, China, a further impairment charge of $2,287,905 to the carrying value of goodwill was recorded in the year ended August 31, 2011.
 
CIBT’s new business strategy in China is to become a western education wholesaler, substituting degree oriented programs with higher tuition, for mass market programs with lower tuition but a larger target market to grow its student base. The market for private degree oriented programs in China has become saturated with limited growth because of increasing competition and government restrictions. As such, CIBT’s MBA program was phased out and is being replaced with mass market programs including KGIC’s language programs and hotel management programs exclusively licensed from AHL-EI. The new strategy is to use GLN broadcasting studios to provide overseas students with mass market western education delivered through interactive video conferencing technology. Since the first quarter of 2011, targeting the mass market has increased CIBT’s twelve month student enrollments from 1,285 on November 30, 2010 to 1,566 on February 28, 2011 to 1,781 on May 31, 2011, to 1,808 on August 31, 2011, representing a steady and rapid growth of 12% per quarter. The new strategy has also decreased average twelve month revenue per student enrolled from $4,801 on November 30, 2010 to $3,483 on February 28, 2011 to $2,676 on May 31, 2011 to $2,327 on August 31, 2011, representing a decline of 16% per quarter.
 
The CIBT student enrollment was 1,808 for the year ended August 31, 2011 compared to 1,765 for the year ended August 31, 2010.  Revenue per student averaged $2,327 for the year ended August 31, 2011 compared to an average of $4,060 for the year ended August 31, 2010, a decrease of 43%.  CIBT’s revenues net of direct costs averaged a 35% margin during the year ended August 31, 2011 compared to a 23% margin during the year ended August 31, 2010.
 
The GLN platform allows students and teachers to communicate in real-time, while overseas students are further supported by a local teacher within their local classroom. Over the past 2.5 years, CIBT has tested the technology, modified their model, and taught courses through the GLN within a limited number of Chinese Universities. In March 2011, CIBT completed the construction of its Vancouver based broadcasting studio. CIBT personnel are allocating extensive time to the roll out of the GLN. The GLN platform produces additional revenue channels for our various school subsidiaries, including Sprott-Shaw and KGIC, so that these schools can offer their educational services via a technology platform in addition to the traditional face-to-face environment. All development costs for these new initiatives were expensed in prior years by us while the financial return was earned at the subsidiary schools.
 
 
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Sprott-Shaw
 
Synergies were generated from the exchange of market intelligence, exchange and recruitment of students between CIBT in China and Sprott-Shaw and KGIC in Canada, and shared resources between these subsidiaries.
 
Revenues for Sprott-Shaw during the year ended August 31, 2011 decreased by $6,299,987 to $30,619,935 from $36,919,922 for the year ended August 31, 2010.  This decrease was due to lower student enrollments, but offset slightly by higher revenue per student enrolled. Sprott-Shaw’s student count was affected by increased stringency on Canadian student loan criteria, which resulted in modifications to Sprott-Shaw’s marketing and recruitment policies to adjust to the new student loan guidelines and has also shut down unprofitable campuses with high student loan default rates. These measures have resulted in decreased revenue and a non- recurring increase in severance pay, but have also given Sprott-Shaw a greater strategic focus on the remaining profitable campuses. A second factor that impacted enrollment levels and ultimately revenues was the change in the Canadian federal government funding policy on unemployment re-training. The funding policy shifted towards shorter programs in 2010, which affected a large percentage of Sprott-Shaw’s government funded programs. Since late 2010,Sprott-Shaw has been actively re-designing its employment insurance programs to adapt to the new policies. A number of new programs were launched in select campuses during the third and fourth quarters of fiscal 2011. Sprott-Shaw has also focused on boosting revenues from government contracts and has successfully won approximately C$1.2 million of government contracts in the twelve months ended August 31, 2011, which we expect will be reflected in Sprott-Shaw’s revenues for fiscal 2012.
 
The Sprott-Shaw student enrollment was 2,740 for the year ended August 31, 2011 compared to 3,822 for the year ended August 31, 2010.  Revenue per student averaged $11,175 for the year ended August 31, 2011 compared to an average of $9,510 for the year ended August 31, 2010, a decrease of 29%.  Sprott-Shaw’s revenues net of direct costs averaged a 66% margin during the year ended August 31, 2011 compared to a 68% margin during the year ended August 31, 2010.
 
Sprott-Shaw realized a net loss of $146,033 for the year ended August 31, 2011 compared to generating a net income of $1,007,400 for the year ended August 31, 2010. The decrease in earnings was due to increased severance pay from staff downsizing and a general decrease in revenue.
 
KGIC
 
We acquired KGIC on March 15, 2010. Revenues for KGIC have grown significantly through its synergistic relationship with us and our subsidiaries in the past fiscal year. In addition, the political unrest in the Middle East and the environmental disaster in Japan encouraged students from those areas to seek education abroad. Utilizing its strong international presence, KGIC was able to attract these students to Canada and study at its Canadian campuses, contributing to the growth in KGIC’s revenues. KGIC’s business trend is seasonal and their highest revenue and earnings season is traditionally the summer due to a significant volume of summer camp students.
 
Since its acquisition, KGIC has undertaken a number of consolidation efforts to decrease its future operating cost and improve its operational efficiency. These reorganizational measures have included a move toward shared resources, including staffing, among KGIC and Sprott-Shaw, which resulted in the elimination of a number of duplicate staff position, merging of campus locations, combining administration and accounting functions and reorganizing our student population among our subsidiary schools. The majority of expenses for these reorganizational efforts have been expensed in fiscal 2011; however, any benefits will not be realized until future quarters. The newly introduced Harmonized Sales Tax in British Columbia also affected KGIC’s earning result due to the increased goods and services tax rate from 5% to 12% with a net difference of 7%.
 
Revenues for KGIC for the year ended August 31, 2011 were $21,838,554 compared to $10,302,107 for the year ended August 31, 2010, and of which $8,167,918 was earned in the six months ended August 31, 2010. Revenues net of direct costs averaged a 65% margin and generated a net loss of $448,527 for fiscal 2011, compared to a 57% margin and a net income of $84,548 for fiscal 2010.
 
KGIC student enrollment was 6,753 for the year ended August 31, 2011 compared to 6,322 for the year ended August 31, 2010.  Revenue per student averaged $3,234 for the year ended August 31, 2011 compared to an average of $3,555 for the year ended August 31, 2010, a decrease of 9%.
 
 
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IRIX
 
Revenues for IRIX during the year ended August 31, 2011 were $1,909,880 compared to $1,566,724  for the year ended August 31, 2010, an increase of 22% as a result of growth in activity in the real estate sector in Western Canada in fiscal 2011. Revenues net of direct costs averaged a 48% margin during the year ended August 31, 2011 compared to a 55% margin for the year ended August 31, 2010.
 
Corporate
 
Our corporate operations generated a net loss of $3,440,273 for the year ended August 31, 2011, compared to a net income of $976,917 for the year ended August 31, 2010. Expenses and other items impacting the corporate results of operations include general and administrative expenses, amortization and stock-based compensation granted to our employees, officers and directors, each of which is discussed in further detail below.
 
General and Administrative Expenses
 
The following selected general and administrative expenses are for the consolidated group on a relative basis (as a percentage of revenues).
 
   
Year Ended
August 31,
2011
   
Percentage
of
Revenues
   
Year Ended
August 31,
2010
   
Percentage
of
Revenues
 
    (C$)     (C$)    
(C$)
    (C$)  
Revenues
    58,575,126       100 %     55,954,852       100 %
Advertising
    12,190,564       21 %     8,700,663       16 %
Consulting and management fees
    1,964,726       3 %     1,380,305       25 %
Office and general
    4,538,292       8 %     4,055,573       7 %
Professional fees
    1,369,960       2 %     1,940,634       3 %
Rent
    6,092,868       10 %     4,108,635       7 %
Salaries and benefits
    12,031,267       21 %     10,645,586       19 %
Total general and administrative expenses
    39,237,013       67 %     31,899,806       57 %
 
Advertising costs increased by $3,489,901 or 40% from $8,700,663 for the year ended August 31, 2010 to $12,190,564 for the year ended August 31, 2011 primarily as a result of including the advertising costs for KGIC in fiscal 2011, which were not included in the advertising costs in fiscal 2010. Of the advertising costs incurred, Sprott-Shaw accounted for $5,431,995 ($5,563,476 for the year ended August 31, 2010), KGIC accounted for $6,290,652 ($2,407,626 for the year ended August 31, 2010), and CIBT accounted for the remainder of $464,380 ($726,605 for the year ended August 31, 2010). As normal course of business, KGIC and Sprott-Shaw pay international agents referral fees to refer them international students. Referral fees paid to agents are expensed out immediately upon payment; however, revenue collections must be booked as deferred revenue to be earned out over the period of the program in which the referred student is enrolled (programs range from 1 to 36 months in duration).  The increased upfront expenses and associated deferred revenues result in a swing of profits or losses depending on the cut-off periods of the year.
 
Consulting and management fees totaled $1,964,726 for the year ended August 31, 2011 as compared to $1,380,305 for the year ended August 31, 2010, an increase of $584,421 or 42% from the prior comparative period. A portion of the increase for the twelve month period comparison is due to the fact that KGIC’s consulting and management fees for the periods prior to its acquisition on March 15, 2010 were not included in the comparable 2010 period. Consulting and management fees from the corporate head office increased by $131,899 in the twelve months ended August 31, 2011 due to the heightened use of consultants for corporate finance and re-organization activity during the first and second quarter of 2011.
 
 
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Professional fees totaled $1,369,960 for the year ended August 31, 2011 compared to $1,940,634 for the year ended August 31, 2010, a decrease of 29%.  The decrease was a result of using internal resources and lower cost contract consultants to perform technical work and the
elimination of non-recurring expenses in the twelve months ended August 31, 2011, such as internal control consultants who provided extensive services in fiscal 2010 to assist us with Sarbanes-Oxley Act (Section 404 - Internal Controls) compliance.
 
Rental and lease costs of $6,092,868 were incurred during the year ended August 31, 2011 as compared to $4,108,635 for the year ended August 31, 2010 an increase of 48%.  The increase is attributable to the addition of KGIC`s rental costs to our fiscal 2011 operating expenses for a full fiscal period, as compared to only five and a half months of rental expenses included in fiscal 2010. The increase in rental expenses is also due to the implementation of the Harmonized Sales Tax (HST) in British Columbia in July 2011.
 
Salaries and benefits for the year ended August 31, 2011 amounted to $12,031,267 as compared to $10,645,586 for the year ended August 31, 2010, an increase of $1,385,681, or 13%.  The increased salaries and benefits cost was primarily attributed to the inclusion of salaries and benefits costs for KGIC for a full fiscal year, as compared to only five and a half months for fiscal 2010. KGIC also experienced significant growth in fiscal 2011, which required additional personnel to meet increased demand. CIBT on the other hand downsized its personnel as a result of a decreased student count in fiscal 2011 as compared to fiscal 2010. As a result, CIBT costs included severance payments in fiscal 2011. Sprott-Shaw’s personnel costs also decreased in fiscal 2011 due to a reduction in staffing levels, with cost savings being offset by severance payments but resulting in a net decrease of $145,418 for the twelve months ended August 31, 2011, as compared to the same period in 2010. Sprott-Shaw accounted for $6,989,431 (compared to $7,134,849 last year, a decrease of 2%) of total salaries and benefits, while our corporate group accounted for $492,908 (compared to $474,730 in fiscal 2010, an increase of 4%).  CIBT accounted for $1,187,357 (compared to $1,468,354 for the year ended August 31, 2010, a decrease of 19%).  KGIC accounted for $2,641,695 (compared to $914,763 for the year ended August 31, 2010, an increase of 189%) and IRIX accounted for $719,876 (compared to $652,890 last year, an increase of 10%) of salaries and benefits.
 
Office and general for the year ended August 31, 2011 totaled $4,538,292 an increase of $482,719 or 12% as compared to $4,055,573 for the year ended August 31, 2010.  Office and general expenses amounted to 8% of the revenues and calculated on a monthly basis, general expenses were $378,191 per month for the year ended August 31, 2011, an increase over the $337,964 per month for the year ended August 31, 2010.
 
Impairment
 
In fiscal 2011, an agreement between CIBT and Beijing University of Technology was not renewed. Accordingly, we recorded an impairment charge of $3,418,317 to the carrying value of intangible assets not subject to amortization. Furthermore, as a result of declining revenues and income stemming from our business operations in China, and the non-renewal of the Beijing University of Technology Agreement, we recorded an impairment charge of $2,287,905 to the carrying value of goodwill in fiscal 2011. This was determined based on a discounted net cash flow analysis. A further net impairment charge of $128,526 was recorded to the carrying value of leasehold improvements and furniture and equipment.
 
This compares to fiscal 2010 when the financial performance of our China operation experienced a slowdown and several programs were wound down, resulting in us determining the fair value of certain long-lived intangible assets to be impaired by $2,000,000.  Impairments are not cash related and do not impact the cash flow or operations of the company.
 
Amortization
 
Amortization of $1,657,575 for the year ended August 31, 2011 increased by $120,298 from $1,537,277 for the year ended August 31, 2010.
 
Deferred Financing Fees
 
In connection with our planned financing to raise US$15 million from accredited and institutional investors by way of a fully underwritten registered offering in the United States that was withdrawn on September 20, 2010, we incurred direct costs of $600,252 as at August 31, 2010, of which $200,000 was expensed in fiscal 2010 as we decided to put the financing on hold temporarily, leaving a remaining balance of $400,252. An additional $110,459 in financing related expenses was incurred in the year ended August 31, 2011, resulting in a balance of $510,711 that was expensed in full in fiscal 2011 as a result of continuing poor market conditions for education company stocks and negative investor sentiment towards companies with operations in China.
 
 
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Results of operations for the year ended August 31, 2010 compared to the year ended August 31, 2009
 
The following table summarizes selected financial information for the year ended August 31, 2010 and the year ended August 31, 2009 on a relative basis (as a percentage of revenues).
 
   
Year Ended
August 31,
2010
   
Percentage
of
Revenues
   
Year Ended