EX-4.5 6 a2195234zex-4_5.htm EXHIBIT 4.5 THIRD QUARTER 2009 FINANCIAL STMNTS
QuickLinks -- Click here to rapidly navigate through this document

              Amended Consolidated Financial Statements
              GLG LIFE TECH CORPORATION
              Three and nine months ended September 30, 2009 and 2008

F-45



GLG LIFE TECH CORPORATION

CONSOLIDATED BALANCE SHEETS

(In Canadian Dollars)
(Unaudited)

   
  September 30, 2009   December 31, 2008  
 

ASSETS

             
 

Current Assets

             
   

Cash and cash equivalents

  $ 8,894,543   $ 7,362,671  
   

Short term investments (Note 5)

        365,785  
   

Accounts receivable

    1,134,338     2,714,114  
   

Interest receivable

        3,651  
   

Taxes recoverable

    4,360,011     1,504,000  
   

Inventory (Note 6)

    28,771,198     33,057,690  
   

Prepaid expenses

    12,054,909     7,380,086  
             
 

    55,214,999     52,387,997  
 

Property, Plant, and Equipment (Note 7)

    89,340,484     83,366,043  
 

Goodwill

    7,587,798     7,587,798  
 

Restricted Cash (Note 8)

    10,000     100,710  
 

Deferred Charges

    96,123     125,261  
 

Intangible Assets (Note 9)

    29,805,172     30,793,314  
             
 

  $ 182,054,576   $ 174,361,123  
             
 

LIABILITIES

             
 

Current Liabilities

             
   

Short term bank loans (Note 10)

  $ 35,639,000   $ 10,231,500  
   

Accounts payable and accruals

    17,839,630     17,167,567  
   

Interest payable

    81,085     1,063,729  
   

Advances from customers (Note 11)

    3,296,271     24,492,000  
   

Due to related party (Note 17c)

    6,754,860      
   

Deferred Revenue

        1,995,000  
             
 

    63,610,846     54,949,796  
 

Non current bank loan (Note 10)

    9,420,000      
 

Future income taxes

    2,343,024     2,414,642  
             
 

    75,373,870     57,364,438  
 

NON-CONTROLLING INTERESTS

   
47,376
   
167,211
 
 

SHAREHOLDERS' EQUITY

             
   

Share capital (Notes 13 and 14)

    95,388,996     93,355,149  
   

Warrants (Note 13)

        11,477,908  
   

Contributed surplus

    14,805,385     3,347,623  
   

Accumulated other comprehensive income

    8,216,236     20,696,008  
   

Deficit

    (11,777,287 )   (12,047,214 )
             
 

    106,633,330     116,829,474  
             
 

  $ 182,054,576   $ 174,361,123  
             
 

Description of business and going concern (Note 1)

             
 

Commitments (Note 18)

             
 

(Signed) "Brian Palmieri"
Director

  (Signed) "Jinduo Zhang"
Director

See Accompanying Notes to the Consolidated Financial Statements

F-46



GLG LIFE TECH CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

For the Periods Ended September 30, 2009 and 2008
(In Canadian Dollars)
(Unaudited)

   
  Three months ended
September 30
  Nine months ended
September 30
 
   
  2009   2008   2009   2008  
 

REVENUE

  $ 14,813,642   $ 3,302,176   $ 28,619,448   $ 5,234,730  
                     
 

    14,813,642     3,302,176     28,619,448     5,234,730  
 

COST OF SALES

   
10,718,257
   
2,470,654
   
21,463,160
   
3,842,766
 
                     
 

GROSS PROFIT

    4,095,385     831,522     7,156,288     1,391,964  
 

GENERAL AND ADMINISTRATIVE EXPENSES

   
2,935,419
   
1,685,941
   
8,171,127
   
3,828,020
 
                     
 

INCOME (LOSS) BEFORE THE UNDERNOTED

    1,159,966     (854,419 )   (1,014,839 )   (2,436,056 )
 

OTHER INCOME (EXPENSES)

                         
   

Donation

        (1,075 )       (22,749 )
   

Interest expense

    (885,977 )   (353,159 )   (1,982,466 )   (1,686,795 )
   

Interest income

    42,492     236,961     77,280     636,705  
   

Foreign exchange gain (loss)

    1,902,808     4,257     3,219,210     1,940  
                     
 

    1,059,323     (113,016 )   1,314,024     (1,070,899 )
                     
 

INCOME (LOSS) BEFORE INCOME TAXES AND NON-CONTROLLING INTERESTS

   
2,219,289
   
(967,435

)
 
299,185
   
(3,506,955

)
 

INCOME TAXES EXPENSE

   
(861,891

)
 

   
(151,403

)
 

 
                     
 

INCOME (LOSS) BEFORE NON-CONTROLLING INTERESTS

    1,357,398     (967,435 )   147,782     (3,506,955 )
 

NON-CONTROLLING INTERESTS

    41,458     15,452     122,145     15,452  
                     
 

NET INCOME (LOSS)

    1,398,856     (951,983 )   269,927     (3,491,503 )
 

DEFICIT, beginning of period

    (13,176,143 )   (3,980,192 )   (12,047,214 )   (1,440,672 )
                     
 

DEFICIT, end of period

    (11,777,287 )   (4,932,175 )   (11,777,287 )   (4,932,175 )
                     
 

NET INCOME (LOSS) PER SHARE

                         
   

Basic

  $ 0.02   $ (0.01 ) $ 0.00   $ (0.05 )
   

Diluted

    0.02     (0.01 )   0.00     (0.05 )
                     
 

NET INCOME (LOSS)

    1,398,856     (951,983 )   269,927     (3,491,503 )
 

OTHER COMPREHENSIVE INCOME (LOSS)

                         
   

Unrealized gains (losses) on translation of self-sustaining operations

    (7,378,537 )   2,766,692     (12,479,772 )   7,887,750  
                     
 

COMPREHENSIVE INCOME (LOSS)

    (5,979,681 )   1,814,709     (12,209,845 )   4,396,247  
                     
 

Weighted Average Number of Shares Outstanding

                         
   

Basic

    80,618,392     73,131,253     79,234,614     70,418,638  
   

Diluted

    92,442,092     73,131,253     97,335,605     70,418,638  
                     

See Accompanying Notes to the Consolidated Financial Statements

F-47



GLG LIFE TECH CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOW

For the Periods Ended September 30, 2009
(In Canadian Dollars)
(Unaudited)

   
  Three months ended
September 30
  Nine months ended
September 30
 
   
  2009   2008   2009   2008  
 

Cash provided by (used in)

                         
 

Operating activities

                         
   

Net income (loss)

  $ 1,398,856   $ (951,983 ) $ 269,927   $ (3,491,503 )
   

Items not affecting cash:

                         
     

Accretion on convertible debenture

                839,632  
     

Stock-based compensation

    749,489     61,283     1,724,701     91,924  
     

Amortization of property, plant and equipment & intangibles

    1,549,465     655,773     4,213,282     1,397,624  
     

Foreign exchange gain

    (1,902,808 )       (3,219,210 )    
     

Future income tax expense (recovery)

    598,958         (184,856 )    
     

Non-controlling interests

    (41,458 )   15,452.00     (122,145 )   15,452  
                     
 

    2,352,502     (219,475 )   2,681,699     (1,146,871 )
   

Changes in non-cash working capital (Note 15)

    (6,915,849 )   (7,667,525 )   (5,442,232 )   (8,049,600 )
                     
   

Cashflow used by operating activities

    (4,563,347 )   (7,887,000 )   (2,760,533 )   (9,196,471 )
                     
 

Investing activities

                         
   

Decrease in short term investment

    333,664         349,075      
   

Increase in loan receivable

        (77,399 )       (117,999 )
   

Decrease in restricted cash

    90,902         90,710      
   

Purchase of property, plant and equipment

    (8,612,768 )   (18,625,895 )   (22,242,626 )   (32,163,549 )
                     
 

Cash flow used by investing activities

    (8,188,202 )   (18,703,294 )   (21,802,841 )   (32,281,548 )
                     
 

Financing activities

                         
   

Issuance of bank debt

    12,634,000         38,541,000      
   

Issuance of common shares

        5,230,500     288,999     17,865,873  
   

Advance from related parties

    4,789,414         7,106,014     (410,078 )
   

Repaid advance from a customer

    (13,019,202 )   (2,940,722 )   (18,862,472 )   (3,533,049 )
   

Increase in advance from a customer

        21,198,000         21,198,000  
                     
 

Cash flow from financing activities

    4,404,212     23,487,778     27,073,541     35,120,746  
                     
 

Effect of foreign exchange rate changes on cash and cash equivalents

    (1,149,281 )   3,018,677     (978,295 )   8,393,816  
                     
 

CHANGE IN CASH AND CASH EQUIVALENTS

    (9,496,618 )   (83,839 )   1,531,872     2,036,544  
 

CASH AND CASH EQUIVALENTS, beginning of period

   
18,391,161
   
30,373,963
   
7,362,671
   
28,253,580
 
                     
 

CASH AND CASH EQUIVALENTS, end of period

  $ 8,894,543   $ 30,290,124   $ 8,894,543   $ 30,290,124  
                     
 

CASH FLOW SUPPLEMENTARY INFORMATION

                         
 

Interest paid

  $ 885,977   $ 469,105   $ 1,982,466   $ 1,069,848  
 

Increase (Decrease) in accounts payable and accruals related to the purchase of property, plant and equipment

    (2,700,724 )       (1,283,898 )    
 

Decrease (Increase) in prepaid expense related to the purchase of property, plant and equipment

    (4,339,067 )       (3,263,049 )  
 

See Accompanying Notes to the Consolidated Financial Statements

F-48



GLG LIFE TECH CORPORATION

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

For the Period Ended September 30, 2009
(In Canadian Dollars)
(Unaudited)

 
  Share Capital   Warrants   Equity portion
of convertible
debenture
  Contributed
Surplus
  Accumulated
Other
Comprehensive
Income
("AOCI")
  Deficit  

Balance, December 31, 2007

  $ 61,052,731   $ 15,378,511   $ 1,513,003   $ 1,702,716   $ (1,307,926 ) $ (1,440,672 )

Warrant exercised by a customer

    20,235,133     (2,453,160 )                

Warrant expired

        (1,447,443 )       1,447,443          

Options exercised

    125,527             (63,107 )        

Convertible debenture converted into common shares

    7,513,004         (1,513,003 )            

Issuance of restricted shares

    1,060,004                      

Options granted

                260,571          

Common shares issued

    3,368,750                      

Change in foreign currency translation

                    22,003,934      

Net loss

                        (10,606,542 )
                           

Balance, December 31, 2008

  $ 93,355,149   $ 11,477,908   $   $ 3,347,623   $ 20,696,008   $ (12,047,214 )
                           

Warrant expired

        (11,477,908 )       11,477,908          

Options exercised

    581,178             (292,179 )        

Stock based compensation

    1,452,669             272,033          

Change in foreign currency translation

                    (12,479,772 )    

Net income

                        269,927  
                           

Balance, September 30, 2009

  $ 95,388,996   $   $   $ 14,805,385   $ 8,216,236   $ (11,777,287 )
                           

See Accompanying Notes to the Consolidated Financial Statements

F-49



GLG LIFE TECH CORPORATION

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

1.     DESCRIPTION OF BUSINESS AND GOING CONCERN

    The Company was incorporated under the Companies Act (British Columbia) on June 5, 1998. On March 14, 2007, the Company changed its name to GLG Life Tech Corporation ("GLG" or the "Company"). The principal business of the Company is to manufacture and sell a refined form of stevia.

    These consolidated financial statements have been prepared on a going concern basis, which assumes that the Company will continue in operation for the foreseeable future, and, accordingly, will be able to realize its assets and discharge its liabilities in the normal course of operations. The Company has generated negative cash flows from operations, is reliant on external sources of financing and has a cumulative deficit of $11,777,287 and a working capital deficiency of $8,395,847 as at September 30, 2009. Accordingly, there is significant uncertainty about the Company's ability to continue as a going concern. These financial statements do not include any adjustments to the amounts and classification of assets and liabilities that may be necessary should the company be unable to continue as a going concern and such adjustments could be material. The Company's ability to continue as a going concern is still dependent upon the ability of the Company to obtain the necessary financing to meet its obligations and to repay its liabilities arising from normal business operations when they come due. The Company must also meet its obligations under a supply agreement with a Strategic Customer and its other commitments (notes 12 and 18). The outcome of these matters cannot be predicted with certainty at this time.

    Management plans to secure the necessary financing through a combination of use and renewal of existing credit facilities, the issue of new equity or debt instruments and entering into joint venture arrangements. There can be no assurance that these initiatives will be successful.

2.     SIGNIFICANT ACCOUNTING POLICIES

    The accompanying unaudited interim consolidated financial statements include the accounts of the Company and all its significantly owned subsidiaries as stated in Note 2a to the 2008 annual consolidated financial statements of the Company, and the account of the Company's wholly owned subsidiary, Qingdao Runhao Rebiana High Tech Company Limited.

    All inter-company balances and transactions have been eliminated upon consolidation.

    The unaudited interim consolidated financial statements for the Company are prepared using the accounting policies disclosed in Note 2 to the 2008 annual consolidated financial statements of the Company, with the exception of the changes in accounting policies described below in Note 3 — Changes in Accounting Policies.

    In accordance with Canadian generally accepted accounting principles ("GAAP"), these interim financial statements do not include all of the financial statement disclosures required for annual financial statements and should be read in conjunction with the 2008 annual consolidated financial statements of the Company. In management's opinion, the financial statements reflect all adjustments that are necessary for a fair presentation of the results for the interim periods presented.

3.     CHANGES IN ACCOUNTING POLICIES

    Effective January 1, 2009, the Company adopted Canadian Institute of Chartered Accountants ("CICA") Handbook Section 3064, "Goodwill and Intangible Assets." This new standard replaces section 3062, "Goodwill and Other Intangible Assets" and Section 3450, "Research and Development Costs," and focuses on the criteria for asset recognition in the financial statements, including those internally developed. The adoption of this standard did not have an impact on the Company's consolidated financial position or results of operations.

F-50



GLG LIFE TECH CORPORATION

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3.     CHANGES IN ACCOUNTING POLICIES (Continued)

    Effective January 1, 2009, the Company adopted the Emerging Issues Committee ("EIC") Abstract EIC-173, "Credit Risk and the Fair Value of Financial Assets and Financial Liabilities," issued by CICA. This standard requires the Company to consider its own credit risk as well as the credit risk of its counterparty when determining the fair value of financial assets and liabilities, including derivative instruments. The adoption of this standard did not have an impact on the valuation of the Company's financial assets or liabilities.

4.     RECENT ACCOUNTING PRONOUNCEMENTS

    In January 2009, the CICA issued the new Handbook Section 1582, "Business Combinations," which requires that all assets and liabilities of an acquired business be recorded at fair value at acquisition. Obligations for contingent considerations and contingencies will also be recorded at fair value at the acquisition date. The standard also states that acquisition-related costs will be expensed as incurred and that restructuring charges be expensed in periods after the acquisition date. The new standard applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period on or after January 1, 2011. Although the Company is considering the impact of adopting this pronouncement on the consolidated financial statements, it will be limited to any future acquisitions beginning in fiscal 2011.

    In January 2009, the CICA issued Section 1601, "Consolidated Financial Statements," which will replace CICA section 1600 of the same name. This guidance requires uniform accounting policies to be consistent throughout all consolidated entities and the difference between reporting dates of a parent and a subsidiary to be no longer than three months. These are not explicitly required under the current standard. Section 1601 is effective for the Company on January 1, 2011 with early adoption permitted. This standard will have no impact on the Company.

    In January 2009, the CICA issued Section 1602, "Non-controlling Interests," which will replace CICA Section 1600, "Consolidated Financial Statements." Under this new guidance, when there is a change in control the previously held interest is revalued at fair value. Currently a gain of control is accounted for using the purchase method and a loss of control is accounted for as a sale resulting in a gain or loss in earnings. In addition, non-controlling interests ("NCI") can be in a deficit position because it is recorded at fair value. Currently, NCI is recorded at the carrying amount and can only be in a deficit position if the NCI has an obligation to fund the losses. Section 1602 is effective for the Company on January 1, 2011 with early adoption permitted.

5.     SHORT TERM INVESTMENTS

    At September 30, 2009, the Company has no short term investments. At December 31, 2008, the Company had $365,785 (RMB 2,037,800) of 6-month term deposits with the Bank of China, which bore interest rate of 3.78% per annum.

6.     INVENTORY

    For the three and nine months ended September 30, 2009, the amount of inventories charged to cost of sales was $10,301,851 and $20,245,663, respectively (three months ended September 30, 2008 — $2,151,362, nine months ended September 30, 2008 — $3,734,728). There was no write-down of inventories during the periods, nor any reversal of any write-down. For the nine months ended September 30, 2009, $602,449 of interest is capitalized as a cost of inventory. No interest has been capitalized as a cost of inventory for the three months ended September 30, 2009 (three months and nine months ended September 30, 2008 — $113,035).

F-51



GLG LIFE TECH CORPORATION

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued)

6.     INVENTORY (Continued)

   
  September 30, 2009   December 31, 2008  
 

Raw material

  $ 1,925,866   $ 22,920,668  
 

Work in process

    24,994,160     8,905,270  
 

Finished goods

    1,851,172     1,231,752  
             
 

  $ 28,771,198   $ 33,057,690  
             

7.     PROPERTY, PLANT AND EQUIPMENT

   
  September 30, 2009   December 31, 2008  
   
  Cost   Accumulated
Amortization
  Net Book
Value
  Cost   Accumulated
Amortization
  Net Book
Value
 
 

Ion exchange resin equipment

  $ 15,396,449   $ 1,457,481   $ 13,938,968   $ 9,673,435   $ 944,565   $ 8,728,870  
 

Manufacturing equipment and Biological assets

    32,252,536     2,467,742     29,784,794     7,951,867     730,566     7,221,301  
 

Buildings

    33,282,269     983,923     32,298,345     2,809,244     112,508     2,696,736  
 

Leasehold land use rights and Construction in progress

    12,416,556     27,616     12,388,940     64,238,039         64,238,039  
 

Computer equipment and software

    758,822     68,056     690,767     377,080     15,556     361,524  
 

Motor vehicles and Furniture and fixture

    285,459     46,788     238,670     142,843     23,270     119,573  
                             
 

  $ 94,392,088   $ 5,051,605   $ 89,340,484   $ 85,192,508   $ 1,826,465   $ 83,366,043  
                             

    The leasehold represents land use rights for a term of 50 years. Under the People's Republic of China ("PRC") law, land use rights can be revoked and the tenants can be forced to vacate at any time when re-development of the land is in the public interest.

    The total amortization charged to cost of sales for the three months and nine months ended September 30, 2009 were $942,139 and $1,946,308 (three months ended September 30, 2008 — $585,889, nine months ended September 30, 2008 — $733,575).

    $82,108 of interest was capitalized to property, plant and equipment during the three months and nine months periods ended September 30, 2009 (three months ended September 30, 2008 — nil, nine months ended September 30, 2008 — $169,912). Testing and preparation charges incurred in the two new leaf processing facilities totaling $674,007 has been capitalized during the nine month period ended September 30, 2009 (three months and nine months ended September 30, 2008 — nil).

8.     RESTRICTED CASH

    As at September 30, 2009, the Company has $10,000 (December 31, 2008 — $100,710) in restricted cash invested in a guaranteed investment certificate, that is required as collateral for the Company's credit cards issued to several employees.

F-52



GLG LIFE TECH CORPORATION

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued)

9.     INTANGIBLE ASSETS

   
  September 30, 2009   December 31, 2008  
   
  Cost   Accumulated
Amortization
  Net Book
Value
  Cost   Accumulated
Amortization
  Net Book
Value
 
 

Customer relationship

  $ 15,416,254   $ 581,165   $ 14,835,089   $ 15,416,254   $ 208,230   $ 15,208,024  
 

Patents and acquired technologies

    16,243,752     1,273,669     14,970,083     16,243,752     658,462     15,585,290  
                             
 

  $ 31,660,006   $ 1,854,834   $ 29,805,172   $ 31,660,006   $ 866,692   $ 30,793,314  
                             

    For the three and nine months ended September 30, 2009, $203,417 and $372,932 amortization of intangible assets was recorded to cost of sales (three months ended September 30, 2008 — $90,970, nine months ended September 30, 2008 — $96,806) and $205,070 and $615,210 was recorded to general and administrative expenses, respectively (three months ended September 30, 2008 — $160,938, nine months ended September 30, 2008 — $482,813).

10.   BANK LOANS

    The short-term bank loans are made up of the following:

  Loan amount in C$   Loan amount
in RMB
  Maturity
Date
  Interest rate
per annum
  Lender
  $ 5,809,000     37,000,000     November 20, 2009     6.66%   Dongtai Rural Credit Union
    7,850,000     50,000,000     December 25, 2009     5.31%   Construction Bank of China
    4,710,000     30,000,000     March 31, 2010     5.31%   Construction Bank of China
    3,140,000     20,000,000     April 29, 2010     5.31%   Construction Bank of China
    9,420,000     60,000,000     June 15, 2010     5.31%   Agricultural Bank of China
    4,710,000     30,000,000     June 24, 2010     4.86%   Construction Bank of China
                       
  $ 35,639,000     227,000,000                
                       

    The non current bank loan is made up of the following:

 
Loan amount in C$
  Loan amount
in RMB
  Maturity
Date
  Interest rate
per annum
  Lender
 

$9,420,000

    60,000,000     June 29, 2011     5.40%   Agricultural Bank of China

    The Company's subsidiaries have been pledged as collateral for the loans. Two pieces of land of two subsidiaries were also used as collateral for the above facilities.

    Unused amount available to borrow under existing loan facilities was $20,410,000 as at September 30, 2009.

11.   ADVANCES FROM CUSTOMERS AND INTEREST PAYABLE

    The $3,296,271 (US$3,074,306) advance from customer was related to a supply and prepayment agreement entered into by the Company in 2008 whereby the Strategic Customer financed $24,492,000 (US$20,000,000) for the purchase of stevia leaves for 2009 orders to be further processed into the stevia extract to be shipped to the Strategic Customer. The prepayment and accrued interest will be repaid by way of the sale of stevia extracts to the Strategic Customer by October 15, 2009. Interest at LIBOR + 6% is charged per annum. The prepayment is collateralized by a general security agreement over all assets of the

F-53



GLG LIFE TECH CORPORATION

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued)

11.   ADVANCES FROM CUSTOMERS AND INTEREST PAYABLE (Continued)

    Company. There is a covenant that at any time during the period the advance remains outstanding, the Company cannot incur more than US$80 million of indebtedness for plant expenditure or additional leaf financing beyond the US$20 million associated with this prepayment. The principal balance of the advance as of September 30, 2009 was $3,296,271 (US$3,074,306) (December 31, 2008 — $24,492,000 or US$20,000,000) and interest accrued was $844 (US$786) (three months and nine months ended September 30, 2008 — $408,742 or US$385,642).

    Subsequent to September 30, 2009, the Company extended the repayment terms from October 15, 2009 to November 15, 2009 at interest rate of LIBOR + 7% per annum.

12.   ECONOMIC DEPENDENCE

    In 2007, the Company entered into a five year renewable supply agreement with the Strategic Customer to supply the Strategic Customer with stevia product and replaced that agreement with a 10-year strategic alliance agreement with the Strategic Customer in May 2008. The agreement outlines annual minimum purchase and supply quantities over the term of the agreement. For each of years two and three, once volume and price have been agreed, the Strategic Customer will be required to either take the committed volume or pay the agreed price.

    The supply agreement with the Strategic Customer accounts for 95% of revenue for the nine month period ended September 30, 2009 (nine months ended September 30, 2008 — 66%).

    The Company also received an advance from the Strategic Customer in fiscal 2008 as described in note 11.

13.   SHARE CAPITAL

    a)    Capital Stock

            Authorized

      Unlimited number of common shares with no par value

            Common shares

      The holders of common shares are entitled to one vote per share

   
  Number of
Shares
  Amount  
 

Balance at December 31, 2007

    65,584,060   $ 61,052,731  
 

Warrants exercised

    5,085,839     20,235,133  
 

Options exercised

    208,067     125,527  
 

Issuance of restricted shares

    1,290,614     1,060,004  
 

Convertible debenture converted into common shares

    1,976,082     7,513,004  
 

Shares issued for AHTD intangible

    4,375,000     3,368,750  
             
 

Balance at December 31, 2008

    78,519,662   $ 93,355,149  
 

Options exercised

    963,333     581,178  
 

Shares cancelled

    (4 )    
 

Issuance of restricted shares

    1,135,400     244,022  
 

Stock based compensation on previously issued restricted shares

        1,208,647  
             
 

Balance at September 30, 2009

    80,618,391   $ 95,388,996  
             

F-54



GLG LIFE TECH CORPORATION

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued)

13.   SHARE CAPITAL (Continued)

    b)    Warrants

      All the Company's share purchase warrants expired before September 30, 2009. A summary of the changes since December 31, 2007 is presented below:

   
  Number of
Warrants
  Amount  
 

Balance at December 31, 2007

    27,574,585   $ 15,378,511  
 

Warrants exercised by a customer

    (5,085,839 )   (2,453,160 )
 

Warrants expired

    (3,591,411 )   (1,447,443 )
             
 

Balance at December 31, 2008

    18,897,335   $ 11,477,908  
 

Warrants expired

    (18,897,335 )   (11,477,908 )
             
 

Balance at September 30, 2009

         
             

14.   STOCK OPTIONS AND RESTRICTED SHARES

    The Company is subject to the policies of the Toronto Stock Exchange ("TSX"), under which it is authorized to grant options to officers, directors, employees and consultants enabling them to purchase common stock of the Company. The Company has one stock option and restricted shares plan ("Plan") which was amended and effective as of May 16, 2008. The Plan is administered by the Board of Directors, which determines individual eligibility under the Plan.

    Stock options

    Under the Plan, options granted are non-assignable and the number of common shares available for issue is a maximum of 10% of the issued and outstanding common shares of the Company inclusive of any restricted shares granted under the Plan. The maximum term of an option is 5 years from the date of grant.

    The fair value of the options granted in 2008 and 2009 has been estimated as of the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions:

   
  2009   2008  
 

Risk-free interest rate

    3.00%     3.00%  
 

Dividend yield

    0%     0%  
 

Volatility

    76%     141%  
 

Expected option life

    5 years     5 years  
 

Expected forfeiture per year

    5%     5%  

F-55



GLG LIFE TECH CORPORATION

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued)

14.   STOCK OPTIONS AND RESTRICTED SHARES (Continued)

    The following is a summary of option transactions:

   
  Number of Shares   Weighted Average
Exercise Price
Per Share
 
 

Balance, December 31, 2007

    5,568,067   $ 0.30  
 

Options granted

    183,866     3.91  
 

Options exercised

    (208,067 )   0.30  
             
 

Balance, December 31, 2008

    5,543,866   $ 0.42  
 

Options granted

    364,600     2.15  
 

Options exercised

    (963,333 )   0.30  
             
 

Balance, September 30, 2009

    4,945,133   $ 0.57  
             

    The following table summarizes information about stock options outstanding at September 30, 2009:

 
Exercise Prices
  Number Outstanding
at September 30,
2009
  Weighted Average
Remaining Contractual
Life (Years)
  Weighted Average
Exercise Price
  Number Exercisable
at September 30,
2009
  Weighted Average
Exercise Price
 
 

$0.30

    4,396,667     0.72   $ 0.30     4,396,667   $ 0.30  
 

  0.80

    5,000     4.16     0.80          
 

  2.15

    364,600     5.00     2.15          
 

  4.00

    178,866     3.62     4.00     50,782     4.00  
                         
 

    4,945,133     1.15   $ 0.41     4,447,449   $ 0.34  
                         

    $100,795 and $272,032 have been recorded as stock-based compensation expense on the consolidated statement of operations for the three month and nine month periods ended September 30, 2009, respectively (three months ended September 30, 2008 — $18,322, nine months ended September 30, 2008 — $27,483).

    Restricted shares

    Under the Plan, restricted shares granted are non-assignable and the number of common shares available for issue is a maximum of 10% of the issued and outstanding common shares in the Company inclusive of any stock options granted under the Plan. Holders of restricted shares are entitled to voting rights and dividends. The maximum vesting period for restricted shares is 5 years from the date of grant. Restricted shares issued to certain employees have certain performance criteria, which are based on production and financial targets.

    1,135,400 restricted shares were issued in 2009 with a fair value of $2,441,110 (September 30, 2008 — 1,179,614 restricted shares with a fair value of $2,386,664).

F-56



GLG LIFE TECH CORPORATION

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued)

14.   STOCK OPTIONS AND RESTRICTED SHARES (Continued)

    Of the total 2,426,014 restricted shares outstanding, 45,436 non-performance based restricted shares vested in the nine months period ended September 30, 2009. The unvested restricted shares are as follows:

Numbers of
restricted shares
  Vesting
period
(years)
  Performance
based
  120,000     1.15   No
  1,125,178     1.62   Yes
  56,000     0.75   No
  1,079,400     2.75   Yes
         
  2,380,578     2.09    
         

    $648,694 and $1,452,669 have been recorded as stock-based compensation expense on the consolidated statements of operations for the three and nine month periods ended September 30, 2009, respectively (three months ended September 30, 2008 — $42,961, nine months ended September 30, 2008 — $64,441) based on achieving certain performance conditions.

15.   CHANGES IN NON-CASH WORKING CAPITAL

   
  Three months ended
September 30
  Nine months ended
September 30
 
   
  2009   2008   2009   2008  
 

Accounts receivable

  $ (533,734 ) $ 988,644   $ 1,314,562   $ 2,405,083  
 

Interest receivable

        137,948     3,651     (46,357 )
 

Loan receivable

                 
 

Taxes recoverable

    (179,085 )   (123,471 )   (3,318,338 )   325,583  
 

Inventory

    1,518,808     (12,496,192 )   1,964,270     (13,697,184 )
 

Prepaid expenses

    (9,903,718 )   359,839     (6,061,632 )   (570,833 )
 

Deferred charges

    3,173         14,660      
 

Accounts payable and accruals

    2,780,099     799,144     3,618,239     854,923  
 

Interest payable

    63,608     16,813     (982,644 )   29,435  
 

Deferred revenue

    (665,000 )   2,649,750     (1,995,000 )   2,649,750  
                     
 

  $ (6,915,849 ) $ (7,667,525 ) $ (5,442,232 ) $ (8,049,600 )
                     

16.   SEGMENTED INFORMATION

    The Company operates in one reportable operating segment, being the manufacturing and selling of a refined form of stevia and has operations in Canada and China.

 
September 30, 2009
  Canada   China   Total  
 

Property, Plant, and Equipment

  $ 4,087   $89,336,397   $ 89,340,484  
 

Revenue

    23,870,879   4,748,569     28,619,448  
 
September 30, 2008
  Canada   China   Total  
 

Property, Plant, and Equipment

  $ 956   $45,455,378   $ 45,456,334  
 

Revenue

      5,234,730     5,234,730  

F-57



GLG LIFE TECH CORPORATION

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued)

17.   RELATED PARTY TRANSACTIONS

    During the period, the Company entered into the following transactions with related parties:

    a)
    Pursuant to consulting agreements between the Company and officers of the Company, consulting fees of $157,773 and $528,356 were expensed for the three month and nine month periods ended September 30, 2009, respectively (three months ended September 30, 2008 — $135,963, nine months ended September 30, 2008 — $396,297), of which $309,738 remained as an accounts payable as at September 30, 2009 (December 31, 2008 — $75,000).

    b)
    Pursuant to a management services agreement, the Company recorded management expenses of $89,822 and $272,601 for the three month and nine month periods ended September 30, 2009, respectively (three months ended September 30, 2008 — $89,309, nine months ended September 30, 2008 — $280,117) to a company controlled by senior executives for management services provided to the Company, of which $272,601 remained as an accounts payable as at September 30, 2009 (December 31, 2008 — Nil)

    c)
    During the period, the Company obtained the following unsecured short term loans from related parties:
 
Loan amount in C$
  Loan amount
in US$
  Maturity
Date
  Interest rate
per annum
  Related
Party
  $ 214,440   $ 200,000     January 14, 2010   8%   a director
    2,144,400     2,000,000     June 28, 2010   HSBC Bank Canada
US Dollar prime rate + 3%
  a director and officer
    1,715,520     1,600,000     July 13, 2010   HSBC Bank Canada
US Dollar prime rate + 3%
  a director and officer
    2,680,500     2,500,000     August 25, 2010   HSBC Bank Canada
US Dollar prime rate + 3%
  a director and officer
                     
  $ 6,754,860   $ 6,300,000              
                     

    These transactions were measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties.

18.   COMMITMENTS

    a)
    The Company has two 5-year operating leases with respect to land and production equipment at the Qingdao factory in China. The leases expire in 2011, and the annual minimum lease payments are approximately $157,000 (RMB 1,000,000).

    b)
    The Company entered into a 30-year agreement with the Dongtai City Municipal Government, located in the Jiangsu Province of China, for approximately 50 acres of land for its seed base operation. Rent of approximately $124,030 (RMB 790,000) is paid every 10 years.

    c)
    The Company entered into an office lease with one year term commencing on May 1, 2009. Commitments for 2009 and 2010 on the new lease are $19,743 and $26,324, respectively.

F-58



GLG LIFE TECH CORPORATION

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued)

18.   COMMITMENTS (Continued)

      The minimum operating lease payments related to the above are summarized as follow:

 

2009

  $ 98,243  
 

2010

    183,324  
 

2011

    157,000  
 

2012

     
 

2013

     
 

Thereafter

    248,060  
         
 

Total

  $ 686,627  
         
    d)
    The Company is committed to deliver US$ 25,200,000 of stevia extract which the US$ 20,000,000 advance from a Strategic Customer (Note 11) will be applied against. The delivery period was contracted over the period from October 1, 2008 and extended to November 30, 2009 from September 30, 2009

    e)
    In April 2008, the Company signed a 20-year agreement with the government of Juancheng County in the Shandong Province of China, which gave the Company exclusive rights to build and operate a stevia processing factory as well as the exclusive right to purchase high quality stevia leaf grown in that region. The agreement requires the Company to make a total investment in the Juancheng region of US 60 million over the course of the 20-year agreement to retain its exclusive rights. As of September 30, 2009, the Company has not made any investment in the region.

    f)
    In May 2009, the Company signed an investment agreement with the Qingdao Export Process Zone to build a Stevia processing facility. The investment agreement calls for the Company to invest US$30 million in registered capital within two years. This timetable for investment can be extended by an additional year if the Company makes the request to the Government. The first phase of its facility construction is targeted to deliver a 1,000 metric ton rebiana facility by the end of 2009. As at September 30, 2009, the Company has invested approximately US$ 13 million and has entered into US 6 million of construction commitments associated with the construction of the facility.

19.   SUBSEQUENT EVENT

    On October 9, 2009, the Company obtained a non secured short term loan of $536,100 (US$500,000) from an unrelated party maturing on October 7, 2010 at interest rate of 8% per annum.

    On October 21, 2009, the State Tax Bureau of Anhui Province in China informed the Company that its 100% owned subsidiary — Chuzhou Runhai Stevia High Tech Company Limited — "Runhai" would receive an enterprise tax exemption on revenues generated for its RA 60 product by that subsidiary. RA 60 products are recognized as primary outputs of Agricultural Products by the Ministry of Finance and State Administration of Taxation which are subject to preferential policies on Enterprise Income tax. As RA 60 is the only product produced by Runhai, this exemption is expected to result in zero enterprise tax payable by Runhai. Runhai is currently subject to a 25% corporate tax rate.

F-59



GLG LIFE TECH CORPORATION

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued)

20.   DIFFERENCES BETWEEN UNITED STATES AND CANADIAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES

    US GAAP accounting principles used in the preparation of these consolidated financial statements conform in all material respects to Canadian GAAP, except as set out below.

    (a)
    The Company capitalized interest costs for routine inventories produced in large quantities on a repetitive basis for the nine months periods ended September 30, 2009 and 2008. The Company also expensed such capitalized interest as costs of sales in the nine months period ended September 30, 2009. In accordance with U.S. GAAP ACS 835-20-15-6 interest costs are not capitalized for routine inventories produced in large quantities on a repetitive basis, and accordingly not allowed to be recorded as costs of sales. As at September 30, 2009, these adjustments resulted a decrease in inventory of $220,634 (December 31, 2008 — $523,272), a decrease in cost of sales for the nine months ended September 30, 2009 of $905,086 (September 30, 2008 — nil) and an increase in interest expense for the nine months ended September 30, 2009 of $602,449 (September 30, 2008 — $353,159).

    (b)
    In accordance with Canadian GAAP, proceeds from the issuance of convertible loans and detachable warrants are allocated to long term convertible term loans and shareholders' equity, resulting in a debt discount that was amortized to interest expense over the term of the loans. In accordance with U.S. GAAP ASC 470-20-25-2 through 25-3 and ASC 470-20-30-1 through 30-2, the proceeds from the issuance of convertible loans and detachable warrants are allocated to the warrants and convertible debt on a relative fair value basis. The difference in allocation among convertible loans, detachable warrants, and the convertible loan's equity component between U.S. GAAP and Canadian GAAP resulted in an increase in warrants of $243,183, contributed surplus of $1,186,147 and a decrease in share capital of $596,716.

    (c)
    In accordance with Canadian GAAP, a subtotal is included in cash flows from operating activities. Under US GAAP, no such subtotal would be disclosed.

    (d)
    In accordance with U.S. GAAP under ACS 835-20, interest costs, including interest and accretion on convertible instrument, are capitalized as part of the historical cost of acquiring certain qualifying assets, which require a period of time to prepare for their intended use. Capitalization is not required under Canadian GAAP, resulting a net increase of $3,929,979 in plant and equipment as at September 30, 2009 (December 31, 2008 — $3,654,274) and a decrease in interest expense for the nine months ended September 30, 2009 of $424,565 (September 30, 2008 — $1,686,795).

    (e)
    In accordance with U.S. GAAP under ACS 810-10, Noncontrolling Interests in Consolidated Financial Statements, which establishes requirements for ownership interests in subsidiaries held by parties other than the Company to be clearly identified, presented, and disclosed in the consolidated statement of financial position within equity, but separate from the parent's equity. All changes in the parent's ownership interests are required to be accounted for consistently as equity transactions and any non controlling equity investments in unconsolidated subsidiaries must be measured initially at fair value. This guidance is effective for fiscal years beginning after December 15, 2008. The Company has retrospectively applied the presentation to prior year resulting in a change in the financial statement presentation of its non-controlling interests.

F-60



GLG LIFE TECH CORPORATION

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued)

20.   DIFFERENCES BETWEEN UNITED STATES AND CANADIAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (Continued)

    The reconciliation of the consolidated balance sheets and consolidated statements of operations, cash flows, comprehensive income and equity are presented below:

    Consolidated Balance Sheets

   
  September 30, 2009   December 31, 2008  
   
  U.S.
GAAP
  Recon.
Items
  Canadian
GAAP
  U.S.
GAAP
  Recon.
Items
  Canadian
GAAP
 
   
  (In Canadian Dollars)
 
 

CURRENT ASSETS

                                     
 

Cash and cash equivalents

  $ 8,894,543         $ 8,894,543   $ 7,362,671         $ 7,362,671  
 

Investment

                  365,785           365,785  
 

Accounts receivable

    1,134,338           1,134,338     2,714,114           2,714,114  
 

Interest receivable

                  3,651           3,651  
 

Taxes recoverable

    4,360,011           4,360,011     1,504,000           1,504,000  
 

Inventories (a)

    28,550,564     (220,634 )   28,771,198     32,534,418     (523,272 )   33,057,690  
 

Prepaid and deposits

    12,054,909           12,054,909     7,380,086           7,380,086  
                             
 

    54,994,365     (220,634 )   55,214,999     51,864,725     (523,272 )   52,387,997  
 

PLANT AND EQUIPMENT (d)

    93,270,463     3,929,979     89,340,484     87,020,317     3,654,274     83,366,043  
 

GOODWILL

    7,587,798           7,587,798     7,587,798           7,587,798  
 

RESTRICTED CASH

    10,000           10,000     100,710           100,710  
 

DEFERRED CHARGES

    96,123           96,123     125,261           125,261  
 

INTANGIBLE ASSETS

    29,805,172           29,805,172     30,793,314           30,793,314  
                             
 

TOTAL ASSETS

  $ 185,763,921   $ 3,709,345   $ 182,054,576   $ 177,492,125   $ 3,131,002   $ 174,361,123  
                             
 

CURRENT LIABILITIES

                                     
 

Short term bank loans

    35,639,000           35,639,000     10,231,500           10,231,500  
 

Accounts payable

    17,839,630           17,839,630     17,167,567           17,167,567  
 

Due to related parties

    6,754,860           6,754,860                
 

Interest payable

    81,085           81,085     1,063,729           1,063,729  
 

Advances to a customer

    3,296,271           3,296,271     24,492,000           24,492,000  
 

Deferred revenue

                  1,995,000           1,995,000  
                             
 

    63,610,846           63,610,846     54,949,796           54,949,796  
 

Non current bank loan

    9,420,000           9,420,000                
                             
 

    73,030,846           73,030,846     54,949,796           54,949,796  
 

FUTURE INCOME TAXES

    2,343,024           2,343,024     2,414,642           2,414,642  
 

NONCONTROLLING INTERESTS (e)

        (47,376 )   47,376         (167,211 )   167,211  
 

SHAREHOLDER'S EQUITY

                                     
 

Share capital (b)

    94,792,280     (596,716 )   95,388,996     92,758,433     (596,716 )   93,355,149  
 

Warrants (b)

                  11,721,091     243,183     11,477,908  
 

Contributed surplus (b)

    16,234,715     1,429,330     14,805,385     4,533,770     1,186,147     3,347,623  
 

Accumulated other comprehensive income

    8,216,236           8,216,236     20,696,008           20,696,008  
 

Deficit

    (8,900,556 )   2,876,731     (11,777,287 )   (9,748,826 )   2,298,388     (12,047,214 )
                             
 

    110,342,675     3,709,345     106,633,330     119,960,476     3,131,002     116,829,474  
 

NONCONTROLLING INTERESTS (e)

    47,376     47,376         167,211     167,211      
                             
 

TOTAL SHAREHOLDER'S EQUITY

    110,390,051     3,756,721     106,633,330     120,127,687     3,298,213     116,829,474  
                             
 

TOTAL LIABILITIES AND

                                     
 

SHAREHOLDERS EQUITY

  $ 185,763,921   $ 3,709,345   $ 182,054,576   $ 177,492,125   $ 3,131,002   $ 174,361,123  
                             

F-61



GLG LIFE TECH CORPORATION

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued)

20.   DIFFERENCES BETWEEN UNITED STATES AND CANADIAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (Continued)

    Consolidated Statements of Income and Deficit

   
  Nine months ended  
   
  September 30, 2009   September 30, 2008  
   
  U.S.
GAAP
  Recon.
Items
  Canadian
GAAP
  U.S.
GAAP
  Recon.
Items
  Canadian
GAAP
 
 

REVENUE

                                     
 

Sales

  $ 28,619,448         $ 28,619,448   $ 5,234,730         $ 5,234,730  
 

Cost of Sales (a)

    20,558,074     (905,086 )   21,463,160     3,842,766           3,842,766  
                             
 

GROSS MARGIN

    8,061,374     905,086     7,156,288     1,391,964           1,391,964  
                             
 

GENERAL AND ADMINISTRATIVE EXPENSES (d)

    8,319,987     148,860     8,171,127     3,828,020           3,828,020  
                             
 

NET INCOME (LOSS) BEFORE THE UNDERNOTED

    (258,612 )   756,227     (1,014,839 )   (2,436,056 )         (2,436,056 )
 

OTHER INCOME (EXPENSES)

                                     
 

Donations

                  (22,749 )         (22,749 )
 

Interest expense

    (2,160,350 )   (177,884 )   (1,982,466 )       1,686,795     (1,686,795 )
 

Interest income

    77,280           77,280     636,705           636,705  
 

Foreign exchange gain

    3,219,210           3,219,210     1,940           1,940  
                             
 

NET INCOME (LOSS) BEFORE INCOME TAXES

    877,528     578,343     299,185     (1,820,160 )   1,686,795     (3,506,955 )
 

Income taxes expense

    (151,403 )         (151,403 )              
                             
 

NET INCOME (LOSS) BEFORE NON-CONTROLLING INTEREST

    726,125     578,343     147,782     (1,820,160 )   1,686,795     (3,506,955 )
 

NON-CONTROLLING INTERESTS (e)

        (122,145 )   122,145         (15,452 )   15,452  
                             
 

NET INCOME (LOSS)

  $ 726,125   $ 456,198   $ 269,927   $ (1,820,160 ) $ 1,671,343   $ (3,491,503 )
 

Net loss attributable to non-controlling
interest (e)

  $ (122,145 ) $ (122,145 )       $ (15,452 ) $ (15,452 )      
                             
 

NET INCOME (LOSS) ATTRIBUTABLE TO GLG LIFE TECH CORPORATION

  $ 848,270   $ 578,343   $ 269,927   $ (1,804,708 ) $ 1,686,795   $ (3,491,503 )
                             
 

INCOME (LOSS) PER SHARE — Basic

    0.01           0.00     (0.03 )         (0.05 )
 

INCOME (LOSS) PER SHARE — Diluted

    0.01           0.00     (0.03 )         (0.05 )
 

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING

                                     
   

 — BASIC

    79,234,614           79,234,614     70,418,638           70,418,638  
   

 — DILUTED

    97,335,605           97,335,605     70,418,638           70,418,638  

F-62



GLG LIFE TECH CORPORATION

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued)

20.   DIFFERENCES BETWEEN UNITED STATES AND CANADIAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (Continued)

    Consolidated Statements of Cash Flow

   
  For the nine months ended September 30  
   
  2009
U.S. GAAP
  2008
U.S. GAAP
 
   
  (In Canadian Dollars)
 
 

Cash provided by (used in)

             
 

Operating activities

             
 

Net income (loss)

  $ 726,125   $ (1,820,160 )
 

Items not affecting cash:

             
   

Amortization of convertible debt discount

        (816,259 )
   

Stock-based compensation

    1,724,701     91,924  
   

Amortization of property, plant and equipment & intangibles

    4,362,142     1,397,624  
   

Foreign exchange loss

    (3,219,210 )    
   

Future income tax recovery

    (184,856 )    
             
 

Changes in non-cash working capital

    (5,221,598 )   (8,049,600 )
             
 

Cash flow used by operating activities

    (1,812,696 )   (9,196,471 )
             
 

Investing activities

             
 

Decrease in short term investment

    349,075      
 

Increase in loan receivable

        (117,999 )
 

Decrease in restricted cash

    90,710      
 

Purchase of property, plant and equipment

    (23,190,463 )   (32,163,549 )
             
 

Cash flow used by investing activities

    (22,750,678 )   (32,281,548 )
             
 

Financing activities

             
 

Increase in short term loan

    38,541,000      
 

Issuance of common shares

    288,999     17,865,873  
 

Repaid advance from a customer

    (18,862,472 )    
 

Increase in advance from a customer

        17,664,951  
 

Advances from (to) related parties

    7,106,014     (410,078 )
             
 

Cash flow from financing activities

    27,073,541     35,120,746  
             
 

Effect of foreign exchange rate changes on cash and cash equivalents

    (978,295 )   8,393,816  
             
 

CHANGE IN CASH AND CASH EQUIVALENTS

    1,531,872     2,036,544  
 

CASH AND CASH EQUIVALENTS, beginning of period

   
7,362,671
   
28,253,580
 
             
 

CASH AND CASH EQUIVALENTS, end of period

  $ 8,894,543   $ 30,290,124  
             

F-63



GLG LIFE TECH CORPORATION

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued)

20.   DIFFERENCES BETWEEN UNITED STATES AND CANADIAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (Continued)

    Consolidated Statements of Shareholders' Equity Under U.S. GAAP

   
  *Common Shares    
   
  Accumulated
Other
Comprehensive
Income
   
   
   
 
   
   
  Contributed
Surplus
   
  Non
Controlling
Interest
   
 
   
  Number   Amount   Warrants   Deficit   Total  
   
  (In Canadian Dollars)
 
 

Balance, December 31, 2007

    65,584,060     61,052,731     15,621,694     3,805,150     (1,307,926 )   (1,151,922 )       78,019,727  
                                     
 

Warrants exercised

    5,085,839     20,235,133     (2,453,160 )                           17,781,973  
 

Options exercised

    208,067     125,527           (63,107 )                     62,420  
 

Convertible debenture redeemed for shares

    1,976,082     6,916,288     (1,447,443 )   531,155                       6,000,000  
 

Stock issued for cash

    1,290,614     1,060,004                                   1,060,004  
 

Stock-based compensation

                      260,572                       260,572  
 

Shares issued for AHTD acquisition

    4,375,000     3,368,750                                   3,368,750  
 

Change in foreign currency translation

                            22,003,934                 22,003,934  
 

Non-controlling interest contributions

                                        235,485     235,485  
 

Net (loss) income

                                  (8,596,904 )   (68,274 )   (8,665,178 )
                                     
 

Balance, December 31, 2008

    78,519,662   $ 92,758,433   $ 11,721,091   $ 4,533,770   $ 20,696,008   $ (9,748,826 ) $ 167,211   $ 120,127,687  
                                     
 

Warrants expired

                (11,721,091 )   11,721,091                        
 

Options exercised

    963,333     581,178           (292,179 )                     288,999  
 

Stock-based compensation

    1,135,400     1,452,669           272,033                       1,724,702  
 

Shares cancelled

    (4 )                                        
 

Change in foreign currency translation

                            (12,479,772 )         2,310     (12,477,462 )
 

Net (loss) income

                                  848,270     (122,145 )   726,125  
                                     
 

Balance, September 30, 2009

    80,618,391   $ 94,792,280       $ 16,234,715   $ 8,216,236   $ (8,900,556 ) $ 47,376   $ 110,390,051  
                                     

    As a result of the above adjustments, the components of other comprehensive income under U.S. GAAP are as follows:

    Statement of Comprehensive Income

   
  Nine months period ended September 30,  
   
  2009   2008  
   
  (in Canadian Dollars)
 
 

Net income (loss) under U.S. GAAP

  $ 726,125   $ (1,820,160 )
             
 

Foreign currency translation adjustments

    (12,479,772 )   7,887,750  
             
 

Other comprehensive income

    (12,479,772 )   7,887,750  
             
 

Comprehensive (loss) earnings

    (11,753,647 )   6,067,590  
 

Comprehensive loss attributable to non-controlling interest

    (122,145 )   (15,452 )
             
 

Comprehensive earnings for the period attributable to GLG Life Tech Corp.

  $ (11,631,502 ) $ 6,083,042  
             

    The calculation of basic earnings per share for the nine months period ended September 30, 2009 is based on the weighted average number of shares outstanding. Diluted earnings per share reflect the dilutive effect of the exercise of options, warrants and reserved for issuance related to the AHTD acquisition. For the nine months period ended September 30, 2008, 5,538,866 share options, 8,750,000 shares reserved for issuance related to the AHTD acquisition, and 20,641,764 warrants were excluded from the calculation of diluted net

F-64



GLG LIFE TECH CORPORATION

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued)

20.   DIFFERENCES BETWEEN UNITED STATES AND CANADIAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (Continued)

    income (loss) per common share, as the effect of including them would have been anti-dilutive. The number of shares for the diluted earnings per share as at September 30, 2009 is calculated as follows:

    The calculation of basic earnings per share is based on the weighted average number of shares outstanding. Diluted earnings per share reflect the dilutive effect of the exercise of options. The number of shares for the diluted earnings per share was calculated as follows:

   
  September 30, 2009   September 30, 2008  
 

Net income (loss) for the period attributable to GLG Life Tech Corporation

  $ 848,270   $ (1,804,708 )
             
 

Weighted average number of shares used in basic earnings per share

    79,234,614     70,418,638  
 

Dilutive potential of the following:

             
   

Employee/director share options

    5,161,036      
   

Reserve for AHTD

    4,375,000        
   

Warrants issued to private placement and customer

    8,564,955      
             
 

Diluted weighted average number of shares outstanding

    97,335,605     70,418,638  
             
 

Earnings per share:

             
   

Basic

  $ 0.01   $ (0.03 )
   

Diluted

  $ 0.01   $ (0.03 )

    New Accounting Pronouncements

    In December 2007, the FASB issued ACS 805 (revised 2007), Business Combinations, which provides revised guidance on how acquirers recognize and measure the consideration transferred, identifiable assets acquired, liabilities assumed, noncontrolling interests, and goodwill acquired in a business combination. This standard also expands required disclosures surrounding the nature and financial effects of business combinations. The standard became effective for the Company January 1, 2009, but did not have a significant impact on the Company's consolidated financial statements.

    In February 2008, the FASB issued Staff ACS 820-10-55-23A, Effective Date of FASB Statement No. 157 which delayed the effective date of ACS 820 to fiscal years beginning after November 15, 2008 for all nonfinancial assets and liabilities that are recognized or disclosed in the financial statements at fair value on a nonrecurring basis only. The adoption of this paragraph did not have a significant impact on the Company's consolidated financial statements.

    In March 2008, the FASB issued amendments to ACS 815-10-50 that expand the quarterly and annual disclosure requirements in about an entity's derivative instruments and hedging activities. This section is effective for fiscal years beginning after November 15, 2008 and its adoption did not have an impact on the Company's financial position, results of operations or cash flows as the pronouncement addresses disclosure requirements only.

    In October 2008, the FASB issued ACS 820-10-35-15A, 55A and 55B, Determining Fair Value of a Financial Asset in a Market That Is Not Active, which clarified the application of ACS 820 in an inactive market. It demonstrated how the fair value of a financial asset is determined when the market for that financial asset is inactive. These paragraphs were effective upon issuance, including prior periods for which financial statements had not been issued and its adoption did not have an impact on the Company's financial position, results of operations or cash flows.

F-65



GLG LIFE TECH CORPORATION

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued)

20.   DIFFERENCES BETWEEN UNITED STATES AND CANADIAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (Continued)

    In May 2009, the FASB issued ACS 855-10-50, Subsequent Events, which requires entities to disclose the date through which they have evaluated subsequent events and whether the date corresponds with the release of their financial statements. This subsection is effective for interim and annual periods ending after June 15, 2009.

    In June 2009, the FASB amended ACS 860, Transfers and Servicing, which prescribes the information that a reporting entity must provide in its financial reports about a transfer of financial assets; the effects of a transfer on its financial position, financial performance and cash flows; and a transferor's continuing involvement in transferred financial assets. Specifically, among other aspects, this standard amended ACS 860 by removing the concept of a qualifying special-purpose entity and removes the exception from applying the Variable Interest subsections of subtopic ACS 810-10 to variable interest entities that are qualifying special-purpose entities. It also modifies the financial components approach used in ACS 860. This standard is effective for transfer of financial assets occurring on or after January 1, 2010. The Company will consider this standard when evaluating future transactions to which it would apply. Historically, the Company has not had any material transfers of financial assets.

    In June 2009, the FASB made amendments to the Variable Interest subsections of subtopic ACS 810-10 which require an enterprise to determine whether its variable interest or interests give it a controlling financial interest in a variable interest entity. The primary beneficiary of a variable interest entity is the enterprise that has both (1) the power to direct the activities of a variable interest entity that most significantly impact the entity's economic performance, and (2) the obligation to absorb losses of the entity that could potentially be significant to the variable interest entity or the right to receive benefits from the entity that could potentially be significant to the variable interest entity. The amendments also require ongoing reassessments of whether an enterprise is the primary beneficiary of a variable interest entity. The amendments are effective for all variable interest entities and relationships with variable interest entities existing as of January 1, 2010. The Company will consider this standard when evaluating future transactions to which it would apply and it did not impact any existing relationships that the Company has.

F-66




QuickLinks

GLG LIFE TECH CORPORATION CONSOLIDATED BALANCE SHEETS (In Canadian Dollars) (Unaudited)
GLG LIFE TECH CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) For the Periods Ended September 30, 2009 and 2008 (In Canadian Dollars) (Unaudited)
GLG LIFE TECH CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOW For the Periods Ended September 30, 2009 (In Canadian Dollars) (Unaudited)
GLG LIFE TECH CORPORATION CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY For the Period Ended September 30, 2009 (In Canadian Dollars) (Unaudited)
GLG LIFE TECH CORPORATION NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS