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