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**UNITED STATES****SECURITIES AND EXCHANGE COMMISSION**
Washington, D.C. 20549 FORM 20-F [   ]  REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) or (g) OF THE SECURITIES EXCHANGE ACT OF 1934 
  OR
  [ X ]  ANNUAL REPORT PURSUANT TO SECTION 13 Or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
For the fiscal year ended December 31, 2009 
OR
[   ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE OF 1934 
OR
[   ]  SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE OF 1934 Commission file number 0-20386 CHAI-NA-TA CORP.(Exact name of Registrant as specified in its charter) NOT APPLICABLE(Translation of Registrants Name into English) BRITISH COLUMBIA, CANADA(Jurisdiction of incorporation or organization) UNIT 100  12051 HORSESHOE WAY, RICHMOND, BRITISH COLUMBIA V7A 4V4(Address of principal executive offices) Securities registered or to be registered pursuant to Section 12(b) of the Act: 
NONE Securities registered or to be registered pursuant to Section 12(g) of the Act:COMMON STOCK, WITHOUT PAR VALUE(Title of Class) Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:None Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report.Common    34,698,157 Indicate by check mark if the registrant is a well-known seasonal issuer, as defined in Rule 405 of the Securities Act. 
Yes[   ]   No [ X ] If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Yes[   ]   No [ X ] Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 12 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. 
Yes [ X ]   No[   ] Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.
Large accelerated filer [   ]   Accelerated filer [   ]   Non-accelerated filer [ X ] Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing: 
U.S. GAAP [   ]   IFRS [   ]   Other [ X ] If Other has been checked, indicate by check mark which financial statement item the registrant has elected to follow: 
Item 17 [ X ]   Item 18 [   ] If this is an annual report, indicated by check mark whether the registrants is a shell company 
Yes [   ]   No [ X ] 1


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Chai-Na-Ta Corp.FORM 20-F ANNUAL REPORTFOR YEAR ENDED DECEMBER 31, 2009 TABLE OF CONTENTS Part I
     
     3ITEM 1
     IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
     3ITEM 2
     OFFER STATISTICS AND EXPECTED TIMETABLE
     3ITEM 3
     KEY INFORMATION
     3ITEM 4
     INFORMATION ON THE COMPANY
     9ITEM 5
     OPERATING AND FINANCIAL REVIEW AND PROSPECTS
     15ITEM 6
     DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
     24ITEM 7
     MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
     28ITEM 8
     FINANCIAL INFORMATION
     29ITEM 9
     THE OFFER AND LISTING
     29ITEM 10
     ADDITIONAL INFORMATION
     31ITEM 11
     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
     37ITEM 12
     DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
     38PART II
     
     38ITEM 13
     DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
     38ITEM 14
     MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
     38ITEM 15T
     CONTROLS AND PROCEDURES
     38ITEM 16
     RESERVED
     39PART III
     
     41ITEM 17
     FINANCIAL STATEMENTS
     41ITEM 18
     FINANCIAL STATEMENTS
     41ITEM 19
     EXHIBITS
     41SIGNATURE PAGE
     43CONSOLIDATED FINANCIAL STATEMENTS
     44
  2


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PART I ITEM 1
     IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
  Not applicable. ITEM 2
     OFFER STATISTICS AND EXPECTED TIMETABLE
  Not applicable. ITEM 3
     KEY INFORMATION
  SELECTED FINANCIAL DATA The selected financial data of the Company for the fiscal years ended December 31, 2009, 2008 and 2007 are derived from the consolidated financial statements of the Company which have been audited by Deloitte & Touche LLP, Independent Registered Chartered Accountants as indicated in their report which is included elsewhere in this Annual Report. The selected financial data set forth for the years ended December 31, 2009, 2008, 2007, 2006 and 2005 are derived from the Company's audited consolidated financial statements. The selected financial data should be read in conjunction with the Companys consolidated financial statements, related notes thereto and other financial information included elsewhere in this report. Table No. 1 is derived from the audited consolidated financial statements of the Company, which have been prepared in accordance with Canadian Generally Accepted Accounting Principles (GAAP), the application of which, in the case of the Company, conforms in all material respects for the periods presented with United States GAAP, except as referred to in the footnotes to the audited consolidated financial statements. The value of the U.S. Dollar relative to the Canadian Dollar was approximately 1.05 as of December 31, 2009. 3


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Table No. 1 
Selected Financial Data
(CDN$ in 000, except Earnings/Loss per Share and Share Data) Year Ended
     
     Year Ended
     
     Year Ended
     
     Year Ended
     
     Year Ended12/31/2009
     
     12/31/2008
     
     12/31/2007
     
     12/31/2006
     
     12/31/2005Canadian GAAPRevenue
     6,941
     
     9,232
     
     7,562
     
     5,928
     
     5,826Gross Profit (Loss) (2)
     368
     
     (2,685
     )
     (2,567
     )
     (5,541
     )
     (9,641
     )Operating Loss (5)
     (1,410
     )
     (4,224
     )
     (4,430
     )
     (7,462
     )
     (11,738
     )Net Income (Loss) (5)
     669
     
     (4,670
     )
     (3,329
     )
     (9,461
     )
     (8,131
     )Earnings (Loss) per Share  basic (5)
     0.02
     
     (0.13
     )
     (0.10
     )
     (0.27
     )
     (0.23
     )Earnings (Loss) per Share  diluted (5)
     0.02
     
     (0.13
     )
     (0.10
     )
     (0.27
     )
     (0.23
     )Weighted Average Number of Common Shares (3)
     34,698
     
     34,698
     
     34,698
     
     34,698
     
     34,698Diluted Number of Common Shares (4)
     34,698
     
     34,698
     
     34,698
     
     34,698
     
     34,698Dividends declared per Share
     0
     
     0
     
     0
     
     0
     
     0Working Capital
     8,968
     
     5,456
     
     7,424
     
     7,525
     
     4,917Ginseng Crops (1)
     6,052
     
     7,486
     
     11,395
     
     14,519
     
     19,349Capital Assets
     2,513
     
     2,678
     
     3,795
     
     5,793
     
     6,589Total Assets
     17,849
     
     20,890
     
     25,613
     
     29,693
     
     36,751Net Assets
     7,144
     
     6,111
     
     11,242
     
     14,258
     
     23,714Term Debt  Non Current
     6,499
     
     8,619
     
     6,973
     
     8,366
     
     2,450Capital Stock
     38,246
     
     38,246
     
     38,246
     
     38,246
     
     38,246U.S. GAAPRevenue
     6,941
     
     9,232
     
     7,562
     
     5,928
     
     5,826Gross Loss (2)
     (123
     )
     (2,675
     )
     (2,553
     )
     (5,496
     )
     (9,082
     )Operating Loss (5)
     (1,581
     )
     (3,644
     )
     (3,621
     )
     (6,715
     )
     (10,751
     )Net Income (Loss)
     174
     
     (4,666
     )
     (3,317
     )
     (9,439
     )
     (7,770
     )Earnings (Loss) per Share- basic (5)
     0.01
     
     (0.13
     )
     (0.10
     )
     (0.27
     )
     (0.22
     )Earnings (Loss) per Share  diluted (5)
     0.01
     
     (0.13
     )
     (0.10
     )
     (0.27
     )
     (0.22
     )Dividends declared per Share
     0
     
     0
     
     0
     
     0
     
     0Working Capital
     8,473
     
     5,453
     
     7,416
     
     7,511
     
     4,877Ginseng Crops (2)
     6,047
     
     7,478
     
     11,382
     
     14,497
     
     19,276Capital Assets
     2,513
     
     2,678
     
     3,795
     
     5,793
     
     6,589Total Assets
     17,346
     
     20,882
     
     25,600
     
     29,669
     
     36,706Net Assets
     6,641
     
     6,104
     
     11,229
     
     14,235
     
     23,668Term Debt  Non Current
     6,499
     
     8,619
     
     6,973
     
     8,366
     
     2,450Capital Stock
     38,226
     
     38,226
     
     38,226
     
     38,226
     
     38,226
  1.
     Ginseng plants reach maturity and can be harvested at the end of their third year of growth. Total acreage under cultivation is 266 acres at December 31, 2009 (392 acres at December 31, 2008, 629 acres at December 31, 2007, 966 acres at December 31, 2006 and 1,240 acres at December 31, 2005). The Company values these plants at the lower of cost and net realizable value.2.
     Under U.S. GAAP, the interest capitalised into Ginseng Crops would not be eligible for capitalisation. These amounts would be expensed in the period incurred.3.
     In 2006, 10,399,149 preferred shares have been converted into common shares on a 1:1 basis. In 2004, 34,500 shares were issued for stock options exercised.4.
     Options to purchase 343,400, and 403,300 shares of common stock were outstanding in 2007 and 2006, respectively, but were not included in the computation of diluted number of common shares because their effect would have been anti-dilutive.5.
     During 2008, 2007 and 2006, the Company incurred write-downs of $2,998,000, $2,735,000 and $5,639,000, respectively, on inventory and crop costs which caused a significant decrease in net earnings (loss) in total and on a per share basis compared to other years. 4


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In this Annual Report, unless otherwise specified, all dollar amounts are expressed in Canadian Dollars (CDN$). The Government of Canada permits a floating exchange rate to determine the value of the Canadian Dollar against the U.S. Dollar (US$). Table No. 2 sets forth the rate of exchange for the Canadian Dollar for the last five years and the most recent six months. For purposes of this table, the rate of exchange means the noon buying rate in New York City for cable transfers in foreign currencies as certified for customs purposes by the Federal Reserve Bank of New York. The table sets forth the number of Canadian Dollars required under that formula to buy one U.S. Dollar. Table No. 2 
U.S. Dollar/Canadian Dollar Fiscal Year Ended
     Average
     High
     Low
     Close12/31/2009
     1.14
     1.30
     1.03
     1.0512/31/2008
     1.07
     1.30
     0.97
     1.2212/31/2007
     1.07
     1.19
     0.92
     0.9912/31/2006
     1.13
     1.19
     1.10
     1.1712/31/2005
     1.21
     1.27
     1.14
     1.16Month Ended
     
     High
     Low
     Close02/28/2010
     
     1.07
     1.04
     1.0501/31/2010
     
     1.07
     1.03
     1.0712/31/2009
     
     1.07
     1.04
     1.0511/30/2009
     
     1.08
     1.05
     1.0610/31/2009
     
     1.08
     1.03
     1.0809/30/2009
     
     1.11
     1.06
     1.07
  The closing rate of exchange was 1.05 on February 28, 2010. RISK FACTORS The Company may from time to time make written or oral forward-looking statements. Written forward-looking statements may appear in this document and other documents filed with the Securities and Exchange Commission, in press releases, in reports to shareholders, on the Companys website, and other documents. While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein. Such estimates, projections or other forward looking estimates involve various risks and uncertainties as outlined below. We caution the reader that important factors in some cases have affected and could materially affect actual results in the future, and cause actual results to differ materially from the results expressed in any estimates, projections or other forward-looking statements. Prospective investors should consider carefully the risk factors set out below. 5


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Chai-Na-Ta is subject to a number of business and financial risks including: agricultural risk such as weather and disease, commodity price risk for ginseng bulk root, exchange risk (predominantly United States and Hong Kong dollar related), the lengthy growing cycle for ginseng, interest rate risk, credit risk and the concentration of customers, and future need for financing. Going Concern The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has experienced an operating loss of $1,410,000 for the year ended December 31, 2009 due to the low selling price of ginseng and has an accumulated deficit of $32,246,000 as at December 31, 2009. The Company is closely monitoring cash resources and has received significant financing from a company formerly under common control. The Company's ability to continue as a going concern is dependant on achieving ongoing profitable operations, obtaining new sources of debt or restructuring existing debt and the continued financial support of its creditors. These consolidated financial statements do not include any adjustments to the amounts and reclassification of assets and liabilities that might be necessary should the Company be unable to continue as a going concern. Agricultural Risks The Companys primary business is the cultivation and marketing of North American ginseng. Ginseng farming is subject to agricultural risks such as weather and disease and risks of low yields, poor crop quality, and crop failure. Insurance is available to cover such risks but the relatively high costs have resulted in the Company electing to self-insure. Although the Company believes that its Integrated Crop Management System and diversification of farming operations will help mitigate risks, there can be no assurance that such policies or procedures will be effective in reducing such risks and accordingly, the Companys business, financial condition, operating results and cash flows may be materially affected. Product Pricing The marketing of bulk and graded North American ginseng in world markets is subject to pricing risks. The price of North American ginseng may be affected by factors such as the size, shape, color, taste, and quality of the harvest for the Company and the industry at large, as well as other factors in any given year. These are factors that the Company may not be able to control in the short term. The Companys long-term strategy is to expand the level of vertical integration throughout its operations, potentially reducing the exposure to bulk North American ginseng price fluctuations as more bulk root is sold into the value-added consumer products market. In addition, the Company maintains economies of scale in its operations which are designed to give it a competitive advantage relative to other producers when prices decline. North American ginseng root prices remained at historic low levels in 2009 but there was a modest recovery at the end of 2009. Although the Company believes that prices will continue to improve modestly towards the end of 2010, significant changes in the supply of or demand for North American ginseng may adversely impact the price of ginseng roots and have a material adverse effect on the Companys business, financial condition, operating results and cash flows. 6


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Lengthy Growing Cycle for Ginseng As the cycle for growing ginseng takes several years from the time of planting to the time of harvesting, our future profitability is also impacted by our ability to accurately predict demand for our products in future years. Unanticipated decreases in demand or excess supplies in world markets could adversely affect profitability due in part to the limitation in our inability to make adjustments to the size of our crops in reaction to short term swings in supply and demand. Consequently, if the expected yields and quality of future harvests are not realized, the Company may not be able to harvest additional ginseng in sufficient quantities or quality to compensate for the shortfall. Lower than expected yields and quality could have a material adverse effect on the Companys business, financial condition, operating results and cash flows. Availability of Suitable Land The Company leases approximately 331 acres and owns 50 acres of farm land in Canada of which 266 acres are currently under ginseng cultivation. Generally, the Company uses farm land only for one ginseng crop as it is generally believed that ginseng depletes the soil of nutrients necessary for a second successful ginseng crop. The Company believes that the southern region of Ontario will continue to have available farm land that could be used for ginseng farming, but there can be no assurances that the Company will be able to secure leases on terms similar to existing leases or acquire suitable farm land at reasonable prices. The inability to secure suitable farm land through leases or through acquisitions could have a material adverse effect on the Company's business, financial condition, operating results and cash flows. Competition The ginseng industry is quite competitive as the Company competes with numerous other long established ginseng growers. Most of these competitors are managed by private companies or individuals who have smaller acres under cultivation and harvest fewer pounds of ginseng but also have lower overhead costs compared to the Company. A high amount of ginseng harvested by the competition can adversely affect the price that the Company can achieve for its ginseng. Credit Risk and the Concentration of Customers The Company is exposed to credit risk on accounts receivable from customers. In order to manage its credit risk, the Company carefully monitors credit terms, and investigates credit history. Payments or deposits are usually received before shipments of inventory to the customer and credit is typically granted only to customers with established relationships or those customers which have been subject to a credit review and approval by management. When such relationships have not been established or credit reviews have not been acceptable, letters of credit may be used to secure such payment or revenues may not be recognized until collection. The Companys product is typically sold to major ginseng brokers in Hong Kong and a limited number of smaller customers. During the years ended December 31, 2009, 2008 and 2007, the Company had sales of approximately 78% to its top three customers, approximately 87% to its top three customers and approximately 83% to its top two customers in each year, respectively. The Company believes that a limited number of customers will continue to represent a significant portion of its total revenue. Although the Company does not consider itself economically dependent upon any single customer or combination of customers due to the existence of other potential brokers capable of purchasing the Companys supply, there can be no assurance that the Company will be able to maintain its current significant customers or secure significant new customers on similar terms and this may have a material adverse effect on the Companys business, financial condition, operating results and cash flows. 7


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During the years ended December 31, 2009, 2008 and 2007, the Company had sales of approximately 79%, 87%, and 89% to customers in the Far East, primarily China. The Company expects sales to markets in the Far East to continue to represent the majority of the Companys sales. Any adverse change in the demand for ginseng from Far East markets may have a material adverse effect on the Companys business, financial condition, operating results and cash flows. Risks Associated with International Operations The Company operates in international markets and conducts business in Canada (bulk root farming operations and certain bulk root sales) and Hong Kong (bulk root sales centre in Asia). There are a number of risks inherent in the Companys international business activities, including changes in regulatory requirements, tariffs and other trade barriers, costs and risks associated with foreign markets, differing culture and business practices, potentially adverse tax consequences, the burdens of complying with a wide variety of foreign laws, war, insurrection, terrorism and other political risks and factors beyond the Companys control. Exchange risks are also present as currencies may fluctuate at different rates depending on economic, political and other factors. There can be no assurance that adverse changes in the above noted factors will not materially affect the Companys business, financial condition, operating results and cash flows. Foreign Exchange The Company maintains its accounts primarily in U.S. dollar, Canadian dollar and Hong Kong dollar (HK$) denominations. The Hong Kong Monetary Authority has set up a linked exchange rate system in which the HK$ is limited to a trading range of 7.75  7.85 against the US$. The Companys long-term debt is denominated in US$ and HK$ and a minor portion of the Companys revenue and receivables is denominated in K$. The Company monitors its exposure to foreign exchange risk and balances its foreign currency holdings to reduce exposure to any one currency by engaging in foreign exchange contracts and by repatriating any excess funds. Market for Common Shares; Potential Volatility of Stock Price The trading prices of the Common Shares have been subject to wide fluctuations in recent years. There can be no assurance that the market price of the Common Shares will not significantly fluctuate from its current level. Furthermore, the low average trading volumes for the Companys Common Shares may impact the liquidity of the shares or the ultimate price at which they can be sold. Financing of Current Operations The Company relies on the sale of inventory to fund the maintenance and harvest of ginseng crops that will be harvested in future years. To fund current operations the Company will first try and sell inventory but if the Company cannot reach acceptable selling terms the Company will attempt to fund current operations with additional financing. There can be no assurance that capital markets will be conducive to such financing at all or on acceptable terms. This could have a material adverse effect on the Company's business, financial condition, operating results and cash flows. Long-Term Financing The Company has historically used term debt financing to finance capital asset acquisitions and short-term borrowings and operating lines to finance crops and working capital needs. In 2009, the Company extended a term loan facility that had been established in 2006 to finance the general working capital requirements of the Company. Interest rate risk is managed by arranging most term debt financing with fixed rates for the life of the obligations. 8


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In order to fund the financial requirements of the Company additional external sources of financing may be required. The amount of such funding depends on the future profitability of the Company, as well as the pricing of its products in world markets and the scale of any future expansion. The ability of the Company to issue additional equity may be impacted by the limited liquidity in the stock due to low historical trading volumes and significant percentages held by a limited number of shareholders. Further, if the Company decides to and is able to issue additional funds through public or private debt or equity financings to fund operations, new equity securities may have priority rights over existing equity security holders and the percentage ownership of current stockholders may be reduced. Although future funding may require issues of additional debt or equity; there can be no assurance that capital markets will be conducive to such financing at all or on acceptable terms. Directors, Officers and Key Employees The success of the Company is currently largely dependent on the performance of its officers and key senior management. The loss of the services of these persons will have a materially adverse effect on the Companys business and prospects. There is no assurance the Company can maintain the services of its officers and key senior management or other qualified personnel required to operate its business. Failure to do so could have a material adverse affect on the Company. The Company has not purchased any key-man insurance with respect to any of its directors or officers to the date hereof. The loss of any key officer or employee of the Company could have an adverse impact on the Company, its business and its financial position. ITEM 4
     INFORMATION ON THE COMPANY
  HISTORY AND DEVELOPMENT OF THE COMPANY The Company and Operations Chai-Na-Ta Corp. (Chai-Na-Ta and the Registrant or the Company) was incorporated on August 12, 1981, under the Canada Business Corporations Act. The Company originally was named Chai-Na-Ta Ginseng Products Limited. During 1994, the name was changed to Chai-Na-Ta Corp. Chai-Na-Ta, together with its subsidiaries, is engaged in the growing, processing and marketing of North American ginseng. Ginseng, a woodland plant with species native to both China and North America, is prized for its root which has been the most valuable herb in Oriental medicine for over 2,000 years. The vast proportion of North American ginseng is farm grown. The corporate head office is located at: Unit 100 - 12051 Horseshoe Way, Richmond, British Columbia, V7A 4V4, the current contact person is Wilman Wong, C.E.O.; and the telephone number is (604) 272-4118. The head office operations include corporate administration, corporate finance, human resources, sales and marketing, and investor relations. The Company maintains farms in the vicinity of its farm office in Otterville Ontario. The Company listed its common stock on the Toronto Stock Exchange ("TSX") in October 1989; the stock symbol was CC. On April 28, 2006, the Company shares were delisted by the Toronto Stock Exchange as the Company had not met the continued listing requirements of the Exchange. The Company listed its common stock on the North American Stock Dealers Automatic Quotation (NASDAQ) Stock Market in October 1992. The Companys stock was delisted from NASDAQ in April 1999 for not meeting the listing requirements. The Company commenced trading on the NASDAQs OTC Bulletin Board in April 1999. The stock symbol is CCCFF. 9


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The Companys wholly-owned subsidiary, Chai-Na-Ta Farms Ltd. (CNT Farms) is headquartered in Richmond, British Columbia and carries out the planting, growing and harvesting of the Companys ginseng crops. CNT Farms also handles the storage of the Companys root inventory and manages the distribution of inventory directly to local customers or to customers in the Far East through its wholly-owned subsidiary, CNT Trading (Hong Kong) Limited (CNT HK). CNT Farms also carries out crop research through its agricultural staff. The Company also has a wholly-owned subsidiary, Unique Formulations Inc. (Unique) which previously operated out of Portland, Oregon as a wholesaler of ginseng and non-ginseng based herbal products to the U.S. market. As part of the Companys efforts to reduce operating costs, the Portland office was closed in November 1999 and the operations were then administered from the head office in British Columbia, Canada. Unique has been inactive since 2003. The Company incorporated CNT HK on October 13, 1999 to carry out direct marketing, sales and distribution functions for North American ginseng in Hong Kong for distribution through Asia. CNT HK sells ginseng roots directly to brokers, distributors and certain customers in the Far East, primarily China, who use the bulk ginseng root for a variety of purposes. The Company incorporated its wholly-owned subsidiary, CNT Nutraceuticals Ltd. (CNTN) on February 3, 2004 to operate a showroom in Richmond, British Columbia and carry out direct marketing and sales of graded roots and ginseng-based value-added products to customers in Canada. The direct marketing and operation of the showroom were scaled down in 2005 due to cash flow restraints. The operations of CNTN in the short-term will be limited to selling existing inventory and to creating custom-made ginseng products for wholesale distribution. The Companys principal capital expenditures incurred during 2009, 2008 and 2007 were $145,000, $139,000 and $61,000, respectively, which related to purchases of property, plant and equipment located in Canada. Financing On August 18, 2006, the Company established a four year term loan facility of HK$54,700,000 (approximately $8,000,000 at the date of establishment) from a company formerly under common control. of which HK$3,200,000 was repaid on August 31, 2009. As of September 1, 2009 the Company negotiated an extension of the remaining HK$51,500,000 loan facility. Under the terms of the extension, the Company will be required to repay HK$3,300,000 by August 31, 2010 and HK$16,700,000 ($2,254,000) by August 31, 2011. The remaining amount is to be repaid by August 31, 2012 in apportionments of HK$1,250,000 and US$3,878,000. The loan is unsecured and bears interest at 1.75% per annum over the HIBOR (Hong Kong Interbank Offered Rate) or LIBOR (London Interbank Offered Rate) through February 28, 2010 after which it will bear interest at a flat rate of 6.25% for the duration of the loan. At December 31, 2009, the Company had a $500,000 revolving demand operating loan with a Canadian chartered bank at a rate of prime plus 3.75% per annum. Based on its positive cash position, the Company could not draw on this facility as of December 31, 2009. The loan availability will reduce to zero effective March 31, 2010. As at December 31, 2009, $NIL (2008 - $1,060,000, 2007 - $3,510,000) had been drawn under the operating loan. On September 4, 2008, the Company secured a $2,000,000 non-revolving term loan from a Canadian chartered bank with an interest rate of prime plus 1.875% per annum which was fully repaid by the due date of May 31, 2009. The loan was secured by the Company's property located near Kamloops, British Columbia. 10


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BUSINESS OVERVIEW Ginseng Farming There are two main types of ginseng recognised in the world. Asian or Korean ginseng (Panax ginseng C.A. Meyer), is a herb indigenous to the mountainous forests of eastern Asia. North American ginseng (Panax quinquefolius) is a woodland plant native to North America. Wild woodland ginseng has been harvested nearly to extinction in both Asia and North America and this has stimulated the demand for farm grown ginseng. Cultivated North American ginseng is grown under artificial shade with a heavy mulch of straw to replicate the conditions found on the forest floor in the hardwood forests of its native habitat. In the late summer and early fall, the ginseng seeds are planted in raised beds, which provide the necessary drainage and solar warming of the soil during the spring. After the straw mulch is applied to conserve moisture and to protect the plants from hard frosts, the shade structure is erected over the plants. The shade cloth is left off the gardens in the spring to allow the soil to warm in the sun. As the plants emerge and the sun gets stronger, the shade cloth is put in place to provide the optimum growing environment for a healthy crop. The shade cloth is removed in the winter months to allow snow cover so that the root remains dormant over the winter. This annual cycle is repeated until the third or fourth year when the root is harvested, typically using mechanical methods. Historically, the Company had chosen to farm in two areas, British Columbia and Ontario. Due to the Companys ongoing problem in British Columbia with rusty roots, an aesthetic problem that decreases the perceived value of the root but does not affect its medicinal properties, the Company made the decision in 2005 to permanently discontinue planting in British Columbia. The company closed its British Columbia operations in 2009 after completing the final harvest in 2008. The sandy tobacco land of southern Ontario allows good drainage, resulting in exceptional growth rates and high quality North American ginseng root. Careful selection of farm sites and scrupulous attention to garden drainage and ventilation substantially reduces the Company's farming risks, while taking advantage of the excellent growing conditions. The Company conducts an extensive battery of tests on each garden to determine water retention characteristics, pH and plant nutrient levels. The Company then adjusts soil fertility and pH to optimum levels for ginseng growth. Once the crop is seeded, the Company's "Integrated Crop Management" program operates seven days a week to monitor nutrients, soil moisture and temperature which are critical to optimum root growth. As the root crop is harvested, the condition and yield of each garden is measured to permit re-evaluation of the production system. As at December 31, 2009, the Company has under lease 331 acres and owns 50 acres of farmland of which 266 are under ginseng cultivation in Ontario. The southern region of Ontario has abundant farm land that could be used for ginseng farming and lease costs are relatively low. This availability is important because farm land is usually used for only one ginseng crop, the growing of which is generally believed to deplete the soil of nutrients necessary for a second successful ginseng crop. Due to the historic low prices for the 2008 harvest in both British Columbia and in Ontario, the Company decided not to plant new crops in Ontario in 2009. Despite an improvement in ginseng prices for the 2009 harvest and the improvement in both the yield and quality of its roots, the ability of the Company to achieve operating income and positive cash flows while continuing to plant at a sustainable level is very uncertain. The Company does not intend to continue planting ginseng in Ontario so that it can conserve funds to meet its financial obligations. 11


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Table No. 3 
Ginseng Farming Operations Calendar
     New AcreagePlanted
     Total Acres UnderCultivation
     AcresHarvested
     Harvest Yield in lbsPer Acre
     Total Harvestin lbs2009
     0
     266
     126
     3,541
     446,2122008
     109
     392
     350
     2,824
     988,4562007
     0
     629
     332
     2,767
     918,9632006
     40
     966
     311
     2,576
     801,6622005
     188
     1,240
     352
     2,240
     787,4022004
     460
     1,431
     240
     2,116
     506,6262003
     354
     1,211
     370
     2,096
     775,6302002
     304
     1,284
     359
     2,666
     956,9962001
     329
     1,339
     346
     2,816
     975,5772000
     289
     1,356
     366
     2,612
     957,431
  Medicinal Properties Ginseng is sold in capsule, slice, tablet, tea, powder, extract, whole root form and as additives to various consumer products. The amount of active ingredients (ginsenosides) varies with each product and each brand. Though it is not a rule, extracts generally contain the highest concentration of active ingredients, followed by capsules, powders, tablets, slices, whole roots, and teas. Western medicine does not recognise ginseng's medicinal properties; however scientific study of ginseng began in the early 19th century. The chemical component of ginseng is very complex and varies in different species and from the different processing methods used. Asian and North American ginseng are similar in chemical composition. They both contain ginsenosides, which are recognized as the main active ingredients in ginseng but the amount and quality of the ginsenosides varies between the two species. In addition to the more than 30 ginsenosides identified by scientists around the world, other elements such as fatty acids, amino acids, peptides, polysaccharides, vitamins and minerals have been discovered in different parts of the ginseng plant. Many of these non-ginsenoside components are believed to have immunity enhancing and hypoglycaemic activities. While Western medicine remains unconvinced of ginseng's effectiveness, millions of users around the world believe in the plant's therapeutic powers. Ginseng has been regarded as an important health product in many Asian cultures for over 2,000 years. Some of the perceived benefits of North American ginseng include: Reduced stress/relaxant;Regulated blood sugar;Strengthened immune function;Antioxidant (anti-aging);Hypotensive;Enhanced mental activity; andSynergized activity of anti-cancer drugs. Competition The Company produces North American ginseng, which is a distinctly different product from the consumers perspective from Asian ginseng grown in Korea and China. Based on information obtained through discussion with customers, suppliers and review of available farming industry literature, management estimates that the Company currently produces approximately 10% of the total North American ginseng supply produced annually in North America. 12


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Competitors currently producing North American ginseng consist primarily of hundreds of small growers (less than one hundred acres) located in southern Ontario, central British Columbia and Wisconsin and one large publicly-traded company. The Company competes through the production of high quality products, lower production costs achieved through economies of scale and an extensive marketing and distribution network serving customers in Hong Kong and the Far East. Marketing and Customers The Companys product is typically sold to major ginseng brokers in Hong Kong and a limited number of smaller customers. The marketing efforts to customers in Hong Kong and the Far East, primarily mainland China, are conducted through the Companys wholly-owned subsidiary CNT HK. During the years ended December 31, 2009, 2008 and 2007, the Company had sales of approximately 63%, 87% and 89%, respectively, to its major customers located in Hong Kong. Although the Company believes that a limited number of customers will continue to represent a significant portion of its total revenue, the Company does not consider itself economically dependent upon any single customer or combination of customers due to the existence of other potential brokers capable of purchasing the Companys supply. Transfer prices between all the companies in the group are determined based on estimated world market prices at the transaction dates. Market prices are established with reference to various ginseng brokers in Hong Kong and comparable sales to third parties. Manufacturing/Processing Canadian farming and processing operations, conducted through the Companys wholly-owned subsidiary, CNT Farms., consist of farming, including cultivation, harvesting, washing and drying the root prior to export or sale to the local market. Substantially, all of the Companys sales during 2009, 2008 and 2007 involved the sale of bulk root. The industry as a whole has a limited supply of seed for new plantings. The supply of seeds comes from those picked each year from mature plants under cultivation. The seeds are living embryos that must be planted in the following year. Normal industry practice is to store the seed for only one year so its limited shelf life can cause some barriers for future planting. Manufacturing and processing of value-added products in North America is contracted out to third party manufacturers through the Companys wholly-owned subsidiary CNTN in Canada. Activities in recent years have consisted of a limited amount of sales of herbal health products to distributors in Canada Canada and Foreign Sales/Assets During 2009, the Company earned $1.5 million in sales in Canada, and $5.4 million in sales in the Far East. During 2008, the Company earned $1.2 million in sales in Canada, and $8.0 million in sales in the Far East. During 2007, the Company earned $3.5 million in sales in Canada, and $4.1 million in sales in the Far East. As at December 31, 2009, 2008 and 2007, 100% of the Companys long lived assets were in Canada. 13


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Staffing As at December 31, 2009, the Company employed 11 salaried full-time people in its operations world-wide. The Company may hire up to 40 persons for seasonal work in the ginseng farms and for production work in its processing facilities. Seasonality The Companys business is highly seasonal, with harvesting and planting activities typically occur during the last two quarters of each year. Historically, fall harvests were sold primarily during the first two quarters of the subsequent year leading to significant seasonal variations in the volume of sales, inventory and crop costs. ORGANIZATIONAL STRUCTURE As at December 31, 2005, Road King, through its subsidiary Herb King International Limited, held about 77% of the Companys issued and outstanding common shares and 100% of the Companys issued and outstanding preferred shares. On September 1, 2006, Herb King exercised its right to convert 10,399,149 preferred shares of the Company into an equivalent number of common shares, thereby raising its holdings of the Companys common shares to 84%. On December 7, 2006, Road King distributed its entire holding of the common shares of the Company to its shareholders by way of a special interim dividend. As a result of the distribution, Wai Kee Holdings Limited (Wai Kee) became the largest single shareholder of the Company and holds about 38% of the Companys issued and outstanding common shares as at December 31, 2009, December 31, 2008 and December 31, 2007. Wai Kee is a Hong Kong based publicly traded company, with its core business in investment holdings. As of December 31, 2009 the Company has the following wholly-owned subsidiaries: a)
     Chai-Na-Ta Farms Ltd. (CNT Farms) incorporated on February 28, 1994 in British Columbia, Canadab)
     Chai-Na-Ta International Ltd. ("CNTI") (Inactive) incorporated on January 18, 1994 in Barbadosc)
     Chai-Na-Ta (Asia) Ltd. (CNTA) (Inactive) incorporated on October 26, 1992 in Barbadosd)
     CNT Nominees Limited. (Inactive) incorporated on August 6, 1999 in the British Virgin Islandse)
     CNT Trading (Asia) Limited. (Inactive) incorporated on October 17, 2000 in the British Virgin Islandsf)
     CNT Trading (Hong Kong) Limited (CNT HK) incorporated on October 13, 1999 in Hong Kongg)
     Unique Formulations Inc. (UF) (Inactive) incorporated on April 21, 1993 in Oregon, USAh)
     CNT Nutraceuticals Ltd. (CNTN) Incorporated on February 3, 2004 in British Columbia, Canada An organisation chart of the Company and its affiliates is included in the exhibit (8.1). PROPERTY, PLANT AND EQUIPMENT The Company's executive office is located in rented premises of approximately 3,000 square feet at Unit 100 -12051 Horseshoe Way, Richmond, British Columbia V7A 4V4. The Company also has an office located on its farm sites in Otterville, Ontario. 14


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The Company holds 331 gross acres of farmland under lease in Ontario (Table No. 4) and owns a 50 acre farm near Otterville, Ontario. All Ontario harvested roots have been processed in on-site facilities, thereby reducing transportation and handling costs. Currently, 266 acres of the agricultural land held by the Company is under cultivation for the production of ginseng. Due to the historic low prices for the 2008 harvest in both British Columbia and in Ontario, the Company decided not to plant new crops in Ontario in 2009. Despite an improvement in ginseng prices for the 2009 harvest and the improvement in both the yield and quality of its roots, the ability of the Company to achieve operating income and positive cash flows while continuing to plant at a sustainable level is very uncertain. The Company does not intend to continue planting ginseng in Ontario so that it can conserve funds to meet its financial obligations. New seeding was 0 acres for 2009, 109 acres for 2008, and 0 acres for 2007. The Company believes that the current levels of leased and owned lands as well as the lands under cultivation are sufficient to meet the Companys needs. The Company cultivates ginseng primarily on leased land. Agricultural land is normally leased for a 5 year period and land rentals range from $300 - $400 per year per acre. Table No. 4 
Agricultural Land Leases Name
     Location
     Gross Acreage
     ExpirationAsh
     Norwich, Ontario
     30.0
     12/31/2010Grim
     Otterville, Ontario
     77.5
     12/31/2012Maitz
     Norwich, Ontario
     40.0
     12/31/2010Pargauskas
     Norwich, Ontario
     48.7
     12/31/2012Pierssens
     Norwich, Ontario
     50.0
     12/31/2010River Ridge
     Norwich, Ontario
     85.0
     12/31/2010331.2
  ITEM 5
     OPERATING AND FINANCIAL REVIEW AND PROSPECTS
  Forward-looking statements The Statements contained in this report which are not historical facts, including, but not limited to, certain statements found under this section, are forward-looking statements that involve a number of risks and uncertainties. The actual results of the future events described in such forward-looking statements could differ materially from those stated in such forward-looking statements. Among the factors that could cause actual results to differ materially are the risks and uncertainties discussed in this report, and the uncertainties set forth from time to time in the Companys filings with the Securities and Exchange Commission, and the other public statements. Such risks and uncertainties include, without limitation, seasonality, interest in the Companys products, general economic conditions, consumer trends, competition, the effect of governmental regulation, prices, yields, availability of new working capital, quality of the Companys harvest, and successful implementation of new products. This section should be read in conjunction with the Companys Consolidated Financial Statements included as item 17 of this report. These consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles (Canadian GAAP), which in the case of these financial statements, conform in all material respects with those in the United States (U.S. GAAP), except as disclosed in note 23 to the consolidated financial statements. 15


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OPERATING RESULTS Fiscal year ended 12/31/2009 compared with year ended 12/31/2008 Revenue decreased 25% to $6,941,000 in 2009 from $9,232,000 in 2008. The Companys average selling price decreased to $8.50 per pound compared to $9.50 per pound in 2008. The Company also saw a decrease of 17% in the volume of sales in 2009 compared to 2008, but this was primarily due to customers not taking delivery of all the inventory they had contracted to purchase from the 2008 harvest. Ginseng prices remained at historic low levels in 2009 but there was a modest recovery of ginseng prices at the end of 2009. The Company expects that there will be a decrease in the number of pounds of root sold in 2010 due to the smaller harvest in 2009 but expects a moderate increase in the average sales price. Cost of goods sold was 95% of sales revenue in 2009 compared to 129% in 2008. In 2009, the gross margin was primarily due to the fulfilment of a contract made with a Canadian customer for the supply of ginseng prongs and fibres. The remaining ginseng root sales in both years were made after the inventory had been written down to its net realizable value in the previous year resulting in a minimal margin on inventory sales. The impairment in the value of inventory and ginseng crops to their estimated net realizable value are accounted for as a part of cost of goods sold which caused cost of goods sold to be in excess of revenue in 2008. The Company harvested 446,212 pounds of root in 2009, a decrease of 55% from 988,456 pounds in 2008 when the Company harvested roots from both Ontario and British Columbia. The Company harvested 340,247 pounds in Ontario in 2008 so there was a 31% increase in total yield in Ontario in 2009. In 2009, the Company harvested 127 acres in Ontario resulting in an average yield of 3,513 pounds per acre. In 2008, the Company harvested a total of 350 acres in British Columbia and Ontario, with an average yield of 2,824 pounds per acre including 126 acres in Ontario with an average yield of 2,700 pounds per acre. The higher average yield in 2009 was mainly due to the harvest of 70 acres of five-year-old roots. The Companys production cost decreased to $10 per pound in 2009 compared to $12 per pound in 2008 also due to the higher yields per acre. The Company recorded a write-down on its long-term ginseng crops of $450,000 for the year ended December 31, 2009 to reduce their carrying value to their net realizable value. The net realizable value of the ginseng crops was estimated based on the estimated yield and quality of the crops upon harvest, accumulated costs, estimated additional costs required to bring the crops to harvest and current and projected selling prices. In 2009, the Company also reversed the $500,000 write-down recorded during the year ended December 31, 2008 on its ginseng crops harvested in 2009 as the net realizable value of those crops increased primarily due to an increase in the selling price of ginseng at the end of 2009 compared to 2008. The Company also recorded a write-down of $64,000 on ginseng fibres from prior harvests resulting in a new carrying value of zero as the ability of the Company to sell these specific ginseng fibres is uncertain. The Company recorded a write-down on its 2008 harvest inventory of $2,498,000 for the year ended December 31, 2008 to reduce their carrying value to their net realizable value. The net realizable value of the inventory was estimated based on purchase commitments received for inventory on hand. Because of the historic low prices in 2008, a $500,000 write-down was recorded on the expected 2009 harvest which was subsequently reversed in 2009. 16


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For the year ended December 31, 2007, the Company recorded a write-down of $1,450,000 on ginseng crops to reduce their carrying value to their net realizable value. The net realizable value of the ginseng crops was estimated based on the estimated yield and quality of the crops upon harvest, accumulated costs, estimated additional costs required to bring the crops to harvest and current and projected selling prices. The Company also recorded a write-down on inventory of $1,285,000 on inventory that was being held by the Company to fulfil a contract with a Canadian customer for a predetermined minimum quantity at a fixed price. The contract expired and the customer did not order the predetermined minimum quantity. Due to the uncertainty of the Company's ability to receive the contracted amount, a write-down was recorded to reduce the carrying value of the inventory to its estimated net realizable value instead of the predetermined contract price. Gross margin was 5% of sales revenue in 2009 compared to a gross loss of 29% in 2008 due to the ginseng root sales in both years being made after the inventory had been written down to its net realizable value in the previous year and due to the write-downs on inventory and ginseng crops. Selling, general and administrative expenses totalled $1,458,000 in 2009 including $530,000 in costs related to the wind-up of the operations in British Columbia. The remaining $928,000 in expenses was a 4% decrease from the $969,000 in expenses incurred during 2008. Interest on short-term debt decreased to $37,000 in 2009 compared to $144,000 in 2008. The decrease in interest on short-term debt is primarily due to decreases in the short-term borrowings throughout 2009 compared to 2008. Interest on long-term debt decreased to $283,000 in 2009 from $426,000 in 2008. The decrease in interest on long-term debt is primarily due to decreases in the Hong Kong Interbank Offered Rate (HIBOR) and London Interbank Offered Rate (LIBOR) throughout 2009. The Company had other non-operating income of $2,079,000 for the year ended December 31, 2009 which included $470,000 in foreign exchanges gains, $611,000 in gains on the disposal of property, plant and equipment, $995,000 in government supplement payments net of participating fees and miscellaneous non-operating income of $3,000. For the year ended December 31, 2008, the Company had other non-operating losses of $446,000 which included $769,000 in foreign exchanges losses, $256,000 in gains on the disposal of property, plant and equipment, $64,000 in government supplement payments net of participating fees and miscellaneous non-operating income of $3,000. In 2009, the Company incurred net earnings of $669,000, or $0.02 basic and diluted earnings per share compared to the 2008 net loss of $4,670,000, or $0.13 basic and diluted loss per share. The net earnings in 2009 were mainly due to gains on the disposal of assets of $611,000, foreign exchange gains of $470,000 and government supplements of $995,000. In order to conform Canadian GAAP to U.S. GAAP, the net loss would be decreased by $4,000 for the year ended December 31, 2008 reflecting the differences in the accounting for interest, financial instruments and write-downs of inventory. As a result of these adjustments, the net loss under U.S. GAAP would have been $4,666,000 for the year ended December 31, 2008. The net income for the year ended December 31, 2009 was $669,000 under both Canadian GAAP and U.S. GAAP. 17


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Fiscal year ended 12/31/2008 compared with year ended 12/31/2007 Revenue increased 22% to $9,232,000 in 2008 from $7,561,000 in 2007. The Companys average selling price increased to $9.50 per pound in 2008 compared to $8.20 per pound in 2007. The Company also saw an increase of 10% in the volume of sales in 2008 compared to 2007. In 2008, there was a greater percentage of higher quality roots sold compared to 2007 and sales prices improved slightly which resulted in a higher average selling price. Ginseng prices remained at low levels but maintained their stability during most of 2008; however there was a significant decrease at the end of 2008 as global economic conditions deteriorated. The Company expects that there will be an increase in the number of pounds of root sold in 2009 due to the larger harvest in 2008 but expects a corresponding decrease in the average sales price. Cost of goods sold was 129% of sales revenue in 2008 compared to 134% in 2007 as ginseng root sales in both years were made after the inventory had been written down to its net realizable value in the previous year resulting in a minimal margin on inventory sales. The impairment in the value of inventory and ginseng crops to their estimated net realizable value are accounted for as a part of cost of goods sold which has caused cost of goods sold to be in excess of revenue. The Company harvested 988,456 pounds of root in 2008, an increase of 8% from 918,963 pounds in 2007. The Company harvested 350 acres in British Columbia and Ontario, with an average yield of 2,824 pounds per acre. In 2007, the Company harvested 332 acres with an average yield of 2,767 pounds per acre. The Company achieved a higher yield for the fifth consecutive year in 2008 due to continual improvement in farming techniques and crop management. The Company harvested 14 acres of three-year-old root in 2008 compared to 56 acres in 2007. The Companys production cost was $12 per pound in both 2008 and 2007. The Company recorded a write-down on its 2008 harvest inventory of $2,498,000 for the year ended December 31, 2008 to reduce their carrying value to their net realizable value. The net realizable value of the inventory was estimated based on purchase commitments received for inventory on hand. This write-down includes $1,500,000 which was recorded in the third quarter of 2008 and a further $998,000 in the fourth quarter as the expected net realizable value of the 2008 harvest inventory decreased as global economic conditions deteriorated. Because of the historic low prices in 2008, a $500,000 write-down was recorded on the expected 2009 harvest. The net realizable value of the ginseng crops was estimated based on the estimated yield and quality of the crops upon harvest, accumulated costs, estimated additional costs required to bring the crops to harvest and current and projected selling prices. For the year ended December 31, 2007, the Company recorded a write-down of $1,450,000 on ginseng crops to reduce their carrying value to their net realizable value. The net realizable value of the ginseng crops was estimated based on the estimated yield and quality of the crops upon harvest, accumulated costs, estimated additional costs required to bring the crops to harvest and current and projected selling prices. During the three months ended June 30, 2007, the Company recorded a write-down on inventory of $1,285,000. This inventory was being held by the Company to fulfill a contract with a Canadian customer for a predetermined minimum quantity at a fixed price. The contract expired and the customer did not order the predetermined minimum quantity. Due to the uncertainty of the Company's ability to receive the contracted amount, a write-down was recorded to reduce the carrying value of the inventory to its estimated net realizable value instead of the predetermined contract price. For the year ended December 31, 2006, the Company recorded a write-down on inventory of $2,901,000. The net realizable value of the inventory was estimated based on purchase commitments received for inventory on hand. The Company recorded a write-down of $2,700,000 on ginseng crops for the year ended December 31, 2006 to reduce their carrying value to their net realizable value. The net realizable value of the ginseng crops was estimated based on the estimated yield and quality of the crops upon harvest, accumulated costs, estimated additional costs required to bring the crops to harvest and current and projected selling prices. The Company also recorded a write-down of inventory, raw materials and supplies for its value-added products of $38,000 during the year ended December 31, 2006. 18


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Gross loss was 29% of sales revenue in 2008 compared to 34% in 2007 due to the ginseng root sales in both years being made after the inventory had been written down to its net realizable value in the previous year and due to the write-downs on inventory and ginseng crops. Selling, general and administrative expenses totalled $969,000, in 2008, a 9% decrease from the $1,068,000 in 2007. The decrease was primarily due to the overhead cost saving measures enacted by management. Interest on short-term debt decreased to $144,000 in 2008 from $160,000 in 2007. The decrease in interest on short-term debt is primarily due to decreases in the Canadian lending rates during the last half of 2008. Interest on long-term debt decreased to $426,000 in 2008 from $635,000 in 2007. The decrease in interest on long-term debt is primarily due to decreases in the HIBOR and LIBOR lending rates throughout 2008. The Company had other non-operating losses of $446,000 for the year ended December 31, 2008 which included $769,000 in foreign exchanges losses, $256,000 in gains on the disposal of property, plant and equipment, $64,000 in government supplement payments net of participating fees and miscellaneous non-operating income of $3,000. For the year ended December 31, 2007, the Company had other non-operating income of $1,101,000 which included $638,000 in foreign exchanges gains, $474,000 in gains on the disposal of property, plant and equipment and miscellaneous non-operating losses of $11,000. In 2008, the Company incurred a net loss of $4,670,000, or $0.13 basic and diluted loss per share, compared to the 2007 net loss of $3,329,000, or $0.10 basic and diluted loss per share. The net loss in 2008 was largely a result of the minimal gross margin achieved on the sale of ginseng, the write-downs on inventory and crop costs and foreign exchange losses. In order to conform Canadian GAAP to U.S. GAAP, the net loss would be decreased by $4,000 for the year ended December 31, 2008 and net loss decreased by $12,000 for the year ended December 31, 2007 reflecting the differences in the accounting for interest, financial instruments and write-downs of inventory. As a result of these adjustments, the net loss under U.S. GAAP would have been $4,666,000 for the year ended December 31, 2008and the net loss would have been $3,317,000 for the year ended December 31, 2007. Basic and diluted loss per share under U.S.GAAP would have been $0.13 for the year ended December 31, 2008 compared to basic and diluted loss per share of $0.10 for the year ended December 31, 2007. LIQUIDITY AND CAPITAL RESOURCES Fiscal year ended 12/31/2009 compared with year ended 12/31/2008 In 2009, the cash surplus from operations was $3,647,000 compared to $303,000 in 2008. The Companys cash as at December 31, 2009 was $2,488,000 compared to a balance of $192,000 at December 31, 2008, an increase of $2,296,000. The increase in cash from operations in 2009 was due to the decrease in crop cost expenditures as the Company only had 392 acres of ginseng crops under cultivation in 2009 compared to 742 acres under cultivation in 2008 including 224 acres in British Columbia. The working capital position of the Company at December 31, 2009 was a surplus of $8,948,000 compared to a surplus of $5,456,000 at December 31, 2008. The increase in working capital is primarily due to the reduction in expenditures on ginseng crops and the proceeds from the disposition of property, plant, and equipment in British Columbia that had been reclassified as assets held for sale in 2008. 19


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At December 31, 2009, the Company had a $500,000 revolving demand operating loan, with an interest rate of prime plus 3.75% per annum, with a Canadian chartered bank. Based on its positive cash position, the Company could not draw on this facility as of December 31, 2009. The loan availability will reduce to zero effective March 31, 2010. The Company has also fully repaid a $2,000,000 term loan, with an interest rate of prime plus 1.875% per annum, with the same Canadian chartered bank during the year ended December 31, 2009. The Company incurred interest of $37,000 (2008 - $144,000) on these loans for the year which has been included in interest on short-term debt on the statement of operations. As of December 31, 2009, the Company had received $3,301,000 in deposits from customers. These deposits are primarily on orders that should be fulfilled in the first half of 2010. On August 18, 2006, the Company established a four year term loan facility of HK$54,700,000 from a company formerly under common control of which HK$3,200,000 was repaid on August 31, 2009. As of September 1, 2009 the Company negotiated an extension of the remaining HK$51,500,000 loan facility. Under the terms of the extension, the Company will be required to repay HK$3,300,000 ($446,000) by August 31, 2010, and HK$16,700,000 ($2,254,000) by August 31, 2011. The remaining amount ($4,245,000) is to be repaid by August 31, 2012 in apportionments of HK$1,250,000 and US$3,878,000. The loan is unsecured and bears interest at 1.75% per annum over the HIBOR or LIBOR through February 28, 2010 after which it will bear interest at a flat rate of 6.25% for the duration of the loan. For the year ended December 31, 2009, the Company incurred $283,000 (2008 - $425,000, 2007 - $626,000) of interest which has been included in interest on long-term debt on the statement of operations and deficit. Capital expenditures of $145,000 during 2009 were mainly for the purchase of dryers, equipment and a vehicle in Ontario. During the fourth quarter of 2009, the Company sold its land, buildings and all remaining production assets located near Kamloops, British Columbia. This, along with the sale of the other assets of the British Columbia operations sold earlier in the year, resulted in $2,379,000 in proceeds from the disposition of assets held for sale for the year ended December 31, 2009. The Company believes that its existing cash resources, together with the cash generated from future sales of inventory and the current borrowings, will be sufficient to meet its working capital and operating requirements for the next twelve months. If the Company cannot generate sufficient cash from its existing resources, it will become necessary to secure additional financing; however there is no assurance that additional financing will be available or available on terms favourable to the Company. If the Company cannot generate sufficient cash and if it cannot secure additional financing, the Company's ability to repay its long-term debt and continue as a going concern will be dependant on the continuing support of its principal shareholder and its creditors. As at December 31, 2009, the Company had the contractual obligations and commercial commitments outlined in the chart below: Table No. 5 Contractual Obligations Contractual Obligations
     Payments Due by PeriodTotal
     Less Than One Year
     1-3 Years
     After 3 YearsLong-term Debt (1)
     $
     8,284,000
     $
     1,101,000
     $
     7,183,000
     $
     0Operating Leases (2)
     $
     186,000
     $
     93,000
     $
     93,000
     $
     0Agricultural Land Leases (3)
     $
     207,000
     $
     129,000
     $
     78,000
     $
     0Total Contractual Obligations
     $
     8,677,000
     $
     1,323,000
     $
     7,354,000
     $
     0
  20


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(1)
     Long-term debt includes the loan from a company formerly under common control at an interest rate of 1.75% per annum over the HIBOR or LIBOR through February 28, 2010 after which it will bear interest at a flat rate of 6.25% for the duration of the loan. Long-term debt also includes accrued interest and estimated future interest payments on long-term debt.(2)
     Operating leases comprise of the Companys long-term leases of equipment, office facilities and vehicles.(3)
     Agricultural land leases comprise of the Companys land rentals in Ontario for the cultivation of ginseng. The following commitments are not included in the Contractual Obligations table above: The Company is committed to maintaining its ginseng crops from the time of initial planting to the time of harvesting which usually takes three to four years. The cost to maintain these crops is financed through the sale of inventory and available bank borrowings. The Company has become involved in a legal proceeding as a result of an automobile accident. The Company believes that existing insurance will be sufficient to cover any claim from this matter. While the outcome of this proceeding cannot be determined at this time, no provision has been recorded as the Company believes that the resolution of this proceeding will not have a material impact on the financial condition, earnings or cash flows of the Company. The Company does not have any off balance sheet arrangements as defined in Item 5(e) of Form 20-F. The Company has no significant purchase obligations as at December 31, 2009. Fiscal year ended 12/31/2008 compared with year ended 12/31/2007 In 2008, the cash surplus from operations was $303,000 compared to $504,000 in 2007. The Companys cash as at December 31, 2008 was $192,000 compared to a balance of $307,000 at December 31, 2007, a decrease of $115,000. The decrease in cash from operations in 2008 was due to the Company paying interest that had accrued since August 2006 on its term loan and due to having more sales near the end of the year thus resulting in a higher accounts receivable balance at December 31, 2008. Crop cost expenditures decreased slightly from $6,277,000 in 2007 to $6,094,000 in 2008 as savings from a reduced acreage in British Columbia were partially offset by the costs of planting new acres in Ontario. The working capital position of the Company at December 31, 2008 was a surplus of $5,456,000 compared to a surplus of $7,423,000 at December 31, 2007. The decrease in working capital is primarily due the reduction in ginseng crops as the Company has harvested all of its crops in British Columbia. The Company had drawn $1,060,000 of the available $2,500,000 revolving demand operating loan, with an interest rate of prime plus 1.625% per annum, with a Canadian chartered bank as of December 31, 2008. The loan availability reduced to $2,000,000 effective June 1, 2009. The Company had also fully drawn a $2,000,000 term loan, with an interest rate of prime plus 1.875% per annum, with the same Canadian chartered bank as at December 31, 2008. The loan was due in full upon the earlier of receipt of the proceeds from the sale of the Company's property near Kamloops, British Columbia or May 31, 2009. The loan was secured by the same property near Kamloops, British Columbia. The Company incurred interest of $144,000 on these loans for the year which has been included in interest on short-term debt on the statement of operations. 21


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On August 18, 2006, the Company established a four year term loan facility of HKD54,700,000 (approximately $8.0 million) from More Growth Finance Limited (More Growth), a company formerly under common control. The loan is unsecured and bears interest at 1.7% per annum over the HIBOR (Hong Kong Interbank Offered Rate) or LIBOR (London Interbank Offered Rate). The loan was used to refinance already existing shorter-term loan facilities with More Growth and to finance the general working capital requirements of the Company. The Company has fully drawn the loan facility. For the year ended December 31, 2008, the Company incurred $425,000 of interest which has been included in interest on long-term debt on the statement of operations. Capital expenditures of $94,000 during 2008 were mainly for the purchase of equipment and vehicles in Ontario. Proceeds from the disposition of excess farming equipment, vehicles, irrigation equipment and hardware used to shade the ginseng gardens totalled $300,000. CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT ESTIMATES The significant accounting policies are outlined within Note 3 to the consolidated financial statements. Some of those accounting policies require the Company to make estimates and assumptions that affect the amounts reported by the Company. The following items require the most significant judgement and involve complex estimation. Inventory The Company periodically reviews the carrying value of inventory to determine if write-downs are required to state the inventory at the lower of cost and net realizable value. The determination of net realizable value reflects managements best estimate of the expected selling price of the roots as well as consideration of qualitative factors such as size, shape, colour and taste. The carrying value of inventory also reflects managements expectation that the inventory will eventually be sold. Although management does not believe that additional provisions are required to align the carrying value of certain inventory with its net realizable values, future events may indicate that the inventory is not saleable or that such inventory is not saleable at prices above carrying value. Ginseng crops The Company uses the full absorption costing method to value its ginseng crops and periodically reviews their carrying value for evidence of impairment. Included in the cost of crops are seed, labour, applicable overhead, interest and supplies required to bring them to harvest. The determination of impairment requires complex calculations and significant management estimation with respect to future costs to bring crops to harvest and expectations as to the yield and quality of ginseng roots harvested. The estimation process is further complicated by the relatively long growing cycle of three to four years and the fact that roots remain underground. The market price of harvested ginseng roots is also difficult to determine due to industry-wide factors such as the variable worldwide supply each harvest season and foreign exchange rate fluctuations, and due to specific qualitative factors to each grower such as the size, shape, color, taste, and quality of the roots harvest. There is no set price for harvested ginseng roots, the yield from each garden will vary and the perceived market value will vary along with it. Although the Companys assumptions reflect managements best estimates, future events may result in materially different outcomes with respect to the recoverability of ginseng crop costs and the time required bringing the crops to harvest. 22


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Income Taxes The Company estimates its income taxes in each of the jurisdictions that it operates. The process involves estimating the current income tax exposure, together with assessing temporary differences from different treatment of items for tax and accounting purposes. These differences result in future tax assets and liabilities that are included in the consolidated balance sheet to the extent that a net future income tax asset or liability exists. The valuation of any future income tax assets or liabilities is reviewed quarterly and adjusted, if necessary, by use of a valuation allowance to reflect the estimated realizable amount. The process of determining if a valuation allowance is necessary includes estimates of the recoverability of inventory and ginseng crops as detailed above and an estimate of future interest expense. Future events may result in a materially different outcomes than is estimated with respect to the recoverability of both inventory and ginseng crops. RECENT ACCOUNTING PRONOUNCEMENTS Pronouncements from the United States In June 2009, the FASB Codification of U.S. GAAP was launched. The FASB ASC will become the source of authoritative U.S. GAAP, it supersedes all existing accounting and reporting standards not issued by the Securities Exchange Commission (SEC), and all other non-SEC accounting literature not included in the Codification will become non-authoritative. This Statement is effective for fiscal years and interim periods beginning on or after September 15, 2009. The Company has incorporated these changes into its consolidated financial statement for the year ended December 31, 2009. In June 2009, the FASB issued an amendment to its guidance on Variable Interest Entities (VIE). This new guidance makes significant changes to the model for determining who should consolidate a VIE by specifically eliminating the quantitative approach and changing to a predominantly qualitative approach. This Statement is effective for fiscal years beginning on or after November 15, 2009. The Company does not expect the adoption of this amendment to have a material impact on the Companys consolidated financial statements. Pronouncements from Canada During the year ended December 31, 2009, the Company adopted various accounting standards relating to goodwill and intangible assets, credit risk and the fair value of financial assets and liabilities, impaired loans and financial instruments that were issued by the Canadian Institute of Chartered Accountants (CICA). These changes are fully described in Note 3(m) of the consolidated financial statements. Future change in accounting policies In April 2008, the Canadian Accounting Standards Board confirmed that on January 1, 2011 Canadian GAAP will be replaced by International Financial Reporting Standards (IFRS) for publicly accountable enterprises. Effective March 2008, the Securities and Exchange Commission ruled that it will accept financial statements prepared in accordance with IFRS without reconciliation to U.S. GAAP for financial years ending after November 15, 2007. As such, the Company does not expect that it will be reconciling to U.S. GAAP upon its conversion to IFRS on January 1, 2011. Changing from current Canadian GAAP to IFRS will be a significant undertaking that may materially affect the Companys reported financial position and result of operations. 23


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ITEM 6
     DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
  DIRECTORS AND SENIOR MANAGEMENT Directors Table No. 6 lists as of February 28, 2010, the names of all the Directors of the Company. The Directors have served in their respective capacities since their election and will serve until the next Annual General Meeting or until a successor is duly elected, unless the office is vacated in accordance with the Articles/By-laws of the Company. Table No. 6 
Directors Name
     Age
     Date First ElectedDr. Eric Littley (2)
     55
     June, 2001Peter Leung (1) (2)
     50
     August, 2001Steven Hsieh (1)
     55
     February, 2002Wilman Wong (2)
     54
     November, 2005Derek Zen
     57
     November, 2006Brent Lau (1)
     49
     November, 2006
  (1) Member of the Audit Committee (2) Member of the Farm Review Committee Dr. Eric Littley, Director of the Company, is a resident of British Columbia, Canada. Dr. Littley has a diverse background in the management of crops and plant diseases, and has extensive experience in the ginseng industry. He holds a Masters degree in Pest Management and a Ph.D. in Plant Pathology from the Centre for Pest Management at Simon Fraser University. His background includes 10 years leading the R&D efforts with Chai-Na-Ta Corp. and 7 years as a consultant to specialty crop growers in Canada and the U.S. He is currently Chair of the Department of Biological Sciences at Thompson Rivers University in Kamloops, British Columbia. Mr. Peter Leung, Director and former Officer of the Company, is a resident of Ontario, Canada. Mr. Leung holds a Bachelor of Science degree in Pharmacy and was a former President of the Chinese Pharmaceutical Society in Ontario. Mr. Steven Hsieh, Director of the Company, is a resident of British Columbia, Canada. Mr. Hsieh is a member of the Chartered Institute of Management Accountants, U.K., and of the Certified Financial Planners of Canada. He is in public practice as a Certified Management Accountant in Vancouver, British Columbia. Mr. Hsieh also serves as a director of Fireswirl Technologies Inc., a public company traded on the TSX Venture. Mr. Wilman Wong, Director and Officer of the Company, is a resident of British Columbia, Canada. Mr. Wong is a fellow member of the Association of Chartered Certified Accountants and associate member of the Hong Kong Institute of Certified Public Accountants. Mr. Wong has over 20 years experience in auditing, taxation, secretarial and financial management 24


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Mr. Derek Zen, Chairman of the Company, is a resident of Hong Kong. Mr. Zen is the executive director of Road King Infrastructure Limited since its establishment. He is also the Vice Chairman of Wai Kee Holdings Limited and the Chairman of Build King Holdings Limited  both companies listed in the Hong Kong Stock Exchange. He holds a Bachelor of Science degree in Engineering and a Master of Business Administration degree. He is a Chartered Engineer and is a member of the Institution of Civil Engineer and is a fellow member of the Institute of Quarrying, UK. Mr. Zen has over 30 years of experience in civil engineering industry. He is the brother of Mr. William Zen. Mr. Brent Lau,Director of the Company, is a resident of Hong Kong. Mr. Lau has previously acted as the executive director for companies listed on the Hong Kong Stock Exchange for many years. He graduated from the University of Toronto with a Bachelor of Commerce degree and has over twenty years of experience in various senior corporate administration and operation management, money lending and securities trading business. Officers Table No. 7 lists as of February 28, 2010 the names of all of the Executive Officers of the Company. The Executive Officers are elected annually by the Directors following the Annual General Meeting and serve until the earlier of their resignation or termination with or without cause by the Directors. Each Executive Officer has continuously served in his respective position from the date indicated in Table No. 7 unless otherwise indicated in his resume data following Table No.7. Table No. 7 
Executive Officers Name
     Age
     Title
     Date First AffiliatedWilman Wong
     54
     CEO & Corporate Secretary
     June, 2000Terry Luck
     33
     CFO
     July, 2000
  Mr. Wilman Wong, Chief Executive Officer/Corporate Secretary, and an Officer of the Company, is a resident of British Columbia, Canada. Mr. Wong is a fellow member of the Association of Chartered Certified Accountants and associate member of the Hong Kong Institute of Certified Public Accountants. Mr. Wong has over 20 years experience in auditing, taxation, secretarial and financial management. Mr. Wong was appointed to the position of Chief Executive Officer in May 2007. Mr. Terry Luck, Chief Financial Officer, and an Officer of the Company, is a resident of British Columbia, Canada. Mr. Luck is a Certified General Accountant with over ten years of experience in accounting, treasury, financial management and taxation. There are no arrangements or understanding between any two or more Directors or Executive Officers. COMPENSATION The Company has a standard arrangement for compensating its Directors for their service in their capacity as Directors. In addition, Directors may be granted stock options. Directors received compensation during the year ended December 31, 2009, for their services as a Director including committee participation and/or special assignments as described below. The Company also grants stock options to Executive Officers and employees from time to time. 25


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Table No. 8 lists the compensation during the year ended December 31, 2009, for Executive Officers and Directors. Table No. 8 
Director/Officer Compensation 
Year Ended December 31, 2009 Officer/Director
     
     Base Salary
     
     OptionExercise Net Market Value
     
     Total CompensationWilman Wong
     $
     121,129
     $
     0
     $
     121,129Terry Luck
     
     92,637
     
     0
     
     92,637Other Directors
     
     26,250
     
     0
     
     26,250Total
     $
     240,016
     $
     0
     $
     240,016
  Option Exercise Net Market Value is computed by subtracting the cost of exercising the stock option from the market value of the respective shares of common stock on the date of exercise. There were no stock options granted to officers/directors as at December 31, 2009. No funds were set aside or accrued by the Company during the year ended December 31, 2009 to provide pension, retirement or similar benefits for Directors or Executive Officers. The Company has entered into contractual agreements with the Executive Officers that will provide specific compensation in the event that the executive is terminated without cause. The executive will be entitled to three months written notice or equivalent severance pay in lieu of notice plus one months salary per full or partial fiscal year of employment. These payments are contingent on the executive accepting a one-year non-competition agreement as well as a non-disclosure agreement. The Company has no plans or arrangements in respect of remuneration received or that may be received by Executive Officers of the Company in the year ended December 31, 2009 to compensate such officers in the event of termination of employment as a result of termination with cause, retirement, or a change of responsibilities following a change of control. BOARD PRACTICES All directors hold office until the next annual general meeting of shareholders, which generally is in May of each calendar year, or until their respective successors are duly elected and qualified or their positions are earlier vacated by resignation or otherwise. All executive officers are appointed by the Board and serve at the pleasure of the Board. The Audit Committee of the board of directors reviews, acts on and reports to the board of directors with respect to various auditing and accounting matters, including the selection of our auditors, the scope of the annual audits, fees to be paid to the auditors, the performance of our independent auditors and our accounting practices. The Audit Committee consists of Mr. Steven Hsieh, Mr. Brent Lau and Mr. Peter Leung. The Farm Review Committee of the board of directors reviews and reports to the board with respect to Ontario Farm operations, including land selection recommendation and site inspection, farm policy and plant science techniques recommendation; quarterly review of farm operations to ensure acceptable cultural maintenance practices are maintained. The Committee consists of Mr. Peter Leung, Mr. Eric Littley and Mr. Wilman Wong. The Company does not currently have a remuneration or compensation committee. 26


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EMPLOYEES During fiscal 2009, the Company employed 12 persons on a full time basis and 57 persons on an hourly basis. During fiscal 2008, the Company employed 19 persons on a full time basis and 156 persons on an hourly basis. During fiscal 2007, the Company employed 23 persons on a full time basis and 122 persons on an hourly basis. The Company is not a party to any material labour contract or collective bargaining agreement. SHARE OWNERSHIP Table No. 9 lists the share ownership in the Company by the Executive Officers and Directors as at February 28, 2010. Table No. 9
Share Ownership of Directors/Officers as at February 28, 2009 Officer/Director
     Title
     Approximate Number of SharesDerek Zen
     Director
     (1)Wilman Wong
     CEO/Corporate Secretary
     -Terry Luck
     CFO
     -Other Directors
     
     2,000
  (1)    10,047,236 and 3,168,000 common shares of the Company are owned by ZWP Investments Limited and Groove Trading Limited, respectively, of which Derek Zen is a Director. Derek Zen holds 253,728 common shares of the Company. STOCK OPTIONS The Company has a total of 785,000 shares reserved for issue under the Plan. As of February 28, 2010, no options to purchase shares were outstanding while 159,268 options remain available for issuance under the Plan. In May 1997, the shareholders approved a stock option plan (the Plan), and all outstanding options to directors, officers and service providers were brought within the purview of the Plan. Shareholder approval will no longer be required for each grant, as has been the case in the past, but will continue to be required as regards to any amendment to the Plan. The Plan has restrictions as follows: 1.
     the number of shares reserved for issuance pursuant to stock options granted to insiders shall not exceed 10% of the outstanding issue;2.
     there shall not be issued to insiders, within a one-year period, a number of shares exceeding 10% of the outstanding issue; or3.
     there shall not be issued to any one insider and such insiders associated parties, within a one year period, a number of shares exceeding 5% of the outstanding issue. 27


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ITEM 7
     MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
  MAJOR SHAREHOLDERS The Company is a publicly owned corporation, the shares of which are owned by Canadian residents, US residents, and residents of other countries. As of December 31, 2009 (latest record date), the following persons and/or companies held 5% or more beneficial interest in the Company's outstanding common stock. ZWP Investments Limited (1)
     10,047,236 (28.96%) common sharesGroove Trading Limited (1)
     3,168,000 (9.13%) common sharesHover Limited
     7,011,318 (20.21%) common shares
  (1)   ZWP Investments Limited and Groove Trading Limited are subsidiaries of Wai Kee. The authorized capital of the Company consists of an unlimited number of shares of common stock without par value of which 34,698,157 were issued/outstanding as of December 31, 2009 and 21 million Series 1 non-voting, non-cumulative preferred shares convertible into common shares on a 1:1 basis of which none were issued/outstanding at December 31, 2009. All of the authorized shares of the Company's common stock are of the same class and, once issued, rank equally as to dividends, voting powers, and participation in assets. Holders of common stock are entitled to one vote for each share held of record on all matters to be acted upon by the shareholders. Holders of common stock are entitled to receive such dividends as may be declared from time to time by the Board of Directors, at its discretion, out of funds legally available therefore. Upon liquidation, dissolution or winding up of the Company, holders of common stock are entitled to receive on a pro rata basis the assets of the Company, if any, remaining after payments of all debts and liabilities, including settlement of the preferred shares. No shares have been issued subject to call or assessment. There are no pre-emptive or conversion rights and no provisions for redemption or purchase for cancellation, surrender, or sinking or purchase funds. Provisions as to the modification, amendment of variation of such shareholder rights or provisions are contained in the Canada Business Corporation Act. Unless the Canada Business Corporation Act, or the Company's By-Laws otherwise provide, any action to be taken by a resolution of the members may be taken by an ordinary resolution or by a vote of a majority or more of the shares represented at the shareholders' meeting. The Canada Business Corporation Actcontains provisions, which require a "special resolution" for effecting certain corporate actions. Such a "special resolution" requires a two-thirds vote of shareholders rather than a simple majority for passage. Special resolutions are required to effect a "fundamental change" as provided in Section 173 of the Canada Business Corporation Act; in addition, special resolutions would be required on an amalgamation, on a continuation, and on a voluntary dissolution. RELATED PARTY TRANSACTIONS The Company pays management fees to Wai Kee for performing sales, accounting and administrative services for CNT HK. Wai Kee is a Hong Kong based publicly traded company which owns 38% of the shares of the Company and has a director in common with the Company. The Company paid management fees of $114,000 for the year ended December 31, 2009 (2008 - $103,000, 2007 - $102,000) of which $17,000 remains outstanding as at December 31, 2009 (2008 - $20,000, 2007 - $14,000) and is included in accounts payable and accrued liabilities on the consolidated balance sheet. 28


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ITEM 8
     FINANCIAL INFORMATION
  CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION Financial Statements The Company's audited consolidated financial statements are set forth under Item 17. Legal Proceedings The Company has become involved in a legal proceeding as a result of an automobile accident. The Company believes that existing insurance will be sufficient to cover any claim from this matter. While the outcome of this proceeding cannot be determined at this time, no provision has been recorded as the Company believes that the resolution of this proceeding will not have a material impact on the financial condition, earnings or cash flows of the Company. Export Sales Information regarding our export sales is provided under Segmented Reporting in the notes to the Consolidation Financial Statements under Item 17. Dividend Policy Holders of our common shares and preferred shares are entitled to receive such dividends as may be declared from time to time by our board of directors. There can be no assurance that any dividend will be declared, or if declared, what the amounts of dividend will be or whether such dividends, once declared, will continue for any future period. ITEM 9
     THE OFFER AND LISTING
  On December 7, 2005, the Company was notified by the TSX that the eligibility of the Companys continued listing on the TSX was being reviewed. The Company was granted 120 days to comply with the requirement for continued listing. On March 31, 2006, the Toronto Stock Exchange suspended the Companys shares from trading and delisted the common shares on April 28, 2006 as the Company had not met the continued listing requirements of the Exchange. The Company's common stock trades on the NASDAQ Stock Market in the United States, having the trading symbol "CCCFF" (formerly "CJGPF") and CUSIP #15745J-10-6. The Company's common stock commenced trading on the NASDAQ Stock Market in October 1992 and was delisted on April 14, 1999 for not meeting the listing requirements. The Companys common stocks commenced trading on the NASDAQ OTC Bulletin Board in April 1999 retaining the trading symbol CCCFF. The following tables set forth the high/low prices on the Toronto Stock Exchange for shares of the Company's common stock for each of the last five years. 29


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Toronto Stock Exchange Stock High/Low Prices 
(CDN Cents) Year Ended
     High
     Low12/31/2009
     N/A
     N/A12/31/2008
     N/A
     N/A12/31/2007
     N/A
     N/A12/31/2006
     N/A
     N/A12/31/2005
     68¢
  21¢
  The following tables set forth the high/low prices on NASDAQ OTC Bulletin Board for shares of the Company's common stock for each of the last five years, each of the quarters in the two most recently completed financial years and monthly for each of the most recent six months. NASDAQ Stock High/Low Prices 
(US Cents) Year Ended
     High
     LowNASDAQ OTCBB:12/31/2009
     6.0¢
     0.2¢12/31/2008
     5.0¢
     1.0¢12/31/2007
     12.0¢
     2.0¢12/31/2006
     20.0¢
     3.0¢12/31/2005
     50.0¢
  11.0¢
  Quarter Ended
     High
     LowNASDAQ OTCBB:12/31/2009
     6.0¢
     1.0¢09/30/2009
     6.0¢
     0.4¢06/30/2009
     1.5¢
     0.2¢03/31/2009
     1.8¢
     0.2¢12/31/2008
     3.0¢
     1.0¢09/30/2008
     3.0¢
     1.0¢06/30/2008
     4.0¢
     2.0¢03/31/2008
     5.0¢
     1.0¢
  30


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Month Ended
     High
     Low02/28/2010
     3.0¢
     2.0¢01/31/2010
     4.0¢
     1.5¢12/31/2009
     2.0¢
     1.0¢11/30/2009
     6.0¢
     2.0¢10/31/2009
     6.0¢
     4.0¢09/30/2009
     6.0¢
     1.5¢
  The Company's common stock is issued in registered form and the following information is taken from the records of Computershare located in Vancouver, British Columbia, Canada, the registrar and transfer agent for the common stock. On February 28, 2010, the shareholders' list for the Company's common stock showed 1,402 registered shareholders and depositories with 34,698,157 shares outstanding of which 6% are held in Canada, 30% in the United States and 64% are held internationally. Based upon the number of proxy statements and annual reports requested by shareholders and brokers for the Company's last annual shareholders' meeting and other research, the Company believes it has in excess of 3,000 beneficial owners of its common stock. The Company's common stock is not registered to trade in the United States in the form of American Depository Receipts (ADR's) or similar certificates. ITEM 10
     ADDITIONAL INFORMATION
  MEMORANDUM AND ARTICLES OF ASSOCIATION Directors (a)
     A director who is, in any way, directly or indirectly interested in a proposed contract or transaction with the Company shall disclose the nature and extent of his interest at a meeting of the directors in accordance with the provisions of the Canada Business Corporations Act. A director shall not vote in respect of any contract or transaction with the Company in which he is interested, and if he shall do so, his vote shall not be counted but he may be counted in the quorum present at the meeting at which such vote is taken.(b)
     Subject to any unanimous shareholder agreement, the directors shall be paid such remuneration for their services as the board may from time to time determine.(c)
     Without limiting the borrowing powers of the Company as set forth in the Canada Business Corporations Act, the board may from time to time in such amounts and on such terms as it deems expedient to borrow money upon the credit of the Company.(d)
     No person shall be qualified for election as a director if he is less than 18 years of age and there are no provisions with respect to the retirement of a director or the non-retirement of directors under an age limit requirement.(e)
     A director need not be a shareholder but a majority of the directors shall be resident Canadians. 31


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Common Shares and Preferred Shares The share capital of the Company shall consist of an unlimited number of Common Shares and an unlimited number of Preferred Shares, of which 21,000,000 shares are designated Preferred Shares, Series 1, all without par value, having the rights, privileges, restrictions and conditions hereinafter described: The Common Shares shall confer on the holders thereof and shall be subject to the following rights, privileges, conditions and restrictions: (a)
     Voting The holders of the Common Shares shall be entitled to receive notice of and to attend all meetings of the shareholders of the Company and shall have one vote for each common share held at all meetings of the shareholders of the Company, except for meetings at which only holders of another specified class or series of shares of the Company are entitled to vote separately as a class or series;(b)
     Dividends Subject to the rights, privileges, conditions and restrictions of the Preferred Shares and any of its series as designated by the directors from time to time, the holders of the Common Shares shall, in the absolute discretion of the directors, be entitled to receive and the Company shall pay out of monies of the Company properly applicable to the payment of dividends, those dividends as may be declared from time to time in respect of the Common Shares; and(c)
     Dissolution Subject to the rights, privileges, conditions and restrictions of the Preferred Shares and any of its series as designated by the directors from time to time, the holders of the Common Shares shall be entitled to receive the remaining property of the Company on dissolution. The Preferred Shares shall confer on the holders thereof and shall be subject to the following rights, privileges, conditions and restrictions: (a)
     Series The directors may issue Preferred Shares in one or more series;(b)
     Designation The directors may by resolution amend the articles of the Company to fix the number of shares in, and to determine the designation of the shares of, each series of Preferred Shares;(c)
     Directors to Attach Rights The directors may by resolution amend the articles of the Company to determine the rights, privileges, restrictions and conditions attaching to the shares of each series of Preferred Shares;(d)
     Cumulative Dividends Where shares of one or more series of Preferred Shares are entitled to cumulative dividends, and where any cumulative dividends in respect of a series of Preferred Shares are not paid in full, the shares of all series of Preferred Shares entitled to cumulative dividends shall participate rateably in respect of accumulated dividends in accordance with the amounts that would be payable on those shares if all the accumulated dividends were paid in full;(e)
     Rateable Participation Where amounts payable are not paid in full on a winding-up, or on the occurrence of any other event as a result of which the holders of the shares of all series of Preferred Shares are then entitled to a return of capital, the shares of all series of Preferred Shares shall participate rateably in a return of capital in respect of the Preferred Shares in accordance with the amounts that would be payable on the return of capital if all amounts so payable were paid in full; 32


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(f)
     No Priority No rights, privileges, restrictions or conditions attached to a series of Preferred Shares shall confer on the series priority over another series of Preferred Shares then outstanding respecting:i.
     dividends, orii.
     a return of capital:(1)
     on a winding-up, or(2)
     on the occurrence of another event that would result in the holders of all series of Preferred Shares being entitled to a return of capital;(g)
     Additions, Changes and Removals A directors resolution pursuant to paragraphs (a), (b) or (c) may only be passed prior to the issue of shares of the series to which the resolution relates, and after the issue of shares of that series, the number of shares in, the designation of and the rights, privileges, restrictions and conditions attached to, that series may be added to, changed or removed only pursuant to applicable provisions of the Canada Business Corporations Act;(h)
     No Right to Vote Except as expressly provided in the rights, privileges, restrictions or conditions which the directors may determine or attach to any series of Preferred Shares, shares of a series of Preferred Shares shall not confer on the holders thereof any right to notice of or to be present at or to vote, either in person or by proxy, at any meeting of the shareholders of the Company other than a separate meeting of the holders of the Preferred Shares, or of the holders of a series of the Preferred Shares, as the case may be. In addition to the rights, privileges, restrictions and conditions attaching to the Preferred Shares of the Company as a class, the Preferred Shares, Series 1 of the Company shall have the following rights and be subject to the following restrictions, conditions and limitations: (a)
     Non-Voting The holders of the Preferred Shares, Series 1 shall not, as such, be entitled to receive notice of or to attend meetings of the shareholders of the Company nor shall they have any voting rights for the election of directors or for any other purpose (except where the holders of a specified class are entitled to vote separately as a class as provided in the Canada Business Corporations Act).(b)
     Dividends The holders of the Preferred Shares, Series 1 shall be entitled to receive, and the directors of the Company shall declare and the Company shall pay thereon, out of the moneys of the Company properly applicable to the payment of dividends, a non-cumulative dividend on each Preferred Share, Series 1 equal to any dividend the board of directors of the Company may from time to time declare and the Company pay on each Common Share, and such dividends on the Preferred Shares, Series 1 shall be declared and paid at the same time as the declaration and payment of such dividends on the Common Shares.  (c)
     Conversion(i)
     A holder of Preferred Shares, Series 1 shall be entitled, at such holders option, at any time and from time to time, to have all or any of the Preferred Shares, Series 1 registered in the name of such holder on the books of the Company converted into Common Shares as the same shall be constituted at the time of conversion upon the basis of one Common Share for each Preferred Share, Series 1 so converted; provided that, on conversion of any Preferred Shares, Series 1, the holders thereof shall be entitled to receive any declared and unpaid dividends thereon which are payable to the holders of Preferred Shares, Series 1 of record on a date prior to the date on which such conversion is effective pursuant to Section 3 (c)(ii) below; 33


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(ii)
     The conversion right provided for herein may be exercised by notice in writing given to the Company at its registered office accompanied by the certificate or certificates representing the Preferred Shares, Series 1 in respect of which the holder thereof desires to exercise such right of conversion and such notice shall be executed by the person registered on the books of the Company as the holder of the Preferred Shares, Series 1 in respect of which such right is being exercised or by such holders duly authorized attorney and shall specify the number of such shares which the holder desires to have converted. The conversion shall be deemed to take effect upon the date which the said certificate or certificates shall be surrendered to the Company at its registered office accompanied by the said notice unless such date be a Saturday, Sunday or a holiday, in which event it shall take effect on the next business day. If a part only of the Preferred Shares, Series 1 represented by any certificate is converted, a new certificate for the balance shall be issued without charge by the Company;(iii)
     Any Preferred Shares, Series 1 issued and outstanding as of 5:00 p.m. (Vancouver time) on that date which is 10 years following issuance shall, at such time, automatically be converted into Common Shares on the basis one Common Share for each Preferred Share, Series 1 then issued and outstanding, and after such time, a holder of such automatically converted Preferred Shares, Series 1 shall cease to have any rights as a shareholder in respect of such shares other than the right to receive any declared and unpaid dividends thereon which are payable to the holders of Preferred Shares, Series 1 of record as of a date prior to the date of such automatic conversion. Such holder shall be entitled to receive from the Corporation, without charge, a certificate representing the Common Shares resulting from such automatic conversion of such Preferred Shares, Series 1;(iv)
     All Common Shares resulting from any conversion provided for herein shall be fully paid and non- assessable; and(v)
     In the event that the Preferred Shares, Series 1 or the Common Shares are at any time subdivided, consolidated or changed into a greater or lesser number of shares of the same or another class, an appropriate adjustment shall be made in the rights and conditions attached to the Preferred Shares, Series 1 so as to maintain the relative rights of the holders of those shares.  (d)
     Liquidation, Dissolution and Winding-up In the event of the liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, the holders of the Preferred Shares, Series 1 shall be entitled to receive, before any distribution of any part of the assets of the Corporation among the holders of the Common Shares or any other shares in the capital of the Corporation ranking junior to the Preferred Shares, Series 1, for each Preferred Share, Series 1, the amount of C$0.6804 and any dividends declared thereon and unpaid, and following such distribution, the holders of the Preferred Shares, Series 1 shall be entitled to share equally and rateably without preference or distinction on a per share basis with the holders of Common Shares or other shares in the capital of the Company in the distribution of the remaining property and assets of the Company. Change Rights of Shareholders The directors may by resolution to amend the articles of the Company to change the rights of shareholders. According to Canada Business Corporations Act, such amendment requires approval by a special resolution of shareholders. Meetings of Shareholders An Annual General Meeting must be held once every financial year for the purpose of considering the financial statements and reports, electing directors, appointing auditors and for the transaction of other business as may be brought before the meeting. The board, the chairman of the board or the president shall have power to call a special meeting of shareholders at any time. 34


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Notice of the time and place of each meeting of shareholders must be given no less than 21 days, nor more than 50 days, before the date of each meeting to each director, to the auditors and to each shareholder who at the close of business on the record date, if any, for notice is entered in the securities register as the holder of one or more shares carrying the right to vote at the meeting. Rights to Own Securities There are no limitations on the rights of non-resident or foreign shareholders to hold or exercise voting rights. Except as provided in the Investment Canada Act, there are no limitations under the applicable laws of Canada or by our charter or other constituent documents of our Company on the right of foreigners to hold or vote Common Shares of other securities of our Company. The Investment Canada Actwill prohibit implementation, or if necessary, require divestiture of an investment deemed reviewable under the Investment Canada Actby an investor that is not a Canadian as defined in the Investment Canada Act(a non-Canadian), unless after review the Minister responsible for the Investment Canada Act (the Minister) is satisfied that the reviewable investment is likely to be of net benefit to Canada. An investment in our Common Shares by a non-Canadian would be reviewable under the Investment Canada Actif it was an investment to acquire control of our Company and the value of our assets was $5 million or more. A non-Canadian would be deemed to acquire control of our company for the purposes of the Investment Canada Actif the non-Canadian acquired a majority of our outstanding Common Shares (or less than a majority but controlled our company in fact through the ownership of one-third or more of our outstanding common shares) unless it could be established that, on the acquisition, our Company was not controlled in fact by the acquirer through the ownership of such Common Shares. Certain transactions in relation to our Common Shares would be exempt from review under the Investment Canada Act, including, among other, the following: 1.
     Acquisition of Common Shares by a person in the ordinary course of that persons business as a trader or dealer in securities;2.
     Acquisition of control of our Company in connection with the realization of security granted for a loan or other financial assistance and not for any purpose related to the provisions of the Investment Canada Act; and3.
     Acquisition of control of our Company by reason of an amalgamation, merger, consolidation or corporate reorganization following which the ultimate direct or indirect control of our company, through the ownership of voting interests, remains unchanged. The Investment Canada Actwas amended with the World Trade Organization Agreementto provide for special review thresholds for WTO Investors of countries belonging to the World Trade Organization, among others, nationals and permanent residents (including WTO Investor controlled entities as defined in the Investment Canada Act). Under the Investment Canada Act, as amended, an investment in our Common Shares by WTO Investors would be reviewable only if it was an investment to acquire control of our Company and the value of our assets was equal to or greater than a specified amount (the Review Threshold), which is published by the Minister after its determination for any particular year. Change in Control There are no provisions in our Articles that would have the effect of delaying, deferring or preventing a change in control of our Company, and that would operate only with respect to a merger, acquisition or corporate restructuring involving the Company. 35


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MATERIAL CONTRACTS There is no material contract entered into for the two years immediately preceding publication of this document. EXCHANGE CONTROL There are no government laws, decrees or regulations in Canada which restrict the export or import of capital or which affect the remittance of dividend, interest or other payments to non-resident holders of our common shares. Any remittances of dividends to United States residents and to other non-residents are, however subject to withholding tax. See Taxation below. TAXATION The following is a fair summary of the material Canadian federal income tax consequences generally applicable in respect of the common stock. The tax consequences to any particular holder of common stock will vary according to the status of that holder as an individual, trust, corporation or member of a partnership, the jurisdiction in which that holder is subject to taxation, the place where that holder is resident and, generally, according to that holder's particular circumstances. This summary is applicable only to holders who are resident in the United States, have never been resident in Canada, deal at arm's length with the Company, hold their common stock as capital property and who will not use or hold the common stock in carrying on business in Canada. This summary is based upon the provisions of the Income Tax Act of Canada and the regulations thereunder (collectively, the "Tax Act") as at the date of the Annual Report, publicly-announced proposals to amend the Tax Act as at the date of this Annual Report and the current administrative practices of the Canada Revenue Agency . This summary does not take into account provincial income tax consequences. The summary assumes that the publicly announced proposals will be enacted as proposed with the effective dates set out therein; otherwise, the summary assumes that there will be no other changes in law whether by judicial or legislative action. This summary is of a general nature only and is not exhaustive of all possible income tax consequences. It is not intended as legal or tax advice to any particular holder of common stock and should not be so construed. Each holder is encouraged to consult their own tax advisor with respect to the income tax consequences applicable to him in his own particular circumstances. Disposition of Common Stock.Under the Tax Act, a gain from the sale of common stock by a non-resident will not be subject to Canadian tax, provided the shareholder (and/or persons who do not deal at arm's length with the shareholder) have not held 25% or more of the shares of any class of the Company's stock at any time in the five years preceding the disposition. Generally, the Canada-United States Tax Convention (the "Tax Convention") will exempt from Canadian taxation any capital gain realized by a resident of the United States unless: their value is derived principally from real property in Canada;the holder was resident in Canada for 120 months during any period of 20 consecutive years preceding the disposition and the common stocks were owned by him when he ceased to be a resident in Canada; orthey form part of the business property of a permanent establishment that the holder has or had in Canada within the 12 months preceding the disposition. 36


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If a non-resident were to dispose of common stock of the Company to another Canadian corporation which deals or is deemed to deal on a non-arm's length basis with the non-resident and which, immediately after the disposition, is connected with the Company (i.e., which holds shares representing more than 10% of the voting power and more than 10% of the market value of all issued and outstanding shares of the Company), the excess of the proceeds over the paid-up capital of the common stock sold will be deemed to be taxable as a dividend either immediately or eventually by means of a deduction in computing the paid-up capital of any shares issued by the purchasing corporation. Dividend.In the case of any dividends paid to non-residents, the Canadian tax is withheld by the Company, which remits only the net amount to the shareholder. By virtue of Article X of the Tax Convention, the rate of tax on dividends paid to residents of the United States is generally limited to 15% of the gross dividend (or 5% in the case of certain corporate shareholders owning at least 10% of the Company's voting shares). In the absence of the treaty provisions, the rate of Canadian withholding tax imposed on non-residents is 25% of the gross dividend. Stock dividends received by non-residents from the Company are taxable by Canada as ordinary dividends at the amount by which the paid up capital of the Company is increased for the shares issued as dividends. The Tax Convention generally exempts from Canadian withholding tax dividends paid to a religious, scientific, literary, educational or charitable organization exclusively administering a pension, retirement or employee benefit fund or plan, if the organization is resident in the United States and is exempt from income tax under the laws of the United States. DOCUMENTS ON DISPLAY The documents concerning our Company may be viewed at the offices of our corporate solicitor, Stikeman Elliott, at Suite 1700, Park Place, 666 Burrard Street, Vancouver, BC V6C 2X8, during normal office hours. ITEM 11
     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  The Companys revenue is derived principally from the sale of ginseng roots to a limited number of customers that are concentrated in Asian markets. In order to manage its credit risk, the Company carefully monitors credit terms, investigates credit history and grants credit to customers with established relationships or an acceptable credit rating. Payments or deposits are usually received before shipments of inventory. Letters of credit may be used, or inventory may be held as security until payment is received, when such relationships have not been established. The Company identifies Canada as the primary economic environment in which it operates and uses the Canadian dollar as its functional currency. A minor portion of the Companys revenues and receivables are denominated in U.S. dollars and Hong Kong dollars as well as a loan which is denominated in Hong Kong dollars. The Company monitors its exposure to foreign exchange risk and balances its foreign currency holdings to reduce exposures to any one currency by repatriating any excess funds. The Company may also from time to time utilize foreign exchange contracts to hedge against exchange risks. The Companys revenues and earnings are also impacted by the world price of ginseng root which is determined by reference to a number of factors including the supply and demand for North American ginseng root, negotiations between buyer and seller, the quality and aesthetic characteristics of the root and the relative strength of the Canadian dollar to the currency used by the Companys customers. A percentage change in the market price of ginseng root will tend to have a corresponding impact on the revenues reported by the Company. An increase in the selling price by $1 per pound will increase the Companys net earnings by approximately $446,000 (based on the 2009 harvest of 446,212 pounds) and a decrease in the selling price by $1 per pound would have an equally negative impact on net earnings. 37


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The interest income from cash and cash equivalents and the interest expense from borrowings under credit facilities are subject to interest rate changes and therefore interest income and interest expense will fluctuate directly with changes in interest rates and the amount of cash and cash equivalents and borrowing outstanding at any given time. The Companys long-term debt reverts to a fixed interest rate effective February 28, 2010 and the final variable interest rate on the loan was established on December 31, 2009. Therefore, the Company is not exposed to any material risk in interest rate changes. ITEM 12
     DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
  Not applicable. PART II ITEM 13
     DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
  Not applicable. ITEM 14
     MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
  Not applicable. ITEM 15T
     CONTROLS AND PROCEDURES
  Disclosure Controls and Procedures Management, with the participation of the Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Companys disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this report, being the year ended December 31, 2009. Based on such evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Companys disclosure controls and procedures are effective as of December 31, 2009 to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the United States Securities and Exchange Commission (SEC) rules and forms. Managements Report on Internal Control over Financial Reporting The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) or 15d-15(f)). This internal control system was designated to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. 38


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Management, with the participation of the Chief Executive Officer and Chief Financial Officer conducted an assessment of the effectiveness of the Companys internal control over financial reporting as of December 31, 2009 based on the criteria in Internal Control  Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, the management has concluded that the Companys internal control over financial reporting as of December 31, 2009 is effective. Management notes that, while they believe the Companys disclosure controls and procedures provide a reasonable level of assurance that they are effective, they do not expect that the Companys disclosure controls and procedures or internal control over financial reporting will prevent all errors and fraud. A control system, no matter how well conceived or operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. This annual report does not include an attestation report of the Companys registered public accounting firm regarding internal control over financial reporting. Managements report was not subject to attestation by the Companys registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only managements report in this annual report. There are no changes in the Companys internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonable likely to material affect, the Companys internal control over financial reporting. ITEM 16
     RESERVED
  ITEM 16A
     AUDIT COMMITTEE FINANCIAL EXPERT
  The Companys Board of Directors has determined that Mr. Steven Hsieh, Chairman of the Audit Committee and independent director, qualifies as audit committee financial expert pursuant to this Item 16A of the Form 20-F. ITEM 16B
     CODE OF ETHICS
  On May 6, 2005, the Company has adopted a code of ethics that applies to its employees, including its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. The Company undertake to provide to any person without charge, upon request, a copy of such code of ethics in either of the following ways: By mail to:
     Chai Na Ta Corp.
Unit 100  12051 Horseshoe Way, 
Richmond, British Columbia V7A 4V4By e-mail to:
     info@chainata.com 39


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ITEM 16C
     PRINCIPAL ACCOUNTANT FEES AND SERVICES
  Deloitte & Touche LLP acts as the Companys principal independent auditor for the years ended December 31, 2009 and 2008. The following table discloses the aggregate fees billed for professional services rendered by Deloitte & Touche LLP for the years ended December 31, 2009 and 2008. 2009 CDN 000
     2008 CDN 000Audit Fees (1)
     126
     124Audit -related Fees
     -
     -Tax Fees (2)
     19
     -All Other Fees
     -
     -Total
     145
     124
  (1)
     Audit fees consist of fees for the annual audit of the Companys consolidated financial statements and fees for reviews of interim financial statements as well as fees for services relating to the review of documents filed with the SEC up to February 28, 2010.(2)
     Tax fees consist of fees billed for withholding tax refund. Audit Committee Pre-Approval Policies and Procedures The Audit Committee is authorized by the Board of Directors to review the performance of the Companys external auditors, approve in advance the provision of services other than auditing and to consider the independence of the external auditors, including the range of services provided in the context of all consulting services bought by the Company. The Audit Committee is authorized to approve any non-audit services or additional work with the Chairman of the Audit Committee deems as necessary and will notify other members of the Audit Committee of such non-audit work. ITEM 16D
     EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
  Not applicable ITEM 16E
     PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
  Not applicable 40


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PART III ITEM 17
     FINANCIAL STATEMENTS
  The Company's consolidated financial statements are stated in Canadian dollars (CDN$) and are prepared in accordance with Canadian Generally Accepted Accounting Principles (GAAP), the application of which, in the case of the Company, conforms in all material respects for the periods presented with United States GAAP, except as referred to in footnotes to the audited consolidated financial statements. The value of the U.S. dollar in relationship to the Canadian dollar was approximately 1.05 as of December 31, 2009. Audited Consolidated Financial Statements and Financial Statement Schedules: Report of Independent Registered Chartered Accountants, dated March 9, 2010 Consolidated Balance Sheets as at December 31, 2009 and December 31, 2008 Consolidated Statements of Operations and Deficit for the years ended December 31, 2009, December 31, 2008 and December 31, 2007. Consolidated Statements of Comprehensive Income for the years ended December 31, 2009, December 31, 2008 and December 31, 2007. Consolidated Statements of Accumulated Other Comprehensive Income for the years ended December 31, 2009, December 31, 2008 and December 31, 2007. Consolidated Statements of Cash Flows for the years ended December 31, 2009, December 31, 2008 and December 31, 2007. Consolidated Statements of Crop Costs for the years ended December 31, 2009, December 31, 2008 and December 31, 2007. Notes to the Consolidated Financial Statements. ITEM 18
     FINANCIAL STATEMENTS
  The Registrant has elected to provide financial statements pursuant to Item 17. ITEM 19
     EXHIBITS
  1.1.
     Articles of Incorporation, effective August 12, 1981 (incorporated by reference from our Form 20-F and Form 6K )1.2.
     Certificate of Name Change, dated September 7, 1994 (incorporated by reference from our Form 20-F and Form 6K)2.1
     Instruments defining the rights of holders of registered equity or debt securities  refer to Exhibit 1.1 above. 41


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4.1
     Private Placement Share Subscription Agreement, dated April 20, 2000, by the Company and Road King Infrastructure Limited (incorporated by reference from our Form 20-F Annual Report filed on May 30, 2001)4.2
     Employment Agreement, dated May 5, 2000, by the Company and Gerald A. Gill. (incorporated by reference from our Form 20-F Annual Report filed on May 30, 2001)4.3
     Conversion Agreement, dated May 8, 2000, by the Company, Chai-Na-Ta Farms Ltd., John Hancock Life Insurance Company and Herb King International Limited. (incorporated by reference from our Form 20-F Annual Report filed on May 30, 2001)4.4
     Partnership Agreement between Chai-Na-Ta Farms Ltd. and 499599 B.C. Ltd. (incorporated by reference from our Form 20-F Annual Report filed on May 31, 1996).4.5
     Joint Venture Agreement between Chai-Na-Ta Farms Ltd. and the Skeetchestn Indian Band (incorporated by reference from our Form 20-F Annual Report filed on May 31, 1996).4.6
     Share Purchase Agreement between the Company and LTRD Biotech Limited. (incorporated by reference from our Form 20-F Annual Report filed on May 26, 2003)8.1
     Organization chart of the Company and its affiliates.12.1
     Certification of the CEO under Section 302 of the Sarbanes-Oxley Act of 2002.12.2
     Certification of the CFO under Section 302 of the Sarbanes-Oxley Act of 2002.13.1
     Certification of CEO and CFO as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.  42


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SIGNATURE PAGE ****** The registrant hereby certifies that it meets all the requirements for filing on Form 20-F and that it has duly caused and authorised the undersigned to sign this registration statement (annual report) on its behalf. Chai-Na-Ta Corp.RegistrantBy
    Terry LuckTerry Luck, Chief Financial Officer  Dated: March 26, 2010 43


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Report of Independent Registered Chartered Accountants and Consolidated Financial Statements CHAI-NA-TA CORP. (Stated in Canadian dollars) December 31, 2009, 2008 and 2007 ****  44


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Deloitte & Touche LLP2800  1055 Dunsmuir Street4 Bentall CentreP.O. Box 49279Vancouver BC V7X 1P4CanadaTel: 604-669-4466Fax: 604-685-0395www.deloitte.ca
  Report of Independent Registered Chartered Accountants To the Board of Directors of Chai-Na-Ta Corp. We have audited the consolidated balance sheets of Chai-Na-Ta Corp. as at December 31, 2009 and 2008 and the consolidated statements of operations and deficit, comprehensive loss and accumulated other comprehensive income, cash flows and crop costs for each of the years in the three year period ended December 31, 2009. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of Chai-Na-Ta Corp. as at December 31, 2009 and 2008 and the results of its operations, its cash flows and its crop costs for each of the years in the three year period ended December 31, 2009 in accordance with Canadian generally accepted accounting principles. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Companys internal control over financial reporting. Accordingly, we express no such opinion. On March 9, 2010, we reported separately to the shareholders of Chai-Na-Ta Corp. on our audits, conducted in accordance with Canadian generally accepted auditing standards, on financial statements for the same period, prepared in accordance with Canadian generally accepted accounting principles, but which excluded a footnote providing a reconciliation of accounting principles generally accepted in Canada and the United States of America as it related to the Company. (Signed) Deloitte & Touche LLP Independent Registered Chartered Accountants 
March 9, 2010 45


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Comments by Independent Registered Chartered Accountants on Canada-United States of America reporting differences The standards of the Public Company Accounting Oversight Board (United States) require the addition of an explanatory paragraph when the financial statements are affected by conditions and events that raise substantial doubt about the Companys ability to continue as a going concern, such as those described in Note 1 to the consolidated financial statements. The standards of the Public Company Accounting Oversight Board (United States) also require the addition of an explanatory paragraph when there are changes in accounting principles that have a material effect on the comparability of the Companys financial statements, such as the change described in Note 3 (m) to the financial statements relating to the adoption of Canadian Institute of Chartered Accountants Handbook Sections 3064, Goodwill and Intangible Assets;Emerging Issues Committee Abstract 173, Credit Risk and the Fair Value of Financial Assets and Liabilities;and amendments to 3025, Impaired Loans;3855, Financial Instruments - Recognition and Measurement;and 3862, Financial Instruments -Disclosure. Although we conducted our audits in accordance with both Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States), our report to the Shareholders dated March 9, 2010 is expressed in accordance with Canadian reporting standards which do not permit or require references to such conditions and events and to such changes in accounting principles in the auditors report when these are properly accounted for and adequately disclosed in the financial statements.
 (Signed) Deloitte & Touche LLP Independent Registered Chartered Accountants 
March 9, 2010 46


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CHAI-NA-TA CORP.Consolidated Balance Sheets(Stated in thousands of Canadian Dollars)
 As at December 31
     
     2009
     
     
     2008ASSETSCurrent assetsCash
     $
     2,488
     
     $
     192Accounts receivable and other assets
     
     13
     
     
     710Inventory (Note 12)
     
     6,668
     
     
     7,928Ginseng crops (Notes 4 and 12)
     
     3,898
     
     
     2,722Prepaid expenses
     
     87
     
     
     6413,154
     
     
     11,616Ginseng crops (Notes 4 and 12)
     
     2,154
     
     
     4,764Prepaid expenses
     
     28
     
     
     49Assets held for sale (Note 5)
     
     -
     
     
     1,783Property, plant and equipment (Note 6)
     
     2,513
     
     
     2,678$
     17,849
     
     $
     20,890LIABILITIESCurrent liabilitiesBank indebtedness (Note 7)
     $
     -
     
     $
     3,060Accounts payable and accrued liabilities
     
     459
     
     
     604Customer deposits (Note 8)
     
     3,301
     
     
     2,454Current portion of long-term debt (Note 9)
     
     446
     
     
     424,206
     
     
     6,160Long-term debt (Note 9)
     
     6,499
     
     
     8,619Total liabilities
     
     10,705
     
     
     14,779SHAREHOLDERS' EQUITYShare capital (Note 10)
     
     38,246
     
     
     38,246Contributed surplus (Note 10)
     
     338
     
     
     338Accumulated other comprehensive income
     
     806
     
     
     442Deficit
     
     (32,246
     )
     
     (32,915
     )(31,440
     )
     
     (32,473
     )Total equity
     
     7,144
     
     
     6,111$
     17,849
     
     $
     20,890
  Going concern (Note 1)
Commitments, contingencies and guarantees (Note 16) See accompanying notes to the consolidated financial statements APPROVED BY THE BOARD DEREK ZEN
     
     WILMAN WONGDerek Zen
     
     Wilman WongChairman
     
     Chief Executive Officer
  47


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CHAI-NA-TA CORP.Consolidated Statements of Operations and Deficit(Stated in thousands of Canadian Dollars except per share amounts)
 Years ended December 31
     
     2009
     
     
     2008
     
     
     2007Revenue
     $
     6,941
     
     $
     9,232
     
     $
     7,561Cost of goods soldCost of inventory sold
     
     6,452
     
     
     8,826
     
     
     7,323Shipping and handling fees
     
     107
     
     
     93
     
     
     70Write-down of inventory and ginseng crops (Note 12)
     
     14
     
     
     2,998
     
     
     2,7356,573
     
     
     11,917
     
     
     10,128Gross margin (loss)
     
     368
     
     
     (2,685
     )
     
     (2,567
     )Selling, general and administrative expenses (Note 13)
     
     1,458
     
     
     969
     
     
     1,068Interest on short-term debt (Note 7)
     
     37
     
     
     144
     
     
     160Interest on long-term debt (Note 9)
     
     283
     
     
     426
     
     
     6351,778
     
     
     1,539
     
     
     1,863Operating loss
     
     (1,410
     )
     
     (4,224
     )
     
     (4,430
     )Other income (loss) (Note 14)
     
     2,079
     
     
     (446
     )
     
     1,101NET EARNINGS (LOSS)
     
     669
     
     
     (4,670
     )
     
     (3,329
     )Deficit, beginning of year
     
     (32,915
     )
     
     (28,245
     )
     
     (24,916
     )DEFICIT, END OF YEAR
     $
     (32,246
     )
     $
     (32,915
     )
     $
     (28,245
     )Basic and diluted earnings (loss) per share (Note 3(i))
     $
     0.02
     
     $
     (0.13
     )
     $
     (0.10
     )Weighted average number of common shares used to calculate basic and diluted earnings (loss) per share (in thousands)
     
     **34,698**
     
     
     34,698
     
     
     34,698
  See accompanying notes to the consolidated financial statements 48


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CHAI-NA-TA CORP.Consolidated Statements of Comprehensive Income(Stated in thousands of Canadian Dollars)
  Years ended December 31
     
     2009
     
     
     2008
     
     
     2007Net earnings (loss)
     $
     669
     
     $
     (4,670
     )
     $
     (3,329
     )Other comprehensive income (loss):Adjustments as a result of foreign exchange translation of self-sustaining subsidiaries
     
     364
     
     
     (460
     )
     
     312Comprehensive income (loss)
     $
     1,033
     
     $
     (5,130
     )
     $
     (3,017
     )
  CHAI-NA-TA CORP.Consolidated Statements of Accumulated Other Comprehensive Income(Stated in thousands of Canadian Dollars)
  Years ended December 31
     
     2009
     
     
     2008
     
     
     2007Balance, beginning of year
     $
     442
     
     $
     902
     
     $
     590Other comprehensive income (loss)
     
     364
     
     
     (460
     )
     
     312Balance, end of year
     $
     806
     
     $
     442
     
     $
     902
  See accompanying notes to the consolidated financial statements 49


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CHAI-NA-TA CORP.Consolidated Statements of Cash Flows(Stated in thousands of Canadian Dollars)
  Years ended December 31
     
     2009
     
     
     2008
     
     
     2007Net inflow (outflow) of cash related to the following activities:Operating ActivitiesNet earnings (loss)
     $
     669
     
     $
     (4,670
     )
     $
     (3,329
     )Items included in net earnings (loss) not affecting cash (Note 19(a))
     
     4,909
     
     
     12,081
     
     
     8,701Changes in non-cash operating assets and liabilities (Note 19(b))
     
     970
     
     
     (1,014
     )
     
     1,409Crop cost expenditures
     
     (2,901
     )
     
     (6,094
     )
     
     (6,277
     )3,647
     
     
     303
     
     
     504Financing ActivitiesBank indebtedness
     
     (3,060
     )
     
     (450
     )
     
     (800
     )Repayment of long-term debt
     
     (527
     )
     
     (155
     )
     
     (299
     )(3,587
     )
     
     (605
     )
     
     (1,099
     )Investing ActivitiesPurchase of property, plant and equipment
     
     (145
     )
     
     (94
     )
     
     (61
     )Proceeds from disposition of property, plant and equipment
     
     7
     
     
     300
     
     
     488Cash outlays included in assets held for sale
     
     -
     
     
     (27
     )
     
     (5
     )Proceeds from disposition of assets held for sale
     
     2,379
     
     
     -
     
     
     -2,241
     
     
     179
     
     
     422Effect of exchange rate changes on cash
     
     (5
     )
     
     8
     
     
     (4
     )Net increase (decrease) in cash
     
     2,296
     
     
     (115
     )
     
     (177
     )Cash, beginning of year
     
     192
     
     
     307
     
     
     484Cash, end of year
     $
     2,488
     
     $
     192
     
     $
     307Supplemental information:Other cash flows:Interest paid
     $
     176
     
     $
     1,289
     
     $
     254Non-cash investing and financing activities:Property, plant and equipment purchases financed through equipment purchase loan agreements
     $
     -
     
     $
     45
     
     $
     -
  See accompanying notes to the consolidated financial statements 50


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CHAI-NA-TA CORP.Consolidated Statements of Crop Costs(Stated in thousands of Canadian Dollars)
  Years ended December 31
     
     2009
     
     
     2008
     
     
     2007Depreciation
     $
     307
     
     $
     592
     
     $
     888Farm equipment operating costs
     
     234
     
     
     556
     
     
     532Interest on long-term debt
     
     3
     
     
     5
     
     
     6Land rental costs
     
     202
     
     
     368
     
     
     548Mulch and fertilizer
     
     881
     
     
     1,499
     
     
     1,470Office and insurance costs
     
     86
     
     
     166
     
     
     168Plant science
     
     6
     
     
     7
     
     
     11Salaries and wages
     
     1,272
     
     
     2,858
     
     
     2,948Seed
     
     43
     
     
     68
     
     
     107Small tools and supplies
     
     19
     
     
     36
     
     
     45Warehouse and dryer operations
     
     196
     
     
     534
     
     
     4523,249
     
     
     6,689
     
     
     7,175Balance, beginning of year
     
     7,486
     
     
     11,395
     
     
     14,51910,735
     
     
     18,084
     
     
     21,694Less:Cost of crop harvested
     
     4,630
     
     
     10,233
     
     
     8,603Cost of seeds sold and available for sale
     
     103
     
     
     -
     
     
     111Crop costs reallocated to assets held for sale
     
     -
     
     
     (135
     )
     
     135Write-down of ginseng crops (Note 12)
     
     (50
     )
     
     500
     
     
     1,450Balance, end of year
     
     6,052
     
     
     7,486
     
     
     11,395Less: current portion
     
     3,898
     
     
     2,722
     
     
     5,678$
     2,154
     
     $
     4,764
     
     $
     5,717
  See accompanying notes to the consolidated financial statements 51


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CHAI-NA-TA CORP.Notes to the Consolidated Financial Statements(Stated in Canadian Dollars except tabular amounts in thousands of Canadian dollars)For the years ended December 31, 2009, 2008 and 2007
  1.
     GOING CONCERN
  The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has experienced an operating loss of $1,410,000 for the year ended December 31, 2009 due to the low selling price of ginseng and has an accumulated deficit of $32,246,000 as at December 31, 2009. The Company is closely monitoring cash resources and has received significant financing from a company formerly under common control. The Company's ability to continue as a going concern is dependant on achieving ongoing profitable operations and the continued financial support of its creditors. These consolidated financial statements do not include any adjustments to the amounts and reclassification of assets and liabilities that might be necessary should the Company be unable to continue as a going concern. 2.
     NATURE OF OPERATIONS
  The Company operates North American ginseng farms in Canada, on which ginseng root is planted, cultivated and harvested. The Company sells ginseng in its primary markets of Hong Kong and China, and to a lesser extent Canada and the United States of America, through its wholly-owned subsidiaries. The Company also sells ginseng-based value-added products in Canada although they do not represent a significant percentage of sales. The Company is publicly traded with no single shareholder holding a majority of the Companys common shares. The largest shareholder of the Company is Wai Kee Holdings Limited (Wai Kee), a publicly traded Hong Kong based company, which owns 38% of the shares of the Company. 3.
     SIGNIFICANT ACCOUNTING POLICIES
  These consolidated financial statements, expressed in thousands of Canadian dollars, have been prepared in accordance with Canadian generally accepted accounting principles (Canadian GAAP) and reflect the following significant accounting policies: 52


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CHAI-NA-TA CORP.Notes to the Consolidated Financial Statements(Stated in Canadian Dollars except tabular amounts in thousands of Canadian dollars)For the years ended December 31, 2009, 2008 and 2007
  (a)
     Basis of presentation
  These consolidated financial statements include the accounts of the Company and those of its subsidiaries. All significant intercompany transactions and balances have been eliminated. At December 31, 2009, the Company's effective ownership interests in these companies were as follows: Subsidiaries Chai-Na-Ta Farms Ltd.
     100%Chai-Na-Ta International Ltd. (Inactive)
     100%Chai-Na-Ta (Asia) Ltd. (Inactive)
     100%CNT Nominees Limited (Inactive)
     100%CNT Nutraceuticals Ltd.
     100%CNT Trading (Asia) Limited (Inactive)
     100%CNT Trading (Hong Kong) Limited
     100%Unique Formulations, Inc. (Inactive)
     100%
  The Companys foreign subsidiaries are considered to be self-sustaining foreign operations. Accordingly, assets and liabilities are translated at exchange rates in effect at the balance sheet date while revenues and expenses are translated at average exchange rates prevailing during the year. The resulting translation adjustment is included in accumulated other comprehensive income until there is a reduction in the net investment. (b)
     Revenue recognition
  Sales of goods are recognized when persuasive evidence of an arrangement exists, delivery has occurred, title and risk have passed to the customer, the sales price is fixed and determinable, and collectibility is reasonably assured. The above conditions are generally satisfied when the goods are delivered to the end customers or to the wholesale distributor. In instances when the above criteria are not satisfied, revenue is deferred until all conditions required for recognition of revenue are met. (c)
     Financial instruments
  The Company has designated its cash, bank indebtedness and foreign exchange forward contracts as held-for-trading, which are measured at fair market value with changes in fair value recorded in earnings. Accounts receivable are classified as loans and receivable which are measured at amortized cost. Accounts payable, accrued liabilities and long-term debt are classified as other liabilities, which are measured at amortized cost. The Company has adopted the changes made by CICA to Section 3862, Financial Instruments: Disclosures, whereby an entity is required to classify and disclose the fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy shall have the following levels: 53


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CHAI-NA-TA CORP.Notes to the Consolidated Financial Statements(Stated in Canadian Dollars except tabular amounts in thousands of Canadian dollars)For the years ended December 31, 2009, 2008 and 2007
  Level 1  valuation based on quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2  valuation techniques based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and Level 3  valuation techniques using inputs for the asset or liability that are not based on observable market data (unobservable inputs). The fair value hierarchy requires the use of observable market inputs whenever such inputs exist. A financial instrument is classified to the lowest level of the hierarchy for which a significant input has been considered in measuring fair value. The required disclosures are included in Note 21. (d)
     Cash
  Cash consists of cash on hand and deposits in banks. (e)
     Inventory
  Inventory is valued at the lower of average cost and estimated net realizable value. The determination of net realizable value reflects managements best estimate of the expected selling price of the roots as well as consideration of qualitative factors such as size, shape, colour and taste. The carrying value of inventory also reflects managements expectation that the inventory will eventually be sold. Inventory written down to its estimated net realizable value can subsequently be written up to the lesser of its new estimated net realizable value or original cost. (f)
     Ginseng crops
  The Company uses the full absorption costing method to value its ginseng crops. Included in crop costs are seeds, labour, applicable overhead, interest and supplies as per the consolidated statement of crop costs. Common costs are allocated in each period based on the total number of acres under cultivation during the period. The carrying value of ginseng crops is reviewed on a regular basis for any impairment in value, using managements best estimate as to expected future market values, yields and costs to harvest. Ginseng crops which include an impairment in value can subsequently have that impairment reversed upon a change in the factors used in managements estimate of value. Crop costs related to the acreage harvested and sold have been charged to cost of sales. 54


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CHAI-NA-TA CORP.Notes to the Consolidated Financial Statements(Stated in Canadian Dollars except tabular amounts in thousands of Canadian dollars)For the years ended December 31, 2009, 2008 and 2007
  (g)
     Property, plant and equipment and depreciation
  Property, plant and equipment are recorded at cost less accumulated depreciation. Depreciation is provided on a straight-line basis over the following periods except as noted below: Buildings
     20 yearsDryers and related works
     20 yearsComputer equipment and software
     4 yearsFurniture and fixtures
     10 yearsMachinery and equipment
     10 yearsSunshade
     10 yearsVehicles
     8 yearsPavement
     12.5 years
  Property, plant and equipment are reviewed on a regular basis for impairment upon the occurrence of events or changes in circumstances which indicate that the net book value of the assets may not be recoverable based on estimated undiscounted future cash flows generated by their use. To the extent not recoverable, impaired assets are written down to their fair value. (h)
     Income taxes
  The Company accounts for income taxes using the asset and liability method. Under this method, future income taxes are recorded for the temporary differences between the financial reporting basis and tax basis of the Companys assets and liabilities, and for losses and other deductions carried forward. Future tax assets and liabilities are measured using substantively enacted tax rates expected to apply in the years in which such temporary differences or losses and other deductions carried forward are expected to be recovered or settled. A valuation allowance is recognized to the extent that the recoverability of future income tax assets is not considered likely. (i)
     Earnings (loss) per common share
  Basic earnings (loss) per share is computed by dividing net earnings (loss) attributable to common shareholders by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per share reflects the potential dilution of common shares by including other common share equivalents in the weighted average number of common shares outstanding for a period, if dilutive. Common share equivalents consist of convertible preferred shares and the incremental number of shares issuable upon the exercise of stock options. A reconciliation of net loss per common share and the weighted average shares used in the earnings per share calculations for fiscal 2009, 2008 and 2007 is as follows: 55


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CHAI-NA-TA CORP.Notes to the Consolidated Financial Statements(Stated in Canadian Dollars except tabular amounts in thousands of Canadian dollars)For the years ended December 31, 2009, 2008 and 2007
  Net Earnings
     
     
     Thousands of
     
     
     Earnings(Loss)
     
     
     Shares
     
     
     (Loss)(numerator)
     
     
     (denominator)
     
     
     Per Share2009Basic and Diluted
     $
     669
     
     
     34,698
     
     $
     0.022008Basic and Diluted
     $
     (4,670
     )
     
     34,698
     
     $
     (0.13
     )2007Basic and Diluted
     $
     (3,329
     )
     
     34,698
     
     $
     (0.10
     )
  The Company had no stock options outstanding as at December 31, 2009 or 2008. The 343,400 stock options to purchase shares as at December 31, 2007, were not included in the computation of diluted loss per share because their effect would have been anti-dilutive. (j)
     Stockbased compensation plans
  The Company has adopted the recommendations of the Canadian Institute of Chartered Accountants (CICA) with respect to stock-based compensation and other stock-based payments. This section establishes standards for recognition, measurement and disclosure of stock-based compensation and other stock-based payments made in exchange for goods and services. The standard requires that all stock-based awards made to employees and non-employees be measured and recognized using a fair value based method. (k)
     Foreign exchange forward contracts
  The Company periodically enters into foreign exchange forward contracts to manage foreign exchange risk associated with future debt repayments denominated in foreign currencies. Realized and unrealized gains and losses resulting from changes in the market value of these contracts are recorded as other income unless they meet specified criteria to qualify as a hedging instrument under Canadian GAAP. The Company has not had any contracts that meet the criteria for hedging instruments during the three years ended December 31, 2009. (l)
     Use of estimates
  The presentation of financial statements in conformity with Canadian generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and other disclosures as at the end of or during the reporting periods. Significant estimates are used for, but not limited to, the accounting for doubtful accounts, net realizable value of inventory, crop costs, depreciation on property, plant and equipment, future income taxes, accrued liabilities and contingencies. Actual results may differ from these estimates. 56


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CHAI-NA-TA CORP.Notes to the Consolidated Financial Statements(Stated in Canadian Dollars except tabular amounts in thousands of Canadian dollars)For the years ended December 31, 2009, 2008 and 2007
  (m)
     Accounting changes
  On January 1, 2009, the Company adopted CICA Handbook Section 3064, Goodwill and Intangible Assets. This Section establishes standards for the recognition, measurement, presentation and disclosure of goodwill and intangible assets. The adoption of this standard has not had a significant impact on the Companys consolidated financial statements. On January 20, 2009, the CICA published the Emerging Issues Committee (EIC) Abstract 173, "Credit Risk and the Fair Value of Financial Assets and Liabilities". The EIC states that an entitys own credit risk and the credit risk of the counterparty should be taken into account in determining the fair value of financial assets and liabilities, including derivative instruments. This recommendation is to be applied retrospectively without restatement of prior periods to all financial assets and liabilities measured at fair value in interim and annual financial statements ending on or after the date of issuance of the Abstract. The Company has adopted this standard and determined that it does not have a material impact on the Companys consolidated financial statements. On August 20, 2009, the CICA published amendments to CICA Handbook Section 3025 "Impaired Loans" and Section 3855 "Financial Instruments - Recognition and Measurement". These amendments were made to: add guidance concerning the assessment of embedded derivatives upon reclassification of a financial asset out of the held-for-trading category; change the categories into which a debt instrument is required or permitted to be classified; change the impairment model for held-to-maturity financial assets and; require the reversal of previously recognized impairment losses on available-for-sale financial assets in specified circumstances. These amendments apply to annual financial statements relating to fiscal years beginning after November 1, 2008. The Company has adopted these amended standards and determined that they do not have a material impact on the Companys consolidated financial statements. The Company has adopt amendments to CICA Handbook Section 3862, Financial Instruments -Disclosure. This Section has been amended to include additional disclosure requirements about fair value measurements of financial instruments and to enhance liquidity risk disclosures. The amendments apply to annual financial statements relating to fiscal years ending after September 30, 2009. The Company has adopted these amended standards and the additional disclosures are included in Note 21. (n)
     Future changes in accounting policies
  In April 2008, the Canadian Accounting Standards Board confirmed that on January 1, 2011 Canadian GAAP will be replaced by International Financial Reporting Standards (IFRS) for publicly accountable enterprises. Changing from current Canadian GAAP to IFRS will be a significant undertaking that may materially affect the Companys reported financial position and result of operations. 57


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CHAI-NA-TA CORP.Notes to the Consolidated Financial Statements(Stated in Canadian Dollars except tabular amounts in thousands of Canadian dollars)For the years ended December 31, 2009, 2008 and 2007
  4.
     GINSENG CROPS
  Ginseng plants reach maturity and can be harvested at the end of their third year of growth. However, the Company may allow crops to mature longer to allow for higher yields and additional seed harvests. Costs accumulated relating to the expected harvest in the next year have been classified as current assets. At December 31, 2009, total area under cultivation and management is 266 acres. A breakdown of acreage by year planted is as follows: Year planted
     Number of acres2005
     1242006
     332008
     109266
  5.
     ASSETS HELD FOR SALE
  2009
     
     
     2008Land, building and related assets
     (a)
     $
     
     -
     $
     1,162Machinery, equipment, sunshade and vehicles
     (b)
     
     
     -
     
     621$
     
     -
     $
     1,783
  (a)
     Land, building and related assets
  Since March 2007, the Company had made available for sale its property located near Kamloops, British Columbia and has reclassified the net book value of the land, buildings, pavement, dryers and related production assets. This facility had been used as the head office for the farms operations in British Columbia. In October 2009, the Company sold the land, building and all related production assets located near Kamloops, British Columbia. These assets were sold for an amount greater than their net book value thus resulting in a gain on disposal of $281,000. 58


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CHAI-NA-TA CORP.Notes to the Consolidated Financial Statements(Stated in Canadian Dollars except tabular amounts in thousands of Canadian dollars)For the years ended December 31, 2009, 2008 and 2007
  (b)
     Machinery, equipment, sunshade and vehicles
  After the completion of the final harvest in British Columbia in December 2008, the Company made available for sale all of its remaining operating assets including machinery, equipment, sunshade, and vehicles. These assets were sold during 2009 for an aggregate amount greater than their net book value thus resulting in a gain on disposal of $322,000. 6.
     PROPERTY, PLANT AND EQUIPMENT
  2009Accumulated
     
     
     Net BookCost
     
     
     Depreciation
     
     
     ValueLand
     $
     171
     
     $
     -
     
     $
     171Buildings
     
     1,220
     
     
     317
     
     
     903Dryers and related works
     
     602
     
     
     183
     
     
     419Computer equipment and software
     
     82
     
     
     73
     
     
     9Furniture and fixtures
     
     203
     
     
     188
     
     
     15Machinery and equipment
     
     3,134
     
     
     2,417
     
     
     717Sunshade
     
     2,852
     
     
     2,694
     
     
     158Vehicles
     
     220
     
     
     127
     
     
     93Pavement
     
     47
     
     
     19
     
     
     28$
     8,531
     
     $
     6,018
     
     $
     2,513
  2008Accumulated
     
     
     Net BookCost
     
     
     Depreciation
     
     
     ValueLand
     $
     171
     
     $
     -
     
     $
     171Buildings
     
     1,216
     
     
     256
     
     
     960Dryers and related works
     
     534
     
     
     156
     
     
     378Computer equipment and software
     
     109
     
     
     105
     
     
     4Furniture and fixtures
     
     203
     
     
     184
     
     
     19Machinery and equipment
     
     2,882
     
     
     2,053
     
     
     829Sunshade
     
     2,751
     
     
     2,552
     
     
     199Vehicles
     
     192
     
     
     106
     
     
     86Pavement
     
     47
     
     
     15
     
     
     32$
     8,105
     
     $
     5,427
     
     $
     2,678
  59


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CHAI-NA-TA CORP.Notes to the Consolidated Financial Statements(Stated in Canadian Dollars except tabular amounts in thousands of Canadian dollars)For the years ended December 31, 2009, 2008 and 2007
  7.
     BANK INDEBTEDNESS
  2009
     
     
     2008Bank operating loan
     (a)
     $
     **-**
     ****
     $
     1,060Bank term loan
     (b)
     
     **-**
     ****
     
     2,000$
     **-**
     ****
     $
     3,060
  (a)
     Bank operating loan
  At December 31, 2009, the Company had a $500,000 revolving demand operating loan with a Canadian chartered bank at a rate of prime plus 3.75% per annum. Based on its positive cash position, the Company could not draw on this facility as of December 31, 2009. The loan availability will reduce to zero effective March 31, 2010. During the year, the Company incurred $11,000 (2008 - $111,000) of interest which has been included in interest on short-term debt on the statement of operations and deficit. (b)
     Term loan
  On September 4, 2008, the Company secured a $2,000,000 non-revolving term loan from a Canadian chartered bank with an interest rate of prime plus 1.875% per annum which was fully repaid by the due date of May 31, 2009. The loan was secured by the Company's property located near Kamloops, British Columbia. During the year, the Company incurred $26,000 (2008 -$33,000) of interest on this debt which has been included in interest on short-term debt on the statements of operations and deficit. 8.
     CUSTOMER DEPOSITS
  Customer deposits represent deposits received from customers to secure inventory purchase commitments prior to the actual delivery of inventory. 9.
     LONG-TERM DEBT
  2009
     
     
     2008Term loan
     (a)
     $
     6,945
     
     $
     8,587Equipment purchase loans
     (b)
     
     -
     
     
     746,945
     
     
     8,661Less: current portion
     
     
     446
     
     
     42$
     6,499
     
     $
     8,619
  60


---

CHAI-NA-TA CORP.Notes to the Consolidated Financial Statements(Stated in Canadian Dollars except tabular amounts in thousands of Canadian dollars)For the years ended December 31, 2009, 2008 and 2007
  *(a)*
     Term loan
  On August 18, 2006, the Company established a four year term loan facility of HK$54,700,000 from a company formerly under common control of which HK$3,200,000 was repaid on August 31, 2009. As of September 1, 2009 the Company agreed to a three year extension of the remaining HK$51,500,000 loan facility. The loan is unsecured and bears interest at 1.75% per annum over the HIBOR (Hong Kong Interbank Offered Rate) or LIBOR (London Interbank Offered Rate) through February 28, 2010 after which it will bear interest at a flat rate of 6.25% for the duration of the loan. For the year ended December 31, 2009, the company incurred $283,000 (2008 - $425,000, 2007 - $626,000) of interest which has been included in interest on long-term debt on the statement of operations and deficit. The term loan is scheduled to be repaid over the next three years as follows (all amounts in thousands of dollars of the respective currencies): Schedule repayments
     
     
     Canadian dollarYear
     
     HK$
     
     
     
     US$
     
     
     equivalents2010
     $
     3,300
     
     
     $
     -
     
     $
     4462011
     
     16,700
     
     
     
     -
     
     
     2,2542012
     
     1,250
     
     
     
     3,878
     
     
     4,245$
     21,250
     
     
     $
     3,878
     
     $
     6,945
  (b)
     Equipment purchase loans
  The Company had entered into various equipment purchase loan agreements all of which have been fully repaid as at December 31, 2009. For the year ended December 31, 2009, the Company incurred $3,000 (2008 - $5,000; 2007 - $6,000) of interest which has been included in interest on long-term debt on the statement of crop costs and $NIL (2008 - $1,000, 2007 - $1,000) of interest which has been included in interest on long-term debt on the statements of crop costs. 10.
     SHARE CAPITAL AND CONTRIBUTED SURPLUS
  Authorized share capital consists of an unlimited number of common shares without nominal or par value and 21 million Series 1 non-voting, non-cumulative preferred shares, convertible into common shares on a 1:1 basis. Any issued and outstanding preferred shares will automatically be converted into common shares in 2010. There are currently no outstanding preferred shares. 61


---

CHAI-NA-TA CORP.Notes to the Consolidated Financial Statements(Stated in Canadian Dollars except tabular amounts in thousands of Canadian dollars)For the years ended December 31, 2009, 2008 and 2007
  Outstanding shares are as follows: Thousands of shares
     
     
     AmountCommon sharesBalance at December 31, 2008 and 2009
     
     34,698
     
     $
     38,246Contributed SurplusBalance at December 31, 2008 and 2009
     
     
     
     $
     338
  11.
     STOCK OPTIONS
  The Company maintains a stock option plan and grants options to officers, directors and employees of the Company at market prices. A total of 785,000 shares were reserved for issue under the plan. The options vest at the date of grant and expire five years thereafter. There are no options to purchase shares outstanding as at December 31, 2009. Information regarding the Company's stock options for each of the periods is summarized as follows: Number of shares
     
     
     Exercise price range
($/share)Outstanding as at December 31, 2007
     
     343,400
     
     $
     0.73Expired
     
     (343,400
     )
     
     0.73Outstanding and exercisable as at December 31, 2008 and 2009
     
     -
     
     $
     -
  There were no options granted or modified during the three years ended December 31, 2009. 62


---

CHAI-NA-TA CORP.Notes to the Consolidated Financial Statements(Stated in Canadian Dollars except tabular amounts in thousands of Canadian dollars)For the years ended December 31, 2009, 2008 and 2007
  12.
     WRITE-DOWN OF INVENTORY AND GINSENG CROPS
  2009
     
     
     2008
     
     
     2007Write-down of ginseng inventory
     $
     64
     
     $
     2,498
     
     $
     1,285Reversal of prior year write-down of ginseng crops
     
     (500
     )
     
     -
     
     
     -Write-down of ginseng crops
     
     450
     
     
     500
     
     
     1,450$
     14
     
     $
     2,998
     
     $
     2,735
  For the year ended December 31, 2009, the Company recorded a reversal of the $500,000 write-down on its ginseng crops that were harvested during the last quarter of 2009. The net realizable value of the ginseng crops harvested in 2009 was higher than had been estimated at December 31, 2008 and therefore the Company reversed the entire write-down that had been recorded. The net realizable value as at December 31, 2009 was determined through sales contracts with buyers that had been agreed to during the final quarter of 2009. The Company recorded a write-down of $450,000 on its long-term ginseng crops which it intends to harvest at the end of 2011. The net realizable value of the long-term ginseng crops was estimated based on current sales prices and estimated future yields, quality and costs to bring the crops to harvest. The Company also recorded a write-down of $64,000 on ginseng fibres from prior harvests resulting in a new carrying value of zero as the ability of the Company to sell these specific ginseng fibres is uncertain. For the year ended December 31, 2008, the Company recorded a write-down of inventory of $2,498,000 on its ginseng crops harvested in 2008 to reduce the carrying value of the inventory to its estimated net realizable value. This amount includes a $1,500,000 write-down in the third quarter of 2008 and an additional $998,000 write-down that was recognized upon the completion of the 2008 harvest. The Company also recorded a write-down of $500,000 on its current ginseng crops which it intends to harvest at the end of 2009. The net realizable value of the inventory was estimated based on purchase commitments received for inventory on hand. For the year ended December 31, 2007, the Company recorded a write-down of $1,450,000 on ginseng crops to reduce their carrying value to their net realizable value. The net realizable value of the ginseng crops was estimated based on the estimated yield and quality of the crops upon harvest, accumulated costs, estimated additional costs required to bring the crops to harvest and current and projected selling prices. During the three months ended June 30, 2007, the Company recorded a write-down on inventory of $1,285,000. This inventory was being held by the Company to fulfill a contract with a Canadian customer for a predetermined minimum quantity at a fixed price. The contract expired and the customer did not order the predetermined minimum quantity. Due to the uncertainty of the Company's ability to receive the contracted amount, a write-down was recorded to reduce the carrying value of the inventory to its estimated net realizable value instead of the predetermined contract price. 63


---

CHAI-NA-TA CORP.Notes to the Consolidated Financial Statements(Stated in Canadian Dollars except tabular amounts in thousands of Canadian dollars)For the years ended December 31, 2009, 2008 and 2007
  13.
     SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
  2009
     
     
     2008
     
     
     2007Selling, general and administrative expenses
     $
     928
     
     $
     969
     
     $
     1,068Wind-up expenses of terminated operations
     
     530
     
     
     -
     
     
     -$
     1,458
     
     $
     969
     
     $
     1,068
  The wind-up expenses of terminated operations include all expenditures associated with closing the ginseng farm operations in British Columbia after the final harvest was completed in 2008. 14.
     OTHER INCOME (LOSS)
  2009
     
     
     2008
     
     
     2007Foreign exchange gain (loss)
     $
     470
     
     $
     (769
     )
     $
     638Gain on disposal of property, plant and equipment
     
     611
     
     
     256
     
     
     474Government supplements
     
     995
     
     
     64
     
     
     -Other non-operating income (expenses)
     
     3
     
     
     3
     
     
     (11
     )$
     2,079
     
     $
     (446
     )
     $
     1,101
  The gain on disposal of property, plant and equipment includes gains on the disposal of items that were previously reclassified as assets held for sale. Government supplements include funds received from Agriculture Canada as compensation for cost of production increases and reduced margins of the Company's farming operations in prior years, net of program participation fees and related costs. 64


---

CHAI-NA-TA CORP.Notes to the Consolidated Financial Statements(Stated in Canadian Dollars except tabular amounts in thousands of Canadian dollars)For the years ended December 31, 2009, 2008 and 2007
  15.
     FUTURE INCOME TAXES
  Temporary differences and loss carry forwards that give rise to future income tax assets and liabilities as at December 31, 2009 and 2008 are as follows: 2009
     
     
     2008Future income tax assets (liabilities)Property, plant and equipment
     $
     (41
     )
     $
     71Tax loss carryforwards
     
     5,041
     
     
     6,6395,000
     
     
     6,710Less: valuation allowance
     
     5,000
     
     
     6,710Future income tax assets
     $
     -
     
     $
     -
  The majority of the above differences relate to the Companys farming operations, which are taxable on a cash basis under Canadian tax law and allow for taxable adjustments of inventory and ginseng crops at the discretion of the Company. The provision for (recovery of) income taxes has been calculated as follows: 2009
     
     
     2008
     
     
     2007Canadian statutory tax rate
     
     33.00
     %
     
     33.00
     %
     
     33.50
     %Income taxes payable (recoverable) at the Canadian statutory rates
     $
     221
     
     $
     (1,541
     )
     $
     (1,065
     )Adjustments:Foreign tax rate differential
     
     (10
     )
     
     34
     
     
     30Change in future income tax rates
     
     1,477
     
     
     80
     
     
     200Other
     
     22
     
     
     (57
     )
     
     163Valuation allowance
     
     (1,710
     )
     
     1,484
     
     
     672Provision for (recovery of) income taxes
     $
     -
     
     $
     -
     
     $
     -
  The Companys foreign subsidiaries have tax losses available for carry forward of approximately $925,000 to reduce future taxable income, subject to the approval of the tax authorities, which can be carried forward indefinitely. The Company and domestic subsidiaries have tax losses available for carry forward of approximately $17,498,000 which can be applied to reduce future taxable income and expire at various times over the next four to twenty years. 65


---

CHAI-NA-TA CORP.Notes to the Consolidated Financial Statements(Stated in Canadian Dollars except tabular amounts in thousands of Canadian dollars)For the years ended December 31, 2009, 2008 and 2007
  16.
     COMMITMENTS, CONTINGENCIES AND GUARANTEES
  (a)
     Operating leases and land rentals
  The Company has entered into operating leases for vehicles, farming equipment and offices expiring at various times to 2012. Total future minimum payments required under these leases are as follows: 2010
     $
     762011
     
     622012
     
     15$
     153
  The Company is committed to agricultural land rentals for the next three years as follows: 2010
     $
     1052011
     
     392012
     
     39$
     183
  The Company has incurred rental costs on operating leases and land rentals of $302,000, $476,000 and $635,000 for the years ended December 31, 2009 2008 and 2007, respectively, of which $265,000, $441,000 and, $591,000 was capitalized to crop costs for the respective years. (b)
     Other commitments, contingencies and guarantees
  The Company has become involved in a legal proceeding as a result of an automobile accident. The Company believes that existing insurance will be sufficient to cover any claim from this matter. While the outcome of this proceeding cannot be determined at this time, no provision has been recorded as the Company believes that the resolution of these proceedings will not have a material impact on the financial condition, earnings or cash flows of the Company. 17.
     FOREIGN EXCHANGE FORWARD CONTRACTS
  As at December 31, 2009, the Company had entered into a forward contract with a Canadian bank to purchase US$1,400,000 on March 22, 2010 to partially fix the rate of exchange on the term loan described in Note 9(a). If the spot Canadian/US dollar exchange rate is less than or equal to $1.0625 on the contract date, the exchange rate of the purchase will be $1.0625. If the exchange rate is greater than or equal to $1.0775 on the contract date, the exchange rate of the purchase will be $1.0775. If the exchange rate is between $1.0625 and $1.0775 on the contract date, the contract will expire and a purchase obligation will not take place. At December 31, 2009, the closing exchange rate of $1.0510 resulted in a liability of $16,000 for the Company on the contract which is included in accounts payable and accrued liabilities on the balance sheet. 66


---

CHAI-NA-TA CORP.Notes to the Consolidated Financial Statements(Stated in Canadian Dollars except tabular amounts in thousands of Canadian dollars)For the years ended December 31, 2009, 2008 and 2007
  As at December 31, 2008, the Company had entered into a forward contract with a Canadian bank to purchase US$2,500,000 on March 19, 2009 to partially fix the rate of exchange on the term loan described in Note 9(a). If the spot Canadian/US dollar exchange rate is less than or equal to $1.0460 on the contract date, the exchange rate of the purchase will be $1.0460. If the exchange rate is greater than or equal to $1.0600 on the contract date, the exchange rate of the purchase will be $1.0600. If the exchange rate is between $1.0460 and $1.0600 on the contract date, the contract will expire and a purchase obligation will not take place. At December 31, 2008, the closing exchange rate of $1.2180 resulted in a fair market value of this contract of $395,000 which was included in accounts receivable and other assets on the balance sheet. 18.
     SEGMENTED REPORTING
  The Company operates in one industry segment and two geographic regions. The geographic region that the revenue is derived from is determined by the residency of the customer. Long-lived assets consist of non-current ginseng crops and property, plant and equipment. Major customers include all customers with whom the Company has derived revenue greater than 10% of its total revenue within the reporting period. Information by geographic region is summarized as follows: Year endedDecember 31, 2009
     
     Canada
     
     
     Far East
     
     
     
     ConsolidatedRevenue - external
     $
     1,473
     
     $
     5,468
     
     
     $
     6,941Revenue - intercompany between regions
     
     4,454
     
     
     556Total revenue
     $
     5,927
     
     $
     6,024Net earnings
     $
     605
     
     $
     64
     
     
     $
     669Long-lived assets
     $
     4,667
     
     $
     -
     
     
     $
     4,667
  Major Customers For the year ended December 31, 2009, consolidated revenue included sales to three customers, which accounted for $1,040,000 from the Canadian geographic region and $2,328,000 and $2,013,000, respectively, from the Far East geographic region. Year endedDecember 31, 2008
     
     Canada
     
     
     Far East
     
     
     
     ConsolidatedRevenue - external
     $
     1,196
     
     $
     8,036
     
     
     $
     9,232Revenue - intercompany between regions
     
     7,002
     
     
     277Total revenue
     $
     8,198
     
     $
     8,313Net loss
     $
     (4,022
     )
     $
     (648
     )
     
     $
     (4,670
     )Long-lived assets
     $
     7,491
     
     $
     -
     
     
     $
     7,491
  67


---

CHAI-NA-TA CORP.Notes to the Consolidated Financial Statements(Stated in Canadian Dollars except tabular amounts in thousands of Canadian dollars)For the years ended December 31, 2009, 2008 and 2007
  Major Customers For the year ended December 31, 2008, consolidated revenue included sales to three customers, which accounted for $3,049,000, $2,825,000 and $2,192,000, respectively, from the Far East geographic region. Year endedDecember 31, 2007
     
     Canada
     
     
     Far East
     
     
     
     ConsolidatedRevenue - external
     $
     3,453
     
     $
     4,108
     
     
     $
     7,561Revenue - intercompany between regions
     
     5,283
     
     
     -Total revenue
     $
     8,736
     
     $
     4,108Net earnings (loss)
     $
     (3,382
     )
     $
     53
     
     
     $
     (3,329
     )Long-lived assets
     $
     9,512
     
     $
     -
     
     
     $
     9,512
  Major Customers For the year ended December 31, 2007, consolidated revenue included sales to two customers, which accounted for $1,819,000 from the Canadian geographic region and $3,633,000 from the Far East geographic region. 19.
     OTHER INFORMATION
  (a)
     Items included in net loss not affecting cash
  2009
     
     
     2008
     
     
     2007Depreciation and amortization
     $
     10
     
     $
     9
     
     $
     16Cost of ginseng crops sold
     
     5,906
     
     
     8,548
     
     
     7,309Write-down of inventory and crop costs net of reversals
     
     14
     
     
     2,998
     
     
     2,735Non-cash realized foreign exchange (gains) losses
     
     (410
     )
     
     782
     
     
     (885
     )Gain on disposal of property, plant and equipment
     
     (611
     )
     
     (256
     )
     
     (474
     )$
     4,909
     
     $
     12,081
     
     $
     8,701
  (b)
     Changes in non-cash operating assets and liabilities
  2009
     
     
     2008
     
     
     2007Accounts receivable and other assets
     $
     302
     
     $
     (259
     )
     $
     123Inventory
     
     (16
     )
     
     (9
     )
     
     4Prepaid expenses
     
     (3
     )
     
     (68
     )
     
     6Accounts payable and accrued liabilities
     
     (161
     )
     
     (744
     )
     
     281Customer deposits
     
     848
     
     
     66
     
     
     995$
     970
     
     $
     (1,014
     )
     $
     1,409
  68


---

CHAI-NA-TA CORP.Notes to the Consolidated Financial Statements(Stated in Canadian Dollars except tabular amounts in thousands of Canadian dollars)For the years ended December 31, 2009, 2008 and 2007
  20.
     CAPITAL DISCLOSURES
  The Company's current objective in managing capital is to safeguard the entity's ability to continue as a going concern so that in the long-term the Company can provide maximum returns for shareholders and benefits for other stakeholders. The Company includes shareholders equity, lease financing, term loans, bank financing, and equipment loan purchases in its definition of capital. The Company met its objective in managing capital by using funds from the sale of inventory and assets held for sale to repay debt while maintaining sufficient capital to fund operations. The Company is not subject to any externally imposed financial covenants. 21.
     FINANCIAL INSTRUMENTS
  Financial instruments of the Company are represented by cash, accounts receivable and other assets, bank indebtedness, accounts payable and accrued liabilities, long-term debt and foreign exchange forward contracts. The carrying value of these instruments, other than long-term debt, approximates their fair value due to the short-term maturity of such items or their bearing market related rates of interest. The fair value of the long-term debt is not readily determinable due to the lender being a company formerly under common control. Hierarchy of Financial Instruments The following fair value hierarchy reflects the significance of the inputs used in making measurements of the Companys financial instruments: As at December 31, 2009Financial assets
     
     Total
     
     
     Level 1
     
     
     Level 2
     
     
     Level 3Cash
     $
     2,488
     
     $
     2,488
     
     $
     -
     
     $
     -Foreign exchange forward contracts
     
     -
     
     
     -
     
     
     -
     
     
     -$
     2,488
     
     $
     2,488
     
     $
     -
     
     $
     -Financial liabilitiesBank indebtedness
     $
     -
     
     $
     -
     
     $
     -
     
     $
     -Foreign exchange forward contracts
     
     16
     
     
     -
     
     
     16
     
     
     -$
     16
     
     $
     -
     
     $
     16
     
     $
     -
  69


---

CHAI-NA-TA CORP.Notes to the Consolidated Financial Statements(Stated in Canadian Dollars except tabular amounts in thousands of Canadian dollars)For the years ended December 31, 2009, 2008 and 2007
  As at December 31, 2008Financial assets
     
     Total
     
     
     Level 1
     
     
     Level 2
     
     
     Level 3Cash
     $
     192
     
     $
     192
     
     $
     -
     
     $
     -Foreign exchange forward contracts
     
     395
     
     
     -
     
     
     395
     
     
     -$
     587
     
     $
     192
     
     $
     395
     
     $
     -Financial liabilitiesBank indebtedness
     $
     3,060
     
     $
     3,060
     
     $
     -
     
     $
     -Foreign exchange forward contracts
     
     -
     
     
     -
     
     
     -
     
     
     -$
     3,060
     
     $
     3,060
     
     $
     -
     
     $
     -
  Level 1 includes financial instruments for which quoted prices in active markets exist for identical assets or liabilities. Level 2 includes financial instruments for which fair value inputs other than quoted prices are observable for the asset or liability, either directly or indirectly. Level 3 includes financial instruments for which fair value inputs are not based on observable market data. There were no significant transfers between Level 1 and Level 2 of the fair value hierarchy during 2009. Liquidity risk Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company manages liquidity risk through the management of its capital structure and financial leverage as outlined in Note 20. The Companys financial obligations are due as follows: Total
     
     
     Within 1 Month
     
     
     Between 1 and 3 Months
     
     
     Between 3 and 12 Months
     
     
     Between 1 to 3 YearsAccounts payable
     $
     46
     
     $
     46
     
     $
     -
     
     $
     -
     
     $
     -Accrued liabilities
     
     414
     
     
     23
     
     
     127
     
     
     264
     
     
     -Interest on long-term debt
     
     1,139
     
     
     -
     
     
     -
     
     
     413
     
     
     726Long-term debt
     
     6,945
     
     
     -
     
     
     -
     
     
     446
     
     
     6,499$
     8,544
     
     $
     69
     
     $
     127
     
     $
     1,123
     
     $
     7,225
  Interest accrued at December 31, 2009 is included in accrued liabilities while estimated future interest payments are included in interest on long-term debt. 70


---

CHAI-NA-TA CORP.Notes to the Consolidated Financial Statements(Stated in Canadian Dollars except tabular amounts in thousands of Canadian dollars)For the years ended December 31, 2009, 2008 and 2007
  Interest rate risk Interest on the Company's line of credit and term loans were based on variable rates as described in Notes 7 and 9, respectively. At December 31, 2009, the Company has no outstanding balance on its operating loan and after March 1, 2010, the term loan will be based on a fixed rate. Therefore the Company is no longer exposed to significant interest rate risk as at December 31, 2009. Credit risk Credit risk is the risk of an unexpected loss if a customer or third party to a financial instrument fails to meet its contractual obligations. The Company is exposed to credit risk on accounts receivable from customers and on cash and foreign exchange forward contracts. A majority of the Company's sales are made to a small number of customers that are concentrated in Asian markets. To manage its credit risk, the Company carefully monitors credit terms, investigates credit history and only grants credit to customers with established relationships or acceptable credit ratings. Letters of credit may be used, or inventory may be held as security until payment is received, when such relationships have not been established. As at December 31, 2009, there was $NIL in accounts receivable related to major customers (December 31, 2008 - $NIL related to major customers). As at December 31, 2009, the amount of non-current accounts receivable was $13,000. There was no impairment allowance recorded for possible non-collection of this amount as the Company considers the amount very likely to be fully collected. The credit risk on the Company's cash and foreign exchange forward contracts are substantially minimized as they are placed in, or contracted with, large financial institutions. While the Company is exposed to credit losses due to the financial collapse by those who are custodians to the Company's cash and those that are counter parties to the foreign exchange forward contracts, the Company considers this risk quite remote. Currency Risk The Company is exposed to currency exchange risk as a result of its international markets and operations and due to the term loan detailed in Note 9(a). The Company periodically enters into foreign exchange forward purchase contracts to manage foreign exchange risk associated with anticipated future debt and interest payments denominated in foreign currencies. 71


---

CHAI-NA-TA CORP.Notes to the Consolidated Financial Statements(Stated in Canadian Dollars except tabular amounts in thousands of Canadian dollars)For the years ended December 31, 2009, 2008 and 2007
  The Company is exposed to currency risk through the following assets and liabilities denominated in United States dollars (all assets and liabilities denominated in Hong Kong dollars have been translated to United States dollars at the rate of 7.80 to 1.00 which is a fixed rate determined by the Hong Kong Monetary Authority): (in thousands of United States dollars)
     
     2009
     
     
     2008Cash
     $
     19
     
     $
     28Accounts receivable
     
     1
     
     
     -Foreign exchange contracts
     
     1,400
     
     
     2,500Accounts payable and accured liabilities
     
     (208
     )
     
     (50
     )Long-term debt
     
     (6,603
     )
     
     (7,013
     )Net exposure
     $
     (5,391
     )
     $
     (4,535
     )
  Based on the above net exposure as at December 31, 2009, an increase in the spot Canadian/US dollar exchange rate of $0.10 would result in a foreign exchange loss of $539,000 while a decrease of $0.10 would result in a corresponding foreign exchange gain. The Company also has foreign exchange exposure related to the foreign exchange adjustment of the deficit of self-sustaining foreign operations which is included in accumulated other comprehensive income. As a result, an increase in the spot Canadian/US dollar exchange rate of $0.10 would result in other comprehensive income of $201,000 while a decrease of $0.10 would result in a corresponding other comprehensive loss. Cumulatively, an increase in the spot Canadian/US dollar exchange rate of $0.10 would result in a decrease to comprehensive income of $338,000 while a decrease of $0.10 would result in a corresponding increase to comprehensive income. 22.
     RELATED PARTY TRANSACTIONS
  In the normal course of business, the Company pays management fees to Wai Kee for performing sales, accounting and administrative services for CNT Trading (Hong Kong) Limited. Wai Kee is a Hong Kong based publicly traded company which owns 38% of the shares of the Company and has a director in common with the Company. The Company paid management fees of $114,000 for the year ended December 31, 2009 (2008 - $103,000, 2007 - $102,000) of which $17,000 remains outstanding as at December 31, 2009 (2008 - $20,000, 2007 - $14,000) and is included in accounts payable and accrued liabilities on the consolidated balance sheet. This related party transaction is measured at the exchange value. 72


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CHAI-NA-TA CORP.Notes to the Consolidated Financial Statements(Stated in Canadian Dollars except tabular amounts in thousands of Canadian dollars)For the years ended December 31, 2009, 2008 and 2007
  23.
     DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
  These consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles (GAAP) which differ in some respects from U.S. GAAP. The significant differences between Canadian and U.S. GAAP which affect the Companys financial statements are summarized below: a)
     Accounting for Capitalization of Interest
  Under Canadian GAAP, interest relating to expenditures on ginseng crop costs has been capitalized. The interest is included in inventory when the ginseng crops are harvested and cost of goods sold when the inventory is sold. Under U.S. GAAP, the portion of interest relating to expenditures on ginseng crop costs would not be eligible for capitalization to ginseng crop costs. The amount would be expensed as period costs and accordingly, the carrying value of crop costs and inventory under U.S. GAAP would be different. Similarly, interest that had been capitalized under Canadian GAAP and included in cost of sales would not have been reported as cost of sales for the period under U.S. GAAP since such costs would have previously have been expensed as period costs. *b)*
     Accounting for Write-downs of Inventory and Ginseng Crops
  Under Canadian GAAP, inventory and ginseng crops are recorded at the lower of cost or estimated net realizable value. Any write-down to estimated net realizable value can be reversed in subsequent periods if there is a change in circumstances which result in an increase in the estimated net realizable. Under U.S. GAAP, inventory and ginseng crops are also recorded at the lower of cost or estimated net realizable value but there is no allowance to reverse a write-down to estimated net realizable value as there is under Canadian GAAP. *c)*
     Interest and Finance Charges
  Under Canadian GAAP, interest and finance charges are presented as operating expenses and are included in the calculation of operating income. Under U.S. GAAP, interest and finance charges would be presented as non-operating expenses and would therefore be excluded from the calculation of operating income. 73


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CHAI-NA-TA CORP.Notes to the Consolidated Financial Statements(Stated in Canadian Dollars except tabular amounts in thousands of Canadian dollars)For the years ended December 31, 2009, 2008 and 2007
  *d)*
     Liability for Uncertain Tax Positions
  As provided by Accounting Standards Codification (ASC) 740 Income Taxes (formerly FASB Interpretation 48  Accounting for Uncertainty in Income Taxes), under U.S. GAAP there is a requirement to evaluate any tax positions that are uncertain and, if necessary, calculate a liability for uncertain tax positions. An analysis of the tax positions taken by the Company was completed and it was determined that there are no material tax positions that could be challenged by taxing authorities that would result in a substantial income tax liability. Under Canadian GAAP, there is no similar standard. e)
     Recent Accounting Pronouncements
  Pronouncements from the United States In June 2009, the FASB Codification of U.S. GAAP was launched. The FASB ASC will become the source of authoritative U.S. GAAP, it supersedes all existing accounting and reporting standards not issued by the Securities Exchange Commission (SEC), and all other non-SEC accounting literature not included in the Codification will become non-authoritative. This Statement is effective for fiscal years and interim periods beginning on or after September 15, 2009. The Company has incorporated these changes into its consolidated financial statement for the year ended December 31, 2009. In June 2009, the FASB issued an amendment to its guidance on Variable Interest Entities (VIE). This new guidance makes significant changes to the model for determining who should consolidate a VIE by specifically eliminating the quantitative approach and changing to a predominantly qualitative approach. This Statement is effective for fiscal years beginning on or after November 15, 2009. The Company does not expect the adoption of this amendment to have a material impact on the Companys consolidated financial statements. Pronouncements from Canada During the year ended December 31, 2009, the Company adopted various accounting standards relating to goodwill and intangible assets, credit risk and the fair value of financial assets and liabilities, impaired loans and financial instruments that were issued by the Canadian Institute of Chartered Accountants (CICA). These changes are fully described in Note 3(m) of the consolidated financial statements. Future change in accounting policies In April 2008, the Canadian Accounting Standards Board confirmed that on January 1, 2011 Canadian GAAP will be replaced by International Financial Reporting Standards (IFRS) for publicly accountable enterprises. Effective March 2008, the Securities and Exchange Commission ruled that it will accept financial statements prepared in accordance with IFRS without reconciliation to U.S. GAAP for financial years ending after November 15, 2007. As such, the Company does not expect that it will be reconciling to U.S. GAAP upon its conversion to IFRS on January 1, 2011. Changing from current Canadian GAAP to IFRS will be a significant undertaking that may materially affect the Companys reported financial position and result of operations. 74


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CHAI-NA-TA CORP.Notes to the Consolidated Financial Statements(Stated in Canadian Dollars except tabular amounts in thousands of Canadian dollars)For the years ended December 31, 2009, 2008 and 2007
  The difference between Canadian and U.S. GAAP and their effect on the Companys consolidated financial statements are summarized below. All amounts except per share amounts are in thousands of Canadian dollars: CONSOLDIATED BALANCE SHEET 2009
     
     
     2008AssetsInventory
     - Canadian GAAP
     $
     6,668
     
     $
     7,928- Interest capitalized (a)
     
     (13
     )
     
     (15
     )- Write-down of inventory (b)
     
     (486
     )
     
     15- US GAAP
     $
     6,169
     
     $
     7,928Ginseng crops current
     - Canadian GAAP
     $
     3,898
     
     $
     2,722- Interest capitalized (a)
     
     (4
     )
     
     (3
     )- US GAAP
     $
     3,894
     
     $
     2,719Ginseng crops
     - Canadian GAAP
     $
     2,154
     
     $
     4,764- Interest capitalized (a)
     
     (3
     )
     
     (5
     )- Write-down of crop costs (b)
     
     3
     
     
     -- US GAAP
     $
     2,154
     
     $
     4,759Shareholders' Equity
     - Canadian GAAP
     $
     7,144
     
     $
     6,111- Interest capitalized (a)
     
     (20
     )
     
     (23
     )- Write-down of inventory (b)
     
     (483
     )
     
     15- US GAAP
     $
     6,641
     
     $
     6,103
  CONSOLIDATED STATEMENT OF OPERATIONS 2009
     
     
     2008
     
     
     2007Net earnings (loss) as reported under Canadian GAAP
     $
     669
     
     $
     (4,670
     )
     $
     (3,329
     )Accounting for interest (a)
     
     4
     
     
     13
     
     
     119Write-down of inventoryand crop costs (b)
     
     (499
     )
     
     (9
     )
     
     (111
     )Other
     
     -
     
     
     -
     
     
     4Net earnings (loss) under USGAAP
     
     174
     
     
     (4,666
     )
     
     (3,317
     )Basic and diluted earnings (loss) per share
     $
     0.01
     
     $
     (0.13
     )
     $
     (0.10
     )Weighted average number of common shares (in thousands)
     
     34,698
     
     
     34,698
     
     
     34,698
  75


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CHAI-NA-TA CORP.Notes to the Consolidated Financial Statements(Stated in Canadian Dollars except tabular amounts in thousands of Canadian dollars)For the years ended December 31, 2009, 2008 and 2007
  CONSOLDIATED STATEMENT OF COMPREHENSIVE INCOME **2009**
     
     
     2008
     
     
     2007Net earnings (loss) under US GAAP
     $
     174
     
     $
     (4,666
     )
     $
     (3,317
     )Other comprehensive income (loss):Adjustments as a result of foreign exchange translation of self-sustaining subsidiaries
     
     364
     
     
     (460
     )
     
     312Comprehensive net earnings (loss) under US GAAP
     $
     538
     
     $
     (5,126
     )
     $
     (3,005
     )
  CONSOLDIATED STATEMENT OF CASH FLOWS There is no difference in net cash flows from Operating, Financing, and Investing Activities between U.S. and Canadian GAAP. 76


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