GLG
LIFE TECH CORPORATION
   CONSOLIDATED
FINANCIAL STATEMENTS
   Years
Ended December 31, 2009 and 2008
    Page
1 of 44
  
 
 INDEPENDENT
      AUDITORS’ REPORT
                      
                      PricewaterhouseCoopers
      LLP
                        Chartered
      Accountants
                        PricewaterhouseCoopers
      Place
                        250
      Howe Street, Suite 700
                        Vancouver,
      British Columbia
                        Canada
      V6C 3S7
                        Telephone
      +1 604 806 7000
                        Facsimile
      +1 604 806 7806
 
 To
the Shareholders of GLG Life Tech Corporation:
 
 We have
audited the consolidated balance sheets of GLG Life Tech Corporation as at
December 31, 2009 and 2008 and the consolidated statements of operations and
comprehensive (loss) income, shareholders’ equity and cash flows for the years
then ended. 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. 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.
 
 In our
opinion, these consolidated financial statements present fairly, in all material
respects, the financial position of the company as at December 31, 2009 and 2008
and the results of its operations and its cash flows for the years then ended in
accordance with Canadian generally accepted accounting principles.
 
 /s/
PricewaterhouseCoopers LLP
 Chartered
Accountants
 Vancouver,
British Columbia
 March 31,
2010
 
 Comments
by Independent Auditor on Canada – US reporting difference
 
 In the
United States, reporting standards for auditors require the addition of an
explanatory paragraph (following the opinion paragraph) when the financial
statements are affected by conditions and events that cast substantial doubt on
the company’s ability to continue as going concern, such as those described in
note 1 to the consolidated financial statements of GLG Life Tech Corporation.
Our report to the shareholders on the consolidated financial statements dated
March 31, 2010 is expressed in accordance with Canadian reporting standards
which do not permit a reference to such events and conditions in the auditors’
report when these are adequately disclosed in the financial
statements.
 
 /s/
PricewaterhouseCoopers LLP
 Vancouver,
British Columbia
 March 31,
2010
  "PricewaterhouseCoopers”
refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership,
or, as the context requires,
 the
PricewaterhouseCoopers global network or other member firms of the network, each
of which is a separate legal entity.
  Page
2 of 44
  GLG
LIFE TECH CORPORATION
 Consolidated
Balance Sheets as at December 31,
 (Expressed
in Canadian Dollars)
 
  2009
                    
                    
                    2008NoteASSETSCurrent
      AssetsCash
      and cash equivalents
                    
                    
                    
                    
                    $
                    16,018,203
                    
                    
                    $
                    7,362,671Short
      term investments
                    
                    
                    5
                    
                    
                    
                    -
                    
                    
                    
                    365,785Accounts
      receivable
                    
                    
                    6
                    
                    
                    
                    5,718,315
                    
                    
                    
                    2,717,765Taxes
      recoverable
                    
                    
                    7
                    
                    
                    
                    5,130,359
                    
                    
                    
                    1,504,000Inventory
                    
                    
                    8
                    
                    
                    
                    41,149,142
                    
                    
                    
                    33,057,690Prepaid
      expenses
                    
                    
                    9
                    
                    
                    
                    8,578,097
                    
                    
                    
                    7,380,08676,594,116
                    
                    
                    
                    52,387,996Property,
      Plant, and Equipment
                    
                    
                    10
                    
                    
                    
                    108,311,690
                    
                    
                    
                    83,366,043Goodwill
                    
                    
                    
                    
                    
                    
                    7,859,523
                    
                    
                    
                    7,587,798Restricted
      Cash
                    
                    
                    11
                    
                    
                    
                    10,003
                    
                    
                    
                    100,710Deferred
      Charges
                    
                    
                    
                    
                    
                    
                    94,867
                    
                    
                    
                    125,261Intangible
      Assets
                    
                    
                    12
                    
                    
                    
                    36,715,455
                    
                    
                    
                    30,793,314$
                    229,585,654
                    
                    
                    $
                    174,361,123LIABILITIESCurrent
      LiabilitiesShort
      term loans
                    
                    
                    13
                    
                    
                    $
                    37,317,500
                    
                    
                    $
                    10,231,500Accounts
      payable and accruals
                    
                    
                    14
                    
                    
                    
                    25,382,988
                    
                    
                    
                    17,167,567Interest
      payable
                    
                    
                    15
                    
                    
                    
                    268,912
                    
                    
                    
                    1,063,729Advances
      from customers
                    
                    
                    15
                    
                    
                    
                    -
                    
                    
                    
                    24,492,000Due
      to related party
                    
                    
                    16
                    
                    
                    
                    7,243,492
                    
                    
                    
                    -Deferred
      revenue
                    
                    
                    17
                    
                    
                    
                    -
                    
                    
                    
                    1,995,00070,212,892
                    
                    
                    
                    54,949,796Non-current
      bank loan
                    
                    
                    18
                    
                    
                    
                    13,797,000
                    
                    
                    
                    -Future
      income taxes
                    
                    
                    26
                    
                    
                    
                    733,203
                    
                    
                    
                    2,414,64284,743,095
                    
                    
                    
                    57,364,438NON-CONTROLLING
      INTERESTS
                    
                    
                    
                    
                    
                    
                    23,243
                    
                    
                    
                    167,211SHAREHOLDERS'
      EQUITYShare
      capital
                    
                    
                    20
                    
                    
                    
                    134,812,115
                    
                    
                    
                    93,355,149Warrants
                    
                    
                    
                    
                    
                    
                    -
                    
                    
                    
                    11,477,908Contributed
      surplus
                    
                    
                    
                    
                    
                    
                    14,909,708
                    
                    
                    
                    3,347,623Accumulated
      other comprehensive income
                    
                    
                    
                    
                    
                    
                    6,386,688
                    
                    
                    
                    20,696,008Deficit
                    
                    
                    
                    
                    
                    
                    (11,289,195
                    )
                    
                    
                    (12,047,214
                    )144,819,316
                    
                    
                    
                    116,829,474$
                    229,585,654
                    
                    
                    $
                    174,361,123
 
 Nature
      of Operations and Going Concern(Note 1)Commitments
      (Note 29)Contingent
      Liabilities (Note 30)Subsequent
      Events (Note 31)APPROVED
      ON BEHALF OF THE BOARD:"
      Sophia Leung "
                      
                      Director"Jinduo
      Zhang "
                      
                      DirectorSee
      Accompanying Notes to the Consolidated Financial
Statements
  Page
3 of 44
  GLG
LIFE TECH CORPORATION
 Consolidated
Statements of Operations and Comprehensive Income (Loss)
 For the
years ended December 31,
 (Expressed
in Canadian Dollars)
 
 2009
                                    
                                    
                                    2008REVENUE
                                    
                                    $
                                    41,883,584
                                    
                                    
                                    $
                                    9,891,31841,883,584
                                    
                                    
                                    
                                    9,891,318COST
      OF SALES
                                    
                                    
                                    29,789,808
                                    
                                    
                                    
                                    7,560,490GROSS
      PROFIT
                                    
                                    
                                    12,093,776
                                    
                                    
                                    
                                    2,330,828GENERAL AND ADMINISTRATIVE
      EXPENSES
                                    
                                    
                                    11,719,517
                                    
                                    
                                    
                                    7,217,189INCOME
      (LOSS) BEFORE THE UNDERNOTED
                                    
                                    
                                    374,259
                                    
                                    
                                    
                                    (4,886,361
                                    )OTHER
      INCOME (EXPENSES)Donation
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (73,337
                                    )Interest
      expense
                                    
                                    
                                    (2,695,178
                                    )
                                    
                                    
                                    (2,009,638
                                    )Interest
      income
                                    
                                    
                                    100,557
                                    
                                    
                                    
                                    820,765Provision
      on loans and receivables
                                    
                                    
                                    (58,358
                                    )
                                    
                                    
                                    (3,111,351
                                    )Foreign
      exchange gain (loss)
                                    
                                    
                                    2,638,188
                                    
                                    
                                    
                                    (2,842,894
                                    )Other
      income
                                    
                                    
                                    11,324
                                    
                                    
                                    
                                    -(3,467
                                    )
                                    
                                    
                                    (7,216,455
                                    )INCOME
      (LOSS) BEFORE INCOME TAXES ANDNON-CONTROLLING
      INTERESTS
                                    
                                    
                                    370,792
                                    
                                    
                                    
                                    (12,102,816
                                    )INCOME
      TAXES  RECOVERY
                                    
                                    
                                    243,259
                                    
                                    
                                    
                                    1,428,000INCOME
      (LOSS) BEFORE NON-CONTROLLING INTERESTS
                                    
                                    
                                    614,051
                                    
                                    
                                    
                                    (10,674,816
                                    )NON-CONTROLLING
      INTERESTS
                                    
                                    
                                    143,968
                                    
                                    
                                    
                                    68,274NET
      INCOME (LOSS)
                                    
                                    
                                    758,019
                                    
                                    
                                    
                                    (10,606,542
                                    )DEFICIT, beginning of
      period
                                    
                                    
                                    (12,047,214
                                    )
                                    
                                    
                                    (1,440,672
                                    )DEFICIT, end of
      period
                                    
                                    
                                    (11,289,195
                                    )
                                    
                                    
                                    (12,047,214
                                    )NET
      INCOME (LOSS) PER SHAREBasic
                                    
                                    $
                                    0.04
                                    
                                    
                                    $
                                    (0.60
                                    )Diluted
                                    
                                    
                                    0.04
                                    
                                    
                                    
                                    (0.60
                                    )NET
      INCOME (LOSS)
                                    
                                    
                                    758,019
                                    
                                    
                                    
                                    (10,606,542
                                    )OTHER
      COMPREHENSIVE (LOSS) INCOMEUnrealized
      (losses) gains on translation ofself-sustaining
      operations
                                    
                                    
                                    (14,309,320
                                    )
                                    
                                    
                                    22,003,934COMPREHENSIVE
      (LOSS) INCOME
                                    
                                    
                                    (13,551,301
                                    )
                                    
                                    
                                    11,397,392Weighted
      Average Number of Shares OutstandingBasic
                                    
                                    
                                    20,379,979
                                    
                                    
                                    
                                    17,604,660Diluted
                                    
                                    
                                    21,453,824
                                    
                                    
                                    
                                    17,604,660
 
 See
Accompanying Notes to the Consolidated Financial Statements
  Page
4 of 44
  GLG
LIFE TECH CORPORATION
 Consolidated
Statements of Shareholders' Equity
 (Expressed
in Canadian Dollars)
 
 Share
      Capital
                                                      
                                                      
                                                      Warrants
                                                      
                                                      
                                                      Equity
      portion of
                                                        convertible
                                                        debenture
                                                      
                                                      
                                                      Contributed
                                                        Surplus
                                                      
                                                      
                                                      Accumulated
                                                        Other
                                                        Comprehensive
                                                        Income
      ("AOCI")
                                                      
                                                      
                                                      Deficit
                                                      
                                                      
                                                      Total
                                                        Comprehensive
                                                        Income
      (Loss)Balance,
      December 31, 2007
                                                      
                                                      $
                                                      61,052,731
                                                      
                                                      
                                                      $
                                                      15,378,511
                                                      
                                                      
                                                      $
                                                      1,513,003
                                                      
                                                      
                                                      $
                                                      1,702,716
                                                      
                                                      
                                                      $
                                                      (1,307,926
                                                      )
                                                      
                                                      $
                                                      (1,440,672
                                                      )
                                                      
                                                      $
                                                      (1,067,311
                                                      )Warrant
      exercised by a customer
                                                      
                                                      
                                                      20,235,133
                                                      
                                                      
                                                      
                                                      (2,453,160
                                                      )
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -Warrant
      expired
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      (1,447,443
                                                      )
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      1,447,443
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -Options
      exercised
                                                      
                                                      
                                                      125,527
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      (63,107
                                                      )
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -Convertible
      debenture converted into common shares
                                                      
                                                      
                                                      7,513,004
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      (1,513,003
                                                      )
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -Issuance
      of restricted shares
                                                      
                                                      
                                                      1,060,004
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -Options
      granted
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      260,571
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -Common
      shares issued
                                                      
                                                      
                                                      3,368,750
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -Change
      in foreign currency translation
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      22,003,934
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      22,003,934Net
      loss
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      (10,606,542
                                                      )
                                                      
                                                      
                                                      (10,606,542
                                                      )Balance,
      December 31, 2008
                                                      
                                                      $
                                                      93,355,149
                                                      
                                                      
                                                      $
                                                      11,477,908
                                                      
                                                      
                                                      $
                                                      -
                                                      
                                                      
                                                      $
                                                      3,347,623
                                                      
                                                      
                                                      $
                                                      20,696,008
                                                      
                                                      
                                                      $
                                                      (12,047,214
                                                      )
                                                      
                                                      $
                                                      11,397,392Warrant
      expired
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      (11,477,908
                                                      )
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      11,477,908
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -Options
      exercised
                                                      
                                                      
                                                      584,376
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      (293,376
                                                      )
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -Common
      shares issued, net
                                                      
                                                      
                                                      37,765,156
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -Future
      income tax recovery related to share issuance costs
                                                      
                                                      
                                                      1,006,072
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -Stock-based
      compensation
                                                      
                                                      
                                                      2,101,362
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      377,553
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -Change
      in foreign currency translation
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      (14,309,320
                                                      )
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      (14,309,320
                                                      )Net
      income
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      758,019
                                                      
                                                      
                                                      
                                                      758,019Balance,
      December 31, 2009
                                                      
                                                      $
                                                      134,812,115
                                                      
                                                      
                                                      $
                                                      -
                                                      
                                                      
                                                      $
                                                      -
                                                      
                                                      
                                                      $
                                                      14,909,708
                                                      
                                                      
                                                      $
                                                      6,386,688
                                                      
                                                      
                                                      $
                                                      (11,289,195
                                                      )
                                                      
                                                      $
                                                      (13,551,301
                                                      )
  See
Accompanying Notes to the Consolidated Financial
Statements
 Page
5 of 44
  GLG
LIFE TECH CORPORATION
 Consolidated
Statements of Cash Flows
 For the
years ended December 31,
 (Expressed in Canadian
Dollars)
 
  2009
                                                                        
                                                                        
                                                                        2008NoteCash
      provided by (used in)Operating
      activitiesNet
      income (loss)
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        $
                                                                        758,019
                                                                        
                                                                        
                                                                        $
                                                                        (10,606,542
                                                                        )Items
      not affecting cash:Accretion
      on convertible debenture
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        1,257,718Stock-based
      compensation
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        2,478,916
                                                                        
                                                                        
                                                                        
                                                                        1,320,575Amortization
      of property, plant and equipment & intangibles
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        6,385,355
                                                                        
                                                                        
                                                                        
                                                                        2,539,869Provision
      on loan and receivables
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        58,358
                                                                        
                                                                        
                                                                        
                                                                        3,111,371Foreign
      exchange loss (gain)
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        (2,615,900
                                                                        )
                                                                        
                                                                        
                                                                        2,841,737Future
      income tax recovery
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        (753,800
                                                                        )
                                                                        
                                                                        
                                                                        (1,416,928
                                                                        )Non-controlling
      interests
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        (143,968
                                                                        )
                                                                        
                                                                        
                                                                        (68,274
                                                                        )6,166,980
                                                                        
                                                                        
                                                                        
                                                                        (1,020,475
                                                                        )Changes
      in non-cash working capital items
                                                                        
                                                                        
                                                                        23
                                                                        
                                                                        
                                                                        
                                                                        (23,427,645
                                                                        )
                                                                        
                                                                        
                                                                        (18,744,065
                                                                        )Cash
      flow used by operating activities
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        (17,260,665
                                                                        )
                                                                        
                                                                        
                                                                        (19,764,540
                                                                        )Investing
      activitiesDecrease
      (increase) in short term investment
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        326,252
                                                                        
                                                                        
                                                                        
                                                                        (299,849
                                                                        )Equity
      contribution by non-controlling interests
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        253,007Decrease
      (increase) in restricted cash
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        90,707
                                                                        
                                                                        
                                                                        
                                                                        (100,710
                                                                        )Purchase
      of property, plant and equipment
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        (34,871,862
                                                                        )
                                                                        
                                                                        
                                                                        (42,381,870
                                                                        )Cash
      flow used by investing activities
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        (34,454,903
                                                                        )
                                                                        
                                                                        
                                                                        (42,529,422
                                                                        )Financing
      activitiesIssue
      of short term loans
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        58,157,200
                                                                        
                                                                        
                                                                        
                                                                        8,387,169Repayment
      of  short term loans
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        (13,928,700
                                                                        )
                                                                        
                                                                        
                                                                        -Issuance
      of common shares
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        33,241,278
                                                                        
                                                                        
                                                                        
                                                                        17,844,394Issuance
      of common shares on exercise of stock options
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        291,000
                                                                        
                                                                        
                                                                        
                                                                        -Share
      issuance costs
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        (3,186,313
                                                                        )
                                                                        
                                                                        
                                                                        (195,000
                                                                        )Repaid
      advance from a customer
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        (22,053,238
                                                                        )
                                                                        
                                                                        
                                                                        (7,122,367
                                                                        )Increase
      in advance from a customer
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        20,191,680Advances
      from related parties
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        7,726,413
                                                                        
                                                                        
                                                                        
                                                                        (846,630
                                                                        )Cash
      flow from financing activities
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        60,247,640
                                                                        
                                                                        
                                                                        
                                                                        38,259,246Effect
      of foreign exchange rate changes on cash and cash
    equivalents
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        123,460
                                                                        
                                                                        
                                                                        
                                                                        3,143,806CHANGE
      IN CASH AND CASH EQUIVALENTS
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        8,655,532
                                                                        
                                                                        
                                                                        
                                                                        (20,890,909
                                                                        )CASH
      AND CASH EQUIVALENTS, beginning of period
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        7,362,671
                                                                        
                                                                        
                                                                        
                                                                        28,253,580CASH
      AND CASH EQUIVALENTS, end of period
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        $
                                                                        16,018,203
                                                                        
                                                                        
                                                                        $
                                                                        7,362,671
 
 See
Accompanying Notes to the Consolidated Financial Statements
 Supplemental
Cash Flow Information – Note 22
  Page
6 of 44
 
 GLG
LIFE TECH CORPORATION
 Notes to
Consolidated Financial Statements
 Years
Ended December 31, 2009 and 2008
  
 1.
                NATURE
      OF OPERATIONS AND GOING CONCERN
 
 The
Company was incorporated under the Companies Act (British Columbia) on June 5,
1998.  On March 14, 2007, the Company changed its name to GLG Life
Tech Corporation (“GLG” or the “Company”).  The Company is a vertical
integrated producer of high-grade stevia extract.  The operations
include stevia seed breeding, propagation, growth and harvest, extraction,
refining and formulation.  The Company’s shares trade on the Toronto
Stock Exchange (“TSX”) under the symbol “GLG”.  On November 20, 2009, the
Company completed a common share offering and commenced trading on the NASDAQ
Global Market under the symbol "GLGL".
 
 These financial statements have been
prepared using Canadian generally accepted accounting principles applicable to a
going concern,which
contemplates the realization of assets and settlement of liabilities in the
normal course of business as they become due.For the year 2009, the Companyincurreda net income of $758,019(2008–net loss of
$10,606,542).As at December 31, 2009 theCompany had an accumulated deficit of
$11,289,195(2008 - $12,047,214), working capital
of $6,381,224(2008–working capital deficiency of
$2,561,799) and a cash outflow from operations of $17,260,665(2008 - $19,767,540).The Company has been
successful in raising
equity financing in fiscal 2009, renewing short term loans and obtaining
additional short term loans of $9,198,000 subsequent to year end (Note 31) and
plans to continue to renew these loans as they come due; however, if the Company
is unableto refinance its credit facilities as
they become due ($37,317,500 in 2010) the Company will require alternative forms
of financing. There can be no assurance the company will be successful in thisendeavour and these
circumstances lead to substantial doubt about the ability of the Company to
continue as a going concern.
 
 These
consolidated financial statements do not include the adjustments that would be
necessary should the Company be unable to continue as a going concern.
 Such adjustments could be material.
 
 2.
                SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES
 
 (a)
                Basis
      of presentation and consolidation
 
 These
consolidated financial statements are prepared in accordance with Canadian
generally accepted accounting principles (“GAAP”) and are presented in Canadian
dollars.
 
 These
consolidated financial statements include the accounts of the Company and all
its wholly owned integrated subsidiaries: Agricultural High Tech
Developments Limited, incorporated in the Marshall Islands; Anhui Bengbu HN
Stevia High Tech Development Company Limited, Chuzhou Runhai Stevia High Tech
Company Limited, Dongtai Runyang Stevia High Tech Company Limited, Qingdao Runde
Biotechnology Company Limited, Qingdao Runhao Stevia High Tech Company Limited,
all incorporated in China; GLG Life Tech US, Inc., incorporated in Delaware,
USA; and 55% owned subsidiary, GLG Weider Sweet Naturals Corporation,
incorporated in Canada.
 
 All
intercompany accounts and transactions were eliminated upon
consolidation.
  Page
7 of 44
  GLG
LIFE TECH CORPORATION
 Notes to
Consolidated Financial Statements
 Years
Ended December 31, 2009 and 2008
  
 2.
                SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES,
Continued
 
 (a)
                Basis
      of presentation and consolidation,
continued
 
 Certain
prior year's figures have been reclassified to conform to the current financial
statement presentation.
 
 On
November 5, 2009, the Company completed a four‐for‐one (4:1) consolidation of
its common shares (Note 20a).  All numbers of shares, warrants and options
and per share amounts have been retroactively restated to give effect to
the consolidation for all periods presented.
 
 (b)
                  Foreign
      currency
 
 (i)
                transactions
      and balances
 
 Foreign
currency transactions are translated into Canadian dollars using the exchange
rates prevailing at the dates of the transactions.  Foreign exchange
gains and losses resulting from the settlement of such transactions and from the
translation at year-end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognized in the consolidated statements
of operations.
 
 (ii)
                  group
      companies
 
 The
consolidated financial statements are presented in Canadian dollars.
 Accounts of the Company’s integrated foreign operations are translated
into Canadian dollars using the temporal method as follows:
 
 (1)
                  monetary
      assets and liabilities for each balance sheet presented are translated at
      the rate of exchange in effect as at the balance sheet
    date;
 (2)
                  non-monetary
      assets and liabilities for each balance sheet presented are translated at
      the rate of exchange prevailing at the time of the acquisition of the
      assets or assumption of the
liabilities;
 (3)
                  revenue
      and expense items for each statement of operations are translated at the
      average rates of exchange for the year;
and
 (4)
                  all
      resulting exchange differences are recognized in the statement of
      operations.
 
 Accounts
of the Company’s self-sustaining operations are translated into Canadian dollars
using the current rate method as follows:
 
 (1)
                  all
      assets and liabilities for each balance sheet presented are translated at
      the rate of exchange in effect as at the balance sheet
    date;
 (2)
                  revenue
      and expense items for each statement of operations are translated at the
      average rates of exchange for the year;
and
 (3)
                  all
      resulting exchange differences are recognized in other comprehensive
      (loss) income and in shareholders’
equity.
  Page
8 of 44
  GLG
LIFE TECH CORPORATION
 Notes to
Consolidated Financial Statements
 Years
Ended December 31, 2009 and 2008
  
 2.
                SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES,
Continued
 
 (c)
                  Cash
      and cash equivalents
 
 Cash and
cash equivalents consist of cash on hand, deposits held with banks and banker’s
acceptance readily convertible into cash and purchased with original maturities
of three months or less.
 
 (d)
                  Short
      term investments
 
 Short
term investments consist of term deposits with maturities of greater than ninety
days and less than one year, and are classified as held for trading for
accounting purposes.
 
 (e)
                  Inventory
 
 Raw
materials, work-in-progress and finished goods are measured at the lower of
cost, determined on a weighted average basis and net realizable
value.
 
 The cost
of raw materials comprises the purchase price, applicable taxes and other costs
incurred in bringing inventory to their present location and condition. The
cost of finished goods includes cost of materials and cost of
conversion.  The cost of conversion includes costs directly related to
the units of production, such as direct labour, capitalized interest and fixed
and variable production overheads, based on normal operating
capacity.
 
 The net
realizable value of inventory is generally considered to be the selling
price in the ordinary course of business less the estimated costs of completion
and estimated costs to make the sale.
 
 The
amount of any write-down of inventories to net realizable value and all losses
of inventories is recognized as an expense in the period the write-down or loss
occurs.  The amount of any reversal of any write-down of inventories,
arising from an increase in net realizable value, is recognized as a reduction
in the amount of inventories recognized as an expense in the period in which the
reversal occurs.
 
 (f)
                  Property,
      plant and equipment
 
 Property,
plant and equipment are recorded at cost and include interest capitalized during
construction, less accumulated amortization.  Amortization is calculated
using the straight line method with 10% residual value over the estimated useful
life of the assets.
  Ion
      exchange resin equipment
                    15
      yearsBuildings
                    20
      yearsManufacturing
      equipment and biological assets
                    10
      yearsMotor
      vehicles, computer equipment and software, and, furniture and
      fixtures
                    5
      years
 
 Amortization
is not provided for construction in progress until the assets are ready for
use.
  Page
9 of 44
  GLG
LIFE TECH CORPORATION
 Notes to
Consolidated Financial Statements
 Years
Ended December 31, 2009 and 2008
  
 2.
                SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES,
Continued
 
 (g)
                Impairment
      of long-lived assets
 
 Long-lived
assets are reviewed for impairment when events and circumstances indicate that
the carrying amount of an asset may not be recoverable.  The Company’s
policy is to record an impairment loss when it is determined that the carrying
amount of the assets exceeds the sum of the expected undiscounted future cash
flows resulting from use of the asset and its eventual disposition.
 Impairment losses are measured as the amount by which the carrying amount
of the asset exceeds its fair value and is recognized as an expense in the
period of impairment.  Long-lived assets to be disposed of are reported at
the lower of the carrying amount or fair value less cost to sell.
 
 (h)
                Goodwill
 
 Goodwill
represents the cost of acquired businesses in excess of the fair value of net
identifiable assets acquired and arose as a result of the acquisition of Qingdao
Runde Biotechnology Company Limited in the year of 2006.  Goodwill is
tested for impairment at least annually or when indicated by events or changes
in circumstances, by comparing the fair value of a particular reporting unit to
its carrying value.  When the carrying value of a reporting unit exceeds
its fair value, the fair value of the reporting unit's goodwill is compared with
its carrying value to measure any impairment loss. The last goodwill
impairment test was performed on December 31, 2009.
 
 (i)
                Intangible
      assets
 
 Intangible
assets include customer relationships, patents and
technology.  Intangible assets are amortized over the estimated useful
life of each asset unless the life is determined to be indefinite. An
intangible asset with an indefinite life is not amortized but will be tested for
impairment annually or more frequently if events or changes in circumstances
indicate that the asset might be impaired. Customer relationships are
amortized over a 10 year period.  Patents and technology are amortized
on a straight-line basis over the expected useful life of 20 years.
 
 (j)
                Income
      taxes
 
 Future
income taxes are recorded using the asset and liability method.  Under this
method, future tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
basis.  Future tax assets and liabilities are measured using enacted or
substantively enacted tax rates expected to apply to taxable income in the years
in which those temporary differences are expected to be recovered or
settled.  The effect on future tax assets and liabilities of a change
in tax rates is recognized in income in the period that includes the enactment
date.  A valuation allowance is provided against future tax assets
unless it is more likely than not that the tax asset will be
realized.
  Page
10 of 44
  GLG
LIFE TECH CORPORATION
 Notes to
Consolidated Financial Statements
 Years
Ended December 31, 2009 and 2008
  
 2.
                SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES,
Continued
 
 (k)
                  Revenue
      recognition
 
 Revenue
from product sales is recognized when products are shipped to customers and
ownership is transferred to customers, when the price is fixed or determinable
and when the ultimate collection is reasonably assured.  Customer
prepayments are recorded as advances from customers and revenue is not
recognized until the shipment of goods occurs.
 
 Initial
fees and non-refundable payments received by the Company are recognized as
revenue on a straight-line basis over the period of the ongoing involvement
of the Company in the contract if no other objectively measureable performance
criteria exists that indicates another method of recognition is more
appropriate.
 
 (l)
                Income
      (loss) per share
 
 Basic
income (loss) per share is calculated using the weighted average number of
common shares outstanding during the period.  The Company uses the
treasury stock method to compute the dilutive effect of options, warrants and
similar instruments.  Under this method, the dilutive effect on income
(loss) per share is calculated presuming the exercise of outstanding options,
warrants and similar instruments.  It assumes that the proceeds of
such exercise would be used to repurchase common shares at the average market
price during the period.  However, the calculation of diluted
income (loss) per share excludes the effects of various conversions and exercise
of options and warrants that would be anti-dilutive.
 
 (m)
                  Stock-based
      compensation
 
 The
Company grants stock options and restricted shares to employees, directors, and
consultants pursuant to the Stock Option and Restricted Share
Plan.  The Company uses the Black-Scholes option valuation model to
calculate the fair value of stock options.
 
 For stock
options and restricted shares granted to directors, officers and employees, the
fair value is estimated on the date of grant and is recognized as compensation
expense on a straight-line basis over the related vesting periods. Compensation
expense is recorded based on the estimated fair value of options with a
corresponding credit to contributed surplus.  Any consideration
received on the exercise of stock options is credited to share
capital.
 
 Option
pricing models require the input of highly subjective assumptions, including the
expected price volatility and expected life of the option.  The Company
estimates forfeitures at the grant date and revises the estimate as necessary if
subsequent information indicates that actual forfeitures differ significantly
from the original estimate.  Changes in these assumptions can
materially affect the fair value estimate.
  Page
11 of 44
  GLG
LIFE TECH CORPORATION
 Notes to
Consolidated Financial Statements
 Years
Ended December 31, 2009 and 2008
  
 2.
                SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES,
Continued
 
 (n)
                  Use
      of estimates and measurement
uncertainty
 
 The
preparation of these consolidated financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the year.
 
 Significant
areas requiring the use of management estimates include determining of the
accrued liabilities, assessing the carrying value of property, plant and
equipment, intangible assets and goodwill, the valuation of future tax assets,
expected useful life of assets subject to amortization and the assumptions used
in determining of the fair value of stock based compensation.  While
management believes the estimates used are reasonable, actual results could
differ from those estimates and could impact future results of operations and
cash flows.
 
 (o)
                  Capitalization
      of interest
 
 Interest
and accretion on long term debt associated with the construction of long term
assets and interest on advances from a customer are capitalized into property,
plant and equipment and inventory, where the borrowing cost is attributable to
the acquisition, construction or production of a qualifying asset.
 
 Where
funds were borrowed specifically for obtaining a qualifying asset, the amount of
borrowing costs eligible for capitalization is determined as the product of the
average accumulated costs and average interest rate applicable to the
borrowing.
 
 The
interest cost of debt attributable to the construction of major new facilities
is capitalized during the construction period until the facilities are
substantially completed.  Interest costs of debt attributable to inventory
is capitalized based on the cost of raw materials until the raw materials are
transferred into work-in-progress.  Interest on funds borrowed that
are not specific to obtaining a qualifying asset are expensed as
incurred.
 
 (p)
                  Financial
      instruments
 
 Financial
instruments are classified into one of these five categories: held-for-trading,
held-to-maturity, loans and receivables, available-for-sale financial assets or
other financial liabilities.
 
 All
financial instruments are measured in the balance sheet at fair value except for
loans and receivables, held‐to‐maturity investments and other financial
liabilities, which are measured at amortized cost. Transaction costs that
are directly attributable to the acquisition or issue of financial instruments
that are classified as other than held-for-trading, which are expensed as
incurred, are included in the initial carrying value of such
instruments.
  Page
12 of 44
  GLG
LIFE TECH CORPORATION
 Notes to
Consolidated Financial Statements
 Years
Ended December 31, 2009 and 2008
  
 2.
                SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES,
Continued
 
 (p)
                  Financial
      instruments, continued
 
 Subsequent
measurement and changes in fair value will depend on their initial
classification as follows: held‐for‐trading financial assets are measured at
fair value and changes in fair value are recognized in net income;
available‐for-sale financial assets are measured at fair value with changes in
fair value recorded in other comprehensive income until the investment is no
longer recognized or impaired, at which time the amounts would be recorded in
net income; held-to-maturity financial assets, loan and receivables, and other
financial liabilities are amortized using the effective interest rate
method.
 
 Financial
instruments that are derivative contracts are considered held-for-trading unless
they are designed as a hedge. Cash and cash equivalents, short term investments,
and restricted cash are classified as “held-for-trading”.  Accounts
receivable and certain other assets that are financial instruments are
classified as “loans and receivables”.
 
 Short
term loans, accounts payable, interest payable, advance from customer, due
to related party, and non- current bank loan are classified as “other
financial liabilities”.
 
 The
Company currently does not have any hedge instruments.
 
 3.
                ADOPTION
      OF NEW ACCOUNTING POLICIES
 
 (a)
                Goodwill
      and intangible assets
 
 Effective
January 1, 2009, the Company adopted Canadian Institute of Chartered
Accountants (“CICA”) Handbook Section 3064, “Goodwill and Intangible
Assets.”  This new standard replaces Section 3062, “Goodwill and Other
Intangible Assets” and Section 3450, “Research and Development Costs,” and
focuses on the criteria for asset recognition in the financial statements,
including those internally developed. The adoption of this standard did not have
an impact on the Company’s consolidated financial position or results of
operations.
 
 (b)
                  Credit
      risk and the fair value of financial assets and financial
      liabilities
 
 Effective
January 1, 2009, the Company adopted the Emerging Issues Committee (“EIC”)
Abstract EIC-173, “Credit Risk and the Fair Value of Financial Assets and
Financial Liabilities,” issued by the CICA.  This standard requires the
Company to consider its own credit risk as well as the credit risk of its
counterparty when determining the fair value of financial assets and
liabilities, including derivative instruments.  The adoption of this
standard did not have an impact on the valuation of the Company’s financial
assets or liabilities.
  Page
13 of 44
  GLG
LIFE TECH CORPORATION
 Notes to
Consolidated Financial Statements
 Years
Ended December 31, 2009 and 2008
  
 3.
                ADOPTION
      OF NEW ACCOUNTING POLICIES,
Continued
 
 (c)
                Fair
      value hierarchy disclosures
 
 In
September 2009, the Company adopted the amendments to CICA Handbook Section
3862, Financial Instruments – Disclosures, which requires enhanced disclosures
about the relative reliability of the data that an entity uses to measure the
fair values of its financial instruments. The new requirements are effective for
annual financial statements for fiscal years ending after September 30,
2009.
 
 The
amended Section 3862 requires that financial instruments measured at fair value
on the balance sheet be classified at one of three fair value hierarchy levels
according to the relative reliability of the data used to estimate the fair
values.
 
 The fair
value hierarchy levels are as follows:
  Classification
                              
                              Information
      (inputs) used to estimate the fair valuesLevel
      1
                              
                              Quoted
      prices (unadjusted) in active markets for identical assets andliabilitiesLevel
      2
                              
                              Inputs other
      than quoted prices included in Level 1 that are observable forthe asset or
      liability, either directly or indirectlyLevel
      3
                              
                              Inputs
      for the asset or liability that are not based on observable market
      data
  The
adoption of the amended standard did not have a material impact on the Company’s
disclosures, since the Company does not have financial instruments measured at
fair value, with the exception of cash and cash equivalents and restricted
cash.
 
 Disclosures
on financial instruments and the associated risks are provided in Note
27.
 
 4.
                RECENT
      ACCOUNTING PRONOUNCEMENTS
 
 (a)
                  Business
      Combinations
 
 In
January 2009, the CICA issued Handbook Section 1582, “Business Combinations”,
which requires that all assets and liabilities of an acquired business be
recorded at fair value at acquisition.  Obligations for contingent
consideration and contingencies will also be recorded at fair value at the
acquisition date.  The standard also states that acquisition-related costs
will be expensed as incurred and that restructuring charges will be expensed in
the periods after the acquisition date. The Section applies prospectively
to business combinations for which the acquisition date is on or after the
beginning of the first annual reporting period on or after January 1,
2011.
  Page
14 of 44
  GLG
LIFE TECH CORPORATION
 Notes to
Consolidated Financial Statements
 Years
Ended December 31, 2009 and 2008
  
 4.
                RECENT
      ACCOUNTING PRONOUNCEMENTS,
Continued
 
 (b)
                Consolidations
 
 In
January 2009, the CICA issued Section 1601, “Consolidated Financial Statements,”
which will replace CICA section 1600 of the same name. This guidance requires
uniform accounting policies to be consistent throughout all consolidated
entities and the difference between reporting dates of a parent and a subsidiary
to be no longer than three months. These are not explicitly required under
the current standard. Section 1601 is effective for the Company on January 1,
2011 with early adoption permitted. The Company is currently assessing the
impact of the new standard on its financial statements.
 
 (c)
                Non-controlling
      Interest
 
 In
January 2009, the CICA issued Section 1602, “Non-controlling Interests,” which
will replace CICA Section 1600, “Consolidated Financial Statements.” Under
this new guidance, when there is a change in control the previously held
interest is revalued at fair value. Currently a gain of control is accounted for
using the purchase method and a loss of control is accounted for as a sale
resulting in a gain or loss in earnings.  In addition, non-controlling
interests (“NCI”) can be in a deficit position because it is recorded at fair
value. Currently, NCI is recorded at the carrying amount and can only be in a
deficit position if the NCI has an obligation to fund the losses. Section 1602
is effective for the Company on January 1, 2011 with early adoption
permitted.
 
 5.
                SHORT
      TERM INVESTMENTS
 
 As at
December 31, 2009, the Company did not have any short term
investments.
 
 At
December 31, 2008, the Company had $365,785 (RMB 2,037,800) of 6-month term
deposits with the Bank of China, which bore interest at a rate of 3.78% per
annum.
 
 6.
                ACCOUNTS
      RECEIVABLE
 
 The
Company was previously involved with the distribution of stevia and other
nutritional health products produced or sourced by or on behalf of the Company
through Shandong Yong He Tang Health Products Chain Stores Limited
(“YHT”).  The Company extended loans to YHT in 2005 and 2006. The
loans are not secured and were valued at $2,290,002 (US$1,870,000) at December
31, 2008. As at December 31, 2008, the Company’s accounts receivable and
interest receivable included $622,029 and $199,320, respectively, owing from
YHT.
 
 Due to
the uncertainty associated with the collectability of amounts owed by YHT, the
Company has recorded an allowance of $3,111,351 against the loans, interest and
accounts receivable.
  Page
15 of 44
  GLG
LIFE TECH CORPORATION
 Notes to
Consolidated Financial Statements
 Years
Ended December 31, 2009 and 2008
  
 6.
                ACCOUNTS
      RECEIVABLE, Continued
  December
      31, 2009
                    
                    
                    December
      31, 2008Accounts
      receivable
                    
                    $
                    6,398,702
                    
                    
                    $
                    3,336,143less
      allowance for doubtful accounts
                    
                    
                    (680,387
                    )
                    
                    
                    (622,029
                    )5,718,315
                    
                    
                    
                    2,714,114Interest
      receivable
                    
                    
                    199,320
                    
                    
                    
                    202,971less
      allowance for doubtful accounts
                    
                    
                    (199,320
                    )
                    
                    
                    (199,320
                    )-
                    
                    
                    
                    3,651Loans receivable
                    
                    
                    2,290,002
                    
                    
                    
                    2,290,002less
      allowance for doubtful accounts
                    
                    
                    (2,290,002
                    )
                    
                    
                    (2,290,002
                    )-
                    
                    
                    
                    -
 7.
                TAXES
      RECOVERABLE
 
 The taxes
are value-added taxes paid on purchases in China and GST paid in
Canada.  These taxes are recoverable from the respective authorities
upon filing of the prescribed returns.
 
 8.
                INVENTORY
  For the
year ended December 31, 2009, the amount of inventories charged to cost of sales
was $27,050,264 (2008 - $7,560,490).  There was no write-down of
inventories during the years ended December 31, 2009 and 2008, nor any reversal
of any write-down.  As at December 31, 2009, $nil (2008 -
$523,272) of interest is capitalized as a cost of inventory.
  December
      31, 2009
                        
                        
                        December
      31, 2008Raw
      material
                        
                        $
                        9,203,227
                        
                        
                        $
                        22,920,668Work
      in process
                        
                        
                        27,818,580
                        
                        
                        
                        8,905,270Finished
      goods
                        
                        
                        4,127,335
                        
                        
                        
                        1,231,752$
                        41,149,142
                        
                        
                        $
                        33,057,690
 
 9.
                PREPAID
      EXPENSES
  December
      31, 2009
                        
                        
                        December
      31, 2008Prepayment
      for raw material
                        
                        $
                        4,283,150
                        
                        
                        $
                        4,037,362Prepayment
      for construction and equipment
                        
                        
                        690,232
                        
                        
                        
                        2,751,191Insurance
                        
                        
                        54,802
                        
                        
                        
                        65,644Rent
      and deposits
                        
                        
                        2,405,663
                        
                        
                        
                        -Others
                        
                        
                        1,144,250
                        
                        
                        
                        525,889$
                        8,578,097
                        
                        
                        $
                        7,380,086
  Page
16 of 44
  GLG
LIFE TECH CORPORATION
 Notes to
Consolidated Financial Statements
 Years
Ended December 31, 2009 and 2008
  
 9.
                PREPAID
      EXPENSES, continued
 
 During
the year ended December 31, 2008, $1,346,250 of the $4,037,362 of raw material
prepayment was a deposit paid to a related company.  The transaction
was not completed and the balance was fully refunded to the Company during the
year ended December 31, 2009.
  10.
                  PROPERTY,
      PLANT AND EQUIPMENT
  December
      31, 2009
                                                                        
                                                                        
                                                                        December
      31, 2008Accumulated
                                                                        
                                                                        
                                                                        Net
      Book
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        Accumulated
                                                                        
                                                                        
                                                                        Net
      BookCost
                                                                        
                                                                        
                                                                        Amortization
                                                                        
                                                                        
                                                                        Value
                                                                        
                                                                        
                                                                        Cost
                                                                        
                                                                        
                                                                        Amortization
                                                                        
                                                                        
                                                                        ValueIon
      exchange resin equipment
                                                                        
                                                                        $
                                                                        11,619,902
                                                                        
                                                                        
                                                                        $
                                                                        1,652,031
                                                                        
                                                                        
                                                                        $
                                                                        9,967,871
                                                                        
                                                                        
                                                                        $
                                                                        9,673,435
                                                                        
                                                                        
                                                                        $
                                                                        944,565
                                                                        
                                                                        
                                                                        $
                                                                        8,728,870Manufacturing
      equipmentand
      Biological assets
                                                                        
                                                                        
                                                                        47,427,276
                                                                        
                                                                        
                                                                        
                                                                        3,123,087
                                                                        
                                                                        
                                                                        
                                                                        44,304,189
                                                                        
                                                                        
                                                                        
                                                                        7,951,867
                                                                        
                                                                        
                                                                        
                                                                        730,566
                                                                        
                                                                        
                                                                        
                                                                        7,221,301Buildings
                                                                        
                                                                        
                                                                        46,897,089
                                                                        
                                                                        
                                                                        
                                                                        1,339,877
                                                                        
                                                                        
                                                                        
                                                                        45,557,212
                                                                        
                                                                        
                                                                        
                                                                        2,809,244
                                                                        
                                                                        
                                                                        
                                                                        112,508
                                                                        
                                                                        
                                                                        
                                                                        2,696,736Leasehold
      land use rights andConstruction
      in progress
                                                                        
                                                                        
                                                                        5,943,154
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        5,943,154
                                                                        
                                                                        
                                                                        
                                                                        64,238,039
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        64,238,039Computer
      equipment and software
                                                                        
                                                                        
                                                                        965,191
                                                                        
                                                                        
                                                                        
                                                                        91,366
                                                                        
                                                                        
                                                                        
                                                                        873,825
                                                                        
                                                                        
                                                                        
                                                                        377,080
                                                                        
                                                                        
                                                                        
                                                                        15,556
                                                                        
                                                                        
                                                                        
                                                                        361,524Motor
      vehicles andFurniture
      and fixture
                                                                        
                                                                        
                                                                        1,723,031
                                                                        
                                                                        
                                                                        
                                                                        57,592
                                                                        
                                                                        
                                                                        
                                                                        1,665,439
                                                                        
                                                                        
                                                                        
                                                                        142,843
                                                                        
                                                                        
                                                                        
                                                                        23,270
                                                                        
                                                                        
                                                                        
                                                                        119,573$
                                                                        114,575,643
                                                                        
                                                                        
                                                                        $
                                                                        6,263,953
                                                                        
                                                                        
                                                                        $
                                                                        108,311,690
                                                                        
                                                                        
                                                                        $
                                                                        85,192,508
                                                                        
                                                                        
                                                                        $
                                                                        1,826,465
                                                                        
                                                                        
                                                                        $
                                                                        83,366,043
  The
leasehold represents land use rights for a term of 50 years.  Under
the People’s Republic of China (“PRC”) law, land use rights can be revoked and
the tenants can be forced to vacate at any time when re-development of the land
is in the public interest.
 
 Interest
capitalized to property, plant and equipment during the year ended December 31,
2009 was $126,398 (2008 – $537,430).  Testing and preparation
charges incurred in the two new leaf processing facilities totaling
$717,796 were also capitalized during the year (2008 – $nil).
 
 Property,
plant and equipment have been pledged as general collateral for the line of
credit facilities available to the Chinese subsidiaries (Note 13).
 
 11.
                RESTRICTED
      CASH
 
 The
Company is required to hold a guaranteed investment certificate with a bank as
collateral for the Company’s credit cards issued to several
employees.
 
 12.
                  INTANGIBLE
      ASSETS
 
 December
      31, 2009
                                                              
                                                              
                                                              December
      31, 2008Accumulated
                                                              
                                                              
                                                              Net
      Book
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              Accumulated
                                                              
                                                              
                                                              Net
      BookCost
                                                              
                                                              
                                                              Amortization
                                                              
                                                              
                                                              Value
                                                              
                                                              
                                                              Cost
                                                              
                                                              
                                                              Amortization
                                                              
                                                              
                                                              ValueCustomer
      relationship
                                                              
                                                              $
                                                              15,416,254
                                                              
                                                              
                                                              $
                                                              1,749,855
                                                              
                                                              
                                                              $
                                                              13,666,399
                                                              
                                                              
                                                              $
                                                              15,416,254
                                                              
                                                              
                                                              $
                                                              208,230
                                                              
                                                              
                                                              $
                                                              15,208,024Patents
      and acquired technologies
                                                              
                                                              
                                                              24,556,250
                                                              
                                                              
                                                              
                                                              1,507,194
                                                              
                                                              
                                                              
                                                              23,049,056
                                                              
                                                              
                                                              
                                                              16,243,752
                                                              
                                                              
                                                              
                                                              658,462
                                                              
                                                              
                                                              
                                                              15,585,290$
                                                              39,972,504
                                                              
                                                              
                                                              $
                                                              3,257,049
                                                              
                                                              
                                                              $
                                                              36,715,455
                                                              
                                                              
                                                              $
                                                              31,660,006
                                                              
                                                              
                                                              $
                                                              866,692
                                                              
                                                              
                                                              $
                                                              30,793,314
  Page
17 of 44
  GLG
LIFE TECH CORPORATION
 Notes to
Consolidated Financial Statements
 Years
Ended December 31, 2009 and 2008
  
 12.
                INTANGIBLE
      ASSETS, continued
 
 (a)
                Customer
      relationship
  In
conjunction with signing a ten year supply agreement with Cargill
Incorporated (“Strategic Customer”), the Company issued share purchase warrants
in July 2007 (Note 20d)).  Since the Company expected to obtain future
economic benefits from the relationship an intangible was recorded as the fair
value of consideration given to enter into the contract.
 
 The first
warrant allowed the Strategic Customer to purchase 3,591,411 common shares
of the Company at a price of $14 per share.  A second warrant allowed
the Strategic Customer to purchase 1,305,986 common shares at a price of
$17.76 per share.
 
 The
warrants were valued at $10,919,330 using the Black-Scholes option pricing
model, with the following assumptions:
  Risk-free
      interest rate:
                  
                  4%Dividend
      yield:
                  
                  0%Volatility:
                  
                  45%Expected
      time to maturity:
                  
                  7
      months to 21 months depending on the lives of the
  warrants
  Future
income taxes of $4,496,924 have also been capitalized as additional cost of the
customer relationship.
  (b)
                Intangible
      from AHTD acquisition
 
 On
December 27, 2007, the Company acquired all issued and outstanding shares of
Agricultural High-Tech Developments Limited (AHTD), a company incorporated under
the laws of the Marshall Islands.  AHTD owns patents relating to new
stevia seedling and breeding technology.  One patent has been
registered with the Chinese government.
 
 The
purchase price consisted of 3,125,000 common shares of the
Company.  937,500 common shares were issued on December 27, 2007
and 1,093,750 common shares were issued on November 27, 2008.  An
additional 1,093,750 common shares were issued on December 8,
2009.  Total consideration for the patents was $24,556,250 based on
the fair value of the common shares on the date of issuance.
 
 13.
                SHORT
      TERM LOANS
 
 As at
December 31, 2009 the Company’s short term loans consisted of borrowings from
two banks in China and from a private lender as follows:
  Page
18 of 44
  GLG
LIFE TECH CORPORATION
 Notes to
Consolidated Financial Statements
 Years
Ended December 31, 2009 and 2008
  
  13.
                SHORT
      TERM LOANS, Continued
 
 Short
term bank loans as at December 31, 2009
 
 Loan
      amount in C$
                                                            
                                                            Loan
      amount in RMB
                                                            
                                                            Maturity
      Date
                                                            
                                                            Interest
      rate
                                                              per
      annum
                                                            
                                                            
                                                            Lender$
                                                            9,198,000
                                                            
                                                            
                                                            60,000,000
                                                            
                                                            June
      15, 2010
                                                            
                                                            
                                                            5.31
                                                            %
                                                            
                                                            Agricultural
      Bank of China3,066,000
                                                            
                                                            
                                                            20,000,000
                                                            
                                                            May
      28, 2010
                                                            
                                                            
                                                            5.31
                                                            %
                                                            
                                                            Agricultural
      Bank of China3,066,000
                                                            
                                                            
                                                            20,000,000
                                                            
                                                            June
      28, 2010
                                                            
                                                            
                                                            5.31
                                                            %
                                                            
                                                            Agricultural
      Bank of China2,606,100
                                                            
                                                            
                                                            17,000,000
                                                            
                                                            July
      28, 2010
                                                            
                                                            
                                                            5.31
                                                            %
                                                            
                                                            Agricultural
      Bank of China459,900
                                                            
                                                            
                                                            3,000,000
                                                            
                                                            October
      28, 2010
                                                            
                                                            
                                                            5.31
                                                            %
                                                            
                                                            Agricultural
      Bank of China3,066,000
                                                            
                                                            
                                                            20,000,000
                                                            
                                                            August
      29, 2010
                                                            
                                                            
                                                            5.31
                                                            %
                                                            
                                                            Agricultural
      Bank of China3,066,000
                                                            
                                                            
                                                            20,000,000
                                                            
                                                            September
      29, 2010
                                                            
                                                            
                                                            5.31
                                                            %
                                                            
                                                            Agricultural
      Bank of China4,599,000
                                                            
                                                            
                                                            30,000,000
                                                            
                                                            October
      29, 2010
                                                            
                                                            
                                                            5.31
                                                            %
                                                            
                                                            Agricultural
      Bank of China4,599,000
                                                            
                                                            
                                                            30,000,000
                                                            
                                                            June
      24, 2010
                                                            
                                                            
                                                            5.31
                                                            %
                                                            
                                                            Construction
      Bank of China3,066,000
                                                            
                                                            
                                                            20,000,000
                                                            
                                                            June
      22, 2010
                                                            
                                                            
                                                            4.86
                                                            %
                                                            
                                                            Construction
      Bank of China$
                                                            36,792,000
                                                            
                                                            
                                                            240,000,000
 
 Short term borrowing from a private
lender as at December 31, 2009
 
 Loan
      amount in C$
                              
                              Loan
      amount in USD
                              
                              Maturity
      Date
                              
                              Interest
      rateper
      annum
                              
                              
                              Lender$
                              525,500
                              
                              $
                              500,000
                              
                              October
      9, 2010
                              
                              
                              8.00
                              %
                              
                              Private
      lender$
                              525,500
                              
                              $
                              500,000
 
 As at
December 31, 2008, the Company’s short term loans consisted of two loans as
follows:
 
 Loan
      amount in C$
                              
                              
                              Loan amount in
      RMB
                              
                              Maturity
      Date
                              
                              Interest rate

                                  per
      annum
                              
                              
                              Lender$
                              6,641,500
                              
                              
                              
                              37,000,000
                              
                              November
      20, 2009
                              
                              
                              6.66
                              %
                              
                              Dongtai
      Rural Credit Union3,590,000
                              
                              
                              
                              20,000,000
                              
                              December
      25, 2009
                              
                              
                              5.31
                              %
                              
                              Construction
      Bank of China$
                              10,231,500
                              
                              
                              
                              57,000,000
 The
Company’s subsidiaries have been pledged as collateral for the loans borrowed in
2009 and 2008.  Two pieces of land of two subsidiaries were also used
as collateral for the above facilities.
  Page
19 of 44
  GLG
LIFE TECH CORPORATION
 Notes to
Consolidated Financial Statements
 Years
Ended December 31, 2009 and 2008
  
 14.
                ACCOUNTS
      PAYABLE AND ACCRUALS
 
 December
      31, 2009
                              
                              
                              December
      31, 2008Raw
      material
                              
                              $
                              942,761
                              
                              
                              $
                              2,687,714Construction
      and equipment
                              
                              
                              20,721,527
                              
                              
                              
                              12,720,270Trade
      payable
                              
                              
                              3,718,700
                              
                              
                              
                              1,759,583$
                              25,382,988
                              
                              
                              $
                              17,167,567
 
 15.
                ADVANCES
      FROM A CUSTOMER AND INTEREST
PAYABLE
 
 In July
2008, the Company entered into a supply and prepayment agreement whereby the
Strategic Customer financed $24,492,000 (US$20,000,000) for the purchase of
stevia leaves for 2009 orders, which shall be further processed into the stevia
extract to be shipped to the Strategic Customer.
 
 The
prepayment and accrued interest was to be repaid by way of the sale of
stevia extracts to the Strategic Customer.  Interest at LIBOR + 6% was
charged per annum.  The prepayment was collateralized by a general
security agreement over all assets of the Company.  There was a
covenant that at any time during the advance remained outstanding, the Company
could not incur more than US $80,000,000 of indebtedness for plant
expenditure or additional leaf financing beyond the US $20,000,000 associated
with this prepayment.
 
 As at
December 31, 2009, the outstanding balance had been repaid in full (2008 -
$24,492,000 (US$ 20,000,000).  Total interest that the Company paid in
respect to the advance during the term it was outstanding was
US$2,006,656.
 
 As at
December 31, 2009, the Company accrued interest payable of $9,675 on short term
borrowing from a private lender (Note 13), $63,863 on banking facilities in
China (Note 13), and $195,374 on loan from a related party (Note
16).
 
 16.
                RELATED
      PARTIES TRANSACTIONS AND BALANCES
 
 In
addition to the transactions disclosed elsewhere in these consolidated financial
statements, the Company has executive and management service arrangements with
Grand Leaf Group Ltd. (“Grand Leaf”), PALCO International Inc.
(“PALCO”), GLG International Development Company (“GLG International”),
AAFAB Corporation (“AAFAB”) and BISM Ltd. (“BISM”) for services provided by
senior management and directors of the Company.  The amount of these
transactions and outstanding balances as at December 31, 2009 are as
follows:
 
 a)
                During
      the year ended December 31, 2009, the Company paid or
      accrued consulting fees totaling $343,794 (2008 - $300,000) in
      respect to Grand Leaf’s management agreement.  As at December
      31, 2009 there was $343,794 (2008 - $75,000) payable to Grand
      Leaf.
  Page
20 of 44
  GLG
LIFE TECH CORPORATION
 Notes to
Consolidated Financial Statements
 Years
Ended December 31, 2009 and 2008
  
 16.
                RELATED
      PARTIES TRANSACTIONS AND BALANCES,
Continued
 
 b)
                During
      year ended December 31, 2009, the Company paid or accrued consulting fees
      of $189,086 (2008 – $120,000) and $68,759 (2008 –
      $45,000) to PALCO and AAFAB respectively.  As at December 31,
      2009 there was $4,702 (2008 - $4,702) payable to PALCO and $nil (2008
      – $1,410) payable to AAFAB.
 
 c)
                During
      the year ended December 31, 2009, the Company paid or accrued consulting
      fees totaling $72,664 (2008 – $55,992) to BISM.  As at
      December 31, 2009 there was $19,545 (2008 – $nil) payable to
      BISM.
 
 d)
                During
      the year ended December 31, 2009, the Company paid or accrued management
      fees totaling $361,883 (2008 - $ 365,475) to GLG International.
       As at December 31, 2009 there was $361,883 (2008 - $365,475) payable
      to GLG International.
 
 During
the twelve month period ended December 31, 2009, the Company
obtained US $6,892,000 non-secured loans from the Company’s
Chairman and Chief Executive Officer.  The loans bear interest at the US
dollar prime rate posted by HSBC Bank (Canada) plus 3% per annum.  The
Company uses the proceeds of these loans for corporate working capital and to
fund the required initial investment in the new Runhao subsidiary in
China.
  Loan amount in C$
                                      
                                      Loan
      amount in US$
                                      
                                      Maturity
      Date
                                      
                                      Interest
      rate per annum$
                                      2,102,000
                                      
                                      $
                                      2,000,000
                                      
                                      June
      28, 2010
                                      
                                      HSBC
      Bank Canada US Dollar prime rate + 3%1,681,600
                                      
                                      
                                      1,600,000
                                      
                                      July
      13, 2010
                                      
                                      HSBC
      Bank Canada US Dollar prime rate + 3%2,627,500
                                      
                                      
                                      2,500,000
                                      
                                      August
      25, 2010
                                      
                                      HSBC
      Bank Canada US Dollar prime rate + 3%832,392
                                      
                                      
                                      792,000
                                      
                                      November
      11, 2010
                                      
                                      HSBC
      Bank Canada US Dollar prime rate + 3%$
                                      7,243,492
                                      
                                      $
                                      6,892,000
  In
addition to the loans above, on September 10, 2009, the Company obtained a
US $200,000 non-secured loan from a director of the Company.  The loan
bore an interest at a rate of 8% per annum and was to mature on March 15, 2010.
 This loan was repaid on December 21, 2009.
 
 These
transactions were measured at the exchange amount, which is the amount of
consideration established and agreed to by the related parties.
  Page
21 of 44
  GLG
LIFE TECH CORPORATION
 Notes to
Consolidated Financial Statements
 Years
Ended December 31, 2009 and 2008
  
 17.
                DEFERRED
      REVENUE
 
 In July
2008, an upfront non-refundable fee of US$2,500,000 was received as
part of a supply agreement with the Strategic Customer that requires a
minimum quantity of stevia to be delivered by the Company over a one year
period.  This payment was deferred and is being recognized as
revenue over a one year period from October 1, 2008 to September 30,
2009.  The balance of the deferred revenue as at December 31, 2009 was
$nil (2008 - $1,995,000).
 
 18.
                NON-CURRENT
      BANK LOAN
 
 Loan amount in C$
                              
                              Loan
      amount in RMB
                              
                              Maturity
      Date
                              
                              Interest
      rate
                                per
      annum
                              
                              
                              Lender$
                              4,599,000
                              
                              
                              30,000,000
                              
                              June
      23, 2011
                              
                              
                              5.40
                              %
                              
                              Construction
      Bank of China9,198,000
                              
                              
                              60,000,000
                              
                              June
      29, 2011
                              
                              
                              5.40
                              %
                              
                              Agricultural
      Bank of China$
                              13,797,000
                              
                              
                              90,000,000
 
 19.
                ECONOMIC
      DEPENDENCE
 
 The
Company has an agreement with the Strategic Customer that outlines annual
minimum purchase and supply quantities over the term of the agreement.  For
each of years two and three, once volume and price have been agreed, The
Strategic Customer will be required to either take the committed volume or pay
the agreed price.
 
 The
supply agreement with the Strategic Customer accounts for 90% of
revenue for the year ended December 31, 2009 (2008 - 77%).
 
 20.
                SHARE
      CAPITAL
 
 a)
                Share
      consolidation
 
 Effective
November 5, 2009 the Company completed a four-for-one consolidation of its
common shares.  All common share, warrant and stock option information
for all periods presented, including earnings per share information have been
adjusted to reflect the consolidation on a retroactive basis.
 
 b)
                Capital
      stock
 
 Authorized
 Unlimited
number of common shares with no par value
 
 Common
shares
 The
holders of common shares are entitled to one vote per share.
  Page
22 of 44
  GLG
LIFE TECH CORPORATION
 Notes to
Consolidated Financial Statements
 Years
Ended December 31, 2009 and 2008
  
 20.
                SHARE
      CAPITAL, Continued
 
 b)
                Capital
      stock, continued
 
 Number
      of Shares
                                          
                                          
                                          AmountBalance
      at December 31, 2007 as previously reported
                                          
                                          
                                          65,584,060
                                          
                                          
                                          $
                                          61,052,731Retroactive
      application of 4:1 consolidation on November 5, 2009
                                          
                                          
                                          16,396,015
                                          
                                          
                                          
                                          61,052,731Share
      purchase warrants exercised (Note 20 d))
                                          
                                          
                                          1,271,460
                                          
                                          
                                          
                                          20,235,133Stock
      options exercised (Note 20 e)(i))
                                          
                                          
                                          52,017
                                          
                                          
                                          
                                          125,527Issuance
      of restricted shares (Note 20 e)(ii))
                                          
                                          
                                          322,654
                                          
                                          
                                          
                                          1,060,004Convertible
      debenture converted into common shares
                                          
                                          
                                          494,020
                                          
                                          
                                          
                                          7,513,004Shares
      issued for AHTD intangible (Note 12 b))
                                          
                                          
                                          1,093,750
                                          
                                          
                                          
                                          3,368,750Balance
      at December 31, 2008 as previously reported
                                          
                                          
                                          19,629,916
                                          
                                          
                                          
                                          93,355,149Stock
      options exercised (Note 20 e)(i))
                                          
                                          
                                          241,457
                                          
                                          
                                          
                                          584,376Issuance
      of restricted shares (Note 20 e)(ii))
                                          
                                          
                                          283,850
                                          
                                          
                                          
                                          485,407Stock
      based compensation on previously issued restricted shares
                                          
                                          
                                          -
                                          
                                          
                                          
                                          1,615,955Shares
      issued on equity offering , net (Note 20 c))
                                          
                                          
                                          4,168,750
                                          
                                          
                                          
                                          29,452,656Shares
      issued for AHTD intangible (Note 12 b))
                                          
                                          
                                          1,093,750
                                          
                                          
                                          
                                          8,312,500Income
      tax recovery related to share issuance costs
                                          
                                          
                                          -
                                          
                                          
                                          
                                          1,006,072Balance
      at December 31, 2009
                                          
                                          
                                          25,417,723
                                          
                                          
                                          $
                                          134,812,115
  c)
                Equity
      offering
 
 On
November 20, 2009, the Company completed an equity offering on NASDAQ of
3,625,000 common shares at US$7.60 per share.  The Company received
aggregate gross proceeds of approximately $28,930,255 (US
$27,550,000).  The underwriter discounts and commissions related to
this equity offering amounted to $2,035,160 (US$ 1,938,063). In addition, the
Company incurred share issuance costs in the amount of $1,473,245 for legal,
audit and accounting, filing, registration and printing fees in relation to the
equity offering.
 
 The
underwriters of the Offering were granted an over-allotment option for a period
of 30 days to purchase up to an additional 543,750 common shares on the same
terms and conditions as the equity offering.  The underwriters
exercised this option and the Company issued 543,750 of its common shares for
gross proceeds of $4,311,024 (US$4,132,500).  Cost incurred in
relation to the issuance of the over allotment shares amounted to $280,216 (US
$268,613).
  Page
23 of 44
  GLG
LIFE TECH CORPORATION
 Notes to
Consolidated Financial Statements
 Years
Ended December 31, 2009 and 2008
  
 20.
                SHARE
      CAPITAL, Continued
 
 d)
                Share
      purchase warrants
 
 All share
purchase warrants of the Company expired before December 31, 2009. A summary of
the changes since December 31, 2007 is presented below:
 
 Number of warrants
                                
                                
                                AmountBalance
      at December 31, 2007
                                
                                
                                6,893,646
                                
                                
                                $
                                15,378,511Warrants
      exercised by a customer
                                
                                
                                (1,271,460
                                )
                                
                                
                                (2,453,160
                                )Warrants
      expired
                                
                                
                                (897,852
                                )
                                
                                
                                (1,447,443
                                )Balance
      at December 31, 2008
                                
                                
                                4,724,334
                                
                                
                                
                                11,477,908Warrants
      expired
                                
                                
                                (4,724,334
                                )
                                
                                
                                (11,477,908
                                )Balance
      at December 31, 2009
                                
                                
                                -
                                
                                
                                $
                                -
  A summary
of the share purchase warrants outstanding at December 31, 2008 is provided
below:
 
 Expiry
      date
                            
                            Weighted
      average
                              exercise
      price
                            
                            
                            Number
      outstaning at
                              December
      31, 2008March
      31, 2009
                            
                            
                            15.80
                            
                            
                            
                            2,728,084June
      11, 2009
                            
                            
                            17.40
                            
                            
                            
                            1,696,250June
      22, 2009
                            
                            
                            12.72
                            
                            
                            
                            300,00016.16
                            
                            
                            
                            4,724,334
  e)
                Stock
      options and restricted shares
 
 The
Company is subject to the policies of the Toronto Stock Exchange (“TSX”), under
which it is authorized to grant options to officers, directors, employees and
consultants enabling them to purchase common stock of the Company. The
Company has one stock option and restricted shares plan (“Plan”) which was
amended effective as of May 16, 2008.  The Plan is administered by the
Board of Directors, which determines individual eligibility under the
Plan.
 
 Under the
Plan, options granted are non-assignable and the number of common shares
available for issue is a maximum of 10% of the issued and outstanding common
shares of the Company inclusive of any restricted shares granted under the Plan.
 The maximum term of an option is 5 years after the date of
grant.
  Page
24 of 44
  GLG
LIFE TECH CORPORATION
 Notes to
Consolidated Financial Statements
 Years
Ended December 31, 2009 and 2008
  
 20.
                SHARE
      CAPITAL, Continued
 
 e)
                Stock
      options and restricted shares,
continued
 
 (i)
                Stock
      options
 
 The
following tables summarize information about stock options outstanding at
December 31, 2009 and 2008:
  Weighted
      averageExercise
                                                    
                                                    Number
      outstanding
                                                    
                                                    
                                                    remaining
      contractual
                                                    
                                                    
                                                    Number
      exercisable
                                                    
                                                    
                                                    Weighted
      averageprice
                                                    
                                                    at
      December 31, 2009
                                                    
                                                    
                                                    life
      (years)
                                                    
                                                    
                                                    at
      December 31, 2009
                                                    
                                                    
                                                    exercise
      price$
                                                    1.20
                                                    
                                                    
                                                    1,099,167
                                                    
                                                    
                                                    
                                                    0.47
                                                    
                                                    
                                                    
                                                    1,099,167
                                                    
                                                    
                                                    $
                                                    1.20$
                                                    8.26
                                                    
                                                    
                                                    18,750
                                                    
                                                    
                                                    
                                                    4.92
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -$
                                                    8.60
                                                    
                                                    
                                                    91,150
                                                    
                                                    
                                                    
                                                    4.50
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -$
                                                    16.00
                                                    
                                                    
                                                    44,716
                                                    
                                                    
                                                    
                                                    3.37
                                                    
                                                    
                                                    
                                                    12,696
                                                    
                                                    
                                                    $
                                                    16.001,253,783
                                                    
                                                    
                                                    
                                                    1.81
                                                    
                                                    
                                                    
                                                    1,111,863
                                                    
                                                    
                                                    $
                                                    1.37
  Weighted
      averageExercise
                                    
                                    Number
      outstanding
                                    
                                    
                                    remaining
      contractual
                                    
                                    
                                    Number
      exercisablePrice
                                    
                                    at
      December 31, 2008
                                    
                                    
                                    life
      (years)
                                    
                                    
                                    at
      December 31, 2008$
                                    1.20
                                    
                                    
                                    1,340,000
                                    
                                    
                                    
                                    1.72
                                    
                                    
                                    
                                    1,340,000$
                                    3.20
                                    
                                    
                                    1,250
                                    
                                    
                                    
                                    4.91
                                    
                                    
                                    
                                    -$
                                    16.00
                                    
                                    
                                    44,716
                                    
                                    
                                    
                                    4.62
                                    
                                    
                                    
                                    -1,385,966
                                    
                                    
                                    
                                    1.81
                                    
                                    
                                    
                                    1,340,000
 The
following is a summary of option transactions since December 31,
2007:
 
 Number
      of options
                                    
                                    
                                    Weighted
      average
                                      exercise
      price per
                                      shareBalance
      at December 31,2007
                                    
                                    
                                    1,392,017
                                    
                                    
                                    $
                                    1.20Options
      granted
                                    
                                    
                                    45,966
                                    
                                    
                                    
                                    15.64Options
      exercised
                                    
                                    
                                    (52,017
                                    )
                                    
                                    
                                    1.20Balance
      at December 31, 2008
                                    
                                    
                                    1,385,966
                                    
                                    
                                    
                                    1.68Options
      granted
                                    
                                    
                                    109,900
                                    
                                    
                                    
                                    8.54Options
      cancelled
                                    
                                    
                                    (626
                                    )
                                    
                                    
                                    1.21Options
      exercised
                                    
                                    
                                    (241,457
                                    )
                                    
                                    
                                    1.21Balance
      at December 31, 2009
                                    
                                    
                                    1,253,783
                                    
                                    
                                    $
                                    2.37
  Page
25 of 44


GLG
LIFE TECH CORPORATION


Notes
to Consolidated Financial Statements


Years
Ended December 31, 2009 and 2008





20.
            SHARE
      CAPITAL, Continued




e)
            Stock
      options and restricted shares,
continued




(i)
            Stock
      options, continued




During
the year ended December 31, 2009, the Company recorded stock based compensation
expense in the amount of $377,553, of which $149,155 related to options granted
in 2009 and vested in the same year and $228,398 related to options granted in
previous years, but vested in 2009.




During
the year ended December 31, 2008, the Company recorded stock based compensation
expense in the amount of $260,571, related to options granted in 2008 and vested
in the same year.




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




2009
                                    
                                    
                                    2008Risk-free
      interest rate
                                    
                                    
                                    0.51
                                    %
                                    
                                    
                                    3.00
                                    %Dividend
      yield
                                    
                                    
                                    0
                                    %
                                    
                                    
                                    0
                                    %Volatility
                                    
                                    
                                    92
                                    %
                                    
                                    
                                    141
                                    %Expected
      option life
                                    
                                    5
      years
                                    
                                    
                                    5
      yearsExpected
      forfeiture per year
                                    
                                    
                                    5
                                    %
                                    
                                    
                                    5
                                    %


(ii)
              Restricted
      shares




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




During
the year ended December 31, 2009, 283,850 (2008 – 322,654)
restricted shares were issued with a fair value of $2,441,110 (2008 -
$4,682,000). The fair value of the restricted shares is calculated based on the
shares price at the date of the issuance of the shares.


Page
26 of 44


GLG
LIFE TECH CORPORATION


Notes
to Consolidated Financial Statements


Years
Ended December 31, 2009 and 2008





20.
            SHARE
      CAPITAL, Continued




e)
            Stock
      options and restricted shares,
continued




(ii)
              Restricted
      shares, continued




The
vesting periods for restricted shares as at December 31, 2009 are as
follows:




Number of restricted shares at
                                                
                                                Vesting period
                                                
                                                PerformanceDecember 31, 2009
                                                
                                                (years)
                                                
                                                based11,359
                                                
                                                
                                                -
                                                
                                                No7,000
                                                
                                                
                                                0.50
                                                
                                                No30,000
                                                
                                                
                                                0.90
                                                
                                                No281,295
                                                
                                                
                                                1.37
                                                
                                                Yes276,850
                                                
                                                
                                                1.50
                                                
                                                Yes606,504
                                                
                                                
                                                1.37


The
vesting periods for restricted shares as at December 31, 2008 are as
follows:




Number of restricted shares at
                                                
                                                Vesting period
                                                
                                                PerformanceDecember 31, 2008
                                                
                                                (years)
                                                
                                                based11,359
                                                
                                                
                                                0.37
                                                
                                                No30,000
                                                
                                                
                                                1.90
                                                
                                                No281,295
                                                
                                                
                                                2.37
                                                
                                                Yes322,654
                                                
                                                
                                                2.24


During
the year ended December 31, 2009, the Company recorded stock based compensation
expense in the amount of $2,101,362, of which $485,407 related to restricted
shares issued in 2009, and $1,615,955 related to restricted shares granted in
2008, and for which certain performance conditions were achieved in
2009.




During
the year ended December 31, 2008, the Company recorded stock based compensation
expense in the amount of $1,060,004 related to restricted shares granted in 2008
and for which certain performance conditions were achieved.




21.
            RESERVE
      FOR EMPLOYEE BENEFITS




The
laws in China require all wholly owned foreign entities to set aside 10% of
retained earnings as a general reserve fund for employee benefits until such a
fund has reached 50% of the Company's registered capital.  The amount
of the Company’s reserve is $509,559 for the year ended December 31, 2009
(2008 - $298,438) which is recorded in deficit.


Page
27 of 44


GLG
LIFE TECH CORPORATION


Notes
to Consolidated Financial Statements


Years
Ended December 31, 2009 and 2008













22.
              SUPPLEMENTAL
      CASH FLOW INFORMATION




2009
                      
                      
                      2008Interest
      paid
                      
                      $
                      4,286,177
                      
                      
                      $
                      654,056Income
      taxes received
                      
                      
                      -
                      
                      
                      
                      -Increase
      in accounts payable and accruals related to the purchase of property,
      plant and equipment
                      
                      
                      8,064,144
                      
                      
                      
                      12,657,383Share
      issuance costs included in accounts payable
                      
                      
                      602,310
                      
                      
                      
                      -




23.
            CHANGES
      IN NON-CASH WORKING CAPITAL




2009
                                  
                                  
                                  2008Changes
      in non-cash working capitalAccounts
      receivable
                                  
                                  $
                                  (3,395,063
                                  )
                                  
                                  $
                                  1,531,643Taxes
      recoverable
                                  
                                  
                                  (4,012,613
                                  )
                                  
                                  
                                  (84,099
                                  )Inventory
                                  
                                  
                                  (13,221,650
                                  )
                                  
                                  
                                  (14,410,203
                                  )Prepaid
      expenses
                                  
                                  
                                  (2,368,189
                                  )
                                  
                                  
                                  (6,016,902
                                  )Deferred
      charges
                                  
                                  
                                  12,648
                                  
                                  
                                  
                                  (102,682
                                  )Accounts
      payable
                                  
                                  
                                  1,694,538
                                  
                                  
                                  
                                  (1,659,795
                                  )Interest
      payable
                                  
                                  
                                  (142,316
                                  )
                                  
                                  
                                  2,973Deferred
      revenue
                                  
                                  
                                  (1,995,000
                                  )
                                  
                                  
                                  1,995,000$
                                  (23,427,645
                                  )
                                  
                                  $
                                  (18,744,065
                                  )




24.
            EARNINGS
      PER SHARE




The
calculation of basic earnings per share for the year ended December 31, 2009 is
based on the weighted average number of shares outstanding.  Diluted
earnings per share reflect the dilutive effect of the exercise of
options.




For
the year ended December 31, 2008, all stock options and warrants were excluded
from the calculation of diluted net loss per common share, as the effect of
including them would have been anti-dilutive.  The number of shares
for the diluted earnings per share was calculated as follows:


Page
28 of 44


GLG
LIFE TECH CORPORATION


Notes
to Consolidated Financial Statements


Years
Ended December 31, 2009 and 2008








24.
            EARNINGS
      PER SHARE, Continued




December 31,
      2009
                          
                          
                          December 31,
      2008Net
      income (loss) for the period
                          
                          $
                          758,019
                          
                          
                          $
                          (10,606,542
                          )Weighted
      average number of shares used in basic earnings per share
                          
                          
                          20,379,979
                          
                          
                          
                          17,604,660Dilutive
      potential of the following:Employee/director share options
                          
                          
                          1,073,845
                          
                          
                          
                          -Diluted
      weighted average number of shares outstanding
                          
                          
                          21,453,824
                          
                          
                          
                          17,604,660Earnings
      per share:Basic
                          
                          $
                          0.04
                          
                          
                          $
                          (0.60
                          )Diluted
                          
                          $
                          0.04
                          
                          
                          $
                          (0.60
                          )




25.
            SEGMENTED
      INFORMATION




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




December
      31, 2009
                          
                          Canada
                          
                          
                          China
                          
                          
                          USA
                          
                          
                          TotalProperty,
      Plant and Equipment
                          
                          $
                          670
                          
                          
                          $
                          108,311,020
                          
                          
                          $
                          -
                          
                          
                          $
                          108,311,690Revenue
                          
                          
                          36,210,362
                          
                          
                          
                          4,609,153
                          
                          
                          
                          1,064,069
                          
                          
                          
                          41,883,584




26.
              INCOME
      TAXES




a)
            Future
      tax assets and liabilities




2009
                    
                    
                    2008Non-capital
      loss carry-forwards
                    
                    $
                    1,620,370
                    
                    
                    
                    2,419,875Pre-operating
      Costs
                    
                    
                    403,689
                    
                    
                    
                    307,818Cumulative
      eligible costs
                    
                    
                    249,010
                    
                    
                    
                    220,945Inventory
                    
                    
                    -
                    
                    
                    
                    (157,056
                    )Deferred
      revenue
                    
                    
                    -
                    
                    
                    
                    598,500Intangible
      assets
                    
                    
                    (3,644,373
                    )
                    
                    
                    (4,278,898
                    )Property,
      plant and equipment
                    
                    
                    (345,813
                    )
                    
                    
                    (343,458
                    )Share
      issuance costs
                    
                    
                    1,064,920
                    
                    
                    
                    629,567(652,196
                    )
                    
                    
                    (602,708
                    )Less:  valuation
      allowance
                    
                    
                    (81,007
                    )
                    
                    
                    (1,811,934
                    )Future
      income tax asset (liability)
                    
                    $
                    (733,203
                    )
                    
                    
                    (2,414,642
                    )


Page
29 of 44


GLG
LIFE TECH CORPORATION


Notes
to Consolidated Financial Statements


Years
Ended December 31, 2009 and 2008








26.
              INCOME
      TAXES, Continued




b)
            Effective
      tax rate




Income
tax expense (recovery) differs from the amount that would be computed by
applying the combined federal and provincial statutory income tax rate of 30%
(2008 - 31%) to income before income taxes.  The reasons for the
differences are as follows:


2009
                                        
                                        
                                        2008Tax
      expense (recovery) at statutory rates
                                        
                                        $
                                        111,238
                                        
                                        
                                        $
                                        (3,751,873
                                        )Increase
      (decrease) resulting from:Permanent
      and other differences
                                        
                                        
                                        1,989,961
                                        
                                        
                                        
                                        1,025,910Change
      in tax rates
                                        
                                        
                                        (313,200
                                        )
                                        
                                        
                                        326,508Book
      to tax differences
                                        
                                        
                                        (182,863
                                        )
                                        
                                        
                                        (629,567
                                        )Foreign
      rate differences
                                        
                                        
                                        (284,290
                                        )
                                        
                                        
                                        (316,994
                                        )Expiry
      of prior year losses
                                        
                                        
                                        166,829
                                        
                                        
                                        
                                        106,081Change
      in valuation allowance
                                        
                                        
                                        (1,730,927
                                        )
                                        
                                        
                                        1,811,934(243,259
                                        )
                                        
                                        
                                        (1,428,000
                                        )




c)
            Canada
      and China income taxes


Provision
      for income taxes
                                  
                                  2009
                                  
                                  
                                  2008Current
      tax expense (recovery)Canadian
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -USA
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -China
                                  
                                  
                                  510,545
                                  
                                  
                                  
                                  -Future
      Tax expense (recovery)Canadian
                                  
                                  
                                  35,017
                                  
                                  
                                  
                                  (1,164,597
                                  )USA
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -China
                                  
                                  
                                  (788,821
                                  )
                                  
                                  
                                  (263,403
                                  )Total
                                  
                                  
                                  (243,259
                                  )
                                  
                                  
                                  (1,428,000
                                  )




d)
            Non-capital
      losses carryforward


$2014
                                        
                                        
                                        2,458,0642028
                                        
                                        
                                        3,394,2212029
                                        
                                        
                                        174,885Total
                                        
                                        
                                        6,027,169




The
Company's Canadian parent and a subsidiary are subject to Canadian income taxes
while the subsidiaries in China are subject to Chinese income
taxes.  One of the subsidiaries is taxed at half of the 25% statutory
rate in China for 2009. Another Chinese subsidiary is fully exempted from
Chinese income taxes indefinitely.


Page
30 of 44


GLG
LIFE TECH CORPORATION


Notes
to Consolidated Financial Statements


Years
Ended December 31, 2009 and 2008








27.
            FINANCIAL
      INSTRUMENTS




(a)
            Categories
      of financial assets and liabilities




Financial
instruments are classified into one of the following five
categories:  held-for-trading, held-to-maturity investments, loans and
receivables, available-for-sale financial assets, and other financial
liabilities.




The
carrying value of the Company’s financial instruments is classified into the
following categories:




Category
                                          
                                          Carrying value
                                          
                                          December
      31, 2009
                                          
                                          
                                          December
      31, 2008Financial
      assetsHeld-for-trading
                                          
                                          Fair
      value
                                          
                                          $
                                          16,028,206
                                          
                                          
                                          $
                                          7,829,166Loans
      and receivables
                                          
                                          Amortized
      cost
                                          
                                          
                                          5,718,315
                                          
                                          
                                          
                                          2,717,765Financial
      liabilitiesOther
      financial liabilities
                                          
                                          Amortized
      cost
                                          
                                          
                                          84,009,892
                                          
                                          
                                          
                                          52,954,796


(b)
              Items
      of income, expense, gains or
losses




Interest
income, gains and losses from held-for-trading, loans and receivables and other
financial liabilities are recognized in other income
(expense).  During the year ended December 31, 2009, interest expense
in the amount of $2,695,178 (2008 - $2,009,638) from other financial
liabilities was recognized in other expense and $1,125,721 (2008 - $nil) was
recognized through cost of goods sold.




Interest
income and expense from held-for-trading and other financial liabilities were
determined using the effective interest method.




December
      31, 2009
                              
                              
                              December
      31, 2008Interest
      income from held-for-trading
                              
                              $
                              104,968
                              
                              
                              $
                              820,765Interest
      expense from other financial liabilities
                              
                              
                              3,820,899
                              
                              
                              
                              2,009,638
  Page
31 of 44


GLG
LIFE TECH CORPORATION


Notes
to Consolidated Financial Statements


Years
Ended December 31, 2009 and 2008










27.
            FINANCIAL INSTRUMENTS,
      Continued




(c)
            Fair
      value




As
at December 31, 2009 and 2008 the recorded amounts for cash and cash equivalents
are at fair value.




As
at December 31, 2009 and 2008 accounts receivable, accounts payable and accrued
liabilities, short term loans, interest payable, advances from customers, and
due to related party, less provision for impairment if applicable, approximate
their fair values due to the short‐term nature of these
instruments.




As
at December 31, 2009 the estimated fair value of non-current bank loans is
$13,210,367 and was determined using the discounted cash flows method with an
estimated discount rate of 9.31% and an estimated period of 18 months to
repayment.  The exchange rate applied in the valuation at December 31, 2009
was C$0.1533/RMB1.00.




The
discount rate was estimated by management taking into
account:




·
            an
      element of the cost of borrowing;


·
            the
      marginal rates charged on similar instruments, plus an adjustment for the
      specific risks relating to these instruments as viewed at December 31,
      2009, considering that the loans are
  unsecured;


·
            the
      credit risk of the Company’s subsidiaries and the lenders Construction
      bank of China and Agricultural bank of
  China.




The
period to repayment was estimated taking into account the maturity dates of the
non-current bank loans.




(d)
            Credit
      risk




Credit
risk is the risk of loss associated with the counterparty’s inability to fulfill
its payment obligations.  The Company’s primary credit risk is on its
cash and cash equivalents, restricted cash and accounts receivable.




The
Company limits its exposure to credit risk by placing its cash and cash
equivalents with various financial institutions.  Given the current
economic environment, the Company monitors the credit quality of the financial
institutions it deals with on an ongoing basis.




Credit
risk with respect to accounts receivable is concentrated as one customer
accounted for 90% of total trade accounts receivable (December 31, 2008 –
71%).  The following tables provide information regarding the aging of
financial assets that were past due but which were not impaired as at December
31, 2009 and 2008.


Page
32of 44


GLG
LIFE TECH CORPORATION


Notes
to Consolidated Financial Statements


Years
Ended December 31, 2009 and 2008







27.
            FINANCIAL
      INSTRUMENTS,
Continued




(d)
            Credit
      risk, continued




December
      31, 2009
                                                            
                                                            0-30
      days
                                                            
                                                            
                                                            31-90
      days
                                                            
                                                            
                                                            over
      90 days
                                                            
                                                            
                                                            TotalDollar
      amount
                                                            
                                                            $
                                                            5,587,383
                                                            
                                                            
                                                            $
                                                            121,962
                                                            
                                                            
                                                            $
                                                            8,970
                                                            
                                                            
                                                            $
                                                            5,718,315%
      of Total accounts receivable
                                                            
                                                            
                                                            98
                                                            %
                                                            
                                                            
                                                            2
                                                            %
                                                            
                                                            
                                                            0
                                                            %
                                                            
                                                            
                                                            100
                                                            %December
      31, 2008
                                                            
                                                            0-30
      days
                                                            
                                                            
                                                            31-90
      days
                                                            
                                                            
                                                            over
      90 days
                                                            
                                                            
                                                            TotalDollar
      amount
                                                            
                                                            $
                                                            2,021,232
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            $
                                                            692,882
                                                            
                                                            
                                                            $
                                                            2,714,114%
      of Total accounts receivable
                                                            
                                                            
                                                            74
                                                            %
                                                            
                                                            
                                                            0
                                                            %
                                                            
                                                            
                                                            26
                                                            %
                                                            
                                                            
                                                            100
                                                            %


The
Company has a high concentration of credit risk as the accounts receivable was
owed by fewer than ten customers. However, the Company believes that it does not
require collateral to support the carrying value of these financial
instruments.  The carrying amount of financial assets represents the
maximum credit exposure. The Company reviews financial assets, including past
due accounts, on an ongoing basis with the objective of identifying potential
events or circumstances which could delay or prevent the collection of funds on
a timely basis. Based on default rates on customers with receivable balances at
December 31, 2009, the Company believes that there are minimal requirements for
an allowance for doubtful accounts against its accounts receivable.




Allowance
account for credit losses




December
      31, 2009
                                    
                                    
                                    December
      31, 2008Balance
      - beginning of year
                                    
                                    $
                                    3,111,351
                                    
                                    
                                    $
                                    -Increase
      in allowance for doubtful accountsAccounts
      receivable
                                    
                                    
                                    58,358
                                    
                                    
                                    
                                    622,029Interest
      receivable
                                    
                                    
                                    -
                                    
                                    
                                    
                                    199,320Loan
      receivable
                                    
                                    
                                    -
                                    
                                    
                                    
                                    2,290,002Balance
      - end of year
                                    
                                    $
                                    3,169,709
                                    
                                    
                                    $
                                    3,111,351




The
Company also requests deposits from customers in certain circumstances to
mitigate the credit risk.


Page
33 of 44


GLG
LIFE TECH CORPORATION


Notes
to Consolidated Financial Statements


Years
Ended December 31, 2009 and 2008







27.
            FINANCIAL INSTRUMENTS,
      Continued




(e)
              Foreign
      exchange risk




Foreign
exchange risk is the risk that the fair value or future cash flows of a
financial instrument will fluctuate because of a change in foreign exchange
rates.  The Company conducts its business primarily in U.S. dollars,
RMB, Canadian dollars and Hong Kong dollars.  The Company is exposed
to currency risk as the functional currency of its subsidiaries is other than
Canadian dollars.




The
majority of the Company’s assets are held in subsidiaries whose functional
currency is the RMB.  The RMB is not a freely convertible
currency.  Many foreign currency exchange transactions involving RMB,
including foreign exchange transactions under the Company’s capital account, are
subject to foreign exchange controls and require the approval of the PRC State
Administration of Foreign Exchange.  Developments relating to the PRC’s
economy and actions taken by the PRC government could cause future foreign
exchange rates to vary significantly from current or historical rates.  The
Company cannot predict nor give any assurance of its future stability.
 Future fluctuations in exchange rates may adversely affect the value,
translated or converted into Canadian dollars of the Company’s net assets and
net profits.  The Company cannot give any assurance that any future
movements in the exchange rates of RMB against the Canadian dollar and other
foreign currencies will not adversely affect its results of operations,
financial condition and cash flows.  The Company does not use
derivative instruments to reduce its exposure to foreign currency
risk.




All
of the Company’s operations in China are considered self-sustaining operations.
 The assets and liabilities of the self-sustaining operations are
translated at exchange rates prevailing at the balance sheet date.




Unrealized
gains and losses resulting from translating self-sustaining operations are
accumulated and reported as a currency translation adjustment in accumulated
other comprehensive income.




Information
on the net foreign exchange risk exposure of self-sustaining operations with an
impact on the other comprehensive income is provided in the following
table:




December
      31, 2009
                                                
                                                
                                                December
      31, 2008RMB
      balance
                                                
                                                
                                                HK$
      balance
                                                
                                                
                                                RMB
      balance
                                                
                                                
                                                HK$
      balanceTotal
      assets
                                                
                                                
                                                1,144,158,524
                                                
                                                
                                                
                                                5,879
                                                
                                                
                                                
                                                740,189,511
                                                
                                                
                                                
                                                6,679Total
      liabilities
                                                
                                                
                                                368,972,741
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                157,345,795
                                                
                                                
                                                
                                                -Net
      foreign exchange risk exposure
                                                
                                                
                                                775,185,783
                                                
                                                
                                                
                                                5,879
                                                
                                                
                                                
                                                582,843,716
                                                
                                                
                                                
                                                6,679
  Page
34 of 44


GLG
LIFE TECH CORPORATION


Notes
to Consolidated Financial Statements


Years
Ended December 31, 2009 and 2008










27.
            FINANCIAL INSTRUMENTS,
      Continued




(e)
              Foreign
      exchange risk, continued




As
of December 31, 2009, assuming that all other variables remain constant, a
change of 1% in the Canadian dollar against the RMB would have an effect on
other comprehensive income of approximately $1,188,360 (2008
–$1,046,204).




The
Company’s US operations, which are integrated operations, and Canadian
operations are primarily exposed to exchange rate changes between the U.S.
dollar and the Canadian dollar.  The Company’s primary U.S. dollar exposure
in Canada relates to the revaluation into Canadian dollars of its U.S. dollar
denominated working capital.




The
following table provides information on the Company’s net foreign exchange risk
exposure from its US and Canadian operations with an impact on the net income
(loss):




December
      31, 2009
                                                  
                                                  
                                                  December
      31, 2008US$
                                                  
                                                  
                                                  US$Financial
      assetsCash
      and cash equivalents
                                                  
                                                  
                                                  3,437,005
                                                  
                                                  
                                                  
                                                  416,797Accounts
      receivable
                                                  
                                                  
                                                  5,368,861
                                                  
                                                  
                                                  
                                                  160,000Financial
      liabilitiesAccounts
      payable and accruals
                                                  
                                                  
                                                  3,719,943
                                                  
                                                  
                                                  
                                                  33,484Short
      term loans
                                                  
                                                  
                                                  500,000
                                                  
                                                  
                                                  
                                                  -Interest
      payable
                                                  
                                                  
                                                  195,099
                                                  
                                                  
                                                  
                                                  868,634Advances
      from a customer
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  20,000,000Due
      to related party
                                                  
                                                  
                                                  6,892,000
                                                  
                                                  
                                                  
                                                  -Net
      foreign exchange risk exposure
                                                  
                                                  
                                                  (2,501,176
                                                  )
                                                  
                                                  
                                                  (20,325,321
                                                  )


As
of December 31, 2009, assuming that all other variables remain constant, an
increase of 1% in the Canadian dollar against US dollar would have an effect on
net income of approximately $26,287 (2008 –$248,904).




(f)
              Liquidity
      risk




Liquidity
risk is the risk that the Company will not be able to meet its financial
obligations as they fall due.  It is the Company’s intention to meet these
obligations through the collection of accounts receivable, receipts from future
sales, current cash and cash equivalents, short term investments, available
lines of credit in China and possible issuance of new equity or debt
instruments.




The
Company is dependent on obtaining regular financings in order to continue its
expansion programs and repay amounts due under current short term loans.
 Despite previous success in acquiring these financings, there is no
guarantee of obtaining future financings on terms acceptable to the
Company.


Page
35 of 44


GLG
LIFE TECH CORPORATION


Notes
to Consolidated Financial Statements


Years
Ended December 31, 2009 and 2008










27.
            FINANCIAL INSTRUMENTS,
      Continued




(f)
              Liquidity
      risk, continued




The
following tables provide due date information for the Company’s significant
financial liabilities as at December 31, 2009 and 2008:




Financial Liabilities at December 31, 2009
            
            0
      to 12 months
            
            
            12
      to 24 months
            
            
            After
      24 monthsAccounts
      payable and accruals
            
            $
            25,382,988
            
            
            $
            -
            
            
            $
            -Short
      term loans
            
            
            37,317,500
            
            
            
            -
            
            
            
            -Interest
      payable
            
            
            268,912
            
            
            
            -
            
            
            
            -Due
      to related party
            
            
            7,243,492
            
            
            
            -
            
            
            
            -Non-current
      bank loan
            
            
            -
            
            
            
            13,797,000
            
            
            
            -Obligation
      under leases
            
            
            179,866
            
            
            
            153,300
            
            
            
            242,214$
            70,392,758
            
            
            $
            13,950,300
            
            
            $
            242,214Financial Liabilities at December 31, 2008
            
            0
      to 12 months
            
            
            12
      to 24 months
            
            
            After
      24 monthsAccounts
      payable and accruals
            
            $
            17,167,567
            
            
            $
            -
            
            
            $
            -Short
      term loan
            
            
            10,231,500
            
            
            
            -
            
            
            
            -Interest
      payable
            
            
            1,063,729
            
            
            
            -
            
            
            
            -Advance
      from a customer
            
            
            24,492,000
            
            
            
            -
            
            
            
            -Obligation
      under leases
            
            
            256,788
            
            
            
            205,824
            
            
            
            463,110$
            53,211,584
            
            
            $
            205,824
            
            
            $
            463,110




(g)
              Interest
      rate risk




Interest
rate risk is the risk that the fair value or future cash flows of a financial
instrument will fluctuate because of changes in market interest
rates.




The
Company is exposed to interest rate risk on its cash and cash equivalents,
restricted cash, and due to related party at December 31, 2009.  The
interest rates on these financial instruments fluctuate based on the bank prime
rate. As at December 31, 2009, with other variables unchanged, a 100-basis point
change in the bank prime rate would have a net effect of approximately $280,407
(2008 – $112,059) on net income (loss).




28.
            CAPITAL
      DISCLOSURE




The
Company’s objectives when managing capital are to provide returns for
shareholders, and comply with any externally imposed capital requirements while
safeguarding the Company’s ability to continue as a going
concern.  The Company considers items included in shareholders’ equity
to be capital.


Page
36 of 44


GLG
LIFE TECH CORPORATION


Notes
to Consolidated Financial Statements


Years
Ended December 31, 2009 and 2008








28.
              CAPITAL
      DISCLOSURE, Continued
  The
Company manages its capital structure and makes adjustments in light of changes
in economic conditions and the risk characteristics of the Company’s
assets.  In order to maintain or adjust the capital structure, the
Company may adjust the amount of dividends paid to shareholders, return capital
to shareholders, issue new shares, or sell assets to reduce debt.  In
this respect, the Company monitors its debt to equity ratio.




Pursuant
to Chinese regulations, the Company is required to make appropriations to
reserve funds, based on after tax net income determined in accordance with
generally accepted accounting principles of China (Note 21).  The
reserve funds are established for covering corporate obligations in the event of
business liquidation.  The reserve funds are recorded as part of
deficit.  The reserve funds are available for the Company to use but
are not available for distribution to shareholders other than in liquidation and
may limit repatriation of invested capital.




29.
            COMMITMENTS




(a)
              The
      Company has two 5-year operating leases with respect to land and
      production equipment at the Qingdao factory in China.  The
      leases expire in 2011, and the annual minimum lease payments are
      approximately $153,300 (RMB
1,000,000).




(b)
              The
      Company entered into a 30-year agreement with the Dongtai City Municipal
      Government, located in the Jiangsu Province of China, for approximately 50
      acres of land for its seed base operation.  Rent of
      approximately $121,107 (RMB 790,000) is paid every 10
    years.




(c)
              The
      Company entered into a new office lease with one year term commencing on
      May 1, 2009. Commitment for 2010 on the new lease is
    $26,566.




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




2010
                                
                                $
                                179,8662011
                                
                                
                                153,3002012
                                
                                
                                -2013
                                
                                
                                -2014
                                
                                
                                -Thereafter
                                
                                
                                242,214Total
                                
                                $
                                575,380


(d)
              In
      April 2008, the Company signed a 20-year agreement with the government of
      Juancheng County in the Shandong Province of China, which gave the Company
      exclusive rights to build and operate a stevia processing factory as well
      as the exclusive right to purchase high quality stevia leaf grown in that
      region.  The agreement requires the Company to make a total
      investment in the Juancheng region of US $60,000,000 over the course of
      the 20-year agreement to retain its exclusive rights.  As of
      December 31, 2009, the Company has not made any investment in the
      region.


Page
37 of 44


GLG
LIFE TECH CORPORATION


Notes
to Consolidated Financial Statements


Years
Ended December 31, 2009 and 2008







29.
            COMMITMENTS,
      Continued




(e)
              In
      2009, the Company signed two Construction Agreements with the construction
      company to build the waste water treatment facilities in two subsidiaries
      with a total consideration of $1,900,000.  The facilities are
      expected to be completed between May and June 2010.  As of
      December 31, 2009, the Company has paid
  $500,000.




30.
            CONTINGENT
      LIABILITIES




(a)
              On
      November 4, 2009, Weider Global Nutrition ("WGN") filed legal proceedings
      in the Supreme Court of British Columbia against the
      Company.  WGN alleges that pursuant to the shareholder agreement
      between WGN and the Company, GLG Weider Sweet Naturals Corp. (“Sweet
      Naturals”) became the Company’s exclusive marketing and sales arm, other
      than as provided under the Strategic Alliance and Supply
      Agreement.  WGN also alleges misrepresentation and breach of
      fiduciary duty by the Company. WGN is claiming injunctive relief, an
      accounting and damages for alleged breaches of the shareholder
      agreement.




The
Company is of the view that the allegations are entirely without
merit.  The shareholder agreement contemplates Strategic Alliance and
Supply Agreement and in no way restricts the Company’s ability to perform that
agreement and pursue any further opportunities arising from that
agreement.  Further, the shareholder agreement contemplates that
marketing and distribution of wholesale stevia extract products through Sweet
Naturals is subject to the Company’s permission and that nothing in the
agreement prevents the shareholders of Sweet Naturals from competing with Sweet
Naturals.  The shareholder agreement contemplates that exclusivity for
Sweet Naturals is limited to new business actually generated or customers
secured by Sweet Naturals.




The
Company’s position is that any claim by WGN for lost profits is expressly
excluded under the shareholders’ agreement.  It is the Company’s view
that the injunctions and accounting sought are not legally available and the
other remedies would not, in any event, materially and adversely effect our
business or operations.




(b)
              On
      May 27, 2008, Northern Securities (“Northern”) filed a claim with the B.C.
      Supreme Court over additional consideration claimed owed by the Company
      with respect to the Sponsorship Agreement dated January 24,
      2007.  The Company has filed its defense and has also filed a
      counter claim against Northern.  There is no certainty over the
      outcome of this lawsuit.  The Company is confident in its
      position that additional amounts are not due; however, should the issue be
      resolved in Northern's favour, the Company would be required to pay
      $38,664 in cash and to issue 62,500 additional shares to
      Northern.




31.
            SUBSEQUENT
      EVENTS




On
January 12, 2010, the Company obtained an additional loan of $9,198,000
(RMB 60,000,000) from the Construction Bank of China.  The loan
bears an interest at a rate of 5.31% per annum and matures on January 11,
2011.  The loan is secured by one of the Company’s
subsidiaries.


Page
38 of 44


GLG
LIFE TECH CORPORATION


Notes
to Consolidated Financial Statements


Years
Ended December 31, 2009 and 2008







31.
            SUBSEQUENT
      EVENTS, Continued




On
March 30, 2010, the Company and Weider Global Nutrition LLC (“Weider”) announced
that the proceedings commenced by Weider against the Company in the Supreme
Court of British Columbia will be dismissed by consent of the
parties.  The dismissal was the result of Weider’s offer to drop its
claim against the Company without any payment to Weider if the Company would
drop its counterclaim against Weider and agree to wind up GLG and Weider’s joint
venture company, GLG Weider Sweet Naturals Corporation.  The Company
will now be marketing all of its products itself.  Weider will carry
on marketing activities in stevia related products independently.




32.
              DIFFERENCES
      BETWEEN UNITED STATES AND CANADIAN GENERALLY ACCEPTED ACCOUNTING
      PRINCIPLES




The
effect of the material measurement differences between general accepted
accounting principles in Canada and the United States on our net earnings is
summarized as follows:




(In
      Canadian Dollars)
                                                          
                                                          2009
                                                          
                                                          
                                                          2008Net
      earning (loss) under Canadian GAAP
                                                          
                                                          $
                                                          758,019
                                                          
                                                          
                                                          $
                                                          (10,606,542
                                                          )Add
      (deduct)Reversal
      of interest capitalized in cost of sales ( a )
                                                          
                                                          
                                                          1,125,721
                                                          
                                                          
                                                          
                                                          -Interest
      captialized ( a), ( b )
                                                          
                                                          
                                                          377,541
                                                          
                                                          
                                                          
                                                          2,009,638Amortization
      on property, plant and equipment ( b )
                                                          
                                                          
                                                          (212,657
                                                          )
                                                          
                                                          
                                                          -Chnage
      in tax expense
                                                          
                                                          
                                                          (653,782
                                                          )
                                                          
                                                          
                                                          -Net
      earning (loss) under US GAAP before comprehensive income
      adjustments
                                                          
                                                          
                                                          1,394,842
                                                          
                                                          
                                                          
                                                          (8,596,904
                                                          )Other
      comprehensive income under Canadian GAAP
                                                          
                                                          
                                                          (14,309,320
                                                          )
                                                          
                                                          
                                                          22,003,934Other
      comprehensive income under US GAAP
                                                          
                                                          
                                                          (14,309,320
                                                          )
                                                          
                                                          
                                                          22,003,934Comprehensive
      income
                                                          
                                                          $
                                                          (12,914,478
                                                          )
                                                          
                                                          $
                                                          13,407,030Earnings
      (loss) per share under US GAAP before comprehensive income
      adjustmentsBasic
                                                          
                                                          
                                                          0.07
                                                          
                                                          
                                                          
                                                          (0.49
                                                          )Diluted
                                                          
                                                          
                                                          0.07
                                                          
                                                          
                                                          
                                                          (0.49
                                                          )


Page
39 of 44


GLG
LIFE TECH CORPORATION


Notes
to Consolidated Financial Statements


Years
Ended December 31, 2009 and 2008








32.
            DIFFERENCES
      BETWEEN UNITED STATES AND CANADIAN GENERALLY ACCEPTED ACCOUNTING
      PRINCIPLES, Continued




Consolidated balance sheets under Canadian GAAP and US
GAAP:




Year
      ended December 31,2009
                                          
                                          
                                          2009
                                          
                                          
                                          2008
                                          
                                          
                                          2008Canadian
                                          
                                          
                                          U
      S
                                          
                                          
                                          Canadian
                                          
                                          
                                          U
      S(In
      Canadian Dollars)
                                          
                                          
                                          GAAP
                                          
                                          
                                          GAAP
                                          
                                          
                                          GAAP
                                          
                                          
                                          GAAPASSETSCurrent
      AssetsCash
      and cash equivalents
                                          
                                          
                                          $
                                          16,018,203
                                          
                                          
                                          $
                                          16,018,203
                                          
                                          
                                          $
                                          7,362,671
                                          
                                          
                                          $
                                          7,362,671Short
      term investments
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          365,785
                                          
                                          
                                          
                                          365,785Accounts
      receivable
                                          
                                          
                                          
                                          5,718,315
                                          
                                          
                                          
                                          5,718,315
                                          
                                          
                                          
                                          2,714,114
                                          
                                          
                                          
                                          2,714,114Interest
      receivable
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          3,651
                                          
                                          
                                          
                                          3,651Taxes
      recoverable
                                          
                                          
                                          
                                          5,130,359
                                          
                                          
                                          
                                          5,130,359
                                          
                                          
                                          
                                          1,504,000
                                          
                                          
                                          
                                          1,504,000Inventory
                                          (
      a )
                                          
                                          
                                          41,149,142
                                          
                                          
                                          
                                          41,149,142
                                          
                                          
                                          
                                          33,057,690
                                          
                                          
                                          
                                          32,534,418Prepaid
      expenses
                                          
                                          
                                          
                                          8,578,097
                                          
                                          
                                          
                                          8,578,097
                                          
                                          
                                          
                                          7,380,086
                                          
                                          
                                          
                                          7,380,08676,594,116
                                          
                                          
                                          
                                          76,594,116
                                          
                                          
                                          
                                          52,387,997
                                          
                                          
                                          
                                          51,864,725Property,
      Plant, and Equipment
                                          (
      b )
                                          
                                          
                                          108,311,690
                                          
                                          
                                          
                                          112,733,297
                                          
                                          
                                          
                                          83,366,043
                                          
                                          
                                          
                                          87,020,317Goodwill
                                          
                                          
                                          
                                          7,859,523
                                          
                                          
                                          
                                          7,859,523
                                          
                                          
                                          
                                          7,587,798
                                          
                                          
                                          
                                          7,587,798Restricted
      Cash
                                          
                                          
                                          
                                          10,003
                                          
                                          
                                          
                                          10,003
                                          
                                          
                                          
                                          100,710
                                          
                                          
                                          
                                          100,710Deferred
      Charges
                                          
                                          
                                          
                                          94,867
                                          
                                          
                                          
                                          94,867
                                          
                                          
                                          
                                          125,261
                                          
                                          
                                          
                                          125,261Intangible
      Assets
                                          
                                          
                                          
                                          36,715,455
                                          
                                          
                                          
                                          36,715,455
                                          
                                          
                                          
                                          30,793,314
                                          
                                          
                                          
                                          30,793,314TOTAL
      ASSETS
                                          
                                          
                                          $
                                          229,585,654
                                          
                                          
                                          $
                                          234,007,261
                                          
                                          
                                          $
                                          174,361,123
                                          
                                          
                                          $
                                          177,492,125LIABILITIESCurrent
      LiabilitiesShort
      term loans
                                          
                                          
                                          
                                          37,317,500
                                          
                                          
                                          
                                          37,317,500
                                          
                                          
                                          
                                          10,231,500
                                          
                                          
                                          
                                          10,231,500Accounts
      payable and accruals
                                          
                                          
                                          
                                          25,382,988
                                          
                                          
                                          
                                          25,382,988
                                          
                                          
                                          
                                          17,167,567
                                          
                                          
                                          
                                          17,167,567Interest
      payable
                                          
                                          
                                          
                                          268,912
                                          
                                          
                                          
                                          268,912
                                          
                                          
                                          
                                          1,063,729
                                          
                                          
                                          
                                          1,063,729Advances
      from customers
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          24,492,000
                                          
                                          
                                          
                                          24,492,000Due
      to related party
                                          
                                          
                                          
                                          7,243,492
                                          
                                          
                                          
                                          7,243,492
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          0Deferred
      revenue
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          1,995,000
                                          
                                          
                                          
                                          1,995,00070,212,892
                                          
                                          
                                          
                                          70,212,892
                                          
                                          
                                          
                                          54,949,796
                                          
                                          
                                          
                                          54,949,796Non-current
      bank loan
                                          
                                          
                                          
                                          13,797,000
                                          
                                          
                                          
                                          13,797,000
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -84,009,892
                                          
                                          
                                          
                                          84,009,892
                                          
                                          
                                          
                                          54,949,796
                                          
                                          
                                          
                                          54,949,796Future
      income taxes
                                          
                                          
                                          
                                          733,203
                                          
                                          
                                          
                                          733,203
                                          
                                          
                                          
                                          2,414,642
                                          
                                          
                                          
                                          2,414,642NON-CONTROLLING
      INTERESTS
                                          (
      c )
                                          
                                          
                                          23,243
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          167,211
                                          
                                          
                                          
                                          -SHAREHOLDERS'
      EQUITYShare
      capital
                                          (
      d )
                                          
                                          
                                          134,812,115
                                          
                                          
                                          
                                          134,869,181
                                          
                                          
                                          
                                          93,355,149
                                          
                                          
                                          
                                          92,758,433Warrants
                                          (
      d )
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          11,477,908
                                          
                                          
                                          
                                          11,721,091Contributed
      surplus
                                          (
      d )
                                          
                                          
                                          14,909,708
                                          
                                          
                                          
                                          16,339,037
                                          
                                          
                                          
                                          3,347,623
                                          
                                          
                                          
                                          4,533,770Accumulated
      other comprehensive income
                                          
                                          
                                          
                                          6,386,688
                                          
                                          
                                          
                                          6,386,688
                                          
                                          
                                          
                                          20,696,008
                                          
                                          
                                          
                                          20,696,008Deficit
                                          
                                          
                                          
                                          (11,289,195
                                          )
                                          
                                          
                                          (8,353,983
                                          )
                                          
                                          
                                          (12,047,214
                                          )
                                          
                                          
                                          (9,748,826
                                          )144,819,316
                                          
                                          
                                          
                                          149,240,923
                                          
                                          
                                          
                                          116,829,474
                                          
                                          
                                          
                                          119,960,476NON-CONTROLLING
      INTERESTS
                                          (
      c )
                                          
                                          
                                          -
                                          
                                          
                                          
                                          23,243
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          167,211TOTAL
      SHAREHOLDER'S EQUITY
                                          
                                          
                                          
                                          144,819,316
                                          
                                          
                                          
                                          149,264,166
                                          
                                          
                                          
                                          116,829,474
                                          
                                          
                                          
                                          120,127,687TOTAL
      LIABILITIES ANDSHAREHOLDERS
      EQUITY
                                          
                                          
                                          $
                                          229,585,654
                                          
                                          
                                          $
                                          234,007,261
                                          
                                          
                                          $
                                          174,361,123
                                          
                                          
                                          $
                                          177,492,125


Page
40 of 44


GLG
LIFE TECH CORPORATION
 Notes
to Consolidated Financial Statements
 Years
Ended December 31, 2009 and 2008




32.
              DIFFERENCES
      BETWEEN UNITED STATES AND CANADIAN GENERALLY ACCEPTED ACCOUNTING
      PRINCIPLES, Continued




The
cumulative effect of these adjustments on the consolidated shareholders’ equity
of the Company is as follows:




(In Canadian
      Dollars)
                        
                        2009
                        
                        
                        2008Shareholders'
      equity based on Canadian GAAP
                        
                        $
                        144,819,316
                        
                        
                        $
                        116,829,474Reversal
      of interest capitalized in cost of sales ( a )
                        
                        
                        1,125,721Interest
      captialized ( a), ( b )
                        
                        
                        2,675,929
                        
                        
                        
                        2,298,388Amortization
      on property, plant and equipment ( b )
                        
                        
                        (212,657
                        )Non-controlling
      interest contributions ( c )
                        
                        
                        23,243
                        
                        
                        
                        167,211Equity
      portion of convertible debenture ( d )
                        
                        
                        832,614
                        
                        
                        
                        832,614Shareholders'
      equity based on US GAAP
                        
                        
                        149,264,166
                        
                        
                        
                        120,127,687


Page
41 of 44


GLG
LIFE TECH CORPORATION


Notes
to Consolidated Financial Statements


Years
Ended December 31, 2009 and 2008







32.
            DIFFERENCES
      BETWEEN UNITED STATES AND CANADIAN GENERALLY ACCEPTED ACCOUNTING
      PRINCIPLES, Continued




Consolidated
statements of cash flows under US GAAP:




2009
                      
                      
                      2008(In Canadian
      Dollars)
                      
                      US GAAP
                      
                      
                      US GAAPCash
      provided by (used in)Operating
      activitiesNet
      income (loss)
                      
                      $
                      1,394,842
                      
                      
                      $
                      (8,665,178
                      )Items
      not affecting cash:Stock-based
      compensation
                      
                      
                      2,478,916
                      
                      
                      
                      693,524Amortization
      of property, plant and equipment & intangibles
                      
                      
                      6,598,012
                      
                      
                      
                      2,539,869Provision
      on loan and receivables
                      
                      
                      58,358
                      
                      
                      
                      3,111,371Foreign
      exchange loss (gain)
                      
                      
                      (2,615,900
                      )
                      
                      
                      2,841,737Future
      income tax recovery
                      
                      
                      (100,018
                      )
                      
                      
                      (1,428,000
                      )Changes
      in non-cash working capital items
                      
                      
                      (24,094,885
                      )
                      
                      
                      (16,893,312
                      )Cash
      flow used by operating activities
                      
                      
                      (16,280,675
                      )
                      
                      
                      (17,799,989
                      )Investing
      activitiesDecrease
      (increase) in short term investment
                      
                      
                      326,252
                      
                      
                      
                      (299,849
                      )Equity
      contribution by non-controlling interests
                      
                      
                      -
                      
                      
                      
                      253,007Decrease
      (increase) in restricted cash
                      
                      
                      90,707
                      
                      
                      
                      (100,710
                      )Purchase
      of property, plant and equipment
                      
                      
                      (35,851,852
                      )
                      
                      
                      (44,346,420
                      )Cash
      flow used by investing activities
                      
                      
                      (35,434,893
                      )
                      
                      
                      (44,493,972
                      )Financing
      activitiesIssue
      of loans
                      
                      
                      58,157,200
                      
                      
                      
                      8,387,169Repayment
      of  short term loans
                      
                      
                      (13,928,700
                      )
                      
                      
                      -Issuance
      of common shares
                      
                      
                      33,241,278
                      
                      
                      
                      17,844,394Issuance
      of common shares on exercise of stock options
                      
                      
                      291,000
                      
                      
                      
                      -Share
      issuance costs
                      
                      
                      (3,186,313
                      )
                      
                      
                      (195,000
                      )Repaid
      advance from a customer
                      
                      
                      (22,053,238
                      )
                      
                      
                      (7,122,367
                      )Increase
      in advance from a customer
                      
                      
                      -
                      
                      
                      
                      20,191,680Advances
      from related parties
                      
                      
                      7,726,413
                      
                      
                      
                      (846,630
                      )Cash
      flow from financing activities
                      
                      
                      60,247,640
                      
                      
                      
                      38,259,246Effect
      of foreign exchange rate changes on cash and cash
    equivalents
                      
                      
                      123,460
                      
                      
                      
                      3,143,806CHANGE
      IN CASH AND CASH EQUIVALENTS
                      
                      
                      8,655,532
                      
                      
                      
                      (20,890,909
                      )CASH
      AND CASH EQUIVALENTS, beginning of period
                      
                      
                      7,362,671
                      
                      
                      
                      28,253,580CASH
      AND CASH EQUIVALENTS, end of period
                      
                      $
                      16,018,203
                      
                      
                      $
                      7,362,671


Page
42 of 44


GLG
LIFE TECH CORPORATION


Notes
to Consolidated Financial Statements


Years
Ended December 31, 2009 and 2008







32.
              DIFFERENCES
      BETWEEN UNITED STATES AND CANADIAN GENERALLY ACCEPTED ACCOUNTING
      PRINCIPLES, Continued




The
areas of material difference between Canadian and United States GAAP and their
impact on the consolidated financial statements of the Company are described
below:




(a)
                The
      Company capitalized interest costs for routine inventories produced in
      large quantities on a repetitive basis for the year ended December 31
      2008.  The Company also expensed such capitalized interest as
      costs of sales.  In accordance with U.S. GAAP ACS 835-20-15-6
      interest costs are not capitalized for routine inventories produced in
      large quantities on a repetitive basis, and accordingly not allowed to be
      recorded as costs of sales.  As at December 31, 2009, these
      adjustments resulted a decrease in inventory of $nil (2008 - $523,272) and
      a decrease in cost of sales for the year ended December 31, 2009 of
      $1,125,721 (2008 - $nil) and an increase in interest expense for the
      year ended December 31, 2009 of $602,449 (2008 -
  $523,272).




(b)
            In
      accordance with U.S. GAAP under ACS 835-20, interest costs, including
      interest and accretion on convertible instrument, are capitalized as part
      of the historical cost of acquiring certain qualifying assets, which
      require a period of time to prepare for their intended
      use.  Capitalization is not required under Canadian GAAP,
      resulting in an increase in property, plant and equipment as at December
      31, 2009 amounted to $4,421,607 (2008 - $3,654,274), an increase in
      amortization expense for the year ended December 31, 2009 of $212,657
      (2008 - $nil) and a decrease in interest expense for the year ended
      December 31, 2009 of $979,990 (2008 -
  $2,532,910).




(c)
            In
      accordance with U.S. GAAP under ACS 810-10, Non-controlling Interests in
      Consolidated Financial Statements, which establishes requirements for
      ownership interests in subsidiaries held by parties other than the Company
      to be clearly identified, presented, and disclosed in the consolidated
      statement of financial position within equity, but separate from the
      parent’s equity.  All changes in the parent’s ownership
      interests are required to be accounted for consistently as equity
      transactions and any non-controlling equity investments in
      unconsolidated subsidiaries must be measured initially at fair
      value.  The Company has applied the presentation resulting in a
      change in the financial statement presentation of its non-controlling
      interests.  The amount transfer to shareholders’ equity as at
      December 31, 2009 is $23,243 (2008 -
    $167,211).




(d)
            In
      accordance with Canadian GAAP, proceeds from the issuance of convertible
      loans and detachable warrants are allocated to long term convertible term
      loans and shareholders' equity, resulting in a debt discount that was
      amortized to interest expense over the term of the loans.  In
      accordance with U.S. GAAP ASC 470-20-25-2 through 25-3 and ASC 470-20-30-1
      through 30-2, the proceeds from the issuance of convertible loans and
      detachable warrants are allocated to the warrants and convertible debt on
      a relative fair value basis.  As at December 31, 2009, the
      difference in allocation among convertible loans, detachable warrants, and
      the convertible loan’s equity component between U.S. GAAP and Canadian
      GAAP resulted in a net increase of $832,164 (2008 -
      $832,614).




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


Page
43 of 44


GLG
LIFE TECH CORPORATION


Notes
to Consolidated Financial Statements


Years
Ended December 31, 2009 and 2008







32.
            DIFFERENCES
      BETWEEN UNITED STATES AND CANADIAN GENERALLY ACCEPTED ACCOUNTING
      PRINCIPLES, Continued




New
Accounting Pronouncements




In
June 2009, the FASB issued a new standard under ASC No. 810-10, Consolidation
which changes the consolidation model for VIE’S. The revised model increases the
qualitative analysis required when identifying which entity is the primary
beneficiary that has (i) the power to direct the activities of a VIE that most
significantly impact the entity’s economic performance and (ii) the obligation
to absorb losses or the right to receive benefits from the VIE.  The
new standard eliminates the QSPE exemption, requires ongoing reconsideration of
the primary beneficiary and amends the events which trigger reassessment of
whether an entity is a VIE. The new guidance is effective for annual and
interim periods beginning after November 15, 2009. We are assessing the
potential impact that the adoption of this standard may have on our consolidated
financial position, results of operations or cash flows.




In
October 2009 the FASB issued ASU No. 2009-13, Multiple-Deliverable Revenue
Arrangements, under ASC No. 605. The new guidance provides a more flexible
alternative to identify and allocate consideration among multiple elements in a
bundled arrangement when vendor-specific objective evidence or third-party
evidence of selling price is not available. ASU No. 2009-13 requires the use of
the relative selling price method and eliminates the residual method to
allocation arrangement consideration.  Additional expanded qualitative
and quantitative disclosures are also required. The guidance is effective
prospectively for revenue arrangements entered into or materially modified in
years beginning on or after June 15, 2010. We are assessing the potential impact
that the adoption of ASU No. 2009-13 may have on our consolidated balance
sheets, results of operations and cash flows.


Page
44 of 44